Chief executive’s review

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Chris Griffith

 

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Construction of roads and drainage infrastructure at Impali housing project near Unki

 

  

 

 

 

 

 

 

 

ceo

Having started my career with Anglo American Platinum Limited (Amplats), I have rejoined it at a difficult time in the life of the Company. As Amplats’ new chief executive, I am in the process of overseeing the restructuring of the business to ensure sustainability, with the future in mind.

Although much of my current focus is on the forward-looking aspects of the business, there are many success stories from 2012 and I will be sharing just a few of them with you in this review.

 

SAFETY

This was our safest year ever. It is, however, with sadness that I have to report that seven of our colleagues died while on Company business in 2012. On behalf of management, I would like to extend my sincere condolences to the Gumede, Leboea, Mahagaja, Malesa, Mzondi, Nyirenda and Sidubulekana families who lost their loved ones in incidents at our operations. I will continue to do everything I can to ensure that we remain steadfast in our commitment to achieving zero harm throughout our operations.

Good progress has been made during the past five years in improving our overall safety performance in the Company, specifically in reducing the number of lost-time injuries. The lost-time injury-frequency rate at Amplats has been declining steadily, from 2.03 in 2007 to 1.15 in 2012. I am proud to be able to report on various milestones in the number of lost-time injury-free and fatality-free shifts recorded at a number of our operations in 2012. Some of the accomplishments at year-end were:

Lost-time injury-free milestones

I am particularly pleased with the following Company safety statistics:

  • Amandelbult concentrators: 4 months
  • School of Mines: 4 months
  • Mogalakwena concentrators: 5 months
  • Rustenburg concentrators: 10 months
  • Western Limb tailings retreatment: 10 months
  • Mototolo Concentrator: 13 months

Fatality-free shifts

  • Thembelani Mine: 1.6 million shifts
  • Siphumelele Mine: 1.9 million shifts
  • Tumela Mine: 2.2 million shifts
  • Twickenham Mine: 2.2 million shifts
  • Dishaba Mine: 2.6 million shifts
  • Precious Metals Refinery: 4.4 million shifts 
  • Amandelbult concentrators: 4.5 million shifts
  • Union concentrators: 6.5 million shifts

It also saddens me to reflect on the death of Ms Binky Moseane, who was assaulted and killed underground at Khomanani Mine through a criminal act. Our sympathy and condolences are extended to Binky’s family, friends and colleagues. The South African Police Service investigation into this murder continues and the Company continues to support the investigation. Following this shocking incident, we have taken steps specifically to improve the safety of the women working underground at our operations, so as not to deter women from seeking employment there.

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Marvin Mahlangu, a bulldozer operator at Mogalakwena North pit

It is with sadness that I have to report that three Amplats employees died as a result of the violent illegal labour unrest and public violence around our operations in 2012. They were Mr Mtshunquleni Qakamba, Mr Elias Moomi Mokgwapha and Mr Rafael Quive.

I am pleased to report that there has been a significant reduction in the impact of the section 54 stoppages on our operations in 2012. This has been brought about through improved safety focus, better communication and relations with the DMR.

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Dishaba Mine overview

Readers will also note the case study later on in this report that describes how a quick and professional response by the Company’s emergency services averted what surely would have been a disaster when a fire started at Khuseleka Mine. Thanks to their efforts, no serious injuries or fatalities resulted. The commitment of Company personnel and the integrity of the systems deployed make me proud. They also confirm my sense and knowledge that Amplats remains a great company despite the challenges it is currently facing.

CONTRIBUTION TO SOCIETY

We make a significant and important contribution to socio-economic development, and the lives of many people, in the areas in which we operate, and in the labour-sending areas of the Eastern Cape, Lesotho and Mozambique. I am confident that we have played a significant role in transforming many people’s lives as a result of our support for initiatives that

  1. improve the quality of education, health and other basic services and
  2. provide important primary infrastructure such as roads, water, housing and electricity.This year we spent R276 million on socio-economic development, R90 million more than in 2011.

At a sector level, I believe that the benefits that stem from mining could be enhanced if there was greater collaboration between mining companies operating in similar geographies. I will be pushing for greater co-operation and group effort among companies and with Government, such that mining companies end up devising and implementing socio-economic development interventions on the basis of common research and shared strategies. This will help the mining sector to identify which needs should be addressed, how and in what order; and to avoid the duplication of resources owing to the sheer size 
and complexity of the socio-economic challenges we face as an industry 
and country.

Alchemy is designed to provide direct participation by local communities in the Company. It is a R3.5 billion transaction that promotes sustainable socio-economic development in the areas where we mine and in the labour-sending areas. We have made considerable progress in 2012 with the implementation of this crucial project. An umbrella trust has been created to hold Company shares for the beneficiary communities. Four independent development trusts, and a not-for-profit company spend dividends on development projects in the labour-sending areas, and are in the process of being established to serve the intended beneficiaries.

Effective operation of the not-for-profit company will be ensured through a careful process of capacity building. The Amandelbult trust is close to being formed, while the trusts at Mogalakwena and Twickenham are likely to be established in the course 
of 2013.

I am pleased with Amplats’ steady and significant increases in spend with BEE suppliers. Total procurement from historically disadvantaged South Africans (HDSAs) in 2012 was R10.9 billion, up from the R10.3 billion spent in 2011. This means that HDSA spend represented 53.4% of all available spend on suppliers in 2012. The portion spent on local HDSA suppliers – i.e. suppliers from the communities close to our operations – was R2.7 billion in 2012, compared with the R2.5 billion spent in 2011. This equates to 13.5% of all available spend.

