ANNUAL INTEGRATED REPORT 2014
SCOPE
REPORTING PARAMETERS Northam Platinum Limited (Northam) is listed on the JSE Limited (JSE) in South Africa. This integrated report, together with the group’s notice of annual general meeting (AGM) and abridged annual financial statements, is published in compliance with the JSE’s listings requirements, and the provisions of the South African Companies Act No 71 of 2008 (Companies Act). Northam is also committed to reporting in line with the King Report on Corporate Governance in South Africa 2009 (King III). The application of these guidelines is reviewed in the corporate governance section of this report (page 24). In its financial disclosure, the group reports in terms of International Financial Reporting Standards (IFRS), the Companies Act and the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC). Northam’s financial year runs from 1 July to 30 June. In this 2014 financial year (the 2014 reporting period), Northam has adopted an integrated approach to reporting, which seeks to present to stakeholders a holistic overview of the company’s financial and nonfinancial performance for the period 1 July 2013 to 30 June 2014, incorporating the recommendations of the International Integrated Reporting Council (IIRC) and the Global Reporting Initiative (GRI) fourth generation (G4) guidelines. In providing an overview of the business, its performance and the value it creates for shareholders, this report also aims to address the group’s governance, economic, social and environmental impacts and performance for the 2014 financial year. The focus is on those issues that are most material to the business and stakeholders, together with those impacts which fundamentally influence the assessments and decisions of stakeholders.
NORTHAM ANNUAL INTEGRATED REPORT 2014
This report’s financial statements include the group’s wholly-owned operations, subsidiaries, joint ventures and associates. The non-financial disclosure is limited to the group’s two wholly-owned operations, the Zondereinde and Booysendal mines. This is the first year that Booysendal’s data is included, given that the mine officially came into production on 1 July 2013. Any data restatements have also been indicated accordingly.
AUDITING AND ASSURANCE Northam’s internal and external auditing functions are critical areas of governance. The internal audit function is outsourced to KPMG Services Proprietary Limited (KPMG) for independent appraisal. KPMG’s specific tasks are to: • examine and evaluate the group’s systems of internal control in the mitigation of business risks; and • assist members of management with discharging their duties effectively. The group’s consolidated annual financial statements have been audited by the external auditor, Ernst & Young Inc. The independent auditor’s report may be found in the annual financial statements on page 140. Certain non-financial key performance indicators in this report have also been assured by independent assurance provider Ernst & Young, in respect of Northam’s application of GRI’s G4. The company reports in line with the ‘core’ format. The reporting process has also been underpinned by the AA1000 AccountAbility Principles Standards 2008, which include Inclusivity, Materiality and Responsiveness. See page 285 for the independent assurance report. Except where specifically stated, Northam reports ore resources, reserves, production and grades in terms of three platinum group elements – platinum, palladium, rhodium – plus gold (3PGE+Au). R signifies rands, the South African currency.
CONTENTS
REPORTING SUITE
SCOPE Reporting parameters, auditing and assurance
ANNUAL INTEGRATED REPORT 2014
Annual integrated report 2014
IFC
ORGANISATIONAL OVERVIEW Northam Platinum Limited and the Bushveld Complex
2
Profile, structure and products
3
Business model and strategy
6 8
Five-year operating and financial review
14
Five-year sustainability review
LEADERSHIP AND ACCOUNTABILITY NOTICE OF ANNUAL GENERAL MEETING AND ABRIDGED ANNUAL REPORT 2014
Notice of AGM and abridged annual report 2014
Chairman’s statement
16
Chief executive’s review
18
Directorate
22
Corporate governance report
24
Managing business risk and opportunities
33
Report of the social, ethics and human resources committee
39
BUSINESS PERFORMANCE
REVIEWED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2014
Reviewed preliminary results for the year ended 30 June 2014
Scan the QR bar code with your smart phone or tablet for more information
Mineral resource and reserve statement
48
Chief financial officer’s review
68
Operational review
78
Sustainability review
80
Material issues
81
Stakeholder engagement
82
Reviewing sustainability in terms of the five capitals:
87
Financial capital
87
Human capital
93
Social capital
113
Natural capital
120
Manufactured capital
132
ANNUAL FINANCIAL STATEMENTS
137
REPORTING AND ASSURANCE Reporting in line with GRI
274
Independent assurance report
285
ADMINISTRATION AND CONTACT INFORMATION
IBC
1
NORTHAM ANNUAL INTEGRATED REPORT 2014
NORTHAM PLATINUM AND THE BUSHVELD COMPLEX
Operations on the Bushveld Complex Northam and associated operations Other operations Cities/towns Main roads Tumela
N
Polokwane
Mogalakwena
Mokopane
Bokoni Twickenham Marula Modikwa
Limpopo Dwaalkop
Thabazimbi Zondereinde
Union Pilanesberg
Two Rivers Mototolo Der Brochen Everest
Bela Bela Sedibelo
Groblersdal
Booysendal BRPM Implats Pandora Rustenburg RPM Eastern & Western Plats
South Africa, location of the Bushveld Complex
Limpopo
North West
Mpumalanga Gauteng
Free State
KwaZulu-Natal
Northern Cape
Eastern Cape Western Cape
NORTHAM ANNUAL INTEGRATED REPORT 2014
2
Brits
Eland Crocodile Pretoria River Johannesburg
Emalahleni 0
50
100 km
CORPORATE PROFILE
Complex, the Pandora joint venture (JV), in partnership with Anglo American Platinum Limited (Amplats), the Bapo ba Mogale community and Lonmin plc (Lonmin).
Northam is an independent, mid-tier, integrated PGM producer with two primary operating assets – the Zondereinde and Booysendal platinum group metal (PGM) mines in the South African Bushveld Complex – and its own metallurgical operations, including a base metals removal plant and smelter, on the Zondereinde lease area. Performance reported in this report only relates to these mines where the company is the operator.
Northam also owns a 50% interest in the Dwaalkop PGM JV, a 51% initial participatory interest in the Kokerboom JV exploration project and a 20.3% interest in listed diamond miner, Trans Hex Group Limited (Trans Hex).
The Zondereinde mine is a mature operation and produces approximately 300 000oz of PGM in concentrate annually.
The company milled a total of 3.2Mt (Zondereinde: 1.7Mt, Booysendal: 1.5Mt) in the year under review to produce 10 213kg of metal in concentrate, which has been processed, to realise sales revenue of R5.3 billion (F2013: R4.4 billion) – an increase of 20.8%, largely due to sales volumes from the recently commissioned Booysendal mine and the effects of a much weaker R/US$ exchange rate year on year (F2014: R10.35/US$; F2013: R8.82/US$).
At steady state, by late 2015, Booysendal, which came into production on 1 July 2013, should produce approximately 160 000oz annually. Post year-end, Northam acquired the remaining 20% of Northam Chrome Producers Proprietary Limited (NCP). NCP produces chrome from Zondereinde mine’s UG2 tailings. NCP is now a wholly-owned subsidiary.
At 30 June 2014, Northam held a combined resource base of 195.0 million ounces (Moz) – 15.1Moz in the reserve category – with a mining life of more than 50 years.
In addition, the company holds a 7.5% interest in another PGM mining operation in the Bushveld
Group structure as at 30 June 2014
100%
Zondereinde mine & metallurgical processing
Resource: 80.1Moz
100%
Booysendal mine
Resource: 103.9Moz
50%
Dwaalkop
Attributable resource: 8.9Moz
7.5%
Pandora
Attributable resource: 2.1Moz
80%
Northam Chrome Producers
Cr2O3 concentrate
20.3%
Trans Hex Group
Listed diamond producer and marketer
51%
Kokerboom
FeO Cu Au prospect
3
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
PROFILE, STRUCTURE AND PRODUCTS
PROFILE, STRUCTURE AND PRODUCTS CONTINUED
SHAREHOLDER BASE
end of the 2014 financial year, the company’s market capitalisation was R18.1 billion.
Northam’s shares are listed on the JSE. Its share code is NHM and its debt instruments are listed under the symbol NHMI. The company has been admitted to participate in the JSE’s Socially Responsible Investment (SRI) Index.
Northam has a geographically diverse shareholder base, which at 30 June 2014 comprised predominantly institutional investors in South Africa (74.7%), North America (15.5%), Europe and the United Kingdom (7.1%), the Far East (2.3%), Australasia (0.3%) and Africa (0.1%).
Northam has a sponsored Level 1 American Depositary Receipt (ADR) facility. The shares trade under the ticker code NMPNY on the over-the-counter (OTC) market in the United States (US).
Northam’s empowerment status has been a matter of concern for a considerable period. To this end, Northam is pursuing an empowerment transaction, balancing the needs of the company’s current shareholders with the Department of Mineral Resources (DMR) requirements to bolster Northam’s empowerment ownership. A successful conclusion of the proposed transaction will enable Northam to pursue its strategic ambitions.
No shares were allotted or issued to participants of the Northam Share Option Scheme or to participants of the Northam Share Incentive Plan during the year while 15 000 000 shares were allotted and issued in terms of a claw-back rights offer, which closed on 29 November 2013, resulting in the share capital at 30 June 2014 increasing to 397 586 090 (2013: 382 586 090) shares. At the
Shareholder type in F2014
Retirement funds
33.8%
Unit trusts
29.1%
Private investor
17.0%
Sovereign wealth Other Mutual funds
6.8% 10.3% 3.0%
Booysendal, the group’s new PGM mine on the eastern limb
NORTHAM ANNUAL INTEGRATED REPORT 2014
4
Geographic spread of shareholders
7.1%
2.3%
74.7%
0.3%
Europe and the United Kingdom
15.5% North America
0.1%
South Africa
Rest of Africa
PRODUCTS AND END USES
Far East
Australasia
Platinum jewellery is tremendously popular in Asia. Globally, overall demand for platinum increased in 2014, driven largely by the autocatalyst, jewellery and industrial sectors. Other industrial uses range from chemical and electrical applications to glass manufacture.
The metallurgical complex at the Zondereinde mine produces final concentrate, which is then dispatched to a precious metal refinery in Hanau, Germany. For 22 years, Northam has refined its metal in terms of a long-term contract with Heraeus GmbH. The company’s in-house marketing department is responsible for marketing and sales of products domestically and to major global markets in Asia, Europe and North America.
PGMs have also attracted investment attention with the launch of exchange-traded funds (ETFs), which expose investors to physical metal holdings. PGMs are traded on international markets where the metal prices are determined by global supply and demand, and are US dollar-denominated. This means that South African PGMs realise prices in US dollars, which are then converted and reported in South African rands on the income statement. Northam has little or no influence on the pricing of the sales of its metal, which is sold in sponge or ingot form to customers in the US, Europe and the Far East, and is essentially a price taker.
Northam’s primary products are the three main PGMs: platinum, palladium and rhodium. The primary consumers of these metals are the motormanufacturing and jewellery industries, among other industrial sectors. In the automotive sector, PGMs are used in exhaust systems, specifically autocatalysts, helping to reduce noxious gases released into the atmosphere. 5
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
PROFILE, STRUCTURE AND PRODUCTS
BUSINESS MODEL AND STRATEGY INPUTS IAL CAP ANC ITA L FIN
• Financing • Shareholder opportunity • Capex
MAN CAPITA L HU
MAXIMISE
• Labour • Skills • Management capacity
• Compliance • Mining Charter • Governance
CIAL CAPITA L SO
• Utility synergies • Footprint limitation • Compliance
LC TURA APITA L NA
OPTIMISE
GROW
M
CTURED C UFU AP AN
• Resource • Infrastructure • Mining type • Synergies
L ITA
NORTHAM ANNUAL INTEGRATED REPORT 2014
6
MINING, PROCESSING, ACCOUNTING
OUTPUTS/OUTCOMES
PRODUCTION AND SALES
EARNINGS GROWTH
Zondereinde: deepening Zondereinde: UG2
PROFITS LoM
Processing
Cost curve
Booysendal: Merensky
Greenfields and brownfields opportunities Local and global
VALUE (NPV) BALANCE SHEET
Booysendal: metallurgical recoveries
BENEFITS TO STAKEHOLDERS
TAXES
BLUE SKY
Booysendal: full production
JOBS
ATTRACT AND REWARD SHAREHOLDERS
7
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
BUSINESS MODEL AND STRATEGY
5-YEAR OPERATING AND FINANCIAL REVIEW
STATEMENT OF COMPREHENSIVE INCOME – GROUP (R000) Sales revenue Cost of sales Operating costs Concentrates purchased Refining and other costs Depreciation and impairments Change in metal stocks Operating profit Share of profits from associate Investment revenue Finance charges Net sundry income/(expenditure) Profit before tax Tax Net profit after tax Other comprehensive income Share of other comprehensive income from associate Profit and total comprehensive income for the year Headline earnings
2014 5 339 397 5 227 915 3 536 002 918 605 267 117 445 875 110 316
2013 4 420 977 3 813 301 2 826 094 657 540 161 591 234 690 (66 614)
2012 3 684 000 3 345 311 2 632 926 624 774 100 612 190 287 (203 288)
2011* 3 571 048 3 185 754 2 258 548# 787 316 68 804 147 838 (76 752)
2010* 3 945 083 3 160 108 2 230 369 735 090 92 972 167 346 (65 669)
61 482 3 464 59 963 (176 124) 97 011 45 796 26 199 19 597
607 676 13 783 33 434 (17 946) 60 108 697 055 169 054 528 001
338 689 16 602 53 951 – 43 343 452 585 142 073 310 512
385 294 7 248 85 520 53 148 531 210 182 001 349 209
784 975 12 440 167 655 – 9 557 974 627 333 601 641 026
(1 327)
(4 145)
(9 868)
–
–
18 270 8 601
523 856 522 182
300 644 309 248
349 209 324 949
641 026 640 434
–
* Where appropriate, financial results have been adjusted for changes in accounting policies and adoption of IFRS Restated
#
Northam
Platinum Index
NORTHAM ANNUAL INTEGRATED REPORT 2014
8
30\06\2014
16\06\2014
02\06\2014
19\05\2014
05\05\2014
21\04\2014
07\04\2014
24\03\2014
10\03\2014
24\02\2014
10\02\2014
27\01\2014
13\01\2014
30\12\2013
16\12\2013
02\12\2013
18\11\2013
04\11\2013
21\10\2013
07\10\2013
23\09\2013
09\09\2013
26\08\2013
12\08\2013
29\07\2013
01\07\2013
150 135 120 105 90 75 60 45 30 15 0
15\07\2013
NHM share vs Platinum Index
STATEMENT OF FINANCIAL POSITION – GROUP (R000) Property, plant and equipment Investment in associate Other non-current assets Current assets Inventories Trade and other receivables Investment in escrow Cash and cash equivalents Receiver of revenue Mineral resources classified as held-for-sale Total assets Shareholders’ equity Deferred tax Domestic medium term notes Non-current liabilities and provisions Current liabilities Total equity and liabilities
2014 2013 11 940 390 11 931 051 496 509 495 498 308 525 196 440 12 745 424 12 622 989 1 995 572 1 734 675 1 076 853 878 530 244 672 547 920 – – 666 174 298 580 7 873 9 645
2012 9 135 822 505 415 189 976 9 831 213 1 232 339 811 183 303 268 – 104 980 12 908
2011* 8 498 935 505 327 144 278 9 148 540 2 725 916 604 647 410 621 – 1 697 853 12 795
2010* 7 660 720 129 741 111 833 7 902 294 2 117 683 521 462 318 054 91 458 1 186 709 –
– – 1 180 300 – – 14 740 996 14 357 664 12 243 852 11 874 456 10 019 977 11 391 872 10 815 635 10 413 247 10 115 352 8 833 154 502 097 476 053 504 628 477 145 447 212 1 370 000 1 250 000 – – – 285 365 271 773 143 972 107 335 64 948 1 191 662 1 544 203 1 182 005 1 174 624 674 663 14 740 996 14 357 664 12 243 852 11 874 456 10 019 977
STATEMENT OF CASH FLOWS – GROUP (R000) Operating cash flow Cash generated from operations Investment revenue Change in working capital Change in short-term provisions Interest paid Taxation paid Investing cash flow Financing cash flow Dividends paid Proceeds from issue of shares Finance charges Revolving credit facilities utilised Domestic medium term notes issued Other financing cash flows Net cash flow Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
2014 945 453 555 911 59 963 270 562 14 285 176 124 (131 392) (826 019) 248 042 (11 066) 579 033 (176 124) (250 000) 120 000 (13 801)
2013 622 463 877 529 33 434 (281 104) 8 204 123 703 (139 303) (1 801 501) 1 372 638 (21 747) 2 007# (123 703) 250 000 1 250 000 16 081#
2012 437 662 595 918 50 723 (90 367) 12 460 – (131 072) (2 010 021) (20 514) (57 364) – – – – 36 850
2011 769 422 726 807 82 183 182 380 6 073 – (228 021) (197 171) (61 107) (90 202) – – – – 29 095
2010 839 683 947 920 163 625 783 9 111 – (281 756) (373 237) (200 640) (216 158) – – – – 15 518
367 476
193 600
(1 592 873)
511 144
265 806
298 580
104 980
1 697 853
1 186 709
920 903
666 056
298 580
104 980
1 697 853
1 186 709
* Where appropriate, financial results have been adjusted for changes in accounting policies and adoption of IFRS. Restated
#
9
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
5-YEAR OPERATING AND FINANCIAL REVIEW
5-YEAR OPERATING AND FINANCIAL REVIEW CONTINUED
OPERATING PERFORMANCE ZONDEREINDE Merensky Tons milled Head grade – g/ton (3PGEs + Au) UG2 Tons milled Head grade – g/ton (3PGEs + Au) Combined Tons milled Head grade – g/ton (3PGEs + Au) Precious metals in concentrates produced – kg Precious metals in concentrates purchased – kg Precious metals sold – kg Revenue – R/kg Operating costs – R/kg Cash costs – R/kg Precious metals in concentrates produced – oz Precious metals in concentrates purchased – oz Precious metals sold – oz Price realised – US$/oz Operating costs – US$/oz Cash costs – US$/oz
2014
2013
2012
2011
2010
803 736 5.8
958 211 5.8
884 660 5.9
793 490 5.6
1 002 208 5.9
920 420 4.3
1 157 501 4.2
1 049 017 4.4
797 355 4.3
1 036 017 4.5
1 724 156 5.0
2 115 712 4.9
1 933 677 5.1
1 590 845 4.9
2 038 225 5.2
7 331
9 041
8 979
7 779
9 999
1 975 9 827 400 381 395 629 358 891
1 633 10 704 365 217 327 331# 302 048#
1 877 9 980 335 325 311 645 283 934
2 244 9 872 323 899 307 203 279 118
2 106 12 313 288 255 236 769 215 900
235 693
290 675
288 675
250 100
321 475
63 488 315 941 1 198 1 189 1 078
52 502 344 128 1 276 1 154# 1 065#
60 347 320 861 1 345 1 247 1 136
72 146 317 392 1 439 1 363 1 238
67 709 395 879 1 185 983 885
Restated
#
The Zondereinde smelter was recommissioned in October 2013 following its rebuild
NORTHAM ANNUAL INTEGRATED REPORT 2014
10
OPERATING PERFORMANCE BOOYSENDAL UG2 Tons milled Head grade – g/ton (3PGEs + Au) Precious metals in concentrates produced – kg Precious metals sold – kg Revenue – R/kg Operating costs – R/kg Cash costs – R/kg Precious metals in concentrates produced – oz Precious metals sold – oz Price realised – US$/oz Operating costs – US$/oz Cash costs – US$/oz
2014
2013
2012
2011
2010
1 233 089 2.6
– –
– –
– –
– –
2 882 2 503 398 710 361 902 277 308
– – – – –
– – – – –
– – – – –
– – – – –
92 668 80 476 1 186 1 087 833
– – – – –
– – – – –
– – – – –
– – – – –
Booysendal is anticipated to reach full production in late 2015
11
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
5-YEAR OPERATING AND FINANCIAL REVIEW
5-YEAR OPERATING AND FINANCIAL REVIEW CONTINUED
GROUP SALES Group sales per metal – oz Platinum Palladium Rhodium Gold Total – 3PGE + Au Group prices realised – US$/oz Platinum Palladium Rhodium Gold Basket – 3PGE + Au Group prices realised – R/kg Platinum Palladium Rhodium Gold Basket – 3PGE + Au
2014
2013
2012
2011
2010
241 831 117 305 31 007 6 275 396 417
212 373 100 716 25 281 5 757 344 128
195 735 92 000 27 095 6 031 320 861
196 688 90 710 23 550 6 444 317 392
242 596 116 303 28 655 8 325 395 879
1 433 756 1 010 1 289 1 198
1 568 683 1 117 1 584 1 276
1 622 679 1 523 1 686 1 345
1 698 971 2 251 1 368 1 439
1 452 384 2 193 1 093 1 185
478 261 252 876 340 018 433 281 400 042
448 004 195 716 322 085 455 474 365 217
404 433 169 151 381 165 421 395 335 325
382 245 150 703 508 056 308 068 323 899
353 507 93 417 532 925 266 527 288 255
2014 1.2 57.2 0.2 0.1 1.7 0.6
2013 13.7 24.3 5.0 3.7 1.1 0.2
2012 9.2 31.4 3.0 2.5 1.0 0.1
2011 10.8 34.3 3.7 2.9 2.3 1.4
2010 19.9 34.2 7.3 6.4 3.1 1.8
10.35 10.61
8.82 10.01
7.77 8.16
7.01 6.78
7.59 7.67
FINANCIAL PERFORMANCE – GROUP Operating margin – % Effective tax rate – % Return on shareholders’ equity – % Return on total assets – % Current ratio Acid ratio US Dollar/Rand exchange rate – average – at year end
NORTHAM ANNUAL INTEGRATED REPORT 2014
12
SHARE PERFORMANCE Weighted average number of shares in issue – 000 Number of shares at year end – 000 Operating cash flow per share – cents Earnings per share – cents Headline earnings per share – cents Dividends per share – cents Dividend cover Net asset value per share – cents Share price (cents) – high – low – at year end Platinum sector index at year end Compound return over 5 years – % Average monthly volume of shares traded – 000 Annual liquidity (%)
2014
2013
2012
2011#
390 970 397 586 226.5 2.4 2.2 – – 2 865.0
382 561 382 586 137.0# 132.0 136.5 – – 2 827.0
382 426 382 497 114.4 81.2 80.9 5.0 16.2 2 722.0
363 088 382 416 211.9# 96.2 89.5 15.0 6.0# 2 645.0
360 292 360 642 239.4 177.9 177.8 40.0 4.4 2 449.0
4 790 3 186 4 550 46.8 9.0
4 098 2 251 3 200 37.1 (13.2)
5 153 3 920 4 247 69.5 6.6
5 772 2 700 4 550 73.5 35.7
14 793 45.4
20 257 63.5
16 289 53.8
17 188 57.2
2 398 2 281 2 325 51.2 (13.0)# 23 555 73.9
2010#
# Restated
The twin headgears at the Zondereinde mine
13
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
5-YEAR OPERATING AND FINANCIAL REVIEW
5-YEAR SUSTAINABILITY REVIEW
FIVE-YEAR SUSTAINABILITY REVIEW – ZONDEREINDE 2011
2010
0.02
0.06
0.01
1.91
1.34
0.83
0.83 1
0.88 2
0.74 5
0.52 1
20 97
43 70
44 85
18 93
9 127
1 049
1 088
1 659
271
1 840
8 788 4
9 148 1
9 163 7
8 927 7
8 562 8
HDSAs in management (%)
38
37
35
45
33
Women in mining (%) HDSAs at board level (%) ENVIRONMENTAL PERFORMANCE Rock mined (000t) Ore milled (000t) Water usage (000m3) Potable water from external sources Fissure water used Water recycled in process % water recycled Electricity consumption (MWh) Energy from electricity purchased by shafts Energy from electricity purchased by plant Total electricity purchased
7 44
7 56
7 64
7 62
7 62
1 907 1 724
2 276 2 116
2 154 1 934
1 802 1 592
2 281 2 038
2 335 1 084 25 524 89
2 633 1 493 25 909 91
2 540 1 273 24 390 91
2 441 2 392 24 308 91
2 601 1 385 23 439 90
470 117 108 600
485 654 101 732 587 386
467 893 125 548 593 441
461 484 140 406 601 890
483 541 156 199 639 740
SOCIAL PERFORMANCE Safety Fatal injury incidence rate (FIIR) Lost time injury incidence rate (LTIIR) Reportable injury incidence rate (RIIR) Number of fatalities Health New cases of noise induced hearing loss (NIHL) New cases of tuberculosis (TB) Voluntary counselling and testing (VCT) encounters Employment and human rights Average number of employees (including contractors) Turnover rate (%)
NORTHAM ANNUAL INTEGRATED REPORT 2014
2014
2013
2012
0.00
0.01
1.70 0.86 0
1.50
578 717
14
FIVE-YEAR SUSTAINABILITY REVIEW CONTINUED 2014 ENVIRONMENTAL PERFORMANCE continued Greenhouse gas emissions (CO2e tonnes): Scope 1 (direct) emissions Scope 2 (indirect) emissions Scope 3 (indirect) emissions Total emissions Land use (hectares) Land disturbed by mining-related activities Land leased for farming purposes Land protected for conservation Total land under management (freehold) Economic performance* Value distributed (R000) Employees Salaries and wages Contributions to retirement benefit funds Contributions to healthcare funds Pay-as-you-earn deducted Government Mining and non-mining tax Deferred tax State’s share of profits Secondary tax on companies Royalties Pay-as-you-earn deducted from employees Providers of capital Dividends Finance charges Broader community Corporate social investment Total value distributed (R000) Retained by company Depreciation and write-offs Decommissioning provision to meet statutory obligations Retained income
2013
2012
2011
2010
23 451
15 509
15 401
14 365
16 796
596 079 580 620 110
605 008
611 244
619 947
658 932
665 621 183
815 627 460
1 089 635 401
1 388 677 166
137 273 800 4 439
137 273 800 4 439
137 273 800 4 439
137 273 800 4 439
137 273 800 4 439
1 288 616 1 341 254 99 275 58 615 (210 528) 262 992 96 229 (70 030) – – 26 265 210 528
1 130 199 1 143 292 94 050 52 361 (159 504) 384 356 197 629 (28 575) – – 55 798 159 504
1 055 805 1 057 780 84 212 55 627 (141 814) 322 617 110 767 27 482 – 3 824 38 730 141 814
883 444 863 719 74 096 54 606 (108 977) 342 972 143 048 29 933 – 9 020 51 994 108 977
873 419 861 411 68 211 45 079 (101 282) 462 829 262 934 18 391 30 660 21 616 27 946 101 282
11 066 176 124
21 747 123 703
57 364 –
90 202 –
216 158 –
2 917 1 741 715 462 424 445 875
3 002 1 663 007 748 123 234 690
2 782 1 438 568 438 474 190 287
4 116 1 320 734 411 255 147 838
12 140 1 564 546 603 324 167 346
9 345 7 204
11 324 502 109
4 907 243 280
(4 110) 259 007
(11 110) 424 868
* Based on group financial performance
15
NORTHAM ANNUAL INTEGRATED REPORT 2014
ORGANISATIONAL OVERVIEW
5-YEAR SUSTAINABILITY REVIEW
CHAIRMAN’S STATEMENT
My colleague and new chief executive, Paul Dunne, deals with the fall-out of the strikes in his review and I do not propose to belabour the issue. However, the fact was that the removal from the market of a significant portion of South Africa’s PGM output for several months did not lead to any upward movements in the metals’ prices. Throughout the strikes PGM prices remained restrained as metals became available from other sources. South Africa’s platinum mines have much less influence in the PGMs market than might have been the case only a few years ago. The platinum market has moved into a new phase – one in which recycling is playing an increasingly significant role, one in which thrifting of metal wherever technically possible will continue to take place and one in which investors are becoming more cautious over the opportunity costs of investing in physical metal.
It is again a privilege to address this message to all of Northam’s stakeholders. You will appreciate that the past financial year presented us with a number of direct and indirect challenges, to which my colleagues rose, and which they handled admirably. But these were challenges that pointed to the rapidly changing South African platinum mining environment – an environment of uncertain demand for PGMs and one in which labour issues are fast evolving. Northam’s Zondereinde operations were interrupted by an, until then unprecedentedly long, eleven-week wage strike by National Union of Mineworker (NUM) members during the year’s first half. This was immediately followed at three other companies’ mines by a five-month stoppage by members of the Association of Mineworkers and Construction Union (AMCU), the union that is challenging NUM’s position in the platinum belt.
As things stand, we believe there is little prospect of platinum prices recovering appreciably until 2016 or later. In this respect, the use of platinum in exhaust catalysts loaded into the diesel-powered vehicles popular in Europe will be a major demand-side factor. The EU economy has yet to set out on the sort of consumer-led economic recovery similar to what is being seen in the US, and vehicle sales are likely to remain constrained until it does.
The industry is threatened by possible turmoil as the two major unions fight turf wars, frequently accompanied by deaths, significant levels of violence and intimidation. Our approach to this situation is that it is our employees who must choose their representative unions, while Northam itself will not intervene in that decision. However my colleagues and I believe that minority unions which, nevertheless, represent significant numbers of workers in specific occupations are entitled to some level of union representation.
NORTHAM ANNUAL INTEGRATED REPORT 2014
We at Northam are prepared for this weak demand factor to persist and, at the same time, understand
16
It is better to be restrained and more profitable than unrestrained and less.
that we and the other platinum producers are price takers, not price setters. We cannot influence the market with supply-side interventions. Our future success lies in ensuring that our mines remain profitable and cash generative no matter what the platinum price does. In addition, I believe that, with the recovery of Zondereinde from the effects of the past year’s strike and with the steady ramp-up at Booysendal, we have proved our capabilities and set our future course.
In conclusion it remains for me to welcome Paul as Northam’s new chief executive and to thank his predecessor Glyn Lewis for his stalwart contribution over the years. Paul has already made his mark, consolidating the company’s direction during something of a baptism of fire. The other individual whose contribution has been invaluable is Bernard van Rooyen, who has been part of Northam for more than a quarter of a century, latterly as a consultant, and who has now retired. We thank Bernard most sincerely for his contribution to this company’s successes.
Booysendal’s profile as a shallower, mechanised operation is likely to shift it into the lower half of the platinum cost curve. Our task now is to contain operating cost inflation, occasioned by the costs of wage agreements reached, and the accelerating costs of inputs.
My thanks, too, go to all of my colleagues throughout the company. Their efforts have been noteworthy. I am sure that, with their commitment, Northam will continue go from strength to strength.
We are aware that the matter of empowerment is a concern for our shareholders. I am pleased to be in a position to reassure shareholders that this is an issue which the board and executive management are working to remedy and that an inordinate amount of good work has already been done. We will keep shareholders apprised at the appropriate time. Paul Dunne has spoken at length about our expansion plans. It goes without saying that the experienced and competent management will incorporate our expectations for the platinum market into our production planning, given that we are not in the business of producing for the sake of producing.
Lazarus Zim Chairman 25 September 2014
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NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
CHAIRMAN’S MESSAGE
CHIEF EXECUTIVE’S REVIEW
My first review to shareholders and stakeholders comes after having had a fair period to establish that this company, its people and its assets, are in good shape. On behalf of the board, I must extend sincere thanks to my predecessor; Glyn Lewis’s contribution to this company has been immense: the construction and successful commissioning of Booysendal, the company’s second PGM mine on the eastern limb now in full ramp-up stage, has transformed Northam, adding to its production profile, on the one hand, reducing the company’s operational risk and on the other, enhancing its optionality.
our Zondereinde operation was watched closely at the time; at that stage it was the longest strike in the South African labour environment, before being eclipsed by the five-month platinum strike called by AMCU soon after the Zondereinde strike was resolved. This was a trying period for management and employees alike. The NUM has traditionally been the strongest union at Zondereinde with membership in excess of 80%. Given the shift in union affiliation throughout the western limb of the Bushveld Complex, we have kept a close watch on developments on the labour front. There is no doubt that AMCU has gained ground at this operation too, where it now claims membership approaching the representivity threshold of 15%. As management, we need to be alive to the potential for inter-union conflict and to guard against being caught up in it. I have, to date, been encouraged by management’s approach to the labour situation – which is to increase and intensify the engagement process with the unions and to deal decisively with any issues which could be amplified, taken out of context and used as a rationale for industrial action. I am also confident that the unions will respect the two-year wage agreement we reached earlier this calendar year. Any further industrial action in the near to medium term will have a severely damaging impact on the company, on the PGM sector as a whole and will further harm South Africa’s rankings as an investment destination.
DISCLOSURE AND REPORTING In this annual integrated report, we seek to tell the story of Northam based on those issues we consider the most material to our business; airing our risks and opportunities while continuing to disclose our performance in terms of the five capitals. In his final annual report last year, Glyn Lewis alluded to the arduous reporting requirements that companies are being subjected to. I echo his concerns and I believe we should be wary about reporting for reporting’s sake; although we keep a watchful eye on the constant evolution of reporting conventions, the primary drivers of our reporting remain compliance, relevance and materiality and we will maintain the maxim of ‘less is more’. The material issues for our business have not changed much year on year, although perhaps there may have been some shifts in their rankings, given the turmoil that has beset the PGM sector over the past year.
There can be no doubt that the five-month platinum strike has completely changed the face of the mining sector in South Africa and, more worryingly, it has raised the social and economic expectations of a very broad stratum of South African society. Never before in this country has our sector been exposed to this level of scrutiny from the media, political and economic commentators, and analysts. Many of the issues
F2014 AND THE OPERATING ENVIRONMENT The issues of constructive employee and community consultation along with meaningful and sustainable benefits for our stakeholders was brought into sharp focus in the past year: the 11-week NUM strike at
NORTHAM ANNUAL INTEGRATED REPORT 2014
18
raised are those we have been grappling with for a number of years. And now, only a few months after the resolution of the strike, a number of economic realities are already hitting home and being felt in the broader South African economic environment, and it has perhaps become clearer to the public at large that there is no easy and quick fix.
Mining inflation, nevertheless, has persisted at the level of approximately 12%. Operating costs were also seriously impacted by increases in refining and related costs, along with a substantially higher depreciation charge, associated with the inclusion, for the first time, of costs relating to the Booysendal mine. We will be evaluating the merits of switching to an alternative accounting convention to calculate depreciation in the future.
We welcome President Zuma’s spotlight on the mining sector in his state of the nation address earlier in the year and look forward to a constructive intervention in conserving an industry which still remains so critical to South Africa’s economic well-being.
Further details on the group’s financial performance may be found in the chief financial officer’s review on page 68 of this document, and in the preliminary annual results announcement, available at www.northam.co.za/investors-and-media/publications/ financials respectively.
Our adherence to Mining Charter requirements are being scrutinised both internally and externally – and we have flagged areas which need an accelerated and intensified approach. Our housing and accommodation strategy has resulted in 359 new home owners at Mojuteng near Zondereinde while we have also created single units converted from the current hostel accommodation. In spite of these successes, and expenditure of R31 million in F2014 alone, we are conscious that the Mining Charter targets are beyond our reach for this year. The accommodation and home ownership strategy is one that is currently being reviewed and accelerated.
Investors in Northam are clearly concerned about the group’s intention to distribute cash and pay dividends. This is something we are grappling with, at board level, balancing the need to reward our shareholders on the one hand, while leveraging our positioning in the sector, and ensuring we have a pipeline of growth projects to sustain the group into the future, on the other hand. These factors will inform our dividend policy in the future. Both mining divisions of the group fared well in the past year. Although there was some slippage in the ramp-up at Booysendal, this is not serious and, with clear management focus, Booysendal should reach steady state by the end of the 2015 calendar year. With Booysendal’s contribution to metal sales for the first time, the effect of the Zondereinde strike was partially tempered, illustrating the progressive derisking that a second operating asset provides.
Performance 2014 As anticipated, the group’s financial performance was dominated by the effects of the 11-week strike at the Zondereinde operation: revenue losses reached the R750 million level before a settlement was reached on 21 January 2014. In spite of the lower production volumes from Zondereinde, sales volumes were supplemented by Booysendal’s contribution and also from a release of inventory. The higher volumes, combined with the effects of a higher rand metal basket price drove sales revenues higher to R5.3 billion (F2013: R4.4 billion), thereby compensating marginally for the moribund US dollar PGM prices.
I am pleased to report that Booysendal achieved one million fatality-free shifts during the year. Safety performance at Booysendal has been world class, with mechanisation clearly being the differentiator.
19
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
CHIEF EXECUTIVE’S REVIEW
CHIEF EXECUTIVE’S REVIEW CONTINUED
is the failure of the markets to react to the supply shortfalls occasioned by the strike in South Africa, giving rise to the postulation that above-ground stocks have comfortably satisfied demand since the 2008 financial crisis, particularly where platinum is concerned. The research we have available to us suggests that we are unlikely to see a more marked and sustained recovery in the platinum price until 2016 and beyond when significant deficits in platinum supply will start manifesting. For us at Northam, the challenge is now to position the company favourably in order to draw substantial benefit from a turn in market conditions.
Zondereinde too has had a commendable safety performance, culminating in the achievement of one million fatality-free shifts. No fatalities were reported in the year under review. There was a slight uptick in the number of injuries during the return to work after the strike, in spite of a rigorous safety drive and risk assessments in areas that had been standing. Management at both divisions, together with employees and the representative unions, must be congratulated for their diligence in this area. We have provided more detail on the divisional operating results on page 78 of this report. Both Zondereinde and Booysendal obviously feature in our strategy going forward, which is explained in considerably more detail below.
The labour relations climate in the sector, and indeed the country, remains fraught, and we are already seeing the early signs of industry restructuring. With these opportunities in the offing, we have to ensure that we are optimally positioned to benefit. I have referred previously to the imperative for the restoration of our empowerment status, the acceleration of a number of Mining Charter initiatives, including the housing and accommodation strategy, and the perceived lack of a social wage, all of which remain critical elements of our licence to operate in the future.
BLACK ECONOMIC EMPOWERMENT We are deeply conscious of Northam’s empowerment equity shortfall. The South African investment community, and indeed the mining sector itself, is divided with regard to companies’ empowerment equity requirements post 2014. Even though I have only been in the chief executive’s seat for a few months, I have taken on board the concerns of shareholders and their fears around dilution, on the one hand, and the imperative for creating value and the principle of being appropriately empowered, on the other. We will keep shareholders informed at the appropriate time and expect to conclude this issue shortly.
We have embarked on a strategic review of the business – an exercise with clear terms of reference and a limited lifespan. The process is being driven internally, with appropriate contributions from specialist external consultancies where required. The review focuses both internally – on optimising our current operations – and externally – by evaluating growth prospects further afield.
STRATEGIC REGENERATION FOR FUTURE SUSTAINABILITY One of the major features of the current economic environment, and of the PGM markets in particular,
20
NORTHAM ANNUAL INTEGRATED REPORT 2014
Operational optimisation
IN CONCLUSION
Given the considerable infrastructural footprint at Zondereinde, our focus there will be on increasing the current 15-year life of mine through prioritising the deepening project, further exploitation of the UG2 orebody and improving the process plant to deal with a higher UG2 ratio, while also improving the Zondereinde operation’s position on the cost curve.
I have mentioned the departure of Glyn Lewis earlier in my review, although I am pleased to advise that Glyn is continuing to provide consultancy services to the group. On behalf of the board, I must thank Judy Dlamini for her nine years’ service as a director. At the same time, it is appropriate to express my thanks to Bernard van Rooyen, who retired from his consultancy position in June this year. Bernard has been involved with Northam since its inception in the late 1980s. On behalf of the board and everyone at Northam, I wish Bernard all the best in his retirement.
At Booysendal, we need to keep our focus on the ramp-up, with full production scheduled for October 2015, along with improving the metallurgical recoveries to 85%; also, given the size of the Booysendal resource, we need to evaluate the opportunities it poses for growth. In terms of processing and refining, Northam’s strategic advantage has perhaps not always been fully recognised and we will be exploring ways of increasing capacity and reducing risk.
From me, a newcomer in the company, I must extend my thanks to the board for their welcome and support over the past few months, and their valuable insights into the company. I am happy to report that the institutional knowledge and expertise amongst a very lean management structure at Northam provides a very solid base from which to grow.
Strategic objectives In terms of the strategic review we have put in place, we will look towards capitalising on any restructuring in the sector, and have put together a four-stage framework which will take account of contiguous, non-contiguous and global expansion opportunities. The process entails a thorough sifting of PGM opportunities in order to come up with a priority list of expansion possibilities and to recalibrate the business based on the presumption of higher metal prices by 2018.
Paul Dunne Chief executive 25 September 2014
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NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
CHIEF EXECUTIVE’S REVIEW
DIRECTORATE
DIRECTORS
Limited. Prior to that, from 2004 to 2008, he was director: finance of Aquarius Platinum South Africa Proprietary Limited.
PL Zim (54) BComm (Hons) MComm Non-executive chairman
ME Beckett (78) (British) BSc, FIMM Independent non-executive director
Joined the board in 2007 Mr Zim is a director of Atisa Group Proprietary Limited, Zim Capital Proprietary Limited, Sanlam Limited and Sanlam Life Insurance Limited. He is also a previous past president of the Chamber of Mines of South Africa. Previously chairman of Telkom Limited, he has also held senior executive positions at Anglo American South Africa Limited, M-Net Supersport and MTN Group Limited.
Joined the board in 1999 Mr Beckett is non-executive chairman of Endeavour Mining Corporation, and a director of International Hotels Investment Limited and Petroamerica Oil Corporation. A geologist by training, Mr Beckett was formerly managing director of Consolidated Gold Fields plc.
PA Dunne (51) (British) BSc (Electronic Electrical Engineering), MBA Chief executive officer
Member of the audit and risk committee, the health, safety and environmental committee, and the social, ethics and human resources committee.
Appointed to the board in March 2014 Prior to joining Northam, Mr Dunne was employed by Impala Platinum Holdings Limited (Implats) as executive director responsible for all mining, concentrating and smelting operations at the Implats Rustenburg and Marula mines.
CK Chabedi (46) BSc (Mining Engineering), MDP Independent non-executive director Joined the board in 2009 Mr Chabedi has many years’ experience in the mining industry, having worked in various management positions for Anglo Coal. He currently consults to the mining industry while lecturing on mining methods in opencast and underground mining at the University of the Witwatersrand. He teaches an international postgraduate course and is an adviser to the South African coal mining industry.
AZ Khumalo (49) CA (SA) Chief financial officer Joined the board in 2010 Mr Khumalo, a chartered accountant by profession, holds a BCompt (Hons) and BComm degrees from the University of South Africa and has extensive mining and corporate finance experience. From September 2008, he was the group finance executive of Coal of Africa
NORTHAM ANNUAL INTEGRATED REPORT 2014
Member of the health, safety and environmental committee, and the investment committee.
22
JAK Cochrane (50) (British) BEng (Hons) MBA Independent non-executive director
TE Kgosi (60) BComm (Hons) Independent non-executive director
Joined the board in 2011 Mr Cochrane is non-executive chairman of Sable Mining Africa Limited. His previous appointments include executive director of Eurasian Natural Resources Corporation plc (ENRC), responsible for marketing and logistical operations, head of M&A and business development at ENRC, independent director at Jindal Steel Limited, marketing director of Samancor Chrome Limited and operations manager at Implats.
Joined the board in 2004 Ms Kgosi is the cluster manager in Supply Chain Operations, Eskom Group Commercial. She has extensive experience in the banking sector, mainly in a treasury operations environment, having held positions at a number of South Africa’s main banking groups as well as Credit Suisse First Boston (New York). Member of the audit and risk committee; chairperson of the social, ethics and human resources committee.
Member of the investment committee.
AR Martin (76) BComm, CA (SA) Independent non-executive director
R Havenstein (58) MSc (Chemical Engineering), BComm Independent non-executive director
Joined the board in 2009 Mr Martin is a director of Datacentrix Holdings Limited and Trans Hex Group Limited.
Joined the board in 2003 Mr Havenstein’s current non-executive directorships include Atlatsa Resources Corporation, Hernic Ferrochrome Proprietary Limited, Murray and Roberts Holdings Limited, Omnia Holdings Limited and Reatile Proprietary Limited. He was previously chief executive officer of Anglo American Platinum Limited, prior to which he was an executive director of Sasol Limited, responsible for Sasol Chemical Industries Limited.
Chairman of the audit and risk committee and lead independent director; member of the investment committee.
Member of the audit and risk committee, and the social, ethics and human resources committee; chairman of the health, safety and environmental committee, and the investment committee.
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NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
DIRECTORATE
CORPORATE GOVERNANCE REPORT
Northam is committed to the highest standards of business integrity, ethics and good corporate governance throughout the group. The board and management recognise that, in order to safeguard the interests of stakeholders, all of their actions must be guided by full accountability and transparency.
the management of risk and opportunities of the group, which are executed within the confines of its corporate governance structure. The board is satisfied that every effort has been made in the financial year to 30 June 2014 to comply as far as is practicable with the principles and recommendations of King III. Where the company does not comply, this is stated and explained. A summary document indicating compliance with the King III principles and recommendations is available on the Northam website at www.northam.co.za.
The board is guided by the board charter, memorandum of incorporation (MOI), the Companies Act, the listings requirements of the JSE, King III, GRI and other applicable legislation. The board is also responsible for the corporate strategy and
BOARD OF DIRECTORS Non-executive director
Executive directors
Independent nonexecutive directors
PL Zim (non-executive chairman)
PA Dunne (chief executive officer)
AR Martin (lead independent)
AZ Khumalo (chief financial officer)
ME Beckett TE Kgosi R Havenstein CK Chabedi JAK Cochrane
BOARD COMMITTEES Audit and risk committee
Health, safety and environmental committee
Investment committee
Social, ethics and human resources committee
AR Martin (chairman)
R Havenstein (chairman)
R Havenstein (chairman)
TE Kgosi (chairperson)
ME Beckett
ME Beckett
CK Chabedi
ME Beckett
R Havenstein
CK Chabedi
JAK Cochrane
R Havenstein
TE Kgosi
AR Martin
By invitation:
By invitation:
By invitation:
By invitation:
Management
Management
Management
Management
Internal audit External audit
NORTHAM ANNUAL INTEGRATED REPORT 2014
24
BOARD OF DIRECTORS
appointed a director and chief executive with effect from 1 March 2014 and, in accordance with the provisions of article 34.5.4, retires from office and, being eligible and available, has offered himself for re-election and appointment. Accordingly at the forthcoming AGM members will be requested to consider a resolution providing for the election and re-appointment of Mr Paul Dunne as an executive director of the company.
As at 30 June 2014, the company’s board comprised nine directors, two of whom were executive directors, being the chief executive officer and the chief financial officer. Five of the seven non-executive directors are regarded as being independent in terms of King III. Subsequent to year-end, Mr Jim Cochrane’s status changed from a non-executive director to that of an independent non-executive. Northam has a unitary board led by a non-executive chairman, Mr Lazarus Zim, who was appointed in 2007. Mr Zim, although non-executive, is not independent and therefore a non-executive lead independent director, Mr Alwyn Martin, was appointed in 2010. It is the responsibility of the board to ensure that its composition is appropriate in terms of skills, knowledge, experience, independence and gender in line with legislation and best corporate governance practice.
Further, in terms of article 34.5.1 of the company’s MOI one third of the non-executive directors, being those longest in office, must retire from office at each AGM. A retiring director who is eligible and available may offer himself or herself for re-election and appointment. Mr Jim Cochrane, Mr Ralph Havenstein and Mr Lazarus Zim retire by rotation and, being eligible and available, offer themselves for re-election. Accordingly at the forthcoming AGM members will be requested to consider resolutions providing for the election and re-appointment of the aforementioned non-executive directors of the company.
Changes to the board During the year under review, Dr Judy Dlamini resigned as a director on 30 September 2013. Mr Paul Dunne was appointed a director and chief executive officer on 1 March 2014 in place of Mr Glyn Lewis who resigned as a director and chief executive on the same day.
Brief summaries of their curricula vitae appear on pages 22 and 23.
Board and committee meetings The board and its committees meet at least once a quarter; ad hoc meetings may also be called to consider specific issues. The investment committee meets as and when required. All directors are required to declare their directorships and interests. At each board and committee meeting they are requested to declare any conflict of interest in matters pending.
Re-election of directors In terms of article 34.5.4 of the company’s MOI any person appointed to the board during the year shall hold office only until the next following annual general meeting (AGM) of the company and shall then retire and be eligible for re-election. Mr Paul Dunne was
25
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD MEETING ATTENDANCE 29 Jul 2013
13 Aug 2013
6 Nov 2013
27 Nov 2013
19 Feb 2014
23 April 2014
24 June 2014
PL Zim (chairman)
3
3
3
Apology
3
3
3
PA Dunne (CEO)*
N/A
N/A
N/A
N/A
N/A
3
3
AZ Khumalo (CFO)
3
3
3
3
3
3
3
GT Lewis**
3
3
3
3
3
N/A
N/A
ME Beckett
%
%
3
%
3
3
3
CK Chabedi
3
3
3
%
3
3
%
JAK Cochrane
%
3
%
%
%
%
3
NJ Dlamini***
Date
Apology
3
N/A
N/A
N/A
N/A
N/A
TE Kgosi
3
3
3
3
3
3
3
R Havenstein
3
3
3
3
3
3
3
AR Martin (lead independent)
%
3
3
3
3
3
3
* appointed 1 March 2014 ** resigned 1 March 2014 *** resigned 30 September 2013 Key 3 attended
% participated telephonically
N/A not applicable
Board charter and committees’ terms of reference
care, skill and diligence. The board charter and the board committees’ terms of reference are reviewed annually, and are available on the Northam website at www.northam.co.za.
The board of directors’ charter articulates the objectives and responsibilities of the board. Each of the board committees operates in accordance with written terms of reference, which are regularly reviewed by the board. The board takes ultimate responsibility for the group’s adherence to sound corporate governance standards and seeks to ensure that all business decisions and judgements are made with reasonable
NORTHAM ANNUAL INTEGRATED REPORT 2014
The key responsibilities of the board in terms of its charter are as follows: • determining the group’s strategy and related plans and objectives; • delegating adequate powers to the chief executive officer and chief financial officer in order to execute
26
the group’s strategy, achieve group objectives and run the group’s business;
company secretary. Overall consensus was that the board is working well, has a good mix of directors and that there is a high commitment to work in the best interests of Northam. Individual director assessments, re-appointment of the board chairman and the independence test prescribed by King III for directors classified as “independent” were undertaken and each board committee conducted an annual evaluation.
• implementing, maintaining and monitoring corporate governance practice with the company; • determining the board’s charter and the terms of reference of board committees; • identifying and managing the risks and opportunities of the group; • ensuring board committees are mandated for specific tasks and that these committees are effective;
Company secretary During the financial year, and in compliance with the JSE listings requirements, the board evaluated the performance of the company secretary and is satisfied that the company secretary is competent, suitably qualified and experienced. Furthermore, since she is not a director, nor is she related to or connected to any of the directors, thereby negating a potential conflict of interest, she maintains an arm’s length relationship with the board.
• reviewing performance of executive directors and senior management; • approving the budget of the group, including capital and project expenditure; • ensuring that there are effective risk and internal controls over all the business processes of the group, including that of information technology; • considering and approving Northam’s interim results, announcement of financial results, the annual financial statements, the sustainability report and the annual integrated report;
The company secretary oversees corporate governance matters within the group in line with King III and the Companies Act and new directors undergo an appropriate induction process. The company secretary seeks to ensure compliance with all statutory and listing requirements relating to the group and ensures that minutes of meetings are kept for shareholder, board and committee meetings in terms of the Companies Act.
• reporting to shareholders and other stakeholders of the group; • ensuring compliance with legislation and corporate governance rules; and • ensuring the effectiveness of the board, board committees and their members.
JSE listings requirements
Annual performance evaluation of board and committees
As a listed entity Northam is required to comply with the JSE’s listings requirements and certification of this is submitted to the JSE annually. Northam’s submissions are currently up to date.
The annual board evaluation was conducted during the year, led by the chairman and facilitated by the
27
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD COMMITTEES Audit and risk committee ATTENDANCE AT AUDIT AND RISK COMMITTEE MEETINGS Date
12 Aug 2013
23 Sep 2013
4 Nov 2013
17 Feb 2014
22 Apr 2014
AR Martin (chairman)
3
3
3
3
3
TE Kgosi
3
3
3
%
3
ME Beckett
3
3
3
3
3
R Havenstein
3
3
3
3
3
Key 3 attended
% participated telephonically
Audit and risk committee members are elected at each AGM in line with the Companies Act and King III. To this end, shareholders will be required, at the forthcoming AGM to approve the necessary resolution appointing the committee. The members of the committee are independent non-executive directors, and the committee is chaired by an independent non-executive director, who in this instance is also the lead independent director. The board is satisfied that members of the audit and risk committee have the requisite skills, understanding of corporate law and adequate practical experience relevant to the business of Northam. They also understand the International Financial Reporting Standards framework in terms of which Northam must report as a listed company.
Audit and risk committee terms of reference
The chief executive and chief financial officer are invitees to these meetings and both external and internal auditors are invited to attend. At least once a year, the external and internal audit plans are reviewed and approved for the year ahead. The internal audit plan is approved after management’s input on areas needing special attention. The committee also approves and reviews the risk management report twice yearly, based on management proposals that identify key risks and measures in place to mitigate these risks.
• ensure the independence of the external and internal auditors;
NORTHAM ANNUAL INTEGRATED REPORT 2014
The committee’s terms of reference is available on the Northam website at www.northam.co.za and the key responsibilities are as follows: • review and recommend to the board for approval the interim report and preliminary announcement of results, the annual financial statements, annual integrated report and the sustainability report; • appoint and evaluate the external auditors and their terms of engagement; • appoint and evaluate the internal auditors and their mandate; • approve the remuneration of the external and internal auditors;
• approve non-audit work which may be performed by the external auditors which includes tax compliance services, assurance related work in respect of any corporate actions and opinions not related to any prohibited services; • ensure that company risks are properly assessed and monitored by management and that a risk register is maintained, and to ensure that such risks are adequately mitigated; 28
In accordance with the Companies Act, the committee reviewed and was satisfied that Mr Mike Herbst of Ernst & Young is independent of the Northam group of companies, in his capacity as the designated auditor for the 30 June 2014 financial year. This committee is required to satisfy itself annually regarding the independence of the external auditors and to approve their audit plan and fees.
• assess the qualifications and effectiveness of the chief financial officer and the effectiveness of the group’s finance department in line with King III; • ensure that internal controls of the company are implemented, effective and are monitored by management; and • ensure that there is a cordial working relationship between management and external and internal auditors.
Internal audit
The risk assessment of the audit and risk committee also involves a review of the role of the information technology (IT) systems within the business, ensuring that IT risk and controls support business continuity. The committee reviews the risk register, which incorporates the legislation and regulatory compliance scorecard, to ensure risks of the business are identified and mitigated by management and laws and regulations are complied with by the group. It is also the responsibility of the committee to review the company’s internal control policies on behalf of the board. The committee’s report is available on page 139 of this document.
The internal audit function of the company is outsourced to KPMG Services Proprietary Limited. The audit and risk committee annually satisfies itself that the internal audit function is independent and effective. Internal audit also has unrestricted access to the chairman of the audit and risk committee. The annual approved scope of internal audit covers the following: • testing the effectiveness of internal controls;
External audit
• checking IT risks and controls and ensuring their effectiveness; and
The group’s external auditors, Ernst & Young Inc., have unrestricted access to the audit and risk committee.
• checking the reliability and integrity of financial information.
Health, safety and environmental (HSE) committee ATTENDANCE AT HSE COMMITTEE: Date R Havenstein (chairman)
12 Aug 2013
5 Nov 2013
18 Feb 2014
22 Apr 2014
3
3
3
3
ME Beckett*
N/A
3
3
3
NJ Dlamini**
3
N/A
N/A
N/A
CK Chabedi
3
3
3
3
* appointed 1 October 2013 ** resigned 30 September 2013 Key 3 attended
N/A not applicable
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LEADERSHIP AND ACCOUNTABILITY
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT CONTINUED
This committee comprises three independent non-executive directors. Mr ME Beckett was appointed a member on 1 October 2013 in place of Dr NJ Dlamini who resigned as a member on 30 September 2013. The chief executive and chief financial officer are invited to attend committee meetings which are held every quarter. The HSE committee terms of reference is available on the Northam website at www.northam.co.za. The committee is charged with ensuring the group’s performance on such sustainability issues as safety, health and the environment at the mines, especially as they affect employees and communities in the areas in which the group operates. This committee has oversight of policies, records and reporting systems pertaining to typical occupational safety and other endemic health issues associated with the mining industry.
Investment committee ATTENDANCE AT INVESTMENT COMMITTEE MEETINGS Date R Havenstein (chairman) JAK Cochrane CK Chabedi AR Martin NJ Dlamini* *
2 October 2013 3 % 3 3 N/A
29 January 2014 3 Apology 3 3 N/A
resigned 30 September 2013
Key 3 attended
% participated telephonically
N/A not applicable
This committee’s members are four independent non-executive directors. Dr NJ Dlamini resigned as a member on 30 September 2013. The committee’s terms of reference is available on the Northam website at www.northam.co.za. The committee was established in April 2012 to evaluate and advise the board on all acquisitions and investmentrelated opportunities. The committee does not have a regular meeting schedule, but meets as required, to consider the suitability and compatibility of potential investments and their returns, weighted against the interests of shareholders. The chief executive and chief financial officer are invited to attend committee meetings.
Social, ethics and human resources (SE&HR) committee ATTENDANCE AT SE&HR COMMITTEE MEETINGS Date TE Kgosi (chairperson) R Havenstein ME Beckett NJ Dlamini* *
12 Aug 2013 3 3 3 %
5 Nov 2013 3 3 3 N/A
12 Dec 2013 3 3 % N/A
resigned 30 September 2013
Key 3 attended
% participated telephonically
N/A not applicable
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18 Feb 2014 3 3 3 N/A
22 Apr 2014 3 3 3 N/A
23 Jun 2014 3 3 3 N/A
This committee’s members are three independent non-executive directors. Dr NJ Dlamini resigned as a member on 30 September 2013. The chief executive and chief financial officer are invited to attend committee meetings and the committee meets at least once every quarter.
of the DMR to bolster Northam’s empowerment status. A successful conclusion will enable the company to pursue its strategic ambitions.
CODE OF ETHICS The group’s code of ethics is reviewed annually, and was updated by the board in April 2014. This code applies to both directors and employees and governs the interaction between the group and its suppliers, contractors, and customers. It also covers the use of group assets and confidential information. A breach of the code of ethics could result in disciplinary action and/or civil or criminal action being taken against a perpetrator. The code of ethics is available on the Northam website at www.northam.co.za.
The main functions of the SE&HR committee are remuneration, nomination, transformation and as set out in the Companies Act, the monitoring of the group’s social and ethics statutory requirements. In terms of King III the chairman of the board should be a member of the nomination committee. The chairman of the board is not an independent director and therefore is not a member of this committee, but may attend committee meetings by invitation for nomination matters requiring approval by the board.
INSIDER TRADING The company has clear rules and guidelines in place which seek to ensure that employees do not contravene the JSE’s rules on insider trading. Neither directors nor employees are allowed to deal in the company’s shares if they are in possession of nonpublic information or during closed periods. These rules also extend to close relatives of directors and employees. Directors and employees are required to obtain prior approval for dealing in the company’s shares and are routinely advised of the company’s closed periods.
SE&HR COMMITTEE TERMS OF REFERENCE The committee’s terms of reference is available on the Northam website at www.northam.co.za and the committee’s report may be found on page 39 of this annual integrated report 2014.
BLACK ECONOMIC EMPOWERMENT (BEE) AND COMPLIANCE Northam continues to progress with an empowerment transaction to restore its historically disadvantaged South African (HDSA) ownership levels to 26% in line with South African minerals legislation. This follows a decline in the group’s black economic empowerment shareholding in 2012 (which was at 26% in May 2011 following the unbundling of shares by Mvelaphanda Resources Limited) when the company’s major HDSA shareholders disposed of their Northam shares to address a shortfall in finance agreement covenants following a general decline in share prices of platinum producers listed on the JSE.
