Risk management and compliance

RISK MANAGEMENT AND COMPLIANCE

The Company’s robust and dynamic risk-management process employs appropriate strategies to exploit upside risk and manage downside risk to an acceptable level.

RISK MANAGEMENT

An intrinsic part of the Group’ strategic and business processes, risk management is also a key element in assisting us to achieve our vision and strategic objectives.

Our integrated risk management methodology requires that each key risk in every part of the business is included in a structured framework and is subjected to systematic process management. The methodology incorporates leading practice in accordance with the principles of the King III Code of Corporate Governance and other guidelines.

Risk management forms an integral part of the Group’s governance framework. The board recognises that effective risk management and systems of internal control are fundamental in ensuring effective governance and business sustainability.

The embedding of risks within the business implies a clear link between risk, strategy and 
business performance.

COMPLIANCE

Mining licences and black economic empowerment

Anglo American Platinum (Amplats), having achieved execution on 14 out of 15 mining licences, remains committed to meeting the requirements of South Africa’s Mineral and Petroleum Resources Development Act and the Mining Charter. The Group is proud of the contribution it has made to empowerment in South Africa through the numerous transactions it has facilitated since 2000. These have resulted in the significant and meaningful empowerment of historically disadvantaged South Africans (HDSAs) in various operations and projects. The table on page 92 contains a brief summary of these transactions completed over 
the years.

Mineral rights under contention

Amplats is geared for growth, with a total declared inclusive Mineral Resource estimate of 878,8 Moz 4E for the Company in South Africa and Zimbabwe. This number excludes any disputed rights such as Middellaagte 382 KQ, a portion of Tigerpoort 426 KS, Rooderand 46 JQ and the Modikwa deeps. Amplats is at the advanced stage of engagement with the regulator, the DMR, to amicably resolve the disputes.

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Mining Charter

Amplats remains committed to the transformation of the South African mining industry and welcomed the release of the revised Mining Charter in September 2010. The charter retained the requirement, set in 2002, of a historically disadvantaged South African (HDSA) ownership of 26% by 2014. The revised charter provided clarity in a number of areas, for instance in its definition of the term “beneficiation”. This is the second year in which we are reporting against the new Mining Charter scorecard.

In advancement of black economic empowerment, the Company has entered into a number of disposal transactions and joint ventures and it has established an employee share ownership scheme as well as various community trusts as part of the community economic empowerment transaction. The result of these transactions was a transfer of more than 26% of the Company’s forecast attributable production, as it would have been in 2014 had it not entered into these transactions, to historically disadvantaged South Africans.

The Company continues to meet all its Mining Charter obligations. The table on page 132 provides a summary of its performance against the charter. It also shows where to obtain more information regarding particular sections of the new scorecard.

Mineral policy – South Africa

It is imperative for business in South Africa to be able to operate in the context of a stable regulatory framework and a clear and fair fiscal regime. The South African Government’s plans to attract and promote the significant private-sector investment required to ensure a thriving mining sector that contributes meaningfully to society at large rests on three critical components: ensuring policy predictability and certainty; enforcing the rule of law; and investing in the enabling infrastructure required.

The resolution taken by the African National Congress (ANC), South Africa’s ruling political party, at its recent policy conference, that wholesale mine nationalisation is not a reasonable or sustainable option for South Africa is welcomed. Nationalisation has now been firmly ruled out by the current ruling party as an option for the mining industry. Nationalisation would not have solved the economic or transformational challenges South Africa faces, but would instead have had a negative impact on the country’s economy and ability to create jobs. The ANC’s decision will create greater certainty among investors and will once again encourage investment in the country’s mining sector.

The ANC did, however, endorse proposals for a review of mineral taxation. Anglo American will continue to engage the Government on any related proposals.

Zimbabwe Indigenisation Act

On 1 November 2012, a Heads of Agreement relating to the proposed Unki Mine indigenisation implementation plan was signed 
with the Government of Zimbabwe. The Heads of Agreement is subject 
to the fulfilment of certain conditions precedent and sets out the key terms for transfer of 51% equity ownership 
of Unki Mines (Private) Limited to selected indigenous Zimbabwean entities as required by the Indigenisation and Economic Empowerment Act. The proposed transaction will be facilitated through a notional vendor financing structure provided to the following indigenous entities:

  • 10% equity ownership transaction to a trust established for the benefit of the community surrounding Unki Mine’s operations.
  • 10% equity ownership transaction to a trust to be established for the benefit of all full-time employees of Unki Mine.
  • 10% equity ownership transaction to a consortium of strategic equity partners.
  • 21% equity ownership transaction to the National Indigenisation and Economic Empowerment Fund.

The notional vendor financing will be repaid by the indigenous entities from a share of their future dividends. Subject to fulfilment of all the conditions precedent, Anglo American Platinum intends to implement the indigenisation plan by 30 June 2013.

