Company Quick10K Filing
Sibanye Gold
20-F 2018-12-31 Filed 2019-04-09
20-F 2017-12-31 Filed 2018-04-02
20-F 2016-12-31 Filed 2017-04-07
20-F 2015-12-31 Filed 2016-03-21
20-F 2014-12-31 Filed 2015-03-24
20-F 2013-12-31 Filed 2014-04-29
20-F 2012-12-31 Filed 2013-04-26

SBGL 20F Annual Report

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Sibanye Gold Earnings 2014-12-31

Balance SheetIncome StatementCash Flow

20-F 1 d891668d20f.htm 20-F 20-F
Table of Contents

As filed with the Securities and Exchange Commission on 23 March 2015

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

(Mark One)

  ¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

  x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended 31 December 2014

or

  ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

or

  ¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                              to

Commission file number: 001-35785

Sibanye Gold Limited       

      (Exact name of registrant as specified in its charter)      

Republic of South Africa

(Jurisdiction of incorporation or organization)

Libanon Business Park

1 Hospital Street (off Cedar Avenue)

Libanon, Westonaria, 1780

South Africa.

011-27-11-278-9600

(Address of principal executive offices)

With copies to:

Charl Keyter

Chief Financial Officer

Sibanye Gold Limited

Tel: 011-27-11-278-9700

Fax: 011-27-11-278-9863

Libanon Business Park

1 Hospital Street (off Cedar Avenue)

Libanon, Westonaria, 1780

South Africa

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

and

Thomas B. Shropshire, Jr.

Linklaters LLP

Tel: 011-44-20-7456-3223

Fax: 011-44-20-7456-2222

One Silk Street

London EC2Y 8HQ

United Kingdom

Securities registered or to be registered pursuant to Section 12(b) of the Act

 

                                                 Title of Each Class                                                                          Name of Each Exchange on Which Registered                    
Ordinary shares of no par value each American Depositary Shares, each representing
four ordinary shares

New York Stock Exchange*

New York Stock Exchange

*Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock

as of the close of the period covered by the Annual Report 898,840,196 ordinary shares of no par value each

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:        Yes  x           No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  ¨  Yes            No  x

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                    x  Yes             No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)*.  ¨  Yes            No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x           Accelerated filer  ¨                  Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP  ¨

International Financial Reporting Standards as issued by the

International Accounting Standards Board  x

Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:      Item 17  ¨        Item  18   ¨

If this is a annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes  ¨            No  x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes  ¨  No  ¨

*  This requirement does not apply to the registrant

 

 

 


Table of Contents

FORM 20-F CROSS REFERENCE GUIDE

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

    

 

    

 

    

 

1

Identity of directors, senior management and advisers

NA

NA

2

Offer statistics and expected timetable

NA

NA

3

Key information

(a)    Selected Financial Data

Integrated Annual Report—Overview—Financial and non-financial performance

16-17

Further Information—Key Information

239

(b)    Capitalisation and Indebtedness

NA

NA

(c)    Risk Factors

Further Information—Risk Factors

240-254

4

Information on the Company

(a)    History and Development of the Company

Integrated Annual Report—Administrative Details—Administration and Corporate information

238

Integrated Annual Report—Guide to our 2014 reports

Inside cover of Integrated Annual Report

Integrated Annual Report—Overview—Group Profile

4-7

Integrated Annual Report—Strategic Leadership—Perspective from the Chair

20-21

Integrated Annual Report—Strategic Leadership—Chief Executive’s Report

26-31

Integrated Annual Report—Strategic Leadership—CFO’s Report

32-33

Integrated Annual Report—Accountability—Directors’ Report

146-150

Integrated Annual Report—Overview—Financial and non-financial Performance

16-17

Integrated Annual Report—Business Performance—Financial Capital

46-49

Integrated Annual Report—Business Performance—Manufactured Capital and Intellectual Capital

74-87

Further Information—Additional Information—Acquisitions

300-301

(b)    Business Overview

Integrated Annual Report—Overview—Group profile

4-7

Integrated Annual Report—Overview—Financial and Non-Financial Performance

16-17

Integrated Annual Report—Overview—External Context

8-12

Integrated Annual Report—Business Performance—Manufactured Capital and Intellectual Capital

74-87

Further Information—Environmental and Regulatory Matters

273-276

 

i


Table of Contents

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

    

 

    

 

    

 

(c)    Organisational Structure

Integrated Annual Report—Overview—Group Profile

4-7

Integrated Annual Report—Annual Financial Statements— Notes to the Consolidated Financial Statements—Note 1.3: Consolidation

180

(d)    Property, Plant and Equipment

Integrated Annual Report—Business Performance—Manufactured Capital and Intellectual Capital

74-87

Integrated Annual Report—Annual Financial Statements—Management’s Discussion and Analysis of the Financial Statements—Statement of Financial Position—Property, Plant and Equipment

170

Integrated Annual Report—Annual Financial Statements—Notes to the Consolidated Financial Statements—Note 13: Property, Plant and Equipment

195-199

Further Information—Environmental and Regulatory Matters

273-276

4A

Unresolved Staff Comments

NA

NA

5

Operating and Financial Review and Prospects

(a)    Operating Results

Integrated Annual Report—Annual Financial Statements—Management’s Discussion and Analysis of the Financial Statements

160-171

Further Information—Operating and Financial Review and Prospects— Fiscal Years Ended 31 December 2013 and 2012

255-263

(b)    Liquidity and Capital Resources

Integrated Annual Report—Annual Financial Statements—Management’s Discussion and Analysis of the Financial Statements—Liquidity and Capital Resources

168-170

Further Information—Operating and Financial Review and Prospects—Liquidity and Capital Resources

261-263

(c)    Research and Development, Patents and Licences, etc.

NA

NA

(d)    Trend Information

Integrated Annual Report—Business Performance—Financial Capital

46-49

 

ii


Table of Contents

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

    

 

    

 

    

 

(e)    Off-balance Sheet Arrangements

Integrated Annual Report—Annual Financial Statements—Management’s Discussion and Analysis of the Financial Statements—Off Balance Sheet Arrangements and Contractual Commitments

171

(f)     Tabular Disclosure of Contractual Obligations

Integrated Annual Report—Annual Financial Statements—Management’s Discussion and Analysis of the Financial Statements—Off Balance Sheet Arrangements and Contractual Commitments

171

(g)    Safe Harbour

Forward-Looking Statements

ix-x

6

Directors, Senior Management and Employees

(a)    Directors and Senior Management

Integrated Annual Report—Strategic Leadership—Board

22-25

Integrated Annual Report—Strategic Leadership—Management

34-35

(b)    Compensation

Integrated Annual Report—Accountability—Remuneration Report

152-157

(c)    Board Practices

Integrated Annual Report—Accountability—Corporate Governance Report

136-141

(d)    Employees

Integrated Annual Report—Business Performance—Human Capital

50-73

(e)    Share Ownership

Integrated Annual Report—Accountability—Remuneration Report

152-157

Integrated Annual Report—Annual Financial Statements— Notes to the Consolidated Financial Statements—Note 7: Share-Based Payments

186-190

7

Major Shareholders and Related Party Transactions

Integrated Annual Report—Overview—Group Profile

6

(a)    Major Shareholders

Further Information—Major Shareholders and Related Party Transactions—Major Shareholders

277-278

Further Information—The Offer and Listing

280-282

(b)    Related Party Transactions

Integrated Annual Report—Accountability—Directors’ Report

146-149

Further Information—Major Shareholders and Related Party Transactions—Related Party Transactions

278

Integrated Annual Report—Annual Financial Statements— Notes to the Consolidated Financial Statements—Note 44: Related-Party Transactions

230-231

(c)    Interests of Experts and Counsel

NA

NA

 

iii


Table of Contents

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

    

 

    

 

    

 

8

Financial Information

(a)    Consolidated Statements and Other Financial Information

Further Information—Financial Information—Dividend Policy and Dividend Distributions

279

(b)    Significant Changes

NA

NA

9

The Offer and Listing

(a)    Offer and Listing Details

Further Information—The Offer and Listing

280-282

(b)    Plan of Distribution

NA

NA

(c)    Markets

Further Information—The Offer and Listing

280-282

(d)    Selling Shareholders

NA

NA

(e)    Dilution

NA

NA

(f)     Expenses of the Issue

NA

NA

10

Additional information

(a)    Share Capital

NA

NA

(b)    Memorandum and Articles of Association

Further Information—Additional Information—Memorandum of Incorporation

283

(c)    (c) Material Contracts

Further Information—Additional Information—Material Contracts

283-285

(d)    Exchange Controls

Further Information—Environmental and Regulatory Matters—Exchange Controls

276

Further Information—Additional Information—South African Exchange Control Limitations Affecting Security Holders

293

(e)    Taxation

Further Information—Additional Information—Taxation

294-299

(f)     Dividends and Paying Agents

NA

NA

(g)    Statement by Experts

NA

NA

(h)    Documents on Display

Further Information—Additional Information—Documents on Display

299

(i)     Subsidiary Information

NA

NA

11

Quantitative and Qualitative Disclosures about Market Risk

Further Information—Quantitative and Qualitative Disclosures about Market Risk

302-303

12

Description of Securities other than Equity Securities

(a)    Debt Securities

NA

NA

 

iv


Table of Contents

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

    

 

    

 

    

 

(b)    Warrants and rights

NA

NA

(c)    Other Securities

NA

NA

(d)    American Depositary Shares

Further Information—Additional Information—American Depositary Shares

285-293

13

Defaults, Dividend Arrearages and Delinquencies

NA

NA

14

Material Modifications to the Rights of Security Holders and Use of Proceeds

NA

NA

15

Controls and Procedures

Further Information—Controls and Procedures

304-305

16A

Audit Committee Financial Expert

Further Information—Audit Committee Financial Expert

306

16B

Code of Ethics

Integrated Annual Report Accountability—Corporate Governance Report

136-141

16C

Principal Accountant Fees and Services

Further Information—Principal Accountant Fees and Services

307

16D

Exemptions from the Listing Standards for Audit Committees

NA

NA

16E

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

None

16F

Change in Registrant’s Certifying Accountant

NA

NA

16G

Corporate Governance

Further Information—Corporate Governance

308

16H

Mine Safety Disclosure

NA

NA

17

Financial Statements

NA

NA

18

Financial Statements

Integrated Annual Report Annual Financial Statements—Consolidated Income Statement

172

Integrated Annual Report Annual Financial Statements—Consolidated Statement of Financial Position

174

Integrated Annual Report Annual Financial Statements—Consolidated Statement of Changes in Equity

176

Integrated Annual Report Annual Financial Statements—Consolidated Statement of Cash Flows

177

Integrated Annual Report Annual Financial Statements—Notes to the Consolidated Financial Statements

178-235

19

Exhibits

Exhibits

II-1-II-3

 

v


Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Historical Consolidated Financial Statements

Sibanye Gold Limited (Sibanye) is a South African company and all of our operations are located in South Africa. Accordingly, our books of account are maintained in South African Rand and our annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, as prescribed by law. These financial statements are distributed to shareholders and are submitted to the JSE and the NYSE.

In previous years the IFRS financial statements were furnished to the Securities and Exchange Commission (SEC), on Form 6-K. Until 31 December 2013, Sibanye also prepared annual financial statements in accordance with United States Generally Accepted Accounting Principles (US GAAP) for inclusion in the annual report on Form 20-F, which were translated into U.S. dollars.