ETHICS 24-HOUR WHISTLE-BLOWING HOTLINE Northam’s ethics hotline number 0800 15 25 39 became effective in 2011 and is monitored by an external party (KPMG), 24 hours a day in all the official languages of South Africa. Anyone (whistleblower) may anonymously report corruption, fraudulent activity or other problems for investigation. All whistle-blowers are protected against any form of victimisation provided disclosures are made in accordance with the provisions of the Protected Disclosures Act, No 26 of 2000.
The company’s efforts are focused on balancing the needs of current shareholders with the requirements 31
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CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT CONTINUED
DONATIONS
REPORTING TO STAKEHOLDERS
The company has a long-standing policy which prohibits, inter alia, donations of a political nature. Furthermore, employees may not accept gifts, hospitality or favours from suppliers or contractors of more than a nominal value. All gifts and entertainment details are recorded in a gift register for record purposes.
The board is acutely aware of the requirements for the group to engage with analysts, shareholders and stakeholders alike about the group’s financial performance, operational developments and sustainability indicators and impacts. Along with the print and electronic publication and dissemination of results on a half-yearly basis, the company regularly hosts visits, presentations, briefings and meetings with interested shareholders, institutions and other stakeholders. Feedback is a critical element of such engagement processes and is communicated to the relevant executive directors for discussion at board level.
CONFLICTS OF INTEREST Members of the board and its committees are required to declare their interests in any matters to be discussed at every board and committee meeting. All board and committee members are required to report any conflicts of interest that may arise in the course of their duties in order to avoid corruption.
APPROVAL FRAMEWORK The approval framework governs the delegation of authority and value limits within the group and is necessary to ensure that all transactions are approved appropriately. This enables management to limit the potential damage that any unauthorised expenditure or corruption could inflict on the group.
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The board is ultimately responsible for ensuring that the group’s system of internal control is effective to guard against any loss of the group’s assets. Internal and external auditors, as well as management, continuously provide assurance on the effectiveness of internal controls. The risk assessment and management function, therefore, covers any material routine transactional or occasional risks that a mining group of the nature and size of Northam, is subjected to in the ordinary course of business.
and ranked on the basis of their materiality. Inherent risk and mitigating steps are identified, so as to ensure that the level of residual risk is acceptable to management. Assessing risk includes testing the extent of compliance with applicable legislation, and is performed by completing the regulatory compliance scorecard. The board of directors appreciates that sustainability is an ethical and economic imperative for business in the 21st century – in terms of risk management and the opportunities it presents. The relationship between good governance, good leadership and excellent financial performance is evident, and entails defining strategy, providing direction and establishing the ethics and values that will influence and guide practices and conduct with regard to sustainability performance.
Risk assessment is an executive management function and is overseen by the audit and risk committee on behalf of the board. In terms of the group’s risk management framework, which incorporates an ongoing risk review process, the major risks of the group that may materially affect its ability to create value from business opportunities are identified,
Booysendal is a shallow, fully mechanised UG2 mining operation
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LEADERSHIP AND ACCOUNTABILITY
MANAGING BUSINESS RISK AND OPPORTUNITIES
MANAGING BUSINESS RISK AND OPPORTUNITIES CONTINUED
RISKS IDENTIFIED COUNTRY REGULATORY RISK
MANAGEMENT RESPONSE
The South African mining environment is governed by legislation to redress some of the social and economic imbalances resulting from the discriminatory policies and practices of the past. The Mineral and Petroleum Resources Development Act No 28 of 2002 (MPRDA) and the Mining Charter (revised in 2011) create the framework for the transformation of the mining industry. A key aspect of this legislation is the vesting of all mineral rights in the state and promoting more equitable ownership of South Africa’s mineral resources, by requiring a 26% BEE interest in the equity of mining companies by April 2014.
Northam has previously advised shareholders of a decrease in these equity levels which stood at 4% as at 30 June 2014.
LABOUR AND SOCIO-POLITICAL RISK
MANAGEMENT RESPONSE
Since the tragic events at Marikana in 2012, the industrial relations climate throughout the mining industry has been volatile and uncertain.
In recognition of employees’ freedom of association, Northam’s policy is to grant organisational rights to any union with representation of 15% or more of a relevant category of employees. Management maintains open channels of communication with its labour force, both directly and with representative union structures. For bargaining rights, a union is required to prove 33.3% representation of its relevant constituency. In addition, management consults with any legitimate worker representatives or committees to resolve any concerns which may arise. Northam has also responded to government’s call on mining groups for more proactive socio-economic engagement in employee communities, and to improve employee housing and related infrastructure. Among a number of improvements, and in line with the company’s Social and Labour Plans (SLPs) (which effectively serve as the company’s licence to operate) at Zondereinde, Northam has sold 359 houses to employees as part of an affordable housing scheme, while the traditional hostels are being de-intensified to relieve overcrowded conditions. Northam is engaged in a number of other initiatives to benefit employees and their communities, and publishes these in the social capital section of this report (page 113). These initiatives are currently being evaluated and fast tracked where there are shortfalls.
Labour relations is governed by several pieces of legislation, the main one being the Labour Relations Act No. 66 of 1995 (LRA) which amongst other things, favours union majoritarianism, a factor which has been challenged by the emergence of unions such as AMCU. Inter-union rivalry and militancy, especially between the NUM and AMCU has increased the spectre of violence especially in the Rustenburg platinum belt. Northam’s Zondereinde mine was badly impacted by 11 weeks of strike action called by the NUM, the majority union on the mine. The strike started on 3 November 2013 and terminated on 21 January 2014. This strike was immediately followed by a five-month strike, the longest in South African labour relations history, called by rival union AMCU, which affected the operations of Anglo American Platinum Limited (Amplats), Impala Platinum Holdings Limited (Implats) and Lonmin plc (Lonmin). This strike is further evidence of the complex social and labour climate in postapartheid South Africa.
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HEALTH AND SAFETY RISK
MANAGEMENT RESPONSE
The occupational illnesses associated with underground mining operations are those caused inter alia, by excessive exposure to heat, dust, noise, radiation and gases. Consequently, the mining industry is subject to stringent health and safety laws and regulations. In certain cases, amendments to health and safety legislation could result in the group incurring additional costs in order to comply with new laws and regulation. In addition, the industry as a whole is experiencing the negative effects of medical pandemics such as HIV/Aids and TB. These medical conditions adversely affect productivity and costs.
Underground mining is inherently hazardous and requires full compliance with health and safety regulations, compulsory safety training and the use of personal protective equipment. Non-compliance with safety standards may lead to costly mine stoppages. HIV/Aids and TB have been aggressively targeted with a strong focus on prevention, through education initiatives and community involvement, as well as the implementation of a monitored employee wellness programme which includes the provision of anti-retroviral treatment (ART) for those affected. At Zondereinde, the use of hydropower itself largely eliminates the presence of dust in the workings. The group has adopted a zero tolerance policy towards safety infringements. All infringements are investigated, and employees may face disciplinary hearings, which may lead to suspension or dismissal. In addition, the group undertakes continuous training campaigns for its employees. Mining standards are meticulously and constantly revised in order to facilitate compliance. Where possible mechanisation is favoured and implemented as a mining method given its improved safety record.
ENVIRONMENTAL AND SOCIAL RISK
MANAGEMENT RESPONSE
In keeping with the rest of the mining sector in South Africa, the group has to ensure that it complies with constantly changing environmental laws and regulations, and that it effectively manages the increasing risk associated with community and social obligations and aspirations. Compliance with changing regulatory standards and community expectations may result in increased costs, which would negatively impact cash flows and earnings. Please see the stakeholder engagement section on page 82 of this report.
The group’s approach is to engage with its various stakeholders on an ongoing basis in order to develop sound relationships with those affected by its mining operations. In addition, the group seeks to comply with all environmental legislation, in order to ensure the sustainability of its operations.
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LEADERSHIP AND ACCOUNTABILITY
MANAGING BUSINESS RISK AND OPPORTUNITIES
MANAGING BUSINESS RISK AND OPPORTUNITIES CONTINUED
MARKET, FINANCIAL AND FINANCING RISK
MANAGEMENT RESPONSE
1. The risks of metal price fluctuations and exchange rates are inextricably linked with the business of Northam. As a PGM producer, the group is a price taker and thus has no control over the commodity prices, which are denominated in US dollars.
1. The company provides investors with full exposure to the PGM markets, and does not hedge either its currency or commodity price risk.
2. The group’s mining operations are exposed to the effects of mining input cost increases, which are denominated in South African rand. As a PGM producer, the group is a price taker, and the higher than inflation increases a number of input costs, including labour and power in South Africa has squeezed the profitability of all mines in the last decade.
2. The group’s response to production cost pressures is to ensure, as far as practicably possible, that price increases granted to suppliers remain within the consumer price index, while working towards achieving greater production efficiencies in order to contain unit cost increases. Through its association with the Platinum Guild International, the group promotes the use of PGMs primarily in the jewellery sector, thus helping to sustain a strong demand for PGMs.
3. Protracted and repeated industrial action resulting in the lack of production is a threat to the viability of mining in South Africa.
3. Northam participates in the Chamber of Mines’ efforts to maintain good relations with all union structures and employees.
4. In order to fund the completion of its second mine, Booysendal, the group has borrowed from a bank and the debt capital markets, and is therefore exposed to financing risk associated with the debt market and interest rates.
4. In order to mitigate and contain this risk, the company is committed to repaying such debt as expeditiously as possible. This is underpinned by a continued focus on optimising operational performance and cost containment.
HUMAN RESOURCE SKILLS AND CAPACITY
MANAGEMENT RESPONSE
Global competition for expertise and skills in the technical field as well as the distance of the operations from major urban centres, have put pressure on the group to attract and retain appropriate technical skills. In addition, the poor standard of education in South Africa has led to low levels of skills.
The group has developed appropriate remuneration policies and practices to retain its technical competitive edge in the industry and aims to keep abreast of developments in this area. Other mitigation measures include intensive skills upliftment programmes, in-house training and learnerships.
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GEOLOGICAL AND ORE RESOURCE RISK
MANAGEMENT RESPONSE
The Zondereinde mine is the deepest platinum mine in the world and its geology is challenging. It is associated with difficult mining conditions, which may result in ore reserve losses. Geological and mining conditions are constantly monitored to reduce the associated risk.
Mitigation measures include developing less complex ore reserve. The deepening project at Zondereinde will help to alleviate some of the challenges associated with mining the Merensky reef, by improving Merensky ore availability while Booysendal mine provides further geographic diversification and access to a less complex, shallower ore body that can be mined mechanically. Plans are in place to increase the exploitation of the more conformable and planar UG2 reef at Zondereinde, thereby also increasing the life of mine.
INFRASTRUCTURAL SERVICE SUPPLY RISK
MANAGEMENT RESPONSE
The group is dependent on the reliable supply of power in order to conduct its operations. South Africa’s national electricity utility, Eskom, currently has very little surplus generating capacity and is struggling to provide a reliable service to the industry in South Africa. Eskom has sought to limit power consumption by large users such as mines during peak hours, by up to 10%.
The group has engaged with Eskom so that it is given advance warning of any possible outages in order to secure employees’ safety and protect its assets. It is not always possible to determine the cost of power disruptions, which are likely to persist in the medium term. The group has instituted a number of measures in order to reduce its maximum demand as well as to lower its total power consumption.
OPERATIONAL RISKS
MANAGEMENT RESPONSE
The group is currently involved in the ramping up of production at the Booysendal mine to steady state and the deepening project at the Zondereinde mine, to improve the availability of Merensky ore, both of which present challenges.
By employing a multi-disciplinary approach to the planning and execution, the group is better equipped to identify and resolve problems.
The group currently operates a single stream process of smelting, base metal removal and refining.
The group maintains good relations with third party toll smelters. There are long term plans to increase smelting capacity at Zondereinde using a different technology that will process higher chrome content ore.
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MANAGING BUSINESS RISK AND OPPORTUNITIES
MANAGING BUSINESS RISK AND OPPORTUNITIES CONTINUED
RISK FINANCING
standards co-ordinator and a risk officer. Appropriate safety staff man the mechanised Booysendal mine which is inherently less risky owing to the mechanised mining methodology.
Risk financing forms an integral part of the group’s risk management philosophy. In this regard, the group ensures that it has adequate insurance cover to safeguard it against major losses. The cover is arranged in respect of material damage and business interruption, and is split between the South African and international insurance markets. Should the group suffer a major loss, future earnings could be affected.
Although the total injury incidence rate has shown a discernible downward trend over the years at Zondereinde, the severity of injuries has increased. Booysendal has an excellent safety record to date.
INTEGRATED REPORTING AND DISCLOSURE
HEALTH AND SAFETY The board-appointed health, safety and environment committee is ultimately responsible for ensuring compliance with legislation and monitoring performance with regard to health and safety. The committee, comprising three non-executive directors, meets on a quarterly basis.
Policies, practices and performance relating to sustainable development form an integral part of the management of the group. Responsibility for these matters lies with the board. The audit and risk committee assists the board in approving the disclosure of sustainability issues in the annual integrated report. This document provides extensive discussion on the operational and financial performance of the group and the material environmental, social and governance (ESG) issues that underpin the group’s business performance, thus enabling stakeholders to make an informed assessment of the economic viability of the group and the sustainability of its business.
Overall co-ordination of the safety function vests with the best practice manager who reports directly to the general manager. The best practice department is tasked with the overall training and optimisation function. Risk management is an integral part of this structure, and the risk management processes are used to drive the revision of standards and updating of training material. Safety officers audit the requirements as defined by the standard procedures and the training of employees as specified by the training material.
COMBINED ASSURANCE The audit and risk committee must ensure that a combined assurance model is applied to provide a co-ordinated approach to all assurance activities, in particular ensuring that the assurance received is appropriate to address all the significant risks facing the company, and monitoring the relationship between the external assurance providers of the company.
A best practice manager, a safety co-ordinator, two chief safety officers and six additional safety officers fulfil safety functions across the Zondereinde mine, while safety and training coaches/instructors are involved in cross-auditing working areas for hazard identification. They are supported by a risk and
NORTHAM ANNUAL INTEGRATED REPORT 2014
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• Northam’s performance as a corporate citizen, including promoting equality, prevention of discrimination, development of communities, sponsorship, donations and charitable giving;
The Companies Act No 71 of 2008 (Companies Act) requires that certain companies, of which Northam is one, constitute a social and ethics committee with statutory duties, which must report to shareholders at an annual general meeting (AGM). The company’s social, ethics and human resources (SE&HR) committee is responsible for these statutory duties.
• the impact of Northam’s activities on the environment, health and public safety; • compliance with the United Nations (UN) Global Compact’s 10 principles on human rights, labour, the environment and anti-corruption;
The current members of the SE&HR committee are Ms TE Kgosi (chairperson), Mr ME Beckett and Mr R Havenstein, all of whom are independent non-executive directors. Dr NJ Dlamini resigned as a member on 30 September 2013.
• compliance with the Organisation of Economic Co-operation and Development (OECD) recommendations on anti-corruption; • consumer relationships, including Northam’s advertising, public relations and compliance with consumer protection laws, and
The main functions of the SE&HR committee are remuneration, nomination, transformation and, as set out in the Companies Act, the monitoring of the company’s activities with regard to the social and ethics statutory requirements.
• labour and employment in terms of the International Labour Organisation’s (ILO) protocol on decent work and working conditions and Northam’s contribution to the training and development of its employees.
SE&HR COMMITTEE TERMS OF REFERENCE
SOCIAL AND ETHICS STATUTORY OBLIGATIONS
The committee’s terms of reference is available on the Northam website at www.northam.co.za and the aims and objectives of the committee are:
In terms of its social and ethics obligations, the committee focuses on monitoring social and economic development goals and the effects of the group’s activities, and ensures that these are sustainable. Group business activities are required to manifest sound corporate citizenship principles, and fair labour practices.
• to enable the board to establish and implement a remuneration policy which empowers the group to source, reward and retain skilled personnel; • to advise on salaries, bonus schemes and share incentive plans; • to ensure the appointment of competent directors and senior managers;
For the financial year 2014, the committee performed its duties in terms of these obligations and confirms that:
• to ensure that the group transforms adequately in order to comply with the Minerals and Petroleum Resources Development Act (MPRDA) and Mining Charter in a manner that will enhance the group’s performance;
a) generally accepted norms on the environment, labour and human rights have been adhered to. Northam is not aware, nor is it complicit in any labour or human rights abuses or environmental damage;
• to comply with the Companies Act in terms of social and ethics obligations which includes the monitoring of;
b) social and economic development goals in terms of the 10 principles set out in the UN Global Compact are complied with; 39
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE CONTINUED monitoring procedures are implemented, monitored and effective;
c) that sound corporate citizenship principles are pursued in the promotion of equality, the prevention of discrimination and the development of surrounding communities;
• there is adequate reporting by independent external assurance providers such as internal and external auditors as well as environmental assurance providers. The main regulators, the DMR and the Department of Labour (DoL) routinely inspect various aspects of the business and/or activities which must comply with legislation; and
d) in its activities the company has taken appropriate measures to minimise the impact of its activities and products on health, public safety and the environment; e) Northam seeks to promote cordial relationships with all its stakeholders; and
• Northam’s participation in mining industry initiatives undertaken by organisations such as the Chamber of Mines and the Platinum Task Team, which is convened under the auspices of the Mining Industry Growth Development and Employment Task Team (MIGDETT).
f) labour and employment legislation in South Africa, and as far as possible the ILO’s protocol on decent work are complied with. The OECD’s recommendations against corruption have been taken into account by ensuring that management has effective internal controls.
HUMAN RESOURCES STATUTORY OBLIGATIONS
The committee has sought to fulfil its obligations by ensuring:
The committee is charged with the oversight of the group’s compliance with the Labour Relations Act (LRA), the Basic Conditions of Employment Act (BCEA) and implementation of various forms of remuneration.
• that the group’s corporate governance structures are effective and all board committees report appropriately and timeously to the board;
Amend Social and Labour Plans (SLP) for Booysendal and Zondereinde mines were submitted to the DMR in December 2012. Formal approvals are still outstanding, given administrative delays in the processing of these documents.
• that the evaluation of the board, assessment of the board chairman and individual directors, the independence test prescribed by King III for directors classified as independent who have been on the board beyond nine years, and the evaluations of the board committee are undertaken annually;
Over the past 12 months the Mining Qualifications Authority (MQA) conducted an audit at Zondereinde on Northam’s systems department. The audit did not reveal any areas of non-compliance.
• the appointment of competent directors and senior managers; • that management is adequately qualified and equipped so that internal controls over such matters such as safety, production, financial transactions, legal obligations and environmental
NORTHAM ANNUAL INTEGRATED REPORT 2014
The committee is also responsible for the remuneration philosophy within the Northam group in terms of its mandate from the board.
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the variable and changing needs of the dynamic and competitive mining employment environment.
The aims and objectives of the committee regarding remuneration are to establish and implement a remuneration policy and to ensure that competent individuals are nominated and appointed as directors and senior managers.
There are, however, a number of key principles that are the basis of the remuneration policy:
In order to do this, the committee oversees and monitors the group’s remuneration criteria and methods. Remuneration takes the form of:
• the attraction and retention of core skills, such as artisans, engineers and management, for which the group must compete within the broader mining industry;
1. appropriate salary packages, including those of the executive directors which incorporate basic pay and pension contribution benefits;
• the harmonisation of working conditions and salaries and wages throughout the group at both of its wholly-owned and managed mining operations;
2. various bonus schemes;
• compliance with all statutory and regulatory requirements and a commitment to applying best practice guidelines in all aspects of remuneration and benefits, and
3. a share incentive plan launched in 2011 which replaced a share option scheme. The committee is also responsible for mandating management on appropriate wage increase thresholds for union negotiations and advises on the following matters:
• the offering of remuneration packages that, at all employment levels, are competitive, fair, reasonable in all respects.
• the appropriate composition and size of the board; and
MAIN FEATURES OF THE REMUNERATION POLICY
• the scale of fees to be paid to non-executive directors, which are submitted to shareholders for approval. The group’s remuneration policy is designed to support its strategic goal in a way that aligns the interests of employees, managers, executives and directors with those of shareholders. The group aims to attract, retain, incentivise and reward top quality staff at all levels, in particular where scarce or critical skills are involved.
Contracts of employment are prepared in compliance with employment legislation in South Africa. As a general principle, employment contracts are concluded on a permanent basis (i.e. for an indefinite period), except where business needs and prevailing circumstances dictate the use of either fixed-term or short-term temporary contracts. The notice period for the termination of employment contracts is typically one month, but for critical positions this can be extended by mutual agreement to a maximum of one year.
The remuneration policy is not intended to be a ‘one size fits all’ statement of rules and procedures, but rather to serve as the basis for a flexible approach to
The group regularly seeks and consults remuneration survey services and uses the Patterson job grading system.
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LEADERSHIP AND ACCOUNTABILITY
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE CONTINUED policy at all job levels is to pay the contractual notice period (if not worked) and severance pay equal to two weeks for the first 10 years of service with the group and one week’s remuneration per year of service with the group thereafter.
Job grades, salary scales and employee benefit costs are benchmarked against mining industry standards and reviewed annually. The midpoints of the group’s salary scales are compared with industry percentiles and adjusted annually, in line with the changing size, structure, financial performance and general circumstances of the group over time.
The group does not provide any special retirement benefits other than the standard benefits available to employees as members of one of the group’s recognised retirement funds, with the exception of those employees who were in service with the group on 31 December 1998. In respect of these employees, a contribution is made to a post-retirement healthcare fund. These contributions cease when the employee leaves the service of the group for any reason.
The group’s salary scales have a range of approximately 40% (20% on either side of the midpoint) to allow for the appropriate positioning of individuals according to factors such as qualifications, experience, performance, growth, development and market imperatives. However, in a very competitive market where skills are scarce such as is the case of the mining industry, often market comparisons at the top of the range are considered and paid, in order to attract and keep critical staff.
All components of the group’s remuneration system are subject to regular internal and external audits, as well as routine monitoring by the South African Revenue Services. The committee is satisfied that the group is compliant with all pertinent regulations.
The committee approves salary increases for all categories of staff in advance each year. Any material changes to allowances, benefits, bonus schemes, or any other aspect of remuneration policy are approved by the committee prior to implementation.
EMPLOYEES COVERED BY COLLECTIVE BARGAINING The majority of the group’s permanent employees at Zondereinde are contributing members of NUM (primarily in the category 2 to 10 bargaining units). Therefore, their salary levels, annual increases, allowances and benefit packages are negotiated on a collective basis. NUM has been granted organisational rights at Booysendal. The company’s labour relations policies provide for organisational rights to any union which can meet a15% representation threshold within a bargaining unit. When a registered union reaches a
The group provides a market-competitive basic salary plus compulsory medical aid and retirement fund membership at all job levels. Various fixed and variable allowances are paid at certain job levels or to certain job categories. Severance payments upon termination of service are governed by legislation, agreements with unions, individual contract and/or group policy and practice. In the case of retrenchment, the group’s most common
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EMPLOYEE BONUSES
representative threshold of 33.3% within a bargaining unit, it acquires the right to bargain for that particular unit. A small proportion of permanent employees (approximately 23%) are contributing members of NUM at Booysendal.
The group has a variety of bonus schemes for employees graded in the C band and higher, whereby the achievement of production and other targets is rewarded.
EXECUTIVE AND MANAGEMENT BONUSES
The group aims to engage in good faith to reach agreement on matters such as wages, substantive conditions of service and other matters of mutual interest. See pages 102 – 105 of this report for further information.
Executives and senior officials’ bonus scheme Executives and senior officials are not paid a guaranteed bonus. The bonus scheme is subject to the achievement of certain safety, production and other criteria or targets as well as individual performance.
In addition to their wages these employees also earn various forms of bonuses to incentivise performance.
NON-UNION STAFF AND MANAGEMENT
In terms of the rules of the bonus scheme, executives may earn a bonus based on the extent to which they have achieved the targets and objectives set for them during the financial year by the chief executive, the SE&HR committee and the board of directors. Bonuses are payable half-yearly.
Members of management at both the group’s corporate office and the mining operations are treated individually in accordance with their contracts of employment and the remuneration and benefit schemes and practices applicable to their job grades. Salaries are reviewed annually, effective 1 July. Salary increases are determined individually, according to individual performance, retention and marketmatching criteria.
Typically, the bonus scheme will be based on a combination of targets such as: • safety; • linear metres advanced;
All non-union staff, managers and executives have detailed job profiles which stipulate the key performance areas of their positions and serve as the basis for performance and management of assessments and the determination of performancelinked salary increases and bonuses.
• square metres mined; • total tonnes milled; • recoverable metals produced; • cash operating costs; • transformation (referring to social employment quotas/criteria that must be met in terms of employment legislation in South Africa); and
Details of the remuneration paid to the directors are disclosed in the directors’ report on page 142 of this integrated report.
• personal performance.
43
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE CONTINUED The tables below indicate the performance targets or criteria for the F2014 bonuses: Performance criteria: Zondereinde and corporate office
Unit
Weighting %
LTIIR/TIIR
30
Linear metres
m
10
Square metres
m2
10
tonnes
10
Safety
Total tonnes milled Recoverable metals
kg
15
Cash operating cost
R000s
15
Personal performance
Rating
10 100
Performance criteria: Booysendal
Unit
Weighting %
Safety
LTIIR
20
Linear metres – decline
m
30
Square metres
m2
10
Total tonnes milled – ROM
tonnes
5
Sweeping and vamping
tonnes
5
kg
5
Cash operating cost
R000s
15
Personal performance
Rating
Recoverable metals – ROM
10 100
Such key performance areas are weighted to total 100% and the bonus is payable on the basis of the extent of achievement of each of these targets, starting at 90% of achievement, up to 110%. Depending on the extent of achievement, bonuses payable range from 5% of basic remuneration package (BRP) for a 90% achievement of target to 125% BRP for 110% achievement of target for each key performance indicator multiplied by its relative weighting.
NORTHAM ANNUAL INTEGRATED REPORT 2014
44
Payment and frequency of senior officials’ bonus scheme
executive also has input into the evaluation of the chief financial officer.
Bonuses are paid twice annually based on the actual results achieved for the six months ending December and June.
The chief executive and the SE&HR committee determine the performance targets and objectives of the chief financial officer and senior managers, conduct their performance assessments and determine the quantum of performance bonuses for approval by the board of directors.
75% of the calculated bonus is paid for each six month period with the balance of 25% being based on the results for the full year.
LONG-TERM EXECUTIVE RETENTION SCHEME AND PLAN
Based on the cost to company (CTC), being the basic remuneration package plus pension contribution, the average group bonus paid under this scheme was 32.9% of CTC in F2014
The group operates the Northam Share Incentive Plan (the Plan) as well as the previous Northam Share Option Scheme (the Scheme). The Scheme has been discontinued owing to its dilutionary nature, although share options issued before its discontinuance will be allowed to run their course. Details of the Scheme are more fully disclosed in Annexure 5 on page 260. The Plan was introduced in 2011, in line with current market trends of attracting, incentivising and retaining skilled senior managers. The target group for the Plan includes all senior officials and executives in job grades D1 and above. The committee approves the annual allocation of shares as well as any changes to the Plan rules.
Retention bonus scheme In terms of this scheme, which is designed to retain employees in the highly competitive South African mining environment characterised by a dearth of skills, an amount equal to 20% of the annual BRP is paid after two years’ service in which it was accumulated. Any employee who is discharged or resigns before such bonus becomes payable forfeits all amounts accumulated. On retirement or retrenchment all accumulated bonuses are payable to employees. Employees taking early retirement will receive bonuses based on the same percentages as the Share Incentive Plan rules.
In March 2013 the JSE approved a change to the rules of the Scheme and the Plan. Option holders may elect to receive either the shares over which an option has been granted or a cash payment equivalent to the difference between the volume weighted average price at which Northam shares traded on the day preceding the exercise date and the exercise price. Participants in the Plan may elect to receive either the shares that have vested or an amount equal to the volume weighted average price on the day preceding the settlement date.
All officials within the D3 Patterson grading and higher are eligible to participate in the scheme. Bonus payments are not pensionable. The board of directors, through the SE&HR committee, determines the performance targets and objectives of the chief executive and the chief financial officer, conduct their performance assessments and decide the quantum of their performance bonuses. The chief
45
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE CONTINUED At the forthcoming annual general meeting shareholders will be asked to approve certain changes to the rules of the Plan, the principal ones being to change the maximum number of shares that may be awarded under the Plan is limited to 5% (previously 10%) of the issued share capital, equating to approximately 19.9 million shares, the maximum number that may be awarded to any single employee in any cycle is limited to 0.5%, equal to approximately 2.0 million shares.
In terms of the Plan, which incorporates a combination of the conditional share plan (CSP) and the forfeitable share plan (FSP) senior officials are awarded shares annually. Under the more often used CSP, a combination of retention and conditional shares are awarded. The smaller portion (no more than 25% of total award) of the shares are awarded or granted, known as “retention” shares and are awarded with no performance conditions attached. These are received by the employee, who does not have to pay for them, and may be exercised after a three-year period. The larger portion of the shares awarded, known as “conditional” shares (at least 75% of the total award), have performance conditions attached to them, and these conditions must be met, fully or in part, before they can be allocated. These conditional shares are also free to the employee. The conditional shares also vest after a three-year period. The key features common to both the CSP and FSP are outlined in detail in the directors’ report.
In addition • in order to avoid any future dilution, all shares will either be cash-settled or equity settled through purchases in the open market; • retention shares will vest after three years (increased from two years); • retention shares will be limited to no more than 25% (decreased from 33.3%) of total awards or grants going forward;
As mentioned above, the final number of conditional performance shares allocated to senior officials and management are subject to certain performance criteria which must be met fully or in part. The performance criteria are based on factors such as:
• measurement of performance conditions on share awards for F2015 and thereafter will be made over a three year period rather than split in three-year lots measured on an annual basis; and
• safety; • estimated recoverable platinum group metals (3PGM+Au) produced, and/or
• performance conditions or criteria for the F2015 awards and thereafter will include one or two rateof-return related target/measures (Total Shareholder Return and or Return On Investment or related target) with a weighting of no less than 30%.
NORTHAM ANNUAL INTEGRATED REPORT 2014
• unit cash costs; and • rate of return measures/targets (for the F2015 and thereafter awards).
46
An achievement of less than 90% of target results in no shares being allocated at all. Every year the committee, with the assistance of management, assesses the allocation of both retention and conditional performance shares per employee.
Each of these factors is weighted with targets set for a three-year period. For staff to earn their allocation, each factor’s target must be measured over the three-year period. For each three-year period’s award, the committee may set different factors, targets and weightings as appropriate:
The first three-year cycle post the launch of the Plan in 2011 will only be completed in November 2014 at which time the performance conditions will then be finalised, with the result determining the allocations of shares that can then vest. The retention awards of F2011 have however vested.
• a typical target for safety might be an improvement of 10% over the previous financial year’s safety record, with a weighting of say 25%; • for unit cash costs, the target may be achieving the budgeted unit costs for the current year with a weighting of 20%;
EMPLOYEE PARTICIPATION SCHEME (TORO EMPLOYEE EMPOWERMENT TRUST)
• estimated recoverable metals production may then, in this example, be weighted at 25%; • from F2015, a rate of return measure (such as Total Shareholder Return and or Return On Investment or related target), with a weighting of at least 30%; and
The group operates an employee profit share scheme for eligible employees at the Zondereinde mine in terms of which 4% of Zondereinde mine’s after-tax profits are contributed to a registered trust fund (The Toro Employee Empowerment Fund). Eligible employees who form part of categories 2 – 10 receive payment at the end of each five year cycle, with the first payments having been made in F2013. Consideration is being given to extending the scheme to the Booysendal mine employees.
• with the sum of the weightings totalling 100%. On measurement of the achievement of these targets, each factor’s “achievement” rank depends on the extent of achievement for each factor over the threeyear period, ranging from: • a ranking of 1 (which represents a 90 to 100% achievement of target). This could mean, for example, a 100% award of conditional shares; and • this rises up to a ranking of 4, which, for example might be an achievement of over 105%, which may equate to a share award of up to135%.
47
NORTHAM ANNUAL INTEGRATED REPORT 2014
LEADERSHIP AND ACCOUNTABILITY
REPORT OF THE SOCIAL, ETHICS AND HUMAN RESOURCES COMMITTEE
MINERAL RESERVE AND RESOURCE STATEMENT
Resources and reserves reflected in this statement are reported on a Northam attributable basis, and include those which are either from properties that are wholly owned by Northam or its wholly owned subsidiaries, or joint venture properties in which Northam holds a stake.
• A material increase in the total UG2 reef reserve at Booysendal UG2 North mine, following the implementation of an amended mining layout, resulting in reduced mining pillar losses and a greater extraction rate.
REGULATORY COMPLIANCE
Mineral resources are reported inclusive of mineral reserves.
The mineral resource and mineral reserve statements for Northam have been prepared under the guidance of the company’s lead competent persons who are duly registered with the South African Council for Professional and Technical Surveyors (PLATO) and/or with the South African Council for Natural Scientific Professions (SACNASP). This ensures that the mineral resource and mineral reserve statements comply with the provisions of the South African Code for Reporting of Mineral Resources and Mineral Reserves of 2007, revised in 2009 (SAMREC 2009). The company’s competent persons have taken cognisance of definitions included in the code. The mineral resource and mineral reserve quantities reported here are considered to be fully compliant in all material respects with the requirements of the code, and the lead competent persons have given written confirmation of such.
SCOPE OF REPORTING Resources and reserves reflected in this statement include those from the following properties: • Zondereinde, the company’s wholly owned PGM mine, located in the Thabazimbi area of the Limpopo province and within the northern portion of the western limb of the Bushveld Complex. This includes both the Zondereinde and Middeldrift portions of the property; • Booysendal, 100% owned by Northam’s wholly owned subsidiary, Micawber 278 Proprietary Limited (Micawber) and situated in the southern portion of the eastern limb of the Bushveld Complex; • Dwaalkop, located in the northern portion of the eastern limb of the Bushveld Complex, in which Northam holds a 50% stake through its wholly owned subsidiary Mvelaphanda Resources. Dwaalkop is managed by Lonmin plc (Lonmin); and
Definitions of the various mineral resource and mineral reserve categories as well as the requirements for reporting of exploration results may be found at www.samcode.co.za/downloads/SAMREC2009.pdf.
• Pandora, located in the Brits area of North West province and within the southern portion of the western limb of the Bushveld Complex, in which Northam holds a 7.5% stake. Pandora is managed by Lonmin.
STATUS OF MINERAL RIGHTS Resources reflected in this statement include those of the Zondereinde and Booysendal concessions which are wholly owned by Northam or its wholly owned subsidiaries. In addition, Northam holds a 7.5% stake in the Pandora joint venture and a 50% stake in the Dwaalkop joint venture, both of which are managed by Lonmin, through its subsidiaries, Eastern Platinum Limited and Western Platinum Limited respectively.
KEY POINTS AND SIGNIFICANT REVISIONS FROM LAST YEAR • An increase in the measured UG2 reef resource at Booysendal UG2 North mine, owing to a reduction in geological losses informed by ongoing mine mapping, sampling and exploration drilling programmes.
NORTHAM ANNUAL INTEGRATED REPORT 2014
48
Further to this, the risk management section on pages 33 to 38 of this report analyses potential risks which may impact the company’s ability to continue its activities.
Northam holds new order mining rights over both the Zondereinde and Booysendal mines. The Pandora mine operates under a new order mining right which was converted from an old order right in 2013.
ENVIRONMENTAL LIABILITIES
The Dwaalkop joint venture holds a new order prospecting right over the Dwaalkop prospect. This right is subject to a renewal application. An application for a new order mining right was submitted in 2009 and is being processed.
The company’s environmental obligations are managed in terms of approved environmental management plans. Compliance with the plans is audited by independent external parties on a regular basis. Details of the environmental liabilities are contained in note 20 to the 2014 annual financial statements and details of the funding of the environmental liabilities are contained in notes 10 and 11 to the 2014 annual financial statements.
Northam further holds eight new order prospecting rights over the Kokerboom prospect, granted in 2009. Kokerboom is an iron oxide copper gold and massive sulphide copper zinc exploration prospect covering some 1 000 000 hectares of the Northern Cape province of the Republic of South Africa. A prospecting work programme is currently in progress and no resource or reserve has yet been estimated.
GROUP RESOURCES AND RESERVES The following tables summarise the mineral resources and reserves attributable to Northam for both the current and previous year. Notes on the reporting criteria are pertinent, together with specific notes to this section.
CONTINUING OPERATIONS The company confirms that it is not aware of any legal or arbitration proceedings, either pending or threatened, which may have or have had a material effect on the financial position of the company and its subsidiaries.
Breakdowns of the mineral resources and reserves into their respective confidence categories may be found in the sections specific to the concessions.
A SUMMARY OF MINERAL RIGHTS HELD AND MANAGED BY NORTHAM IS TABULATED BELOW: Property
Type of right
Status
Zondereinde mine
New order mining right
Converted mining right
Booysendal mine
New order mining right
Converted mining right
Pandora mine
New order mining right
Converted mining right
Dwaalkop prospect
New order prospecting right
Application for a new order mining right in process
Kokerboom prospect
New order prospecting rights
Eight new order prospecting rights granted
Prospecting and mining rights are held in good order, and Northam perceives no risk to its rights to continue prospecting for and mining of minerals over any of its properties.
49
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
NORTHAM GROUP RESOURCE ESTIMATE (combined measured, indicated and inferred) as at 30 June 2014
as at 30 June 2013
4E PGE Reef
Mine
Merensky
g/t
Moz
Mt
g/t
Moz
Booysendal North
164.90
5.32
28.22
164.90
5.32
28.22
Booysendal South
90.57
3.54
10.32
90.57
3.54
10.32
Booysendal UG2 mine Dwaalkop1 Pandora1
UG2
0.00
0.00
0.00
0.00
0.00
0.00
38.05
2.98
3.64
38.05
2.98
3.64
0.00
0.00
0.00
0.00
0.00
0.00
Zondereinde
168.12
7.36
39.77
169.09
7.37
40.08
Total
461.64
5.52
81.95
462.61
5.53
82.26
Booysendal North
328.77
3.61
38.19
328.77
3.61
38.19
Booysendal South
208.10
3.10
20.74
208.10
3.10
20.74
Booysendal UG2 mine
44.13
4.52
6.41
40.75
4.36
5.71
Dwaalkop
37.56
4.35
5.25
37.56
4.35
5.25
14.18
4.65
2.12
14.25
4.65
2.13
1
Pandora1
Combined
4E PGE
Mt
Zondereinde
247.16
5.08
40.37
248.35
5.08
40.59
Total
879.90
4.00
113.08
877.78
3.99
112.62
Booysendal North
493.67
4.18
66.41
493.67
4.18
66.41
Booysendal South
298.67
3.23
31.06
298.67
3.23
31.06
Booysendal UG2 mine
44.13
4.52
6.41
40.75
4.36
5.71
Dwaalkop1
75.61
3.66
8.90
75.61
3.66
8.90
Pandora
14.18
4.65
2.12
14.25
4.65
2.13
415.29
6.00
80.14
417.45
6.01
80.67
1341.55
4.52
195.04
1340.38
4.52
194.88
1
Zondereinde Total
Current resources and reserves of Pandora and Dwaalkop are quoted as at 30 September 2013 while those of the previous year are at 30 September 2012.
1
NORTHAM ANNUAL INTEGRATED REPORT 2014
50
NORTHAM GROUP RESERVE ESTIMATE (combined proven and probable) as at 30 June 2014
as at 30 June 2013
4E PGE Reef Merensky
Mine
Mt
Mt
g/t
Moz
Booysendal North
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Booysendal UG2 mine Pandora1
0.00
0.00
0.00
0.00
0.00
0.00
13.66
2.61
1.15
13.66
2.61
1.15
0.00
0.00
0.00
0.00
0.00
0.00
Zondereinde
15.96
5.40
2.77
12.80
5.84
2.40
Total
29.62
4.12
3.92
26.46
4.17
3.55
0.00
0.00
0.00
0.00
0.00
0.00
Booysendal North Booysendal South
0.00
0.00
0.00
0.00
0.00
0.00
Booysendal UG2 mine
44.82
3.00
4.32
33.27
2.96
3.17
Dwaalkop
16.10
3.30
1.71
16.10
3.30
1.71
1.31
4.11
0.17
1.36
4.02
0.18
1
Pandora1
Combined
4E PGE Moz
Booysendal South Dwaalkop1
UG2
g/t
Zondereinde
37.25
4.19
5.02
34.24
4.39
4.83
Total
99.48
3.51
11.22
84.97
3.62
9.88
Booysendal North
0.00
0.00
0.00
0.00
0.00
0.00
Booysendal South
0.00
0.00
0.00
0.00
0.00
0.00
Booysendal UG2 mine
44.82
3.00
4.32
33.27
2.96
3.17
Dwaalkop1
29.76
2.98
2.85
29.76
2.98
2.85
Pandora
1
Zondereinde Total
1.31
4.11
0.17
1.36
4.02
0.18
53.20
4.55
7.79
47.04
4.78
7.23
129.09
3.65
15.13
111.42
3.75
13.43
Current resources and reserves of Pandora and Dwaalkop are quoted as at 30 September 2013 while those of the previous year are at 30 September 2012.
1
51
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
COMPETENT PERSONS
member of Prospect Geoservices with 24 years’ experience in mining and exploration geology, 18 years of which are relevant to Bushveld-related resource and reserve estimation.
The resource and reserve statement for the Zondereinde and Middeldrift portions of Zondereinde mine were compiled by Charl van Jaarsveld, BSc (Hons) Geology, PrSciNat. (400268/05), chief geologist at the Zondereinde mine with 11 years’ experience relevant to Bushveld-related resource and reserve estimation.
The resource and reserve estimates for the Pandora joint venture were prepared by a team from both Anglo Platinum and Lonmin. Resources were signed off by J Whitley (Lonmin) and P. Stevenson (Anglo Platinum), while reserves were signed off by AA Brown (Lonmin).
The Booysendal resource statement was compiled by Meshack Mqadi, BSc (Hons) Geology, MGSSA (966985), chief geologist at Booysendal UG2 North mine with six years’ experience relevant to precious metal-related resource estimation.
The resource and reserve estimates for the Dwaalkop joint venture were prepared by a team from Snowden Mining Industry Consultants (Resources) and from AMC Consulting (Pty) Limited (Reserves). Resources were signed off by D Hoffmann (Lonmin), while reserves were signed off by AA Brown (Lonmin).
The Booysendal reserve statement was compiled by Willie Theron, BSc (Hons) Mining, PrCertEng, ECSA (200790030), general manager at Booysendal UG2 North mine with 17 years’ experience of Bushveldrelated underground mining and reserve estimation.
Contact details for Northam’s lead competent persons authorising publication of the resource estimates are contained within the notes on reporting criteria within this report.
Resource and reserve estimates for both Zondereinde and Booysendal were reviewed by Damian Smith, BSc (Hons) Geology, MSc, PrSciNat. (400323/04), principal
Ore reserve development and the deepening project at Zondereinde are progressing satisfactorily.
NORTHAM ANNUAL INTEGRATED REPORT 2014
52
GEOLOGICAL SETTING – THE BUSHVELD COMPLEX
subdivided into a lower and upper unit), the main zone and the upper zone.
The two-billion-year-old Bushveld Complex is the largest layered igneous complex in the world, and is the repository for around 85% of known global PGM resources. Extending over an area of some 67 000km2 within the north-eastern portion of the Republic of South Africa, it contains the intrusive, mafic-ultramafic Rustenburg Layered Suite (RLS), which outcrops as three main acicular limbs, namely the western, eastern and northern limbs (see figure below), and ranges in thickness from 7km to 12km.
PGM and associated precious and base metal mineralisation is hosted in or adjacent to chromitite seams located within the upper critical zone of the RLS. There are two significant ore bodies from which 75% of global primary PGM production is derived, these being the UG2 and Merensky reefs. The vertical separation between the UG2 and Merensky reefs is variable across the Bushveld Complex, ranging from 20m to 140m on the western limb and between 170m and 400m on the eastern limb.
The magmatic layering in the RLS is laterally persistent and can be correlated throughout most of the complex. Layering is generally shallow dipping towards the centre of the complex. The RLS stratigraphy is sub-divided into five zones, which are, from lowest to highest, the marginal zone, the lower zone, the critical zone (which is further
Historically, PGM production was concentrated on the western limb but, in recent years, the eastern limb has been the focus of new mine development. The two wholly-owned Northam properties, the Zondereinde and Booysendal mines, contain resources of both the UG2 and Merensky reefs.
Bushveld location indicating current PGM mining operations South Africa, location of the Bushveld Complex
N
Limpopo
Gauteng North West Free State
Mpumalanga
Polokwane
Mogalakwena
KwaZulu-Natal
Mokopane
Northern Cape
Bokoni Twickenham Marula Modikwa
Limpopo Eastern Cape
Tumela
Western Cape
Zondereinde
Union Pilanesberg Sedibelo Northam and associated operations Other operations Cities/towns Main roads
Dwaalkop
Thabazimbi
Two Rivers Mototolo Der Brochen Everest
Bela Bela Groblersdal
BRPM Implats Pandora Brits Eland Rustenburg RPM Crocodile Pretoria Eastern & River Western Plats Johannesburg
53
Booysendal
Emalahleni 0
50
100 km
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
ZONDEREINDE MINE Zondereinde location and access routes THABAZIMBI
Ama
ndelb
ult
Limpopo
E IND
ERE
ND
ZO
KOEDOESKOP
1
1 R5
R510
R516
North West NORTHAM
N
0
10
North West
mafic lithologies. Vertical separation between the UG2 and Merensky reefs is in the range of 20m to 40m.
Zondereinde mine is situated in the northern portion of the western limb of the Bushveld Complex, approximately 30km south of the town of Thabazimbi in the Limpopo province of the Republic of South Africa. The mining concession covers some 7 625ha underlain by both the Merensky and UG2 ore bodies, which dip at approximately 20˚ and extend from a depth of 1 100m below surface to 2 900m below surface.
Combined geological and extraction losses were discounted from the resources for both reefs. These comprised pothole and structural losses as well as other pillar losses. Discount losses vary per Merensky reef type and resource category, but average at 33% for Merensky reef and 48% for UG2.
History and mining activities
The company exploits both the Merensky and UG2 reefs of the upper critical zone of the Bushveld Complex. While there is lateral continuity of both reefs across the mine property, the Merensky reef displays a variety of reef types. The distribution of these is determined by a combination of surface exploration boreholes, ongoing prospect drilling from underground development and reef mapping in development and stoping. In contrast to the Merensky reef, the UG2 displays little variation in reef attributes.
Development of Zondereinde mine started in 1986, following a five year exploration programme. Mining of ore, commissioning of a PGM concentrator, smelter and base metal removal plant and the sale of first PGMs came in 1993. The mine originally exploited only the Merensky reef resource but the commissioning of a UG2 concentrator in 2000, together with the necessary underground ore handling systems, allowed mining and processing of UG2 from this time onwards. The mine produces approximately 2 000 000 tonnes of ore per annum, generating in the order of 300 000oz of 3PGE+Au in final concentrate together with associated precious and base metal by-products.
The Bushveld sequence at Zondereinde is typical of the northern portion of the western limb. The critical zone stratigraphy is telescoped and dominated by NORTHAM ANNUAL INTEGRATED REPORT 2014
20 K m
54
Underground mining focuses on the exploitation of PGM ores by means of traditional narrow tabular reef drill and blast mining methods. A standard breast mining layout is used at Northam. The vertical interval (distance) between levels is 63m. With the ore body dipping at 20°, this provides a raise length of 180m allowing for six panels of 30m each per raise connection. Strike gullies are inclined at 10° above the strike direction. A dip gully handles the ore transported via the strike gullies to three orepasses situated in the original raise, all of which are fitted with radialdoor control chutes. Ore is transported to the main shaft ore passes by battery powered locomotives (locos) pulling spans of eight hoppers. Broken ore is transported to a conventional shaft ore-pass system with separate rock handling facilities for Merensky reef, UG2 reef and waste.
level below that of the normal reef sub-facies. These being NP2 and P2, which constitute the main sources of ore, and FWP2 which, while not considered a primary mining target due to the undulating nature of this reef type, is successfully exploited in the southwestern quadrant of the current mining area where it displays lesser disruption. The stoping cut on the Merensky reef is dependent upon the reef type mined and the geozone in which it is located. In all stoping cuts, the Merensky chromitite is exposed with a minimum of 10cm of the overlying mineralized Merensky pyroxenite as hanging wall. The measured resource is an estimate of the in situ tonnage, grade and 4E PGM ounces that have been exposed through development and are immediately available for mining. The Merensky measured resource has increased from 2.79Mt (744 000oz) in June 2013 to 2.91Mt (746 000oz) in June 2014. This is the result of an increase to the exposed Merensky resource, combined with the application of a lower resource grade owing to a higher proportion of moderate grade Normal reef in the deeper portions of the resource block.
Mining is successfully conducted using hydropowered equipment such as rock drills and high-pressure water jets in conjunction with electric scraper winches. The underground workings are accessed from a twin shaft system. No 1 shaft extends to 13 level (2 039m below surface) and No 2 shaft serves workings down to 8 level (1 724m below surface). The shafts are 90m apart and are interconnected at an intermediate pump chamber (IPC) at 1 019m below surface, and also on levels 2, 4, 6, 7, 8 and 9. Workings below 13 level are serviced by a decline access way, designed to accommodate both people and materials, and equipped with a conveyor belt system that transports the broken rock.
The Merensky indicated resource has declined as a result of conversion to the measured category. The Merensky inferred resource is essentially unchanged.
UG2 reef The UG2 reef at Zondereinde mine is remarkably conformable when compared with the Merensky reef. Disruption, in the form of potholes and reef rolls, is extremely limited and localised. The reef consists of three chromitite seams separated by narrow pyroxenite partings. The lower seam, termed the main member, is generally in the order of 85cm thick, and is overlain by two leader seams, each in the order of 15cm thick. Total reef thickness, inclusive of a portion of mineralised reef footwall, is in the order of 150cm to 160cm. There is no basis for subdividing the UG2 reef into facies types.
Merensky reef The Merensky reef is a zone of mineralisation which straddles the base of the Merensky cyclic unit. In the area of Zondereinde mine, the Merensky reef consists of two sub-facies of the Zwartklip facies of the RLS, namely the normal and regional pothole sub-facies. The latter may be further subdivided into three reef types, each of which occurs at a specific stratigraphic 55
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
Historically, UG2 mining has been limited to de-stressed areas underlying previously mined Merensky reef. Furthermore, a full reef cut is mined, which enhances metal output, hanging wall stability and safe working practices.
available for mining. The UG2 measured resource has
The measured resource is an estimate of the in situ tonnage, grade and PGM ounces that have been exposed through development and are immediately
UG2 reef. The UG2 indicated resource has declined in
decreased from 4.52Mt (730 000oz) in June 2013 to 4.26Mt (689 000oz) in June 2014. This is the result of a decrease in exposed UG2 resource and is in line with mining depletion and planned development of the line with mining depletion. The UG2 inferred resource is essentially unchanged.
ZONDEREINDE RESOURCES AND RESERVES Zondereinde Merensky resource classification 2014
Zondereinde UG2 resource classification 2014
N
0
4 -370 000
-360 000
8 Km -365 000
-360 000
The available ore reserves of the Merensky and UG2 reefs at Zondereinde are estimated at 20 months and 24 months respectively
NORTHAM ANNUAL INTEGRATED REPORT 2014
56
-276 000
-275 500
8 Km -365 000
-276 000
4 -370 000
-275 500
0
-276 000
-275 500 -276 000
N
Mine boundary Far northern gap Mined out Shaft pillar Measured Indicated Inferred Dyke Graben
-275 500
Legend
Legend Mine boundary Far northern gap Mined out Shaft pillar Measured Indicated Inferred Transition Dyke Graben
-360 000
-274 500
-365 000
-275 000
-274 500 -275 000
-275 000
-370 000
-274 500
-360 000
-275 000
-365 000
-274 500
-370 000
ZONDEREINDE RESOURCE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE
4E PGE
Reef
Category
Mt
g/t
Moz
Mt
g/t
Moz
Merensky
Measured
2.91
7.98
0.75
2.79
8.29
0.74
Indicated
18.70
7.03
4.22
19.76
7.09
4.50
UG2
Combined
Inferred
146.52
7.39
34.80
146.54
7.39
34.83
Total
168.13
7.36
39.77
169.09
7.37
40.08
Measured
4.26
5.03
0.69
4.52
5.04
0.73
Indicated
35.70
5.03
5.77
36.64
5.04
5.94
Inferred
207.20
5.09
33.91
207.20
5.09
33.92
Total
247.16
5.08
40.37
248.35
5.08
40.59
Measured
7.17
6.23
1.43
7.31
6.28
1.48
Indicated
54.40
5.71
9.99
56.40
5.76
10.44
Inferred
353.72
6.04
68.72
353.74
6.05
68.75
Total
415.29
6.00
80.14
417.45
6.01
80.67
ZONDEREINDE RESERVE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE Reef
Category
Merensky
Proven
UG2
Combined
Prill splits %
4E PGE
Mt
g/t
Moz
Mt
g/t
Moz
3.56
5.77
0.66
3.29
6.14
0.65
Probable
12.40
5.30
2.11
9.51
5.73
1.75
Total
15.96
5.40
2.77
12.80
5.84
2.40
4.71
4.19
0.64
4.78
4.39
0.67
Probable
32.53
4.19
4.38
29.46
4.39
4.16
Total
37.24
4.19
5.02
34.24
4.39
4.83
Proven
8.27
4.87
1.30
8.07
5.10
1.32
Probable
Proven
44.93
4.50
6.49
38.97
4.72
5.91
Total
53.20
4.55
7.79
47.04
4.78
7.23
Pt
Pd
Rh
Au
Cr2O3%
Cu%
Ni%
UG2
57.7
30.9
10.3
1.0
27.6
0.021
0.123
Merensky
63.0
29.2
5.2
2.6
0.8
0.072
0.164
57
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
BOOYSENDAL MINE
R36
Booysendal location and access routes
7 R3
Limpopo
MASHISHING R540
Mpumalanga as s
R57
7
N
0
10
20 K m
The Booysendal concession is located in the southern compartment of the eastern limb of the Bushveld Complex, approximately 35km west of the town of Mashishing (formerly Lydenburg), straddling the border of Limpopo and Mpumalanga provinces in the Republic of South Africa.
Development of a UG2 mine (UG2 North mine) in the northernmost 4km of strike started in May 2010. The resource estimate for the Booysendal concession is subdivided into three sections, these being the southern section of Booysendal South; the UG2 North mine; and the remainder of the northern section of the concession (Booysendal North). A mineral reserve estimate is presented for the UG2 North mine only.
The concession covers some 15 151 hectares and hosts both the UG2 and Merensky ore bodies, which outcrop over a strike length of 14.5km and dip at approximately 10˚ to the west.
The Bushveld sequence at Booysendal is similar to that found across the southern compartment of the eastern limb. The critical zone stratigraphy is fully developed, and middling between the UG2 and Merensky reefs is in the order of 175m in the northern portion of Booysendal. The sequence is, however, subject to thinning in the southern portion, which is linked to the Bushveld rocks abutting basement highs. The impact of this ‘abutment’ is further manifested in localised zones of disruption to surface morphology and internal structure of the two reefs. This has led to the characterisation of three geozones within the Booysendal concession, these being the normal, slump and abutment geozones. Despite this progressive disruption to the
The resource estimate is informed by exploration data, including 248 boreholes, together with channel sampling from on-reef development within the UG2 North mine. 90% of the exploration drilling was conducted within 2.5km down-dip of outcrop. Drill hole spacing in this near outcrop area ranges from 150m to 400m. Channel samples are located at 15m intervals within on-reef development and stoping. A study to determine the feasibility of mining UG2 and Merensky reefs within the northernmost 8km of the Booysendal strike, over a dip extent from outcrop of approximately 2km, was completed in September 2009. NORTHAM ANNUAL INTEGRATED REPORT 2014
R36
Ste en ka mp sb erg P
R555
ROOSENEKAL
AL
ND
YSE
O BO
58
together with a qualitative appreciation of ore body continuity informed by the resource database together with data from surrounding properties.
south, the continuity of the reef surfaces is robust across the property. The internal structure of the UG2 reef is similar to that found on the Bushveld western limb, while the Merensky reef is typical of the northern portion of the Bushveld eastern limb.
Mine design and mining activities The UG2 North mine is an underground, mechanised bord and pillar mine, accessed from surface via a ramp decline system, comprising three declines on the plane of reef and one decline situated 20m into the footwall of the reef, containing a belt for ore handling.
The UG2 reef consists of an upper leader chromitite and a lower main chromitite with a combined thickness of some 140cm. These seams are generally juxtaposed or merged, but can display variable internal silicate partings.
Mining sections extend over a dip length of 144m, equating to a vertical interval of 25m. Strike drives are inclined at 5° above the line of strike, strike belts within the drives will transport ore to the central decline system, tipping through an ore pass system to the footwall belt for transport to a UG2 concentrator plant on surface. Mechanised boom rigs and LHDs are employed in mining and development.
The Merensky reef is the upper mineralised portion of the Merensky pyroxenite, generally extending over 110cm. The Merensky reef is immediately overlain by a sequence of competent norites. Resources were estimated over the reef channels. For the UG2 reef, the reef channel extends from the top of the leader chromitite to the base of the main chromitite seam. For the Merensky reef, the reef channel extends from the top of the Merensky pyroxenite to a sample grade cut off of 1g/t, with a minimum mining channel width of 80cm applied.
The mine is planned, with a remaining life of 22 years, to produce 2 250 000 tonnes of ore per annum at steady state, generating in the order of 160 000oz of metals in concentrate (3PGE+Au), together with associated precious and base metal by-products. It is in build-up phase and is expected to reach steady state in H1 of F2016.
Geological losses were discounted from the resources for both reefs. These, for the Booysendal North and South sections, comprised known pothole and structural losses, together with assumed pothole losses benchmarked to mean eastern limb losses. They amounted to 23% for the Merensky reef and 24% and 30% for the UG2 in the North and South sections respectively. In the UG2 North mine section, ongoing mining and exploration drilling has improved confidence in known geological losses, leading to the application of 12.5% total geological loss for the UG2 reef. Furthermore, a channel cut-off 4E grade of 2.5g/t was applied to estimated blocks in all three sections. In addition, a 30m thick surface oxidized zone was discounted along the lines of outcrop of both reefs.
BOOYSENDAL RESOURCES AND RESERVES The UG2 measured resource for the UG2 North mine has increased from 40.75Mt (5.71Moz) in June 2013 to 44.13Mt (6.41Moz) in June 2014, as a result of the decrease in geological losses, partially offset by mining depletion. Merensky and UG2 resources for Booysendal North and South sections remain unchanged. Conversion of resources to reserves for the UG2 North mine includes a mining pillar loss discount. An amendment to the mining layout, which was implemented during the reporting period, has led to a 12% decrease in total pillar loss. This, together with a marginal improvement in reserve grade, has resulted in a material increase in total reserves from 33.27Mt (3.17Moz) in June 2013 to 44.82Mt (4.32Moz) in June 2014.