Company operations retained their environmental management system certificates against the ISO 14001 standard in 2012, and all but one operation’s new water-use licences have now been granted by the Department of Water Affairs. Amandelbult Mine continues to operate under the conditions contained in its water permit, granted under previous legislation. Engagement with Government officials continues, and the new licence is likely to be issued in the course of 2013.

Once again, the Company performed well in the rating of companies’ disclosure on climate change issues undertaken by the Carbon Disclosure Project (CDP). Amplats achieved second position in the materials category of the CDP’s 2012 Global 500 Climate Change assessment of disclosure. Overall, Amplats was rated among the top-scoring companies of the Global 500 Report and was the highest-rated South African company, an achievement of which we are extremely proud.

LABOUR UNREST

Production at our Rustenburg, Union and Amandelbult mines was negatively impacted by unprotected industrial action that spanned two full months, from 18 September to 15 November 2012. At the Rustenburg mines, production decreased by 43,300 ounces or 8%, while at the Union and Amandelbult mines production decreased by 13% and 23% respectively. The net effect of the strike action was a loss of platinum production of 306,000 ounces, including 82,000 ounces lost during the start-up period following the strike. A detailed analysis of this labour unrest is included from page 6 of this Sustainable Development Report.

PROGRESS WITH INTERNAL TRANSFORMATION

We have been progressing pleasingly in our efforts to ensure that the Company’s workforce properly reflects South Africa’s demographic profile.  

I am proud to note that the percentages of HDSAs at all levels of the Company continue to increase: at present HDSAs constitute 38% of top management, close to 40% of senior management, 57% of middle management and 65% of junior management. The numbers of women in technical mining jobs and in management at Amplats have been rising slowly but steadily, suggesting that a corner has been turned in this area of transformation.

PROPOSED RECONFIGURING OF AMPLATS

We are taking firm steps to create a sustainable, competitive and profitable platinum business. The review we conducted during the course of 2012 and early 2013 was initiated in response to revised expectations concerning growth in platinum demand; and also to a number of factors that have eroded profitability in recent years, including capital intensity, mine depths, ore grades, higher-than-inflation unit-cost increases, elasticity in the demand for jewellery and increasing secondary supply of platinum through the growth of recycling stocks.

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Construction of roads and drainage infrastructure at Impali housing project near Unki

Several of our mines have been under considerable economic pressure for some time already. The continued operation of these mines within the current configuration, and in light of the Company’s revised demand and cost expectations, is not sustainable. We therefore propose to reconfigure our Rustenburg operations into a sustainable 320,000 to 350,000 ounces platinum producer across three operating mines. Four unsustainable, high-cost shafts could be put on long-term care and maintenance, including Khuseleka 1 and 2, and Khomanani 1 and 2. It is proposed that Rustenburg’s processing operations will also be reconfigured to align with the revised mining footprint, which may include closing the Waterval UG2 Concentrator and the No 2 smelting furnace.
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Roadworks at Impali housing project

We also believe that the Union mines are likely to be of greater value under different ownership, particularly in comparison to the other attractive growth options in the Company’s portfolio, and Amplats therefore proposes to divest Union at the right time to maximise value. The restructuring of joint-venture operations has also been reviewed in order to optimise long-term profitability and competitiveness. This may include the rationalisation of farm boundaries to optimise extensions in life-of-mine and other commercial considerations.

Current and forecast market conditions require cash preservation and the optimal allocation of capital. The proposed restructuring of the operations would ensure more effective capital allocation towards the Company’s mines that are best placed to sustain and create employment over the long term, avoiding significant capital expenditure that would be required simply to maintain output from certain marginal operations. The Company is likely to spend R100 billion over the next ten years on low-cost, high-margin projects. Regretably as a result of the proposed changes to the business, a total of 14,000 employees may need to be retrenched. Approximately 64% of these will be redeployed; the remainder will be addressed by the extensive and comprehensive interventions that comprise the social plan.

As is clear from the rest of this report, we take our social responsibilities seriously, particularly with regard to employees and their communities, and propose to protect and create more jobs than may be affected by labour restructuring. Where labour restructuring may be necessary, the Company will seek to redeploy as many affected workers as possible to other Anglo American operations in South Africa where vacancies exist. With the clear objective of minimising the impact of the restructuring of the business, the Company will also assist affected employees and communities through an extensive social plan that involves reskilling, entrepreneurial development, a house-building scheme, job creation, financial support and health cover, among a number of initiatives aimed at labour-sending communities and communities neighbouring our operations. The proposed support to be provided will include:

  • A comprehensive assistance package for employees including the following: financial support; counselling; support to search for new jobs in cases where employment may be terminated; portable skills training; and entrepreneurial support that will be able to build on Anglo American’s award-winning and internationally recognised Zimele enterprise-development programmes.
  • Assistance for the dependants of employees, including dependants in the labour-sending areas, again focusing on portable skills development and enterprise development.
  • A multi-year programme of community-development support for Amplats’ labour-sending areas, 
    in South Africa and neighbouring countries, in partnership with local governments and development agencies. This will focus on the development of viable agricultural supply chains and other measures to support the rural economy in labour-sending areas.

The Company has agreed with the Department of Mineral Resources and labour unions to follow an intensive consultation process which is not likely to take more than 60 days beginning 30 January 2013.

Many thanks are due to staff for their hard work during the course of a difficult year. I am especially grateful for the welcome I have received on my return to the Company. I will be relying on commitment and dedication to assist in implementing a new vision for the business. I am confident that Amplats will emerge a safer, more sustainable and more resilient Company.

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Chris Griffith

Chief executive

1 February 2013