Sibanye has prepared the annual financial statements contained in this annual report on Form 20-F for the fiscal years ended 31 December 2014, 2013 and 2012 and as at 31 December 2014, 2013 and 2012 in accordance with IFRS. As a consequence of having previously filed IFRS financial statements in our home country, we are not permitted to take advantage of any IFRS 1 “First-time Adoption of International Financial Reporting Standards” exceptions in this first filing of IFRS on Form 20-F. Sibanye changed to reporting in accordance with IFRS in our Form 20-F to remove duplication, improve efficiencies as we report in accordance with IFRS in South Africa, our home country, and align with the majority of our peers. As this is a first time filing of IFRS on Form 20-F the financial statements include a reconciliation of IFRS to US GAAP for the fiscal years ended 31 December 2013 and 2012. See “Note 47: Reconciliation of Comparative IFRS financial statements to US GAAP financial statements” in the Notes to the Consolidated Financial Statements.

The audited consolidated financial statements of Sibanye as at and for the fiscal years ended 31 December 2014, 2013 and 2012 (the Consolidated Financial Statements) have been prepared using the historical results of operations, assets and liabilities attributable to Sibanye and all of its subsidiaries (the Sibanye Gold Group). For the fiscal year ended 31 December 2012, this information was consolidated by Gold Fields Limited (Gold Fields). In addition, the Consolidated Financial Statements include historical charges from Gold Fields. The Consolidated Financial Statements have been prepared under the historical cost convention, except for available-for-sale financial assets, financial assets and financial liabilities (including derivative financial instruments), which are measured at fair value through profit or loss or through the fair value adjustment reserve in equity.

Non-IFRS Measures

The financial information in this annual report includes certain measures that are not defined by IFRS, including “operating costs”, “operating margin,”, “earnings before interest, tax, depreciation and amortisation” (EBITDA), “total cash cost”, “All-in sustaining cost”, “All-in cost”, “All-in cost margin”, “headline earnings per share”, “free cash flow” and “net debt” (each as defined below or in “Integrated Annual Report—Overview—Key Features—Financial and Non-Financial Performance”). These measures are not measures of financial performance or cash flows under IFRS and may not be comparable to similarly titled measures of other companies. These measures have been included for the reasons described below or in “Integrated Annual Report—Overview—Key Features—Financial and Non-Financial Performance” and should not be considered by investors as alternatives to costs of sales, net operating profit, profit before taxation, cash from operating activities or any other measure of financial performance presented in accordance with IFRS.

 

vi


Table of Contents

Operating costs is defined as cost of sales excluding amortisation and depreciation. Management considers operating costs to be all gold mining related costs before amortisation and depreciation, taxation and non-recurring items. Operating margin is defined as revenue minus operating costs, divided by revenue. Free cash flow is defined as cash flows from operating activities before dividends paid, less additions to property, plant and equipment. Management considers free cash flow to be an indicator of cash available for repaying debt, funding exploration and paying dividends.

See “Integrated Annual Report—Overview—Key Features—Financial and Non-Financial Performance—Footnote 1” and “Integrated Annual Report—Overview—Key Features—Financial and Non-Financial Performance—Footnote 2” for more information.

Conversion Rates

Certain information in this annual report presented in Rand has been translated into U.S. dollars. Unless otherwise stated, the conversion rate for these translations is R11.56 per $1.00 which was the closing rate on 31 December 2014. By including the U.S. dollar equivalents, Sibanye is not representing that the Rand amounts actually represent the U.S. dollar amounts shown or that these amounts could be converted into U.S. dollars at the rates indicated.

Market Information

This annual report includes industry data about Sibanye’s markets obtained from industry surveys, industry publications, market research and other publicly available third-party information. Industry surveys and industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Sibanye and its advisers have not independently verified this data.

In addition, in many cases statements in this annual report regarding the gold mining industry and Sibanye’s position in that industry have been made based on internal surveys, industry forecasts, market research, as well as Sibanye’s own experiences. While these statements are believed by Sibanye to be reliable, they have not been independently verified.

 

vii


Table of Contents

DEFINED TERMS AND CONVENTIONS

In this annual report, all references to “we”, “us” and “our” refer to Sibanye and the Sibanye Gold Group, as applicable. On 18 February 2013, the board of directors of Gold Fields completed the separation of its wholly-owned subsidiary, Sibanye (formerly known as GFI Mining South Africa Proprietary Limited (GFIMSA)), into an independent, publicly traded company, or the Spin-off or the Unbundling. See “Further Information—Operating and Financial Review and Prospects—Introduction”.

In this annual report, all references to “fiscal 2015” and “2015” are to the fiscal year ending 31 December 2015, all references to “fiscal 2014” and “2014” are to the audited fiscal year ended 31 December 2014, all references to “fiscal 2013” and “2013” are to the audited fiscal year ended 31 December 2013 and all references to “fiscal 2012” and “2012” are to the audited fiscal year ended 31 December 2012.

In this annual report, all references to “South Africa” are to the Republic of South Africa, all references to the “United States” and “U.S.” are to the United States of America, its territories and possessions and any state of the United States and the District of Columbia and all references to the “United Kingdom” and “UK” are to the United Kingdom of Great Britain and Northern Ireland.

In this annual report, all references to the “DMR” are references to the South African Department of Mineral Resources, the government body responsible for regulating the mining industry in South Africa.

This annual report contains descriptions of gold mining and the gold mining industry, including descriptions of geological formations and mining proceeds. In order to facilitate a better understanding of these descriptions, this annual report contains a glossary defining a number of technical and geological terms.

In this annual report, gold production figures are provided in kilograms, which are referred to as “kg”, or in troy ounces, which are referred as “ounces” or “oz”. Ore grades are provided in grams per metric ton, which are referred to as “grams per ton” or “g/t.” All references to “tons”, “tonnes” or “t” in this annual report are to metric tons.

In this annual report, “R”, “Rand” and “rand” refer to the South African Rand and “Rand cents” refers to subunits of the South African Rand, “$”, “U.S.$”, “U.S. dollars” and “dollars” refer to United States dollars and “U.S. cents” refers to subunits of the U.S. dollar.

 

viii


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FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the Securities Act) and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) with respect to our financial condition, results of operations, business strategies, operating efficiencies, competitive position, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters.

These forward-looking statements, including, among others, those relating to our future business prospects, revenues and income, wherever they may occur in this annual report and the exhibits to this annual report, are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this annual report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

 

 

economic, business, political and social conditions in South Africa and elsewhere;

 

 

changes in assumptions underlying Sibanye’s estimation of its current mineral reserves and resources;

 

 

the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions, as well as at existing operations;

 

 

the success of exploration and development activities;

 

 

changes in the market price of gold and/or uranium;

 

 

the occurrence of hazards associated with underground and surface gold and uranium mining;

 

 

the occurrence of labour disruptions and industrial actions;

 

 

the availability, terms and deployment of capital or credit;

 

 

changes in relevant government regulations, particularly environmental, tax, health and safety regulations and new legislation affecting water, mining and mineral rights;

 

 

the outcome and consequence of any potential or pending litigation or regulatory proceedings or other environmental health and safety issues;

 

 

power disruption and cost increases;

 

 

fluctuations in exchange rates, currency devaluations and other macro-economic monetary policies;

 

 

the occurrence of temporary stoppages of mines for safety incidents and unplanned maintenance;

 

 

Sibanye’s ability to hire and retain senior management or sufficient technically skilled employees, as well as its ability to achieve sufficient representation of historically disadvantaged South Africans in its management positions;

 

 

failure of Sibanye’s information technology and communications systems;

 

 

the adequacy of Sibanye’s insurance coverage;

 

 

any social unrest, sickness or natural or man-made disaster at informal settlements in the vicinity of some of Sibanye’s operations; and

 

 

the impact of HIV, tuberculosis and other contagious diseases.

 

ix


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We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.

 

x


Table of Contents

TABLE OF CONTENTS

 

 

xi


Table of Contents

LOGO

 


Table of Contents

 

SCOPE OF THE REPORT

 

 

 

GUIDE TO OUR 2014 REPORTS

 

 

 

 

 

 

LOGO

 

  

Sibanye Gold Limited (Sibanye or the Group) is listed on the Main Board of the JSE Limited (JSE) in terms of its stock exchange licence (ordinary shares) and on the New York Stock Exchange (NYSE) (American Depositary Receipts) (ADRs). Sibanye reports in compliance with the JSE Listing Requirements, the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides, the South African Companies Act, 2008 (Act No 71 of 2008) (the Companies Act), the Code of and Report on Governance Principles for South Africa (King III), and in terms of the Industry Guide number 7 promulgated by the Securities and Exchange Commission (SEC).

 

As such, this integrated report for the year ended 31 December 2014 provides shareholders with an overview of the context, performance and objectives of the business; the resources and capacity it has at its disposal; and how these are used to deliver value for all of its stakeholders.

 

REPORT CONTENT

In determining the content of the integrated report, Sibanye has identified certain financial and non-financial issues that are most important to the sustainability of the Group. The report takes into account the International Integrated Reporting <IR> Framework published by the International Integrated Reporting Council (IIRC) in December 2013 and the G4 guidelines (“core” format) of the Global Reporting Initiative (GRI) to provide insight into the Group’s resources and relationships (“the capitals”: financial, human, manufactured, intellectual, social and relationship, and natural) that create value over time at Sibanye’s operations, which include Beatrix, Cooke, Driefontein Kloof, and projects.

 

Sibanye focuses on sustainability issues deemed most important to the Group and its stakeholders. In determining these material issues, relating to G4, cognisance was taken of the guidance on materiality provided by the IIRC and the GRI.

 

The content gathering and data-collation process for the report included questionnaires

  

to relevant discipline heads and interviews based broadly on GRI systems already in place, for the provision of the quantitative information included in this document.

 

Sibanye currently collates and reports sustainable development performance on an annual basis.

 

ASSURANCE

Sibanye’s internal audit function is conducted in-house, and is required to provide an independent evaluation of the Group’s internal control processes and systems in order to mitigate any business risks.

 

The reporting guideline used by Sibanye includes the GRI G4 Sustainability Reporting Guidelines, the Broad Based Socio-Economic Empowerment Charter for the South Africa Mining and Minerals Industry (Mining Charter) (2002) and related Scorecard (2004) and the amendments to the Mining Charter (2010) and the related Scorecard (2010), as well as Sibanye’s internally developed guidelines.

 

KPMG Inc (KPMG Inc) has audited the consolidated financial statements. Sibanye’s consolidated financial statements are available on page 172.