Resource categorisation was based upon a combination of quantitative geostatistical parameters, 59
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
Booysendal Merensky resource classification 2014
Booysendal UG2 resource classification 2014 -100000
-90000
-2780000
Booysendal UG2 North
Legend
Legend
UG2 outcrop UG2 boreholes Mine boundary
Merensky outcrop Merensky boreholes Mine boundary
0
N -100000
4
8 Km
-95000
-90000
UG2 classification
-2790000
Measured Indicated Inferred
-2790000
-2790000
Merensky classification
-85000
-2785000
-2780000 -2785000
-2775000 -2780000
Booysendal South
-2785000
-2785000
-2780000
Booysendal North
-95000
N -100000
-85000
0
4 -95000
Measured Indicated Inferred Mined out
8 Km -90000
Booysendal UG2 North mine UG2 resource classification 2014
-2775000
-2775000
-90000
The UG2 plant at Booysendal Legend UG2 outcrop UG2 boreholes Mine boundary Dyke
UG2 classification
N
0
1
2 Km
Measured Indicated Inferred Mined out
-90000
NORTHAM ANNUAL INTEGRATED REPORT 2014
-2775000
-85000
60
-2790000
-90000
-2775000
-95000
-2775000
-100000
-85000
BOOYSENDAL UG2 NORTH MINE RESOURCE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE Reef Merensky
Category
Mt
Combined
Moz
Mt
g/t
Moz
Measured
0.00
0.00
0.00
0.00
0.00
0.00
Indicated
0.00
0.00
0.00
0.00
0.00
0.00
Inferred
0.00
0.00
0.00
0.00
0.00
0.00 0.00
Total UG2
4E PGE
g/t
0.00
0.00
0.00
0.00
0.00
Measured
44.13
4.52
6.41
40.75
4.36
5.71
Indicated
0.00
0.00
0.00
0.00
0.00
0.00
Inferred
0.00
0.00
0.00
0.00
0.00
0.00
Total
44.13
4.52
6.41
40.75
4.36
5.71
Measured
44.13
4.52
6.41
40.75
4.36
5.71
Indicated
0.00
0.00
0.00
0.00
0.00
0.00
Inferred
0.00
0.00
0.00
0.00
0.00
0.00
44.13
4.52
6.41
40.75
4.36
5.71
Total
BOOYSENDAL UG2 NORTH MINE RESERVE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE Reef
Category
Merensky
UG2
g/t
Moz
Mt
g/t
Moz
Proven
0.00
0.00
0.00
0.00
0.00
0.00
Probable
0.00
0.00
0.00
0.00
0.00
0.00
Total
0.00
0.00
0.00
0.00
0.00
0.00
Proven
44.82
3.00
4.32
33.27
2.96
3.17
0.00
0.00
0.00
0.00
0.00
0.00
Total
44.82
3.00
4.32
33.27
2.96
3.17
Proven
44.82
3.00
4.32
33.27
2.96
3.17
0.00
0.00
0.00
0.00
0.00
0.00
44.82
3.00
4.32
33.27
2.96
3.17
Probable Combined
Probable Total Prill splits % UG2 Merensky
4E PGE
Mt
Pt
Pd
Rh
Au
Cr2O3%
Cu%
Ni%
57.3
32.6
9.3
0.8
25.6
0.0078
0.0854
–
–
–
–
–
–
–
All categories of the Merensky and UG2 resources for Booysendal North and South are unchanged from the previous reporting period. 61
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
BOOYSENDAL NORTH RESOURCE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE Reef Merensky
Category
Mt
Combined
Prill splits %
Moz
Mt
g/t
Moz 5.75
Measured
33.30
5.37
5.75
33.30
5.37
Indicated
46.34
5.43
8.08
46.34
5.43
8.08
Inferred
85.26
5.25
14.39
85.26
5.25
14.39 28.22
Total UG2
4E PGE
g/t
164.90
5.32
28.22
164.90
5.32
Measured
51.73
3.88
6.45
51.73
3.88
6.45
Indicated
46.23
4.66
6.92
46.23
4.66
6.92
Inferred
230.81
3.34
24.82
230.81
3.34
24.82
Total
38.19
328.77
3.61
38.19
328.77
3.61
Measured
85.03
4.46
12.20
85.03
4.46
12.20
Indicated
92.57
5.04
15.00
92.57
5.04
15.00
Inferred
316.07
3.86
39.21
316.07
3.86
39.21
Total
493.67
4.18
66.41
493.67
4.18
66.41
Pt
Pd
Rh
Au
Cr2O3%
Cu%
Ni%
UG2
56.9
33.7
8.5
0.8
26.7
0.007
0.075
Merensky
59.0
31.0
2.4
7.7
0.8
0.141
0.301
NORTHAM ANNUAL INTEGRATED REPORT 2014
62
BOOYSENDAL SOUTH RESOURCE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE Reef Merensky
UG2
Combined
Prill splits %
Category
Mt
4E PGE
g/t
Moz
Mt
g/t
Moz
Measured
3.80
2.46
0.30
3.80
2.46
0.30
Indicated
15.97
3.15
1.62
15.97
3.15
1.62
Inferred
70.80
3.69
8.40
70.80
3.69
8.40
Total
90.57
3.54
10.32
90.57
3.54
10.32
Measured
14.60
3.41
1.60
14.60
3.41
1.60
Indicated
52.90
3.43
5.84
52.90
3.43
5.84
Inferred
140.60
2.94
13.30
140.60
2.94
13.30
Total
208.10
3.10
20.74
208.10
3.10
20.74
Measured
18.40
3.21
1.90
18.40
3.21
1.90
Indicated
68.87
3.37
7.46
68.87
3.37
7.46
Inferred
211.40
3.19
21.70
211.40
3.19
21.70
Total
298.67
3.23
31.06
298.67
3.23
31.06
Pt
Pd
Rh
Au
Cr2O3%
Cu%
Ni%
UG2
60.6
28.6
9.5
1.2
26.0
0.010
0.071
Merensky
57.1
33.1
2.6
7.3
0.8
0.096
0.221
63
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
PANDORA RESOURCES AND RESERVES PANDORA RESOURCE ESTIMATE as at 30 June 2014
as at 30 June 2013
4E PGE
4E PGE
Reef
Category
Mt
g/t
Moz
Mt
g/t
Moz
Merensky
Measured
0.00
0.00
0.00
0.00
0.00
0.00
Indicated
0.00
0.00
0.00
0.00
0.00
0.00
Inferred
0.00
0.00
0.00
0.00
0.00
0.00 0.00
UG2
Total
0.00
0.00
0.00
0.00
0.00
Measured
1.94
4.80
0.30
2.00
4.81
0.31
Indicated
10.55
4.61
1.56
10.52
4.61
1.56
Inferred Total Combined
1.70
4.74
0.26
1.72
4.73
0.26
14.19
4.65
2.12
14.25
4.65
2.13 0.31
Measured
1.94
4.80
0.30
2.00
4.81
Indicated
10.55
4.61
1.56
10.52
4.61
1.56
Inferred
1.70
4.74
0.26
1.72
4.73
0.26
14.19
4.65
2.12
14.25
4.65
2.13
Total PANDORA RESERVE ESTIMATE
as at 30 June 2014
as at 30 June 2013
4E PGE Reef Merensky
UG2
Combined
Prill splits % UG2 Merensky
Category
Mt
4E PGE
g/t
Moz
Mt
g/t
Moz 0.00
Proven
0.00
0.00
0.00
0.00
0.00
Probable
0.00
0.00
0.00
0.00
0.00
0.00
Total
0.00
0.00
0.00
0.00
0.00
0.00
Proven
0.11
3.81
0.01
0.11
4.30
0.01
Probable
1.21
4.14
0.16
1.25
4.00
0.16
Total
1.32
4.11
0.17
1.36
4.02
0.18 0.01
Proven
0.11
3.81
0.01
0.11
4.30
Probable
1.21
4.14
0.16
1.25
4.00
0.16
Total
1.32
4.11
0.17
1.36
4.02
0.18
Pt
Pd
Rh
Au
Cr2O3%
Cu%
Ni%
60.6
28
11.1
0.3
no data
0.004
0.024
–
–
–
–
–
–
–
NORTHAM ANNUAL INTEGRATED REPORT 2014
64
DWAALKOP RESOURCES AND RESERVES All categories of the Merensky and UG2 resources and reserves for Dwaalkop are unchanged from the previous reporting period. DWAALKOP RESOURCE ESTIMATE
Reef Merensky
UG2
Combined
Category Measured Indicated Inferred Total Measured Indicated Inferred Total Measured Indicated Inferred Total
as at 30 June 2014 4E PGE Mt g/t Moz 0.00 0.00 0.00 21.83 2.89 2.03 16.22 3.10 1.62 38.05 2.98 3.65 0.00 0.00 0.00 20.85 4.35 2.92 16.71 4.35 2.34 37.56 4.35 5.26 0.00 0.00 0.00 42.68 3.60 4.94 32.93 3.73 3.95 75.61 3.66 8.89
as at 30 June 2013 4E PGE Mt g/t Moz 0.00 0.00 0.00 21.83 2.89 2.03 16.22 3.10 1.62 38.05 2.98 3.65 0.00 0.00 0.00 20.85 4.35 2.92 16.71 4.35 2.34 37.56 4.35 5.25 0.00 0.00 0.00 42.68 3.60 4.94 32.93 3.73 3.95 75.61 3.66 8.90
as at 30 June 2014 4E PGE Mt g/t Moz 0.00 0.00 0.00 13.66 2.61 1.15 13.66 2.61 1.15 0.00 0.00 0.00 16.10 3.30 1.71 16.10 3.30 1.71 0.00 0.00 0.00 29.76 2.98 2.85 29.76 2.98 2.85
as at 30 June 2013 4E PGE Mt g/t Moz 0.00 0.00 0.00 13.66 2.61 1.15 13.66 2.61 1.15 0.00 0.00 0.00 16.10 3.30 1.71 16.10 3.30 1.71 0.00 0.00 0.00 29.76 2.98 2.85 29.76 2.98 2.85
DWAALKOP RESERVE ESTIMATE
Reef Merensky
UG2
Combined
Prill splits % UG2 Merensky Combined
Category Proven Probable Total Proven Probable Total Proven Probable Total Pt 47.1 56.8 51.1
Pd 42.8 31.9 38.3
Rh 7.9 4.2 6.4 65
Au 2.2 7.2 4.2
Cr2O3% no data no data
Cu% 0.090 0.110 0.098
Ni% 0.140 0.170 0.152
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
MINERAL RESERVE AND RESOURCE STATEMENT CONTINUED
NOTES ON REPORTING CRITERIA
• Kriging parameters are applied to discrete mining areas in order to estimate tonnage and metal content.
• Mineral resource tonnages and grades for Zondereinde are reported as estimates discounted for geological and mining pillar losses. All other mineral resources are reported as estimates discounted for geological losses.
• Kriging parameters are derived from the interrogation of extensive sampling databases. • Rounding of numbers in the tables may result in minor computational discrepancies. Where this occurs, it is deemed insignificant.
• Mineral resource tonnages and grades are in situ estimates inclusive of internal waste dilution but exclusive of external waste dilution.
• The most reasonable mining width is assumed, based on practical mining conditions. 4E grade, as well as specific gravity are calculated for these widths.
• PGM grade is expressed as corrected 4E (combined platinum, palladium, rhodium and gold) grade; this being synonymous with 3PGE+Au.
• Total mineral resources and reserves attributable to Northam Platinum Limited are listed in the summary tables.
• PGM metal prill splits (platinum, palladium, rhodium and gold) are expressed as percentages of the combined 4E value.
• Mineral resources for Pandora and Dwaalkop, reflecting Northam is 7.5% and 50.0% respective attributable interests, are quoted as at the end of September 2013 and 2012 and are provided by Lonmin.
• Base metal contents (chromite, copper and nickel) are expressed as weight percentages. • Structural losses, due to faults, dykes and joints, include the volumes of expected bracket pillars required to be placed on such features.
• Measured and indicated mineral resources are reported separately and include those mineral
UG2 are being transported on a conveyor at the Booysendal plant
NORTHAM ANNUAL INTEGRATED REPORT 2014
66
Contact details for lead competent persons are:
resources modified to produce proven and probable mineral reserves.
• Mr C van Jaarsveld, chief geologist at Zondereinde mine PO Box 441, Thabazimbi 0380
• While mineral resources are quoted as in-situ resources, all reserves provided by Northam are quoted at run-of-mine (ROM) grades and tonnages as delivered to the concentrator plants on site and are therefore, fully diluted.
• Mr M Mqadi, chief geologist at Booysendal UG2 North mine
• Mineral reserves for Zondereinde mine are quoted to 16 level (2 228m below surface).
• Mr W Theron, general manager at Booysendal UG2 North mine PO Box 412694, Craighall 2024
• Mineral reserves for Booysendal relate to the first planned mining module, the UG2 North mine.
• Mr D Smith, principal member of Prospect Geoservices PO Box 37876, Faerie Glen 0043
• Mineral reserves for Pandora and Dwaalkop are provided by Lonmin and reflect Lonmin’s reserve modifying factors. • All references to tonnage are to the metric unit. • All references to ounces are troy with a conversion factor of 31.103475 used to convert from metric grams to ounces.
67
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
MINERAL RESERVE AND RESOURCE STATEMENT
CHIEF FINANCIAL OFFICER’S REVIEW – F2014
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
The higher sales volumes combined with the effects of a much weaker average ZAR/USD exchange rate year on year of R10.35/US$ (F2013 8.82/ US$) contributed to record group sales revenues of R5.3 billion for the group. Platinum group metal sales from Zondereinde mine fell by 8.2% to 9 827kg (F2013: 10 704kg), while Booysendal contributed 2 503kg towards metal sales. Revenue relating to the sale of development ounces from the Booysendal mine of R137.7 million (345kg) was offset against property, plant and equipment during the year.
Sales revenue Northam’s financial results were lower compared to F2013 primarily due to the impact of the 11-week strike at Zondereinde during the reporting period, which began on 3 November 2013 and ended on 21 January 2014. After the strike, and given the cautious approach to resuming safe mining activities, the production build-up was gradual, reaching full production towards the end of April 2014. In addition, Booysendal mine, currently still in ramp-up phase, is not yet in a position to contribute positively to the group’s earnings.
The average basket price of Zondereinde mine’s metals released into the market was 9.6% higher in F2014 at R400 381/kg (F2013: R365 217/kg), while Booysendal mine metal sales achieved an average price of R398 710/kg. The improvement in the basket price is attributable to the weakening of the rand rather than an improvement in the average US dollar prices of platinum group metals, which were 6.1% lower at US$1 198/oz (F2013: US$ 1 276/oz).
Despite lower production from the Zondereinde mine, sales volumes were supplemented by the contribution from the Booysendal mine for the first time, and also from a release of inventory, which had built up during the smelter rebuild at the beginning of the financial year, resulting in group sales of 12 330kg or 396 417oz.
Booysendal expects to produce approximately 160 000oz annually
NORTHAM ANNUAL INTEGRATED REPORT 2014
68
GROUP METAL SALES AND REVENUES F2014 Units sold
Average price received
F2013
Revenue
Units sold
Average price received
Revenue
kg
R/kg
R000
kg
R/kg
R000
Platinum
7 522
478 259
3 597 415
6 606
448 004
2 959 316
Palladium
3 649
252 877
922 648
3 133
195 716
613 109
Rhodium
964
340 033
327 928
786
322 085
253 262
Gold Sub-total: (3PGE+Au) Iridium Ruthenium Other precious metals Sub-total: precious metals Nickel (tonnes)
195
433 263
84 574
179
455 474
81 557
12 330
400 042
4 932 565
10 704
365 041
3 907 243
320
174 909
55 865
261
284 852
74 264
1 360
19 544
26 577
1 315
23 391
30 751
149
6 853
7 931
14 159
1 019
130
5 016 026
12 409
1 028 4 013 286
1 544
163 551*
252 507
1 313
140 547*
184 513
Copper (tonnes)
764
68 967*
52 656
678
65 171*
44 161
Chrome (tonnes)
79 793
481*
38 388
–
Other by-product revenue Development ounces offset against property, plant and equipment Sales revenue – Booysendal and Zondereinde mines Sales revenue – other activities Total group sales revenue
–
–
2 749
1 460
(137 687)
–
5 224 639
4 243 420
114 758
177 557
5 339 397
4 420 977
* Rand per tonne
69
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
CHIEF FINANCIAL OFFICER’S REVIEW – F2014
CHIEF FINANCIAL OFFICER’S REVIEW – F2014 CONTINUED
METAL SALES AND REVENUES BY OPERATING MINE – F2014 Booysendal mine Units sold
Average price received
Zondereinde mine
Revenue
Units sold
Average price received
Revenue
kg
R/kg
R000
kg
R/kg
R000
1 524
478 589
729 274
5 998
478 180
2 868 141
Palladium
741
251 676
186 366
2 908
253 186
736 282
Rhodium
227
340 506
77 363
737
339 874
250 565
Platinum
Gold
11
433 362
5 027
184
433 168
79 547
2 503
398 710
998 030
9 827
400 381
3 934 535
Iridium
108
163 757
17 653
212
180 638
38 212
Ruthenium
404
19 216
7 765
956
19 681
18 812
–
–
6 850
Sub-total: (3PGE+Au)
Other precious metals Sub-total: precious metals
3 015
–
149
1 023 448
11 144
1 019 3 992 578
Nickel (tonnes)
174
153 954*
26 711
1 370
164 767*
225 796
Copper (tonnes)
75
68 369*
5 114
689
69 027*
47 542
Chrome (tonnes)
79 793
481*
38 388
–
Other by-product revenue
–
–
229
2 520
Development ounces offset against property, plant and equipment
(137 687)
–
Sales revenue – Booysendal and Zondereinde mines
956 203
4 268 436
Total sales: operating mines
5 224 639
* Rand per tonne
Cost of sales The 38.4% increase in group cost of sales to R5.3 billion (F2013: R3.8 million) is a result of a combination of increases in operating costs, purchased concentrates, refining and related costs and depreciation charges.
NORTHAM ANNUAL INTEGRATED REPORT 2014
70
GROUP COST OF SALES – F2014
Labour Stores Utilities Sundries Decommissioning and restoration costs Operating costs – core business activities* Concentrates purchased Refining and other costs Depreciation and write-offs# Change in metal inventories Cost of sales – core business activities* Operating costs – other group companies Depreciation – other group companies# Cost of sales – other group companies Group cost of sales
F2014 R000 1 499 144 735 647 443 016 839 072 9 345 3 526 224 918 605 267 117 445 622
F2013 R000 1 263 779 697 954 340 820 445 557 11 323 2 759 433 657 540 161 591 234 690
110 316 5 267 884 9 778 253
(66 458) 3 746 796 66 505 –
10 031 5 277 915
66 505 3 813 301
* Core business activities refer to Zondereinde mine, Booysendal mine and Northam Chrome Producers. Total group depreciation R445 875.
#
Operating costs Operating costs increased by 25.1% to R3.5 billion (F2013: R2.8 billion) mainly owing to Booysendal mine’s contribution to group costs. The increase of 18.6% in labour costs is largely attributable to the inclusion of Booysendal labour costs. The mining royalty declined to R20.8 million (F2013: R55.1 million) owing to lower unit sales achieved at Zondereinde mine given the industrial action. OPERATING COSTS BY BUSINESS ACTIVITY – F2014
Labour Stores Utilities Sundries Decommissioning and restoration costs Total operating costs
Zondereinde mine R000 1 354 749 652 232 372 396 305 074 6 421 2 690 872
71
Booysendal mine R000 129 171 83 415 69 330 521 944 2 924 806 784
Northam Chrome Producers R000 15 224 – 1 290 12 054 – 28 568
Other group entities R000 – – – 9 778 – 9 778
Total group R000 1 499 144 735 647 443 016 848 850 9 345 3 536 002
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
CHIEF FINANCIAL OFFICER’S REVIEW – F2014
CHIEF FINANCIAL OFFICER’S REVIEW – F2014 CONTINUED
Concentrates purchased Concentrate purchases at Zondereinde increased by 20.9% to 1 975kg (F2013: 1 633kg), giving rise to the spend on concentrate purchases being 39.7% higher at R918.6 million (F2013: R657.5 million).
Purchase of concentrate
ANALYSIS OF GROUP OPERATING PROFIT Kilograms sold (3PGE+Au)
2 184 R000
Sales revenue
1 005 384
Cost of sales
991 407
– operating costs plus depreciation and write-offs*
32 901
– change in metal stocks
24 648
– freight and realisation costs
–
– refining costs
15 253
– concentrates purchased
918 605
Operating profit
13 977
Treatment charges recovered
78 198*
Contribution to operating profit
92 175
* Treatment charges recovered are included in sundry income in the statement of profit or loss and other comprehensive income
NORTHAM ANNUAL INTEGRATED REPORT 2014
72
Zondereinde production
Sub-total Zondereinde production
Booysendal production
Northam Chrome Producers
Other group entities
Total group
7 643
9 827
2 503
–
–
12 330
R000
R000
R000
R000
R000
R000
3 263 052
4 268 436
956 203
103 631
11 127
5 339 397
3 161 531
4 152 938
1 084 599
30 347
10 031
5 277 915
2 867 401
2 900 302
1 041 383
30 161
10 031
3 981 877
153 594
178 242
(68 112)
186
–
110 316
14 759
14 759
–
–
–
14 759
125 777
141 030
111 328
–
–
252 358
–
918 605
–
–
–
918 605
101 521
115 498
(128 396)
73 284
1 096
61 482
Total capital expenditure at Zondereinde was R351.5 million in F2014
73
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
CHIEF FINANCIAL OFFICER’S REVIEW – F2014
CHIEF FINANCIAL OFFICER’S REVIEW – F2014 CONTINUED
Refining and other costs
Share of earnings from associate and joint venture
Refining and related costs rose significantly by 65.3% to R267.1 million (F2013: R161.6 million), owing to increased volumes emanating from Booysendal mine as well as toll treatment charges during the period in which the Zondereinde mine smelting complex was being rebuilt following the smelter shutdown in May 2013.
The decrease in share of earnings from associate and joint venture was as a result of the lower production performance due to strike action during the year, which also adversely affected sales, by the Pandora joint venture.
Investment revenue, finance charges and net sundry income
Depreciation and write-offs
Investment revenues were 79.4% higher, at R60.0 million, on the back of higher average cash balances resulting from the group’s fundraising activities in F2014 and lower capital expenditure as the construction of Booysendal mine nears an end.
As the new Booysendal mine is now operational, the substantial 90.0% increase in amortisation charges to R445.9 million (F2013: R234.7 million) results from the first-time amortisation charges on Booysendal mine’s property, plant and equipment and mining properties and mineral resources on a straight line basis, in line with group accounting policies. Now that the Booysendal mine has been in production for one full year, management has better knowledge of the geology, and the rate of production that the mine is likely to achieve and, therefore, as is required in terms of IAS 16 on property, plant and equipment, to review the depreciation policy of the group for F2015.
Finance charges increased significantly to R176.1 million (F2013: R17.9 million) as the group utilised the domestic medium term note financing facilities and the revolving credit facilities more actively during F2014 relative to F2013. In the previous financial year, finance charges relating to the Booysendal development were capitalised as borrowing costs. Net sundry income was 61.4% higher at R97.0 million (F2013: R60.1 million) owing to increased foreign exchange gains resulting from the weakening rand against the US dollar during F2014 as well as an increase in the treatment charges recovered from purchased concentrate during the year.
Change in metal inventories The change in metal inventories amounts to a consolidated increase of R110.3 million (F2013: R66.6 million decrease). This comprises a R178.4 million positive change in Zondereinde mine’s inventories and a R68.1 million negative change in Booysendal mine’s inventory levels.
Hedging The group’s policy is not to hedge, thus exposing investors fully to the prevailing PGM prices. Consequently, there were no outstanding contracts at the end of the financial year.
Operating profit The operating profit of the group fell by 89.9% to R61.5 million (F2013: R607.7 million), mainly as a result of the increases in the components making up cost of sales as outlined above. Consequently, the operating margin for the group fell to 1.2% compared to 13.7% in F2013.
NORTHAM ANNUAL INTEGRATED REPORT 2014
Taxation charge The group net taxation charge of R26.2 million (F2013: R169.1 million) was lower owing to the decline in profit before tax achieved in F2014.
74
The higher effective tax rate, which increased to 57.2% in F2014 (F2013: 24.3%) is the result of the net effect of permanent tax differences at group level, including exempt income in the form of dividends and non-deductible expenditure, which includes fair value adjustments.
in F2014, on the back of a significant decline in capital expenditure at Booysendal mine, which is now fully commissioned. Revenue relating to the sale of development ounces of R137.7 million was offset against these cash outflows in F2014, further reducing cash flows utilised in investing activities.
A detailed analysis of the tax charge, including the effect of permanent and other differences is set out in note 33 to the annual financial statements on page 237.
Financing activity cash flow Cash flows generated from financing activities fell significantly by 82.0% to R248.0 million (F2013: R1.4 billion) primarily owing to the R120 million raised in F2014 from the domestic medium term notes programme, compared to R1.25 billion raised in F2013.
Total comprehensive income attributable to shareholders A lower total comprehensive income of R18.3 million was earned in the current year, compared to R523.9 million in F2013, largely as a consequence of the strike at Zondereinde mine which resulted in lower revenues, as well as costs associated with the new Booysendal mine, which is still ramping up, achieving approximately 50% of steady state production as at 30 June 2014. NCP contributed an amount of R50.6 million to the group’s F2014 after tax profits.
Net increase in cash and cash equivalents The result of all operating, investing and financing cash flow activities for the year was a net cash inflow of R367.5 million (F2013: R193.6 million).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Non-current assets
Consequently, earnings per share fall by 98.2% in F2014 to 2.4 cents per share compared to 132.0 cents per share in F2013.
Property, plant and equipment Despite group capital expenditure increasing to R897.8 million, revenue from the sale of development ounces of R137.7 million being offset against property, plant and equipment, a depreciation charge of R234.6 million from the Booysendal mine, which is being depreciated over the life of mine for the first time, and pre-production expenditure relating to the development of Booysendal mine, amounting to R300.3 million, was credited to property, plant and equipment to account for the initial stockpile in the inventory balance on 1 July 2013 when the mine came into production. The initial stockpile was depleted by year end.
CONSOLIDATED STATEMENT OF CASH FLOWS Operating activity cash flow Cash flows from operating activities improved by 68.9% to R885.5 million (F2013: R524.2 million) owing to higher sales revenues achieved by the group in F2014.
Investing activity cash flow Cash flows utilised in investing activities decreased significantly from R1.7 billion in F2013 to R766.1 million
75
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
CHIEF FINANCIAL OFFICER’S REVIEW – F2014
CHIEF FINANCIAL OFFICER’S REVIEW – F2014 CONTINUED
Deferred tax asset The deferred tax asset arises out of the tax benefits that are expected to arise in future as a result of the capital expenditure incurred during the development of the Booysendal mine.
Interest in associates and joint venture There are no major changes in the group, which has interests in the following: • 7.5% of the Pandora joint venture; • 50% of the Dwaalkop joint venture;
Buttonshope Conservancy Trust The trust was established in 2011 as part of an initiative in collaboration with the Mpumalanga Tourism and Parks Agency to retain a portion of the freehold land adjacent to the Booysendal mine as an environmental conservancy. The group contributed an initial amount of R10.0 million to the trust in F2012.
• A 51% initial participatory interest in the Kokerboom joint venture (a greenfields iron oxide/ gold/copper and massive sulphide exploration project); and • 20.3% share of Trans Hex Group Limited, a diamond producer and marketer listed on the JSE; An analysis of these assets is available in Annexure 2 of these annual financial statements, on page 256.
Current assets Inventories Inventories increased due to the higher unit cost of stock values and higher quantities held at year end.
Land and township development At 30 June 2014, a total of 359 housing units had been sold to new home owners at Mojuteng near Zondereinde and an additional 29 stands are being prepared for housing construction for the benefit of employees. The company has also converted, from the current hostel accommodation, and built 1 640 employee single units (including units for contractors).
Trade and other receivables The decrease in this balance is due to the more aggressive following up of debtors in order to lower net interest charges of borrowing. Cash and cash equivalents The total cash resources of the group at year end were R666.1 million (F2013: R298.6 million). The rise in this balance is mainly due to an increase in operating cash flows and the raising of funds through the claw-back rights offer (net R579.0 million raised) and the tap issue on the domestic medium term notes programme in F2014 (R120.0 million).
Long-term receivables The increase in this balance reflects the sales of housing to employees on an installment sale basis, through the 100%-owned housing subsidiary Norplats Properties Proprietary Limited. Northam Platinum Restoration Trust Fund and Environmental Guarantee Investment The R14.1 million increase in the combined balance of these funds is due to contributions made and net income earned.
NORTHAM ANNUAL INTEGRATED REPORT 2014
Non-current liabilities Deferred tax liability The deferred tax liability arises from normal timing differences.
76
Long-term provisions The increase in this provision is mainly as a result of the unwinding of the discount rate on calculating the decommissioning and restoration cost provisions.
Revolving credit facilities The revolving credit facility was repaid in full during the year and the total R1.4 billion facility was available for drawing at 30 June 2014.
Share-based payment liability This balance represents the liability arising from the 30 June 2014 balance of outstanding options and incentive shares granted to employees in terms of the group’s share option scheme and share incentive plan. The increase in the liability relates to the additional allocation of incentive shares to employees during F2014.
Capital expenditure Booysendal mine Capital expenditure of R539.6 million was spent on the development of the mine during F2014 (F2013: R1.4 billion). Capital expenditure is expected to be R483.4 million in F2015, including R78.4 million of ongoing capital expenditure. Since inception, the total project expenditure, including finance costs and other directly attributable costs, is expected to be R4.9 billion by the end of F2015. The original capital budget for Booysendal mine was R3.9 billion in June 2010 money terms.
Domestic medium term notes This balance represents the R1.25 billion finance for the continued development of Booysendal mine raised during F2013 plus the R120 million tap issue raised in F2014, through the issue of three-year senior unsecured floating rate notes at a rate of Jibar plus 350 basis points.
Zondereinde mine Capital expenditure was R351.5 million in F2014 (2013: R347.9 million). Capital spend in F2015 is expected to be R331.2 million.
Long-term loans The loan was raised from a Dutch organisation, Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV (FMO), to fund the group’s affordable home-ownership initiative for employees. The short-term portion of this loan amounts to R3.8 million and is disclosed under current liabilities.
Ayanda Khumalo Chief financial officer 25 September 2014
Current liabilities Trade and other payables Cash conservation strategies, particularly during the strike, resulted in a decline in trade payables. Short-term provisions This liability relates to leave accrued to employees, and is higher owing to the rising salary and wages expenditure.
77
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
CHIEF FINANCIAL OFFICER’S REVIEW – F2014
OPERATIONAL REVIEW
KEY DEVELOPMENTS DURING THE YEAR
Progress on ore reserve development in the northwest quadrant of the mine and the deepening project on the lower levels of the mine to access normal Merensky reef were curtailed during the strike. These activities have resumed and will gain momentum in the coming financial year.
• Good safety performance at both divisions* • Lower production at Zondereinde due to 11-week strike • Smelter successfully recommissioned • Booysendal ramp-up on track
Given the considerable infrastructural footprint at Zondereinde, the strategy going forward will be to work on increasing the current 15-year life of mine by prioritising the deepening project to access more normal Merensky reef and to further exploit the UG2 ore body which is more conformable and potentially more productive than Merensky reef. Management is currently exploring processing options to accommodate an increase in UG2 production, including the option of an additional furnace within the current smelter complex.
• Total group capex of R891.1 million
ZONDEREINDE Zondereinde mine’s operating performance was adversely impacted by the 11-week strike, which began on 3 November 2013 and ended on 21 January 2014. Following the strike, it took a little over three months for production to return to normal and, by the end of the financial year, production levels had improved significantly. Consequently, the combined tonnes milled declined by 18.5% to 1 724 156 tonnes (F2013: 2 115 712 tonnes). Merensky reef contributed 803 736 tonnes at a head grade of 5.8g/t (F2013: 5.8 g/t) (3PGE+Au) and the UG2 reef contributed 920 420 tonnes at an improved head grade of 4.3g/t (F2013: 4.2g/t) (3PGE+Au). Consequently, the combined head grade normalised to 5.0g/t (3PGE+Au) from 4.9g/t (3PGE+Au).
The smelter rebuild, prompted by the unexpected erosion of the refractory bricks in proximity to the slag level interface, was completed using a different brick specification and the introduction of copper cooling at the end of September 2013 as planned, and successfully recommissioned thereafter. The total capex for the repair work was R54.0 million. On 28 July 2014, shareholders were advised of an incident during routine maintenance at No1 shaft when a counterweight in one of the shaft’s hoisting components became detached and fell to the bottom causing damage to steelwork between 12 and 13 levels, approximately 2 000m below surface. While there were no injuries as a result of the incident, the shaft was out of commission for five weeks for repairs.
Available ore reserves are currently estimated at 20 months for the Merensky reef and 24 months for the UG2 reef. Metals produced from underground fell by 18.9% to 7 331kg (F2013: 9 041kg) and the volume of concentrates purchased increased by 20.9% from 1 663kg to 1 975kg.
* Safety development and performance are discussed in more detail on pages 94 to 97.
NORTHAM ANNUAL INTEGRATED REPORT 2014
78
During this time the mine’s production was reduced by approximately 50% while No 2 shaft remained fully operational.
1 517 109 tonnes (F2013: 242 602 tonnes) were milled at a head grade of 2.6g/t (3PGE+Au) to produce 2 882kg of metal in concentrate.
Zondereinde – costs and capital expenditure
Improving the recoveries from the concentrator plant and evaluating opportunities for growth, including the possibility of also mining the Merensky reef at Booysendal, will be key focus areas at this operation going forward.
Total operating costs were R2.691 billion compared to R2.759 billion in F2013, a 2.5% decrease. Unit costs were negatively affected by lower production volumes as a result of the strike. Unit operating costs increased by 19.0% to R1 682 per tonne (R1 414 per tonne) and cash costs by 18.2% to R1 526 per tonne (F2013: R1 291 per tonne).
Booysendal – costs and capital expenditure The mine’s unit operating and cash costs were R688 and R527 per tonne milled respectively. This is not a realistic reflection of Booysendal’s performance as the unit costs have been positively influenced by the addition of tonnage from the preproduction stockpile. A more realistic assessment of unit costs will be obtained as the mine ramps up to steady state production.
Capital expenditure for the year was R351.5 million (F2013: R347.9 million) of which the major items were the rebuild of the smelter, the deepening project and the hostel-conversion programme. Capital expenditure is estimated to be R331.2 million in F2015, of which R105 million has been allocated to the deepening project and the balance to maintenance expenditure, which includes R28 million for an autoclave replacement and a further R42 million for the hostel-conversion programme.
Capital expenditure at Booysendal declined significantly from R1.4 billion in F2013 to R539.6 million owing to the near-completion of the mine’s capital footprint. Forecast capital expenditure for F2015 is expected to be R483.4 million of which R78.4 million will be allocated to routine capital while R50 million will be spent on a project to investigate the feasibility of mining Merensky ore at Booysendal.
BOOYSENDAL The Booysendal UG2 North mine came into production on 1 July 2013 and is expected to ramp up to full production by H1 F2016. During the year,
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OPERATIONAL REVIEW
SUSTAINABILITY REVIEW
company’s business and operations. These issues are reviewed and re-evaluated, on an ongoing basis, by management and have remained largely constant, notwithstanding some changes in their rankings.
In identifying and reporting on sustainability matters management has adopted an inclusive approach, ensuring that the reporting narrative is informed by the context of the business, its business model and strategy, the risks to the business, while also taking into account the needs and concerns of its stakeholders, both internal and external.
The material issues should be read in conjunction also with the company’s business risks which may be found on page 33 of this document, and are defined as those issues which “reflect the organisation’s significant economic, environmental and social impacts; or would substantively influence the assessment and decisions of stakeholders.”
Northam has in the past identified, through a series of GRI-guided workshops which took into account an analysis of the internal and external environments, information from the company’s risk register and feedback from stakeholders, a number of issues which are considered to be material to the
These issues are outlined below and form the substance of what we report against throughout this document.
Tailings storage facility at Booysendal
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MATERIAL ISSUES Creating meaningful value and sustainable benefits for all stakeholders, including shareholders (see financial capital, page 87)
• Increased production and sales • Increased earnings and growth • Transformation • Salaries and wages • Investing in communities (LED/CSI) • Taxes and royalties
Establishing and maintaining
• Stakeholder engagement and
constructive communication and
employee relations • Establishing direct channels of
consultation with our employees (see human capital, page 93)
two-way communication
Operating safely and efficiently to protect the lives and livelihoods of employees and contractors (see human capital, page 93)
• Reducing injury rates • Applying appropriate technologies • Communication and training • Reinforcing operational standards and responsibility
Establishing and maintaining constant and constructive community engagement, in order to deal with community concerns, expectations and developments (see social capital, page 113)
• Stakeholder engagement • Investing in communities (LED/CSI) • Local employment • Local procurement
Achieving and maintaining legislative and regulatory compliance, including our social licence to operate, and ensuring the underlying systems and processes are in place to achieve this (reported throughout)
• Environmental compliance • Mining Charter compliance • Social and labour plans • Accounting standards and IFRS
Environmental
• Optimal use and conservation of resources
management, conservation and the optimal use of resources (see natural capital, page 120)
• Minimising environmental impacts • Land conservation • Compliance
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STAKEHOLDER ENGAGEMENT
APPROACH
transformation manager are accountable for the internal aspects.
Northam’s day-to-day business relies on its capacity to develop and maintain enduring, mutually beneficial relationships with its stakeholders. The company defines its stakeholders as those individuals, groups and entities directly affected, both positively and negatively, by its business activities.
The company conducts a sustained programme of communication directed at its stakeholders, including shareholders and their advisors, employees, unions, communities, government and regulators and nongovernmental organisations (NGOs).
The company’s stakeholder engagement policy is reviewed annually, and regulates Northam’s various engagement approaches with both internal and external stakeholders. Most recently the stakeholder engagement policy was reviewed and approved by the board in April 2014.
Northam is a member of the Chamber of Mines and actively participates in the Chamber’s industry initiatives. The company’s major impacts are felt at the operational level. As such, operational management is empowered to deal with any concerns raised by stakeholders. Management is committed to reacting timeously to any stakeholder concerns, and engages both formally and informally. External stakeholder concerns may be escalated to the chief financial and chief executive officers, and to the board subcommittees, which deal with the relevant disciplines.
In line with the company’s governance procedures, Northam’s chief executive and chief financial officer are responsible for the approval of all external stakeholder engagement interventions, while the general managers at each operating division, together with the corporate human resources and
Northam engages with stakeholders in terms of an annually reviewed policy
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R750 million REVENUE LOSS
R151.0 million LOSS IN EMPLOYEE WAGES
Scan the QR barcode with your smartphone or tablet to go into the webpage.
Wage negotiations and the 11-week strike at Zondereinde A key concern for various stakeholders during the year was the impact of the 11-week NUM strike following the inability of the parties to reach a settlement on wage increases at the company’s Zondereinde operation. All stakeholders were affected either directly or indirectly by the strike. This included employees and their local communities, the investment community, suppliers and contractors, media, local and national government and Northam’s industry peers. At ground level, management actively engaged with employees and union representatives in order to find an affordable solution that would benefit employees but would also ensure the sustainability of the operation. In a novel development the company established a web-based platform for stakeholders which provided latest and reliable strike and negotiations related information. F2014 WAGE NEGOTIATIONS provided current and up-to-date information for both internal and external stakeholders including investors, analysts and the media.
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STAKEHOLDER ENGAGEMENT CONTINUED
ENGAGING WITH STAKEHOLDERS Shareholders (providers of capital), research analysts and fund managers Northam provides information on operating, financial and other performance in a timely and equitable manner through the regulatory channels such as the JSE Stock Exchange News Service (SENS), accompanied by website postings, electronic web-based communiques to a database of registered stakeholders including the investment community and the media. In terms of the company’s inclusive approach, it focuses on clear and plain English in its communication material. Shareholders are encouraged to participate in the annual general meeting (AGM) of the company and to raise issues of concern or interest directly. The notice of meeting is a regulated issue and shareholders are notified accordingly.
Employees and unions Relations with employees and organised labour are governed by recognition agreements and conditions of employment by legislation. Northam supports the rights of all employees to freedom of association and acts in accordance with the South African Constitution, prescribed legislation, industry compacts and recognition agreements with unions. The company encourages open communication and consultation and employees are encouraged to raise issues of concern and interest via the formal and informal structures in place, including through the human resources discipline, line management and union structures.
Communities Community development is prescribed by the commitments made in the company’s social and labour plans (SLPs). In line with the requirements of the Mining Charter, Northam ensures that its policies and practices are aligned with those of the local municipalities’ integrated development plans (IDPs) as far as reasonably possible. Northam engages on a formal and regular basis with local authorities, including the Moses Kotane and Thabazimbi municipalities in respect of Zondereinde and the Thaba Chweu Municipality in respect of Booysendal. Community forums are in place to address community concerns, in particular issues such as local employment, training, and development and procurement.
Customers Northam has long-standing relationships with its customer base. The company’s marketing department maintains regular weekly contact with its domestic and international customers, and hosts customer meetings and visits customer facilities. Customer representatives, in turn, visit Northam’s mining and metallurgical operations. Any issues relating to customer satisfaction are directly taken up with the marketing department.
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KEY STAKEHOLDERS, CONCERNS AND CHANNELS OF COMMUNICATION Key stakeholder
Topics/concerns
Communication channels
Shareholders and investors
• Operating and financial performance
Company announcements
• Share price performance and dividends
SENS
• Issues related to the sustainability of the company:
Company website
• labour relations • risk mitigation • legislation • safety
Preliminary and annual results presentations
See the financial capital section of this report – page 87
Roadshows
One-on-one investor meetings Investor site visits AGMs and special shareholder meetings Annual integrated reports CDP submissions CDP water submissions
Employees
• Wage negotiations
Company policies
• Job security
Collective bargaining practices
• Training and development
Team briefings
• Health and safety
Two-way manager-employee
• Company performance
communication Let’s talk campaigns: recruitment HIV/AIDS education performance
Customers
• Impact of industrial action on supply
Company announcements
• Continued availability of supply
Company reports
• Quality of supply
Website Formal presentations Roadshows Site visits CDP submissions CDP water submissions
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STAKEHOLDER ENGAGEMENT CONTINUED
KEY STAKEHOLDERS, CONCERNS AND CHANNELS OF COMMUNICATION CONTINUED Key stakeholder
Topics/concerns
Communication channels
Suppliers and contractors
• Impact of the strike on suppliers
Company announcements
• Sustainability of the company
Company practices and policies
• Company’s financial performance • Employment practices
Preferential procurement policies
• Local procurement practices
Open days
• Quality control
Dialogue
• Preferential procurement practices Media
Communities and NGOs
Government and regulatory authorities
• Impact of the strike on the company, employees, the industry and the South African economy
Company announcements
• Operating and financial performance
Online presentations
• Corporate activity
Media site visits
• Environmental issues
Company reports
• Community-related topics
Interviews
• Impact of the strike on local business
Community forums
• LED/CSI
Stakeholder forums
• Employment
Industry partnerships
• Job opportunities • Health related issues
Community engagement programmes
• Skills development
Wellness campaigns
• Environmental impact
Dialogue
• Labour relations
Formal processes
• Licence to operate • Employment
Participation in industry associations
• Education and training
Social and labour plans
• Environmental impact and rehabilitation
Dialogue
Website
Company reports Site visits
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FINANCIAL CAPITAL Northam aims to create meaningful value and sustainable benefits for all stakeholders, including shareholders.
KEY FEATURES
11-week strike at Zondereinde – estimated loss in revenue of
R750.0 million
R1 billion
raised in successful fund raising Northam acquires
10% in
Employees lost
a further
R151.0 million
Northam Chrome Producers (NCP)*
in wages
Booysendal rampup progressing
Smelter at Zondereinde recommissioned in October 2013
Total capex for the year reaches
R891.1 million
(Booysendal: R539.6 million Zondereinde: R351.5 million) Group tax down
R26.2 million
at
*Post the year-end NCP became a wholly-owned subsidiary of Northam.
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APPROACH
F2014 FINANCIAL PERFORMANCE
In terms of market capitalisation, Northam ranks as a mid-tier PGM producer. The company is distinguished from its peers and other smaller PGM producers in that its activities are integrated; from the underground mining function, through to the concentrating, smelting and base metal removal processes.
• 79 production days lost at Zondereinde owing to industrial action, resulting in the loss of approximately 48 000oz in production, R750.0 million in revenues and R151.0 million in employee wages • Two-year wage deal of 7.5% to 9.5% per annum reached, concluded at Zondereinde resulting in an increase of R49 million to the total wage bill
Final precious metal concentrate is transported from Zondereinde platinum mine and metallurgical complex for refining to the Heraeus facilities in Hanau, Germany, and also to the Heraeus refinery in Port Elizabeth. Northam’s in-house marketing department administers sales of precious metals to customers in Europe, Japan and North America. By-product metals, copper and nickel sulphate, are extracted at the on-site base metals removal plant and sold in the domestic market.
• 20.9% increase in Zondereinde’s unit operating costs to R395 629/kg (F2013: R327 331/kg) • 18.9% decline in metals in concentrate produced at Zondereinde to 235 693oz (3PGE+Au) (F2013: 290 675oz (3PGE+Au) • Impact on sales revenue mitigated by first-time contribution to production of 92 668oz (3PGE+Au) from Booysendal • 96.3% decline in annual group profits to R19.6 million (F2013: R528.0) resulting in headline earnings per share of 2.2 cents (F2013: 136.5 cents per share)
For about 20 years, Zondereinde was Northam’s only operating asset. Construction of the shallow mechanised Booysendal mine started in 2010 and, for Northam, represents a significant diversification in terms of geography, mining method, costs and, consequently, lowers the risk that the company is exposed to with a single operating asset. Booysendal came into production on 1 July 2013. Ramp-up to reach steady-state production in F2016 continues. Booysendal plans to produce some 2 250 000 tonnes of ore per annum at steady state, generating around 160 000oz of metals in concentrate (3PGE+Au), together with associated precious and base metal by-products.
NORTHAM ANNUAL INTEGRATED REPORT 2014
• Year-on-year the value of the rand weakened by 17.4% against the US dollar, averaging R10.35/US$ (F2013: R8.82/US$) For production and financial performance see pages 68 and 137 respectively. IMPACT OF THE STRIKE Days of production lost Production lost Revenue lost estimate Employee wages lost
88
79 48 000oz R750.0 million R151.0 million
Capital expenditure (R million)
F2014 value distribution (%)
2 000
Employees
58.5%
Government
11.9%
1 200
8.5%
800
0.2%
400 232 132 0 2010
Providers of capital Broader community Retained by company
1 700
1 600
20.9%
1 500
688 287
2011
Booysendal
331
2012
350
2013
352
540
2014
Zondereinde
F2014 ECONOMIC IMPACTS
Black economic empowerment
• The Toro Employee Empowerment Trust received R9.2 million (F2013: R24 million)
Northam was one of the first resource companies in the South African mining space to comply with the requirement imposed by the South African Minerals Petroleum and Resources Act (MPRDA) and the associated South African Mining Charter for 26% HDSA equity ownership. However, given the economic downturn post 2008, and the associated decline in the price of platinum equities, including those of Northam, certain of Northam’s BEE shareholders were obligated to dispose of a significant portion of their holdings in order to address breaches of covenants applicable in their BEE financing agreements in 2012.
• In its first pay-out to employees, the Toro Employee Empowerment Trust disbursed R54.8 million to 6 332 individuals at Zondereinde • A total of 6 889 permanent employees at Zondereinde and Booysendal • R1 499 million paid to employees in wages and benefits • R26.2 million paid in corporate tax (F2013: R169.1 million)
• Corporate social investment (CSI) expenditure amounted to R2.9 million
Northam is currently working on a transaction to restore the group’s empowerment credentials. The new scheme, which seeks to balance the requirements of current shareholders with legislative compliance, is based on the following key principles:
• No significant financial assistance received from government
• Compliance with the provisions and principles of the Mining Charter and the Mineral and Petroleum
• A total of 359 affordable housing units sold to employees to date
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Resources Development Act, 2008 (Act No 49 of 2008) (MPRDA);
of the Mining charter were valid, verifiable and accurately reported.
• A BEE transaction that is sustainable and beneficial for all stakeholders;
A number of areas were, however, highlighted indicating shortfalls (these included local enterprise and supplier development) in order to improve procurement from local black-owned enterprises, and a requirement of more proactive community engagement since the municipality channels may not be adequate in the future.
• A secure shareholding structure so that the BEE status cannot be threatened again in future; • Broad-based participation as much possible; and • Northam’s historically disadvantaged South African (HDSA) employees and communities should participate in and benefit from the scheme.
Preferential procurement Northam accords preferred-supplier status to HDSA suppliers subject to commercial competitiveness. Northam spent R3.1 billion in F2014 (F2013: R2.9 billion) on procurement, of which 57.70% or R1.6 billion was allocated to BEE suppliers.
In pursuit of further satisfying BEE criteria, Northam submitted its Mining Charter Annual Report in April 2014, while its Work Skills Plan and Annual Training Report for both operations were completed and submitted by the end of May 2014.
In compliance with the Mining Charter, Northam is committed to giving preference to local businesses in the communities surrounding its operations. Northam’s procurement policy accordingly gives local BEE companies preferred supplier status.
In February 2014, Zondereinde was subjected to the Mining Charter Impact Assessment audit conducted by Moloto Solutions, an external consultant to the DMR. The overall audit findings indicated that all elements
Zondereinde employees
NORTHAM ANNUAL INTEGRATED REPORT 2014
90
HDSA EXPENDITURE BEE equity
Capital
Services and contractors
Consumables
%
R
R
R
R
58.25%
59.43%
54.13%
57.70%
53 761 600
53 647 871
86 872 496
192 281 967
7.21
414 776 087
654 808 652
291 475 131
1 361 059 869
50.49
Actual spent HDSA owned
>50%
HDSA empowered
25% to 50%
HDSA influenced
5% to 25%
Total* % Spent* R
0
0
0
0
0.00
468 537 686
708 456 524
378 347 626
1 555 341 836
57.70
Exempt micro enterprise
Exempt micro enterprise
1 656 096
1 947 233
4 274 575
7 877 905
Multinational enterprises
Multinational company
69 631 782
5 394 228
21 639 880
96 665 889
3.59
Measured HDSA spend
539 825 565
715 797 985
404 262 081
1 659 885 630
61.29
Without HDSA
No BEE shareholding
262 471 673
468 385 930
298 212 123
1 029 069 726
38.18
Black influenced
Less than 25% shareholding
3 712 944
9 922 975
743 362
14 379 281
0.53
806 010 181
1 194 106 890
703 217 565
2 703 334 637
100.00
Electricity
0.00
383 408 460.02
0.00
383 408 460
Water
0.00
16 544 927.88
0.00
16 968 359
Total discretionary spend Non-discretionary spend
Municipal services
74 566.60
1 965 469.17
0.00
2 040 036
0.00
27 234 317.00
0.00
27 234 317
806 084 748
1 623 260 064
703 640 996
3 132 985 808
66.85%
74.97%
57.49%
Royalties Total spend
* Excluding custom purchases and toll smelting
Local employment and economic development Given the rural isolation of both the Zondereinde and Booysendal operations (and indeed of the majority of mining operations) employment opportunities are scarce and frequently the level of education and skills in these communities is low. Consequently the expectations in local communities are frequently unrealistic. Northam works closely with municipal officials to manage these expectations and has assisted in identifying economic targets which could be developed by way of SMEs or SMMEs in collaboration with local entrepreneurs. 91
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VALUE ADDED STATEMENT F2014 % Sales revenue
F2013 R’000
%
5 339 397
Less: Purchase of goods and services in order to operate and produce refined metals
(3 294 369)
Value added by operations
92.8
R’000 4 420 977 (2 113 027)
2 045 028
95.7
2 307 950
Add: Share of earnings from associate
0.1
2 137
0.4
9 638
Investment revenue
2.7
59 963
1.4
33 434
Net sundry income Total value added
4.4
97 011
2.5
60 108
100.0
2 204 139
100.0
2 411 130
Value distributed EMPLOYEES
58.5
1 288 616
46.9
1 130 199
Salaries and wages
60.9
1 341 254
47.4
1 143 292
Contributions to retirement benefit funds
4.5
99 275
3.9
94 050
Contributions to health-care funds
2.7
58 615
2.2
52 361
Pay-as-you-earn deducted
(9.6)
(210 528)
(6.6)
(159 504)
GOVERNMENT
11.9
262 992
15.9
384 356
Mining and non-mining tax, including capital gains tax
4.4
96 229
8.2
197 629
Deferred tax
(3.2)
(70 030)
(1.2)
(28 575)
Royalties
1.1
26 265
2.3
55 798
Pay-as-you-earn deducted from employees
9.6
210 528
6.6
159 504
PROVIDERS OF CAPITAL Dividends
0.5
11 066
1.0
21 747
Finance charges
8.0
176 124
5.1
123 703
BROADER COMMUNITY Corporate social responsibility
0.2
2 917
0.1
3 002
Total value distributed
79.1
1 741 715
69.0
1 663 007
RETAINED BY COMPANY
20.9
462 424
31.0
748 123
Depreciation and write-offs
20.2
445 875
9.7
234 690
Decommissioning provision to meet statutory obligations
0.4
9 345
0.5
11 324
Retained income
0.3
7 204
20.8
502 109
100.0
2 204 139
100.0
2 411 130
NORTHAM ANNUAL INTEGRATED REPORT 2014
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HUMAN CAPITAL Northam aims to maintain constructive consultation with all employees, while protecting their lives and livelihoods. As an operator of mines, Northam’s business is reliant on people. The successful operation of Northam’s assets requires a healthy, skilled, trained and committed workforce, which is capable of working safely and productively.
KEY FEATURES
One million
fatality-free shifts achieved at
Zondereinde
359 houses sold to employees to date
fatality-free
No safety stoppages at
Booysendal 93
One million shifts achieved at
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REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
Accordingly, these employees may participate in and contribute to the union’s elected health and safety committees.
HEALTH AND SAFETY The health and safety of Northam employees takes precedence over all production objectives. Health and safety is a key material issue and forms an important part of Northam’s strategy.
At Zondereinde, the joint management and employee-represented health and safety committee meets on a monthly basis or more frequently if required. The committee is responsible for the identification of critical issues that may have an effect on the health and safety of employees and the environment as well as for inspections, audits and accident investigations, identifying areas for training and development, and providing personal protective equipment. The committee’s main focus is on empowering employees to take responsibility for their own health and safety, and the health and safety of others, by identifying and reporting potentially hazardous situations.
Northam’s approach to health and safety is guided by extensive legislation and regulations, notably the Mine Health and Safety Act No 29 of 1996. The health, safety and environment (HSE) board sub-committee is responsible for overseeing compliance with health and safety laws and regulations that may have an impact on the company. Operational health and safety ultimately remains the responsibility of the general manager at each operation, while day-to-day safety management is delegated to the operational managers, who are supported by the mine health and safety departments. All employees and contractors receive safety induction training on an annual basis, and intermittently during the year, for example, when they return from leave.
The operational HSE committees hold monthly meetings, which are chaired by each operation’s general manager and attended by two full-time health and safety representatives who have been elected by employees. Safety representatives receive training in safety and also attend mine production meetings where safety concerns are discussed.
All employees who participated in the strike were required to undergo normal induction upon their return to work. The operations maintain policies and procedures, detailed records and reports on safety matters, accidents and their severity, transgressions and remediation work. This information is analysed and used to improve safety performance. Reports on health and safety are submitted to the HSE board sub-committee, which is tasked with health and safety matters for further interrogation and oversight.
Free issue personal protective equipment (PPE) is supplied to employees and a comprehensive code of practice was drafted in F2013 for the allocation of PPE for occupational-specific requirements. Zondereinde’s HSE committee aligns its activities with the joint health and safety committee. There are three health and safety committees in place at Booysendal, these include:
Joint management/employee approach Northam encourages the participation of employees and management in all health and safety matters. Given fairly strong labour union affiliation at Zondereinde in particular, employees participate in the union’s health and safety committees through their elected officials. Some 84% of Zondereinde’s workforce is affiliated to a union while 22% of employees at Booysendal belong to a union.
NORTHAM ANNUAL INTEGRATED REPORT 2014
• The mining operation’s health and safety committee which meets on a monthly basis. • The concentrator plant health and safety committee which also meets on a monthly basis. • An overarching health and safety committee, which meets every quarter to discuss unresolved issues which were raised at the business unit level. 94
Incidents and accidents are discussed and reviewed at this level and common risks are identified and deliberated as a preventative measure. Other issues raised during the year include PPE for women, remuneration of safety representatives, additional safety training as well as approvals of codes of practices, procedures and standards.
were introduced to manage the prevalence of behaviour-based safety transgressions:
In total 64 safety representatives were trained at the new on-mine training centre during the year.
• Suspension without pay
SAFETY
At Zondereinde, the Du Pont safety management programme was instituted in 2012. This system focuses on incident investigations to ensure that the correct hazards, risks and root causes are detected in incident investigations, and the requisite training is provided. This is supplemented by coaching in the completion of hazard identification and risk assessment documents. The system is further enhanced by coaching in visible felt leadership. All management levels are coached in the various aspects of visible felt leadership.
• Counselling • Verbal warnings • Written warnings • Final written warnings • Dismissal
F2014 safety performance In line with the material issue of operating safely and efficiently to protect the lives and livelihoods of all employees, all incidents are considered very seriously at Northam, and continuous efforts are made to ensure the reinforcement of operational standards and responsibility. Analysis of safety incidents indicates that injuries are generally associated with the following:
No fatalities were reported during the year under review (F2013: 1).
• Material handling • Trucks and tramming
• Moving machinery
Northam defines a lost time injury (LTI) as an injury which results in one to 13 days of lost time while a reportable injury (RI) is an injury which results in lost time of 14 days or more. The LTI and RI incidence rates are based on 200 000 man-hours worked.
• Hydropower
Zondereinde
• Ventilation
Traditionally, handling of materials and falls of ground have been the main contributors to injuries at Zondereinde – with employees involved in construction, development and stoping activities most at risk.
Efforts to reduce the number and severity of injuries at Zondereinde continued during the year. The total number of injuries recorded was lower year-on-year as a result of substantially fewer shifts worked owing to industrial action. Expressed in terms of rates, however, injury rates deteriorated marginally as fewer man hours were worked during the strike. Pleasingly, however, Zondereinde reported a fatality-free year.
A particular safety theme at Zondereinde during the year was highlighting the need to adhere to safety standards. Focused training and disciplinary measures
After the conclusion of the strike, safety personnel, in consultation with other service departments, assisted mining crews to ensure that workplaces that had not
• Falls of ground • Winches and rigging • Slip and falls
• Explosives
95
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REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
The DMR imposed three Section 54 safety-related work stoppages at Zondereinde during the year under review. Two followed routine visits and another after an in loco investigation into a reportable injury. The stoppages were all restricted to specific working places, which were stopped for a period of three days each.
been operational for the duration of the strike were subjected to thorough risk assessments. Risks were duly scrutinised and recorded, and remedial action plans were prioritised and executed. The “making safe” of workplaces was the most urgent priority at the start-up of operations after 21 January 2014. Safety officers intensified on-the-job training activities and management exercised due diligence in declaring working areas safe. Abnormally high ambient temperatures in some workplaces and where ground conditions had deteriorated over time, were the main impediments noted. However, these challenges were resolved during the making safe process.
To date, Zondereinde has adopted and implemented the following Mining Industry Occupational Safety and Health (MOSH) initiatives: • Hearing-protection devices • Netting with bolting • Entry examinations and making safe
In F2014, 113 LTIs were reported at Zondereinde, of which 57 were reportable. The primary causes of LTIs in F2014 were related to materials handling and to falls of ground.
• Proximity detection system
FATALITIES – ZONDEREINDE F2014
F2013
F2012
F2011
F2010
0
1
2
5
1
LOST TIME INJURY INCIDENCE RATE PER 200 000 HOURS WORKED – ZONDEREINDE F2014
F2013
F2012
F2011
F2010
1.70
1.50
1.91
1.34
0.83
REPORTABLE INJURY INCIDENCE RATE PER 200 000 HOURS WORKED – ZONDEREINDE F2014
F2013
F2012
F2011
F2010
0.86
0.83
0.88
0.74
0.52
FATAL INJURY INCIDENCE RATE PER 200 000 HOURS WORKED – ZONDEREINDE F2014
F2013
F2012
F2011
F2010
0.00
0.01
0.02
0.06
0.01
NORTHAM ANNUAL INTEGRATED REPORT 2014
96
Booysendal
and materials handling. The early examinations initiative known as THINK FALL OF GROUND was initiated in F2013. It provides for officials to go underground every Monday and Friday morning to ensure that employees are entering their worksites safely. Any deviations are rectified immediately. This drive continues and has resulted in significant improvements in examination techniques.
In F2014, Booysendal achieved one million fatalityfree shifts. Booysendal’s total lost time injury incidence rate (LTIIR) was 0.27 per 200 000 hours worked (F2013: 0.53) and the reportable injury incidence rate (RIIR) was 0.21 per 200 000 hours worked (F2013: 0.33). To date, no fatalities have been recorded at Booysendal. There were no safety-related work stoppages at the operation during the year.