Water use licence

Our operations with approved water use licences (WUL) are Twickenham Platinum Mine, Polokwane Metallurgical Complex, Mogalakwena mining area, Rustenburg mines, Union mines and the Mototolo Concentrator and Der Brochen Project (whose integrated WUL was approved in April 2011). Engagement around the issuing of Amandelbult’s water use licence with Government continues. Amandelbult has a valid water 
permit under the old Act.

Anglo American Platinum significant (rating 13 to 20) and high risks (rating 21 to 25)

 

SUSTAINABLE DEVELOPMENT RISKS

Risks falling within the SD ambit represent a substantial part of our risk profile. Of the 13 key risks identified by the Company in 2011, six (46%) fell under SD.

Amplats obviously subscribes to the view that the top risks to the Company should receive commensurate attention and those of lower ranking less. However, mitigation measures for all risks are deployed to the point where the resultant risk ranking is acceptable to the Company. Amplats is well aware that the potential impact of risks of lower ranking, when not attended to, can increase significantly in a relatively short time.

The Company’s risk-management process is assured by its internal audit function and Anglo Business Assurance Services (ABAS). It is an ongoing process that includes risk-based internal audits, the compilation of risk registers and their associated action plans, and an annual review conducted by ABAS on the risk-management processes used by the Company.

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New road built by Twickenham Mine for the Makgopa Village

MINERAL RIGHTS UNDER CONTENTION

Amplats is geared for growth, with a total declared inclusive Mineral Resource estimate of 878,8 Moz 4E for the Company in South Africa and Zimbabwe. This number excludes any disputed rights such as Middellaagte 382 KQ, a portion of Tigerpoort 426 KS, Rooderand 46 JQ and the Modikwa deeps. Amplats is at the advanced stage of engagement with the regulator, the DMR, to amicably resolve the disputes.

Chronology of Anglo American Platinum empowerment transactions

August 2000

Sale of a 17.5% (and facilitation of an additional 5%) in Northam to Mvelaphanda Resources.

August 2001

Formation of 50:50 Modikwa JV with ARM Mining Consortium, an empowerment company that includes the Mampudima and the Matimatjatji communities of approximately 60,000 rural residents as broad-based participants.

August 2002

The establishment in July 2002 of a 50:50 unincorporated joint venture with Royal Bafokeng Nation over the Bafokeng-Rasimone Platinum Mine (BRPM) and the Styldrift project area. Following the restructuring of the BRPM Joint Venture in December 2009, Royal Bafokeng Platinum Limited (RB Plat) acquired a 67% interest as well as operational control of the BRPM Joint Venture on 4 January 2010. RB Plat listed on the JSE Limited on 8 November 2010 and the Group currently holds a 12.6% equity interest in RB Plat, in addition to the 33% direct interest in BRPM.

February 2003

The formation, in August 2002, with Lonmin plc, of the Pandora Joint Venture, which includes the participation of the Bapo-Ba-Mogale mining company and Mvelaphanda Resources (on behalf of Northam) as empowerment partners, each having a 7.5% interest in the joint venture.

December 2005

The disposal in October 2005 of the rights on the property Elandsfontein 440 JQ to Eland Platinum Mines (EPM), with the Ngazana Consortium holding a 26% interest in EPM.

July 2006

The development of a chromite recovery plant at the Group’s Union Mine with Siyanda Chrome Investments, an HDSA company.

November 2006

The transaction, in December 2006, with the Bakgatla-Ba-Kgafela (Bakgatla), who are the traditional community at Union Mine, giving the Bakgatla a 15% stake in Union Mine as well as a 26% stake in the Magazynskraal project and a 55% stake in the Rooderand project.

September 2007

The announcement of the Group’s sale to Anooraq Resources Corporation (Anooraq) of an effective 51% of Bokoni Platinum Mine (Bokoni) and an additional 1% of the Ga-Phasha, Boikgantsho and Kwanda Joint Venture projects. Anooraq now owns and controls an effective 51% of Bokoni, Ga-Phasha, Boikgantsho and Kwanda. This transaction gave Anooraq control over the third-largest PGM resource base in South Africa.

September 2007

The disposal of the Group’s 50% interest in the Booysendal project and of its 22.4% interest in Northam to Mvelaphanda Resources, for a total consideration of R3.7 billion. Mvelaphanda Resources injected the Booysendal project into Northam in return for Northam shares, resulting in Mvelaphanda Resources acquiring majority control of Northam. This transaction gave Mvelaphanda Resources control over the fifth-largest PGM resource base in South Africa.

September 2007

Announcement of the establishment of an employee share ownership plan (ESOP) that effectively owns 1.5% of Amplats to benefit all permanent employees not participating in any other company share scheme. More than 90% of the scheme’s beneficiaries are HDSAs.

December 2008

The Group swapped its 37% interest in the Western Bushveld Joint Venture for a 26.6% equity interest in Wesizwe Platinum Limited (Wesizwe), an HDSA company.

February 2011

Announcement of the Group’s R3.5 billion (circa 2.33% of market capitalisation) community economic empowerment transaction, Project Alchemy. See details on page 81.