Table of Contents

 

CONTENTS

 

 

 

CONTENTS

 

 

SCOPE OF THE REPORT

      

 

OVERVIEW

      

 

Objectives

 

 

 

03

 

 

IFC

Guide to our 2014 reports

 

      

 

02

       Group profile   04  
             

 

External context

 

 

08

 
             

 

Business overview

 

 

14

 
             

 

Financial and

non-financial performance

  16  
                 
                 
                 
                 
                             

 

    STRATEGIC LEADERSHIP

 

 

    18

 

      

 

Perspective from the Chair

 

 

20

    

 

BUSINESS PERFORMANCE

 

44

 

   
      

 

Board

 

22

        
      

 

Chief Executive’s report

 

26

        
      

 

CFO’s report

 

32

        
      

 

Management

 

34

        
      

 

Managing risk, identifying opportunities

 

36

        
      

 

Engaging with stakeholders

 

40

        
          

 

Material issues

 

 

42

              

 

    ACCOUNTABILITY

 

    136

      

 

ANNUAL FINANCIAL

STATEMENTS

 

160

      

 

Financial capital

 

 

46  

 
             

 

Human capital

 

 

50  

 
             

 

Manufactured capital and

Intellectual capital

 

 

74  

 
                 
             

 

Social and relationship capital

 

 

88  

 
             

 

Natural capital

 

 

100  

 
                 
                 
                 
                               

Corporate governance report

 

 

136  

    

 

Management’s discussion

and analysis of the financial

statements

 

160  

        

 

Report of the Risk Committee

  142                  

 

Report of the Social and

 

143  

               

 

Ethics Committee

      

 

Consolidated income statement

  172           

 

Report of the Audit Committee

 

144  

    

 

Consolidated statement of

financial position

          

 

Directors’ report

 

146  

       174           

 

Share capital statement

 

150  

    

 

Consolidated statement of

changes in equity

          

 

Remuneration report

 

152  

       176           
      

 

Consolidated statement of

cash flows

          
         177           
      

 

Notes to the consolidated

financial statements

 

          
              

178  

 

                

 

    ADMINISTRATIVE

    DETAILS

 

 

    236

 

      

 

Shareholder information

 

 

236  

        
      

 

Administration and

corporate information

 

IBC

        
                 
                 
                 
                 
                 
                 
                 
                 
                 

 

Sibanye Gold Integrated Annual Report 2014       01                     


Table of Contents

OVERVIEW

 

 

 

Overview

Our vision:

Superior value creation for all stakeholders

through a culture of caring

 

 

 

CONTENTS

 

          
            
 

 

  OBJECTIVES

 

  0  3

 

          
       Group profile      04      
       External context      08      
       Business model and strategy      14      
       Financial and non-financial performance      16      
            

 

LOGO

 

                    02    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW OBJECTIVES

 

 

 

OBJECTIVES

 

 

LOGO

 

Sibanye Gold Integrated Annual Report 2014     03                     


Table of Contents

 

OVERVIEW GROUP PROFILE

 

 

 

GROUP PROFILE

 

LOGO

 

WHY SIBANYE?

 

The word “Sibanye” means “We are one” in isiXhosa, one of the 11 official languages spoken in South Africa and the mother tongue of the majority of our workforce, drawn from labour-sending areas in the Eastern Cape province of the country.

 

Geographically focused on South Africa, Sibanye currently owns and operates high-quality gold operations and projects throughout the Witwatersrand Basin.

 

As a responsible corporate citizen, we foster and maintain constructive engagement with all of our stakeholders in order to deliver on our vision of creating value for all stakeholders, to maintain our licence to operate, and ultimately for the long-term success of the business.

 

Our skilled and experienced workforce is a key stakeholder, and the safety, health and well-being of our employees are critical to our long-term success.

 

 

 

 

 

                    04  Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW GROUP PROFILE

 

 

 

 

 

 

       
 

 

CARE CULTURE

 
   
    Sibanye conducts its business in an ethical and fair manner, and promotes a non-sectarian, apolitical, socially and environmentally responsible corporate culture.        
   
   

This is achieved by living the CARE values:

 

       
       
    LOGO     Commitment: Delivering on our promises to all our stakeholders        
   
       
    LOGO     Accountability: Accepting responsibility for our actions and their consequences        
   
       
    LOGO   Respect: Showing regard and consideration for others        
   
       
    LOGO   Enabling: Creating an environment where it is possible to work safely and productively        
           

 

LOGO     

 
   

In pursuing these principles, we require our employees, officers and directors alike to adhere to and be bound by a Code of Ethics.

 

       
       

 

Sibanye is an independent, South African-domiciled mining group, which currently owns and operates four underground and surface gold operations – the Cooke, Driefontein and Kloof operations in the West Witwatersrand region, and the Beatrix operation (Beatrix) in the southern Free State province. In addition to its mining activities, the Group owns and manages significant extraction and processing facilities at the operations where the gold-bearing ore is treated and processed before it is refined. The Group has a number of organic projects including the West Rand Tailings Retreatment Project (WRTRP) on the Far West Rand and the Burnstone project on the South Rand of Gauteng province, and the Beisa North, Beisa South, Bloemhoek, De Bron-Merriespruit, Hakkies and Robijn projects in the Free State.

 

Sibanye is the largest individual producer of gold from South Africa and is one of the world’s 10 largest gold producers. In 2014, the Group produced 49,432kg (2013: 44,474kg) or 1.59Moz (2013: 1.43Moz) of gold at an All-in cost of R375,854/kg (2013: R354,376/kg) or US$1,080/oz (2013: US$1,148/oz) and invested

R3.3 billion (2013: R2.9 billion) in capital at its operations.

 

In 2014, in line with our strategy to create value by extending the operating lives of Group assets and in support of our dividend yield strategy, we assumed control of the Cooke underground and surface operations from Gold One International Limited (Gold One); concluded the acquisition of Witwatersrand Consolidated Gold Resources Limited (Wits Gold), a JSE and Toronto Stock Exchange (TSX) listed gold and uranium exploration company with significant gold resources in South Africa; and exercised the option held by Wits Gold to acquire the Burnstone gold mine from the previous owner, Great Basin Gold Limited (Great Basin Gold).

 

Sibanye’s dividend policy is to pay at least 25% to 35% of normalised earnings to shareholders. The Group will return excess cash back to shareholders through the declaration of special dividends where appropriate. Sibanye has established itself as a benchmark dividend payer in the global gold industry and intends to maintain this position.

 

Sibanye Gold Integrated Annual Report 2014     05                     


Table of Contents

 

OVERVIEW GROUP PROFILE

GROUP PROFILE

CONTINUED

 

 

 

Geographic shareholder

spread at 31 December 2014 (%)

 

LOGO

 

    

SHAREHOLDER BASE

Sibanye’s corporate office is located close to Westonaria, in the province of Gauteng, near our West Wits operations. The Group’s primary listing is on the JSE, trading under the share code SGL, where it is a constituent of the JSE’s Socially Responsible Investment (SRI) index. The Group has a secondary listing of ADRs on the NYSE, which trade under the ticker code SBGL. Each ADR is equivalent to four ordinary shares.

 

At 31 December 2014, Sibanye had issued share capital of 898,840,196 shares (2013: 735,079,031) – 1,000,000,000 authorised – and market capitalisation of approximately R20.3 billion (2013: R9.0 billion) or US$1.8 billion (2013: US$874 million).

 

The Group’s diverse shareholder base predominantly comprises institutional investors located in China (20%), South Africa (31%), the United States of America (37%), the United Kingdom (2%), Saudi Arabia (1%) and others (8%) at 31 December 2014. The Group’s Chinese shareholders (20%) own their position through Gold One. Sibanye has a 100% free float and its three largest institutional shareholders (holding 23.25% of the Group) at 31 December 2014 were Allan Gray Proprietary Limited (9.98%), the Public Investment Corporation (SOC) Limited (7.94%) and Old Mutual plc (5.33%).

  

Following, the acquisition of the Cooke operations, Gold One holds a 19.80% interest in Sibanye at 31 December 2014.

 

The Group is committed to transformation and is guided by the Mining Charter. In 2004, Gold Fields Limited (Gold Fields) undertook a black economic empowerment (BEE) transaction, transferring an amount equivalent to 15% of its equity from Sibanye, formerly GFI Mining South Africa Proprietary Limited, to Mvelaphanda Gold Proprietary Limited. In 2010, 10% of equity was allocated to an Employee Share Ownership Plan (ESOP) and another 1% in an empowerment deal. At the end of 2014, 27,959 employees were participants in the ESOP.

 

PRODUCTS AND MARKETS

Sibanye mines, extracts and processes gold ore to produce a beneficiated product, doré. The doré is then further refined at Rand Refinery Proprietary Limited (Rand Refinery) into gold bars with a purity of at least 99.5%, in accordance with the Good Delivery standards determined by the London Bullion Market Association. The refined gold is then sold on international markets.

 

Sibanye holds a 33% interest in Rand Refinery, one of the largest global refiners of gold, and the largest in Africa. Rand Refinery markets gold to customers around the world.

 

LOGO

 

                    06    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW GROUP PROFILE

 

 

 

LOGO

 

Sibanye Gold Integrated Report 2014     07                     


Table of Contents

 

OVERVIEW EXTERNAL CONTEXT

 

 

 

EXTERNAL CONTEXT

 

    

LEGISLATIVE, REGULATORY AND

POLITICAL ENVIRONMENT

As a mining company with assets based in South Africa, each of our operations holds a right to mine and/or prospect in accordance with the Minerals and Petroleum Resources Development Act, 2002 (Act No 28 of 2002) (MPRDA) and its associated Mining Charter. This legislation aims to promote equitable access to the nation’s Mineral Resources, expand opportunities for historically disadvantaged South Africans (HDSAs) who would like to participate in the South African mining industry, advance social and economic development, and create an internationally competitive and efficient administrative and regulatory regime, based on universally accepted principles and consistent with common international practice that Mineral Resources are part of a nation’s patrimony.

 

A review of the South African mining industry’s level of compliance with the requirements of the Mining Charter was commissioned by the Department of Mineral Resources (DMR). It is being audited by the DMR and the outcome is expected in April.

 

RESPONSIBILITIES

The fiduciary and other duties and responsibilities of our Board of Directors are governed by the South African Companies Act and King III. The Companies Act prescribes the Group’s activities in respect of social and economic development, including compliance with the Broad-Based Black Economic Empowerment Act, 2003 (Act No 53 of 2003) and the Employment Equity Act, 1998 (Act No 55 of 1998), the Group’s standing in terms of the International Labour Organisation protocol on decent work and working conditions, employment relationships and the Group’s contribution to the educational development of its employees.

  

In addition, the Group also subscribes to the 10 Principles of the International Council on Mining and Metals (ICMM).

 

In terms of the JSE Listing Requirements, Sibanye also adheres to the 10 principles of the United Nations Global Compact (UNGC) and the Organisation for Economic Co-operation and Development recommendations regarding corruption.

 

The Board’s performance and interaction with stakeholders is guided by the Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996), which includes the Bill of Rights, tasking management with the development and implementation of corporate citizenship policies and programmes for relevant stakeholders.

 

In terms of the National Development Plan 2030 of South Africa’s National Planning Commission, which aims to eliminate poverty and reduce inequality by 2030, the mining sector will continue to play a major role in generating the resources needed to build the necessary capacity and capabilities. Government has committed to assisting the industry in doing this by providing policy and regulatory certainty, extracting reasonable taxes, investing in infrastructure to support the industry, enabling value adding opportunities and employment, and supporting the industry while encouraging mines to reduce carbon emissions.

 

Sibanye’s Board and management complies with the listings requirements of the JSE and the NYSE.

 

In compliance with our responsibilities under the Companies Act and the listings requirements of the JSE, our Board has a duty to ensure that all shareholders are treated equitably.

       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
     Rand/dollar exchange rate December 2012 to December 2014 (R/US$)
     LOGO

 

                    08    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW EXTERNAL CONTEXT

 

 

 

LOGO

 

ECONOMIC CONDITIONS

As a general rule, gold produced is sold at prevailing market prices in the period it is produced.

 

Historically, the price of gold has been primarily affected by macro-economic factors, such as inflation, exchange rate volatility, reserves policy, and global political and economic events, and to a lesser extent by simple supply and demand dynamics. Sibanye’s revenues and costs are highly sensitive to the Rand/US dollar exchange rate.

 

Gold and uranium sales are denominated in US dollars, with US dollars converted at a realised Rand/US dollar exchange rate, while operating costs are incurred principally in Rand. Depreciation of the Rand against the US dollar therefore results in higher Rand revenue or alternatively lower operating costs when they are translated into US dollars, thereby increasing the operating margins of our operations. Conversely, appreciation of the Rand results in lower Rand revenue or higher operating costs when translated into US dollars, thereby decreasing the operating margins of our operations. The impact on profitability of changes in the value of the Rand against the US dollar can be substantial.

 

MARKET FORCES

In South Africa, there are currently 35 large-scale gold mines, mining mostly narrow-vein, deep underground deposits, which require manual extraction and are inherently labour-intensive. However, technologies have been developed that facilitate the mechanisation of new mines, which allow for mining of these deposits in a more economical manner.