The mine’s trigger action response programme has been incorporated into the daily early morning examination process and continues to inform the mine’s safety initiatives.
Booysendal recorded five LTIs in F2014 of which four were reportable. The primary causes of LTIs for F2014 were falls of ground, trucks and tramming,
LOST TIME INJURY INCIDENCE RATE PER 200 000 HOURS WORKED – BOOYSENDAL F2014
F2013
F2012
F2011
0.27
0.53
0.19
0.65
REPORTABLE INJURY INCIDENCE RATE PER 200 000 HOURS WORKED – BOOYSENDAL F2014
F2013
F2012
F2011
0.21
0.33
0.05
0.22
Underground operations at Booysendal
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BUSINESS PERFORMANCE
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
HEALTH
workers and physiotherapists. A network of doctors, specialists and dentists is also contracted to the scheme. Five hospitals are available to employees in the area, as well as the Netcare® and Life® network countrywide. In addition, Suremed® administers a comprehensive TB and HIV/Aids management programme at Zondereinde.
Approach As a mining company, Northam is subject to stringent health and safety laws and regulations that change from time to time. In the event of changes to health and safety legislation, the company may incur additional costs in order to comply with any new laws and regulation.
Zondereinde’s occupational health programmes cover:
Northam seeks to comply fully with applicable health and safety legislation, and to ensure that all the employees adhere to group safety standards. The primary occupational health risks identified at Northam in F2014, which were the key health focus areas, included:
• Wellness
• Tuberculosis (TB)
• Emergency care
• Noise induced hearing loss (NIHL)
Booysendal
• Occupational lung disease
Booysendal’s medical facilities are located at the Mashishing medical station. The Suremed® scheme offers healthcare services to Booysendal employees, contractors and their families. The scheme’s healthcare services include:
• Medical surveillance • Injury-on-duty management • Occupational and chronic disease management • Rehabilitation and back-to-work programmes
HIV/Aids and TB have been targeted aggressively with a strong focus on prevention, through education initiatives and community involvement, as well as a monitored employee wellness programme, which includes the provision of ART. There has also been focus on drugs and alcohol, and their effects on employee performance.
• An on-site emergency facility with four full-time 24/7 paramedics available for the treatment of accidents, injuries and minor health issues
Zondereinde
• Two on-site ambulances on permanent standby with a back-up facility at Dwarsrivier and Thorncliffe
An integrated and holistic healthcare service, for primary health and occupational health, is provided to Zondereinde employees and contractors through Suremed® and Life®. This service is provided on site and at a network of medical facilities where employees reside and is available to all employees who contribute to the schemes. It provides on-site paramedics with emergency response vehicles, social
NORTHAM ANNUAL INTEGRATED REPORT 2014
• Access to helicopter services • Medical centres in Mashishing, Middelburg and Nelspruit Through the Suremed® scheme, families in Mashishing, Middelburg, Nelspruit, Burgersfort and Steelpoort areas have access to these facilities.
98
F2014 HEALTH PERFORMANCE Zondereinde During the year, 10 397 medical surveillance examinations were undertaken at Zondereinde (F2013: 12 500), 650 of which were entry, 796 exits and 8 951 annual examinations. The results of surveillance examinations undertaken during the year were satisfactory and no concerns were raised. MEDICAL EXAMINATIONS F2014 – ZONDEREINDE F2014
F2013
F2012
F2011
Entry examinations
650
1 231
1 407
1 484
Exit examinations
796
2 263
1 073
926
Annual examinations Total examinations Total number of employees (including contractors)
8 951
9 006
8 260
8 118
10 397
12 500
10 740
10 528
8 788
9 148
–
–
Booysendal A total of 3 464 medical surveillance examinations were undertaken at Booysendal (F2013: 9 586), 1 334 of which were entry, 598 exits and 1 532 annual examinations. The results of surveillance examinations undertaken during the year were satisfactory and no concerns were raised. MEDICAL EXAMINATIONS F2014 – BOOYSENDAL
Entry examinations Exit examinations Annual examinations
F2014
F2013
F2012
F2011
1 334
2 294
4 160
1 427
598
2 347
1 496
77
1 532
1 271
500
56
Total examinations
3 464
5 912
6 156
1 560
Total number of employees (including contractors)
1 421
1 915
–
–
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NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
HIV/AIDS
positive. A total of 902 employees currently participate in the HIV/Aids wellness programme.
Northam has a comprehensive HIV/Aids policy in place which covers employee care, education programmes, information confidentiality and non-discrimination. All Northam employees have access to professional counselling and support including VCT and ART.
Zondereinde’s peer educator programme includes 15 employees who form part of the support structure that provides counselling and training for employees infected and affected by HIV/Aids.
The Northam HIV/Aids programme focuses on the following priorities:
During the 11-week strike, more than 60% of the employees registered on the Suremed® HIV/Aids programme defaulted on their ART treatment. A number of these employees were admitted to hospital owing to compromised health. As a result, the medical aid scheme embarked on a targeted strategy to identify the defaulters and make arrangements for them to receive their ART treatment. Upon return to work, employees’ viral loads were checked and medication was adjusted in order to ensure that the treatment remains appropriate and effective. At the end of F2014, the rate of defaulters had declined to 20.5% and viral loads had improved as a result of the focused strategy.
• Encouraging employees who are HIV-negative not to participate in high-risk behaviour through education and awareness programmes, the mass distribution of condoms, the treatment of sexually transmitted infections (STIs) and a peer education programme • Early detection and identification of HIV to limit high-risk behaviour among those infected and to start them on a treatment regimen that can prolong healthy living (the VCT programme underpins this objective and provides the necessary counselling) • Encouraging infected employees to participate in the wellness programme, which includes the provision of ART (comprehensive counselling is provided to ensure that employees understand and accept the long-term implications of participating in the ART programme)
VCT ENCOUNTERS – ZONDEREINDE F2014 1 049
F2012 1 659
F2011 271
F2010 1 840
Booysendal
Zondereinde
Booysendal’s HIV/Aids peer education group is managed by a core contractor, Minopex. The contractor aims to educate employees about chronic illness, the spread of contagious diseases and prevention measures. Minopex encourages employees to undergo VCT and to ensure that effective intervention, assistance and referral systems are in place. They manage the proper distribution and supply of preventative promotion material.
Zondereinde’s HIV/Aids programme comprises: • Health education • Campaigning • Clinical management (VCT, pre- and post-test counselling, adherence testing and counselling, prevention of mother-to-child transmission, and HIV treatment) • Laboratory investigations
The numbers of employees registered on the VCT programme and taking ART medication are not recorded at Booysendal as this information is kept confidential.
In F2014, 1 049 employees were registered on the VCT programme (F2013: 1 088). Of these, 210 tested
NORTHAM ANNUAL INTEGRATED REPORT 2014
F2013 1 088
100
TUBERCULOSIS
any exposure to noise levels above 85dBA over an extended period of time is limited.
In South Africa, TB is a significant health risk due to the symbiotic relationship between TB and HIV. Northam runs a highly effective, directly observed treatment regime, which is aligned to the TB guidelines of the World Health Organisation.
Training in the use of personal protective equipment and prevention of NIHL is ongoing as part of the mines’ hearing conservation programme overseen by a hearing conservation committee.
Zondereinde
Zondereinde
In F2014, 97 new cases of TB (F2013: 70) were identified at Zondereinde. A total of 109 employees were discharged from the programme. A total of 68 employees remained on TB treatment at the end of F2014 (F2013: 63)
In F2014, 20 incidences of NIHL were detected and referred for compensation (F2013: 43), of which two were compensable (F2013: 25). NEW CASES OF NOISE INDUCED HEARING LOSS – ZONDEREINDE
NEW CASES OF TB – ZONDEREINDE F2014
F2013
F2012
F2011
F2010
97
70
85
93
127
F2014
F2013
F2012
F2011
F2010
20
43
44
18
9
Booysendal
Booysendal
Booysendal has a hearing awareness campaign in place, as well as a hearing conservation committee, which holds quarterly meetings. In F2014, 41 incidences of NIHL were detected (F2013: 28) of which one received compensation (F2013: 0). There were 41 new cases of NIHL reported in F2014 (F2013: 28).
In F2014, 6 (F2013:2) new cases of TB were identified at Booysendal – all of whom were receiving treatment. NEW CASES OF TB – BOOYSENDAL F2014
F2013
F2012
F2011
F2010
6
2
3
–
3
NEW CASES OF NIHL – BOOYSENDAL
NOISE INDUCED HEARING LOSS Excessive noise exposure is one of the most pervasive health hazards in mining. Prolonged exposure to hazardous noise causes loss of hearing acuity, which occurs gradually and is known as noise-induced hearing loss (NIHL). Northam ensures that it is legally compliant by guaranteeing that the noise associated with underground equipment is contained to below 110dBA. All Northam employees are issued with personal protective equipment to ensure that
F2014
F2013
F2012
F2011
F2010
41
28
19
17
7
OCCUPATIONAL LUNG DISEASE The use of hydropowered mining equipment at Zondereinde helps to reduce employee exposure to both noise and dust. Bushveld Complex rock does not contain quartz, thereby eliminating the threat of silicosis and occupational lung disease. Neither operation reported any such cases.
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BUSINESS PERFORMANCE
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
DRUG AND ALCOHOL TESTING
The corporate human resources and transformation manager is tasked with overall responsibility for employment equity and is, therefore, responsible for providing strategic direction and priorities in respect of equity and transformation.
Drugs and alcohol are not tolerated in the workplace. At Zondereinde tests are conducted on a daily basis, and particularly after any safety incident. Employees who test positive are subject to disciplinary procedures along with assistance/rehabilitation offered to overcome dependency.
A senior manager, tasked with overseeing the operation’s human resources function, is in place at each operation and reports to a general manager. The general managers and chief executive officer are ultimately responsible for the management of human capital while the social, ethics and human resources committee assumes board level oversight of the management of human capital.
During F2014, a total of 3 578 employees were tested for drugs and alcohol at Zondereinde. A decrease in drug use (22 employees tested positive in F2014) and alcohol use (two employees tested positive in F2014) in the workplace was recorded. Booysendal does not report on the number of alcohol and drug tests, but does implement a strict no tolerance policy.
The social, ethics and human resources committee is responsible for ensuring that employees are equitably and fairly rewarded in alignment with company standards and their industry peers. The committee complies with the Companies Act No 71 of 2008 in terms of its social and ethical obligations. It is also responsible for governance of employment contracts and the remuneration packages of senior management, ratifying their appointments, setting mandates, approving short-term incentive schemes and bonuses, and overseeing shares in line with the Northam share scheme.
EMPLOYMENT AND HUMAN RIGHTS Northam upholds the basic labour rights of the Fundamental Rights Convention of the International Labour organisation (ILO), through the implementation of fair employment practices. In terms of policies, Northam’s policies and practices comply with South Africa’s employment equity requirements. All employees are treated fairly, irrespective of origin, race or gender.
Mine-based human resources departments are responsible for the implementation and achievement of human resource priorities, including all aspects of the Mining Charter, focusing on:
All Northam employees are expected to adhere to the code of ethics – supervisors and managers are required to take all reasonable steps to ensure that the people for whom they are responsible are aware of and uphold the guidelines set out in the code. This includes consistent demonstration of exemplary behaviour, activities to foster a culture in which employees understand their responsibilities and feel comfortable to raise concerns without fear of retaliation or victimisation, ensuring mandatory policies, standards and procedures are accessible and understood, and responding promptly to legitimate concerns. NORTHAM ANNUAL INTEGRATED REPORT 2014
• Training and development • Mentorship and talent management • Recruitment and retention • Succession planning • Career plans • Employment equity programmes • Labour relations • Human resource development • Stakeholder and compliance management 102
F2014 PERFORMANCE
The company also acts in compliance with the Labour Relations Act No 66 of 1995 and may use established processes, inclusive of legal relief when necessary, to bring any form of strike action to a swift resolution. The company is committed to engage and negotiate with any union that achieves the necessary representation levels.
Wage negotiations Wage negotiations at Zondereinde started on 31 July 2013 and were marked by disputes from the outset. Following the intervention of third-party facilitators and extensive talks, the National Union of Mineworkers (NUM) was granted a certificate of non-resolution and proceeded with strike action on 3 November 2013.
There was no industrial action at Booysendal during F2014.
The strike continued for 79 days until 21 January 2014. Losses amounted to 48 000oz of PGM production and revenues of R750.0 million while employees lost R151.0 million in wages.
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING All employees, contractors and suppliers have the right to freedom of association and to act out this freedom within the bounds of the law, collective agreements and the rights of others. Employees and their elected representatives must shoulder the duties and responsibilities that attain to this right.
The two-year wage agreement reached included increases in basic wages of 8.5% to 9.5% for Category 2 to 8 employees, and a 9% increase in the living-out allowance. Category 9 to 10 employees’ increases ranged from 7.5% to 8% with a livingout allowance increase of 7%. The settlement also included an ex gratia payment of R3 000 per employee upon return to work. The terms for payment of the ex gratia amount were elected by individual employees – either upfront or over time.
Wages and other conditions of service are negotiated on an annual basis. At Northam operations, unions registered with the Department of Labour (DoL), which represent at least 15% in any particular bargaining unit, receive organisational rights including: • Access to the workplace, allowing qualifying unions to recruit members and host meetings on mine property outside of working hours
While engagement with labour around wages and conditions of service will always be a dynamic process, Northam management actively seeks to build constructive and progressive relationships, and to avoid any unnecessary work stoppages, which will inevitably have a negative impact on the company’s performance and the welfare of employees. The company has an established protocol and communication strategy in place to deal with industrial action, which includes maintaining open channels of communication with unions, employees, shareholders and investors, labour relations experts, mediators and facilitators, security services and the media. See page 82 on stakeholder engagement and communication.
• Access to payroll deduction facilities • The opportunity to elect employee representatives for internal disciplinary processes • Paid leave for representatives to allow them to carry out union-related duties When a registered union reaches a representative threshold of 33.3% within a bargaining unit, it acquires the right to bargain for that particular unit. The company aims to engage in good faith to reach agreement on matters such as wages, substantive conditions of service and other matters of mutual interest. 103
NORTHAM ANNUAL INTEGRATED REPORT 2014
BUSINESS PERFORMANCE
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
At Zondereinde, employees are divided into three bargaining units. Category 2 to 8 comprises operator level employees, Category 9 miners and artisans, and Category 10 officials. A total of 84.3% of the workforce in these bargaining units is covered by collective bargaining agreements.
At Booysendal, Murray & Roberts Cementation Proprietary Limited (MRC) is currently unionised and holds regular structured meetings with NUM while Minopex holds employee forum meetings from time to time.
RECOGNISED UNION REPRESENTATION AT ZONDEREINDE F2014 (PERMANENT EMPLOYEES) Category 2 to 8
Category 9
Category 10
5 935
NUM
4 874
84.1%
151
38.7%
121
33.3%
5 146
78.6%
19
0.3%
92
23.6%
113
31.1%
224
3.4%
Solidarity
389
366
Total
Complement
6 690
UASA
14
0.2%
79
20.3%
55
15.2%
148
2.3%
Total
4 907
84.7%
322
82.6%
289
79.6%
5 518
84.3%
RECOGNISED UNION REPRESENTATION AT BOOYSENDAL F2014 (PERMANENT EMPLOYEES) Category 2 to 8
Category 9
Category 10
9
82
Total
Complement
56
NUM
27
48.2%
6
67.0%
1
1.2%
34
23.0%
Total
27
48.2%
6
67.0%
1
1.2%
34
23.0%
review and approval of all applications regarding CSI, local economic development (LED) and socioeconomic development.
At Zondereinde. Northam has formal structures in place to facilitate consultation with organised labour including:
• A joint health and safety structure, which is a statutory component of the Mine Health and Safety Act No 29 of 1996, with organised labour participating in this process to ensure that the company adheres to safe operating practices.
• An employee equity and training committee, which is consulted on issues relating to employment equity and human resource development, to review the company’s employment equity, recruitment, and training and development policies, to ensure equity and transparency within these procedures.
EMPLOYMENT PRACTICES
• A six-a-side committee, comprising management and organised labour, tasked with the smooth progress of the hostel de-intensification programme.
Northam is committed to fair and progressive employment practices where long-term employment opportunities are provided to employees to grow and develop their potential. Remuneration practices take account of the demanding skills required in the mining industry, as well as the difficulty of attracting skilled
• A corporate social investment (CSI) committee, which oversees all initiatives relating to mine community and rural development, including NORTHAM ANNUAL INTEGRATED REPORT 2014
147
104
Zondereinde
historically disadvantaged South Africans (HDSA) to work in remote locations.
In F2014, Zondereinde employed 6 638 full-time employees and 2 150 contractors (F2013: 6 916 full-time employees and 2 232 contractors) and the operation’s total employee turnover was 358 (4.0%).
Northam’s employment practices and policies are governed by South African legislation and regulations such as the Mine Health and Safety Act, the Employment Equity Act No 55 of 1998, the Skills Development Act No 97 of 1998, the Skills Development Levies Act No 9 of 1999, the Basic Conditions of Employment Act No 75 of 1997, the Labour Relations Act, the MPRDA, collective bargaining and recognition agreements with organised labour.
Given the emphasis on local employment, engagement with the Thabazimbi municipality provides a platform for management to discuss required skills levels and competencies amongst the local populace. Zondereinde’s migrant labour contingent comprises 30.9% of its permanent workforce and 32.3% contractors – sourced from South African provinces other than Limpopo and the North West. The operation’s foreign labour workforce, drawn from beyond South Africa’s borders, comprises 31.3% of permanent employees.
A formal grievance policy is in place, providing for both individual and group grievances at Zondereinde. During F2014, three grievances were submitted. These have been referred for resolution in the current financial year. In F2013, nine grievances were submitted, relating to unfair labour practice, and were resolved in F2014.
NUMBER OF EMPLOYEES AND CONTRACTORS – ZONDEREINDE
Full-time Northam employees receive the following benefits: • Membership of pension and provident funds • Death benefits
F2014
F2013
F2012
F2011
F2010
8 788
9 148
9 163
8 927
8 724
• Access to medical care EMPLOYEE TURNOVER RATE (%) – ZONDEREINDE
• Housing and living-out allowances • Study assistance • Maternity and paternity leave Minimum notice periods prior to the implementation of significant operational changes that could substantially affect employees are prescribed by legislation.
6 785 3 397
Corporate office
F2012
F2011
F2010
4
1
7
7
8
In F2014, Booysendal employed 174 full-time employees and 1 247 contractors (F2013: 143 fulltime employees and 1 772 contractors).
Total employment 2014
Contractors
F2013
Booysendal
TOTAL EMPLOYMENT: GROUP
Full-time employees
F2014
Booysendal’s employment policies and those of its contactors give preference to local employees and South African citizens as part of its commitment outlined in its social and labour plan (SLP). Booysendal has recruited 42% of its workforce from local communities as part of its stated SLP commitment.
24
105
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BUSINESS PERFORMANCE
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL
REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
All contractors on site are obliged to commit to the company’s local recruitment targets, and they are required to submit a monthly report detailing the number of local employees, resignations and terminations. The employment of migrant labourers is discouraged at Booysendal, particularly in the mine’s unskilled categories.
regions where they have their primary homes and families – and most employees have indicated that they would not like to be permanently housed in the area. A total of 2 797 employees are provided with a living-out allowance while another 2 884 live in hostels provided by Northam. The living-out allowance for each category forms part of the annual wage negotiations between Northam and organised labour.
NUMBER OF EMPLOYEES AND CONTRACTORS – BOOYSENDAL F2014 1 421
F2013 1 915
F2012
F2011
F2010
2 468
Not reported
Not reported
Employees in company-provided accommodation are provided with meals, which are overseen by a dietician who draws up meal plans and rigorously monitors energy, macro and micro nutrient content. An average of 4 586 meals were served to employees every day during F2014.
HOUSING AND LIVING CONDITIONS The welfare and living conditions of employees is a key concern for Northam. The MPRDA and the Mining Charter provide the company with direction in respect of the provision of housing and accommodation for employees and contractors.
Hostel conversions By the time of going to print some 1 640 single units were created in terms of the hostel conversion programme. A further 1 280 units will be converted during F2015. During F2014 alone, the company spent R31.3 million on upgrading hostels.
At Zondereinde the Mining Charter targets are beyond its reach for F2014. To this end, the accommodation and home ownership strategy is currently being reviewed and accelerated in order to meet the necessary requirements by 2017. The company continuously engages with the DMR and provides regular updates on progress made to achieve set targets.
Mojuteng Home Ownership Scheme In 2005 Northam introduced the Mojuteng housing project to promote home ownership among its employees. Employees are offered a home loan, a debt consolidation facility and a structured housing subsidy, which helps employees to increase disposable income levels and results in higher home loan approval rates.
A six-a-side committee, consisting of six NUM representatives and six hostel managers, meets regularly and is chaired by the corporate human resources and transformation manager.
A total of 359 housing units have been sold to employees at Mojuteng near Zondereinde. An additional 29 stands are being prepared for the construction of houses for the benefit of employees. For the Mojuteng township in F2014, Northam paid
Zondereinde The majority of Zondereinde’s workforce comes from labour-sending areas – other countries, provinces and
NORTHAM ANNUAL INTEGRATED REPORT 2014
106
During this time, Northam launched an internal communications campaign to help educate employees about the purpose of the trust, how it works, who will benefit and its value creation. The Toro Trust is governed by a board of trustees comprising representatives of management, the unions and independent trustees.
R51 107 to the Thabazimbi Municipality for services. The project is managed by Northam Properties (Norprops) and costs incurred are debited to the cost of sales. Norprops has a loan account with Northam, which is repaid in terms of houses sold.
Booysendal Booysendal employees and contractors live predominantly in the towns and villages surrounding the operation, including Mashishing, Steelpoort, Burgersfort, Ngwaabe and Jane Furse. The mine only provides single unit accommodation for employees and core contractors at Tshufi residence where a total of 185 employees and contractors currently live (F2013: 184). The remaining employees and contractors opt to receive living-out allowances.
EMPLOYMENT EQUITY AND TRANSFORMATION South African employment equity legislation is aimed at redressing the imbalances of the past through equal opportunity, non-discrimination and affirmative action. To rectify these imbalances, Northam focuses on the participation of black South Africans and women. The Mining Charter requires 40% of management to comprise HDSA employees by 2014. Northam achieved a 45% HDSA level of management in F2014 with 39% at Zondereinde (F2013: 37%) and 64% at Booysendal (F2013: 31%).
THE TORO EMPLOYEE EMPOWERMENT TRUST
The employment equity and training committee structure, although equitably and transparently constituted, has had significant challenges in successfully achieving its objectives. The company is currently engaging with recognised organised labour structures and officials from the Department of Labour in addressing these challenges and realising requisite goals and targets.
The Northam Toro Employee Empowerment Trust, a profit-share scheme, was established in August 2008 and represents the interests of 6 530 employees who fall into Category 2 to 10 at Zondereinde. In F2014, Northam contributed R9.2 million to the trust (F2013: R24.0 million). The trust’s net income for the year was R3.0 million (F2013: R4.3 million) and the net interest of the beneficiaries was R94.2 million (F2013: R127.2 million) at 30 June 2014.
Northam’s corporate human resources and transformation manager is responsible for employment equity, strategic direction and the priorities of equity and transformation.
The Toro Trust intends to distribute benefits to employees in three stages over a 15-year period, with the first payment of R54.8 million having been made in 2013. The creation and intent of the Toro Trust was communicated via a robust internal communications campaign to educate employees on its functioning and the benefits it creates.
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REVIEWING SUSTAINABILITY IN TERMS OF THE FIVE CAPITALS HUMAN CAPITAL CONTINUED
HDSAs IN MANAGEMENT (%) – GROUP F2014 45
F2013 37
F2012 35
F2011 45
F2010 33
F2012 64
F2011 62
F2010 62
HDSAs AT BOARD LEVEL (%) – GROUP F2014 44
F2013 56
HDSAs AND WOMEN IN MANAGEMENT IN F2014
Occupational levels
Zondereinde
Booysendal
Total workforce (number)
Senior management Middle management Junior management Senior management Middle management Junior management
8 66 191 6 19 69
It is important for Northam to attract and retain HDSAs and women in management positions in order for the company meet the 40% HDSA and 10% women in mining targets respectively. Detailed plans are being put in place to finalise departmental employment equity plans and to find ways of retaining appropriately competent individuals.
Actual (%) Women in HDSAs mining 25 13 33 9 41 9 67 0 26 0 74 35
working relationships with organised labour and key stakeholders. Structures have been defined to ensure efficiency and focus on the implementation of these initiatives. The composition of the employment equity and training committee has been revisited, and will be finalised in structure and mandate by 30 September 2014. Although the current structure is compliant with the requirements of the Employment Equity Act, the implementation of key interventions and monitoring of impact and outputs of the structure was not effective.
Northam’s employment equity plan is compliant with the requirements of the Mining Charter and the Employment Equity Act. Northam submits its employment equity plans and progress reports to the Department of Labour annually. The Mining Charter annual report was submitted to the DMR in Polokwane in April 2014 for both Zondereinde and Booysendal.
WOMEN IN MINING Northam’s engagement and consultation with women is undertaken by the employment equity and training committee at Zondereinde and the future forum at Booysendal, and is informed by consultation with local branch structures of the NUM.
Northam’s transformation priorities are informed by constructive, productive and sustainable
NORTHAM ANNUAL INTEGRATED REPORT 2014
Target (%) Women in HDSAs mining 40 10 40 10 40 10 40 10 40 10 40 10
108
The following major barriers and challenges have been identified by these structures:
• Bursaries and study assistance
• The suitability of protective equipment for the needs of women;
• Mentorship
• Adult basic education and training (ABET) • Succession planning
• Underground facilities for women in the workplace;
Northam’s training and development policy stipulates that emphasis be placed on the competence and competitiveness of employees as well as their personal development. The impact of training and development interventions is assessed in order to ensure that these interventions positively influence workplace behaviour.
• Perceptions about women in mining To address these challenges, Northam continues to implement the following interventions: • Sourcing suppliers able to provide suitable protective equipment for female employees; • Identifying and discussing women’s requirements and establishing appropriate arrangements and facilities.
In F2014, the company spent a total of R16.7 million on training and development at Zondereinde (F2013: R20.2 million) and R1.8 million at Booysendal (F2013: R1.3 million). This is equivalent to 2.1% of the total wage bill (F2013: 2.1%). Of this training expenditure, 1.8% was for HDSAs (F2013: 2.1%) and 0.2% for women (F2013: 0.3%).
• Changing perceptions using training programmes for a diverse workforce. In F2014, Northam employed a total of 537 women (F2013: 469), of whom 12% were working in the core disciplines of mining, metallurgy and engineering. Women made up 7% of the workforce at Zondereinde (F2013: 7%) and 20% at Booysendal.
Given the operations’ employee requirements for the medium term, no portable skills training was conducted during F2014.
Leadership development
WOMEN IN MINING (%) – ZONDEREINDE F2014
F2013
F2012
F2011
F2010
7
7
7
7
7
In F2014, a total of R1.1 million was spent on leadership development. This training was offered to 205 beneficiaries. A total of 124 employees received Du Pont leadership training, which emphasises improvement of managers’ safety management skills and encourages employee participation in safety.
TRAINING AND DEVELOPMENT Northam’s training and development programme aims to ensure that employees have the support they need to improve their competence and knowledge in the workplace and to grow as individuals. This programme includes:
Zondereinde Literacy is important to Northam as it improves employees’ ability to communicate effectively and clearly. ABET is available to all employees on a part-time basis and the company is accredited to offer ABET up to General Education and Training Certificate (GETC) level or National Qualifications Framework (NQF)
• Legislative training (skills, health and safety) • Learnerships • External specialised training
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(F2013: five students supported at a cost of R375 000).
Level 1. In F2014, 268 employees attended the ABET programme at Zondereinde.
The current bursary programme includes seven black females in line with the company’s strategy to increase female participation in professional occupations. To date, a total of R559 810 was paid for tuition, accommodation and other costs.
Northam offers electrical, plater/boilermaker, rigging, underground mining and rock-breaking learnerships to all employees. In F2014, 16 employees participated (14 men and two women) in these learnership programmes.
Bursary students employed at Zondereinde during the university vacation of June/July 2014 participated in intensive induction training and mine orientation programmes. In addition, they are mentored and guided in curriculum-related and personal enrichment topics.
Zondereinde’s bursary programme offers bursaries to second-year students in the fields of mining, electrical, mechanical and metallurgical engineering. Zondereinde also offers in-service training to participating individuals during their vacations. Successful bursars are subsequently entered into a two-year graduate internship programme before they are appointed to the Northam workforce.
Sibitlo Sulman, a permanent employee at Zondereinde, was awarded a bursary to complete her BTech degree in mining engineering at the University of Johannesburg in F2014. To date, a total of R160 065 (including wages) was invested in this bursary.
In F2014, eight students received support to the value of R719 875 for mining-related engineering degrees
ZONDEREINDE – LEARNING ASSISTANCE BREAKDOWN F2014 Expenditure
Number of people
HDSAs
Women
R1 119 752
268
65.3%
4.4%
Learnerships
R800 116
18
77.8%
11.1%
Bursaries
R719 875
8
100.0%
100.0%
R44 081
1
100%
100%
–
–
–
–
External training and skills development
R5 884 889
782
56.9%
6.9%
Internal training and skills development
R12 165 242
7 234
74.1%
3.0%
Total
R18 290 622
8 313
72.2%
3.5%
ABET
Study grants Study assistance refunds
Performance reviews of junior, middle and senior management employees are conducted on a quarterly basis for all management positions. This process forms the basis of annual merit ratings for employees at middle and senior management level.
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Booysendal
in the fields of rigging, electrical, auto-electrical, fitting and turning, instrumentation and plater/boilermaker.
A study of the literacy levels at Booysendal has revealed that contractors have an average minimum ABET level 4 or Grade 9 qualification. ABET is, therefore, not considered necessary on mine. In F2013 Northam prioritised the facilitation of ABET classes for local community members in order to improve their access to employment opportunities in the future. An independent service provider from the local community provides these classes.
Bursaries are available to Booysendal employees in surrounding communities in areas of study that support the company’s social and labour plans. These bursaries place emphasis on assisting bursars from Booysendal’s surrounding communities. In F2014 five students were offered bursaries (F2013: three) to the value of R391 612 (F2013: R147 645) as they endeavoured to complete a mining-related engineering degree of their choice.
In F2014, 10 community members were enrolled into ABET and five completed the course (F2013: 16 and 15). A total of 38 employees participated in learnerships (27 men and 14 women)
Four men and three women participated in the bursary programme.
BOOYSENDAL – LEARNING ASSISTANCE BREAKDOWN F2014
ABET Learnerships Bursaries
Expenditure
Number of people
HDSAs
Women
R154 000
10
100%
80%
R2 352 414
39
97%
30%
R204 270
4
75%
25%
Study grants
R43 675
3
100%
0%
Study assistance refunds
R21 660
2
100%
0%
External and Internal training and skills development
R543 292
92
87%
13%
Internal training and skills development
R459 838
254
83%
19%
R3 779 149
404
92%
33%
Total
Performance reviews are conducted on a quarterly basis for all managerial positions. The performance appraisal process forms the basis of annual merit ratings for employees at middle and senior management levels – 30% of the employees in these occupational levels are male and 7.2% are female.
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HUMAN RIGHTS
rights abuses. Systems are in place to deal with issues of discrimination and human rights breaches.
Employees are not provided specific training in human rights. However, employees are exposed to training in
Northam’s code of ethics clearly safeguards the rights of all employees to a working environment free of discrimination on the basis of race, gender, sexual orientation, religious belief, political affiliation, age or disability. Effective grievance and disciplinary procedures are supported by a sexual harassment policy. In F2014, no incidents of sexual harassment were reported.
a number of areas including the company’s code of ethics on a bi-annual basis. Northam’s social, ethics and human resources committee monitors support and respect for the protection of internationally proclaimed human rights, ensuring that Northam is not complicit in human
Employees receiving training at Zondereinde
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SOCIAL CAPITAL Northam aims to play a responsible and co-operative role in the communities in which its operations are located by providing meaningful and relevant contributions to their social and economic upliftment wherever possible.
KEY FEATURES
Intensification Audits reveal certain of engagement areas to target for with municipal structures
improved performance
Engagement forums at
Booysendal functioning well
Supplier forum established in Thabazimbi Local Municipality
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APPROACH AND STRUCTURE
municipality and final approval of the SLP submission. (F2013: a total of R3.0 million).
Northam seeks to mitigate any negative impacts on local communities, and maintains open and proactive communication channels with community structures and other stakeholders in order to deal with community concerns, expectations and developments. In addition, and given that its operations are situated in fairly remote areas of the country, the company recognises its responsibility to contribute to local surrounding communities, providing project and infrastructural support in pursuit of socio-economic upliftment and the provision of a social wage.
At Booysendal, CSI expenditure amounted to R1.4 million. Northam’s community development programme focuses on contributing to the social upliftment of communities surrounding its operations and those within major labour-sending areas. The programme aims to empower these groups economically in a sustainable manner. Investment in social and local economic development this year was restricted, however, owing to delays in project approval processes in the local municipalities other authorities.
The CSI committee comprises three members of management and one representative from each of the organised employee representative bodies. It meets on a monthly basis to identify, prioritise and allocate resources to sustainable projects. Key interventions are planned with local municipalities in the areas of local recruitment and community projects.
Zondereinde Zondereinde engages with three municipalities: • Thabazimbi Local Municipality in Limpopo • Moses Kotane Local Municipality in North West Province, a labour-sending municipality
Northam’s social and labour plans are aligned with the integrated development plans (IDPs) of local municipalities to address community needs effectively. In addition to local economic development the company also supports several projects that are not necessarily in the ambit of its social and labour plans but are considered worthy causes.
• OR Tambo District Municipality in the Eastern Cape, also a labour-sending municipality In pursuit of developing a local supplier base, a supplier forum has been established, with mining companies and municipal officials represented on the steering committee. In addition a mining forum has been established in order to improve communication and coordination between the mines and municipal representatives on large-scale projects to improve infrastructure and delivery in the area.
Compliance with aspects of the Mining Charter relating to local economic development and related issues is the responsibility of the corporate human resources and transformation manager under the guidance of the social, ethics and human resources committee, and is overseen at board level through the SE&HR committee.
Guided by the Zondereinde social and labour plan and the operation’s CSI committee, which is tasked with identifying development priorities in the areas surrounding the mine, Zondereinde’s primary local economic development projects in F2014 included:
F2014 PERFORMANCE In F2014, a total of R2.9 million was spent on CSI (F2013: R3.0 million). CSI expenditure at Zondereinde was R1.5 million during the year. The mine has been restricted in expenditure due to the delay in the final approval by the DMR of proposed projects by the local NORTHAM ANNUAL INTEGRATED REPORT 2014
• continued investment in the Northam Comprehensive School in Thabazimbi, where some 280 children benefited from improved sanitation facilities at the premises and other repairs; 114
resources manager, who is also responsible for oversight of community engagement in the area.
• extensions to the Deo Gloria Primary School, Thabazimbi, which can now accommodate an additional 90 pupils;
Stakeholder identification and engagement at Booysendal has been ongoing since the mine’s inception, but this is complicated by the scale, proximity and needs of local communities, and by historic interests in landholdings.
• a contribution to the establishment of 25 microenterprises in the OR Tambo municipal area of the Eastern Cape (a major labour-sending area) resulting in at least 35 individuals, the majority of whom are relatives of Zondereinde employees, benefiting from the contributions; and
Booysendal has sound working relationships with all its stakeholders and engages with them mainly through the following structures:
• providing agricultural employment activities and small business support services through an entrepreneurial support centre as a joint initiative with TEBA Limited.
• Sekhukhune District Municipality • Executive mayor’s office • ArcelorMittal South Africa Socio-Economic Development Managers Forum
CSI priorities are focused on education, support for people living with disabilities and the elderly. Zondereinde continued to support the Thabang Children’s Home which cares for orphans and other children. In addition the company invested in infrastructural support services and refuse removal for 200 residents in the Mojuteng housing project.
• Greater Tubatse Local Municipality • LED Forum • Greater Tubatse Mining Forum • Southern Cluster Mining Community Development Committee
As part of its commitment to the Madiba Rhodes Foundation, Northam contributed R1.2 million towards bursaries for black students.
• Thaba Chweu Local Municipality • Executive mayor’s office A stakeholder engagement policy is in place and several forums have been set up in the area where Booysendal operates. The forums provide structures and channels for Booysendal to facilitate the flow of meaningful benefits to communities, help the mine to keep abreast of concerns among community members and to address any issues raised.
The lack of service delivery and poor follow-up and support from local municipalities remains a significant challenge, with the company having to contribute to service delivery instead of focusing on economic growth.
Booysendal The Booysendal mine is located in a remote region of the Limpopo province where there are limited economic opportunities. Agriculture, forestry, mining and tourism are the region’s primary activities. A major challenge is the low level of literacy and education in the area, which is rated among the lowest in the country.
The forums include the following: • The Booysendal Community Forum comprises 15 identified families, who have family graves within the footprint of the mine. The forum has a constitution, meets monthly with management representatives and strives to: • Promote economic growth, employment and advancing the socio-economic welfare of the identified core communities
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opportunities and supporting local entrepreneurs; training opportunities including bursaries and learnerships and infrastructure development. Booysendal management has contributed towards establishing a skills and supplier database in the area.
• Substantially and meaningfully expand social development opportunities for HDSAs and women. • Provide for the facilitation of consultation within the spirit of the MPRDA and the Broad-Based Black Economic Empowerment Amendment Act No 53 of 2003 to promote sound relations. • The Stakeholder Engagement Forum for all interested and affected stakeholders, including, but not limited to local municipalities, the DMR, provincial government and other community forums meets bi-monthly. This forum’s constitution is in line with the group’s sustainable development policy which focuses strongly on social and economic upliftment of local communities through positive engagement and contributions in support of sustainable projects and programmes.
Given the lack of infrastructure in the area surrounding Booysendal, the division contributed some R412 787 to upgrades and repairs to the R577 road, the main access from Lydenburg. This was a joint initiative in collaboration with other mines in the southern cluster. The road is used by more than 10 000 people daily from the nearby mines and on neighbouring villages and farms. A number of local economic development projects, targeted in the social and labour plans, are still in the approval process at the DMR, resulting in project delays. This was exacerbated also by conflict within different stakeholder groupings, unsuitability of certain projects and the lack of suitable land for LED projects.
• The Local Chiefs Forum provides an engagement platform for communities within a 50km radius of the mine, and meets quarterly. • These meetings generally deal with matters such as local recruitment; supply chain business
Employees receiving training at Booysendal
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BOOYSENDAL CORPORATE SOCIAL INVESTMENT AND LOCAL ECONOMIC DEVELOPMENT INITIATIVES IN F2014 Project
Objectives
Location
Spend
Mine crime combating forum
Address crime affecting mines in the Greater Tubatse municipal area
Greater Tubatse Local Municipality
R15 000
Upgrading Rooi Draai substation
To avoid load shedding in Lydenburg
Thaba Chweu Local Municipality
R17 256
Ngwaabe crime prevention campaign
Community crime awareness
Greater Tubatse Local Municipality
R10 000
Laerskool Lydenburg – English text books
Assist the school with English text books not supplied by government
Thaba Chweu Local Municipality
R20 831
R577 road maintenance
Repair and maintain the road which is in a bad state
Thaba Chweu Local Municipality
R412 787
PLANNED CORPORATE SOCIAL INVESTMENT PROJECTS Project
Objectives
Location
Budget
Ngwaabe multipurpose centre
Provide educational and sports facilities
Ngwaabe
R800 000
Dinalane early childhood development centre
Better infrastructure and facilities for the children living around Kutullo
Kutullo
R700 000
ABET-community based initiative
Provide lifelong learning for adults
Ngwaabe
R90 000
SMME mentorship programme
Capacitate local emerging SMMEs
Booysendal
R60 000
Environmental cleaning education/ Mandela day celebration
Encourage community participation in environmental initiatives
Ngwaabe
R50 000
Sports development/Ngwaabe secondary school soccer tournament
Network of community leaders and organisations actively using sports programmes to bring people from diverse backgrounds together and thus reinforce healthy lifestyles and foster civic pride and participation – theme: healthy body, healthy mind
Greater Tubatse Local Municipality
R100 000
Scholar awareness/career guidance
Promote the mining industry through dissemination of information to attract quality candidates to mining disciplines from local schools
Ngwaabe Cluster
R50 000
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LOCAL EMPLOYMENT
• Environment and waste management
In F2014 5.1% of permanent employees and 6.8% of contractors at Zondereinde were drawn from the local Thabazimbi municipal area.
• Agriculture • Construction Engagements were held with local community structures, with representation of municipal councilors wherein specific issues of sustainable small business development and establishment of local economies were considered. Follow-up sessions are scheduled during September and October 2014.
In order to limit the dependence of communities on the mining industry for jobs, Zondereinde has prioritised key economic areas to be developed through the contributions of small businesses and local entrepreneurs. These areas include:
ZONDEREINDE CORPORATE SOCIAL INVESTMENT AND LOCAL ECONOMIC DEVELOPMENT Project
Objectives
Location
Spend
Northam comprehensive primary school
Upgrading sanitation facilities and infrastructure, i.e. doors and ceilings
The town of Northam
R81 661
Deo Gloria primary school
Construction of three additional classrooms at Deo Gloria primary school
Thabazimbi
R14 677
Entrepreneurial support centre
Agricultural activities and preparation towards provision of small business support activities
OR Tambo
R199 702
OR Tambo job creation project
A joint initiative with Teba Development to create employment opportunities
OR Tambo
R405 911
Computer Services
Payment for the provision of networking services for 3 schools
Moses Kotane and Thabazimbi Municipality areas
R322 114
Local employment remains key in the communities surrounding Northam’s operations. A major challenge faced by mines in remote and underdeveloped areas, is the community’s unrealistic expectations in terms of employment opportunities and the availability of resources.
As a single, shallow and mechanised operation, Booysendal is not labour-intensive, and it is unlikely that the mine will ever be able to meet the expectations and needs of everyone in the surrounding communities. Currently, 63% of MRC’s employees are local while 42% of Minopex and 44% of Booysendal’s employees are drawn from local communities.
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In collaboration with the local municipalities at Booysendal, a dynamic database has been
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from the regional land claims commissioner’s office in Mpumalanga in order to restore it to the Ba Choma community. This property is not part of the Booysendal mining right. At the time of writing, this transaction had not yet been concluded. In addition, the company was notified by the regional land commissioner’s office in Limpopo that a number of land claims had been lodged over the farm Booysendal on which the mine is situated. An in loco inspection of the property conducted by officials from the regional land claims commissioner’s office was attended by more than 20 members of local communities. Investigation and research of these claims is still in progress. Should a claim be proved over Booysendal, the mining right is unlikely to be threatened as the claim is for the surface of the land and the state has many options available to compensate the claimants.
established for the recruitment of local employees with the necessary skills and experience, particularly in the fields of engineering, trackless mining and plant operations. Booysendal prefers to hire people from the host communities at all levels of the workforce and encourages contractors to do the same in support of local development. The mine strives to provide meaningful support to small and medium-sized businesses in nearby communities as well as those who are already providing services to the mine so that they can contribute to the development of the local economic base. Booysendal emphasises a pragmatic, gradual approach and plans to train 12 identified small, medium and micro enterprises (SMMEs), who have already been assessed by SEDA in the 2012/13 financial year, during F2015.
Booysendal did not incur any significant fines or other non-monetary sanctions. Furthermore there were no cases referred for dispute resolution in F2014. Booysendal did not incur any significant fines or other non-monetary sanctions. Furthermore there were no cases referred for dispute resolution in F2014.
LOCAL PROCUREMENT In compliance with the Mining Charter, Northam is committed to giving preference to local businesses in the communities surrounding its operations. Northam’s procurement policy, accordingly, gives local BEE companies preferred supplier status.
At Zondereinde, the company engages local municipalities as conduits towards ensuring that priority areas are targeted with key interventions. However, councillors and traditional leaders do collaborate with the mine in respect of key interventions such as local recruitment, CSI and LED projects. Engagements with communities are on a needs basis and relationships to date can be reported as constructive and fruitful.
LOCAL COMMUNITIES Northam enjoys a reasonably healthy and professional working relationship with all its stakeholders. Nevertheless, as reported in the 2013 sustainable development report, land invasions by the Ba Choma community over a company-owned property adjacent to Booysendal, which is traversed by an Eskom servitude, led to delays in commissioning permanent power supply to Booysendal. The company has subsequently accepted an offer to purchase the farm
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NATURAL CAPITAL Northam aims to optimally use and conserve the resources available to the company and seeks to mitigate any negative environmental impacts.
KEY FEATURES
Waste licence obtained at Zondereinde salvage yard Panel management system fully implemented at
Booysendal
Power factor
Use of correction equipment results hydropowered in savings of between equipment and R1.3 million and R2.0 million backfill results in savings of Buttonshope Conservancy 31 506MWh Trust in place to at annually at Booysendal Zondereinde
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APPROACH
which has been set aside specifically for conservation and biodiversity purposes. (See the 2012 and 2013 sustainable development reports for details on governance and funding of this offset area – http:// www.northam.co.za/investors-and-media/publications/ sustainable-development-reports )
Competition for resources such as land, water, energy and fuel is becoming progressively more robust in South Africa. In terms of environmental custodianship, Northam has identified these resources as its highest priorities with its most significant challenges being their conservation and optimal use.
LEGISLATION AND COMPLIANCE
The health, safety and environmental (HSE) committee is responsible at board level for overseeing environmental matters. As a matter of course, environmental management issues are reported to the operational general managers and the chief executive on a monthly basis, and on a quarterly basis to the board’s HSE committee. The chief executive and general managers of Zondereinde and Booysendal have final accountability for environmental compliance and performance.
South Africa has a strict environmental legislative framework and this is governed by the following: • Constitution of the Republic of South Africa No 108 of 1996 • Mineral and Petroleum Resources Development Act No 28 of 2002 (MPRDA) • National Environmental Management Act No 107 of 1998 (NEMA) • National Environmental Management: Waste Act No 59 of 2008
At Zondereinde and Booysendal, environmental issues are dealt with by a specific management team. At Zondereinde, in particular, the environmental management function and engineering services are inextricably intertwined, given the Zondereinde operation’s reliance on technology, which is applied in many instances, specifically to creating environmentally safe working areas. The engineering department is responsible for overseeing this function under the guidance of the engineering manager who is supported by the environmental officer. The safety, health and environmental manager at Booysendal heads this process and is supported by environmental staff.
• National Environmental Management: Biodiversity Act No 10 of 2004 • National Heritage Resources Act No 25 of 1999 • National Environmental Management: Air Quality Act No 39 of 2004 • National Water Act No 36 of 1998 Care has been taken to uphold Northam’s compliance with South Africa’s environmental and mining legislative framework. The company is committed to prudent practices and usage of natural resources, in accordance with NEMA, and this is outlined in its environmental policy, which may be found at http://www.northam.co.za/governance/policies-andprocedures.
At Booysendal, the mine management team is responsible for looking after only approximately 8% of the mine’s freehold area. The balance of the land (approximately 6 200 hectares) is managed by a dedicated land manager and, of this, 960ha is under the custodianship of the Buttonshope Conservancy Trust, an offset area which was created under the stewardship of former chief executive, Glyn Lewis, and
At Zondereinde and Booysendal, a precautionary environmental approach has been taken – aligned with NEMA and Northam’s own environmental management systems (EMS). Management at both operations engage regularly with regulatory authorities including the DMR and 121
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the Department of Water Affairs (DWA) and other relevant departments. New mining projects are subject to environmental impact assessments (EIAs) which involve thorough public participation and many studies to assess environmental aspects such as air, water, land, flora and fauna. These EIAs become part of the mines’ approved environmental management plans or EMPs. EMPs provide guidance in monitoring, addressing and mitigating environmental impacts. Routine audits are undertaken to ensure compliance with the EIAs and EMPs. Northam has the requisite permits for Zondereinde and Booysendal in terms of new order mining rights and integrated water use licences.
discharged directly into the Bierspruit, following above-average rainfall, as the evaporation dam and settling ponds were near full capacity due to fissure water being pumped and no consumption during the extended strike. Although this incident was reported to the DWA, the discharge volume was within the 1 000 000m3 provided for in section 7 of the water licences. As such no fine was issued and no administrative action was taken.
Zondereinde has recently completed a revised EMP application in line with the DMR’s requirement to consolidate its original document and three amendments for the UG2 stockpile, coal-fired boilers and the slag dump. The mine is awaiting approval from the DMR.
Northam has adopted the ISO14001 standard as the basis for its EMSs. The Zondereinde mine has been ISO14001-certified since 2011. A re-certification process conducted in February 2014, identified seven non-conformances. These were rectified and recertification was issued on 12 May 2014 until 2017.
In compliance with the amendment to the NEMA: Air Quality Act, which came into effect in 2013, Northam has submitted an application for an atmospheric emission licence for the Zondereinde operations as well as a request for exemption from the requirement to reduce sulphur dioxide (SO2) emissions by 2020, based on affordability and the historic dispersion of SO2 at Zondereinde which has been significantly lower than the licensed limits.
Procedures, aspect and impact identification are currently underway for the implementation of ISO14001 at the Zondereinde metallurgical complex with a view to completion in mid-2015. A gap analysis will then be conducted and an application for certification of the plant will be submitted as soon as identified shortcomings have been addressed.
No grievances regarding environmental impacts were received during the year.
ISO14001
While the ISO14001 standard is taken into account in managing environmental issues at Booysendal, a formal ISO14001-compliant EMS is not yet in place at this operation.
Northam is a member of the South African Waste Information System (SAWIS) developed by the DEA, and both Zondereinde and Booysendal are registered with SAWIS. The company complies with the monitoring and management processes of hazardous waste in terms of recovery, recycling, treatment, disposal and exportation.
F2014 PERFORMANCE Zondereinde Water and energy consumption continue to be the most pressing environmental management concerns at Zondereinde. Efforts to reduce consumption are assessed and implemented continuously.
Northam did not receive any significant fines or non-monetary sanctions for non-compliance with environmental laws and regulations.
Zondereinde was granted a waste licence for the salvage yard although local interested and affected parties did raise concerns about community job
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creation. An external audit was conducted on 19 August 2014.
Three annual audits were conducted at Booysendal during the year, these include:
Zondereinde recorded one reportable environmental incident in the year under review but did not incur a fine.
• An annual performance assessment of the EMP as required by the MPRDA. • The first ever performance assessment of the EIA as required by NEMA.
Booysendal
• An annual audit of the new water licence
During F2014, Booysendal implemented a number of projects to reduce the impact of operational activities on the environment.
No reportable environmental incidents were recorded at Booysendal during the year.
In order to ensure that hydraulic and motor oil is not released into the surrounding area and water system, extra sumps are in the process of being installed into the storm water system to capture the oil and separate it from the system before the surface water run-off reaches the pollution control dams.
RESOURCE UTILISATION As a mining company, Northam is mainly reliant on natural resources – water, energy and bulk materials. Bulk materials comprise mined and processed rock, liquid fuels, coal, grease, steel, timber, lubricating and hydraulic oils as well as diesel. Zondereinde and Booysendal take pride in utilising resources efficiently and recycling materials like plastics, steel, timber and scrap.
Biodegradable tablets, known as ECO tablets, have been introduced into the main pollution control dam. These tablets assist in maintaining water quality of the dam within the required limits of the water use licence.
Water samples being taken at Booysendal
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MATERIALS USED AT ZONDEREINDE IN F2014 Unit
F2014
F2013
F2012
F2011
Rock mined
000t
1 907
2 276
2 154
1 801
Ore milled
000t
1 724
2 116
1 934
1 591
m3
2 412
1 573
827
754
Cartridge explosives
t
2 076
2 401
2 552
2 010
Oxygen
t
1 722
1 561
2 018
2 461
Sulphuric acid
t
586
520
769
747
Sulphur dioxide
t
61
56
82
90
Grease
t
34
47
47
41
Lubricating and hydraulics oils
l
130 618
130 270
135 155
112 311
Diesel
l
648 709
635 739
576 079
500 639
Timber use (bulk support)
MATERIALS USED AT BOOYSENDAL IN F2014 Unit
F2014
F2013
Rock mined
000t
1 233
755
Ore milled
000t
1 517
261
Emulsion explosives
t
960
284
Lubricating and hydraulics oils
l
640 192
83 314
Diesel
l
1 830 066
1 745 435
F2011
MATERIALS RECYCLED AT ZONDEREINDE IN F2014 Unit
F2014
F2013
F2012
Plastic
t
53
42
108
62
Steel
t
2 182
1 640
2 053
759
Timber
m3
2 015
2 380
4 601
5 874
Scrap metal
m
2 526
3
0
0
1 995
Rubber
t
197
153
134
156
Industrial waste
t
1 246
1 419
1 955
2 526
MATERIALS RECYCLED AT BOOYSENDAL IN F2014 Unit
F2014
F2013
General waste to landfill
m3
551 571
–
Hazardous waste
m
204
–
NORTHAM ANNUAL INTEGRATED REPORT 2014
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3
WATER USE Northam recognises the importance of optimising its water usage through reuse and recycle processes, especially as a large volume of water is used for the mining and processing of minerals. The vital role water plays is highlighted in regular water awareness campaigns. Two primary water sources contribute to Northam’s water consumption at both Zondereinde and Booysendal, namely industrial and potable water. Northam’s source of potable and industrial water is from Magalies Water at Zondereinde and the Lebalelo Water User Association at Booysendal – Northam has contracts with both companies in this regard. WATER USAGE (000m³) Zondereinde
Booysendal
F2014
F2013
F2012
F2014
F2013
Potable water from external sources
2 335
2 633
2 540
513 103
429
Fissure water used
1 084
1 492
1 273
–
–
25 524
25 909
24 390
–
237
89
91
91
–
36
Water recycled in process % water recycled
Zondereinde
application of backfill helps to lower underground temperatures by reducing heat ingress from workedout areas while also reducing the size of the area to be cooled by 65%.
Zondereinde’s integrated water licence was granted in May 2012. The mine has since applied for relaxation of certain standards and requirements. In September 2013, the DWA conducted a compliance audit on Zondereinde’s water use licence and the mine submitted an annual water management report to the DWA in December 2013. On 11 August 2014, Zondereinde received feedback from the DWA, requesting further assessment by a specialist.
Zondereinde endeavours to run a zero discharge operation and closely monitors any potential impact of its operations on surface and groundwater sources. The water bodies that could be affected by surface water discharges are the Crocodile River and the Bierspruit River. Extensive monitoring is undertaken and a comprehensive groundwater model, developed and maintained by a third party consultant, has been in place for nine years. This consultant also monitors and advises on surface and groundwater quality control.
Water is fundamentally important for Zondereinde mine, not only from an environmental and permitting perspective, but also operationally. Through a shaftbased hydropower system, the mine uses water as its primary source of energy for its direct mining operations underground. These technical innovations were pioneered at Northam and refined over time. Hydropowered equipment has the advantage of reducing the temperatures in the working areas. This technology, used in conjunction with the strategic
The only significant water discharge during the year was from the sewer plant into the Bierspruit, as described in more detail on page 122. In terms of the water use licence, 1 000 000m3 of water is allowed to be discharged annually. 125
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Booysendal
tariffs and supply shortages have increased steadily, by 16% in 2012, 8% in 2013 and 9% in 2014. For F2014, Northam’s electricity spend totalled R424.9 million (85% at Zondereinde and 15% at Booysendal).
Water allocation is also of critical importance at Booysendal. The integrated water use licence requirements guide water management processes, especially in terms of water allocation. This licence is reviewed every five years from the date of issue. Water quality at Booysendal is monitored on a continuous basis and compared with the original base line study information.
In terms of its overall focus on efficiencies and avoidance of waste, the company’s energy reduction initiatives (such as a move to using electricity at low-peak periods to reduce the strain on the national grid during high-peak periods) have been ongoing for many years.
The Lebalelo pipeline is the main source of industrial and potable water at Booysendal, which could be supplemented with on-site boreholes. The mine currently holds a 20-year licence to extract water from boreholes should additional water be required. The Groot Dwarsrivier is the only water source that could potentially be affected by the withdrawal of water from the boreholes. However, as a limited volume of water is currently being drawn from this source, there is no risk.
At current capacity at Zondereinde, Eskom’s supply is currently sufficient. Nevertheless, power requirements are not static, given the deepening project and the smelting of additional material from Booysendal. Zondereinde, therefore, has to concentrate on energy efficiency rather than outright quantity. To this end, a number of initiatives have been implemented, such as an underground refrigeration plant and fan clipping.
Nevertheless management is vigilant about the potential for any contamination risk, and closely monitors the conservation processes and water reduction practices, along with checking water levels in the pollution control dams, which could result in discharges or run-off.
With the refrigeration plant being moved underground water is not required to be pumped to surface, which immediately provides some savings: one refrigeration machine fulfils the function of two 2MW pumps. It is estimated that R22.8 million could be saved annually.
The Groot Dwarsrivier and the Der Brochen Dam are the only at-risk water bodies. Management has an emergency preparedness programme in place to address any run-off or spillages, which includes a stakeholder schedule along with emergency remediation measures. Three water evaporators have been installed at the pollution control dams to mitigate the effects of excessive rainfall during the rainy season.
The company’s use of hydropower has also reduced its reliance on Eskom as the primary energy source. As a result, less electricity is required for production than other platinum mines on compressed air to power underground equipment. The use of hydropowered equipment and backfill has led to annual power savings of 31 506MWh.
Industrial water at Booysendal is maintained within a closed circuit and recycled on an ongoing basis.
Booysendal currently has sufficient power to continue operating, with one incoming Eskom line and transformers capable of sustaining 80MVA. The maximum demand at the moment is 29MVA.
Energy consumption In South Africa, electricity is supplied by Eskom, the national electricity supplier. In recent years, Eskom’s
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POWER FACTOR
Zondereinde recorded an overall decrease in energy consumption in F2014 – attributed to the 11-week strike as well as the furnace rebuild. The company’s long-term strategy is based on energy efficiency rather than energy reduction as the mines continuously strive to replace ore reserves and require more energy for production. The energy efficiency strategy is continuously reviewed in order to optimise its effectiveness.
Power factor correction equipment is in place at both Zondereinde and Booysendal to reflect the correct power consumption and reduce the overall electricity bill. Power factor correction was upgraded at Zondereinde to the value of R4.0 million. At Booysendal, power factor correction equipment was installed during the construction phase. A study conducted by DRA Mineral Projects indicates that the annual estimated saving per substation is between R1.3 million to R2.0 million.
See also ENERGY CONSERVATION PROJECTS on page 129.
ELECTRICITY CONSUMPTION (MWH) Zondereinde
Booysendal
F2014
F2013
F2012
F2014
F2013
Energy from electricity purchased by shafts
470 117
485 654
461 484
35 251
6 726
Energy from electricity purchased by plants
108 600
101 732
125 548
57 515
7 533
Total electricity purchased
578 717
587 386
593 441
92 766
14 259
The base metal removal plant at Zondereinde
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Zondereinde
Climate change and emissions
Apart from the measures mentioned above, no further energy saving initiatives were introduced at Zondereinde in F2014. Two independent parties reviewed the mine’s energy consumption; no viable, cost-effective solutions which do not pose any safety risk to employees, was found.
Climate change has increasingly become an area of concern for mining companies with the many regulations governing environmental management. At Northam, climate change has been assessed as a moderate risk managed primarily through the company’s energy conservation initiatives. In addition, PGMs are used in the production of technologies to reduce emissions thus limiting the climate change risk.
In F2014, total indirect non-renewable energy consumption of electricity sourced from the national grid at Zondereinde decreased by 1.48% to 578 717MWh (F2013: 587 386MWh). This was mainly due to loss in production days as a result of the 11-week strike as well as the furnace rebuild, offset by an increase in smelting activities from processing Booysendal’s production.
Northam has considered the risks and opportunities relating to climate change, including the financial implications, in its sixth consecutive voluntary submission to the Carbon Disclosure Project (CDP), which may be found at www.cdp.net/en-US/Results/ Pages/Company-Responses.aspx?company=13459.
Booysendal
Northam reports on emissions of carbon dioxide (CO2) and SO2, the most significant of its emissions.
Given the strain on South Africa’s energy utility Eskom, energy efficiency has and will continue to be a priority at Booysendal. A panel management system which assists with the protection and annual testing of the medium voltage network, and fault analysis has been fully implemented and operational since June 2014. A monthly report on the findings is presented by the engineering department. Going forward, this system will allow Booysendal to identify areas where electricity savings may be affected.
In F2014, 4 807 tonnes of SO2 were emitted by the Zondereinde operations attributed to direct emissions from the smelter. These emissions comprise SO2 (directly from the smelting operations), CO2 (both direct and indirect), potential discharges to water courses and dust from tailings dams.
In F2014, total indirect non-renewable energy consumption from electricity sourced from the national grid increased by 551% to 92 766MWh (F2013: 14 256MWh) owing to the ramp-up.
As mentioned earlier, Northam has applied for an atmospheric emission licence at Zondereinde, which requires an amendment to be submitted by the end of November 2014. The company has also applied for exemption from the requirements for SO2 emissions.
A solar-aided water heating system at the mine’s change house is in place to conserve energy.
Zondereinde’s energy efficiency programmes have reduced the mine’s GHG emissions.
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ENERGY CONSERVATION PROJECTS ENERGY EFFICIENCY PROJECTS Compact fluorescent lamps (CFLs) and geyser blankets have been distributed to village and mining staff, and geyser blankets have been fitted in 600 houses. Street lights have been converted to energy saving alternatives. Mast lights at the shafts and hostels have been converted to energy saving lighting. Hostel geysers are solar-powered with large thermal storage capacity. Geyser timers have been installed in 600 village houses to reduce energy consumption. ENERGY SAVING PROJECTS Electric geysers are supplemented with solar heaters. Northam has retrofitted 55 x 37kW geysers with solarpowered hot water generators. This initiative targets Scope 2 emissions and is voluntary. Power consumption of the main ventilation fans is reduced by approximately 0.8MW for four hours per day during the working week and 24 hours over the weekend. The volume of water to be chilled and pumped is reduced by improving the efficiency of spot coolers in the underground workings. This saves approximately 2.5MW of electricity consumption on a continuous basis. Three 1.5MW electrode boilers have been replaced with coal-fired boilers to realise an estimated saving of 15% in carbon emissions due to the positional and thermal efficiency of the installation. TIME OF USE Some 3.2MW of electricity consumption has been shifted from Eskom peak to off-peak periods by automatically controlling the time when refrigeration plants are allowed to operate. Some 5.8MW of electrical consumption has been shifted from Eskom peak to off-peak periods by automatically controlling the time when underground dewatering pumps are allowed to operate. PROJECTS The volume of water to be pumped to surface has been reduced by relocating additional refrigeration plants required for the deepening project from surface to underground using innovative methods for the condenser cooling circuit. Based on reduced pumping costs, the estimated saving in electricity consumption is 9.5MW. GREENHOUSE GAS EMISSIONS (CO2e tonnes) Zondereinde F2014 Total Scope 1 emissions (direct emissions)
F2013
Booysendal
F2012
F2011
F2014
23 451
15 509
15 401
14 432
4 912
Total Scope 2 emissions (indirect emissions)
596 079
605 008
611 244
619 947
95 549
Total Scope 3 emissions (indirect emissions)
580
665
815
1 089
103
620 110
621 183
627 460
635 468
100 565
Total emissions
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Dust management
that dust fall-out within these areas is well within residential dust fall-out limits.
Due to the nature of its operations, Zondereinde monitors dust fall-out and its stakeholder engagement programme is effective in dealing with any incidents and complaints logged. Since inception, Zondereinde has had no such complaints.
The mine’s location in a valley surrounded by mountains means that dust dispersion into the surrounding communities is limited. No community or stakeholder complaints were received regarding dust emissions during the year.
The tailings dam is continuously revegetated to reduce dust entrainment, and to minimise wind and water erosion.
LAND MANAGEMENT AND BIODIVERSITY Northam acknowledges that biodiversity entails careful land management, especially with mining processes that could have an adverse impact on the environment. Careful planning for new mining projects, engagement with stakeholders and the surrounding community, and compliance with legislation could also add value to the mining process and prove beneficial in land management.
Previously exposed areas at Booysendal have been paved, tarred or grassed, and the few areas where dust could be produced, are monitored and dust suppression is conducted as needed. Continuous dust fall-out monitoring at Booysendal is conducted at potential receptor sites around the Booysendal operation. Monitoring results indicate REHABILITATION FUND
Booysendal Zondereinde Total
Provision at 30 June 2014 (Rm)
Investments held at 30 June 2014 (Rm)
Unfunded probability at 30 June 2014 (Rm)
45.9
18.4
27.5
96.8
79.1
17.7
142.7
97.5
45.2
Booysendal’s dust management programme includes the revegetation of road verges
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Zondereinde
several landscape types, which are critically important for conservation action – Mpumalanga’s conservation authorities actually prioritise these areas.
No animals or plants in the area are listed on the IUCN’s Red List of Threatened Species nor the Red Data list.
The Dwarsrivier Valley is unique as the landscape includes forests, small wetlands, seepages and grasslands. Certain protected mammals and species of fish have also been recognised as endemic to this habitat. Research has also indicated that the threatened SCPE is not formally protected, and that more land needs to be incorporated within reserves to protect the province’s biodiversity.
Land management and conservation at Zondereinde is simpler than it is at Booysendal for a number of reasons, including the fact that the required policies and practices have been established and entrenched over the years. Northam’s land ownership of Zondereinde is larger than the actual mining operations, with a surface freehold of approximately 4 439 hectares.
In the spirit of preserving the biodiversity of the area, a creative approach was adopted to generate long-term funding to support the protection of the environment surrounding Booysendal. A key result was the Buttonshope Conservancy Trust, which funds Booysendal’s conservation, offset management and expansion.
Final rehabilitation of Zondereinde’s tailings storage facility will only take place after closure. However, ongoing rehabilitation continues for dust management as well as aesthetic reasons. The total rehabilitation and closure costs for F2014 were R6.4 million.
Booysendal
For more information see page 57 of the F2013 Sustainable Development report, or go to .
Booysendal’s host area, the Dwarsrivier Valley, is situated within the Sekhukhuneland Centre of Plant Endemism and the Roossenekal Subcentre of Endemism. The Booysendal property encompasses
Rehabilitation and closure costs at Booysendal amounted to R2.9 million in F2014.
LAND USE (HECTARES) Zondereinde
Booysendal
F2014
F2013
F2014
F2013
Land disturbed by mining and related activities
137
137
521
521
Land leased for farming purposes
273
273
N/A
N/A
Land protected for conservation Total land under management (freehold)
800
800
960
960
4 439
4 439
6 773
6 773
While Zondereinde’s operational footprint has been reduced, including the processing of waste rock, the unused footprint has not been rehabilitated. Several years ago, the borrow pits at the village and turn-off to the smelter plant were rehabilitated, and rubble heaps at the entrance to Setaria were levelled and covered with topsoil so that the area could be rehabilitated to a more natural state.
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MANUFACTURED CAPITAL ZONDEREINDE
Ownership
Extent
Reserves
Wholly owned
7 625ha (strike length: 8km)
7.8Moz
Resources
Life of mine
Employees
80.1Moz
15 years
6 638 permanent employees 2 150 contractors
F2014 capex
F2014 operating profit/(loss)
R351.5 million
R115.5 million
F2014 CSI and LED expenditure R1.30
million
F2014 total electricity consumption
587 717MWh
Operations Underground mining activities focus on the Merensky and UG2 reefs at an average depth of 1 750m. Hydropowered equipment is used in stoping and development. Surface infrastructure includes concentrators for Merensky and UG2, a base metals removal plant and a smelter. Marketing and sales to customers in North America, Japan and Europe is conducted in-house.
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BOOYSENDAL
Ownership
Extent
Wholly owned
15 151ha (strike length: 14.5km) 4.3Moz
Resources
Life of mine
Employees
103Moz
50+ years
212 permanent employees 1 247 contractors
F2014 CSI and LED expenditure
F2014 capex
F2014 operating profit/(loss)
R1.4 million
R539.6 million
(R130.1 million)
F2014 total electricity consumption
Operations
92 766MWh
The mechanised room and pillar underground workings are accessed via a cluster of four declines (three on reef and one in the footwall), as well as a reverse decline system. Surface metallurgical infrastructure includes a UG2 concentrator and a dense media separation plant as well as a chrome spirals plant. Concentrate is smelted at Zondereinde.
Reserves
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METALLURGICAL OPERATIONS Merensky and UG2 concentrator plants Crushing/screening circuit: In the crushing/screening circuit the ore is crushed to reduce its size before it reports into the mill. Milling: Merensky ore feeds into a fully autogenous (FAG) mill. In the UG2 plant, the crushed product feeds into a high pressure grinding roll and then into a primary ball mill. Flotation: The circuit includes rougher cells, scavenger cells and cleaner columns. External sparger column cells act as a cleaner and help to produce a final UG2 concentrate with significantly lower chrome content while maintaining PGM recoveries. Smelter and furnace operations Commissioned in 1993, the smelter has a 15MW capacity. Key processes include drying, smelting and converting the concentrate. Concentrate brought in is blended and dried concentrate is pulverized and then stored in silos. Off-gases are cleaned in an electrostatic precipitator. Concentrate and flue dust is mixed with lime and then fed through to the day bin and into the furnace where electrodes provide heat. The lighter oxides float to the top as slag and the more dense sulphides, which contain the PGMs, sink to the hearth as furnace matte.
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APPROACH AND STRUCTURE
The Booysendal North mine has been developed as a room and pillar operation.
Looking beyond the prevailing operational landscape, Northam seeks to harness the inherent potential for growth of its production profile, and to optimise its current infrastructure, thereby maximising value delivered to all stakeholders.
The main underground infrastructure consists of the following key elements: • A reverse decline system consisting of two barrels. The main barrel contains the conveyor belt and chairlift for the transfer of rock and personnel. The other barrel is for the movement of mechanized equipment into and out of the mine.
Northam’s current business relies primarily its two primary operating assets – the Zondereinde and Booysendal PGM mines, and its own metallurgical operations, including a base metals removal plant and smelter, located on the Zondereinde lease area.
• Unique to the Booysendal design is the footwall decline placed some 24m below the reef horizon. It is typical in most room and pillar operations to have a conveyor placed on reef. At Booysendal some buffer storage capacity was designed and constructed in order to mitigate any risk related to interruptions in power supply, particularly at peak times. The buffer storage will allow continuous operations for up to 12 hours on the reef horizon should the footwall conveyor be offline; the placement of the conveyor in the footwall allows for rock hoisting to surface during off peak periods
Zondereinde Incorporating a metallurgical complex, comprising a smelter and a base-metal removal plant, Zondereinde is a deep-level conventional mining operation producing approximately 300 000oz of PGM per annum. Zondereinde is the world’s deepest platinum mine and the complex geology is characterised by potholed reef and frequent fault structures. Ore grades are relatively high at Zondereinde, as are the metallurgical recoveries from both the Merensky and UG2 ore, which is mined concurrently from the same infrastructure. The mine’s resource is estimated at 80.1Moz, and the life of mine currently stands at 15 years.
• There are three main on-reef declines, a central decline for the movement of mechanized equipment and two additional declines; one north and one south of the central decline, to provide access to the tips of the main ore pass system.
To extend the life of mine, a deepening project is underway. The development of infrastructure which includes a conveyor decline, a chairlift and a material decline from 13 level to 18 level, has reached 16 level at a depth of 2 300m below surface, and has been equipped to 15 level.
Processing and refining Independent of the major South African platinum producers, Northam’s metal is toll-refined in terms of a long-standing contract with Heraeus PGM concentrate is delivered on a weekly basis to the Heraeus refinery in Hanau near Frankfurt, Germany.
Booysendal
Since 1992, Northam’s entire production of metal, has been refined in Hanau. Latterly some of Northam’s material has also been treated at the Heraeus plant in Port Elizabeth in South Africa.
The Booysendal North mine is a relatively shallow, fully mechanised UG2 mining operation, with a resource of 6.4Moz. The current life of mine is 20+ years. The total Booysendal resource is in excess of 100Moz and with the development of additional mining modules could support mining operations for 50+ years.
A registered member of the London Platinum and Palladium Market (LPPM), Heraeus has London-
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MARKETING AND COMMUNICATIONS
Zurich ‘Good Delivery’ status for metal production. The refinery in Hanau is subject to strict European Union and materials handling protocols. Product transportation is also strictly defined by international aviation regulations.
Northam’s marketing department maintains regular weekly contact with its domestic and international customers, and hosts customer meetings and undertakes visits to customer facilities. Customer representatives undertake reciprocal visits to Northam’s mining and metallurgical operations.
CUSTOMER HEALTH AND SAFETY All health and safety impacts of the final product in the various stages of production are assessed, and health and safety issues relating to the final product are addressed continuously.
Any issues relating to customer satisfaction are taken up directly with the marketing department and addressed proactively. Any problems can thus be addressed timeously and resolved satisfactorily, and customer feedback receives immediate attention.
Customers are assured that there are no material health and safety complications related to the final products produced and sold by Northam with the exception of nickel sulphate, which is managed as a hazardous material and accompanied by relevant safety and health documentation.
Due to the nature of Northam’s long-standing relationships, frequent face-to-face interaction with its customers and proactive redress of any issues arising, and additional customer satisfaction surveys are not required.
There were no incidents of non-compliance with voluntary codes concerning the health and safety of products and services in F2014.
As the sale of Northam’s products is largely conducted on a business-to-business basis for industrial applications, no definitive codes are followed for the purposes of marketing communications, promotions and sponsorships. As a result, no incidents of non-compliance with regulations or voluntary codes concerning marketing communication, advertising or promotion on sponsorship were reported during F2014.
PRODUCT AND SERVICE LABELLING No safety, health or environmental labelling is required for pure PGMs, however, requirements exist for the base metal by-products entering Northam’s marketing and sales stream. Specifically, the transportation and distribution of nickel sulphate is strictly regulated – it is transported as hazardous material and accompanied by appropriate coding and labelling along with relevant safety data sheets informing transporters, handlers and customers.
COMPLIANCE AND CUSTOMER PRIVACY During F2014, no fines were received in respect of non-compliance in the process of the provision and use of Northam’s product.
Northam, as a regulated agent, complies with South African Civil Aviation Authority regulations, which govern export of the company’s products. All containers used in the exportation process – from mine to market – are accompanied by documentation validating the contents of each shipment.
Northam respects the privacy of its customers and, to this end, confidentiality agreements and nondisclosure undertakings are standard in its customer contracts. No complaints, substantiated or otherwise, regarding breaches of customer privacy and losses of customer data occurred during the year under review.
No incidents of non-compliance with regulations and voluntary codes were reported in F2014 relating to product and service information and labelling. NORTHAM ANNUAL INTEGRATED REPORT 2014
136
Approval of annual financial statements and company secretary’s confirmation
138
Report of the audit and risk committee
139
Independent auditor’s report
140
Directors’ report
142
Accounting policies
160
Financial statements and notes
194
Annexure 1 – analysis of financial instruments
246
Annexure 2 – interest in associates and joint ventures
250
Annexure 3 – subsidiaries
256
Annexure 4 – related party transactions
258
Annexure 5 – analyses of share option and share incentive plan
260
Annexure 6 – segmental analysis
268
The annual financial statements set out on pages 142 to 273 have been prepared under the supervision of the chief financial officer, Mr AZ Khumalo CA (SA). The annual financial statements have been audited by Ernst & Young Inc.
Chrome stockpile at Booysendal
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ANNUAL FINANCIAL STATEMENTS
ANNUAL FINANCIAL STATEMENTS
APPROVAL OF ANNUAL FINANCIAL STATEMENTS AND COMPANY SECRETARY’S CONFIRMATION 6. The going concern basis has been adopted in preparing the annual financial statements. The directors have no reason to believe that the group will not be a going concern in the foreseeable future based on forecasts and available cash resources. These financial statements support the viability of the company and the group.
In approving the annual financial statements the directors hereby confirm: 1. That they are responsible for the preparation, integrity and fair presentation of the annual financial statements of Northam and its subsidiaries. The auditors are responsible for auditing and reporting on whether the financial statements are fairly presented. Their report appears on page 139.
7. The annual financial statements have been audited by the independent auditors, Ernst & Young Inc. who were given unrestricted access to all financial records and related data including minutes of all meetings of shareholders, the board of directors and committees of the board. The directors believe that all representations made to the independent auditors during their audit are valid and appropriate. The unmodified audit report of Ernst & Young Inc. is presented on page 140.
2. The directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can only provide reasonable and not absolute, assurance against material misstatement or loss.
8. A corporate governance report appears on pages 24 to 32 and includes information regarding the group’s compliance with the King III Code.
3. The annual financial statements presented on pages 142 to 273 have been prepared in accordance with International Financial Reporting Standards as more fully described on pages 160 to 193. They conform and adhere to applicable accounting standards and are presented after applying accounting policies supported by reasonable and prudent judgements and estimates made by management, which have been consistently applied.
The annual financial statements were approved by the board of directors on 25 September 2014 and are signed on its behalf by:
4. Adequate accounting records and an effective system of internal controls and risk management have been maintained during the entire financial year.
PL Zim PA Dunne Chairman Chief executive officer
5. They have reviewed the additional information included in the annual report and are responsible for both the accuracy and consistency with the annual financial statements.
AR Martin Chairman – Audit and Risk Committee
Johannesburg 25 September 2014
COMPANY SECRETARY’S CONFIRMATION I, PB Beale, in my capacity as company secretary of Northam, hereby certify in terms of section 88(2)(e) of the Companies Act that all returns and notices required of a public company in terms of the Act have, in respect of the year under review, been lodged with the Companies and Intellectual Property Commission and that all such returns are true, correct and up to date. PB Beale Company secretary Johannesburg 25 September 2014 NORTHAM ANNUAL INTEGRATED REPORT 2014
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RESPONSIBILITIES OF THE COMMITTEE
Appropriateness of the expertise and experience of the chief financial officer
The committee, which operates in terms of a mandate approved by the board meets at least five times a year. Its responsibilities include:
In terms of the JSE listings requirements, the audit and risk committee has satisfied itself as to the appropriateness of the expertise and experience of the chief financial officer.
• the appointment and evaluation of external auditors and their terms of engagement; • the appointment and evaluation of the internal auditors and their mandate;
Appointment of external auditors The committee confirms the skills, independence, audit plan, reporting and overall performance of the external auditors are acceptable and that it recommends their re-appointment for the financial year ending 30 June 2015.
• the approval of remuneration of external and internal auditors; • ensuring the independence of external and internal auditors; • ensuring that the appointment of both the external and internal auditors is made in compliance with the provisions of the Companies Act;
Going concern statement The directors report that they have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future.
• the approval of non-audit work which may be performed by the external auditors which includes tax compliance services, assurance related work in respect of any corporate actions and opinions not related to any prohibited services;
Annual financial statements
• approving the internal audit plan;
The committee has:
• approving the external audit plan without infringing on the external auditors independence;
• reviewed and discussed the audited annual financial statements included in the integrated annual report with the external auditors, the chief executive officer and the chief financial officer;
• reviewing interim and preliminary results of the company;
• reviewed the external auditor’s management letter and management’s response thereto; and
• reviewing and recommending to the board for approval the interim report and preliminary announcement of results, the annual financial statements, annual integrated report and the sustainability report;
• reviewed significant adjustments resulting from external audit queries and accepted any unadjusted audit differences; and received and considered reports from the internal auditors.
• ensuring that the risks of the company are adequately assessed and monitored by management through a risk register, and ensuring that such risks are properly mitigated;
The committee concurs with and accepts the external auditor’s conclusions on the annual financial statements and has recommended the approval thereof to the board. The board has subsequently approved the financial statements, which will be open for discussion at the forthcoming annual general meeting.
• ensuring that internal controls of the company are implemented, effective and monitored; • ensuring a cordial working relationship between management and external and internal auditors; and • to deal appropriately with any concerns or complaints raised by any of the company’s stakeholders relating to accounting policies or practices and internal audit, content or auditing of the company’s financial statements, internal financial controls or any related matter.
AR Martin Chairman – audit and risk committee Johannesburg 25 September 2014 139
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
REPORT OF THE AUDIT AND RISK COMMITTEE
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF NORTHAM PLATINUM LIMITED
AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.
We have audited the consolidated and separate financial statements of Northam Platinum Limited set out on pages 142 to 273, which comprise the statements of financial position as at 30 June 2014, the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, the directors report and the notes, comprising a summary of significant accounting policies and other explanatory information.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.
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and Risk Committee and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Northam Platinum Limited as at 30 June 2014, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa.
Ernst & Young Inc.
OTHER REPORTS REQUIRED BY THE COMPANIES ACT
Director – Mike Herbst Registered Auditor Chartered Accountant (SA)
As part of our audit of the consolidated and separate financial statements for the year ended 30 June 2014 we have read the report of the Audit
102 Rivonia Road Sandton 25 September 2014
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NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
DIRECTORS’ REPORT
The directors have pleasure in submitting their report for the year ended 30 June 2014. The review of the group’s business performance is set out on pages 48 to 136, whilst the nature of business is described in the corporate profile which appears on page 3.
MAIN BUSINESS AND OPERATIONS Booysendal mine The mine, which came into production on 1 July 2013, continues to ramp up to full production with 1 517 109 tonnes being milled at a head grade of 2.6g/t (3PGE+Au), producing 2 882kg of metals in concentrate. The mine’s operating and cash costs were R688 and R527 per tonne milled respectively. This is not a realistic reflection of the performance of Booysendal as the current year’s unit costs were lower owing to the processing of the preproduction stockpile. More realistic unit costs are expected as the mine ramps up to steady state production, which is expected by October 2015. Capital expenditure in F2014 was R539.6 million (F2013: R1.4 billion), with the significant decrease owing to the near completion of the construction of the mine which came into production on 1 July 2013. Forecast capital expenditure in F2015 is expected to be R483.4 million of which R78.4 million will be allocated to routine capital, and of the R405 million project capital, R50 million is to be spent on a project to investigate the feasibility of mining Merensky ore at Booysendal. The total capital expenditure for the development of Booysendal mine since inception is expected to be R4.9 billion by the end of F2015. The original capital budget for Booysendal was R3.9 billion in June 2010 terms.
Zondereinde mine Zondereinde mine’s operating performance was adversely impacted by an 11 week strike, which began on 3 November 2013 and ended on 21 January 2014, resulting in the combined tonnes milled declining by 18.5% to 1 724 156 tonnes (F2013: 2 115 712 tonnes). Merensky reef tonnes milled were 803 736 tonnes (F2013: 958 211 tonnes) at a head grade of 5.8g/t (3PGE+Au) and the UG2 reef contributed 920 420 tonnes (F2013: 1 157 501 tonnes) at a head grade of 4.3g/t (3PGE+Au). This resulted in a combined head grade of 5.0g/t. The available ore reserves of the Merensky and UG2 reefs are estimated at 20 months and 24 months respectively. Total operating costs were R2.7 billion compared to R2.8 billion in F2013, a 2.5% decrease. Metals in concentrate production fell by 18.9% to 7 331kg (F2013: 9 041kg), while purchased metals in concentrate increased by 20.9% to 1 975kg (F2013: 1 633kg). The lower production volumes had a negative impact on costs with unit operating and cash costs attributable to mining and processing Merensky and UG2 ore increasing by 19.0% to R1 682 per tonne (F2013: R1 414 per tonne) and by 18.2% to R1 526 per tonne (F2013: R1 291 per tonne) respectively. The smelter rebuild was completed at the end of September 2013 as planned and successfully recommissioned thereafter at a cost of R54.0 million. The facility is operating normally. Progress on ore reserve development in the north-west quadrant of the mine and the deepening project was curtailed during the strike. Following a slow restart, these activities are progressing satisfactorily.
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Total capital expenditure in F2014 was R351.5 million (F2013: R347.9 million). This included R54.0 million for the smelter rebuild. Capital expenditure is estimated to be R331.2 million in F2015.
ASSOCIATES AND JOINT VENTURES The group has an interest in the following entities and joint ventures:
Dwaalkop platinum project This project is a PGM development opportunity in joint venture with Lonmin plc. The group’s share of the exploration expenditure amounted to R0.7 million (2013: R0.5 million), which was charged to sundry expenditure. The carrying value of the group’s investment is R300.7 million (2013: R300.7 million). Further details of the group’s interest in Dwaalkop are set out in Annexure 2 on page 250.
Kokerboom joint venture This is an early stage Iron Oxide Copper Gold and Massive Sulphide deposit situated in the Northern Cape Province, The exploration is being undertaken in joint venture with two other parties, with the group having a 51% interest. The group spent R1.3 million (2013: R9.8 million), primarily on an airborne magnetic survey, during the year, which was charged to sundry expenditure.
Pandora joint venture As a consequence of the five month strike that affected the platinum belt, the Pandora joint venture recorded a loss of which the group’s share was R3.3 million (2013: profit of R3.6 million). The carrying value of the group’s investment was R114.9 million (2013: R120.9 million). Further details of the group’s interest in Pandora are set out in Annexure 2 on page 250.
Trans Hex Group Limited (Trans Hex) The group has a 20.3% interest in this company, a diamond producing and marketing company, which is listed on the JSE. The group’s share of earnings from Trans Hex, including its share of other comprehensive income amounted to R5.5 million (2013: 6.1 million). The carrying value of the group’s investment amounted to R80.9 million (2013: R73.9 million). Further details of the group’s interest in Trans Hex are set out in Annexure 2 on page 250.
CORPORATE GOVERNANCE Northam is committed to the highest standards of business integrity, ethics and good corporate governance throughout the group. The board and management recognise that, in order to safeguard the interests of stakeholders, all of their actions must be guided by full accountability and transparency. The board is guided by the board charter, memorandum of incorporation (MOI), the Companies Act No 71 of 2008 (Companies Act), the JSE listings requirements, the third King Report on Corporate Governance for South Africa 2009 (King III), the Global Reporting Initiative (GRI) as well as other applicable legislation. Further details on the group’s corporate governance practices are set out in the corporate governance report on pages 24 to 32.
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ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
MINING LICENCES Booysendal mine Micawber 278 Proprietary Limited, a 100% owned subsidiary of Northam, holds a consolidated new order mining right for the Booysendal mine which covers an area of approximately 15 151 hectares on the farms Booysendal 43 JT, Buttonshope 51 JT, Der Brochen 7 JT, Draaikraal 48 JT, Hebron 5 JT, Hermansdal 3 JT, Kliprivier 73 JT, Pietersburg 44 JT, Uysedoorns 47 JT, Johannesburg 45 JT, Sheeprun 50 JT and Sheeprun 179 JT.
Zondereinde mine Northam holds two new order mining rights in respect of the Zondereinde mine covering an area of approximately 7 625 hectares on the farms Aapieskraal 377 KQ, Amandelbult 383 KQ, Elandsfontein 386 KQ, Grootkuil 376 KQ, Kopje Alleen 422 KQ, Middeldrift 379 KQ, Vrugbaar 381 KQ, Vrugbaar 387 KQ, Witvley 423 KQ and Zondereinde 384 KQ. The converted new order mining rights were executed on 13 July 2011 and an application for registration is in progress with the Mining Titles Registration Office (MTRO).
FINANCIAL RESULTS The accounting policies, statements of financial position, statements of profit or loss and other comprehensive income, statements of cash flow and statements of changes in equity and notes to the financial statements, on pages 160 to 268, reflect the financial results and position of the company and the group.
DIVIDENDS Owing to the continued uncertainty prevailing in the mining industry and the cash requirements at Booysendal for the ramp up, the board did not declare any dividend in respect of the year under review. (F2013: Rnil).
STATED CAPITAL The authorised share capital of the company remains as 545 000 000 shares. No shares were allotted and issued to participants of the Northam Share Option Scheme or to participants of the Northam Share Incentive Plan during the year whilst 15 000 000 shares were allotted and issued in terms of a claw back rights offer which closed on 29 November 2013, resulting in the issued share capital at 30 June 2014 increasing to 397 586 090 (2013: 382 586 090) shares. At the forthcoming annual general meeting (AGM) shareholders will be asked to place the authorised but unissued ordinary shares in the capital of the company, under the control of the directors.
REPURCHASE OF ISSUED SHARES At the annual general meeting on 6 November 2013 shareholders approved a special resolution granting a general authority for the repurchase of ordinary shares by the company (or any one of its wholly-owned subsidiaries),
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subject to the JSE listings requirements and the provisions of the Companies Act. No shares were repurchased in the current or prior year in terms of this general authority. This general authority is valid until the company’s next AGM or for 15 months from the date of the aforementioned resolution (being 5 November 2014) whichever period is the shorter. Approval to renew this general authority will be sought at the forthcoming AGM to be held on Wednesday, 5 November 2014. The text of the necessary special resolution, as well as the reasons therefor and the effects thereof, appears in the notice of annual general meeting on page 5, which forms part of the abridged annual report.
BORROWINGS AND BORROWING POWERS In terms of the MOI the directors may borrow for purposes of the company, such sums as they deem fit. In November 2011 the company entered into a five-year revolving credit facility agreement with Nedbank Limited for an amount of R1 billion. An additional R400.0 million revolving credit facility was arranged during the year, which is available until March 2015. At 1 July 2013 an amount of R250.0 million had been drawn under five-year facility with further amounts being drawn down during the year under review. These amounts were fully repaid during the year and at the reporting date the facility had been repaid in full. There have been no drawings from this facility between the reporting date and the date of this report. On 3 September 2012 the company announced that it had raised R1.25 billion through the issue of senior unsecured floating rate notes, under the company’s R2 billion domestic medium term note (DMTN) programme dated 3 August 2012. On 11 July 2013, the company announced that a further R120.0 million had been raised in the domestic capital market through the DMTN programme. These funds have been used for the development of the Booysendal mine, the deepening project at the Zondereinde mine as well as and other operational and working capital requirements of the group. In addition to the above a subsidiary, Norplats Properties Proprietary Limited has arranged loan facilities of R81.5 million to fund the sale of houses to employees in terms of the group’s affordable housing initiative. Details of the interest rates and terms of these loans are contained in notes 21 and 23 to the annual financial statements on pages 230 to 231.
FINANCIAL ASSISTANCE At the forthcoming AGM shareholders will be asked to approve a special resolution to authorise the granting of the necessary financial assistance as set out below. The text of the special resolution is contained in the notice of AGM and abridged annual report. Section 45 of the Companies Act requires that shareholders approve the granting of financial assistance by a company to, inter alia, any of its subsidiaries. At the date of this report Northam had granted the following financial assistance to its subsidiaries in accordance with the Companies Act:
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NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
Name of subsidiary Dialstat Trading 133 Proprietary Limited (note 1)
Approved loan facility at 30 June 2014
Balance at 30 June 2014
Additional amount to be advanced in coming year
R000
R000
R000
R000
R000
R000
New loan facility
Other facilities
Total financial assistance to be granted
260 000
1
nil
nil
nil
260 000
Micawber 278 Proprietary Limited (note 2)
4 970 000
4 556 577
219 358
4 970 000
22 815
4 992 815
Norplats Properties Proprietary Limited (note 3)
73 300
40 740
10 000
73 300
nil
73 300
Windfall 38 Properties Proprietary Limited (note 4)
15 800
15 167
nil
15 800
nil
15 800
The funds to be advanced to Dialstat will be used for any share repurchase programme. Such shares will be used exclusively for the settlement of shares to be transferred to employees who exercise options in terms of the rules of the Northam Share Option Scheme, or for the settlement of shares to be transferred to employees in terms of the rules of the Northam Share Incentive Plan.
1)
The loan to Micawber comprises an interest bearing portion of R3 704.8 million which is repayable out of surplus cash funds and an interest free portion of R851.8 million which has no fixed repayment date. The interest bearing portion carries interest at prime less 2.0%.
2)
The loan facility granted to Norplats comprises an interest bearing portion of R34.3 million which is repayable in 2026 and an interest free portion of R29.0 million which has no fixed repayment date. The interest bearing portion carries interest at prime less 2.0%.
3)
4)
The loan to Windfall which is repayable out of surplus cash funds bears interest at prime less 2.0%.
A letter of guarantee has been issued by Northam Platinum in favour of Mvelaphanda Resources Proprietary Limited.
STRATE (SHARE TRANSACTIONS TOTALLY ELECTRONIC) Shareholders who have not already dematerialised their shares (certificated shareholders) are once again strongly urged to do so as soon as possible (unless it is their explicit intention not to do so) in order to enable them to trade in such shares. It is most important for certificated shareholders to note that their shares may not be traded on the JSE unless the shares have been dematerialised.
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NORTHAM SHARE OPTION SCHEME (THE SCHEME) The Scheme was established on 4 January 1995 with the objective of attracting and retaining employees with appropriate levels of ability and expertise who make a significant contribution to the operations of the company. The Scheme was discontinued in 2011 owing to its dilutionary nature, although share options issued before its discontinuance will be allowed to run their course. Options were offered at the volume weighted average price at which Northam shares traded on the JSE on the trading day immediately preceding the offer date. In terms of the rules of the Scheme, option holders may exercise 50% of their options two years after the offer date and 100% of their options three years after the offer date. Options not exercised within seven years of the offer date shall lapse. In March 2013 the JSE approved a change to the rules of the Scheme in terms of which option holders may elect, at the time of exercising their option, to receive either the shares over which an option has been granted or a cash payment equivalent to the difference between the volume weighted average price at which Northam shares traded on the day preceding the exercise date and the exercise price. A reconciliation of the options held at 30 June 2014 is as follows:
Earliest and latest exercise date
Price per share
Total number of options
R 23 October 2008 and 21 October 2013
38.45
1 058 000
22 October 2009 and 21 October 2014
48.00
1 397 500
27 November 2010 and 26 November 2015
32.38
1 237 000
5 November 2011 and 4 November 2016
36.95
2 050 000
1 July 2012 and 30 June 2017
45.59
125 000
12 October 2012 and 11 October 2017
46.57
2 907 500
Number of options held at 30 June 2013
8 775 000
Number of options granted pursuant to the claw-back offer Number of options forfeited during the year
40.00
302 551 (534 535)
Number of options exercised during the year – refer Annexure 5 on page 260 Equity settled options
–
Cash settled options
(3 822 431)
Number of options held at 30 June 2014
4 720 585
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NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
At 30 June 2014 the outstanding options were exercisable as follows:
Earliest and latest exercise date
Price per share
Options Options vested vested at at 30 June Total 30 June 2014 2014 at claw number of at price back offer options per share price
R
R40.00 per share
22 October 2009 and 21 October 2014
48.00
1 210 674
1 165 000
27 November 2010 and 26 November 2015
32.38
166 272
160 000
6 272
5 November 2011 and 4 November 2016
36.95
537 788
517 500
20 288
1 July 2012 and 30 June 2017
45.59
129 901
125 000
4 901
12 October 2012 and 11 October 2017
46.57
2 675 950
2 575 000
100 950
4 720 585
4 542 500
178 085
Number of options held at 30 June 2014
45 674
Full details of the options exercised during the year are set out in Annexure 5 on page 260, and are summarised as follows: Cash settled options Number of options exercised
Exercise price R
R000
1 058 000
38.45
3 307
27 November 2008
1 114 500
32.38
11 205
5 November 2009
1 582 500
36.95
11 263
67 431
40.00
Grant date 23 October 2006
15 November 2013 Total
Total gain paid to participants
3 822 431
316 26 091
NORTHAM SHARE INCENTIVE PLAN (THE PLAN) The Plan was approved in 2011 when shareholders approved a proposal that the Scheme be discontinued and replaced by the Plan, as the Scheme no longer served the primary purpose of attracting and retaining employees. The Plan is a full share-type plan which incorporates a combination of a conditional share plan (CSP) and a forfeitable share plan (FSP). The key features that are common to both the CSP and the FSP are as follows: • All senior officials and executives, including executive directors, in job grade D1 and above are eligible; • Non-executive directors are not eligible to participate; • Employees will not be required to pay for shares granted to them; • In the event of a change of control of the company, all awards will vest; NORTHAM ANNUAL INTEGRATED REPORT 2014
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• In the event of a variation in share capital such as a capitalisation issue, subdivision of shares, consolidation of shares, liquidation etc., employees will continue to participate in the Plan. The committee may make such adjustment to awards or take such other action to place employees in no worse a position than they were prior to the happening of the relevant event, and to ensure that the fair value of awards immediately after the event is materially the same as the fair value thereof immediately before the event; • The issue of shares as consideration for an acquisition or a vendor consideration placing will not be regarded as a circumstance that requires any adjustment to awards; • Where necessary, the auditors of the company will confirm to the company and JSE that the adjustments are calculated on a non-prejudicial basis.; • Any adjustments made will be reported in the company’s annual financial statements in the year during which the adjustment is made; and • In order to avoid any future dilution, all shares will either be cash – settled or equity settled through purchases in the open markets. The key features of the CSP and FSP are as follows:
CONDITIONAL SHARE PLAN • Shares will be awarded or granted to employees once a year; • The number of conditional shares awarded, and the extent to which they will be subject to performance conditions, will primarily be based on the employee’s annual salary, grade, performance, retention requirements and market benchmarks or some combination thereof; • Both the retention shares and the performance shares will vest after 3 years; and • Performance conditions will be set by the SE&HR committee before an award is made, and will be based on appropriate company performance measures at the time.
FORFEITABLE SHARE PLAN • No forfeitable shares have been awarded since the inception of the plan in 2011; • Shares, which have no performance conditions attached, can only be awarded or granted in exceptional circumstances and have a minimum vesting period of three years, as approved by the SE&HR committee for purposes of attracting key new employees; • The number of forfeitable shares to be made to an employee will primarily be based on the employee’s annual salary, grade, performance and retention or attraction requirements; • The forfeitable shares will be delivered to the employees, free of charge, subsequent to the award date, with them enjoying all shareholder rights from inception; • Awards will, however, be subject to restrictions that will prevent the forfeitable shares from being disposed of, ceded, transferred or otherwise encumbered before vesting; and • Vesting of the forfeitable shares will only be subject to the particular employee remaining in the employ of a group company for a pre-determined vesting period. 149
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
In March 2013 the JSE approved a change to the rules of the Plan in terms of which, upon the vesting of any awards, participants may elect to receive either the shares that have vested or an amount equal to the volume weighted average price on the day preceding the settlement date. At the forthcoming annual general meeting shareholders will be asked to consider and approve the following changes to the rules of the Plan: 1. In terms of the rules of the Plan the maximum number of shares that may be awarded under the Plan is currently limited to 38 000 000 shares, equivalent to approximately 9.6% of the current issued share capital. It is proposed to reduce this limit to 19 879 000, equal to approximately 5% of the current issued share capital. 2. In terms of the rules of the Plan the maximum number that may be awarded to any single employee in any cycle is currently limited to 4 000 000, equivalent to 1% of the current issued share capital. It is proposed to reduce this limit to 2 000 000 shares equal to approximately 0.5% of the current issued share capital. The committee, which is charged with overseeing the group’s remuneration policy, reviews the performance criteria annually and revises them as economic and operational circumstances dictate. No shares were allocated under the FSP during the year under review, whilst the details of the shares allocated under the CSP are set out below. Grant date Balance at 30 June 2013 15 November 2013
Details Shares awarded Shares forfeited Shares cash-settled
Balance at 30 June 2014
Total
Retention shares
Performance shares
4 198 000 2 164 000 (233 729) (1 245 271) 4 883 000
1 512 000 789 000 (81 400) (753 600) 1 466 000
2 686 000 1 375 000 (152 329) (491 671) 3 417 000
At 30 June 2014 the following awards were outstanding:
Grant date
Details
22 November 2011 22 November 2011 6 November 2012 6 November 2012 15 November 2013 15 November 2013
Retention shares Performance shares Retention shares Performance shares Retention shares Performance shares
Balance at 30 June 2014
Total number of shares
Shares to be settled in 2015
Shares to be settled thereafter
58 000 968 000 711 000 1 237 000 697 000 1 212 000
58 000 968 000 711 000 – – –
– – – 1 237 000 697 000 1 212 000
4 883 000
1 737 000
3 146 000
Full details of the shares granted during the year are set out in Annexure 5 on page 260. Copies of the rules of the Scheme and the Plan are available for inspection at the company’s registered office during normal business hours.
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DIRECTORATE The following changes have occurred in the composition of the directorate since the date of the last annual report: • Mrs NJ Dlamini (Dr) resigned as a director on 30 September 2013. • Mr PA Dunne was appointed a director, and chief executive, with effect from 1 March 2014 in the place of Mr GT Lewis who resigned on the same date. The composition of the board of directors, as well as of board appointed committees, at the date of this report, is reflected on pages 22 to 23. In terms of article 34.5.4 of the company’s MOI any person appointed to the board during the year shall hold office only until the next following AGM of the company and shall then retire and be eligible for re-election. Mr PA Dunne was appointed a director and chief executive with effect from 1 March 2014 and, in accordance with the provisions of article 34.5.4, retires from office and, being eligible and available, has offered himself for re-election and appointment. Accordingly at the forthcoming AGM members will be requested to consider a resolution providing for the election and re-appointment of Mr PA Dunne as an executive director of the company. Further, in terms of article 34.5.1 of the company’s MOI one third of the non-executive directors, being those longest in office, must retire from office at each AGM. A retiring director who is eligible and available may offer himself or herself for re-election and appointment. Mr JAK Cochrane, Mr R Havenstein and Mr PL Zim retire by rotation and, being eligible and available, offer themselves for re-election. Accordingly at the forthcoming AGM members will be requested to consider resolutions providing for the election and re-appointment of the aforementioned non-executive directors of the company. Brief summaries of their curricula vitae appear on pages 22 and 23. In addition, in terms of Section 94 of the Companies Act, shareholders are required to appoint the company’s audit and risk committee. The members of the committee are Mr AR Martin (Chairman), Mr ME Beckett, Mr R Havenstein and Ms TE Kgosi, all of whom are independent non-executive directors. Accordingly at the forthcoming AGM members will be requested to consider resolutions providing for the appointment of the aforementioned members of the audit and risk committee.
DIRECTORS’ FEES In terms of the MOI the fees for services as directors are determined by the company in general meeting. The current level of fees paid to non-executive directors for their services is as follows:
Board fees • Board chairman – R116 100 per annum. • Lead independent director – R86 100 per annum. • Board members – R55 200 per annum. • Board meeting attendance fees – R35 700 per meeting.
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ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
Audit and risk committee fees • Committee chairman – R51 900 per annum. • Committee members – R26 400 per annum. • Committee meeting attendance fees – R17 300 per meeting.
Social, Ethics and Human Resources committee fees • Committee chairman – R44 400 per annum. • Committee members – R21 900 per annum. • Committee meeting attendance fees – R13 800 per meeting.
Other board appointed committees fees • Committee chairmen – R41 400 per annum. • Committee members – R20 700 per annum. • Committee meeting attendance fees – R13 800 per meeting. • Ad hoc fees – R2 760 per hour. The above fees were set in 2013, and in order to recognise the ever increasing regulatory environment as well as the effects of inflation, it is proposed that they be increased by an average of 7.3% to bring them more into line with market norms. The proposed fee for ad hoc work is calculated on the basis of 1/5 (one fifth) of the board appointed committee meeting attendance fee, on the basis that the average meeting preparation and attendance time being five hours. Subject to approval by members, the revised level of fees will be as follows:
Board fees • Board chairman – R126 600 per annum. • Lead independent director – R93 900 per annum. • Board members – R59 100 per annum. • Board meeting attendance fees – R38 200 per meeting.
Audit and risk committee fees • Committee chairman – R56 700 per annum. • Committee members – R28 400 per annum. • Committee meeting attendance fees – R18 500 per meeting.
Social, Ethics and Human Resources committee fees • Committee chairman – R48 300 per annum. • Committee members – R22 200 per annum. • Committee meeting attendance fees – R14 800 per meeting.
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Other board appointed committees fees • Committee chairman – R45 300 per annum. • Committee members – R22 200 per annum. • Committee meeting attendance fees – R14 800 per meeting. • Ad hoc fees – R2 960 per hour.
DIRECTORS’ REMUNERATION The directors’ remuneration for the year ended 30 June 2014 was as follows:
Benefits
Gain on share based payments
R000
R000
R000
R000
1 900
500
251
–
2 651
2 392
1 629
509
–
4 530
–
3 894
27 040
534
20 003
51 471
ME Beckett
611
–
–
–
–
611
CK Chabedi
447
–
–
–
–
447
JAK Cochrane
340
–
–
–
–
340
89
–
–
–
–
89
R Havenstein
718
–
–
–
–
718
TE Kgosi
643
–
–
–
–
643
AR Martin
523
–
–
–
–
523
PL Zim
330
–
–
–
–
330
3 701
8 186
29 169
1 294
20 003
62 353
Fees 2014
Remuneration Performance package bonus
R000
R000
PA Dunne (Note 1)
–
AZ Khumalo
–
GT Lewis (Note 2)
Total
Executive
Non-executive
NJ Dlamini (Note 3)
1. Mr PA Dunne was appointed a director and CEO on 1 March 2014 in place of Mr GT Lewis who resigned as a director and CEO on the same day. 2. The performance bonus paid to GT Lewis is in respect of the achievement of certain specific mining milestones. 3. Dr NJ Dlamini resigned on 30 September 2013.
An analysis of the board and board committee fees is set out on page 155.
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ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
Benefits
Gain on share based payments
R000
R000
R000
R000
2 392
955
391
–
3 738
5 841
2 291
809
–
8 941
475
–
–
–
–
475
389
–
–
–
–
389
JAK Cochrane
282
–
–
–
–
282
NJ Dlamini (Note 1)
512
–
–
–
–
512
R Havenstein
892
–
–
–
–
892
TE Kgosi
510
–
–
–
–
510
AR Martin
517
–
–
–
–
517
MSMM Xayiya (Note 2)
112
–
–
–
–
112
PL Zim
280
–
–
–
–
280
3 969
8 233
3 246
1 200
–
16 648
Fees 2013
Remuneration Performance package bonus
R000
R000
AZ Khumalo
–
GT Lewis
–
ME Beckett CK Chabedi
Total
Executive
Non-executive
1. Dr NJ Dlamini resigned on 30 September 2013 2. Mr MSMM Xayiya resigned as a director 7 December 2012.
An analysis of the board and board committee fees is set out on page 155.
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An analysis of the non-executive paid in respect of the board and board committee services is as follows:
Audit and Risk Board Committee 2014
Social, Ethics and Human Resources Committee
Ad hoc fees
Total
R000
R000
R000
R000
Health, Safety and Environmental Investment Committee Committee
R000
R000
R000
ME Beckett
305
113
55
–
105
33
611
CK Chabedi
305
–
76
48
–
18
447
JAK Cochrane
305
–
–
35
–
–
340
47
–
18
5
19
–
89
R Havenstein
NJ Dlamini
305
113
96
69
105
30
718
TE Kgosi
305
113
–
–
127
98
643
AR Martin
336
139
–
48
–
–
523
PL Zim
330
–
–
–
–
–
330
2 238
478
245
205
356
179
3 701
Health, Safety and Environmental Investment Committee Committee
Social, Ethics and Human Resources Committee
Ad hoc fees
Total
R000
R000
R000
R000
Audit and Risk Board Committee 2013
R000
R000
ME Beckett
257
108
–
–
100
10
475
CK Chabedi
257
–
86
46
–
–
389
JAK Cochrane
223
–
–
59
–
–
282
NJ Dlamini
257
–
73
86
86
10
512
R Havenstein
257
108
92
118
100
217
892
TE Kgosi
257
108
–
–
121
24
510
AR Martin
286
132
–
99
–
–
517 112
MSMM Xayiya PL Zim
R000
90
–
–
22
–
–
280
–
–
–
–
–
280
2 164
456
251
430
407
261
3 969
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NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
SERVICE CONTRACTS Mr PA Dunne, the chief executive, has a service contract with the company which is subject to a notice period of one year. Mr AZ Khumalo, the chief financial officer, has a service contract with the company which is subject to a notice period of three months.
DIRECTORS’ INTERESTS According to information available to the company after reasonable enquiry, the interests of the directors and their families in the shares of the company at 30 June 2014 were as follows:
ME Beckett
ME Beckett NJ Dlamini
Direct beneficial holding 30 000 30 000
30 June 2014 Indirect beneficial holding – –
Total 30 000 30 000
Direct beneficial holding 30 000 – 30 000
30 June 2013 Indirect beneficial holding – 326 326
Total 30 000 326 30 326
ANALYSIS OF SHAREHOLDERS AT 30 JUNE 2014 Shareholding range 1 – 5 000 5 001 – 10 000 10 001 – 50 000 50 001 – 100 000 100 001 – 1 000 000 1 000 001 and over Total
Number of holders 6 761 306 342 100 190 55 7 754
Total shareholding 6 442 617 2 203 455 7 810 975 7 236 208 55 419 984 318 472 851 397 586 090
Percentage holding 1.6 0.6 2.0 1.8 13.9 80.1 100.0
Category of shareholder Individuals Companies Managed funds and other bodies Total
Number of holders 7 232 1 521 7 754
Total shareholding 15 688 788 51 732 782 330 164 520 397 586 090
Percentage holding 4.0 13.0 83.0 100.0
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GEOGRAPHIC ANALYSIS OF SHAREHOLDERS
Australasia
Total shareholding
Percentage holding
1 072 317
0.3
Europe and United Kingdom
28 194 541
7.1
North America
61 830 394
15.5
Far East
9 073 824
2.3
310 485
0.1
South Africa
297 104 529
74.7
Total
397 586 090
100.0
Number of shares
Percentage holding
51 732 782
13.0
Rest of Africa
MAJOR SHAREHOLDERS AT 30 JUNE 2014
Owner ENRC NV Fund manager Coronation Asset Management
84 767 238
21.3
Public Investment Commission
73 184 166
18.4
Foord Asset Management
19 052 970
4.8
Sanlam Investment Managers
15 312 305
3.9
Old Mutual Asset Managers
14 070 240
3.5
Number of shareholders
Percentage holding
7 753
100.0
– Directors
1
***
– Other (any who fall outside the scope of the above)
–
–
7 754
100.0
SHAREHOLDER SPREAD AT 30 JUNE 2014 The company’s shareholder spread is set out below.
Public Non-public
Total *** Shareholding below 0.1%.
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DIRECTOR’S REPORT
DIRECTORS’ REPORT CONTINUED
BEE STATUS The board is mindful of the fact that Northam’s empowerment status has been a matter of concern for a considerable period. To this end discussions with a view to redress the situation have continued, balancing the needs of the group’s current shareholders with the requirements of the Department of Mineral Resources. These discussions are nearing finality, and the board is hopeful that an announcement can be made within the next two months.
NORTHAM PLATINUM RESTORATION TRUST FUND (THE FUND) The Northam Platinum Restoration Trust Fund was established in 1996 to assist the group in making financial provision for the environmental rehabilitation of the group’s mines, in terms of the Mineral and Petroleum Resources Development Act, No. 28 of 2002, upon cessation of their mining operations. Details of the contributions made and provisions raised are disclosed in notes 10 and 20 of the notes to the financial statements. In addition, the group has procured the issue of guarantees for R114.9 million (2013: R96.9 million) in respect of certain unfunded environmental restoration costs, as more fully disclosed in note 11 of the notes to the financial statements.
BUTTONSHOPE CONSERVANCY TRUST The Buttonshope Conservancy Trust was established in 2011 as part of an initiative to retain a portion of the freehold land adjacent to the Booysendal mine as an environmental conservancy. Details of the contributions made are disclosed in note 12 of the notes to the financial statements.
TORO EMPLOYEE EMPOWERMENT TRUST The group has entered into an agreement with the representative unions at the Zondereinde mine in terms of which the group contributes 4% of Zondereinde mine’s after-tax profits to a registered trust fund (The Toro Employee Empowerment Fund), providing Zondereinde mine’s unskilled and semi-skilled employees of Zondereinde with an opportunity to participate in the profits of the mine. Eligible employees will receive payment at the end of each five year cycle, with the first payments of R55.0 million having been made in F2013. Consideration is being given to extending the scheme to the Booysendal mine employees.
SUBSIDIARIES Northam increased its holding in Northam Chrome Producers Proprietary Limited (NCP) by 10% at a cost of R10.0 million on 1 July 2013, resulting in a holding of 80%. The primary business of NCP is producing a metallurgical grade chrome concentrate from Northam’s UG2 tailings. The product is sold primarily via traders into the export market at international market related prices. The plant operated satisfactorily within design parameters during the year under review. Subsequent to the end of the reporting period Northam acquired the balance of the shares in NCP for R50.0 million, increasing its total shareholding to 100%. Details of Northam’s subsidiaries at 30 June 2014 are set out in Annexure 3 on page 256.
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SPECIAL RESOLUTIONS Special resolutions relating to directors’ remuneration, financial assistance, amendments to the company’s MOI, and authority to repurchase issued shares were passed during the year under review.
GOING CONCERN AND ASSESSMENT OF RECOVERABLE AMOUNTS Mining operations have a limited life by nature and their operations are dependent on, amongst other things, geological, technical as well as economic factors such as demand volumes, commodity prices and exchange rates. The outlook for the global economy remains uncertain and the labour relations, especially in the mining and related sectors in South Africa are fragile. Although there are signs that the United States is emerging out of recession and the Eurozone economy has bottomed out, the Chinese economic performance is still uncertain. The volatile rate of exchange of the South African rand against the US dollar has weakened significantly in the last eighteen months. In addition average PGM prices in US dollar terms seem to have bottomed out. Taking account of the outlook for these factors as contained in the chairman and chief executive’s message, as well as the group’s present financial resources and borrowings, the directors believe that the group is a going concern. Details of the key assumptions made are set out in note 1 of the notes to the financial statements. The group annual financial statements have accordingly been prepared on this basis. In addition management has assessed whether there are any indicators of impairment in the market and believes that the increase in the average rand price realised, as well as the anticipated firmer outlook of the platinum price, indicates that no impairment needs to be recognised. None of Northam’s investments in subsidiaries manifested any indicators of impairment requiring management to perform impairment testing.
COMPANY SECRETARY Ms P B Beale continues in office as company secretary. Relevant details appear on the inside back cover of this report.
LISTING Northam is listed on the JSE, trading under the equity issuer code of NHM and the debt issuer code NHMI for the DMTN programme. The ISIN is ZAE000030912.
ADR LISTING The company has a Level 1 American Depositary Receipt (ADR) listing. The shares are traded under the ticker code of NMPNY on the over-the-counter (OTC) market in the United States of America.
EVENTS AFTER THE REPORTING DATE Subsequent to the end of the reporting period Northam acquired the balance of the shares in NCP for R50.0 million, increasing its total shareholding to 100%.
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ANNUAL FINANCIAL STATEMENTS
DIRECTOR’S REPORT
ACCOUNTING POLICIES
1. BASIS OF PREPARATION The consolidated financial statements have been prepared on the historical cost basis, except for financial instruments that have been measured at fair value, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements incorporate the following accounting policies which have been applied on a basis consistent with the previous year, with the exception of the policies adopted during the year as more fully set out below in accounting policy note 1.1. The preparation of financial statements in conformity with IFRS requires that management and the board exercises their judgement in the process of applying the company’s group accounting policies. It also requires the use of certain critical economic and other estimates. The areas requiring a high degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements are disclosed in note 1 to the financial statements.
1.1 New accounting policies adopted The group has adopted the following new and amended International Financial Reporting Standards and IFRIC interpretations during the year. • IFRS 1 – First time adoption of International Financial Reporting Standards – Government Loans (Amendment) • IFRS 1 – First time adoption of International Financial Reporting Standards – Application of IFRS 1 for previous IFRS reporters (Annual Improvements Project 2012) • IFRS 1 – First time adoption of International Financial Reporting Standards – Borrowing costs capitalised under previous GAAP (Annual Improvements Project 2012) • IFRS 10 – Consolidated Financial Statements • IFRS 10 – Consolidated Financial Statements – Transition guidance amendments (Amendment) • IFRS 11 – Joint Arrangements • IFRS 12 – Disclosure of Interests in Other Entities • IFRS 11 and 12 – Joint Arrangements and Disclosure of Interests in Other Entities – Transition guidance amendments (Amendment) • IFRS 13 – Fair Value Measurement • IAS 16 – Property, Plant and Equipment – Classification of servicing equipment (Annual Improvements Project 2012) • IAS 19 – Employee Benefits (Revised) • IAS 27 – Consolidated and Separate Financial Statements – Reissued as IAS 27 Separate Financial Statements (as amended in 2011) • IAS 28 – Investments in Associates and Joint Ventures (Amendment) • IAS 32 – Financial Instruments: Presentation – Tax effect of distributions (Annual Improvements Project 2012)
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• IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendment) • IAS 34 – Interim Financial Reporting – Interim Financial Reporting and segment information for total assets and liabilities (Annual Improvements Project 2012) • IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine The effect of the adoption of these standards, interpretations and amendments in the current financial year is set out below:
IFRS 1 – First time adoption of International Financial Reporting Standards – Government Loans (Amendment) The amendment, dealing with loans received from governments at a below market rate of interest, give first-time adopters of IFRSs relief from full retrospective application of IFRSs when accounting for these loans on transition. It provides the same relief to first-time adopters as is granted to existing preparers of IFRS financial statements when applying IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. The adoption of this amendment had no impact on the financial statements of the group as the group adopted IFRS in 2006 already.
IFRS 1 – First time adoption of International Financial Reporting Standards – Application of IFRS 1 for previous IFRS reporters (Annual Improvements Project 2012) The amendment clarifies that when an entity ceased IFRS reporting, it may choose to either re-apply IFRS 1 or apply changes retrospectively in accordance with IAS 8. The adoption of this amendment had no impact on the financial statements of the group as the group adopted IFRS in 2006 already.
IFRS 1 – First time adoption of International Financial Reporting Standards – Borrowing costs capitalised under previous GAAP (Annual Improvements Project 2012) The amendment clarifies that when an entity capitalised borrowing costs as per previous GAAP, it may carry forward the amount previously capitalised on the date of transition. The adoption of this amendment had no impact on the financial statements of the group as the group adopted IFRS in 2006 already
IFRS 10 – Consolidated Financial Statements IFRS 10 includes a new definition of control which is used to determine which entities are consolidated. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This applies to all entities, including special purpose entities (now known as ‘structured entities’). The changes introduced by IFRS 10 require management to exercise significant judgment to determine which entities are controlled and therefore consolidated. The adoption of this standard had no impact on the financial statements of the group, as there are no new entities to be consolidated and all subsidiaries were assessed to still be under the group’s control.
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ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
IFRS 10 – Consolidated Financial Statements – Transition guidance amendments (Amendment) The amendments clarify that an entity is not required to make adjustments to the previous accounting for its involvement with entities if the consolidation conclusion reached at the date of initial application is the same when applying IAS 27/SIC-12 and when adopting IFRS 10. As a result, relief from retrospective application of IFRS 10 also applies to an investor’s interests in investees that were disposed of during a comparative period, such that consolidation would not occur in accordance with either IAS 27/SIC-12 or IFRS 10 at the date of initial application. The adoption of the amendments has reduced the burden of adopting IFRS 10 during the 2014 financial year.
IFRS 11 – Joint Arrangements This standard deals with the accounting for joint arrangements and focuses on the rights and obligations of the arrangement rather than its legal form. Joint arrangements will be classified as joint operations or joint ventures. Proportionate consolidation will no longer be permitted for joint ventures. The adoption of this new standard had no impact on the group as the interest held in a joint venture by the group is already equity accounted.
IFRS 12 – Disclosure of Interests in Other Entities IFRS 12 includes all the disclosures that are required relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. An entity is now required to disclose the judgements made to determine whether it controls another entity. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements for such investments but will have no impact on the group’s financial position or performance. IFRS 12 disclosures are provided in Note 1, 5 and 6.
IFRS 11 and 12 – Joint Arrangements and Disclosure of Interests in Other Entities – Transition guidance amendments (Amendment) The amendments provide transition relief, as follows: To limit the requirement to provide adjusted comparative information to the immediately preceding period only; and for the first year that IFRS 12 is applied, the requirement to present comparative information for the disclosures related to unconsolidated structured entities is removed. The adoption of these amendments had no additional impact on the group as the group does not have any unconsolidated structured entities.