 

The key gold producers in South Africa – Gold Fields, AngloGold Ashanti Limited (AngloGold Ashanti), Harmony Gold Mining Company Limited (Harmony) and Sibanye – produced 6,237kg (200,500oz), 38,000kg

 

(1.2Moz), 36,453kg (1.17Moz) and 49,432kg (1.59Moz), respectively, in South Africa in 2014, and together accounted for approximately 86% of the country’s total gold production for the year.

 

Sibanye is the largest individual producer of gold in South Africa, based on annual production of 49,432kg (1.59Moz) of gold in 2014, and the Group is the ninth largest producer of gold worldwide.

 

In order to maintain competitiveness in the South African labour market, regular industry market surveys are conducted to benchmark remuneration practices, and to keep abreast of any shifts in industry practices with regard to employee benefits, and non-financial employee reward and recognition programmes.

 

Strikes over remuneration and working conditions are a persistent feature of the mining industry in South Africa. Worker pay has been rising in the South African gold mining industry at a steady pace with average wage inflation consistently higher than the benchmark inflation rate. In June 2014, the South African government announced that it was investigating the introduction of a national minimum wage or “living wage” to address “income inequality”. A report on the national minimum wage and its implications is due in July 2015. As a member of Business Unity South Africa (BUSA), the Chamber of Mines addressed Parliament’s Portfolio Committee on Labour in September 2014. BUSA has since entered into negotiations with the National Economic Development and Labour Council (Nedlac) on this matter.

 

Centralised negotiations on wages and conditions of employment are held between the Chamber of Mines, representing the majority of gold mine employers, and recognised trade unions, representing their members. The Chamber provides a venue for the negotiations, which are often referred to as the “Chamber negotiations”.

 

Sibanye Gold Integrated Annual Report 2014     09                     


Table of Contents

 

OVERVIEW EXTERNAL CONTEXT

 

 

EXTERNAL CONTEXT

CONTINUED

 

   

The smaller gold mines negotiate on a decentralised basis.

 

SOCIAL FORCES

The MPRDA requires the submission of, among others, a social and labour plan (SLP) as a prerequisite for the granting of mining or production rights. The SLP requires applicants to develop and implement comprehensive human resource development programmes, including employment equity plans, local economic development (LED) programmes, and processes pertinent to the management of downscaling and retrenchment.

 

Sibanye participates in socio-economic development (SED) initiatives of our local municipalities, and support projects aimed at uplifting people and infrastructure development, as well as projects identified and prioritised to address key areas such as poverty reduction, economic viability, healthcare, public safety, job creation, urban renewal and preferential procurement.

 

Our experience to date has shown that the approach to LED, in terms of the SLPs, has varying degrees of success. While the construction of schools and clinics has added the necessary value, other projects have not necessarily had the desired impact. A key component of the success achieved to date in the construction of schools and clinics is the upfront buy-in and support of all critical role players. The signing of a memorandum of agreement (MOA), which enunciates key responsibilities before construction begins, has proven invaluable. Projects initiated without proper collaboration have not been successful. These and other lessons have prompted us to consider an approach that includes:

 

Ÿ  fewer but more impactful projects;

 

Ÿ  focus on community development, education, agriculture/environment, health and sustainable human settlements;

 

Ÿ  options ranging from corporate social investment (CSI) to infrastructure and enterprise development;

 

Ÿ  all role players influencing the decision on how to best invest the money available for LED in terms of the Sibanye budgeting process;

 

Ÿ  a tripartite engagement platform that assists in making appropriate decisions on LED projects with the DMR and municipalities; and

 

Ÿ  ongoing feedback on projects approved for implementation.

 

HEALTH AND SAFETY

Health and safety performance on mines is regulated by the South African Mine Health and Safety Act, 1996 (Act No 29 of 1996) (MHSA). The Act requires employers and others to ensure that their operating and non-operating mines provide a safe and healthy working environment,

   

it provides for penalties and a system of administrative fines for non-compliance, gives the Minister of Mineral Resources the right to restrict or stop work at any mine, and requires an employer to take steps to minimise health and safety risks. Further, it provides for employee participation through health and safety committees and representatives, gives employees the right to refuse dangerous work, and describes the powers and functions of the Mine Health and Safety Inspectorate, within the jurisdiction of the DMR and as part of the process of enforcement.

 

As legally required, all employees are represented in formal joint management/worker health and safety committees, through their representatives, to help monitor and advise on occupational health and safety programmes.

 

In terms of the MHSA, an employer is obligated, among others, to ensure that mines are designed, constructed and equipped to provide conditions for safe operation and a healthy working environment, and the mines are commissioned, operated, maintained and decommissioned so that employees can perform their work without endangering their health and safety or that of any other person. Every employer must ensure that people who are not employees, but who may be directly affected by the activities at a mine, are not exposed to any health and safety hazards.

 

The principal health risks associated with mining operations in South Africa arise from occupational exposure to silica dust, noise, heat and certain hazardous chemicals. The most significant occupational diseases affecting our workforce include lung diseases such as silicosis, tuberculosis (TB), a combination of both, and chronic obstructive airways disease (COAD) as well as noise induced hearing loss (NIHL).

 

The Occupational Diseases in Mines and Works Act, 1973 (Act No 78 of 1973) (ODMWA) governs compensation paid to mining employees who contract certain occupational illnesses, such as silicosis. The South African Constitutional Court has ruled that a claim for compensation under ODMWA does not prevent an employee from seeking compensation from an employer in a civil action under common law (either as individuals or as a class).

 

NATURAL ENVIRONMENT

Sibanye’s operations are subject to various laws relating to the protection of the environment and South Africa’s Constitution grants the country’s people the right to an environment that is not harmful to human health or well-being, and to protection of that environment for the benefit of present and future generations through reasonable legislative and other measures. The Constitution and the National Environmental Management Act, 1998 (Act No 107 of 1998)

 

                    10    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW EXTERNAL CONTEXT

 

 

 

(NEMA), as well as various other related pieces of legislation enacted, grant legal standing to a wide range of interest groups to bring legal proceedings to enforce their environmental rights, which are enforceable against private entities as well as the South African government.

 

South African environmental legislation commonly requires businesses whose operations may have an impact on the environment to obtain permits, authorisations and other approvals for those operations. The rationale behind this is to ensure that companies with activities that have environmental impacts, can put reasonable mitigation measures in place to manage these impacts. The applicable environmental legislation also imposes general compliance requirements and incorporates the “polluter pays” principle. Prior to 8 December 2014, under the terms of the MPRDA, all prospecting and mining operations had to be conducted according to an environmental management plan/programme (EMP), which had to be approved by competent officials of the DMR. From 8 December 2014, the “One Environmental System” for the mining industry, which changed the previous environmental regulatory regime, came into force following the commencement of legislation creating the new regime on 2 September 2014. In terms of the “One Environmental System”, prescribed officials at the DMR became competent to grant environmental authorisations under NEMA for prospecting/mining operations. Since that point, environmental authorisations have replaced the traditional EMPs. However, the Department of Environmental Affairs (DEA) remains the appeal authority. Directors, in their personal capacity, may be held liable under provisions of NEMA for any environmental degradation and/or the remediation thereof.

 

The Minerals and Petroleum Resources Development Amendment Bill was published on 27 December 2012 for public comment. A second version of this Bill was published in June 2013 and, although the parliamentary process is complete, the Bill has yet to be published as an Amendment Act. This Bill contains further proposed amendments to allow for a smooth transition of the One Environmental System. Another key change is the introduction of “perpetual liability”, meaning that previous holders of rights remain responsible for environmental liability notwithstanding the issuance of a closure certificate in terms of the MPRDA. A mirror of this provision was brought into force under NEMA on 2 September 2014. A further Amendment Act was published on 2 June 2014 and came into effect three months after its publication in the Government Gazette on 2 September 2014. This however only came into effect on 8 December 2014 with the introduction of the “One Environmental System”. The 2014 Amendment Act amends NEMA

to allow for the integration of environmental management with mining activities. Among others, it designates the Minister of Mineral Resources as the competent authority for environmental matters insofar as these matters relate to prospecting, exploration, mining or production of mineral and petroleum resources. Under the 2014 Amendment Act, the Minster of Environmental Affairs may, under certain circumstances, make an environmental decision insofar as mining activities are concerned. The 2014 Amendment Act also allows for the Minister of Mineral Resources to appoint environmental mineral resource inspectors to monitor the compliance of mining companies, as well as the enforcement of provisions insofar as it relates to prospecting, exploration, mining or production. Importantly, Section 28 of the 2014 Amendment Act repealed section 14(2) of the 2008 NEMA Amendment Act, deleting the provisions which provided for the 18-month transitional period after the commencement of the MPRDA Amendment Act, with effect from 1 September 2014 (or presumably now with effect from 8 December 2014).

 

The National Environmental Management Waste Act, 2008 (Act No 59 of 2008) (Waste Act) commenced on 1 July 2009 with the exception of certain sections relating to contaminated land, which came into force on 2 May 2014. Responsible waste management has become a priority for the DEA. We have assessed, through a waste gap analysis, which requirements of the Waste Act are applicable to our operations and would proceed with the waste management licensing process on that basis. We have two waste disposal facilities at our Beatrix operation and one at Driefontein (which is currently dormant and in respect of which we intend to apply for a closure certificate). There is now a duty to rehabilitate this dormant site. We must ensure that it has the appropriate waste management licences and environmental authorisations for the closure and rehabilitation of all its waste sites.

 

Sibanye undertakes activities which are regulated by the National Nuclear Regulator Act, 1999 (Act No 47 of 1999) (the NNR Act). The NNR Act requires Sibanye to obtain authorisation from the National Nuclear Regulator (NNR) and undertake activities in accordance with the conditions of such organisations. During the reporting period, both internal and external audits and inspections were conducted. These audits and inspections registered an average compliance index of 84%, which is higher than the benchmark of 80%. Each of Sibanye’s mining operations possesses and maintains a Certificate of Registration (CoR) as required by the NNR Act.

 

Although South Africa has a comprehensive environmental regulatory framework,

Fatalities in the gold sector: 2007 to 2014

 

LOGO

 

 

 

 

 

Sibanye Gold Integrated Annual Report 2014     11                     


Table of Contents

 

OVERVIEW EXTERNAL CONTEXT

EXTERNAL CONTEXT

CONTINUED

 

 

 

enforcement of environmental law has traditionally been poor. However, this situation is improving vastly, given the appointment of, and appropriate resourcing, environmental management inspectors in the DEA, Department of Water and Sanitation and now the DMR. As of 8 December 2014, under the One Environmental System, separate environmental management inspectors will be appointed under the DMR to regulate environmental compliance of the mining industry.

 

POWER SUPPLY

Our mining operations depend on electrical power generated by the state utility, Eskom, which holds a monopoly on power supply in the South African market. Tariffs are determined by the National Energy Regulator of South Africa (NERSA). Ongoing disruptions in electrical power supply have an adverse impact on our operations and there is no assurance that conservation programmes will ensure sufficient electricity for us to run our operations at full capacity or at all. Eskom continues to warn us of constraints in the supply of power, which is frequently curtailed.

 

We are also subject to increases in costs relating to our energy-intensive assets and assets that emit significant amounts of GHGs as a result of regulatory initiatives in South Africa. These regulatory initiatives are either voluntary or mandatory and either impact our operations directly or by affecting our suppliers or customers. These costs may include, among

  

others, emission measurement and reduction, audit processes and human resource costs.