IFRS 13 – Fair Value Measurement IFRS 13 provides guidance on how to measure fair value of financial and non-financial assets and liabilities when fair value measurement is required or permitted by IFRS. The proposed disclosures increase transparency about fair value measurement, e.g. fair value hierarchy, inputs in fair value measurement, etc. The application of IFRS 13 has not materially impacted the fair value measurements of the group. Additional disclosures, where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. During our assessment of the impact of IFRS 13, the investments classified as held for trading (financial assets at fair value through profit or loss) were classified as financial assets at amortised cost.
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This reclassification had no impact on the financial statements and only impacted the disclosure in terms of IFRS 7 and IFRS 13. The total carrying amounts of these investments in the group were R108.2 million (2013: R93.5 million) and in the company R79 million (2013: R69.9 million). More details on these investments are disclosed in notes 10, 11 and 12. These investments earn interest based on market interest rates of between 5% and 8%.
IAS 16 – Property, Plant and Equipment – Classification of servicing equipment (Annual Improvements Project 2012) The amendment clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory. The adoption of this amendment had no impact on the group, as this principle is already applied.
IAS 19 – Employee Benefits (Revised) Numerous changes to IAS 19 have been made. The two most significant of these relates firstly to short and long-term benefits that will now be distinguished based on the expected timing of settlement, rather than employee entitlement. The second item relates to the corridor mechanism for pension plans being removed. This means all changes in the value of defined benefit plans will be recognised as they occur. The adoption of this revised standard with regards to defined benefit plans had no material effect on the group’s financial statements, as there are no such plans. The removal of the corridor method had no impact on the Toro Long Term Employee plan, as the corridor method cannot be applied to such plans at present. The measurement implications for the recognition of net interest (as opposed to interest cost and expected return on plan assets) had no impact on the financial statements of the group.
IAS 27 – Consolidated and Separate Financial Statements – Reissued as IAS 27 Separate Financial Statements (as amended in 2011) This amendment is as a consequence of amendments resulting from the issue of IFRS 10, 11 and 12. The adoption of this standard had no impact on the financial statements of the group as the basis of preparation for the separate financial statements of the company remains the same, i.e. investments in group entities are measured at cost.
IAS 28 – Investments in Associates and Joint Ventures (Amendment) The revised standard caters for joint ventures (now accounted for by only applying the equity method) in addition to prescribing the accounting for investments in associates. The adoption of this amended standard had no impact on the group as the current application of the equity method did not change.
IAS 32 – Financial Instruments: Presentation – Tax effect of distributions (Annual Improvements Project 2012) The amendment clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12. The adoption of this amendment had no impact on the group as these principles were already applied.
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ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendment) The amendments introduce new disclosure requirements that aim to improve the comparability of financial statements. New disclosures are required for all financial instruments that are set off in accordance with the amendments made in IAS 32 and for financial assets that are subject to an enforceable master netting arrangement or similar arrangement regardless whether they are set off. The adoption of this amendment had no impact on the group as no significant offsetting is taking place with regards to the group’s financial instruments.
IAS 34 – Interim Financial Reporting – Interim Financial Reporting and segment information for total assets and liabilities (Annual Improvements Project 2012) The amendment clarifies the requirements of IAS 34 to disclose segment information for total assets and liabilities only if such information is regularly provided to the chief operating decision maker. The adoption of this amendment had no impact on the group as these principles are already applied in the preparation of interim reports or press releases.
IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine The Interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The adoption of the interpretation had no impact on the financial statements of the group as the group is not involved in “open cast” mining activities.
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1.2 Standards and Interpretations issued and not yet effective: At the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective. The effective date refers to periods beginning on or after, unless otherwise indicated. Standard or Interpretation
Effective date
Description
Impact
IFRS 1
First-time Adoption of International Financial Reporting Standards – Meaning of ‘effective IFRSs’ (Annual Improvements 2011-2013 Cycle)
The amendment clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This new amendment will have no impact on the group as the group has already adopted IFRS in 2006.
1 July 2014
IFRS 2
Share-based Payment – Definitions Performance condition and service of vesting conditions (Annual condition are defined in order to clarify Improvements 2010-2012 Cycle) various issues, including the following: • A performance condition must contain a service condition. • A performance target must be met while the counterparty is rendering service. • A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group. • A performance condition may be a market or non-market condition. • If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied.
1 July 2014
The adoption of this amendment has not yet been assessed.
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ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
Standard or Interpretation
Effective date
Description
Impact
IFRS 3
Business Combinations – Accounting for contingent consideration in a business combination (Annual Improvements 2010-2012 Cycle)
The amendment clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IFRS 9 (or IAS 39, as applicable). The adoption of this amendment will have no impact on the group as the principle is already applied.
1 July 2014
IFRS 3
Business Combinations – Scope exceptions for joint ventures (Annual Improvements 20112013 Cycle)
The amendment clarifies that joint arrangements, not just joint ventures, are outside the scope of IFRS 3. The scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The adoption of this amendment has not yet been assessed.
1 July 2014
IFRS 8
Operating Segments – Aggregation of operating segments (Annual Improvements 2010-2012 Cycle)
The amendment clarifies that an entity must disclose the judgements made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’. The impact of the adoption of this amendment has not yet been assessed.
1 July 2014
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166
Standard or Interpretation
Effective date
Description
Impact
IFRS 8
Operating Segments – Reconciliation of the total of the reportable segments’ assets to the entity’s assets (Annual Improvements 2010-2012 Cycle)
The amendment clarifies that the reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities. The adoption of this amendment will have no impact on the group as the principle is already applied.
1 July 2014
IFRS 9
Financial InstrumentsClassification and Measurement of Financial Assets and Liabilities
Financial Assets: This phase applies to financial assets and simplifies the classification of financial assets whilst retaining the measurement principles, being at fair value or amortised cost. Financial assets are classified on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. The IAS 39 exemption which allows equity instruments to be measured at cost will be limited further and reclassifications between categories will only be allowed in exceptional circumstances. IFRS 9 could impact the classification and measurement of the group’s financial assets – the impact has not yet been assessed as the group is still awaiting the finalisation of the other chapters in the accounting standard, e.g. amortised cost and impairment.
1 January 2018
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ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
Standard or Interpretation IFRS 9
Description
Impact
Financial InstrumentsClassification and Measurement of Financial Assets and Liabilities
Financial Liabilities: The Standard retains the existing IAS 39 classification and measurement requirements for financial liabilities not designated at fair value through profit or loss using the Fair Value Option as well as the criteria within IAS 39 for using the fair value option for financial liabilities. The changes only affect the measurement of fair value option liabilities. All other requirements in IAS 39 in respect of liabilities are carried forward into IFRS 9. For fair value option liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in other comprehensive income (OCI). The remainder of the change in fair value is presented in profit or loss. The Standard prohibits any recycling through profit or loss of amounts recognised in OCI upon derecognition of the liability, but these amounts may be transferred to retained earnings upon derecognition. Liabilities arising from certain derivatives on unquoted equity instruments will no longer be able to be measured at cost and will be required to be measured at fair value.
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Effective date 1 January 2018
Standard or Interpretation IFRS 9
Effective date
Description
Impact
Financial InstrumentsClassification and Measurement of Financial Assets and Liabilities
Hedge accounting: Hedge 1 January effectiveness testing must be done 2018 prospectively and can be qualitative, depending on the complexity of the hedge. A risk component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measureable. The time value of an option, the forward element of a forward contract and any foreign currency basis spread can be excluded from the hedge instrument designation requirement and accounted for as costs of hedging. More designations of groups of items as the hedged item are possible, including layer designations and some net positions. The impacts of this Standard have not yet been assessed.
IFRS 10, IFRS 12, IAS27
Consolidated Financial Statements – Investment entities final amendment – exception to consolidation (amendment)
The amendment provides an exception to the consolidation requirement for entities that meet the definition of an investment entity. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement. The adoption of this amendment will have no impact on the Group as the holding company does not comply with the definition of an investment entity.
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Standard or Interpretation IFRS 11
Description
Impact
Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
The amendment amends IFRS 11 such that the acquirer of an interest in a joint operation, in which the activity constitutes a business, as defined in IFRS 3, is required to apply all of the principles on business combinations accounting in IFRS 3 and other IFRSs with the exception of those principles that conflict with the guidance in IFRS 11. Accordingly, a joint operator that is an acquirer of such an interest has to: • measure most identifiable assets and liabilities at fair value; • expense acquisition-related costs (other than debt or equity issuance costs); • recognise deferred taxes; • recognising any goodwill or bargain purchase gain; • perform impairment tests for the cash generating units to which goodwill has been allocated; • disclose information required relevant for business combinations. The amendments apply to the acquisition of an interest in an existing joint operation and also to the acquisition of an interest in a joint operation on its formation, unless the formation of the joint operation coincides with the formation of the business. The impact of the adoption of these amendments has not yet been assessed.
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Effective date 1 January 2016
Standard or Interpretation
Effective date
Description
Impact
IFRS 13
Fair Value Measurement – Shortterm receivables and payables (Annual Improvements 2010 – 2012 Cycle)
The amendment clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. The adoption of this amendment will have no impact on the group as the principle is already applied.
1 July 2014
IFRS 13
Fair Value Measurement – Scope of paragraph 52 (portfolio exception) (Annual Improvements 2011-2013 Cycle)
The amendment clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as applicable). The adoption of this amendment has not yet been assessed.
1 July 2014
IFRS 14
Regulatory Deferral Accounts
IFRS 14 allows an entity, whose activities are subject to rate regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first time adoption of IFRS. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate regulation and the effects of that rate regulation on its financial statements. This new standard will have no impact on the group as the group’s activities are not subject to rate regulation and has already adopted IFRS in 2006.
1 January 2016
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Standard or Interpretation
Description
Impact
IFRS 15
Revenue from Customer Contracts
The core principal of IFRS15 is that revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The principles in IFRS 15 will be applied using a five step model which includes the identification of performance obligations within a single contract. Entities will need to exercise judgement when considering the terms of the contracts and all relevant facts and circumstances.
Effective date 1 January 2017
The impact of this new standard has not yet been assessed. IAS 16
Property, Plant and Equipment – Revaluation method – proportionate restatement of accumulated depreciation/ amortisation (Annual Improvements 2010-2012 Cycle)
NORTHAM ANNUAL INTEGRATED REPORT 2014
The amendment to IAS 16 and IAS 38 clarifies that the asset may be revalued by reference to observable data on either the gross or the net carrying amount. The amendment also clarifies that accumulated depreciation/amortisation is the difference between the gross and carrying amounts of the asset. The adoption of this amendment will have no impact on the group as the principle is already applied.
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1 July 2014
Standard or Interpretation
Effective date
Description
Impact
IAS 16, IAS 38
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
These amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, the ratio of revenue generated to total revenue expected to be generated cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The adoption of these amendments will not have an impact on the group as the straight-line method of depreciation is used to depreciate property, plant and equipment.
1 January 2016
IAS 16, IAS 41
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
The amendment changed the accounting requirements for biological assets that meet the definition of bearer plants (e.g., fruit trees). Bearer plants will now be within the scope of IAS 16 Property, Plant and Equipment and will be subject to all of the requirements therein. This includes the ability to choose between the cost model and revaluation model for subsequent measurement. Agricultural produce growing on bearer plants (e.g., fruit growing on a tree) will remain within the scope of IAS 41 Agriculture.
1 January 2016
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Standard or Interpretation
Effective date
Description
Impact
IAS 16, IAS 41
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
Government grants relating to bearer plants will now be accounted for in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, instead of in accordance with IAS 41.The adoption of these amendments will have no impact on the group as the group is not involved in the agriculture of bearer plants.
1 January 2016
IAS 19
Defined Benefit Plans: Employee Contributions – Amendments to IAS 19
IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. IAS 19 requires such contributions that are linked to service to be attributed to periods of service as a negative benefit. The amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. The adoption of this amendment will have no impact on the group as it is not subject to a defined benefit plan.
1 July 2014
IAS 24
Related Party Disclosures – Key management personnel (Annual Improvements 2010-2012 Cycle)
The amendment clarifies that a management entity – an entity that provides key management personnel services – is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The impact of the adoption of this amendment has not yet been assessed.
1 July 2014
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Standard or Interpretation
Effective date
Description
Impact
IAS 32
Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (amendment)
The amendments clarify the 1 January accounting requirements for offsetting 2014 financial instruments. New guidance clarifies that the right of set-off must not be contingent on a future event and must be legally enforceable in the normal course of business, or in the event of a default, or in the event of insolvency or bankruptcy of the entity and all of the counterparties. The adoption of this amendment is unlikely to have an impact on the group, as the financial instruments that were previously offset are likely to comply with the new criteria also.
IAS 36
Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets (amendment)
These amendments clarify the disclosure requirements about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments clarify that additional information should also be disclosed on discount rates if fair value less costs of disposal is based on present value techniques. It is unlikely that this amendment will have an impact on the group, as impairment calculations are normally done on a value-in-use basis.
1 January 2014
IAS 38
Intangible Assets – Revaluation method – proportionate restatement of accumulated depreciation/amortisation (Annual Improvements 2010-2012 Cycle)
The amendment to IAS 16 and IAS 38 clarifies that the asset may be revalued by reference to observable data on either the gross or the net carrying amount. The amendment also clarifies that accumulated depreciation/amortisation is the difference between the gross and carrying amounts of the asset. The adoption of this amendment will have no impact on the group as the principle is already applied.
1 July 2014
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Standard or Interpretation
Description
Impact
IAS 39
Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation of Hedge Accounting (amendment)
IAS 40
Investment Property – Interrelationship between IFRS 3 and IAS 40 (ancillary services) (Annual Improvements 20112013 Cycle)
IFRIC 21
Levies
The amendment provides relief from discontinuing hedge accounting when novation of a derivative (designated as a hedging instrument) to a central counterparty following the introduction of a new law or regulation meets certain criteria. The adoption of this amendment will have no impact on the group as hedge accounting is not applied. The description of ancillary services in IAS 40 differentiates between investment property and owneroccupied property (i.e., property, plant and equipment). The amendment clarifies that IFRS 3, not the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or business combination. The adoption of this amendment has not yet been assessed. The interpretation clarifies that a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ and those where the timing and amount of the levy is certain. The interpretation clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognised before the specified minimum threshold is reached. The impact of this interpretation has not yet been assessed.
Effective date 1 January 2014
1 July 2014
1 January 2014
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2. CONSOLIDATION The consolidated financial statements include the results, financial position and cash flows of Northam, its subsidiaries, joint ventures and associates. A subsidiary is an entity that is controlled due to the company being exposed or having rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The results of any subsidiary acquired or disposed of during the year are included from the date control was obtained up to the date control ceased to exist. Where an acquisition of a subsidiary is made during the financial year, any excess or deficit of the purchase price compared to the fair value of the attributable net identifiable assets is recognised respectively as goodwill (excess) and accounted for as described in the goodwill accounting policy note 4 or in profit or loss (deficit) as a bargain purchase gain. The financial statements of the subsidiaries are prepared for the same reporting period as Northam, using consistent accounting policies, and all intra-group transactions and balances are eliminated on consolidation. Non-controlling interests represent the portion of profit or loss and net assets not held by the group and are presented separately in profit or loss and within equity in the consolidated statement of financial position, separately from parent shareholders equity. Changes in the group’s ownership interest in a subsidiary that do not result in the group losing control of the subsidiary are equity transactions. If the group loses control of a subsidiary, the group shall: • Derecognise the assets and liabilities of the former subsidiary. • Recognise any investment retained in the former subsidiary at its fair value when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant IFRSs. That fair value shall be regarded as the fair value on initial recognition of a financial asset in accordance with IFRS 9 or, when appropriate, the cost on initial recognition of an investment in associate or joint venture. • Recognise the gain or loss associated with the loss of control in profit or loss Investments in subsidiaries are recognised at cost less accumulated impairment losses in the accounts of the company.
3. ASSOCIATES AND JOINT ARRANGEMENTS An associate is an entity in which the group has significant influence. The group has an interest in a “joint venture” which is classified as an investment in associate due to the existence of significant influence as opposed to joint control; as well as other interests in associates. The group’s investment in its associates is accounted for using the equity method of accounting except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The group also has an interest in a joint arrangement which is classified as a joint venture in terms of IFRS 11 Joint Arrangements. The group’s investment in this joint venture is accounted for using the equity method of accounting except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5. Under the equity method, the investment in the associates and joint venture is carried in the statement of financial position at cost plus post acquisition changes in the group’s share of net assets of the associate. Goodwill relating 177
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to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Profit or loss in the Statement of Comprehensive Income reflects the share of the results of operations of the associate. Where there has been a change recognised directly in other comprehensive income or equity of the associate or joint venture, the group recognises its share of any changes and recognises this, when applicable, in other comprehensive income or equity within the statement of changes in equity. Unrealised gains and losses resulting from transactions between the group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. The share of profit of associates or joint venture is shown on the face of the Statement of Comprehensive Income in profit or loss. This is the profit attributable to equity holders of the associate or joint venture and is therefore profit after tax and non-controlling interests. The financial statements of the associates and joint venture are prepared for the same reporting period as the parent company. Where necessary, adjustments are made to bring the accounting policies in line with those of the group. After application of the equity method, the group determines whether it is necessary to recognise an impairment loss on the group’s investment in its associates or joint venture. The group determines at each reporting date whether there is any objective evidence that the investment in the associate or joint venture is impaired. If this is the case the group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognises the amount in profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the group measures and recognises any remaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
4. BUSINESS COMBINATIONS AND GOODWILL Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit and loss. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability,
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is recognised in accordance with IAS 39 Financial Instruments: Recognition and Measurement, either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the date of acquisition. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss. Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised. Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) that is expected to benefit from the combination. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Goodwill is tested for impairment annually or more frequently if events or circumstances suggest that it might be impaired and an impairment loss recognised is not reversed in a subsequent period. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
5. PROPERTY, PLANT AND EQUIPMENT 5.1 Mining assets Mining assets are recorded at cost of acquisition less accumulated depreciation and accumulated impairment losses.
5.2 Mine development costs Capitalised mine development costs include expenditure incurred to develop new ore bodies, to define further mineralisation in existing ore bodies and to expand the capacity of the mine. Costs include interest capitalised during the construction period until commercial production is reached where development is financed by borrowings, and the net present value of future decommissioning costs. Depreciation is first charged on new mining ventures from the date on which the mining venture reaches commercial production levels. When a mine development project moves into the production phase, the capitalisation of certain mine development costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions, improvements or new developments, underground mine development or mineable reserve development. Mine development costs are depreciated on a straightline basis, over the estimated economic life of the mine, based on measured and indicated resources which are revised annually.
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5.3 Mining plant and equipment Mining plant and equipment, including the decommissioning asset, is depreciated on a straight-line basis over the lesser of the estimated economic life of the mine, based on measured and indicated resources, which are revised annually, or their expected useful lives. Where items of plant and equipment comprise separate, identifiable components that have differing lives, such components are depreciated according to their individual useful lives. Research costs associated with the design of new items of plant and equipment, or improvements to existing items of plant and equipment, are expensed when incurred, unless the recognition criteria are met. Items of property, plant and equipment that are withdrawn from use, or have no reasonable prospect of being recovered through use or sale, are regularly identified and impaired / scrapped.
5.4 Decommissioning asset The decommissioning asset is depreciated on a straight-line basis over the estimated economic life of the mine, based on measured and indicated resources which are revised annually. The decommissioning asset is recognised and subsequent changes in the assumptions which impact the asset is reflected in the asset as set out in the decommissioning provision accounting policy note 11.1.1.
5.5 Intangible assets comprising mining properties Mining properties, comprising mineral rights are recorded at cost of acquisition. Depreciation is first charged on new mining properties from the date on which the mining in respect of the mining property reaches commercial production levels. Mining properties are depreciated on a straight-line basis over the estimated economic life of the mine, based on measured and indicated resources which are revised annually. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is expensed in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense of intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.
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Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually either individually or at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.
5.6 Plant and equipment Office equipment, furniture and vehicles are depreciated using varying rates, ranging between 10% and 20% on a straight-line basis over their expected useful lives.
5.7 Land Land is recorded at cost of acquisition less accumulated impairment losses and is not depreciated.
5.8 Impairment At each reporting date, the group assesses whether there is any indication that an asset or cash-generating-unit may be impaired. Where an indicator of impairment exists or where annual impairment testing for an asset is required, the group makes a formal estimate of the asset or cash-generating-unit’s recoverable amount. Where the carrying amount of an asset or cash-generating-unit exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount and the difference is recognised in profit or loss. The recoverable amount is the higher of value in use and fair value less cost of disposal. The value in use of mining assets is determined by applying a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset to the anticipated cash flows for the remaining useful life of the assets. The fair value less costs of disposal of non-mining assets is determined with reference to market values by making use of a valuation model. The revised carrying amounts are depreciated on a systematic basis over the remaining useful lives of such affected assets. Impairment losses are recognised in profit or loss in those expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the
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asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. An impairment calculation used during a previous financial year can be re-used if: • the assets and liabilities making up the unit have not changed significantly; • the recoverable amount is significantly greater than the carrying amount; and • an analysis of events indicates that the chances of the difference being eliminated are remote.
5.9 Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
5.10 Annual review of residual values, depreciation method and useful lives The assets’ residual value, depreciation method and useful life are reviewed, and adjusted prospectively, if appropriate, at each financial year end.
5.11 Subsequent expenditure Subsequent expenditure relating to an item of property, plant, equipment and mining properties is added to the carrying value of the asset when it is probable that future economic benefits will flow to the group. All other subsequent expenditure is recognised as an expense and included in profit before tax.
6. LAND AND TOWNSHIP DEVELOPMENT Land and township development, which is an initiative in order to assist the group’s employees to acquire their own affordable housing, is initially recognised at cost, being the fair value of the consideration given and including acquisition charges. Where the recoverable amount is less than the carrying value, an impairment loss is recognised in accordance with accounting policy note 5.8. Cost is determined on the basis of land acquisition, development and housing construction cost. Land and township development is derecognised when the risks and rewards of ownership of the property transfers to the employees.
7. FINANCIAL INSTRUMENTS Financial instruments recognised on the statement of financial position include investments, cash and cash equivalents, long-term receivables, trade accounts receivable, trade accounts payable, borrowings and derivative instruments. These are recognised when the group becomes party to the contractual agreements. All financial instruments are initially recorded at fair value and in the case of financial instruments not at fair value through profit or loss, directly attributable transaction costs.
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7.1 Investments Investments acquired for the purpose of selling in the near term are classified as held for trading and is part of the fair value through profit or loss category of financial assets. Other investments are classified as available-for-sale or amortised cost, depending on the nature of the investment. After initial recognition, investments, which are classified as available-for-sale, are re-measured at fair value with unrealised gains or losses recognised as other comprehensive income until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired when it is recognised in profit or loss – refer to accounting policy note 7.7. Gains or losses on investments held for trading are recognised in profit or loss. After initial recognition, investments at amortised cost are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process. Interest income on these investments is recognised in profit or loss.
7.2 Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and include trade and other receivables, long-term receivables and cash and cash equivalents. After initial measurement receivables are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the receivables are derecognised or impaired, as well as through the amortisation process.
7.3 Cash and cash equivalents Cash and cash equivalents comprise demand and time deposits with banking institutions and money market instruments readily convertible to known amounts of cash subject to insignificant risk of changes in value. Current account balances are only netted off when set-off would apply or when the balances are with the same banking institution. Cash and cash equivalents are subsequently carried at amortised cost. Negotiable instruments are recorded initially at the fair value of the consideration given subsequent measurement is at amortised cost which is incorporated in the determination of investment income.
7.4 Trade and other payables Trade and other payables are stated at the recognised obligation less payments made and adjustments made to reflect the fair value of the expected outflow of economic resources and are subsequently carried at amortised cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.
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7.5 Borrowings After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.
7.6 Derivative instruments In the ordinary course of its operations, the group is exposed to fluctuations in metal prices, exchange rates and changes in interest rates. The group engages in a number of activities to manage these risks. These activities include economic hedging of a portion of these exposures through the use of derivative financial instruments. Forward sales contracts and option contracts are utilised to manage metal price and exchange rate exposures. The group does not speculate, acquire, hold or issue derivative instruments for trading purposes, and does not apply hedge accounting. Derivatives are initially measured at fair value and associated transaction costs are charged to profit or loss when incurred. Subsequently these instruments are measured as set out below: • All forward and option contracts outstanding at reporting date are marked to market and any changes in their fair value is included in net sundry income/(expenditure). • Gains and losses on all contracts not outstanding at reporting date are recognised and included in net sundry income/(expenditure) at the time that the contracts expire.
7.7 Impairment of financial instruments The group assesses at each reporting date whether a financial asset or group of financial assets is impaired.
Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in estimated future cash flows. The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss. The group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for
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impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. In relation to loans and receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.
Available-for-sale investments For available-for-sale investments, the group assesses at each reporting date whether there is objective evidence that an investment or group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is to be evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairments in respect of equity instruments classified as available for sale are never reversed. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.
7.8 Derecognition of financial instruments Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: • the rights to receive cash flows from the asset have expired; • the group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass through” arrangement; and either: (a) the group has transferred substantially all the risks and rewards of the asset or (b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
185
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
8. COMMODITY CONTRACTS Contracts that are entered into and continue to meet the group’s expected purchase, sale or usage requirements that were designated for that purpose at their inception and are expected to be settled by delivery are recognised in the financial period when the risks and rewards of ownership of such items have passed.
9. INVENTORIES 9.1 Consumable stores Consumable stores consist of consumable and maintenance stores and are valued at the lower of cost or net realisable value. Cost is determined on the weighted average cost basis. Consumable stores are under continual review and are written down in regard to age, condition and utility.
9.2 Metal on hand Stocks of the three major platinum group elements and gold (3 PGEs + Au), either in refined or concentrate form, are valued at the lower of cost of production (including the value of any purchased concentrate) or net realisable value. Production costs include an appropriate portion of overhead expenses. Cost is determined on the first-in, first-out basis. No account is taken of the value of metal in the process of production prior to the production of flotation concentrate. Other metals are accounted for as by-products and are not capitalised as inventory.
10. DEFERRED TAX Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences, except: • Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither the accounting profit nor taxable profit or loss; and • In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that future taxable profits will be available, against which the deductible temporary differences, carry forward of unused tax credits and unused tax losses can be utilised in the foreseeable future except: • where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
NORTHAM ANNUAL INTEGRATED REPORT 2014
186
• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rate that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognised directly in equity or other comprehensive income is recognised in equity or other comprehensive income and not in profit or loss. Deferred income tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and when they relate to income taxes levied by the same taxation authority and taxable entity.
11. PROVISIONS 11.1 Environmental rehabilitation provisions 11.1.1 Decommissioning provision Provision is made for the present value of the estimated future decommissioning costs at the end of the mine’s life. A decommissioning asset is recognised as part of the underlying property, plant and equipment. With regards to the provision, the estimates are discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the decommissioning provision due to the passage of time is recognised as a finance cost in profit or loss. Other changes in the carrying value of the provision subsequent to initial recognition are adjusted in the determination of the carrying value of the decommissioning asset as opposed to being recognised in profit or loss. If the adjustment result in an addition to the decommissioning asset consideration is given as to whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the asset is tested for impairment by estimating its recoverable amount in accordance with accounting policy note 5.8.
11.1.2 Environmental restoration provision Provision is made for the estimated cost to be incurred on long-term environmental obligations, comprising expenditure on pollution control and closure over the estimated life of the mine. The estimates are discounted at a pre-tax discount rate that reflects current market assessments of the time value of money.
187
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
The increase in the restoration provision due to the passage of time is recognised as a finance cost in profit or loss. In assessing the future liability, no account is taken of the potential proceeds from the sale of assets and metals from the plant clean-up. The future liability is reviewed regularly and adjusted as appropriate for new facts and changes in legislation. The cost of ongoing programmes to prevent and control pollution and rehabilitate the environment is recognised as an expense when incurred.
11.1.3 Environmental rehabilitation fund The group makes annual contributions to a dedicated trust fund, the Northam Platinum Restoration Trust Fund (“the Fund”), to fund the expenditure on future decommissioning and restoration. Income earned by the fund is credited to the group’s profit or loss in the period to which it relates. In terms of IFRIC 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds, the Fund is consolidated. The assets of the Fund are separately administered and the group’s right of access to these funds is restricted.
11.2 Other provisions Provisions are recognised where the group has a present legal or constructive obligation as a result of a past event, a reliable estimate of the obligation can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
12. FOREIGN CURRENCIES The functional and presentation currency of the group is the South African Rand. Transactions in foreign currencies are translated into South African Rand at the rates of exchange ruling at the transaction date. Monetary assets or liabilities denominated in foreign currencies are translated at rates prevailing at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Profits and losses arising on the translation of foreign currencies, whether realised or unrealised, are credited to or charged to profit or loss.
13. REVENUE RECOGNITION Revenue is recognised to the extent it is probable that the economic benefits associated with the transaction will flow to the group and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the amounts received or receivable net of value added tax, cash discounts and rebates.
13.1 Metal sales Revenue from the sale of metal is accounted for when the risks and rewards of ownership have passed and is recorded at the invoiced amounts with an adjustment for provisional pricing at each reporting date. Adjustments, in respect of final assayed quantities and/or prices, arising between the date of recognition of the revenue and the date of settlement are recognised in the period in which the adjustment arises.
NORTHAM ANNUAL INTEGRATED REPORT 2014
188
13.2 Revenue from the sale of township land Revenue from the sale of township land which is sold under suspensive sale agreements is recognised when the substantial risks and rewards of ownership have been assigned to the purchaser.
13.3 Interest revenue Interest revenue is recognised as it accrues, using the effective interest rate method.
13.4 Dividends Dividend revenue is recognised when the right to receive payment has been established.
13.5 Sundry income Sundry income is recognised when the right to receive payment has been established.
14. LEASED METAL When metal is leased to fulfil marketing commitments, the equivalent cost of production is charged to cost of sales in profit or loss and is reflected in the statement of financial position as a liability. On the maturity of the lease the liability is credited to metal inventories. The leasing transaction costs associated with the borrowed metal are charged to other costs in net sundry revenue on a time proportional basis.
15. BORROWING COSTS Borrowing costs that are directly attributable to the acquisition, construction or development of qualifying assets that require a substantial period of time to prepare for their intended use are capitalised. Capitalisation is suspended when the active development is interrupted and ceases when the activities necessary to prepare the asset for its use are complete. Other borrowing costs are recognised as an expense when incurred. In determining the amount of borrowing cost eligible for capitalisation during a period, any investment income earned on such funds is deducted from the borrowing costs incurred.
16. EMPLOYEE BENEFITS 16.1 Short-term employee benefits Remuneration to employees in respect of services rendered during a reporting period is recognised as an expense in that reporting period. Accruals are made for accumulated leave and are measured at the amount that the group expects to pay when the leave is used.
16.2 Equity compensation plans 16.2.1 Share Option Scheme Options granted to employees in terms of the rules of the Northam Share Option Scheme (the Scheme) are valued at every reporting period using a Black Scholes model. The value so determined is recognised as an expense within operating costs, together with a corresponding increase in the liability, evenly over the period between the grant date and the date on which the relevant employees become fully entitled to the award (vesting date).
189
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
The cumulative expense recognised for these options at each reporting date until the vesting date reflects the best estimate of the value attributable to the number of options that will ultimately vest. Where employees exercise options in terms of the rules of the Scheme, the value of the options are settled in cash. Options granted to an employee are forfeited in the event of the employee resigning or being dismissed. The accumulated credit to the equity compensation reserve in respect of options that have lapsed or been forfeited after their vesting date is transferred to retained earnings.
16.2.2 Share Incentive Plan Awards granted to employees in terms of the rules of the Northam Share Incentive Plan (the Plan) are measured at fair value based on market prices at every reporting period. The shares awarded in terms of the rules of the Plan comprise: retention shares, which vest after two years with no performance criteria, and performance shares, which vest after three years. The final number of performance shares that the relevant employee will receive will be subject to certain performance criteria being met. The fair value is recognised as an expense within operating costs, together with a corresponding increase in the liability, over the period between the grant date and the date on which the relevant employees become fully entitled to the award (vesting date). Vesting conditions, other than market conditions, are taken into account by adjusting the number of shares actually expected to vest at each reporting period. Where the performance criteria attached to the awards are not met, any cumulative expense previously recognised is reversed. On vesting date, the value of the shares are settled in cash.
16.2.3 Modification during the previous year During the previous financial year both the Scheme and Plan were amended to provide employees with the option to either elect for settlement in shares or cash. The change was made to avoid the ongoing dilution of the BEE position and approval was granted by the JSE during March 2013. Where the counterparty has the right to elect for settlement in either shares or cash, IFRS 2 regards the transaction as a compound transaction to which split accounting must be applied. The general principle is that the transaction must be analysed into a liability component (the counterparty’s right to demand settlement in cash) and an equity component (the counterparty’s right to demand settlement in shares). Management considered the requirements and determined that based on historical information very few individuals, if any, have kept their Northam shares, and that the majority of the outstanding options, performance and retention shares will be settled in cash and should therefore be accounted for as a liability rather than an equity compensation reserve. Cash-settled options and shares are accounted for as a liability and until the liability is settled, the entity remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value being recognised in profit or loss for the period.
NORTHAM ANNUAL INTEGRATED REPORT 2014
190
16.3 Retirement benefits Eligible employees are members of various defined contribution schemes. Employer contributions are recognised as an expense during the period in which the employees’ services are rendered.
16.4 Medical benefits Employer contributions in respect of current medical benefits are recognised as an expense during the period in which the employees’ services are rendered.
16.5 Post-retirement medical costs Eligible employees are members of a defined contribution scheme established to assist those employees to meet post-retirement medical costs. Employer contributions are recognised as an expense during the period in which the employees’ services are rendered. These contributions cease when the employees’ service terminate.
16.6 Toro employee empowerment trust The Toro employee empowerment trust (“the Trust”) was established for the benefit of eligible employees. Northam contributes 4% of its after tax profits to the Trust where after eligible employees will receive payment at the end of each 5 year cycle. The amount of this cash to be distributed is based on the valuation of the fund and Northam does not guarantee any values over and above what is included in the Trust and managed accordingly by the investment manager. Since the cash distribution is payable to employees after the end of the period in which the related services are rendered and it is not a post-employment benefit or a termination benefit, the Trust is accounted for as an “Other Long Term Employee Benefit” in terms of IAS 19. The benefits payable to employees are therefore measured using the Projected Unit Credit Method. Independent actuarial valuations are conducted annually. Re-measurements, comprising actuarial gains and losses arising as a result of experience adjustments and/or the effects of changes in actuarial assumptions, the effect of changes to the asset ceiling and the return on plan assets (excluding interest) are recognised immediately in other comprehensive income when they occur. Any increase in the present value of plan liabilities expected to arise from employee service during the period is charged to operating profit. Net interest is determined by applying the discount rate at the beginning of the year to the net defined liability or asset. Past-service cost is recognised immediately in profit or loss in the period to the extent that benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested The defined benefit asset or liability comprises the present value of the defined benefit obligation less the fair value of plan assets out of which the obligations are to be settled. Plan assets are assets that are held by the Trust and are not available to the creditors of the group.
191
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
ACCOUNTING POLICIES CONTINUED
17. LEASES 17.1 Group as lessee A finance lease transfers substantially all the risks and rewards of ownership of an asset to the group. Assets subject to finance leases are capitalised as property, plant and equipment at the lower of the fair value of the leased asset at inception of the lease or the present value of the minimum lease payments with the related lease obligation recognised at the same amount. Capitalised leased assets are depreciated over the estimated useful lives. However, if there is no reasonable certainty that the group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Finance lease payments are allocated between finance costs and the capital repayment so as to achieve a constant rate of interest on the remaining balance of the liability. Leases in respect of which the lessor retains substantially all the risks and rewards of ownership of an asset are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the period of the lease.
17.2 Group as lessor Leases in respect of which the group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Operating lease payments received such as those relating to mining properties are recognised as revenue in profit or loss on a straight-line basis over the period of the lease.
18. TAXATION 18.1 Current tax The charge for current tax is based on the results for the year, as adjusted for by items that are exempt or disallowed, and is calculated using the enacted or substantially enacted tax rates, at the reporting date. Where items are credited or charged directly to equity or other comprehensive income the tax effect is also recognised within equity or other comprehensive income.
NORTHAM ANNUAL INTEGRATED REPORT 2014
192
18.2 Deferred tax Deferred tax is provided at enacted or substantially enacted tax rates, as more fully set out in Note 10 – Deferred tax of the accounting policies.
18.3 Dividends withholding tax The group withholds dividends tax on behalf of its shareholders at a rate of 15% on dividends declared. Amounts withheld are not recognised as part of the group’s tax charge but rather as part of the dividend paid recognised directly in equity.
18.4 Value Added Tax Revenue, expenses and assets are recognised net of the amount of value added tax except: • where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authorities, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item where applicable; and • receivables and payables that are stated with the amount of value added tax included.
19. DIVIDENDS DECLARED Dividends declared are charged to equity in the period in which the dividend is declared.
193
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ACCOUNTING POLICIES
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 June 2014 Group
Company
2014
2013
2014
2013
Note
R000
R000
R000
R000
Revenue
27
5 477 558
4 510 475
4 702 912
4 579 424
Sales revenue
27
5 339 397
4 420 977
4 268 436
4 243 420
5 277 915
3 813 301
4 152 938
3 745 036 2 759 433
Cost of Sales Operating costs
3 536 002
2 826 094
2 690 872
Concentrates purchased
918 605
657 540
918 605
657 540
Refining and other costs
267 117
161 591
155 789
161 591
Depreciation and write-offs
28
29
Change in metal inventories Operating profit
445 875
234 690
209 430
232 930
110 316
(66 614)
178 242
(66 458)
61 482
607 676
115 498
498 384
Share of earnings from associate and joint venture/dividends received
30
3 464
13 783
69
16 740
Investment revenue
31
59 963
33 434
261 274
174 311 (119 669)
Finance charges
(176 124)
(17 946)
(170 690)
Sundry expenditure
32
(26 724)
(28 254)
(89 442)
(70 666)
Sundry income
32
123 735
88 362
216 334
193 067
45 796
697 055
333 043
692 167
33
26 199
169 054
93 870
149 149
19 597
528 001
239 173
543 018
Profit before tax Taxation Profit for the year
NORTHAM ANNUAL INTEGRATED REPORT 2014
194
Group Note Other comprehensive income
Company
2014
2013
2014
2013
R000
R000
R000
R000
(1 327)
(4 145)
–
–
Items that will not be subsequently reclassified to profit or loss
418
–
–
–
Share of associate’s remeasurements of postemployment benefit obligations net of tax
418
–
–
–
Items that will be reclassified subsequently to profit or loss
(1 745)
(4 145)
–
–
Share of associate’s exchange differences on translating foreign operations net of tax
(1 738)
(4 105)
–
–
Share of associate’s fair value adjustment on available-for-sale financial assets net of tax
(7)
(40)
–
–
Total comprehensive income for the year
18 270
523 856
239 173
543 018 543 018
Profit attributable to: 9 486
504 907
239 173
Non-controlling interests
Owners of the parent
10 111
23 094
–
–
Profit for the year
19 597
528 001
239 173
543 018
Total comprehensive income attributable to: 8 159
500 762
239 173
543 018
Non-controlling interests
Owners of the parent
10 111
23 094
–
–
Total comprehensive income for the year
18 270
523 856
239 173
543 018
Cents
Cents
Earnings per share
34
2.4
132.0
Diluted earnings per share
34
2.4
132.0
Headlines earnings per share
34
2.2
136.5
Diluted headline earnings per share
34
2.2
136.5
195
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION At 30 June 2014
Group Note
Company
2014
2013
2014
2013
R000
R000
R000
R000
ASSETS Non-current assets
12 745 424
12 622 989
8 369 853
8 287 148
Property, plant and equipment
2
6 287 062
6 222 226
2 295 671
2 147 090
Mining properties and mineral resources
113 091
121 762
3
5 653 328
5 708 825
Interest in associates and joint venture
5
496 509
495 498
Investments in subsidiaries
6
109 938
122 442
5 747 619
5 801 514
Unlisted investment
7
6
6
6
6
Land and township development
8
10 204
15 553
–
–
Long-term receivables
9
94 047
87 400
–
–
Investments held by Northam Platinum Restoration Trust Fund
10
46 468
40 948
36 791
33 913
Environmental Guarantee Investment
11
51 024
42 407
42 281
35 965
Buttonshope Conservancy Trust
12
10 702
10 126
–
–
Long-term subsidiary loans
13
24 456
24 456
Deferred tax asset
19
Current assets
96 074
–
–
–
1 995 572
1 734 675
6 116 903
5 534 946
4 588 974
4 119 639
Short-term subsidiary loans
13
Inventories
14
1 076 853
878 530
700 983
872 333
Trade and other receivables
15
244 672
547 920
192 186
333 959
Cash and cash equivalents
16
666 174
298 580
634 760
209 015
Tax receivable
7 873
9 645
–
–
Total assets
14 740 996
14 357 664
14 486 756
13 822 094
NORTHAM ANNUAL INTEGRATED REPORT 2014
196
Group
Company
2014
2013
2014
2013
Note
R000
R000
R000
R000
17
9 178 688
8 599 655
9 178 688
8 599 655
2 223 135
2 220 477
2 302 455
2 063 282
–
–
–
–
(15 340)
(14 013)
–
–
11 386 483
10 806 119
11 481 143
10 662 937
5 389
9 516
–
–
11 391 872
10 815 635
11 481 143
10 662 937
EQUITY AND LIABILITIES Stated capital/Share capital and share premium Retained earnings Equity compensation reserve
18
Share of other comprehensive income from associate Equity attributable to owners of the parent Non-controlling interests Total equity Non-current liabilities
2 157 462
1 997 826
2 063 084
1 909 754
Deferred tax liability
19
502 097
476 053
506 818
484 447
Long-term provisions
20
142 709
133 267
96 834
90 299
Long-term loans
21
43 763
47 564
–
–
Long-term share-based payment liability
22
98 893
90 942
89 432
85 008
Domestic medium term notes
23
1 370 000
1 250 000
1 370 000
1 250 000
1 191 662
1 544 203
942 529
1 249 403
3 801
–
–
Current liabilities Current portion of long-term loans
21
3 801
Short-term share-based payment liability
22
69 942
16 665
63 449
14 518
Revolving credit facilities
23
–
250 000
–
250 000
Bank overdraft
16
Tax payable
118
–
118
–
121 481
156 963
15 390
52 848
Trade and other payables
24
877 365
1 012 104
751 577
826 650
Short-term provisions
25
118 955
104 670
111 995
104 670
Short-term subsidiary loans
13
–
717
14 486 756
13 822 094
Total equity and liabilities
14 740 996
197
14 357 664
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2014
Share capital*
Share premium*
R000
R000
GROUP Balance at 1 July 2012
3 825
8 593 823
Share based payments expense
–
–
Transfer of equity compensation reserve to share-based payment liability
–
–
Transfer of equity compensation reserve to retained earnings
–
–
Non-controlling interest arising on a business combination
–
–
Total comprehensive income for the year
–
–
Profit for the year
–
–
Other comprehensive income for the year
–
–
Dividends declared#
–
–
Issue of new shares
1
2 006
(3 826)
(8 595 829)
Balance at 1 July 2013
–
–
Acquisition of non-controlling interest
–
–
Total comprehensive income for the year
–
–
Profit for the year
–
–
Other comprehensive income for the year
–
–
Dividends declared#
–
–
Issue of new shares
–
–
Balance at 30 June 2014
–
–
17
17
Transfer of share capital and share premium to stated capital
Note
# Non-controlling interest’s portion of dividends declared by entities within the Northam group. * Share capital and share premium were converted to no par value shares and are now referred to as stated capital.
Equity compensation reserve The equity compensation reserve represents the value of equity-settled share-based payments provided to employees as part of their remuneration. Refer to note 18 for further details.
Other comprehensive income from associate The value of other comprehensive income from associate relates to the group’s share of the associate’s: remeasurements of post-employment benefit obligations, translation differences on foreign subsidiaries held by the associate, as well as the fair value adjustment on available-for-sale financial assets.
NORTHAM ANNUAL INTEGRATED REPORT 2014
198
Other comprehensive Retained income from earnings associate
Stated capital*
Equity compensation reserve
Noncontrolling interest
R000
R000
R000
Total
R000
R000
R000
–
202 634
–
13 807
1 622 833
(9 868)
–
10 413 247
–
–
–
–
13 807
(123 704)
–
–
–
(123 704)
–
(92 737)
92 737
–
–
–
–
–
–
8 169
8 169
–
–
504 907
(4 145)
23 094
523 856
–
–
504 907
–
23 094
528 001
–
–
–
(4 145)
–
(4 145)
–
–
–
–
(21 747)
(21 747) 2 007
–
–
–
–
–
8 599 655
–
–
–
–
–
8 599 655
–
2 220 477
(14 013)
9 516
10 815 635
–
–
(6 828)
–
(3 172)
(10 000)
–
–
9 486
(1 327)
10 111
18 270
–
–
9 486
–
10 111
19 597
–
–
–
(1 327)
–
(1 327)
–
–
–
–
(11 066)
(11 066)
579 033
–
–
–
–
579 033
9 178 688
–
2 223 135
(15 340)
5 389
11 391 872
18
199
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CHANGES IN EQUITY CONTINUED for the year ended 30 June 2014
COMPANY Balance at 1 July 2012 Share based payments expense Transfer of equity compensation reserve to share based payment liability Transfer of equity compensation reserve to retained earnings Total comprehensive income for the year/profit for the year Issue of new shares Transfer of share capital and share premium to stated capital Balance at 1 July 2013 Total comprehensive income for the year/profit for the year Issue of new shares Balance at 30 June 2014 Note * Share capital and share premium were converted to no par value shares and are now referred to as stated capital.
Equity compensation reserve The equity compensation reserve represents the value of equity-settled share-based payments provided to employees as part of their remuneration. Refer to note 18 for further details.
NORTHAM ANNUAL INTEGRATED REPORT 2014
200
Share capital*
Share premium*
Stated capital*
Equity compensation reserve
Retained earnings
Total
R000
R000
R000
R000
R000
R000
3 825
8 593 823
–
202 634
1 427 527
10 227 809
–
–
–
13 807
–
13 807
–
–
–
(123 704)
–
(123 704)
–
–
–
(92 737)
92 737
–
–
–
–
–
543 018
543 018 2 007
1
2 006
–
–
–
(3 826)
(8 595 829)
8 599 655
–
–
–
–
–
8 599 655
–
2 063 282
10 662 937
–
–
–
–
239 173
239 173
–
–
579 033
–
–
579 033
–
–
9 178 688
–
2 302 455
11 481 143
17
17
18
201
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS for the year ended 30 June 2014
Group Note Cash flows from operating activities
Company
2014
2013
2014
2013
R000
R000
R000
R000
885 379
524 200
670 485
428 377
35
693 774
915 317
507 329
829 423
52 583
29 290
35 516
17 468
Change in working capital
36
270 414
(281 104)
238 050
(308 050)
Taxation paid
37
(131 392)
(139 303)
(110 410)
(110 464)
(765 945)
(1 703 238)
(523 201)
(1 640 058)
– additions to maintain operations
(358 200)
(363 914)
(351 466)
(347 871)
– additions to expand operations
(539 645)
(1 383 200)
–
–
– p roceeds from sale of development ounces
137 687
–
–
–
3 508
4 497
1 297
3 689
– additions
(2 825)
(17 683)
–
–
– disposals proceeds
8 174
45 979
–
–
69
16 740
Cash generated from operations Interest received
Cash flows utilised in investing activities Property, plant, equipment and mining properties and mineral reserves
– disposals proceeds Land and township development
Investment in associate – cash distributed Increase in subsidiary loans
69
16 740
(248 911)
(1 401 345)
Increase in investments held by Northam Platinum Restoration Trust Fund
(5 520)
(5 259)
(2 878)
(2 682)
Increase in Environmental Guarantee Investment
(8 617)
(6 687)
(6 316)
(4 442)
(576)
(351)
–
–
Acquisition of subsidiary net of cash acquired
–
6 416
(10 000)
(10 000)
Dividends received
–
224
95 004
105 853
Increase in Buttonshope Conservancy Trust
NORTHAM ANNUAL INTEGRATED REPORT 2014
202
Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
Cash flows generated from/financing activities
248 042
1 372 638
278 343
1 382 338
Proceeds from issue of shares
600 000
2 007
600 000
2 007
Transaction costs
(20 967)
–
(20 967)
–
Acquisition of non-controlling interest
(10 000)
–
–
–
Finance charges
(176 124)
(123 703)
(170 690)
(119 669)
Dividends paid
(11 066)
(21 747)
–
–
(3 801)
16 081
–
–
Revolving credit facilities (repaid)/utilised
(250 000)
250 000
(250 000)
250 000
Domestic medium-term notes issued
120 000
1 250 000
120 000
1 250 000
Increase in cash and cash equivalents
367 476
193 600
425 627
170 657
Cash and cash equivalents at beginning of year
298 580
104 980
209 015
38 358
666 056
298 580
634 642
209 015
Note
(Decrease)/increase in long-term loans
Cash and cash equivalents at end of year
16
203
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2014
1. KEY ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS The preparation of the company and group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of assets or liabilities affected in future. These estimates and assumptions are continually evaluated and are based on historical experience and expectations of future events that are believed to be reasonable under the circumstances.
1.1 Impairment of assets The Group assesses each cash generating unit annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair-value-less-costs-of-disposal and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Fair value is the price that would be received to sell an asset or payment made to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Impairment testing requires management to make significant judgements concerning the existence of impairment indicators, identification of cash-generating units, remaining useful lives of assets and estimates of projected cash flows and fair-value-less-costs-of-disposal. Management’s analysis of cash-generating units involves an assessment of a group of assets’ ability to independently generate cash inflows and involves analysing the extent to which different products make use of the same assets. Management’s judgement is also required when assessing whether a previously recognised impairment loss should be reversed. Cash flows are discounted by an appropriate discount rate to determine the net present value. Management has assessed its cash generating units as being both Zondereinde and Booysendal, which is the lowest level for which cash flows are largely independent of other assets. The determined value in use of the cash-generating unit is most sensitive to the platinum price, the US dollar exchange rate and the discount rate. In assessing the value in use, key estimates and judgements were made by management, which are based on management interpretation of market forecast and the future inflation rates. These included long term platinum prices and USD exchange rates. Both these variables were determined based on market consensus forecasted prices for the first five years after which the price for platinum was inflated using 2.5% (2013: 2.5%) and the devaluation of the ZAR using an inflation rate of 3.4% (2013: 3.9%). The nominal weighted average cost of capital used to discount the future free cash flows was determined as 15.2% nominal (2013: 13.4% nominal). NORTHAM ANNUAL INTEGRATED REPORT 2014
204
Management estimated the residual amount of mineral assets that the group is not currently developing. For those assets, the residual amount is calculated on a fair-value-less-cost-of-disposal basis taking into account earlier binding sales agreements between market participants.
1.2 Mine rehabilitation provision The net present value of current decommissioning and restoration costs are based on the following assumptions: Company 2014
2013
Long-term inflation rate for South Africa – %
6.00
6.00
Long-term real discount rate – % (based on long bond yield rates)
8.00
8.00
Mine rehabilitation costs will be incurred by the group at the end of the operating life of some of the group’s facilities and mine properties. The group assesses its mine rehabilitation provision at each reporting date. The ultimate rehabilitation costs are uncertain, and cost estimates can vary in response to many factors, including estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rates (2014: 6% (2013: 6%)), and changes in discount rates (2014: 8% (2013: 8%)). These uncertainties may result in future actual expenditure differing from the amounts currently provided. Therefore, significant estimates and assumptions are made in determining the provision for mine rehabilitation. As a result, there could be significant adjustments to the provisions established which would affect future financial result. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required.
1.3 Useful lives and residual values of property, plant and equipment In assessing the useful live of its assets, technological innovation, product life cycles, physical condition of the assets and maintenance programmes are taken into consideration by the group. As residual values are the expected values at the end of an asset’s useful life, a process of estimation is required to determine the residual values at year end.
1.4 Ore reserve and mineral resource estimates (life of mine) Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the group’s mining properties. The group estimates its ore reserves and mineral resources, based on information compiled by appropriately qualified persons, relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgements to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgements made in estimating the size and grade of the ore body. Changes in the reserve or resources estimates may impact upon the carrying value of exploration and evaluation assets, mine properties, property, plant and equipment, provision for rehabilitation, recognition of deferred tax assets (if any), and depreciation and amortisation charges. The group estimates and reports ore reserves in line with the principles contained in the South African Code for Reporting of Mineral Resources and Mineral Reserves of 2007, revised in 2009 (SAMREC 2009). 205
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
1. KEY ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS continued 1.5 Production start date for Booysendal mine (1 July 2013) The group assesses the stage of a mine under construction to determine when the mine moves into the production phase. This being when the mine is substantially complete and ready for its intended use. The criteria used to assess the start date are determined based on the unique nature of that mines construction project, such as the complexity of the project and its location. The group considers various relevant criteria to assess when the production phase is considered to have commenced. At this point, all related amounts are reclassified from “pre-production development expenditure” to “property, plant and equipment”. Some of the criteria used to identify the production start date include, but are not limited to: • Level of capital expenditure incurred compared to the original construction cost estimate • Ability to produce metal in saleable form (within specification) • Ability to sustain ongoing production of metal When a mine development project moves into the production phase, the capitalisation of certain mine development costs ceases and costs are either regarded as forming part of the cost of inventory or expensed, except for costs that qualify for capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve development. It is also at this point that depreciation commences.
1.6 Capitalisation of borrowing costs Northam obtained various forms of borrowings to fund the development of the Booysendal mine. In assessing these borrowing costs incurred, an allocation was made to estimate the percentage of costs that funded working capital at the Zondereinde mine. Only borrowing costs relating to qualifying assets (development of the Booysendal mine) was capitalised as borrowing costs in the previous financial year.
1.7 TORO Employee Empowerment Trust In applying the projected unit credit method, the following estimates were used: Group and Company 2014
2013
Discount rate – %
7.90
5.40
Interest rate – %
8.20
7.30
NORTHAM ANNUAL INTEGRATED REPORT 2014
206
The company entered into an agreement with the representative unions at the Northam mine in terms of which the company has undertaken to contribute 4% of its after tax profits to the Toro Employee Empowerment Trust, providing Northam’s Zondereinde mine unskilled and semi-skilled employees an opportunity to participate in the profits of the company. Eligible employees will receive payment at the end of each five year cycle, starting from September 2013. The amount of this cash to be distributed is based on the valuation of the fund and Northam does not guarantee any values over and above what is included in the Trust and managed accordingly by the investment manager. The Trust is accounted for as an “other long term employee benefit” in terms of IAS19.
1.8 Taxes Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Judgement is required to determine which arrangements are considered to be a tax on income as opposed to an operating cost. Judgement is also required to determine whether deferred tax assets are recognised in the statement of financial position. Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the group will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These estimates of future taxable income are based on forecast cash flows from operations (which are impacted by production and sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions) and judgement about the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the reporting date could be impacted. In addition, future changes in tax laws in the jurisdictions in which the group operates could limit the ability of the group to obtain tax deductions in future periods.
1.9 Contingencies By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential quantum of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
207
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
1. KEY ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS continued 1.10 Inventories Net realisable value tests are performed at each reporting date and represent the estimated future sales price of the product the entity expects to realise when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained PGM ounces is based on assay data, and the estimated recovery percentage is based on the expected processing method. Stockpile tonnages are verified by periodic surveys.
1.11 Fair value measurement The group measures financial instruments at fair value at each financial reporting date. Also, from time to time, the fair values of non-financial assets and liabilities are required to be determined, e.g., when the entity acquires a business, or where an entity measures the recoverable amount of an asset or cash-generating unit at fair-valueless-costs-of-disposal. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Changes in estimates and assumptions about these inputs could affect the reported fair value.
1.12 Exploration and evaluation expenditure The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement to determine whether future economic benefits are likely, from either future exploitation or sale, or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves. In addition to applying judgement to determine whether economic benefits are likely to arise from the Group’s exploration assets or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves, the Group has to apply a number of estimates and assumptions.
NORTHAM ANNUAL INTEGRATED REPORT 2014
208
Exploration costs are currently being expensed. Mineral resource is itself an estimation process that involves varying degrees of uncertainty depending on how the resources are classified (i.e. measured, indicated or inferred). If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the relevant capitalised amount is written off in the statement of profit or loss and other comprehensive income in a period when the new information becomes available.
2. PROPERTY, PLANT AND EQUIPMENT
Group – 30 June 2014
Mining plant and equipment
Mine development costs
Decommissioning asset
Motor vehicles
Total
R000
R000
R000
R000
R000
Property, plant and equipment – at cost
3 920 378
4 115 766
95 544
18 318
8 150 006
– accumulated depreciation
(1 645 129)
(185 712)
(22 080)
(10 023)
(1 862 944)
Balance at end of year
2 275 249
3 930 054
73 464
8 295
6 287 062
2 117 502
4 016 435
77 477
10 812
6 222 226
358 086
–
–
–
358 086
Reconciliation of movement in property, plant and equipment: – balance at beginning of year – additions to maintain operations – additions to expand operations
–
537 336
–
2 309
539 645
– proceeds from sale of development ounces
–
(137 687)
–
–
(137 687)
– reclassification of development tonnes to inventory (note 36)
–
(300 318)
–
–
(300 318)
– p resent value of decommissioning asset capitalised (note 20)
–
–
114
–
114
– disposals at cost
(94 464)
–
–
(3 221)
(97 685)
– accumulated depreciation on disposals during the year
91 481
–
–
1 578
93 059
– depreciation charged for the year Balance at end of year
(197 356)
(185 712)
(4 127)
(3 183)
(390 378)
2 275 249
3 930 054
73 464
8 295
6 287 062
209
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
2. PROPERTY, PLANT AND EQUIPMENT continued Mining plant and equipment
Mine development costs
Decommissioning asset
Motor vehicles
Total
R000
R000
R000
R000
R000
Group – 30 June 2013 Property, plant and equipment – at cost
3 656 756
4 016 435
95 430
19 230
7 787 851
– accumulated depreciation
(1 539 254)
–
(17 953)
(8 418)
(1 565 625)
Balance at end of year
2 117 502
4 016 435
77 477
10 812
6 222 226
1 983 761
2 529 543
69 172
16 213
4 598 689
345 745
–
–
478
346 223
– additions to expand operations
–
1 381 135
–
2 065
1 383 200
– borrowing costs capitalised
–
105 757
–
–
105 757
Reconciliation of movement in property, plant and equipment: – balance at beginning of year – additions to maintain operations
– present value of decommissioning asset capitalised (note 20)
–
–
10 658
–
10 658
– acquisition of a subsidiary (note 4)
10 039
–
–
456
10 495
(117 989)
–
–
(7 782)
(125 771)
– disposals at cost – accumulated depreciation on disposals during the year
117 989
–
–
2 777
120 766
– depreciation charged for the year
(189 043)
–
(2 353)
(3 395)
(194 791)
– write-off of assets Balance at end of year
(33 000)
–
–
–
(33 000)
2 117 502
4 016 435
77 477
10 812
6 222 226
Borrowing costs were incurred on the Domestic Term Notes and interest was payable at JIBAR plus 3.5%.
NORTHAM ANNUAL INTEGRATED REPORT 2014
210
Company – 30 June 2014 Property, plant and equipment – at cost – accumulated depreciation Balance at end of year Reconciliation of movement in property, plant and equipment: – balance at beginning of year – additions to maintain operations – present value of decommissioning asset capitalised (note 20) – disposals at cost – accumulated depreciation on disposals during the year – depreciation charged for the year Balance at end of year
Company – 30 June 2013 Property, plant and equipment – at cost – accumulated depreciation Balance at end of year Reconciliation of movement in property, plant and equipment: – balance at beginning of year – additions to maintain operations – present value of decommissioning asset capitalised (note 20) – disposals at cost – accumulated depreciation on disposals during the year – depreciation charged for the year – write-off of assets Balance at end of year
Mining plant, equipment and development cost R000
Decommissioning asset R000
Motor vehicles R000
Total R000
3 905 157 (1 644 577) 2 260 580
52 742 (20 434) 32 308
7 103 (4 320) 2 783
3 965 002 (1 669 331) 2 295 671
2 107 197 351 352
34 675 –
5 218 –
2 147 090 351 352
– (91 013)
114 –
– (2 640)
114 (93 653)
90 286 (197 242) 2 260 580
– (2 481) 32 308
1 241 (1 036) 2 783
91 527 (200 759) 2 295 671
Mining plant, equipment and development cost R000
Decommissioning asset R000
Motor vehicles R000
Total R000
3 644 818 (1 537 621) 2 107 197
52 628 (17 953) 34 675
9 743 (4 525) 5 218
3 707 189 (1 560 099) 2 147 090
1 983 761 343 846
33 545 –
10 308 478
2 027 614 344 324
– (117 989)
3 483 –
– (6 570)
3 483 (124 559)
117 989 (187 410) (33 000) 2 107 197
– (2 353) – 34 675
2 498 (1 496) – 5 218
120 487 (191 259) (33 000) 2 147 090
211
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
3. MINING PROPERTIES AND MINERAL RESOURCES Mining properties
Mineral resources*
Total
R000
R000
R000
– at cost
282 374
5 571 003
5 853 377
– accumulated depreciation
(153 223)
(46 826)
(200 049)
Balance at end of year
129 151
5 524 177
5 653 328
137 822
5 571 003
5 708 825
(8 671)
(46 826)
(55 497)
129 151
5 524 177
5 653 328
– at cost
282 374
5 571 003
5 853 377
– accumulated depreciation
(144 552)
–
(144 552)
Balance at end of year
137 822
5 571 003
5 708 825
146 430
4 390 703
4 537 133
–
1 180 300
1 180 300
63
–
63
(8 671)
–
(8 671)
137 822
5 571 003
5 708 825
Group – 30 June 2014
Reconciliation of movement in mining properties and mineral resources: – balance at beginning of year – depreciation charged for the year Balance at end of year Group – 30 June 2013
Reconciliation of movement in mining properties and mineral resources: – balance at beginning of year – reclassification from mineral resource held-for-sale – additions during the year – depreciation charged for the year Balance at end of year
NORTHAM ANNUAL INTEGRATED REPORT 2014
212
Mineral resource held-for-sale Balance at 1 July 2012 Carrying value of assets held-for-sale reclassified to mining properties and mineral resources Balance at 1 July 2013 Carrying value of assets held-for-sale reclassified to mining properties and mineral resources Balance at 30 June 2014
Mineral resources R000
Total R000
1 180 300
1 180 300
(1 180 300) –
(1 180 300) –
– –
– –
The aforementioned represented the agreement with Aquarius Platinum Limited and Aquarius Platinum (South Africa) Proprietary Limited to dispose of the mineral rights attached to the southern portion of Booysendal mine for an amount of R1.2 billion. The agreement lapsed during the previous financial year and the mineral resource was subsequently reclassified to mineral resources.
Company – 30 June 2014 – at cost – accumulated depreciation Balance at end of year Reconciliation of movement in mining properties and mineral resources: – balance at beginning of year – depreciation charged for the year Balance at end of year Company – 30 June 2013 – at cost – accumulated depreciation Balance at end of year Reconciliation of movement in mining properties and mineral resources: – balance at beginning of year – additions during the year – depreciation charged for the year Balance at end of year
Mining properties R000
Mineral resources* R000
Total R000
266 314 (153 223) 113 091
– – –
266 314 (153 223) 113 091
121 762 (8 671) 113 091
– – –
121 762 (8 671) 113 091
266 314 (144 552) 121 762
– – –
266 314 (144 552) 121 762
130 369 64 (8 671) 121 762
– – – –
130 369 64 (8 671) 121 762
* The mineral resources relate to the mining titles that were acquired in respect of the Booysendal mine.
213
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
4. BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTS Acquisitions in 2014 Acquisition of non-controlling interest On 1 July 2013, the company acquired an additional 10% of the voting shares in Northam Chrome Producers Proprietary Limited (NCP) for a consideration of R10 million. This represented an acquisition of non-controlling interest. Group
Non-controlling interest
Company
2014
2013
2014
2013
R000
R000
R000
R000
10 000
–
Non-controlling interest acquired
3 172
–
Adjustment to retained earnings
6 828
–
10 000
–
Purchase consideration transferred
Subsequent to year end, the remaining 20% non-controlling interest was acquired for a consideration of R50 million.
Acquisitions in 2013 Acquisition of subsidiary On 1 July 2012, the company acquired 70% of the voting shares in NCP, an unlisted company based in the town of Northam, and specialising in chrome recovery, for a cash consideration of R10 million. The group acquired NCP in order to capture benefits from chrome, a by-product of PGM. Assets acquired and liabilities assumed The fair values of the identifiable assets and liabilities of NCP as at the date of acquisition were: Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
Property, plant and equipment
–
10 495
Cash and cash equivalents
–
16 416
Trade receivables
–
1 442
Inventories
–
689
–
29 042
Assets
NORTHAM ANNUAL INTEGRATED REPORT 2014
214
Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
Long-term provisions
–
166
Short-term provisions
–
18
Liabilities
Trade payables
–
6 619
Tax payable
–
4 070
–
10 873
Total identifiable net assets
–
18 169
Non-controlling interest
–
(8 169)
Non-controlling interest's portion of the identifiable net assets
–
(5 173)
Non-controlling interest's portion of preacquisition dividends declared during the financial year
–
(2 996)
Purchase consideration transferred
–
10 000
The non-controlling interest in NCP has been determined as the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. NCP has contributed R103.6 million (2013: R129.8 million) of revenue and R73.0 million (2013: R105.6 million) to profit before tax for the group. Trade receivables are considered fully recoverable. No significant transaction costs were incurred with the acquisition of NCP.
215
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
5. INTEREST IN ASSOCIATES AND JOINT VENTURES Interest in associates and joint ventures comprises of a 7.5% interest in the Pandora joint venture (associate), a 50% interest in the Dwaalkop platinum project (joint venture), a 51% interest in the Kokerboom exploration project and a 20.3% interest in the issued share capital of Trans Hex Group Limited (associate). The percentage holdings remain unchanged from the prior year. Group Company
Dwaalkop joint venture Pandora joint venture/associate Trans Hex Group Limited
2014
2013
2014
2013
R000
R000
R000
R000
300 679 114 927 80 903 496 509
300 679 120 915 73 904 495 498
– 42 333 67 605 109 938
– 44 933 77 509 122 442
Details of the group’s share of the comprehensive income and financial position are set out in Annexure 2, which forms part of these notes. During the previous financial year the investment in Trans Hex Group Limited was transferred from Mvelaphanda Resources Proprietary Limited to Northam Platinum Limited.
6. INVESTMENTS IN SUBSIDIARIES Group
Dialstat Trading Proprietary Limited (1) Khumama Platinum Proprietary Limited (2) Mvelaphanda Resources Proprietary Limited (3) Norplats Properties Proprietary Limited (4) Northam Chrome Producers Proprietary Limited (5) Windfall 38 Properties Proprietary Limited (6) Balance at end of year
Company
2014
2013
2014
2013
R000
R000
R000
R000
* 5 566 000 161 619 * 20 000 * 5 747 619
* 5 566 000 225 514 * 10 000 * 5 801 514
During the year the investment in Mvelaphanda Resources Proprietary Limited was impaired to the value of R63.9 million (2013: R72.2 million), subsequent to the distribution of dividends of R60 million (2013: R62 million). The company holds 120 ordinary shares representing a 100% equity interest in Dialstat Trading Proprietary Limited. The company holds 405 ordinary shares representing a 100% equity interest in Khumama Platinum Proprietary Limited. (3) The company holds 217 881 101 ordinary shares representing a 100% equity interest in Mvelaphanda Resources Proprietary Limited. (4) The company holds 100 ordinary shares representing a 100% equity interest in Norplats Properties Proprietary Limited. (5) The company holds 80 (2013: 70) ordinary shares representing a 80% (2013: 70%) equity interest in Northam Chrome Producers Proprietary Limited. (6) The company holds 100 ordinary shares representing a 100% equity interest in Windfall 38 Properties Proprietary Limited. (1)
(2)
* Represents investment of less than R1 000.
All companies are incorporated in the Republic of South Africa, and with the exception of NCP, all companies are wholly-owned. Subsequent to year end the investment in NCP was increased to 100%. Details of the subsidiaries are contained in Annexure 3, which forms part of these notes. NORTHAM ANNUAL INTEGRATED REPORT 2014
216
7. UNLISTED INVESTMENTS Group
Available for sale investment
Company
2014
2013
2014
2013
R000
R000
R000
R000
6
6
6
6
The investment in Rand Mutual Assurance Company Limited was acquired a number of years ago to assist with the administration of occupational injuries and decease. The shares are disclosed at cost as the fair value is not available as these shares are not traded in an active market. Management is not planning to dispose of these shares.
8. LAND AND TOWNSHIP DEVELOPMENT Group 2014 Balance at beginning of year
Company 2013
2014
2013
R000
R000
R000
R000
15 553
43 849
–
–
Construction in progress
23
28
–
–
2 802
17 655
–
–
Disposals
(8 174)
(45 979)
–
–
Balance at end of year
10 204
15 553
–
–
Acquisitions
Township development comprising 411 residential erven (2013: 411 residential erven) with houses erected thereon in Northam, District of Thabazimbi, as well as 502 undeveloped erven (2013: 502 undeveloped erven) in Northam. These properties have been acquired in order to assist the group’s employees to acquire affordable housing. These erven are registered in the name of the company’s subsidiary, Norplats Properties Proprietary Limited (Norplats Properties). In 2014, 38 houses (2013: 97 houses) were sold in Mojuteng Township of Northam town during the year, totalling the number of houses sold to date at 359 (2013: 336), taking into account properties that have been surrendered.
217
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
9. LONG-TERM RECEIVABLES Group
Long-term receivables
Company
2014
2013
2014
2013
R000
R000
R000
R000
102 484
92 961
–
–
Current portion of long-term receivables (note 15)
(8 437)
(5 561)
–
–
Non-current portion of long-term receivables
94 047
87 400
–
–
This comprises balances due by employees in respect of Northam’s employee home ownership scheme under suspensive sale agreements. The loans to the employees bear interest at prime, and repayable over 15 years. In terms of the agreements, employees enjoy the full benefits of home ownership, and at such a time as the loan is paid off, the title to the houses will be transferred to the employees. As at 30 June 2014 there were no receivables (2013: R nil) which were impaired and fully provided for. The group has pledged the instalment sales agreements as security for the loan secured from Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO) (note 21).
10. INVESTMENTS HELD BY NORTHAM PLATINUM RESTORATION TRUST FUND The company contributes to a dedicated environmental restoration trust fund to provide for the estimated decommissioning and environmental restoration costs at the end of the mine’s life. The balance of the fund comprises: Group
Balance at beginning of year
2014
2013
2014
2013
R000
R000
R000
R000
40 948
35 689
33 913
31 231
2 774
3 114
603
806
Contributions made during the year Interest earned during the year (note 31) Balance at end of year
Company
2 746
2 145
2 275
1 876
46 468
40 948
36 791
33 913
The assets, which mainly consists of cash, of the fund are separately administered and the group’s right of access to these funds are restricted.
NORTHAM ANNUAL INTEGRATED REPORT 2014
218
11. ENVIRONMENTAL GUARANTEE INVESTMENT The balance of the fund comprises: Group 2014 Balance at beginning of year
Company 2013
2014
2013
R000
R000
R000
R000
42 407
35 720
35 965
31 523
Contributions made during the year
6 000
6 000
3 000
3 000
Management fees
(1 441)
(1 312)
(479)
(350)
Interest earned during the year (note 31) Balance at end of year
4 058
1 999
3 795
1 792
51 024
42 407
42 281
35 965
The Environmental Guarantee Investment policy was issued in terms of the insurance guarantee for R114.9 million (2013: R96.9 million) relating to the group and R49.0 million (2013: R31.0 million) for the company. The assets, which mainly consists of cash, of the fund are separately administered and the group’s right of access to these funds are restricted.
12. BUTTONSHOPE CONSERVANCY TRUST The balance of the fund comprises: Group 2014 Balance at beginning of year
Company 2013
2014
2013
R000
R000
R000
R000
10 126
9 775
Contributions received during the year
141
48
Interest earned during the year (note 31)
576
351
Less expenditure incurred during the year Balance at end of year
(141)
(48)
10 702
10 126
The trust was established as a conservancy trust by Northam, with the principal objective of engaging in the conservation, rehabilitation and/or protection of the natural environment, including flora, fauna and the biosphere as well as promoting the establishment of, and education and training programmes relating to, environmental awareness, greening, cleanup and/or sustainable development projects in respect of Portion 1 of the Farm Buttonshope 51, Registration Division JT, Mpumalanga Province, and which may involve the participation by local communities. The aforementioned property is owned by Micawber 278 Proprietary Limited (Micawber), an indirect subsidiary of Northam. An initial contribution of R10 million was required by Micawber in terms of the trust agreement, which was paid in previous financial years.
219
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
12. BUTTONSHOPE CONSERVANCY TRUST continued Funds of R2.5 million (2013: R10.1 million) are invested with Standard Bank Limited in a call fund account and R8.1 million (2013: Rnil) is held in an Extra Income Fund with Stanlib Collective Investments Limited. The assets of the trust are separately administered and the group’s right of access to these funds are restricted.
13. SUBSIDIARY LOANS Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
24 456
24 456
4 556 577
4 091 830
Long-term subsidiary loans receivable Norplats Properties Proprietary Limited The loan bears interest at 2.0% below South African prime interest rate and may only be repaid once the loan from FMO has been repaid by Norplats Properties Proprietary Limited (note 21) by no later than 30 September 2026. Short-term subsidiary loans receivable Micawber 278 Proprietary Limited Mvelaphanda Resources Proprietary Limited
945
–
Norplats Properties Proprietary Limited
16 284
12 384
Windfall 38 Properties Proprietary Limited
15 167
15 424
1
1
4 588 974
4 119 639
4 613 430
4 144 095
Broad Brush Investments 2 Proprietary Limited
–
(717)
Total subsidiary loans payable
–
(717)
Dialstat Trading 133 Proprietary Limited Total subsidiary loans receivable Short-term subsidiary loans payable
The loans to Broad Brush Investments 2, Dialstat Trading 133, Mvelaphanda Resources and the short term portion of the Norplats Properties Proprietary Limited are unsecured and interest free, repayable on demand, and therefore, stated as current. The loans to Micawber 278, the long term portion of the Norplats Properties and Windfall 38 Properties bear interest at 2.0% below the South African prime interest rate, repayable on demand, and therefore, stated as current. Details of the subsidiaries are set out in Annexure 3, which forms part of these notes.
NORTHAM ANNUAL INTEGRATED REPORT 2014
220
14. INVENTORIES Inventories comprise: Group
Metals on hand and in transit – at cost (2013 net realisable value)
2014
2013
2014
2013
R000
R000
R000
R000
1 007 945
825 733
647 491
825 733
176
274
–
–
68 732
52 523
53 492
46 600
1 076 853
878 530
700 983
872 333
Chrome finished product – at cost Consumable stores – at cost Total inventories at the lower of cost and net realisable value
Company
The cost of sales figure disclosed in the statement of comprehensive income approximates the cost of inventory expensed. Included in cost of sales is R1.1 million (2013: R0.1 million) for consumable stores written down to net realisable value and R325.3 million (2013: R72.7 million) recognised as an expense for metals on hand and in transit carried at net realisable value.
15. TRADE AND OTHER RECEIVABLES Trade and other receivables comprise: Group 2014 Trade receivables
Total trade and other receivables
2013
R000
R000
R000
R000
215 965
107 159
213 899
5 698
58 124
5 088
57 346
61 702
139 838
20 377
20 799
Current portion of long-term receivables (note 9) Other
2014
108 875
Prepayments Value added tax
Company 2013
8 437
5 561
–
–
59 960
128 432
59 562
41 915
244 672
547 920
192 186
333 959
Trade receivables are unsecured, non-interest-bearing and are generally on 30 day terms except for metal debtors who have payment terms of between 2 – 5 days. As at 30 June 2014 there were no receivables (2013: R nil) which were impaired and fully provided for. The age analysis of trade receivables as at 30 June 2014 is set out in Annexure 1, which forms part of these notes.
221
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
16. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise: Group 2014 Cash at banks and on hand
Company 2013
2014
2013
R000
R000
R000
R000
135 555
132 501
108 441
42 936
Short-term deposits
530 619
166 079
526 319
166 079
Cash and cash equivalents
666 174
298 580
634 760
209 015
(118)
–
(118)
–
666 056
298 580
634 642
209 015
Bank overdraft Total cash and cash equivalents including bank overdrafts
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and six months, depending on the immediate cash requirements of the group, and earn interest at the respective short-term deposit rates. At 30 June 2014 the group had R1.4 billion (2013: R750 million) of undrawn committed borrowing facilities. Included in cash and cash equivalents is R4.3 million (2013: R4.3 million) that has been pledged to FMO by Norplats Properties Proprietary Limited (Norplats Props) as a debt service reserve account (the account) as security for servicing of the loan from FMO (note 21). In accordance with the FMO agreement, Norplats Props shall maintain at all times a balance in the account equal to not less than the sum of all payments of principal and interest on each loan which will be due and payable during the next relevant period. Norplats Props may withdraw amounts from the account only for the purpose of paying principal and interest under the agreement. Norplats Props shall not withdraw funds from the account for any other purpose without the written consent of FMO.
NORTHAM ANNUAL INTEGRATED REPORT 2014
222
17. STATED CAPITAL/SHARE CAPITAL AND SHARE PREMIUM Group and Company
Group and Company
2014
2013
R000 Authorised share capital
Number of shares
R000
Number of shares
5 450
545 000 000
5 450
545 000 000
3 825
382 496 990
3 825
382 496 990
1
89 100
1
89 100
3 826
382 586 090
3 826
382 586 090
Issued share capital At 1 July 2012 Shares issued during the year for cash on the exercise of share options At 1 July 2013 Share premium At 1 July 2012
8 593 823
8 593 823
2 006
2 006
At 1 July 2013
8 595 829
8 595 829
Share capital and share premium at 1 July 2013
8 599 655
Transfer to stated capital
(8 599 655)
(8 599 655)
Stated capital at 1 July 2013
8 599 655
8 599 655
Shares issued during the year for cash on the exercise of share options
Shares issued during the year for cash in terms of rights issue Stated capital at 30 June 2014
382 586 090
579 033
15 000 000
9 178 688
397 586 090
8 599 655
382 586 090
During the previous financial year share capital and share premium were converted to no par value shares and are now referred to as stated capital. During the year no shares (2013: 89 100 shares) were allotted and issued it terms of the rules of Northam Share Option Scheme at a value of Rnil (2013: R2.0 million). 15 million shares were issued during the year in terms of a fully subscribed rights issue. This resulted in the issued share capital increasing to 397 586 090 shares. Details of stated capital held by the directors are contained in the Directors’ Report.
223
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
18. EQUITY COMPENSATION RESERVE Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
Balance at beginning of year
–
202 634
–
202 634
Increase in equity compensation reserve
–
13 807
–
13 807
Transfer to retained earnings
–
(92 737)
–
(92 737)
Transfer to share based payment liability (note 22)
–
(123 704)
–
(123 704)
Balance at end of year
–
–
–
–
The group has a Share Option Scheme (the Scheme) and Share Incentive Plan (the Plan) under which options to subscribe for the group’s shares were granted to certain executives and senior employees. Options were offered at the volume weighted average price at which Northam shares traded on the JSE up to the trading day immediately preceding the offer date. In terms of the rules of the Scheme, option holders may exercise 50% of their options two years after the offer date and 100% of their options three years after the offer date. Options not exercised within seven years of the offer date shall lapse. The Scheme has been discontinued owing to its dilutionary nature although share options issued before its discontinuance will be allowed to run their course. The shares awarded in terms of the rules of the Plan comprise: retention shares, which vest after two years with no performance criteria, and performance shares, which vest after three years. The final number of performance shares that an employee receives is subject to certain performance criteria being met. During the previous financial year the rules to both the Scheme and the Plan were amended to allow for a cash-settlement option. Consequently, both the Scheme and Plan are now accounted for as cash-settled share based payments based on the historical number of shares retained by employees. Details thereof can be found under note 22. Refer to Annexure 5, which forms part of these notes, for further details on the equity settled and cash settled share-based payments.
NORTHAM ANNUAL INTEGRATED REPORT 2014
224
19. DEFERRED TAX The principal components of the deferred tax liability are as follows: Group
Deferred tax liabilities Property, plant and equipment Metal inventory Restoration Trust Fund Section 24C allowance in respect of long-term receivables Deferred tax assets Employee benefits relating to leave pay and bonus provisions Decommissioning and environmental restoration provisions Share-based payment liability Calculated loss Net deferred tax liability The charge in the deferred tax balance is reconciled as follows: Deferred tax liability at beginning of year Charge for the year (per note 33) Temporary differences in respect of property, plant and equipment Depreciation component included in metals on hand and in transit Temporary differences in respect of restoration trust fund Section 24C allowance in respect of long-term receivables Calculated loss Temporary difference in respect of employee benefits Temporary difference in respect of decommissioning and environmental restoration provisions Temporary difference in respect of share-based payment liabilities Net deferred tax liability at end of year
Company
2014
2013
2014
2013
R000
R000
R000
R000
585 184 12 662 10 301
547 872 16 971 –
596 812 12 662 10 301
559 675 16 971 –
8 977 617 124
3 746 568 589
– 619 775
– 576 646
(43 441)
(39 339)
(43 036)
(39 048)
(27 155) (42 807) (1 624) (115 027) 502 097
(25 330) (27 867) – (92 536) 476 053
(27 114) (42 807) – (112 957) 506 818
(25 284) (27 867) – (92 199) 484 447
476 053 26 044
504 628 (28 575)
484 447 22 371
500 365 (15 918)
37 312
13 536
37 137
25 339
(4 309)
2 795
(4 309)
2 795
10 301
–
10 301
–
5 231 (1 624)
(517) –
– –
– –
(4 102)
(12 329)
(3 988)
(12 038)
(1 825)
(4 193)
(1 830)
(4 147)
(14 940)
(27 867)
(14 940)
(27 867)
502 097
476 053
506 818
484 447
225
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
19. DEFERRED TAX continued The group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Micawber 278 Proprietary Limited – deferred tax asset A deferred tax asset has been raised for the first time for items included in Micawber 278 Proprietary Limited as the statutory entity in which the Booysendal mine is housed. Taxable profits will be generated in the foreseeable future against which the deferred tax asset can be utilised. The amount of unrecognised deferred tax assets in the previous financial year amounted to R8.7 million. As the mine is now in production a deferred tax asset has been raised in the current year. Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
56 533
–
692
–
Deferred tax assets Property, plant and equipment Employee benefits relating to leave provisions Decommissioning and environmental restoration provisions
12 803
–
2 204
–
50 823
–
Share-based payment liability Calculated loss
123 055 Deferred tax liability Metal inventory
(21 065)
–
Restoration Trust Fund
(2 710)
–
Employee benefits relating to bonus provisions
(3 206)
–
Net deferred tax asset
NORTHAM ANNUAL INTEGRATED REPORT 2014
(26 981)
–
96 074
–
226
Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
–
–
The charge in the deferred tax balance is reconciled as follows: Deferred tax liability at beginning of year Charge for the year (per note 33)
96 074
–
Temporary differences in respect of property, plant and equipment
56 533
–
Depreciation component included in metals on hand and in transit
(21 065)
–
Temporary differences in respect of restoration trust fund
(2 710)
–
Calculated loss
50 823
–
Temporary difference in respect of employee benefits
(2 514)
–
Temporary difference in respect of decommissioning and environmental restoration provisions
12 803
–
Temporary difference in respect of share-based payment liabilities
2 204
–
Net deferred tax liability at end of year
96 074
–
227
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
20. LONG-TERM PROVISIONS Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
105 653
91 659
75 139
67 262
114
9 600
114
3 483
Provision for decommissioning costs Balance at beginning of year Change in estimate and capitalisation of decommissioning costs as part of the development of the Booysendal mine (note 2) Unwinding of discount (note 28) Balance at end of year
7 233
4 394
5 149
4 394
113 000
105 653
80 402
75 139
27 614
19 459
15 160
8 230
–
167
–
–
Provision for restoration costs Balance at beginning of year Restoration provision acquired under a business combination Capitalisation of restoration cost as part of the development of the Booysendal mine (note 2) Change in estimate (note 28) Unwinding of discount (note 28) Balance at end of year Total long-term provisions
–
1 058
–
–
(114)
6 272
59
6 272
2 209
658
1 213
658
29 709
27 614
16 432
15 160
142 709
133 267
96 834
90 299
In terms of, inter alia, the Mineral and Petroleum Resources Development Act no 28, of 2002, the company is required to make financial provision for its decommissioning and restoration costs that will be incurred upon the cessation of mining activities. The future value of environmental obligation will be paid over to Northam Platinum Restoration Trust fund (note 10) over the remaining life of the Zondereinde mine which is currently estimated at 16 years, and over the remaining life of the Booysendal mine which is currently estimated at over 25 years. Financial provision is not however required to be made for the decommissioning of certain structures, such as housing, which may have alternative use.
NORTHAM ANNUAL INTEGRATED REPORT 2014
228
Group 2014
Company 2013
2014
2013
R000
R000
R000
R000
Provisions before funding
142 709
133 267
96 834
90 299
Less: Northam Platinum Restoration Trust Fund (note 10)
(46 468)
(40 948)
(36 791)
(33 913)
Less: Environmental Guarantee Investment (note 11)
(51 024)
(42 407)
(42 281)
(35 965)
Net present value of unfunded environmental rehabilitation obligations
45 217
49 912
17 762
20 421
160 450
150 211
108 432
101 519
43 106
40 051
22 159
20 444
Total decommissioning and restoration obligation
203 556
190 262
130 591
121 963
Less: Obligation not requiring financial provision
(46 096)
(43 057)
(46 096)
(43 057)
157 460
147 205
84 495
78 906
The future value of the environmental rehabilitation obligation will be paid over to the Northam Platinum Restoration Trust Fund (note 10) over the remaining life of the mines, which is currently estimated at 16 years for the Zondereinde mine and over 25 years for the Booysendal mine. The present value of the environmental restoration obligation is determined by applying a pre-tax discount rate of 8.0% (2013: 8.0%) and a longterm inflation rate of 6.0% (2013: 6.0%) over the remaining life of the mines. The decommissioning and restoration costs are reviewed on an annual basis, and at the reporting date the net unfunded future obligations were as follows: Undiscounted decommissioning obligations Undiscounted restoration obligations
Less: Funds held by Northam Platinum Restoration Trust Fund (note 10)
(46 468)
(40 948)
(36 791)
(33 913)
Environmental Guarantee Investment (note 11)
(51 024)
(42 407)
(42 281)
(35 965)
Total unfunded future rehabilitation obligations
59 968
63 850
5 423
9 028
The group has procured the issue of an insurance guarantee for R114.9 million (2013: R96.9 million) in respect of the unfunded decommissioning and restoration costs, of which R49.0 million (2013: R31.0 million) relates to the company.
229
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
21. LONG-TERM LOANS Group
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO) Current portion of long-term loans Total long-term loans
Company
2014
2013
2014
2013
R000
R000
R000
R000
47 564 (3 801) 43 763
51 365 (3 801) 47 564
– – –
– – –
The loan, which is repayable in equal bi-annual instalments over 15 years, bears interest at 3.5% above JIBAR, with the last payment due 30 September 2026. The group has pledged the instalment sales agreement as security for the loan (note 9). The original loan withdrawal amounted to R36.5 million repayable over 30 biannual payments made in September and March every year. A second withdrawal was made in November 2012 for R20.6 million, also repayable over 30 biannual payments made in September and March every year.
22. SHARE-BASED PAYMENT LIABILITY
Share-based payment liability at modification date Share-based payment liability reversal Total share-based payment liability at year-end Short-term share-based payment liability Long-term share-based payment liability
Group 2014 2013 R000 R000 – 123 704 – (16 097) 168 835 (69 942) 98 893
107 607 (16 665) 90 942
Company 2014 2013 R000 R000 – 123 704 – (24 178) 152 881 (63 449) 89 432
99 526 (14 518) 85 008
The group operates the Northam Share Option Scheme (the Scheme) as well as the Northam Share Incentive Plan (the Plan). The Scheme has been discontinued owing to its dilutionary nature although share options issued before its discontinuance will be allowed to run their course. During the previous financial year both the Scheme and Plan was amended to provide employees with the option to either elect for settlement in shares or cash. The change was made to avoid the ongoing dilution of the BEE position and approval was granted by the JSE during March 2013. The previous share Scheme and Plan was considered as equity-settled share based payment transactions. The fair value of these equity instruments were measured at the grant date and included in equity as an equity compensation reserve. Where the counterparty has a right to elect for the settlement in either shares or cash, IFRS 2 regards the transaction as a compound transaction to which split accounting must be applied. The general principle is the
NORTHAM ANNUAL INTEGRATED REPORT 2014
230
transaction must be analysed into a liability component (the counterparty’s right to demand settlement in cash) and an equity component (the counterparty’s right to demand settlement in shares). Management considered the requirements and determined that based on historical information very few individuals, if any, have kept their Northam shares, and that the majority of the outstanding options, performance and retention shares will be settled in cash and should therefore be accounted for as a liability rather than an equity compensation reserve. The short term portion is determined based on the options that will expire in the next 12 months and retention and performance shares which will vest within the next 12 months. Refer to Annexure 5, which forms part of these notes, for further details on the share based payments.
23. DOMESTIC MEDIUM TERM NOTES AND REVOLVING CREDIT FACILITIES
Domestic medium term notes
Group 2014 2013 R000 R000 1 370 000 1 250 000
Company 2014 2013 R000 R000 1 370 000 1 250 000
The group raised term debt through the issue of R1.25 billion 3 year senior unsecured floating rate notes (notes) under its R2 billion Domestic Medium Term Note Programme dated 3 August 2012. The notes attract a coupon of 350 basis points above three month JIBAR and interest payments are due quarterly. The notes will mature on 4 September 2015. The issue is guaranteed by Northam’s wholly owned subsidiaries, Micawber 278 Proprietary Limited and Khumama Platinum Proprietary Limited, who are the statutory entities in which the Booysendal mine development is housed. During the year the company raised an additional amount of R120 million in the domestic capital market through a tap issue which will also mature on 4 September 2015. The interest rate for the tap issue notes was placed at a lower rate of JIBAR plus 330 basis points, which was accounted for in the issue price. Group 2014 2013 R000 R000 – 250 000
Revolving credit facilities
Company 2014 2013 R000 R000 – 250 000
The group entered into a facility agreement with Nedbank Limited in August 2011 regarding a R1.0 billion 5 year senior unsecured revolving credit facility (the facility). The facility is available to be utilised by way of periodic drawdown requests until the earlier of 1 month prior to final maturity and cancellation of the agreement. Interest is calculated at JIBAR plus 2.80% for each applicable interest period. This facility matures August 2016. During the year the group secured an additional R400 million revolving credit facility with Nedbank Limited, bringing the total available facility to R1.4 billion. The additional facility is only available until March 2015 and certain covenant conditions were relaxed until December 2014 in terms of the agreement with the bank.
231
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
24. TRADE AND OTHER PAYABLES Trade and other payables comprise: Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
Trade payables
312 499
319 397
266 257
280 700
Accruals
403 540
364 577
356 069
362 147 65 000
Accrual for acquisition of participating interest in the Pandora joint venture
–
65 000
–
13 141
12 804
–
–
Other
148 185
250 326
129 251
118 803
Total trade and other payables
877 365
1 012 104
751 577
826 650
Receiver of revenue – value added tax
Trade payables are unsecured, non-interest bearing and are normally settled on 30 day terms.
25. SHORT-TERM PROVISIONS Group
Company
2014
2013
2014
2013
R000
R000
R000
R000
104 670
96 466
104 670
96 466
Provision for leave pay Balance at beginning of year Additional amounts raised
194 968
120 938
188 008
120 938
Utilised
(180 683)
(112 734)
(180 683)
(112 734)
Balance at end of year
118 955
104 670
111 995
104 670
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the financial reporting date based on the basic cost of employment and available leave entitlement at that date.
NORTHAM ANNUAL INTEGRATED REPORT 2014
232
26. TORO EMPLOYEE EMPOWERMENT TRUST The company entered into an agreement with the representative unions at the Northam mine in terms of which the company has undertaken to contribute 4% of its after tax profits to the Toro Employee Empowerment Trust, providing Northam’s Zondereinde mine unskilled and semi-skilled employees an opportunity to participate in the profits of the company. Eligible employees will receive payment at the end of each five year cycle, starting from September 2013. Group 2014 2013 R000 R000 127 170 96 863 4 641 7 402 9 189 24 006 (54 995) (1 415) 8 229 314 94 234 127 170 83 180 (75 533) 51 637 63 884 13 675 19 067 1 052 6 379 (315) (36 278) (54 995) (1 415) 11 054 51 637
Assets at fair market value as at 1 July Interest income on assets Employer contributions Benefits paid Actuarial gain/(loss) Assets at fair market value as at 30 June Unrecognised due to Paragraph 64 and 65 limit* Defined benefit obligation as at 1 July Service cost Interest cost Actuarial (gain)/ loss Benefits paid Defined benefit obligation as at 30 June Asset/(liability) recognised on the statement of financial position
–
–
Company 2014 2013 R000 R000 – – – – – – – – – – – – – – – – – – – – – – – – – – –
–
* The “Paragraph 64 and 65 limit” ensure the asset to be recognised on the company’s statement of financial position is subject to a maximum of the sum of any unrecognised actuarial losses, past-service costs and the present value of any economic benefits available to the company in the form of refunds or reductions in future contributions.
The company is not entitled to any refund from the fund and hence the economic benefits available to the company is nil.
27. REVENUE Total revenue comprises:
Sales revenue Investment income (note 31) Sundry revenue (note 32) Total revenue
Group 2014 2013 R000 R000 5 339 397 4 420 977 59 963 33 434 78 198 56 064 5 477 558 4 510 475
Company 2014 2013 R000 R000 4 268 436 4 243 420 261 274 174 311 173 202 161 693 4 702 912 4 579 424
Sales revenue comprises of the turnover of platinum group metals and related precious, base metals and ferrous metals, net of value added tax, trade discounts and intra-group sales. 233
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
28. OPERATING COSTS Group 2014 R000 Operating costs comprise mining and concentrating costs, excluding depreciation, and consist of the following principal prime cost categories: Labour (note 39) Stores Utilities Sundries (including fees paid to non-executive directors) Provision for decommissioning and restoration costs (note 20) Total operating costs The analysis of operating costs by principal activity is as follows: – Mining operations – Smelter operations – Base metal removal plant operations – Overheads – P rovision for decommissioning and restoration costs (note 20) Sundry operating costs include the following: Directors' remuneration – Non-executive fees – Executive remuneration Share-based payment expense Share-based payment liability reversal (note 22) Operating lease payments – Office equipment – Premises
2013 R000
1 499 144 735 647 443 016
1 289 703 701 268 344 463
1 354 749 652 232 372 396
1 275 927 701 268 342 802
848 850
479 336
305 074
428 112
9 345 3 536 002
11 324 2 826 094
6 421 2 690 872
11 324 2 759 433
2 814 611 77 266 38 769 596 011
2 117 255 97 532 64 053 535 930
2 112 238 77 266 38 769 456 178
2 117 255 97 532 64 053 469 269
9 345 3 536 002
11 324 2 826 094
6 421 2 690 872
11 324 2 759 433
3 701 58 652 139 081 –
3 969 12 679 13 807 (16 097)
3 701 58 652 117 739 –
3 969 12 679 13 807 (24 178)
2 475 1 456
1 813 3 422
1 063 1 454
771 1 040
Details of directors’ remuneration are contained in the Directors’ Report on page 153.
NORTHAM ANNUAL INTEGRATED REPORT 2014
Company 2014 2013 R000 R000
234
29. DEPRECIATION AND WRITE-OFFS Depreciation of mining properties and mineral resources as well as plant and equipment consists of the following:
Mining property and mineral resources Property, plant and equipment and mine development costs Decommissioning asset Vehicles Write-off of assets Total depreciation and write-offs
Group 2014 R000 55 497 383 068 4 127 3 183 – 445 875
2013 R000 8 671 189 043 2 353 1 623 33 000 234 690
Company 2014 2013 R000 R000 8 671 8 671 197 242 2 481 1 036 – 209 430
187 410 2 353 1 496 33 000 232 930
30. SHARE OF EARNINGS FROM ASSOCIATES AND JOINT VENTURES/DIVIDENDS RECEIVED Group 2014 R000 Share of earnings from associates/dividends received (refer Annexure 2)
3 464
2013 R000 13 783
Company 2014 2013 R000 R000 69
16 740
31. INVESTMENT REVENUE Investment revenue consists of the following:
Interest received on cash and cash equivalents Interest received from subsidiary Interest received on instalment sale agreement Interest received in Northam Platinum Restoration Trust Fund (note 10) Interest received in Environmental Guarantee Investment (note 11) Interest received in Buttonshope Conservancy Trust (note 12) Total investment revenue
Group 2014 R000 43 802 – 8 781
2013 R000 21 855 – 7 084
Company 2014 2013 R000 R000 35 516 17 468 219 688 153 175 – –
2 746
2 145
2 275
1 876
4 058
1 999
3 795
1 792
576 59 963
351 33 434
– 261 274
– 174 311
235
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
32. NET SUNDRY INCOME Net sundry income is arrived taking into account the following:
Dividends received Treatment charges in respect of concentrates purchased Sundry revenue (note 27) Rent received Sale of scrap Insurance claim Other income Foreign currency translation gain Total sundry income Sundry expenditure Loss on sale of property, plant and equipment Amortisation of participation interest of the Pandora joint venture Write-down on investment Other expenditure Total sundry expenditure Net sundry income
NORTHAM ANNUAL INTEGRATED REPORT 2014
Group 2014 R000 –
2013 R000 224
Company 2014 2013 R000 R000 95 004 105 853
78 198 78 198 5 926 2 675 – 4 829 32 107 123 735
55 840 56 064 5 377 2 145 4 318 2 168 18 290 88 362
78 198 173 202 5 870 2 620 – 2 535 32 107 216 334
55 840 161 693 5 377 2 145 4 318 1 244 18 290 193 067
(1 118)
(508)
(829)
(383)
(2 600) – (23 006) (26 724) 97 011
(2 600) – (25 146) (28 254) 60 108
(2 600) (73 799) (12 214) (89 442) 126 892
(2 600) (62 270) (5 413) (70 666) 122 401
236
33. TAXATION Group 2014 R000 Current income tax Current income tax charge Adjustment in respect of current income tax of previous year Deferred tax Relating to origination and reversal of temporary differences (note 19) Relating to calculated tax losses (note 19) Income tax expense reported in profit or loss Taxation comprises: Mining tax Non-mining tax Tax on share of earnings from associate – current year Capital gains tax Adjustment in respect of prior years Temporary differences Calculated loss Total taxation A reconciliation of the standard rate of South African tax compared with that charged in the statement of comprehensive income is set out below: South African normal tax Adjustments in respect of prior periods Expenditure disallowed and other adjustments Other Effective tax rate
2013 R000
Company 2014 2013 R000 R000
102 829
197 346
78 202
163 704
(6 600) 96 229
283 197 629
(6 703) 71 499
1 363 165 067
(17 583) (52 447) 26 199
(28 575) – 169 054
22 371 – 93 870
(15 918) – 149 149
32 437 70 327
131 883 65 300
32 437 45 700
131 883 31 662
65 – (6 600) (17 583) (52 447) 26 199 %
159 4 283 (28 575) – 169 054 %
65 – (6 703) 22 371 – 93 870 %
159 – 1 363 (15 918) – 149 149 %
28.0 (14.4) 43.6 – 57.2
28.0 – 0.3 (4.0) 24.3
28.0 (2.0) 2.2 – 28.2
28.0 0.2 (2.7) (4.0) 21.5
237
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
33. TAXATION continued 33.1 Mining tax The current rate of mining tax applicable to the company is 28% (2013: 28%).
33.2 Non-mining tax Non-mining income is subject to a rate of 28% (2013: 28%).
33.3 Deferred tax Deferred tax is provided at the statutory rate of 28% (2013: 28%) for all temporary differences.
33.4 Dividends withholding tax Dividends withholding tax is levied at 15% (2013: 15%) for local shareholders.
33.5 Capital gains tax The effective capital gains tax rate payable on any gains realised on the disposal of investments or mining properties is 18.7% (2013: 18.7%).
33.6 Tax on share of earnings from associate Mining and non-mining income is subject to a rate of 28% (2013: 28%).
34. EARNINGS AND DIVIDEND PER SHARE Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares of 390 969 652 (2013: 382 560 902) outstanding during the year. Headline earnings per share are based on headline earnings and are reconciled to profit attributable to shareholders as follows: Group 2014 2013 R000 R000 9 486 504 907
Profit attributable to shareholders Loss/(profit) on sale of property, plant and equipment Property, plant and equipment written-off Insurance claim Profit on sale of associate's property, plant and equipment Tax effect on above Headline earnings
1 118 – –
(1 769) 33 000 (4 318)
(2 347) 344 8 601
(2 118) (7 520) 522 182
Fully diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. NORTHAM ANNUAL INTEGRATED REPORT 2014
238
Fully diluted headline earnings per share are based on the headline earnings and the average number of potential diluted shares in issue. Group 2014 R000 –
Dividends per share (cents) The number of potential diluted shares are calculated as follows: Average number of ordinary shares in issue during the year Average number of Northam Share Option Scheme options and Incentive Scheme shares outstanding during the year* Average number of potential diluted ordinary shares in issue
2013 R000 –
390 969 652
382 560 902
– 390 969 652
– 382 560 902
* The effect of the Northam Share Option and Incentive Schemes were not included as the options/incentive shares are cash settled and therefore will no longer have a dilutive impact.
35. CASH GENERATED FROM OPERATIONS
Profit before taxation Adjusted for non-cash items Loss on disposal of property,plant and equipment Depreciation and write-off Increase in long-term provisions Increase in long-term receivables Change in short-term provisions Share based payment expense Share of profit from associate Amortisation of participation interest in the Pandora joint venture Fair value adjustment of investment in associate/impairment of investment in subsidiary Interest paid Interest received Dividend received Total cash generated from operations
Group 2014 2013 R000 R000 45 796 697 055
Company 2014 2013 R000 R000 333 043 692 167
1 118 445 875 9 442 (6 647) 14 285 61 228 (3 464)
508 234 690 22 149 (22 463) 8 204 (2 290) (13 783)
829 209 430 6 535 – 7 325 53 355 (69)
383 232 930 14 807 – 8 204 (10 371) (16 740)
2 600
2 600
2 600
2 600
– 176 124 (52 583) – 693 774
215 17 946 (29 290) (224) 915 317
73 799 170 690 (255 204) (95 004) 507 329
62 270 119 669 (170 643) (105 853) 829 423
239
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
36. CHANGE IN WORKING CAPITAL
Inventories Reclassification of development tonnes to inventory (note 2) Trade and other receivables Trade and other payables
Group 2014 2013 R000 R000 (198 323) (67 347)
Company 2014 2013 R000 R000 171 350 (61 150)
300 318 303 248 (134 829) 270 414
– 141 773 (75 073) 238 050
– (244 652) 30 895 (281 104)
– (178 082) (68 818) (308 050)
37. TAXATION PAID
Balance owing at beginning of year Profit or loss charge Write-off of state share of profits* Balance owing at end of year
Group 2014 2013 R000 R000 147 318 88 992 96 229 197 629 1 453 – (113 608) (147 318) 131 392 139 303
Company 2014 2013 R000 R000 52 848 (1 755) 71 499 165 067 1 453 – (15 390) (52 848) 110 410 110 464
* This relates to an overpayment of state share of profits in 2010. The company is attempting to recover this from SARS.
38. COMMITMENTS Group 2014 R000 Capital Expenditure – Booysendal mine – Authorised but not contracted – Contracted Capital Expenditure – Zondereinde mine – Authorised but not contracted – Contracted Information Technology Outsource Service Providers – Due within one year – Due within two to five years Operating lease rentals – office equipment – Due within one year – Due within two to five years Operating lease – premises – Due within one year – Due within two to five years – More than five years Housing development – Authorised Unutilised loan facility granted to subsidiary Bank guarantees issued
NORTHAM ANNUAL INTEGRATED REPORT 2014
2013 R000
Company 2014 2013 R000 R000
338 204 145 186
54 801 477 281
– –
– –
172 316 154 060
223 071 127 085
172 316 154 060
223 071 127 085
10 293 21 460
9 710 31 753
10 293 21 460
9 710 31 753
1 947 1 004
1 117 915
1 126 1 004
847 915
4 585 13 588 5 959
3 116 11 098 11 900
1 201 2 233 –
734 – –
4 800
4 000
78 736
73 210
4 800 – 78 736
4 000 – 49 240
240
These commitments will be funded from a combination of internal retentions and debt as more fully described in the financial review and Directors’ Report.
39. EMPLOYEE BENEFITS The aggregate earnings and benefits of employees, including directors, were: Group 2014 R000 Salaries, wages, share-based payments and other benefits Contributions to retirement benefit funds Contributions to health-care funds Employee empowerment scheme Total labour Fees paid to non-executive directors Total labour including fees paid to non-executive directors
2013 R000
Company 2014 2013 R000 R000
1 331 209 99 685 59 061 9 189 1 499 144 3 701
1 119 286 94 050 52 361 24 006 1 289 703 3 969
1 193 532 94 160 57 868 9 189 1 354 749 3 701
1 105 510 94 050 52 361 24 006 1 275 927 3 969
1 502 845
1 293 672
1 358 450
1 279 896
40. RELATED PARTIES Details of transactions and period end balances with those entities identified as related parties are contained in Annexure 4 which forms part of these notes.
41. SEGMENTAL REPORTING The group has two business segments, the Zondereinde mine and the Booysendal mine. The group’s operating committee looks at the performance of the Zondereinde and Booysendal mines when allocating resources and assessing the segmental performances. Details of the financial position, sales revenue and operating contribution of the two segments are set out in Annexure 6 which forms part of these notes.
42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The group’s principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the group’s operations and to provide guarantees to support its operations. The group has various financial assets such as trade receivables, investments, long-term receivables and cash and cash equivalents, which arise directly from its operations. The group may enter into derivative transactions, being forward currency contracts or metal hedging contracts. The purpose is to manage the currency risks arising from the group’s operations and its sources of finance. The main risks arising from the group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk, commodity-price risk and credit risk. The board of directors reviews and agrees policies for managing each of these risks which are summarised below:
(a) Market risk Market risk is the risk that fair value of future cashflows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest-rate risk,currency risk, commodity-price risk and other price risk, such as equity risk. 241
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued (b) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. The group has transactional currency exposures. Such exposure arises from sales in currencies other than the unit’s functional currency. The majority of the group’s sales are denominated in currencies other than functional currency of the operating unit making the sale, whilst most of the costs are denominated in the unit’s functional currency, the South African Rand. The following table demonstrates the sensitivity to a possible change in the US dollar exchange rate with all other variables held constant, of the group’s profit before tax due to changes in the fair value of monetary assets and liabilities.
Weakening by 10% Strengthening by 10% At year end the foreign currency value of items under their respective balance sheet classifications were as follows: – Accounts receivable – US$ – Cash and cash equivalents – US$ – Accounts payable – E Exchange rates at year end: – ZAR/US$ – ZAR/E
Group 2014 2013 R000 R000 16 424 16 386 (16 424) (16 386)
Company 2014 2013 R000 R000 16 424 16 386 (16 424) (16 386)
5 327 10 150 –
12 763 4 122 (389)
5 327 10 150 –
12 763 4 122 (389)
10.61 14.50
10.01 13.05
10.61 14.50
10.01 13.05
(c) Commodity price risk The group is subject to commodity price risks as a result of the prices at which it sells its products being determined by reference to international commodity exchanges. Group 2014 R000 The following is an indication of the effect that changes in the commodity prices would have on the profit before tax: – Increase of 10% – Decrease of 10%
10 716 (10 716)
The group did not enter into any hedging contracts during the year.
NORTHAM ANNUAL INTEGRATED REPORT 2014
242
2013 R000
21 390 (21 390)
Company 2014 2013 R000 R000
10 716 (10 716)
21 390 (21 390)
(d) Credit risk Credit risk is the risk that a counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The group is exposed to credit risk from its operating activities with banks and financial institutions. The group trades only with recognised, creditworthy third parties. It is the group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In additional, receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant. The credit risk on trade receivables within the group is disclosed in Annexure 6. With respect to credit risk arising from other financial assets of the group, which comprise cash and cash equivalents, available-for-sale investments and loans, the group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments as per Annexure 1, which forms part of these notes.
(e) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in market interest rate. The group’s exposure to risk of changes in market interest rates relates primarily to the group’s cash balances with floating interest rates and the long-term loan. As part of the process of managing the group’s interest rate risk, all borrowing and the refinancing of existing borrowings are positioned according to expected movements in interest rates. The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the group’s profit before tax (through the impact on floating rate borrowings and cash and cash equivalents). There is no impact on the group’s equity. Group 2014 R000 Cash and cash equivalents – Increase of 1% – Decrease of 1% Floating rate borrowings – Increase of 1% – Decrease of 1%
2013 R000
Company 2014 2013 R000 R000
6 661 (6 661)
2 986 (2 986)
6 346 (6 346)
2 090 (2 090)
(14 176) 14 176
(15 514) 15 514
(13 700) 13 700
(15 000) 15 000
(f) Fair value The price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management is of the opinion that the book value of financial instruments approximates fair value for group purposes. At a company level, the book value of financial instruments approximates fair value with the exception of inter-group loans, for which the fair value is R4.7 billion (2013: R4.2 billion).
243
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUED for the year ended 30 June 2014
42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued The fair value is based on the net present value of the expected resources attributable to the realisation of the asset or the extinguishing of the liability.
Financial assets at amortised cost Long-term subsidiary loans receivable Norplats Properties Proprietary Limited Short-term subsidiary loans receivable Micawber 278 Proprietary Limited Mvelaphanda Resources Proprietary Limited Norplats Properties Proprietary Limited Windfall 38 Properties Proprietary Limited Dialstat Trading 133 Proprietary Limited Total subsidiary loans receivable
2014 Carrying amount R000
2014 Fair value* R000
24 456
24 945
4 556 577 945 16 284 15 167 1 4 588 974 4 613 430
4 621 504 988 17 574 15 471 1 4 655 538 4 680 483
* Fair value has been determined using the prime interest rate, and is classified as level 3 in terms of the fair value hierarchy.
(g) Liquidity risk The group’s treasury operations are managed by a reputable treasury management institution. They assist the group in monitoring its risk to a shortage of funds by only depositing its surplus cash funds with major banks of high credit standing. They consider and monitor the maturity and returns of all financial investments. Management performs regular projected cash flow forecasts for the group. In addition to the loan secured from Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO) (note 21) by Norplats Properties Proprietary Limited in the previous financial period, the group has the following unsecured loans at financial reporting date: Funding in the debt capital market through the issue of R1.25 billion 3 year senior unsecured floating rate notes (the notes) under its R2 billion Domestic Medium Term Note Programme dated 3 August 2012. The notes attract a coupon of 350 basis points above three month JIBAR and interest payments are due quarterly. The notes will mature on 4 September 2015. During the year the company raised an additional amount of R120 million in the domestic capital market through a tap issue which will also mature on 4 September 2015. The group had entered into a facility agreement with Nedbank Limited in August 2011 regarding a R1.0 billion 5 year senior unsecured revolving credit facility (the facility). The facility is available to be utilised by way of periodic
NORTHAM ANNUAL INTEGRATED REPORT 2014
244
drawdown requests until the earlier of 1 month prior to final maturity and cancellation of the agreement. Interest is calculated at JIBAR plus 2.80% for each applicable interest period. During the year an additional R400 million revolving credit facility was acquired, brining the total facility to R1.4 billion, which will expire during March 2015. At year end R1.4 billion (2013: R750 million) of the total facility was unutilised. The interest rate for the tap issue notes was placed at a lower rate of JIBAR plus 330 basis points, which was accounted for in the issue price. All trade accounts payable are due within 30 days. The maturity profile of the group’s financial liabilities is set out in Annexure 1, which forms part of these notes.
(h) Capital management Capital comprises the equity attributable to the shareholders of Northam. The primary objective of the group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the group may adjust the dividend payment to shareholders, return capital to share holders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 30 June 2014 and 30 June 2013. During the year, the group successfully raised R600 million through a claw-back rights offer, underwritten by Coronation Asset Management Proprietary Limited, in terms of which 15 million new Northam ordinary shares (claw-back shares) were offered to shareholders at a subscription price of R40 per claw-back share. The group monitors capital by assessing interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents to assess whether additional capital is required. No formal objectives have been set for a specific ratio/headroom to be met in this regard.
(i) Categories of financial instruments The various categories of financial instruments are set out in Annexure 1, which forms part of these notes.
43. EVENTS AFTER THE REPORTING DATE Please refer to events after the reporting date included on page 159 of the Directors’ Report.
44. MAJOR SHAREHOLDERS AND SHAREHOLDER SPREAD Please refer to major shareholders at 30 June 2014 on page 157 of the Directors’ Report and shareholder spread at 30 June 2014 on page 157 of the Directors’ Report.
245
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
ANNEXURE 1 ANALYSIS OF FINANCIAL INSTRUMENTS AT 30 JUNE 2014
a) Categories of financial instruments
Available for sale
Loans and receivables
Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 2014 2013 2014 2013 R000
R000
R000
R000
Group Available for sale investments
6
6
–
–
Long-term receivables
–
–
94 047
87 400
Investments held by Northam Platinum Restoration Trust Fund
–
–
–
–
Environmental Guarantee Investment
–
–
–
–
Buttonshope Conservancy Trust
–
–
–
–
Trade and other receivables
–
–
177 272
349 958
Cash and cash equivalents
–
–
666 056
298 580
Trade and other payables
–
–
–
–
Loans and unsecured lending
–
–
–
–
6
6
937 375
735 938
Available for sale investments
6
6
–
–
Investments held by Northam Platinum Restoration Trust Fund
–
–
–
–
Environmental Guarantee Investment
–
–
–
–
Trade and other receivables
–
–
166 723
255 814
Cash and cash equivalents
–
–
634 642
209 015
Subsidiary loans
–
–
–
–
Trade and other payables
–
–
–
–
Loans and unsecured lending
–
–
–
–
6
6
801 365
464 829
Company
Note: Non financial instruments comprise pre-payments and VAT receivable.
NORTHAM ANNUAL INTEGRATED REPORT 2014
246
Assets designated at fair valued through profit and loss
Financial assets and liabilities at amortised cost
Non-financial instruments
Total
Year ended Year ended Year ended Year ended Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 2014 2013 2014 2013 2014 2013 2014 2013 R000
R000
R000
R000
R000
R000
R000
R000
–
–
–
–
–
–
6
6
–
–
–
–
–
–
94 047
87 400
–
40 948
46 468
–
–
–
46 468
40 948
–
42 407
51 024
–
–
–
51 024
42 407
–
10 126
10 702
–
–
–
10 702
10 126
–
–
–
–
67 400
197 962
244 672
547 920
–
–
–
–
–
–
666 056
298 580
–
–
(864 224) (1 012 104)
(13 141)
–
(877 365) (1 012 104)
–
–
(1 417 564) (1 551 365)
–
–
(1 417 564) (1 551 365)
–
93 481
(2 173 594) (2 563 469)
54 259
197 962
(1 181 954) (1 536 082)
–
–
–
–
–
–
6
6
–
33 913
36 791
–
–
–
36 791
33 913
–
35 965
42 281
–
–
–
42 281
35 965
–
–
–
–
25 463
78 145
192 186
333 959
–
–
–
–
–
–
634 642
209 015
–
–
4 613 430
–
–
–
4 613 430
–
–
–
(751 577)
(826 650)
–
–
(751 577)
(826 650)
–
–
(1 370 000) (1 500 000)
–
–
–
69 878
(2 570 925) (1 816 728)
25 463
78 145
247
(1 370 000) (1 500 000) 3 397 759
(1 713 792)
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 1
ANNEXURE 1 CONTINUED ANALYSIS OF FINANCIAL INSTRUMENTS AT 30 JUNE 2014
b) Trade and other receivables The table below summarises the maturity profile of the company and group’s trade and other receivables. Neither past due nor impaired
< 30 days
Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 2014 2013 2014 2013 R000
R000
R000
R000
Group
146 924
374 233
57 136
14 733
Company
121 457
300 955
37 096
14 703
c) Borrowings and trade and other payables The table below summarises the maturity profile of the company and group’s borrowings and trade and other payables. Payable on demand Year ended 30 June 2014
Year ended 30 June 2013
R000
R000
312 499
319 397
– accruals
–
–
– accrual for the acquisition of the interest in the Pandora joint venture
–
–
– Value added tax
–
–
– other
–
–
– long-term loans
–
–
– unsecured lending
–
–
312 499
319 397
Group – trade payables
Company – trade payables
266 257
280 700
– accruals
–
–
– accrual for the acquisition of the interest in the Pandora joint venture
–
–
– other
–
–
– unsecured lending
–
–
266 257
280 700
NORTHAM ANNUAL INTEGRATED REPORT 2014
248
30 - 60 days
60 - 90 days
> 90 days
Total
Year ended Year ended Year ended Year ended Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 2014 2013 2014 2013 2014 2013 2014 2013 R000
R000
R000
R000
R000
R000
R000
R000
14 825
251
1 914
242
23 873
158 461
244 672
547 920
9 582
226
1 892
88
22 159
17 987
192 186
333 959
1 to 6 months
More than six months
Total
Year ended 30 June 2014
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2013
R000
R000
R000
R000
R000
R000
–
–
–
–
312 499
319 397
403 540
364 577
–
–
403 540
364 577
–
–
–
65 000
–
65 000
13 141
–
–
–
13 141
–
148 185
250 326
–
–
148 185
250 326
–
–
150 982
153 720
150 982
153 720
–
–
1 519 768
1 749 093
1 519 768
1 749 093
564 866
614 903
1 670 750
1 967 813
2 548 115
2 902 113
–
–
–
–
266 257
280 700
356 069
362 147
–
–
356 069
362 147
–
–
–
65 000
–
65 000
129 251
118 803
–
–
129 251
118 803
–
–
1 519 768
1 749 093
1 519 768
1 749 093
485 320
480 950
1 519 768
1 814 093
2 271 345
2 575 743
249
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 1
ANNEXURE 2 INTEREST IN ASSOCIATES AND JOINT VENTURES AT 30 JUNE 2014
RECONCILIATION OF NORTHAM’S INTEREST IN ASSOCIATES AND JOINT VENTURES 2014 Interest in Pandora joint venture 7.50%
Interest in Interest Dwaalkop in Trans joint Hex Group venture Limited 50.00% 20.30% Group R000
Cost of investment
65 000
Amortisation/ Impairment
(12 567)
–
52 433
300 679
Share of earnings previously accounted for
300 679
67 821
Interest in Pandora joint Total venture 7.50%
Interest in Trans Hex Group Limited 20.30% Company R000
Total
77 509
142 509
433 500
65 000
–
(12 567)
(12 567)
(9 904)
(22 471)
67 821
420 933
52 433
67 605
120 038
104 536
–
6 083
110 619
–
–
–
Profit/(loss) for the year
(3 319)
–
6 783
3 464
–
–
–
Other comprehensive income
–
–
(1 327)
(1 327)
–
–
–
Current year amortisation
(2 600)
–
–
(2 600)
(2 600)
–
(2 600)
Cash distributions received in previous years
(36 054)
–
–
(36 054)
(7 500)
–
(7 500)
Cash distributions received in the current year
(69)
–
–
(69)
–
–
–
–
–
1 543
1 543
–
–
–
114 927
300 679
80 903
496 509
42 333
67 605
109 938
69
–
69
Other Carrying value of investment in associate Dividends received
NORTHAM ANNUAL INTEGRATED REPORT 2014
250
2013 Interest in Pandora joint venture 7.50%
65 000
Interest in Interest Dwaalkop in Trans joint Hex Group venture Limited 50.00% 20.30% Group R000 300 679
67 821
Total
433 500
Interest in Pandora joint venture 7.50%
Interest in Trans Hex Group Limited 20.30% Company R000
Total
65 000
77 509
142 509
(9 967)
–
–
(9 967)
(9 967)
–
(9 967)
55 033
300 679
67 821
423 533
55 033
77 509
132 542
100 981
–
–
100 981
–
–
–
3 555
–
10 228
13 783
–
–
–
–
–
(4 145)
(4 145)
–
–
–
(2 600)
–
–
(2 600)
(2 600)
–
(2 600)
(19 314)
–
–
(19 314)
(7 500)
–
(7 500)
(16 740)
–
–
(16 740)
–
–
–
–
–
–
–
–
–
–
120 915
300 679
73 904
495 498
44 933
77 509
122 442
16 740
–
16 740
251
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 2
ANNEXURE 2 CONTINUED INTEREST IN ASSOCIATES AND JOINT VENTURES AT 30 JUNE 2014
STATEMENT OF COMPREHENSIVE INCOME
Sales
2014 Interest in Interest in Interest in Pandora joint Dwaalkop joint Trans Hex venture venture Group Limited 7.50% 50.00% 20.30% Group R000 23 019 – 155 900
Cost of sales and operating expenditure
Total
178 919
(21 111)
–
(141 753)
(162 864)
1 908
–
14 147
16 055
259
–
3 173
3 432
–
–
2 015
2 015
(5 426)
–
(16 334)
(21 760)
(60)
–
(937)
(997)
Income tax
–
–
(935)
(935)
Profit from discontinued operation
–
–
5 654
5 654
(3 319)
–
6 783
3 464
Other comprehensive income/(loss)
–
–
(1 327)
(1 327)
Total comprehensive income/(loss) for the year
(3 319)
–
5 456
2 137
Operating profit Investment income Sundry income/(expenditure) Other operating costs Finance charges
Profit for the year
The interest in the Pandora joint venture and Trans Hex Group Limited are accounted for as associates. The interest in the Dwaalkop joint venture is accounted for as a joint venture.