 

Energy is a significant input in our mining and processing operations with our principal energy sources being electricity, purchased petroleum products, natural gas and coal. With a substantial weight of scientific evidence concluding that carbon emissions from fossil fuel-based energy consumption contribute to global warming, greenhouse effects and climate change, a number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impact of climate change that may restrict emissions of GHGs. In particular, the “Durban platform” – established during the United Nations Climate Change Conference (UNFCCC) in Durban, South Africa, in 2011 – commits all parties to the conference to developing a global mitigation regime with the specific terms of that legally binding accord, including individual targets, to be finalised by 2015.

 

In addition, a carbon tax that would endeavour to change behavioural and consumptive patterns with regard to the use of carbon-intensive energy sources is currently being mooted by government. No legislative instruments in this regard have been promulgated, however significant work has been done by all stakeholders, including National Treasury in so far as the carbon tax regime and its implementation is concerned.

 

 

 

 

                    12    Sibanye Gold Integrated Annual Report 2014


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OVERVIEW EXTERNAL CONTEXT

 

 

 

 

LOGO

 

Sibanye Gold Integrated Report 2014     13                     


Table of Contents

 

OVERVIEW BUSINESS OVERVIEW

 

 

 

BUSINESS OVERVIEW

 

LOGO

 

                    14  Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW BUSINESS OVERVIEW

 

 

 

 

LOGO

 

Sibanye Gold Integrated Annual Report 2014     15                     


Table of Contents

 

OVERVIEW KEY FEATURES – FINANCIAL AND NON-FINANCIAL PERFORMANCE

 

 

 

KEY FEATURES – FINANCIAL AND NON-FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

                                                      For the six            
                                                -month           
                                                transition        For the year  
                                                period ended        ended  
                  For the year ended 31 December        31 December        30 June  
                  2014          2013      2012        2011        2010        2010  
Group operating statistics                                   
Gold produced        kg         49,432          44,474        38,059           45,005           26,001           51,888   
       ’000oz         1,589          1,430        1,224           1,447           836           1,668   
Ore milled        000t         18,235          13,624        12,185           14,648           7,117           13,436   
Gold price        R/kg         440,615          434,663        434,943           369,139           294,766           264,231   
       US$/oz         1,267          1,408        1,652           1,590           1,284           1,084   
Operating cost        R/t         785          879        888           669           709           709   
Operating profit        Rm         7,469          7,358        5,730           6,816           2,642           4,181   
Operating margin        %         34          38        35           41           34           30   
Total cash cost1        R/kg             295,246          273,281        285,851           220,224           191,246           177,650   
       US$/oz         849          885        1,086           949           833           729   
All-in sustaining cost2        R/kg         372,492              354,376        382,687           296,531                       
       US$/oz         1,071          1,148        1,453           1,277                       
All-in cost2        R/kg         375,854          354,376        382,687           296,531                       
       US$/oz         1,080          1,148        1,453           1,277                       
All-in cost margin3        %         15          18        12           20                       

 

Group financial statistics4

                                  
Income statement                                   
Revenue        Rm         21,781          19,331        16,554           16,613           7,664           16,613   
Net operating profit        Rm         4,214          4,254        3,367           4,559           1,497           2,178   
Profit for the period from continuing operations        Rm         1,507          1,698        2,980           2,563           4,332           1,287   
Profit for the year        Rm         1,507          1,698        2,980           2,563           4,186           1,150   
Profit for the year attributable to owners of Sibanye        Rm         1,552          1,692        2,980           2,564           4,191           1,158   
Basic earnings per share        cents         186          260        297,960,000           256,410,000           419,100,000           115,570,000   
Basic earnings per share from continuing operations        cents         186          260        297,960,000           256,410,000           433,710,000           129,250,000   
Diluted earnings per share        cents         182          255        297,960,000           256,410,000           419,100,000           115,570,000   
Diluted earnings per share from continuing operations        cents         182          255        297,960,000           256,410,000           433,710,000           129,250,000   
Headline earnings per share        cents         170          355        297,790,000           256,130,000           (36,930,000        115,460,000   
Headline earnings per share from continuing operations        cents         170          355        297,790,000           256,130,000           (22,320,000        129,140,000   
Dividend per share        Rcents         125          37        73,130,000           242,330,000           2,038,220,000           91,710,000   
Dividend per share        $cents         12          4        9,550,000           33,560,000           285,500,000           12,100,000   
Weighted average number of shares        ’000         835,936          650,621        1           1           1           1   
Diluted weighted average number of shares        ’000         854,727          664,288        1           1           1           1   
Number of shares in issue at end of period        ’000         898,840          735,079        1           1           1           1   
Statement of financial position                                   

 

Property, plant and equipment

       Rm         22,704          15,151        16,376           15,359           14,471           30,867   
Cash and cash equivalents        Rm         563          1,492        292           363           1,036           883   
Total assets        Rm         27,922          19,995        19,698           18,492           18,119           39,626   
Net assets/(liabilities)        Rm         14,986          9,423        (9,673        (11,976        (12,354        5,689   
Stated share capital        Rm         21,735          17,246                                      3,138   
Borrowings5        Rm         3,170          1,991        4,220                                 
Total liabilities        Rm         12,936          10,572        29,371           30,468           30,473           33,937   

 

                    16    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

OVERVIEW KEY FEATURES – FINANCIAL AND NON-FINANCIAL PERFORMANCE

 

 

 

                                                      For the six            
                                                -month           
                                                transition        For the year  
                                                period ended        ended  
                  For the year ended 31 December        31 December        30 June  
                  2014          2013      2012        2011        2010        2010  

 

  Statement of cash flows

                                  

 

  Cash from operating activities

       Rm         4,053          6,360        2,621           3,861           1,577           2,527   

 

  Cash used in investing activities

       Rm         (4,309)         (3,072)        (3,126        (3,005        (2,568        (4,581

 

  Cash (used in)/flows from financing activities

       Rm         (673)         (2,088)        434           (1,529        1,147           2,131   

 

Net increase/(decrease) in cash and cash equivalents

       Rm         (930)         1,201        (71        (673        157           78   

 

  Other financial data

                                  

 

  EBITDA6

       Rm         7,469          7,358        5,730           6,752           2,642           4,181   

 

  Net debt(cash)7

       Rm         1,506          499        3,928           (363        (1,036        (879

 

  Net debt to EBITDA8

       ratio         0.20          0.07        0.69           (0.05        (0.39        (0.21

 

  Net asset value per share

       R         16.67          12.80        (9,672,700        (11,975,600        12,353,500           5,688,700   

 

  Average exchange rate9

       R/US$         10.82          9.60        8.19           7.22           7.14           7.58   

 

  Closing exchange rate10

       R/US$         11.56          10.34        8.57           8.13           6.75           7.57   

 

 

  Share data

                                  

 

  Ordinary share price – high

       R         29.52          16.30        n/a11           n/a11           n/a11           n/a11   

 

 

  Ordinary share price – low

       R         12.34          6.73        n/a11           n/a11           n/a11           n/a11   

 

  Ordinary share price at year end

       R         22.55          12.30        n/a11           n/a11           n/a11           n/a11   

 

  Average daily volume of shares traded

          2,868,842          4,754,958        n/a11           n/a11           n/a11           n/a11   

 

  Market capitalisation at year end

       Rbn         20.3          9.04        n/a11           n/a11           n/a11           n/a11   

Note

 

1  Sibanye presents the financial measures “total cash cost”, “total cash cost per kilogram” and “total cash cost per ounce” which have been determined using industry standards promulgated by the Gold Institute and are not IFRS measures. The Gold Institute was a non-profit international industry association of miners, refiners, bullion suppliers and manufacturers of gold products that ceased operation in 2002, which developed a uniform format for reporting production costs on a per ounce basis. The Gold Institute has now been incorporated into the National Mining Association. The guidance was first adopted in 1996 and revised in November 1999. An investor should not consider these items in isolation or as alternatives to cost of sales, net operating profit, profit before taxation, profit for the year, cash from operating activities or any other measure of financial performance presented in accordance with IFRS. While the Gold Institute provided definitions for the calculation of total cash costs, the calculation of total cash cost per kilogram and the calculation of total cash cost per ounce, these may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis for comparison with other gold mining companies. Total cash costs is defined as cost of sales as recorded in the income statement, less amortisation and depreciation and off-site (ie central) general and administrative expenses (including head office costs) plus royalties and production taxes. Total cash cost per kilogram is defined as the average cost of producing a kilogram of gold, calculated by dividing the total cash costs in a period by the total gold sold over the same period. Management considers total cash cost and total cash cost per kilogram to be a measure of the on-going costs of production. For a reconciliation of operating costs to total costs, see page 164.

 

2 Sibanye presents the financial measures “All-in sustaining cost”, “All-in cost”, “All-in sustaining cost per kilogram”, “All-in sustaining cost per ounce”, “All-in cost per kilogram” and “All-in cost per ounce”, which were introduced during the year ended 31 December 2013 by the World Gold Council (the “Council”). Despite not being a current member of the Council, Sibanye adopted the principles prescribed by the Council. The Council is a non-profit association of the world’s leading gold mining companies established in 1987 to promote the use of gold from industry, consumers and investors and is not a regulatory organisation. The Council has worked with its member companies to develop a metric that expands on IFRS measures such as cost of goods sold and currently accepted non-IFRS measures to provide relevant information to investors, governments, local communities and other stakeholders in understanding the economics of gold mining operations related to expenditures, operating performance and the ability to generate cash flow from operations. This is especially true with reference to capital expenditure associated with developing and maintaining gold mines, which has increased significantly in recent years and is reflected in this new metric.

 

   All-in sustaining cost, All-in cost, All-in sustaining cost per kilogram, All-in sustaining cost per ounce, All-in cost per kilogram and All-in cost per ounce metrics are intended to provide additional information only, do not have any standardised meaning prescribed by IFRS and should not be considered in isolation or as alternatives to cost of sales, profit before taxation, profit for the year, cash from operating activities or any other measure of financial performance presented in accordance with IFRS. All-in sustaining cost, All-in cost, All-in sustaining cost per kilogram, All-in sustaining cost per ounce, All-in cost per kilogram and All-in cost per ounce as presented in this document may not be comparable to other similarly titled measures of performance of other companies. Other companies may calculate these measures differently as a result of differences in the underlying accounting principles, policies applied and accounting frameworks such as in U.S. GAAP. Differences may also arise related to definitional differences of sustaining versus development capital activities based upon each company’s internal policies.

 

  Total All-in cost excludes income tax, costs associated with merger and acquisition activities, working capital, impairments, financing costs, one-time severance charges and items needed to normalise earnings.

 

  All-in cost is made up of All-in sustaining cost, being the cost to sustain current operations, given as a sub-total in the All-in cost calculation, together with corporate and major capital expenditure growth.

 

  For a reconciliation of operating costs to All-in cost, see page 165. All-in sustaining cost per kilogram, All-in sustaining cost per ounce, All-in cost per kilogram and All-in cost per ounce is not presented for the six-month transition period ended 30 December 2010 and year ended 30 June 2010 as it is not practicable to calculate All-in sustaining cost and All-in cost for these periods.

 

3  All-in cost margin is defined as revenue minus All-in cost divided by revenue.

 

4  The selected historical consolidated financial data set out above have been derived from Sibanye’s audited consolidated financial statements for those periods and as of those dates and the related notes which have been prepared in accordance with IFRS. The other operating data presented has been calculated as described in the footnotes to the table.

 

5  Borrowings that have recourse to Sibanye is R2,036 million excludes the Burnstone Debt. Borrowings also exclude related-party loans.

 

6  EBITDA is defined as net operating profit before depreciation and amortisation. EBITDA may not be comparable to similarly titled measures of other companies. Management believes that EBITDA is used by investors and analysts to evaluate companies in the mining industry.

 

  EBITDA is not a measure of performance under IFRS and should be considered in addition to, and not as a substitute for, other measures of financial performance and liquidity reported in accordance with IFRS.

 

7  Net debt represents borrowings and bank overdraft less cash and cash equivalents. Borrowings are only those borrowings that have recourse to Sibanye and therefore exclude the Burnstone Debt of R1,134 million. Borrowings also exclude related-party loans. Net debt excludes Burnstone cash and cash equivalents of R33 million.

 

8  Net debt to EBITDA ratio is defined as net debt as at the end of a reporting period divided by EBITDA of the last 12 months ending on the same reporting date.

 

9  The daily average of the closing rate during the relevant period as reported by I-Net Bridge.

 

10  Sourced from I-Net Bridge, being the closing rate at period end.

 

11  Sibanye, previously a wholly owned subsidiary of Gold Fields. The Company separated from Gold Fields in February 2013 to become an independent and publicly traded company.

 

Sibanye Gold Integrated Annual Report 2014       17                     


Table of Contents

 

STRATEGIC LEADERSHIP

 

 

 

Strategic

leadership

 

LOGO

 

                    18  Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP CONTENTS

 

 

 

 

 

CONTENTS

 

          
            
 

 

  PERSPECTIVE FROM

  THE CHAIR

 

  2  0

 

    

 

Board

Chief Executive’s report

CFO’s report

Management

Managing risk, identifying opportunities

Engaging with stakeholders

Material issues

  

 

2 2 

2 6 

3 2

3 4

3 6 

4 0 

4 2 

  
            
            
            
            
            
            
            

 

LOGO

 

Sibanye Gold Integrated Annual Report 2014       19                     


Table of Contents

 

STRATEGIC LEADERSHIP PERSPECTIVE FROM THE CHAIR

 

 

 

PERSPECTIVE FROM THE CHAIR

 

LOGO

 

 

 

 

It gives me great pleasure to endorse this integrated annual report for all our stakeholders. It seeks to illustrate the various components of our business, executive management’s significant efforts in delivering on its strategy as well as its extensive stakeholder interventions. These efforts have been duly rewarded in Sibanye’s top performance on the JSE. I am proud to report that in less than two years, Sibanye has taken its place among the country’s gold champions and as one of the world’s top producers of the precious metal.

 

Management has also managed the balance sheet well, maintaining a net debt to EBITDA ratio of 0.20 times, which is low compared to its peers. This was despite acquisitions made during the year and the extension of financing to Rand Refinery. Operationally, a creditworthy performance was recorded, with excellent production numbers, especially in the last quarter of the year, targeting best-ever output in 2015.

 

Given the Group’s genesis, some radical changes were required in the first year of operation. This was followed in 2014 by a period of consolidation: entrenching our new operating model, and integrating the newly acquired Cooke and Wits Gold assets.

 

These acquisitions are consistent with our strategy of creating value by extending the operating lives of Group assets, and support the dividend strategy, by leveraging our regional presence and existing infrastructure. We assumed control of the Cooke underground and surface operations from Gold One; concluded the acquisition of Wits Gold, a JSE and TSX-listed gold and uranium exploration company with significant gold resources in South Africa; and exercised the option held by Wits Gold to acquire the Burnstone gold mine from its previous owner, Great Basin Gold.

 

Management has also signalled that it is not limited to seeking value in the gold sector alone but will consider diversification into other sectors if this can be proven to be value-accretive and supports the dividend strategy. An example is the well-publicised interest shown in the platinum sector in early 2014. Sibanye has identified

 

an opportunity to leverage its deep-level, hard rock mining capabilities, and proven operating structures and strategy, to the platinum mines, which share many operational similarities. The platinum industry was also in a distressed position with looming wage negotiations and significantly indebted balance sheets. Sibanye will continue to assess opportunities in this area but has thus far not identified opportunities presenting suitable value.

 

Gold is still our core business with our high-quality, cash-generative mines key to our future success and we continue to explore value-accretive opportunities in the sector. A previously underdeveloped opportunity also exists in the uranium market. A number of our operations and projects produce uranium as a by-product of the production of gold. We are already producing uranium at our Cooke Operation and, by year end, had accumulated a stockpile of around 180,000lb of uranium oxide. Uranium production is forecast to be approximately 250,000lb in 2015 as we build up our production capacity. However, instead of selling into the spot market, we are looking for higher prices – most likely by entering into long-term uranium supply contracts at an appropriate time. Despite a recovery in late 2014, we believe the uranium price is below long-term averages at the moment and, because of solid supply and demand fundamentals. That said, we believe the price will increase in the medium to long term.

 

What encourages me as Chairman is the innovative thinking at Sibanye, which has also manifested in the area of safety. Management is conscious about the use of technology to improve working conditions and provide a safer working environment, as well as the potential productivity benefits that may arise. It is really all about responsibly maximising production while promoting a safe and healthy operating environment and habits, or culture, and upskilling our employees at the same time.

 

At the end of 2013, we launched our CARE values – Commitment, Accountability, Respect and Enabling. CARE is more than a strategy, though. It is Sibanye’s culture and mirrors our values. CARE is part of everything we do.

 

                    20    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP PERSPECTIVE FROM THE CHAIR

 

 

 

The coming year is going to be challenging on several fronts. First of all, we will be engaging in wage negotiations during the year. We will strive to reach agreement with organised labour on terms deemed agreeable to both the workers and the mining industry while striving to keep people in jobs. Our country cannot afford to lose jobs in the way that we have in the past 20 years. Besides introducing productivity-linked increases, stakeholders need to consider planning beyond the traditional two-year wage cycles – this is a long-term industry with long-term implications.

 

Besides wages, the industry is facing greater uncertainty about the regulatory framework in 2015 with further delays in the amendments to the MPRDA. Mineral Resources Minister Ngoako Ramatlhodi has indicated that the Bill is likely to emerge as two separate pieces of legislation. He has also indicated that he is hoping that the issue will be settled by mid-year. We have made significant efforts to comply with the requirements of the MPRDA and we are comfortable with our position.

 

Probably the biggest single factor of concern to us at the moment is the energy situation in South Africa and its impact, particularly on deep underground mines. As we stated in 2013, we are seeking alternatives to long-term reliance on Eskom, and we hope to identify some viable and cost-effective options in the coming year.

 

In a challenging operating environment, the quality of the team supporting the business is crucial. We are fortunate to have the support of an exemplary Board and management, who deliver stellar results – even in a challenging industry where asset write-downs have become the global norm. I would like to congratulate Neal and his team for taking what people perceived to be defunct assets and turning them into the success Sibanye is today.

 

Sibanye is proof that innovative thinking, an adjusted operational focus, improved financial management and the right investment in the right places is a winning formula.

 

Importantly, we remain committed to South Africa. Our goal is to be the No 1 South African gold miner and the No 1 South African mining

  

company. To this end, we are putting our money where our mouths are, and investing in sustaining our business for longer and for the benefit all of our stakeholders. We are also heavily invested in sustaining the country’s reputation as the No 1 mining destination. We firmly believe in the opportunities presented by our beautiful country, and we have confidence that we can make a real difference in South Africa.

 

Sibanye: We are one!

 

 

 

 

 

 

 

 

 

Sello Moloko

Chairman

23 March 2015

 

 

Sibanye Gold Integrated Annual Report 2014       21                     


Table of Contents

 

STRATEGIC LEADERSHIP BOARD

 

 

 

BOARD

 

 

LOGO

 

LOGO SELLO MOLOKO (49)    LOGO NEAL FRONEMAN (55)    LOGO CHARL KEYTER (41)

CHAIRMAN

NON-EXECUTIVE DIRECTOR

BSc (Hons) and Postgraduate Certificate in Education, University of Leicester

Advanced Management Programme, University of Pennsylvania Wharton School

 

Sello Moloko was appointed non-executive Chairman of the Board on 1 January 2013. Prior to this, he served as a director of Gold Fields from 25 February 2011 to 31 December 2012. Sello is the Executive Chairman and founder of the Thesele Group Proprietary Limited and Chairman of Alexander Forbes Group Holdings Limited. He has an extensive career in financial services, including periods at Brait South Africa Limited as well as Chief Executive Officer (CEO): Asset Management of Old Mutual Life Assurance Company (South Africa) Limited until 2004. Sello’s other directorships include Sycom Property Fund Managers Limited and Acucap Properties Limited. He is a trustee of the Nelson Mandela Foundation.

  

CHIEF EXECUTIVE OFFICER,

EXECUTIVE DIRECTOR AND

CHAIRMAN OF THE EXECUTIVE COMMITTEE

BSc Mech Eng (Ind Opt), University of the Witwatersrand

BCompt, University of South Africa

PrEng

 

Neal Froneman was appointed an executive director and CEO of Sibanye on 1 January 2013. He has over 30 years of relevant operational, corporate development and mining industry experience. He was appointed CEO of Aflease Gold Limited (Aflease Gold) in April 2003. Aflease Gold, through a series of reverse take-overs, became Gold One in May 2009. Neal was primarily responsible for the creation of Uranium One Incorporated (Uranium One) from the Aflease Gold uranium assets. During this period, he was CEO of Aflease Gold and Uranium One until his resignation from Uranium One in February 2008. Prior to joining Aflease Gold, Neal held executive and senior management positions at Gold Fields of South Africa Limited, Harmony Gold and JCI Limited. He is also a non-executive director of Delview Three Proprietary Limited, Hi-Zone Traders 116 Proprietary Limited, 17 Perissa Proprietary Limited and Forestry Services Proprietary Limited.

  

CHIEF FINANCIAL OFFICER

EXECUTIVE DIRECTOR

BCom, University of Johannesburg

MBA, North-West University

ACMA and CGMA

 

Charl Keyter was appointed a director of Sibanye on 9 November 2012, and executive director and Chief Financial Officer (CFO) on 1 January 2013. Previously, he was Vice President and Group Head of International Finance at Gold Fields. Charl has more than 20 years’ mining experience, having begun his career at Gold Fields in February 1995. He is also a non-executive director of Oil Recovery and Maintenance Services Proprietary Limited.

 

                    22    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP BOARD

 

 

 

 

 

LOGO

 

LOGO CHRISTOPHER CHADWICK (46)

NON-EXECUTIVE DIRECTOR

BCompt (Hons) (CTA), University

of South Africa

CA(SA)

 

Christopher Chadwick was appointed as a non-executive director on 16 May 2014. He is a chartered accountant who passed the South African Institute of Chartered Accountants Board exam in 1991 when he also completed his articles at Deloitte Touche Tohmatsu Limited. The earlier part of his career was spent with Comair Limited, the largest privately owned airline in South Africa, where he assisted in growing the company tenfold over a period of four years. After financial executive roles in the advertising, fast-moving consumer goods and services industries, Christopher moved into the information technology industry to assume financial and strategic directorships for five years. He spent another four years at an investment holding group where he was involved in corporate development and finance across many different sectors. Christopher joined Gold One in July 2008 as a Board director and is currently the CEO of Gold One. He was directly involved in the creation of Gold One through the reverse take-over of Australian-listed BMA Gold Limited.

 

LOGO ROBERT CHAN (68)

NON-EXECUTIVE DIRECTOR

BSc (Economics) (Hons), University of London

MBA, University of Liverpool

 

Robert Chan was appointed as a non-executive director on 16 May 2014. He is an experienced banker with over 39 years’ experience in commercial and investment banking, having worked in London, Malaysia and Singapore. He retired from the United Overseas Bank Limited (United Overseas Bank) on 31 December 2011 after 35 years of service (25 years as CEO of United Overseas Bank, Hong Kong). Robert has served as an independent non-executive director of Noble Group Limited since 1996. He is an independent non-executive director of Hutchison Port Holdings Trustees Pte Limited, Trustee Manager of Hutchison Port Holdings Trust, a business trust listed in Singapore, as well as Quam Limited, which is listed in Hong Kong. He is currently non-executive Chairman of The Hour Glass (HK) Limited. He is also a Fellow of the Hong Kong Institute of Directors.