NORTHAM ANNUAL INTEGRATED REPORT 2014
252
2013 Interest in Interest in Interest in Pandora joint Dwaalkop joint Trans Hex venture venture Group Limited 7.50% 50.00% 20.30% Group R000 32 775 – 150 119
Total
182 894
(25 316)
–
(130 926)
(156 242)
7 459
–
19 193
26 652
555
–
3 667
4 222
375
–
–
375
(4 776)
–
(13 308)
(18 084)
(58)
–
(1 572)
(1 630)
–
–
(1 886)
(1 886)
–
–
4 134
4 134
3 555
–
10 228
13 783
–
–
(4 145)
(4 145)
3 555
–
6 083
9 638
253
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 2
ANNEXURE 2 CONTINUED INTEREST IN ASSOCIATES AND JOINT VENTURES AT 30 JUNE 2014
STATEMENT OF FINANCIAL POSITION 2014 Interest in Pandora joint venture 7.50%
Interest in Dwaalkop joint venture 50.00%
Interest in Trans Hex Group Ltd 20.30%
Total
Group R000 Non-current assets Property, plant and equipment Financial assets Current assets Inventory
63 113
–
54 622
–
–
22 922
117 735 22 922
14 377
–
103 252
117 629
–
–
33 031
33 031
7 609
–
4 629
12 238
61
–
–
61
6 707
–
65 592
72 299
Total assets
77 490
–
180 796
258 286
Participants interest
72 917
25 450
98 367
–
109 430
109 430
Trade and other receivables Prepayments Cash and cash equivalents
Total shareholder’s interest Non-Current liabilities Capital loans from participants Provision for environmental and rehabilitation obligations
895
–
29 988
30 883
–
–
–
–
895
–
–
895
Deferred tax
–
–
8 831
8 831
Borrowings
–
–
–
–
Other provisions
–
–
21 157
21 157
3 678
–
15 928
19 606
Current liabilities Royalties payable
6
–
–
6
3 672
–
15 777
19 449
Borrowings
–
–
176
176
Income tax liability
–
–
(25)
(25)
77 490
–
180 796
258 286
Trade and other payables
Total equity and liabilities
NORTHAM ANNUAL INTEGRATED REPORT 2014
254
2013 Interest in Pandora joint venture 7.50%
Interest in Dwaalkop joint venture 50.00%
Interest in Trans Hex Group Ltd 20.30%
Total
Group R000 59 197
–
67 869
–
–
24 372
127 066 24 372
17 384
–
97 113
114 497
–
–
36 054
36 054
9 772
–
6 912
16 684
51
–
–
51
7 561
–
54 147
61 708
76 581
–
189 354
265 935
69 240
–
5 847
75 087
–
–
97 948
97 948
796
–
32 476
33 272
–
–
–
–
796
–
–
796
–
–
11 839
11 839
–
–
176
176
–
–
20 461
20 461
6 545
–
53 083
59 628
288
–
–
288
6 257
–
40 112
46 369
–
–
12 971
12 971
–
–
–
–
76 581
–
189 354
265 935
255
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 2
ANNEXURE 3 SUBSIDIARIES AT 30 JUNE 2014
Name of company
Effective holding
Share capital and premium
Interest of holding company Shares 2014 2013 R000 R000 ** **
Broad Brush 2 Proprietary Limited
2014 % 100.0
2013 % 100.0
R000 ***
Dialstat Trading 133 Proprietary Limited Khumama Platinum Proprietary Limited Micawber 278 Proprietary Limited
100.0 100.0 100.0
100.0 100.0 100.0
*** 2 506 125 ***
* 5 566 000 **
* 5 566 000 **
Mvelaphanda Resources Proprietary Limited NCP Materials Handling Proprietary Limited NCP Staff Transportation Proprietary Limited Norplats Properties Proprietary Limited
100.0
100.0
4 358
161 619
225 514
20.0
17.5
2 089
**
**
39.2
34.3
***
**
**
100.0
100.0
***
*
*
80.0
70.0
1
20 000
10 000
100.0
100.0
***
*
*
5 747 619
5 801 514
Northam Chrome Producers Proprietary Limited
Windfall 38 Properties Proprietary Limited Interest in subsidiaries * Investment less than R1 000 ** Indirectly held subsidiary *** Issued capital is less than R1 000
All companies are incorporated in the Republic of South Africa. With the exception of Northam Chrome Producers, NCP Materials Handling and NCP Staff Transportation, all companies are wholly-owned. Subsequent to year end, the remaining 20% interest in Northam Chrome Producers was acquired by the company, bringing the effective holding to 100%. The loan to Norplats Properties Proprietary Limited includes a fixed-term loan, further details of which are disclosed in note 13. The loans to Micawber 278 and Windfall 38 Properties bear interest at 2.0% below South African prime interest rate. The loans to Dialstat Trading 133 and Mvelaphanda Resources are unsecured and interest free. All loans are repayable on demand and are, therefore, stated as current.
NORTHAM ANNUAL INTEGRATED REPORT 2014
256
Interest of holding company Nature of business Indebtedness 2014 2013 R000 R000 – (717) Broad Brush is in the process of voluntary liquidation. All assets and liabilities were transferred to its holding company Norplats Properties Proprietary Limited during the year. 1 1 Dormant – – Khumama owns 100% of the issued capital of Micawber 278 Proprietary Limited. 4 556 577 4 091 830 Micawber owns the mining titles and certain freehold land in respect of the Booysendal mine. 945 – Mvelaphanda Resources holds the group’s interest in the Dwaalkop exploration joint venture and the Kokerboom exploration joint venture. – – NCP Materials Handling provides logistical services to Northam Chrome Producers. The company is in the process of voluntary liquidation. – – NCP Staff Transportation provides transport services to Northam Chrome Producers. The company is in the process of voluntary liquidation. 40 740 36 840 Norplats Properties owns residential erven in the town of Northam, and has erected houses thereon as part of an initiative to assist Northam employees in acquiring their own affordable houses. In addition, Norplats Properties owns 100% of the issued capital of Broad Brush 2 Proprietary Limited. During the year Broad Brush transferred all assets and liabilities to Norplats Properties and is in the process of voluntary liquidation. – – Northam Chrome Producers operates a chrome recovery plant at Northam’s Zondereinde mine. Northam Chrome Producers owns 25% of the issued capital of NCP Materials Handling Proprietary Limited and 49% of the issued capital of NCP Staff Transportation Proprietary Limited. 15 167 15 424 Windfall owns certain freehold land in respect of Booysendal. 4 613 430
4 143 378
257
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 3
ANNEXURE 4 RELATED PARTY TRANSACTIONS FOR THE YEAR ENDED 30 JUNE 2014 – KEY MANAGEMENT PERSONNEL
Where charged/(credited) in statement of comprehensive income
Non-executive directors fees
Remuneration
Contribution to retirement funds
Operating costs – sundries
Operating costs – labour
Operating costs – labour
2014 R000
2013 R000
2014 R000
2013 R000
2014 R000
2013 R000
3 701
3 969
–
–
–
–
PA Dunne
–
–
1 900
–
238
–
AZ Khumalo
–
–
2 392
2 392
299
299
GT Lewis
–
–
3 894
5 841
487
730
–
–
8 186
8 233
1 024
1 029
3 701
3 969
8 186
8 233
1 024
1 029
23 953
22 443
3 011
2 812
Non-executive directors’ remuneration See Directors’ Report page 153 Executive directors
Total directors’ remuneration Senior management
Refer to page 156 of the Directors’ Report for directors’ interests.
NORTHAM ANNUAL INTEGRATED REPORT 2014
258
Performance bonus
Other benefits
Share based payment charge
Operating costs – labour
Operating costs – labour
Operating costs – labour
Total cash payment on cash settlement of share option and incentive schemes obligations
Total
2014 R000
2013 R000
2014 R000
2013 R000
2014 R000
2013 R000
2014 R000
2013 R000
2014 R000
2013 R000
–
–
–
–
–
–
3 701
3 969
–
–
500
–
14
–
–
–
2 652
–
–
1 629
955
210
92
7 694
3 401
12 224
7 139
–
–
27 040
2 291
47
79
11 595
2 801
43 063
11 742
20 003
–
29 169
3 246
271
171
19 289
6 202
57 939
18 881
20 003
–
29 169
3 246
271
171
19 289
6 202
61 640
22 850
20 003
–
19 046
12 937
7 667
2 842
46 367
14 267
100 044
55 301
28 458
5 934
259
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 4
ANNEXURE 5(A) ANALYSIS OF SHARE OPTIONS HELD AS AT 30 JUNE 2014
Grant date Earliest exercise date Expiry date Exercise price – rands Balance at 30 June 2012 New options granted during the year Options forfeited during the year Options exercised during the year Month July August September October November December January February March April May June
24 October 2005 23 October 2006 22 October 2007 24 October 2007 23 October 2008 22 October 2009 23 October 2012 22 October 2013 21 October 2014 17.00 38.45 48.00 56 700 1 071 000 1 467 500 – – – – (13 000) (70 000) (56 700) – – – – (12 500) (44 200) – – – – – – – –
– – – – – – – – – – – –
– – – – – – – – – – – –
Balance at 30 June 2013 Options granted during the year Options forfeited/reissued during the year Options exercised during the year Month July August September October November December January February March April May June
– – – –
1 058 000 – – (1 058 000)
1 397 500 – (232 500) –
– – – – – – – – – – – –
– (450 000) (353 000) (255 000) – – – – – – – –
– – – – – – – – – – – –
Balance at 30 June 2014 Total gain on cash-settled options R000
– –
– 3 307
1 165 000 –
NORTHAM ANNUAL INTEGRATED REPORT 2014
260
Total 27 November 2008 05 November 2009 27 November 2010 05 November 2011 26 November 2015 04 November 2016 32.38 36.95 1 955 500 2 752 500 – (38 000) (100 000) (680 500) (602 500)
01 July 2010 12 October 2010 15 November 2013 01 July 2012 12 October 2012 30 June 2017 11 October 2017 45.59 46.59 40.00 125 000 3 242 500 – – – – – (335 000) – – – –
10 670 700 – (556 000) (1 339 700)
– – – – – – – – (680 500) – – –
– – – – – – – – (577 500) (25 000) – –
– – – – – – – – – – – –
– – – – – – – – – – – –
– – – – – – – – – – – –
– – (12 500) (44 200) – – – – (1 258 000) (25 000) – –
1 237 000 – 37 500 (1 114 500)
2 050 000 – 50 000 (1 582 500)
125 000 – – –
2 907 500 – (332 500) –
– 302 551 (57 035) (67 431)
8 775 000 302 551 (534 535) (3 822 431)
– (459 500) (147 500) – – – – – – – (250 000) (257 500)
– (57 500) (207 500) (50 000) – – – (45 000) (22 500) (55 000) (767 500) (377 500)
– – – – – – – – – – – –
– – – – – – – – – – – –
– – – – – – – (1 764) (882) – (39 890) (24 895)
– (967 000) (708 000) (305 000) – – – (46 764) (23 382) (55 000) (1 057 390) (659 895)
160 000 11 205
517 500 11 263
125 000 –
2 575 000 –
178 085 316
4 720 585 26 091
261
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 5(A)
ANNEXURE 5(A) CONTINUED ANALYSIS OF SHARE OPTIONS HELD AS AT 30 JUNE 2014
In March 2013, the JSE approved a change to the rules of the Scheme in terms of which option holders may elect to receive either the shares over which an option has been granted or a cash payment equivalent to the difference between the volume weighted average price at which Northam shares traded on the day preceding the exercise date and the exercise price. Options which are cash settled are regarded as having been exercised. All options exercised during the year in respect of the 27 November 2008 and 05 November 2009 grant date were cash-settled.
DETAILS OF OPTIONS GRANTED TO DIRECTORS Grant date Earliest exercise date Expiry date Exercise price – Rands
24 October 2005 23 October 2006 22 October 2007 24 October 2007 23 October 2008 22 October 2009 23 October 2012 22 October 2013 21 October 2014 17.00 38.45 48.00
PA Dunne Balance at 30 June 2013 New options granted during the year Balance at 30 June 2014 GT Lewis Balance at 30 June 2012 New options granted during the year Balance at 30 June 2013 New options granted during the year Options exercised during the year Options forfeited during the year Balance at 30 June 2014 AZ Khumalo Balance at 30 June 2012 New options granted during the year Balance at 30 June 2013 New options granted during the year Balance at 30 June 2014 Options granted during the year are pursuant to the claw-back rights issue. PA Dunne was appointed as a director and CEO on 1 March 2014.
NORTHAM ANNUAL INTEGRATED REPORT 2014
262
– – –
– – –
– – –
– – – – – – –
187 500 – 187 500 – (187 500) – –
187 500 – 187 500 – – (187 500) –
– – – – –
– – – – –
– – – – –
Pursuant to the claw-back rights offer concluded during the year, option holders were offered 3.92068 options (claw-back options) at an exercise price of R40.00 for every 100 options held on 15 November 2013. The clawback options are only exercisable with the original option to which it relates.
Total 27 November 2008 05 November 2009 27 November 2010 05 November 2011 26 November 2015 04 November 2016 32.38 36.95
01 July 2010 12 October 2010 15 November 2013 01 July 2012 12 October 2012 30 June 2017 11 October 2017 45.59 46.59 40.0
– – –
– – –
– – –
– – –
– – –
– – –
187 500 – 187 500 – (187 500) – –
187 500 –187 500 – (187 500) – –
– – – – – – –
187 500 – 187 500 – – (187 500) –
– – – 29 404 (14 702) (14 702) –
937 500 – 937 500 29 404 (577 202) (389 702) –
– – – – –
– – – – –
125 000 – 125 000 – 125 000
125 000 – 125 000 – 125 000
– – – 9 802 9 802
250 000 – 250 000 9 802 259 802
263
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 5(A)
ANNEXURE 5(B) ANALYSIS OF SHARE INCENTIVE PLAN AS AT 30 JUNE 2014
Retention shares Balance at 30 June 2012 Shares awarded during the year Shares forfeited during the year Shares cash-settled during the year Balance at 30 June 2013 Shares awarded during the year Shares forfeited/adjusted for performance conditions met during the year Shares cash-settled during the year Balance at 30 June 2014
15 November 2013 share award – – – – – 789 000
06 November 2012 share award – 930 000 – (26 000) 904 000 –
22 November 2011 share award 684 000 – (48 000) (28 000) 608 000 –
(4 600) (87 400) 697 000
(84 800) (108 200) 711 000
8 000 (558 000) 58 000
– – – – – 1 375 000
– 1 619 000 – (46 000) 1 573 000 –
1 257 000 – (92 000) (52 000) 1 113 000 –
(9 300) (153 700) 1 212 000
(134 705) (201 295) 1 237 000
(8 324) (136 676) 968 000
Performance shares Balance at 30 June 2012 Shares awarded during the year Shares forfeited during the year Shares cash-settled during the year Balance at 30 June 2013 Shares awarded during the year Shares forfeited/adjusted for performance conditions met during the year Shares cash-settled during the year Balance at 30 June 2014
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DETAILS OF SHARE INCENTIVES GRANTED TO DIRECTORS 15 November 2013 share award
06 November 2012 share award
22 November 2011 share award
– – –
– – –
– – –
– – –
– – –
– – –
– – – – – 44 000 77 000
– 56 000 98 000 – 154 000 – –
93 000 – – – 93 000 – –
(36 300) (84 700) –
(79 319) (74 681) –
18 917 (111 917) –
– – – – – 44 000 77 000
– 56 000 98 000 – 154 000 – –
93 000 – – 93 000 – –
– – 121 000
– – 154 000
– – 93 000
PA Dunne Balance at 30 June 2013 Retention shares awarded during the year Performance shares awarded during the year Shares forfeited/adjusted for performance conditions met during the year Shares cash-settled during the year Balance at 30 June 2014 GT Lewis Balance at 30 June 2012 Retention shares awarded during the year Performance shares awarded during the year Shares forfeited during the year Balance at 30 June 2013 Retention shares awarded during the year Performance shares awarded during the year Shares forfeited/adjusted for performance conditions met during the year Shares cash-settled during the year Balance at 30 June 2014 AZ Khumalo Balance at 30 June 2012 Retention shares awarded during the year Performance shares awarded during the year Shares forfeited during the year Balance at 30 June 2013 Retention shares awarded during the year Performance shares awarded during the year Shares forfeited/adjusted for performance conditions met during the year Shares cash-settled during the year Balance at 30 June 2014
265
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 5(B)
ANNEXURE 5(C) SHARE-BASED PAYMENT LIABILITY AT 30 JUNE 2014
The shares awarded in terms of the rules of the Share Incentive Plan comprise: retention shares, which vest after two years from grant date with no performance criteria, and performance shares, which vest after three years from grant date. The final number of performance shares that an employee will receive will be subject to certain performance criteria being met. In March 2013, the JSE approved a change to the rules of the Plan in terms of which, upon the vesting of any awards, participants may elect to receive either the shares that have vested or an amount equal to the volume weighted average price at which Northam shares traded on the day preceding the settlement date. All awards that were cash-settled during the year relate to employees who retired. PA Dunne was appointed as a director and CEO on 1 March 2014. The carrying amount of the liability relating to the share options scheme and share incentive plan: Group
Company
R000
R000
Long-term share based payment liability
90 942
85 008
Short-term share based payment liability
16 665
14 518
107 607
99 526
Total share-based payment liability at 30 June 2013 Net movement of share-based payment liability during the year Share-based payment expense during the year
61 228
53 355
139 081
117 739
Options/incentive shares cash-settled during the year
(77 853)
(64 384)
Total share-based payment liability at 30 June 2014
168 835
152 881
Long-term share-based payment liability
98 893
89 432
Short-term share-based payment liability
69 942
63 449
The short term portion is based on the options/shares which will expire in the next 12 months.
NORTHAM ANNUAL INTEGRATED REPORT 2014
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The following table lists the inputs to the model used for the share option scheme for the year ended 30 June 2014: 22 October 27 November 05 November 2007 2008 2009 Dividend yield (%)
01 July 2010
12 October 2010
–
–
–
–
–
29.30
29.30
29.30
29.30
29.30
Risk-free interest rate (%)
5.85
6.53
6.88
7.10
7.16
Expected life of share options (years)
0.31
1.41
2.35
3.00
3.28
Expected volatility (%)
Spot price (R) Model used
45.50
45.50
45.50
45.50
45.50
Black-Scholes
Black-Scholes
Black-Scholes
Black-Scholes
Black-Scholes
The following table lists the inputs to the model used for the share incentive plan for the year ended 30 June 2014: 22 November 2011
06 November 2012
15 November 2013
Retention Performance shares shares
Retention Performance shares shares
Retention Performance shares shares
Dividend yield (%)
–
–
–
–
–
–
Forfeiture rate (%)
–
0.90
0.90
0.90
0.90
0.90
Expected life of share awards (years) Spot price (R) Model used
–
0.40
0.35
1.35
1.38
2.38
45.50
45.50
45.50
45.50
45.50
45.50
Black-Scholes Black-Scholes
Black-Scholes Black-Scholes
Black-Scholes Black-Scholes
The expected life is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options/incentive shares is indicative of future trends, which may not necessarily be the actual outcome.
267
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 5(C)
ANNEXURE 6 SEGMENTAL ANALYSIS AT 30 JUNE 2014
Non-current assets Property, plant and equipment Mining properties and mineral resources Investment in associates and joint ventures Unlisted investments Land and township development Long-term receivables Investments held by Northam Platinum Restoration Trust Fund Environmental Guarantee Investment Buttonshope Conservancy Trust Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Tax receivable Total assets Non-current liabilities Deferred tax liability Long-term provisions Long-term share-based payment liability Long-term loans Domestic medium-term notes Current liabilities Trade and other payables Tax payable Short-term provision Short-term share-based payment liability Current portion of long-term loans Bank overdraft Revolving credit facilities Net assets
NORTHAM ANNUAL INTEGRATED REPORT 2014
268
Booysendal operations R000 9 671 814 4 032 778 5 524 542 – – – – 9 677 8 743 – 96 074 417 149 375 178 41 942 29 –
2014 Zondereinde operations R000 3 073 610 2 254 284 128 786 496 509 6 10 204 94 047 36 791 42 281 10 702 – 1 578 423 701 675 202 730 666 145 7 873
Total group R000 12 745 424 6 287 062 5 653 328 496 509 6 10 204 94 047 46 468 51 024 10 702 96 074 1 995 572 1 076 853 244 672 666 174 7 873
Booysendal operations R000 9 705 791 4 120 946 5 571 368 – – – – 7 035 6 442 – – 212 761 5 266 205 631 79 1 785
2013 Zondereinde operations R000 2 917 198 2 101 280 137 457 495 498 6 15 553 87 400 33 913 35 965 10 126 – 1 521 914 873 264 342 289 298 501 7 860
Total group R000 12 622 989 6 222 226 5 708 825 495 498 6 15 553 87 400 40 948 42 407 10 126 – 1 734 675 878 530 547 920 298 580 9 645
10 088 963 55 188 – 45 727 9 461 – – 73 406 60 304 1 101 5 508 6 493 – – –
4 652 033 2 102 274 502 097 96 982 89 432 43 763 1 370 000 1 118 256 817 061 120 380 113 447 63 449 3 801 118 –
14 740 996 2 157 462 502 097 142 709 98 893 43 763 1 370 000 1 191 662 877 365 121 481 118 955 69 942 3 801 118 –
9 918 552 48 736 – 42 802 5 934 – – 124 226 122 079 – – 2 147 – – –
4 439 112 1 949 090 476 053 90 465 85 008 47 564 1 250 000 1 419 977 890 025 156 963 104 670 14 518 3 801 – 250 000
14 357 664 1 997 826 476 053 133 267 90 942 47 564 1 250 000 1 544 203 1 012 104 156 963 104 670 16 665 3 801 – 250 000
9 960 369
1 431 503
11 391 872
9 745 590
1 070 045
10 815 635
269
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 6
ANNEXURE 6 CONTINUED SEGMENTAL ANALYSIS AT 30 JUNE 2014
SEGMENTAL STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Sales revenue Cost of sales – operating costs – concentrates purchased – refining and other costs – depreciation and write-offs – change in metal inventories Operating profit Share of earnings from associate Investment revenue Finance charges Net sundry (expenditure)/income Profit before tax Taxation Profit for the year Other comprehensive income Share of other comprehensive income/(loss) from associate Total comprehensive income/(loss) for the year
NORTHAM ANNUAL INTEGRATED REPORT 2014
270
2014 Booysendal operations
Zondereinde operations
2013 Total group
Booysendal operations
Zondereinde operations
Total group
R000
R000
R000
R000
R000
R000
956 203
4 383 194
5 339 397
–
4 420 977
4 420 977
1 084 599
4 193 316
5 277 915
–
3 813 301
3 813 301
806 784
2 729 218
3 536 002
–
2 826 094
2 826 094
–
918 605
918 605
–
657 540
657 540
111 328
155 789
267 117
–
161 591
161 591
234 599
211 276
445 875
–
234 690
234 690
(68 112)
178 428
110 316
–
(66 614)
(66 614)
(128 396)
189 878
61 482
–
607 676
607 676
–
3 464
3 464
–
13 783
13 783
6 664
53 299
59 963
723
32 711
33 434
–
(176 124)
(176 124)
–
(17 946)
(17 946)
(3 965)
100 976
97 011
2
60 106
60 108
(125 697)
171 493
45 796
725
696 330
697 055
(93 995)
120 194
26 199
(952)
170 006
169 054
(31 702)
51 299
19 597
1 677
526 324
528 001
–
(1 327)
(1 327)
–
(4 145)
(4 145)
(31 702)
49 972
18 270
1 677
522 179
523 856
271
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 6
ANNEXURE 6 CONTINUED SEGMENTAL ANALYSIS AT 30 JUNE 2014
ANALYSIS OF SALES REVENUE BY GEOGRAPHIC LOCATION OF CUSTOMER 2014
2013
Booysendal Zondereinde operations operations R000
Total Booysendal Zondereinde group operations operations
R000
R000
R000
R000
Total group R000
Europe
287 549
999 103
1 286 652
–
702 279
702 279
Japan
286 678
1 042 602
1 329 280
–
1 145 127
1 145 127
North America
242 813
811 847
1 054 660
–
1 333 179
1 333 179
South Africa
276 850
1 529 642
1 806 492
–
1 240 392
1 240 392
Less: Proceeds from sale of development ounces
(137 687)
–
(137 687)
–
–
–
956 203
4 383 194
5 339 397
–
4 420 977
4 420 977
7 950
–
6 510
6 510 76 656
ANALYSIS OF TRADE AND OTHER RECEIVABLES BY GEOGRAPHIC LOCATION OF CUSTOMER Europe
–
Japan
–
–
–
–
76 656
North America
–
48 581
48 581
–
44 531
44 531
41 942
146 199
188 141
205 631
214 592
420 223
41 942
202 730
244 672
205 631
342 289
547 920
539 645
361 025
900 670
1 383 200
381 597
1 764 797
539 645
361 025
900 670
1 383 200
381 597
1 764 797
South Africa
7 950
OTHER DISCLOSABLE ITEMS Additions to non-current assets (excluding financial instruments)
All non-current assets fall under South Africa in a geographical analysis.
NORTHAM ANNUAL INTEGRATED REPORT 2014
272
ANALYSIS OF SALES REVENUE The following customers each account for more than 10% of the total sales revenue of the group. Group and Company 2014
2013
Customer 1
901 492
849 039
Customer 2
716 190
848 641
Customer 3
687 925
610 553
Customer 4
579 470
515 094
Customer 5
459 097
484 378
3 344 174
3 307 705
273
NORTHAM ANNUAL INTEGRATED REPORT 2014
ANNUAL FINANCIAL STATEMENTS
ANNEXURE 6
REPORTING IN LINE WITH GRI
The following table presents the GRI content index in line with the G4 guidelines, including GRI’s G4 Mining and Metals Sector Supplement (MMSS), to which Northam has reported ‘in accordance’ with the Core option. SPECIFIC STANDARD DISCLOSURES General standard disclosures
Section and page number
Reporting level
External assurance
STRATEGY AND ANALYSIS G4-1
Provide a statement from the most senior decision-maker of the organisation (such as CEO, chair, or equivalent senior position) about the relevance of sustainability to the organisation and the organisation’s strategy for addressing sustainability
Chief executive’s review (pages 18 – 21)
Fully
Assured
G4-2
Provide a description of key impacts
Managing business risks and opportunities (pages 33 – 38)
Fully
Assured
Fully
Assured
Sustainability review (pages 80 – 81) Stakeholder engagement (pages 82 – 86) Northam’s operations have been affected by strike action (Zondereinde) and are still ramping up (Booysendal). The company is reviewing its sustainability targets and will include revised targets in the F2015 report ORGANISATIONAL PROFILE G4-3
Report the name of the organisation
G4-4
Report the primary brands, products, and services
Profile, structure and products (pages 3 – 5)
Fully
Assured
G4-5
Report the location of the organisation’s headquarters
Northam Platinum and the Bushveld Complex (page 2)
Fully
Assured
Fully
Assured
Front cover Scope (inside front cover)
Administration and contact information (inside back cover) G4-6
Report the number of countries where the organisation operates, and names of countries where either the organisation has significant operations or that are specifically relevant to the sustainability topics covered in the report
Scope (inside front cover) Northam Platinum and the Bushveld Complex (page 2) Corporate profile (page 3)
G4-7
Report the nature of ownership and legal form
Profile, structure and products (pages 3 - 5)
Fully
Assured
G4-8
Report the markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries)
Profile, structure and products (pages 3 – 5)
Fully
Assured
Report the scale of the organisation, including:
Scope (inside front cover)
Fully
Assured
a. Total number of employees
Corporate profile (page 3)
G4-9
Manufactured capital (pages 135 – 136)
b. Total number of operations c. Net sales (for private sector organisations) or net revenues (for public sector organisations) d. Total capitalisation broken down in terms of debt and equity (for private sector organisations) e. Quantity of products or services provided
Chief executive’s review (page 19) Chief financial officer’s review (pages 68 – 70, 75, 77) Annual financial statements – statement of financial position (page 196 – 197) Human capital (page 105)
NORTHAM ANNUAL INTEGRATED REPORT 2014
274
SPECIFIC STANDARD DISCLOSURES Reporting level
External assurance
Human capital (pages 105 – 106 and 108 – 109)
Partially
Assured
Report of the SE&HR committee (pages 42 -43)
Fully
Assured
Partially
Assured
Fully
Assured
Fully
Assured
General standard disclosures
Section and page number
G4-10
Report the composition of the workforce, including: a. Report the total number of employees by employment contract and gender. b. Report the total number of permanent employees by employment type and gender. c. Report the total workforce by employees and supervised workers and by gender. d. Report the total workforce by region and gender. e. Report whether a substantial portion of the organisation’s work is performed by workers who are legally recognised as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors. f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
G4-11
Report the percentage of total employees covered by collective bargaining agreements
Human capital (pages 103 – 104) G4-12
Describe the organisation’s supply chain
G4-13
Report any significant changes during the reporting period regarding the organisation’s size, structure, ownership, or its supply chain, including:
Profile, structure and products (page 5) Manufactured capital (pages 132 – 136)
a. Changes in the location of, or changes in, operations, including facility openings, closings, and expansions
Scope (inside front cover) Profile, structure products (page 3) Chairman’s statement (page 17)
b. Changes in the share capital structure and other capital formation, maintenance, and alteration operations (for private sector organisations) c. Changes in the location of suppliers, the structure of the supply chain, or in relationships with suppliers, including selection and termination G4-14
Report whether and how the precautionary approach or principle is addressed by the organisation
This page The precautionary approach (that is, the recognition of our duty to consider and take action to investigate, address and mitigate threats of harm to the environment even when cause and effect relationships have not been fully identified) is embedded in policies, and implemented through our risk management processes.
275
NORTHAM ANNUAL INTEGRATED REPORT 2014
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI CONTINUED
SPECIFIC STANDARD DISCLOSURES Reporting level
External assurance
Fully
Assured
As a South African mining company, Northam is a member of the Chamber of Mines which is an industry association responsible for representing the interests of the mining industry. Natural capital (page 125)
Fully
Assured
Profile, structure and products (page 3)
Fully
Assured
a. Explain the process for defining the report content and the Aspect Boundaries
Managing business risks and opportunities (pages 33 – 38)
Fully
Assured
b. Explain how the organisation has implemented the Reporting Principles for Defining Report Content
Sustainability review (pages 80 – 81)
General standard disclosures
Section and page number
G4-15
www.cdp.net/en-US/Results/Pages/CompanyResponses.aspx?company=13459
List externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses
Throughout this report The South African mining industry, including Northam, is governed by various laws, codes and guidance initiatives. These include: • MPRDA • NEMA • Employment equity act • National water act • Mining Charter • ILO • SAMREC Voluntary codes Northam subscribes to include: • GRI • CDP • SRI • MHSC targets • Framework agreement on a sustainable mining industry • Framework for peace and stability in the mining industry
G4-16
List memberships of associations (such as industry associations) and national or international advocacy organisations in which the organisation: • Holds a position on the governance body • Participates in projects or committees • Provides substantive funding beyond routine membership dues • Views membership as strategic
IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES G4-17
a. List all entities included in the organisation’s consolidated financial statements or equivalent documents b. Report whether any entity included in the organisation’s consolidated financial statements or equivalent documents is not covered by the report
G4-18
Stakeholder engagement (pages 82 – 86) Throughout this report
NORTHAM ANNUAL INTEGRATED REPORT 2014
276
SPECIFIC STANDARD DISCLOSURES Reporting level
External assurance
Fully
Assured
Fully
Assured
Throughout this report
Fully
Assured
General standard disclosures
Section and page number
G4-19
Managing business risks and opportunities (pages 33 – 38)
List all the material Aspects identified in the process for defining report content
Sustainability review (pages 82 – 86) Stakeholder engagement (pages 82 – 86) Throughout the report G4-20
For each material Aspect, report the Aspect Boundary within the organisation, as follows:
Managing business risks and opportunities (pages 33 – 38)
• Report whether the Aspect is material within the organisation
Sustainability review (pages 82 – 86)
• If the Aspect is not material for all entities within the organisation (as described in G4-17), select one of the following two approaches and report either:
Stakeholder engagement (pages 82 – 86) Throughout the report
• The list of entities or groups of entities included in G4-17 for which the Aspect is not material or • The list of entities or groups of entities included in G4-17 for which the Aspects is material • Report any specific limitation regarding the Aspect Boundary within the organisation G4-21
For each material Aspect, report the Aspect Boundary outside the organisation, as follows: • Report whether the Aspect is material outside of the organisation • If the Aspect is material outside of the organisation, identify the entities, groups of entities or elements for which the Aspect is material. In addition, describe the geographical location where the Aspect is material for the entities identified • Report any specific limitation regarding the Aspect Boundary outside the organisation
G4-22
Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements
Scope (inside front cover)
Fully
Assured
G4-23
Report significant changes from previous reporting periods in the Scope and Aspect Boundaries
Scope (inside front cover)
Fully
Assured
Fully
Assured
Fully
Assured
Profile, structure products (page 3)
STAKEHOLDER ENGAGEMENT G4-24
Provide a list of stakeholder groups engaged by the organisation
Stakeholder engagement (pages 82 – 86) Throughout the Reviewing sustainability in terms of the five capitals section
G4-25
Report the basis for identification and selection of stakeholders with whom to engage
Managing business risks and opportunities (pages 33 – 38) Sustainability review (pages 81 – 82) Stakeholder engagement (pages 82 – 86)
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NORTHAM ANNUAL INTEGRATED REPORT 2014
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI CONTINUED
SPECIFIC STANDARD DISCLOSURES General standard disclosures
Section and page number
G4-26
Managing business risks and opportunities (pages 33 – 38)
Report the organisation’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and give an indication as to whether any of the engagement was undertaken specifically as part of the report preparation process
Reporting level
External assurance
Fully
Assured
Fully
Assured
Sustainability review (pages 81 – 82) Stakeholder engagement (pages 82 – 86) Throughout the Reviewing sustainability in terms of the five capitals section
G4-27
Report key topics and concerns raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting. Report the stakeholder groups that raised each of the key topics and concerns
Managing business risks and opportunities (pages 33 – 38) Sustainability review (pages 81 – 82) Stakeholder engagement (pages 82 – 86) Throughout the Reviewing sustainability in terms of the five capitals section
REPORT PROFILE G4-28
Reporting period (such as fiscal or calendar year) for information provided
Scope (inside front cover)
Fully
Assured
G4-29
Date of most recent previous report (if any)
Scope (inside front cover)
Fully
Assured
G4-30
Reporting cycle (such as annual, biennial)
Scope (inside front cover)
Fully
Assured
G4-31
Provide the contact point for questions regarding the report or its contents
Administration and contact information (inside back cover)
Fully
Assured
G4-32
‘In accordance’ option:
GRI content index and independent assurance report (pages 274 – 278)
Fully
Assured
Assurance:
Scope (inside front cover)
Fully
Assured
a. Report the organisation’s policy and current practice with regard to seeking external assurance for the report.
Independent assurance report (page 286)
a. Report the ‘in accordance’ option the organisation has chosen. b. Report the GRI Content Index for the chosen option. c. Report the reference to the External Assurance Report, if the report has been externally assured. GRI recommends the use of external assurance but it is not a requirement to be ‘in accordance’ with the Guidelines. G4-33
b. If not included in the assurance report accompanying the sustainability report, report the scope and basis of any external assurance provided. c. Report the relationship between the organisation and the assurance providers. d. Report whether the highest governance body or senior executives are involved in seeking assurance for the organisation’s sustainability report.
NORTHAM ANNUAL INTEGRATED REPORT 2014
278
SPECIFIC STANDARD DISCLOSURES General standard disclosures
Section and page number
Reporting level
External assurance
GOVERNANCE Governance structure and composition G4-34
Report the governance structure of the organisation, including committees of the highest governance body. Identify any committees responsible for decision-making on economic, environmental and social impacts.
Corporate governance report (pages 24 – 30)
Fully
Assured
G4-36
Report whether the organisation has appointed an executive-level position or positions with responsibility for economic, environmental and social topics, and whether post-holders report directly to the highest governance body.
Corporate governance report (pages 29 – 31)
Fully
Assured
Report the composition of the highest governance body and its committees by:
Corporate governance report (pages 24 – 30)
Fully
Assured
G4-38
The chief executive takes ultimate responsibility for matters relating to the sustainability at the business.
• Executive or non-executive • Independence • Tenure on the governance body • Number of each individual’s other significant positions and commitments, and the nature of the commitments • Gender • Membership of under-represented social groups • Competences relating to economic, environmental and social impacts • Stakeholder representation G4-39
Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her function within the organisation’s management and the reasons for this arrangement).
Corporate governance report (pages 24 – 30)
Fully
Assured
G4-41
Report processes for the highest governance body to ensure conflicts of interest are avoided and managed. Report whether conflicts of interest are disclosed to stakeholders, including, as a minimum:
Corporate governance report (pages 25, 27 and 32)
Fully
Assured
Corporate governance report (page 28 – 30)
Fully
Assured
Corporate governance report (28 – 30)
Fully
Assured
• Cross-board membership • Cross-shareholding with suppliers and other stakeholders • Existence of controlling shareholder • Related party disclosures G4-47
Report the frequency of the highest governance body’s review of economic, environmental and social impacts, risks, and opportunities.
Highest governance body’s role in sustainability reporting G4-48
Report the highest committee or position that formally reviews and approves the organisation’s sustainability report and ensures that all material Aspects are covered
279
NORTHAM ANNUAL INTEGRATED REPORT 2014
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI CONTINUED
SPECIFIC STANDARD DISCLOSURES General standard disclosures
Reporting level
External assurance
Fully
Assured
Report of the SE&HR committee (pages 41 – 49)
Fully
Assured
Corporate governance report (pages 31 – 32)
Fully
Assured
Fully
Assured
Fully
Assured
Section and page number
Remuneration and incentives G4-51
a. Report the remuneration policies for the highest governance body and senior executives for the types of remuneration below:
Report of the SE&HR committee (pages 41 – 49)
• Fixed pay and variable pay:
AFS (pages 148 – 156)
• Performance-based pay • Equity-based pay • Bonuses • Deferred or vested shares • Sign-on bonuses or recruitment incentive payments • Termination payments • Clawbacks • Retirement benefits, including the difference between benefit schemes and contribution rates for the highest governance body, senior executives, and all other employees b. Report how performance criteria in the remuneration policy relate to the highest governance body’s and senior executives’ economic, environmental and social objectives G4-52
Report the process for determining remuneration. Report whether remuneration consultants are involved in determining remuneration and whether they are independent of management. Report any other relationships which the remuneration consultants have with the organisation.
ETHICS AND INTEGRITY G4-56
Describe the organisation’s values, principles, standards and norms of behaviour such as codes of conduct and codes of ethics
www.northam.co.za/governance/policies-andprocedures G4-57
G4-58
Report the internal and external mechanisms for seeking advice on ethical and lawful behaviour, and matters related to organisational integrity, such as helplines or advice lines
Corporate governance report (pages 31 and 32)
Report the internal and external mechanisms for reporting concerns about unethical or unlawful behaviour, and matters related to organisational integrity, such as escalation through line management, whistleblowing mechanisms or hotlines
Corporate governance report (pages 31 and 32)
NORTHAM ANNUAL INTEGRATED REPORT 2014
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www.northam.co.za/governance/policies-andprocedures
www.northam.co.za/governance/policies-andprocedures
SPECIFIC STANDARD DISCLOSURES Page
Omissions
Reporting level
External assurance
Economic performance
DMA: Financial capital (pages 87 – 92)
N/A
Fully
Assured
G4-EC1
G4-EC1: Direct economic value generated and distributed
Financial capital (pages 88 – 92)
N/A
Fully
G4-EC2
Financial implications and other risks and opportunities for the organisation’s activities due to climate change
Natural capital (page 128 – 131)
Total financial data has not been collated for F2014 although savings related to specific projects and risks and opportunities are discussed in the CDP report.
Partially reported
Not assured
Financial assistance received from government
Financial capital (page 89)
N/A
Fully
Not assured
Indirect economic impacts
DMA: Financial capital (pages 90 – 94)
N/A
Fully
Assured
G4-EC7
Development and impact of infrastructure investments and services supported
Financial capital (page 89)
N/A
Fully
Assured
Significant indirect economic impacts, including the extent of impacts
Financial capital (page 89)
N/A
Fully
Not assured
Material aspects: DMA and indicators ECONOMIC
G4-EC4
G4-EC8
Carbon Disclosure Project Report www.cdp.net/en-US/Results/ Pages/Company-Responses. aspx?company=13459
Assured
Social capital (pages 114 – 119)
Social capital (pages 114 – 119)
Procurement practices
DMA: Financial capital (pages 90 and 91)
N/A
Fully
Assured
G4-EC9
Financial capital (pages 90 and 91)
N/A
Fully
Not assured
DMA: Natural capital (page 123)
N/A
Fully
Assured
Natural capital (page 124)
N/A
Fully
Not assured Assured
Proportion of spending on local suppliers at significant locations of operation
ENVIRONMENTAL Materials G4-EN1
Materials used by weight or volume
Energy
Natural capital (page 126)
N/A
Fully
G4-EN3
Direct energy consumption
Natural capital (pages 126 – 127)
N/A
Fully
Assured
G4-EN5
Energy intensity
Natural capital (pages 126 – 129)
N/A
Fully
Not assured
DMA: Natural capital (page 125)
N/A
Fully
Assured
Natural capital (pages 125 – 126)
N/A
Fully
Not assured
DMA: Natural capital (page 130 – 131)
N/A
Fully
Assured
Natural capital (page 130 – 131)
N/A
Fully
Not assured
Water G4-EN8
Total water withdrawal by source
Biodiversity G4-EN11
Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas
281
NORTHAM ANNUAL INTEGRATED REPORT 2014
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI CONTINUED
SPECIFIC STANDARD DISCLOSURES Material aspects: DMA and indicators
Page
Omissions
Reporting level
External assurance
G4-EN12
Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas
Natural capital (page 130 – 131)
N/A
Fully
Not assured
MM1
Amount of land (owned or leased, and managed for production activities or extractive use) disturbed or rehabilitated
Natural capital (page 130 - 131)
N/A
Fully
Not assured
DMA: Natural capital (pages 128 and 130)
N/A
Fully
Assured
Direct greenhouse gas (GHG) emissions (Scope 1)
Natural capital (page 129)
N/A
Fully
Assured
Energy indirect greenhouse gas (GHG) emissions (Scope 2)
Natural capital (page 129)
N/A
Fully
Assured
Greenhouse gas (GHG) emissions intensity
Natural capital (pages 130 and 131)
N/A
Fully
Not assured
G4-EN20
Emissions of ozone depleting substances
Natural capital (page 129)
N/A
Fully
Assured (SO2 – )
G4-EN22
Total water discharge by quality and destination
Natural capital (pages 125 - 126)
N/A Note: Northam has a “no release policy”. Discharges may be logged as environmental incidents depending on severity. No significant environmental incidents were recorded during the year.
Partially reported
Not assured
Effluents and waste
DMA: Natural capital (pages 122 – 123)
N/A
Fully
Assured
G4-EN24
Total number and volume of significant spills
Natural capital (page 122)
N/A
Fully
Assured
G4-EN34
Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
Natural capital (page 122)
No grievances regarding environmental impacts were received during the year.
Fully
Not assured
N/A
Fully
Assured
Northam did not receive any significant fines or non-monetary sanctions for non-compliance with environmental laws and regulations
Fully
Not assured
Emissions G4-EN15
G4-EN16
G4-EN18
Carbon Disclosure Project Report www.cdp.net/en-US/Results/ Pages/Company-Responses. aspx?company=13459
Carbon Disclosure Project Report www.cdp.net/en-US/Results/ Pages/Company-Responses. aspx?company=13459 Carbon Disclosure Project Report www.cdp.net/en-US/Results/ Pages/Company-Responses. aspx?company=13459
This page
Compliance G4-EN29
Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
NORTHAM ANNUAL INTEGRATED REPORT 2014
Natural capital (page 122) This page
282
SPECIFIC STANDARD DISCLOSURES Page
Omissions
Reporting level
External assurance
Employment
DMA: Human capital (pages 102, 104 – 105)
N/A
Fully
Assured
G4-LA1
Total number and rates of new employee hires and employee turnover by age group, gender, and region
Human capital (pages 105 – 106)
Turnover by age group or gender is not collated and therefore not available
Partially reported
Not assured
G4-LA4
Percentage of employees covered by collective bargaining agreements
Human capital (pages 103 – 105)
N/A
Fully
Not assured
Labour/management relations
DMA: Human capital (pages 103 – 105)
N/A
Fully
Assured
MM4
Human capital (page 103)
N/A
Fully
Assured
Occupational health and safety
DMA: Human capital (pages 94 and 95)
N/A
Fully
Assured
G4-LA5
Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programmes
Human capital (pages 94 – 95)
N/A
Fully
G4-LA6
Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work related fatalities, by region and by gender
Human capital (pages 94 – 95)
Information on absenteeism is not available
Partially reported
Diversity and equal opportunity
DMA: Human capital – employment equity and transformation (pages 107 – 109)
N/A
Fully
G4-LA12
Human capital (page 108)
A breakdown of employees by age group is not available.
Partially reported
Material aspects: DMA and indicators SOCIAL: LABOUR PRACTICES AND DECENT WORK
Number of strikes and lock-outs exceeding one week’s duration, by country
Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity
Assured
Assured
Assured
A more critical measure in South Africa specifically, is the percentage of historically disadvantaged South Africans (HDSAs) in management roles and women in mining, which we have reported
Labour practices grievance mechanisms
DMA: Human capital – human rights (page 112)
N/A
Fully
Assured
G4-LA16
Human capital (page 114)
N/A
Fully
Not assured
Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms
283
NORTHAM ANNUAL INTEGRATED REPORT 2014
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI
REPORTING IN LINE WITH GRI CONTINUED
SPECIFIC STANDARD DISCLOSURES Material aspects: DMA and indicators
Reporting level
External assurance
No operations have been identified where the right to exercise freedom of association and collective bargaining may be at risk. Northam upholds the basic labour rights of the Fundamental Rights Convention of the ILO, through the implementation of fair employment practices
Fully
Not assured
DMA: Human capital (pages 102 – 105)
N/A
Fully
Assured
Human capital (pages 102 – 105)
Northam upholds the basic labour rights of the Fundamental Rights Convention of the ILO and in legislation, regulations and practices of South Africa.
Partially
Not assured
Partially
Not assured
Assured
Page
Omissions
Human capital (pages 102 – 105)
Child labour G4-HR5
SOCIAL: HUMAN RIGHTS G4-HR4
Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and measures taken to support these rights
Operations and suppliers identified as having significant risk for incidents of child labour, and measures taken to contribute to the effective abolition of child labour
The company does not employ child labour, nor does it employ workers younger than 18 years of age as all prospective employees are screened in terms of Northam’s employment policies and procedures. Forced or compulsory labour
DMA: Human capital (pages 102 – 105)
G4-HR6
Human capital (pages 102 – 105)
Operations and suppliers identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of all forms of forced or compulsory labour
Northam upholds the basic labour rights of the Fundamental Rights Convention of the ILO and in legislation, regulations and practices of South Africa. No operations identified concerns relating to forced or compulsory labour.
SOCIAL: SOCIETY Local communities
DMA: Social capital (page 114)
N/A
Fully
G4-SO1
Social capital (pages 114 – 119)
N/A
Fully
Assured
DMA: Corporate governance report (pages 29 – 32, 30 – 37)
N/A
Fully
Not assured
Percentage of operations with implemented local community engagement, impact assessments, and development programmes
Anti-corruption
NORTHAM ANNUAL INTEGRATED REPORT 2014
284
for the year ended 30 June 2014 SCOPE OF OUR ENGAGEMENTS Part A We have completed our independent limited assurance engagement to enable us to express our limited assurance conclusions on whether anything has come to our attention that causes us to believe that the integrated report (“the report”) for the year ended 30 June 2014 has not been prepared, in all material respects, in accordance with the Global Reporting Initiative (GRI) G4 Reporting Guidelines; and whether the following specified performance indicators (“specified KPIs”), highlighted for identification purposes in the report by the symbol have not been prepared, in all material respects, in accordance with the basis of measurement as described in the report: • Direct and indirect energy usage, as disclosed on pages 14, 124, 127 to 128 of the report • SO2 emissions, as disclosed on page 128 of the report • Fatality injury incidence rate (FIIR) and lost time injury incidence rate (LTIIR) , as disclosed on pages 14, 96 to 97 of the report • Percentage of Historically Disadvantaged South African’s (HDSAs) in management, as disclosed on pages 14 and 108 of the report • Percentage of women in mining, as disclosed on pages 14 and 108 of the report and • Social and labour plan expenditure, as disclosed on pages 110 to 111 of the report Northam Platinum Limited has elected to prepare the report in accordance with the GRI G4 Guidelines, and has applied a “core” reporting level. A full copy of the guidelines, published by the GRI, can be obtained from the GRI’s website. Northam Platinum Limited’s GRI G4 content index table is presented on pages 275 to 285 in the report.
Part B We have completed our independent limited assurance engagement to enable us to express our limited assurance conclusion on whether anything has come to our attention that causes us to believe that the direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions by weight (“specified carbon emissions KPIs”), as described on page 129 and highlighted by the symbol in the report have not been prepared, in all material respects, in accordance with the basis of measurement as described in the CDP report which may be found at www.cdp.net/en-US/Results/ Pages/Company-Responses.aspx?company=13459 (“carbon emissions criteria”). Our responsibility in performing our independent limited assurance engagement is to Northam Platinum Limited only and in accordance with the terms of reference for this engagement as agreed with them. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Northam Platinum Limited for our work, for this report, or for the conclusions we have reached.
DIRECTORS’ RESPONSIBILITY The directors are responsible for implementing a stakeholder engagement process to identify all relevant stakeholders; to identify key issues; to respond appropriately to key issues identified; to determine those key performance indicators which may be relevant and material to the identified stakeholders; and to design and apply appropriate sustainability reporting policies. The directors are also responsible for the preparation and presentation of the report, the information and assessments contained in the report and for such internal control as the directors determines is necessary to ensure that the information and data reported meet the requirements of the relevant criteria, and contains all relevant disclosures that could materially affect any of the conclusions drawn. 285
NORTHAM ANNUAL INTEGRATED REPORT 2014
INDEPENDENT ASSURANCE REPORT
INDEPENDENT LIMITED ASSURANCE REPORT TO THE DIRECTORS OF NORTHAM PLATINUM LIMITED
INDEPENDENT LIMITED ASSURANCE REPORT TO THE DIRECTORS OF NORTHAM PLATINUM LIMITED CONTINUED for the year ended 30 June 2014 The directors are also responsible for the preparation of the specified carbon emissions in accordance with the carbon emissions criteria as disclosed in the CDP report which may be found at www.cdp.net/en-US/Results/ Pages/Company-Responses.aspx?company=13459. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the specified carbon emissions that is free from material misstatement, whether due to fraud or error. The quantification of the specified carbon emissions is subject to inherent uncertainty because of incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of different gases.
OUR INDEPENDENCE AND QUALITY CONTROL We have complied with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which includes independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. In accordance with International Standard on Quality Control, Ernst & Young Inc. maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
ASSURANCE PROVIDER’S RESPONSIBILITY Our responsibility is to express our limited assurance conclusions on the report and/or the specified KPIs based on our independent limited assurance engagement. Our independent limited assurance engagement was performed in accordance with the International Federation of Accountants’ (IFACs) International Standard on Assurance Engagements (ISAE) 3000 Assurance Engagements Other Than Audits or Reviews of Historical Financial Information with regards to the scope described in part A and with the ISAE3410 Assurance Engagements on Greenhouse Gas Statements with regards to the specified carbon emissions KPIs in part B. This standard requires us to comply with ethical requirements and to plan and perform our engagement to obtain the assurance as required by the scope of our engagement, as expressed in this report.
BASIS OF WORK AND LIMITATIONS The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the subject matter and the purpose of our engagement. In making these assessments, we have considered internal control relevant to the entity’s preparation and presentation of the report and the information contained therein, in order to design procedures appropriate for gathering sufficient appropriate assurance evidence to determine that the information in the report is not materially misstated or misleading as set out in the summary of work performed below. Our assessment of relevant internal control is not for the purpose of expressing a conclusion on the effectiveness of the entity’s internal controls. We planned and performed our work to obtain all the information and explanations that we considered necessary to provide a basis for our reasonable and limited assurance conclusions pertaining to the specified KPIs, the specified carbon emissions KPIs and the report, expressed below. Where a limited assurance conclusion is expressed, our evidence gathering procedures are more limited than for a reasonable assurance engagement, and therefore less assurance is obtained than in a reasonable assurance engagement. NORTHAM ANNUAL INTEGRATED REPORT 2014
286
Our report does not extend to providing assurance on any prior periods’ information or any other information specifically excluded from the scope of the engagement.
SUMMARY OF WORK PERFORMED Set out below is a summary of the procedures performed pertaining to the specified KPIs, specific carbon emission KPIs and the report which were included in the scope of our limited assurance engagement. We: • obtained an understanding of: • the entity and its environment; • entity-level controls; • the stakeholder engagement process; • the selection and application of sustainability reporting policies; • how management has applied the principle of materiality in preparing the report, the specified KPIs and specific carbon emissions KPIs; and • the significant reporting processes including how information is initiated, recorded, processed, reported and incorrect information is corrected, as well as the policies and procedures within the reporting processes. • made such enquiries of management, employees and those responsible for the preparation of the report and the specified KPIs, as we considered necessary. • inspected relevant supporting documentation and obtained such external confirmations and management representations as we considered necessary for the purposes of our engagement. • performed analytical procedures and limited tests of detail responsive to our risk assessment and the level of assurance required, including comparison of judgementally selected information to the underlying source documentation from which the information has been derived. • evaluated whether Northam Platinum Limited’s methods for developing estimates are appropriate and had been consistently applied. However, our procedures did not include testing the data on which the estimates are based or separately developing our own estimates against which to evaluate Northam Platinum Limited’s estimates. • We considered whether Northam Platinum Limited has applied the GRI G4 “Core” Reporting Guidelines as described in the inside front cover under the section “Scope” in the report. We believe that the evidence obtained as part of our limited assurance engagement, is sufficient and appropriate to provide a basis for our findings and our limited assurance conclusion expressed below.
CONCLUSIONS Part A Based on the work performed and subject to the limitations described above, nothing has come to our attention that: • the following specified KPIs, marked by the symbol in the report, have not been prepared, in all material respects, in accordance with management’s sustainability criteria as described in the Report for the year ended 30 June 2014: • direct and indirect energy usage, as disclosed on pages 14, 124, 127 to 128 of the Report • SO2 emissions, as disclosed on page 128 of the Report • Fatality injury incidence rate (FIIR) and lost time injury incidence rate (LTIIR) , as disclosed on pages 14, 96 to 97 of the report 287
NORTHAM ANNUAL INTEGRATED REPORT 2014
INDEPENDENT ASSURANCE REPORT
INDEPENDENT LIMITED ASSURANCE REPORT TO THE DIRECTORS OF NORTHAM PLATINUM LIMITED for the year ended 30 June 2014
INDEPENDENT LIMITED ASSURANCE REPORT TO THE DIRECTORS OF NORTHAM PLATINUM LIMITED CONTINUED for the year ended 30 June 2014 • Percentage of Historically Disadvantaged South African’s (HDSAs) in Management, as disclosed on pages 14 and 108 of the Report • Percentage of women in mining, as disclosed on pages 14 and 108 of the report and • Social and labour plan expenditure, as disclosed on pages 110 to 111 of the report
Part B Based on the work performed and subject to the limitations described above, nothing has come to our attention that the specified carbon emissions KPIs disclosed on page 129 and by marked by the symbol in the report, have not been prepared in all material respects in accordance with management’s carbon criteria as described in the CDP report which may be found at www.cdp.net/en-US/Results/Pages/Company-Responses.aspx?company=13459 in the report for the year ended 30 June 2014.
OTHER MATTER The maintenance and integrity of Northam Platinum Limited’s website is the responsibility of Northam Platinum Limited’s management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the report or our assurance report that may have occurred since the initial date of presentation on the Northam Platinum Limited website.
Ernst & Young Inc Director – Jeremy Grist Registered Auditor Chartered Accountant (SA) 102 Rivonia Road Sandton 2148 30 September 2014
NORTHAM ANNUAL INTEGRATED REPORT 2014
288
NORTHAM PLATINUM LIMITED
AUDITORS
(Registration number 1977/003282/06) Share code: NHM ISIN: ZAE000030912 Debt issuer code: NHMI
Ernst & Young Inc Wanderers Office Park 52 Corlett Drive Illovo 2196 Johannesburg South Africa
REGISTERED OFFICE Block 1A, Albury Park Magalieszicht Avenue Dunkeld West 2196 Johannesburg South Africa PO Box 412694 Craighall 2024 South Africa Telephone: +27 11 759 6000 Facsimile: +27 11 759 6013
TRANSFER SECRETARIES Computershare Investor Services Proprietary Limited 70 Marshall Street 2001 Johannesburg South Africa PO Box 61051 Marshalltown 2107 South Africa Telephone: +27 11 370 5000 Facsimile: +27 11 688 5238
WEBSITE www.northam.co.za
COMPANY SECRETARY PB Beale Block 1A, Albury Park Magalieszicht Avenue Dunkeld West 2196 Johannesburg South Africa PO Box 412694 Craighall 2024 South Africa Email:
[email protected]
BANKERS Standard Bank of South Africa Limited PO Box 61029 Marshalltown 2107 South Africa 7808/14
SPONSOR One Capital 17 Fricker Road Illovo 2196 Johannesburg South Africa PO Box 784573 Sandton 2146 South Africa
INVESTOR RELATIONS Russell and Associates PO Box 1457 Parklands 2121 South Africa Telephone: +27 11 880 3924
NORTHAM ANNUAL INTEGRATED REPORT 2014
ADMINISTRATION AND CONTACT INFORMATION
ADMINISTRATION AND CONTACT INFORMATION
www.northam.co.za