 

LOGO TIMOTHY CUMMING (57)

NON-EXECUTIVE DIRECTOR

BSc (Hons) (Engineering), University of

Cape Town

BA (PPE), MA (Oxon)

 

Timothy Cumming was appointed as a non-executive director on 21 February 2013. He is the founder and a partner of Scatterlinks Proprietary Limited, a South African-based company mentoring and coaching senior business executives, and providing strategic advisory services to financial services businesses. He was previously involved with the Old Mutual group in various capacities: CEO of Old Mutual Investment Group (South Africa) Proprietary Limited, Executive Vice President: Director of Global Business Development of Old Mutual Asset Management for Old Mutual (US) Holdings Inc, Managing Director: Head of Corporate Segment at Old Mutual (South Africa), Strategy Director of Old Mutual Emerging Markets and Interim CEO of Old Mutual Investment Group (South Africa). He was also executive director and Head of Investment Research (Africa) for HSBC Holdings plc, Chairman of Amama South Africa Rural Social Enterprise NPC, sole director of Chris Leal Property Investments Proprietary Limited and independent non-executive director of Nedgroup Investments Limited. Timothy started his career as a management trainee at the Anglo American Corporation of South Africa Limited (Anglo American). He worked on a number of diamond mines and was Resident Engineer at Anglo American’s gold mines in Welkom, South Africa.

 

Sibanye Gold Integrated Annual Report 2014       23                     


Table of Contents

 

STRATEGIC LEADERSHIP BOARD

BOARD

CONTINUED

 

 

LOGO

 

LOGO BARRY DAVISON (69)

NON-EXECUTIVE DIRECTOR

BA (Law and Economics), University of the Witwatersrand

Graduate Commerce Diploma, Birmingham University

CIS Diploma in Advanced Financial Management and Advanced Executive

Programme, University of South Africa

 

Barry Davison was appointed as a non-executive director on 21 February 2013. He has more than 40 years’ experience in the mining industry and served as Executive Chairman of Anglo American Platinum Limited Amplats (Amplats), Chairman of Anglo American’s Platinum Division, and Ferrous Metals and Industries Division, and was an executive director of Anglo American. He has been a director of a number of listed companies, including Nedbank Group Limited, Kumba Resources Limited, Samancor Limited and the Tongaat-Hulett Group Limited.

 

LOGO RICHARD MENELL (59)

NON-EXECUTIVE DIRECTOR

MA (Natural Sciences, Geology), Trinity College,

University of Cambridge

MSc (Mineral Exploration and Management),

Stanford University

 

Richard (Rick) Menell was appointed as a non-executive director on 1 January 2013. He has over 30 years’ experience in the mining industry and has been a director of Gold Fields since 8 October 2008. Previously, he occupied the positions of President and Member of the Chamber of Mines of South Africa (Chamber of Mines), President and CEO of TEAL Exploration & Mining Inc, Chairman of Anglovaal Mining Limited (Anglovaal) and Avgold Limited (Avgold), Chairman of Bateman Engineering Proprietary Limited (South Africa), Deputy Chairman of Harmony and African Rainbow Minerals (ARM) Limited. He has also been a director of Telkom Group Limited, Standard Bank of South Africa Limited, and Mutual and Federal Insurance Company Limited. He is currently a non-executive director and Chairman of Credit Suisse Securities Johannesburg Proprietary Limited, non-executive director of Gold Fields, The Weir Group plc, Rockwell Diamonds Inc. Rick is a trustee of Brand South Africa and the Carrick Foundation. He is co-Chairman of the City Year South Africa Citizen Service Organisation, and Chairman and trustee of the Palaeontological Scientific Trust.

 

LOGO NKOSEMNTU NIKA (57)

NON-EXECUTIVE DIRECTOR

BCom, University of Fort Hare

BCompt (Hons), University of South Africa

Advanced Management Programme, INSEAD CA(SA)

 

Nkosemntu Nika was appointed as a non-executive director on 21 February 2013. He is currently an independent non-executive director of Scaw South Africa Proprietary Limited and Chairman of the Audit and Risk Committee of Foskor Proprietary Limited. He was previously CFO and Finance Director of PetroSA (SOC) Limited (PetroSA) and Executive Manager: Finance at the Development Bank of Southern Africa. He has held various internal auditing positions at Eskom Holdings (SOC) Limited, Shell Company of South Africa Limited (Shell) and Anglo American. He was also a non-executive Board member of the Industrial Development Corporation of South Africa Limited and chaired its Audit and Risk Committee and Governance and Ethics Committee.

 

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STRATEGIC LEADERSHIP BOARD

 

 

 

 

LOGO

 

LOGO  KEITH RAYNER (58)

NON-EXECUTIVE DIRECTOR

BCom, Rhodes University

CTA

CA(SA)

 

Keith Rayner was appointed as a non-executive director on 1 January 2013. Keith is a South African chartered accountant with experience in corporate finance. He is CEO of KAR Presentations, an advisory and presentation corporation, which specialises in corporate finance and regulatory advice and presentations. Advice and presentations include, inter alia, the JSE Listings Requirements, Financial Markets Act, Companies Act, governance, takeover law, corporate action strategy, valuation theory and practice, IFRS and various directors’ courses. He is an independent non-executive director of Goliath Gold Limited (Goliath Gold), Sabie Gold Proprietary Limited, John Daniel Holdings Limited and Appropriate Process Technologies Proprietary Limited. He is a member of the JSE Limited’s Issuer Regulation Advisory Committee, is a fellow of the Institute of Directors in South Africa (IOD), is a non-broking member of the Institute of Stockbrokers in South Africa and is a member of the Investment Analysts Society. He is a past member of the SAMREC/SAMVAL working group, the Takeover Regulation Panel’s rewrite committee, the IOD’s CRISA committee and SAICA’s Accounting Practices Committee.

  

LOGO ZOLA SKWEYIYA (73)

NON-EXECUTIVE DIRECTOR

LLD, University of Leipzig

 

Zola Skweyiya was appointed as a non-executive director on 1 October 2013. He was Minister of Public Service and Administration from 1994 to 1999 and Minister of Social Development from 1999 to 2008. He was a founding member of the Centre for Development Studies at the University of the Western Cape. Zola also served on the board of trustees of the National Commission for the Rights of Children. He was previously Chairman of the United Nations Commission for Social Development, and Founder and Chairman of the Constitution Committee African National Congress (ANC). In August 2013, he returned to South Africa after serving as the South African High Commissioner to the United Kingdom. He is also a director of Umsimbithi Holdings Proprietary Limited.

 

LOGO   SUSAN VAN DER MERWE (60)

NON-EXECUTIVE DIRECTOR

BA, University of Cape Town

 

Susan van der Merwe was appointed as a non-executive director on 21 February 2013. She served as a member of Parliament for 18 years until October 2013, and held various positions, including Deputy Minister of Foreign Affairs from 2004 to 2010. She is currently a member of the National Executive Committee of the ANC. She has participated in various civil society organisations and currently serves as a trustee and Chair of the Kay Mason Foundation, which is a non-profit organisation assisting disadvantaged scholars in Cape Town. Susan was appointed to the National Council of the South African Institute of International Affairs in 2014.

    

LOGO   JERRY VILAKAZI (54)

NON-EXECUTIVE DIRECTOR

BA, University of South Africa

MA, Thames Valley University

MA, University of London

MBA, California Coast University

 

Jerry Vilakazi was appointed as a non-executive director on 1 January 2013. He is Chairman of Palama Investment Holdings Proprietary Limited, which he co-founded to facilitate investments in strategic sectors. He is a past CEO of BUSA. Prior to this, he was Managing Director of the Black Management Forum. In 2009, Jerry was appointed to the Presidential Broad-Based Black Economic Empowerment Advisory Council and he was appointed as a Commissioner of the National Planning Commission in 2010. He was appointed Public Service Commissioner in 1999 and has played a critical role in shaping major public service policies in post-1994 South Africa. Jerry is Chairman of the Mpumalanga Gambling Board and the State Information Technology Agency (SOC) Proprietary Limited. He is non-executive Chairman of Netcare Limited and holds non-executive directorships in Goliath Gold, Blue Label Telecoms Limited and General Healthcare Group plc (UK). He is also a former non-executive director of Pretoria Portland Cement Limited.

 

       

 

TERMS OF OFFICE

 

Christopher Chadwick, Robert Chan, Timothy Cumming, Rick Menell and Jerry Vilakazi retire by rotation at the upcoming Annual General Meeting on 12 May 2015, and have indicated that they are available for election or re-election.

 

Barry Davison, Nkosemntu Nika, Keith Rayner, Zola Skweyiya and Susan van der Merwe retire by rotation in 2016.

 

 

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STRATEGIC LEADERSHIP CHIEF EXECUTIVE’S REPORT

 

 

 

CHIEF EXECUTIVE’S REPORT

 

LOGO

 

LOGO

   

INTRODUCTION

Sibanye is the largest producer of South African gold, with its production entirely sourced from its operations in South Africa. Our vision is to create superior value for all of our stakeholders. Our strategy is underpinned by our commitment to pay our shareholders sustainable, industry leading dividends. We will achieve this vision by optimising our current operations and extending their operating lives, and by leveraging existing infrastructure to enhance the inherent value of brownfields and greenfield projects. We will also consider making acquisitions in the gold and other mineral sectors if they enhance or sustain our ability to pay an industry leading dividend to our shareholders.

 

We are comfortable investing in South Africa, which offers significant opportunities for us to continue to deliver sustainable value for all of our stakeholders. South Africa offers well understood and simple geology and still contains some of the highest grade gold resources in the world as well as an abundance of skilled and experienced mining practitioners. The areas in which we operate are accessible via first class infrastructure and the established mining industry is serviced by well-developed and innovative associated industries. While regulatory uncertainty is a factor which has inhibited investment in recent years, the country has sound financial and judicial systems and a world class constitution, which protects individual and corporate rights.

 

By applying our experience in the South African mining industry and understanding of the regulatory and labour environment, we intend to grow our business in the gold and in other mineral sectors for the benefit of all stakeholders. By applying our proven operating model and deep-level, hard-rock mining capability to new acquisitions and projects, we believe we can continue to unlock value, in much the same way we have by turning around Sibanye’s existing mines. Our high-quality, cash-generative gold operations and robust balance sheet, underpin our ability to deliver on this vision while continuing to pay sustainable, industry leading dividends to shareholders.

 

We are aware however, that in order to achieve our goals and re-establish the primacy of mining to South Africa’s economic development in the eyes of government and all the country’s people, we are going to have to adopt a prominent leadership role in the industry. I am confident that we have laid a solid foundation in the last two years, which will allow this.

 

SAFETY

Our focus on establishing a safe, production-friendly operating environment, through the ongoing implementation of our health and safety strategy and initiatives to reduce risk

   

continues, as we strive towards our goal of Zero Harm. I am pleased to report that our safety performance improved significantly towards the end of the year. Following specific management intervention (mentioned in the September 2014 results report), Beatrix recorded a fatality free December 2014 quarter, with Driefontein and Kloof consecutively experiencing no fatalities for seven and six months respectively. Fatalities at Beatrix, Driefontein and Kloof were, as a result, lower year-on-year, with eight fatalities recorded during 2014, compared with nine during 2013. Cooke suffered a total of three fatal accidents during the seven months of incorporation into Sibanye. The majority of these incidents were a result of avoidable human error and the safety performance at Cooke is being addressed through ongoing implementation of Sibanye’s safety management systems and practices.

 

2014 IN REVIEW

2014 was a year of operational and financial consolidation for Sibanye, after significant restructuring in 2013. Our primary objective, during the year, was to entrench the new operating model and operational structures, which had been successfully implemented at the Beatrix, Driefontein and Kloof operations (Beatrix, Driefontein and Kloof) in 2013, whilst integrating the newly acquired Cooke Operation (Cooke) into the Group. At the same time, cognizant of the importance of ensuring the consistency and sustainability of our performance, we established dedicated internal capacity focused on securing the long term future of our company. A dedicated projects team is assessing all organic opportunities within the group while a new business development function was established to consider external, value accretive opportunities, ensuring that the operations focus on delivery. We have also established a Safe Technology function which will explore ways to modernise the operations, by using new technologies to improve working conditions and make the working environment safer for employees, while at the same time improving productivity and reducing costs.

 

We are confident that we have now convincingly arrested the historical declining production and rising cost trends at our core Beatrix, Driefontein and Kloof operations. Production at these operations has stabilised at approximately 45,000kg (1.45Moz) and gold Reserves increased for a second consecutive year, despite continued depletion as a result of our operating activities. The acquisitions of the Cooke assets and Wits Gold in mid-2014, added significant optionality to our sizeable gold Resource and Reserve base, as well as adding 60Mlb of uranium Reserves, predominantly contained in low cost surface dumps.

 

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The integration of Cooke will also result in Sibanye achieving its strategic objective of bringing lower grade gold resources to account through the production of by-product uranium. Sibanye is now well positioned to exploit extensive lower grade resources at the Cooke operations profitably. In addition, Sibanye will now be able to enter into long term uranium contracts as a result of the regular and consistent delivery of ammonium diuranate to Nufcor. Uranium production from Cooke continued uninterrupted from May 2014, resulting in uranium inventory of approximately 180,000lb at year-end.

 

Group gold production for 2014, including a 4,305kg (138,400oz) contribution from Cooke, increased by 11% year-on-year to 49.432kg (1.59Moz), compared with 44,474kg (1.43Moz) in 2013. Group Total cash cost for the year of R295,246/kg (US$849/oz) and All-in sustaining cost of R372,492/kg (US$1,071/oz) were in line with guidance, with the annual cost increases maintained at well below historical mining inflation rates. Group unit cost per ton milled declined by 10% to R785/t (2013:R879/t).

 

The outlook for 2015 is for consistent forecast gold production of between 50,000kg (1.61Moz) and 52,000kg (1.67Moz), with Total cash cost forecast at between R305,000/kg (US$850/oz) and R315,000/kg (US$875/oz). All-in sustaining cost is forecast to be between R380,000/kg (US1,055oz) and R395,000/kg (US$1,100/oz), and All-in cost forecast to be between R385,000/kg (US$1,070/oz) and R400,000/kg (US$1,110/oz). Approximately 250,000lb of by-product uranium production is forecast.

 

Supported by the solid operating performance and stable outlook for 2015, the Board declared full year dividends of R1.0 billion (2013: R272 million), which was equivalent to a 5% yield at 31 December 2014. This is

significantly higher than the average global gold industry dividend yield, despite the 83% increase in Sibanye’s share price during the year. Sibanye’s share price appreciated by 83% from R12.30 at end 2013 to R22.55 at end 2014 after closing at a high of R29.52 on 23 July 2014. This compares with the 12% increase in the JSE gold index over the same period.

 

DELIVERING SUSTAINABLE VALUE

We are committed to our stated strategy of rewarding our shareholders by paying sustainable, industry leading dividends. This dividend is the first call on cash, and our commitment to the dividend strategy introduces an element of capital discipline, with projects or acquisitions only pursued if they support or enhance the dividend.

 

The acquisitions of the Cooke assets and Wits Gold, which were concluded in May 2014, are consistent with this strategy. These acquisitions will allow us to leverage regional and operational synergies in order to extend the Group operating life, thereby sustaining the dividend for longer and improving the Group’s return on invested capital:

 

•  The consolidation of the significant uranium and gold Reserves contained in Cooke’s tailings storage facilities (TSFs) with the high grade gold TSFs already owned by Sibanye, has improved the economic viability of developing the high volume WRTRP. Combining the TSFs and allows for phasing of the project capital, thereby lowering the operational risk and improving the economics. Consolidating the existing gold processing infrastructure at Driefontein and Kloof with the Ezulwini gold and uranium plant into the project will also allow for better project phasing and early cash generation with relatively low upfront capital requirements

Sibanye annual production and total cash cost (000oz)

 

LOGO

 

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CHIEF EXECUTIVE’S REPORT

CONTINUED

 

 

 

  

Ÿ  Wits Gold’s Bloemhoek and De Bron-Merriespruit projects are located North of and adjacent to Beatrix North Section in the Free State province. The Sibanye project team is currently assessing the potential to access parts of the Bloemhoek lease area from the underground workings at Beatrix North Section, potentially extending the life of the mine by five to 10 years. The close proximity of the projects to Beatrix could also negate the construction of stand-alone surface infrastructure, reducing the required project capital and thereby enhancing project returns.

 

In the past, I discussed how Group production could be maintained at over 1.5Moz per annum until at least 2028 and could be funded from internal cash flow without compromising the dividend (assuming a constant real gold price of R430,000/kg), if all of Sibanye’s organic projects were to be developed on current assumptions. Since then, our centrally managed projects team, which was established in mid-2014, has made significant progress in reviewing and classifying all of the organic projects.

 

Following intensive assessment and review, key projects have been identified and prioritised, with additional work required on others. Projects which have been prioritised and will be advanced in 2015 include:

 

Ÿ  The Kloof 4 Shaft and Driefontein 5 Shaft below infrastructure projects: pre-feasibility studies on the viability of accessing resources below current infrastructure, by means of the development of declines were completed in 2014. The pre-feasibility studies for both projects suggest robust economic returns that exceed the Group’s internal investment hurdle rates. These projects have consequently been included in Group gold Reserves in 2015 and into the LOM production plan. The below

  

infrastructure projects add approximately 1.1Moz and 0.5Moz to the Driefontein and Kloof gold Mineral Reserves, respectively. Additional detailed feasibility studies are scheduled for completion during the second quarter of 2015.

 

Ÿ  The WRTRP: a phased development approach has been adopted for this significant surface dump retreatment project. A detailed feasibility study, which is due for completion during the first quarter of 2015, is specifically considering how to leverage available surface infrastructure, including existing surface gold plants at Driefontein and Kloof and uranium processing capacity at the Ezulwini plant in order to generate early cash flow and enhance value.

 

Ÿ  The Burnstone project: Capital expenditure of R286 million was approved by the Sibanye Board in 2014 to provide working capital, complete critical required infrastructure at the Burnstone project and to complete a feasibility study. The Infrastructure project, which commenced in July 2014 and is planned for completion in September 2015, involves two main areas of focus: completion of the shaft infrastructure and pumping facilities underground to allow permanent dewatering. A feasibility study reviewing and assessing the viability of the entire project is well advanced and is on schedule for completion during the second quarter of 2015. This will form the base for the feasibility study and associated development and life of mine plan.

 

Ÿ  The Beatrix West Section, Beisa project: a pre-feasibility study on this gold and uranium resource was completed in December 2014. Various regulatory approvals and permits are

  

 

Gold Reserves (Moz)

 

LOGO

 

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required before this project can be advanced. Applications for the various permits and approvals will commence during 2015 and ongoing optimisation and review of the pre-feasibility study will continue in parallel with the permitting process.

 

While our high-quality gold operations underpin our ability to deliver a sustainable dividend to shareholders and gold production will always be an important component of our asset portfolio, delivery on our dividend strategy is not necessarily restricted to the gold sector. We are confident that our operating model and structures can be applied to unlock value in other sectors in the same way we have created value in Sibanye.

 

In this regard, we announced in February 2014 that we would be interested in participating in any restructuring in the platinum industry if any opportunities that arose were accretive to earnings and cash flow on a per share basis in the near to medium term. The technical similarities between tabular intermediate to deep, hard rock mining in both the South African gold and platinum mines, makes platinum a natural area for application of Sibanye’s core mining competences. Sibanye’s operating model, which has started to deliver operational turnaround at the mature deep-level gold mining operations, is well suited to deliver similar value to platinum mining operations. Our platinum ambitions remain firmly in place and we will continue to participate in the Amplats auction process as well as assessing other opportunities in 2015. I again wish to stress however, that commodity diversification is not an imperative and will not be pursued if it is not value accretive and has any negative implications for the dividend strategy.

  

We will also continue to pursue opportunities which may arise in the South African gold sector, but see less value in the purchase of specific assets or mines assets, following the logical, strategic acquisitions of Cooke and Wits Gold. We believe that it is only through larger, company scale consolidation, that significant corporate and other overhead costs can be removed, in order to unlock sustainable value in the industry.

 

STAKEHOLDER RELATIONS

The South African gold industry will again be entering into negotiations with organised labour in mid-2015, focused on annual wage increases. The structure of organised labour in South Africa has undergone significant change since 2012, with the emergence of younger unions such as the Association of Mineworkers and Construction Union (AMCU), which has gained significant membership in an industry previously dominated by a single union, the National Union of Mineworkers (NUM). This has introduced some complexity and uncertainty into the upcoming gold sector wage negotiations, particularly against the backdrop of lengthy and hostile negotiations in the Platinum Sector in 2014.

 

The gold industry is an essential constituent of the South African economy, providing much needed employment, supporting small and medium enterprises, developing communities and generating a significant amount of foreign income. As such, the profitability and sustainability of the gold industry is critical to the successful future development and growth of the economy. Sibanye’s superior value creation feeds through to many sectors of the economy.

 

 

 

LOGO

 

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CHIEF EXECUTIVE’S REPORT

CONTINUED

 

 

 

We will endeavour to avoid a similarly damaging outcome from the 2015 gold wage negotiations, and hope that the devastating impact on all stakeholders of the Platinum sector negotiations and the lessons learned, will result in a much more mature and cooperative process, we will also ensure that we do not compromise the sustainability of the business by acceding to unrealistic demands from the unions.

 

In the past two years, we have put significant emphasis on improving the living and working conditions for our employees and attempting to address the challenges they face in their daily lives. Wages in the gold industry are, on average, significantly higher than in many other industries and professions in South Africa, if one considers the numerous benefits and bonuses that are earned. Various historical and external factors have however significantly reduced the take home pay of many employees which, compounded by inadequate service delivery and other factors, has negatively impacted on the living standards of employees.

 

We have begun addressing critical issues such as indebtedness by providing financial literacy programmes and debt counselling to over 9,000 employees and community members and are investigating debt consolidation with third parties in order to provide affordable financing for employees. We have also developed a low cost housing model which will facilitate ownership of property for all of our employees, which are affordable using existing live out allowances.

  

We also continue to actively engage communities around our operations and in labour sending areas in order to, where possible, address their developmental needs.

 

We recognize the importance that all our stakeholders play in ensuring the sustainability of our business and our efforts are guided and underpinned by our vision of delivering superior value to all of our stakeholders through our culture of caring. Through continued delivery of this vision, we expect that our employees and communities will come to appreciate the importance that a profitable and sustainable business has for them and the other stakeholders who rely on the gold industry. We will however, obviously be prepared for any eventuality that may arise and have prepared plans to minimize losses and unsure our long term viability in the event of an extended strike.

 

SECURING RELIABLE POWER

Shortly after listing in 2013, we stated that we would be exploring alternative sources of long term electricity supply in response to the risk that uncertain, inconsistent and increasingly expensive power supplied by the state owned power utility, Eskom posed to our current operations and future development. Ongoing delays at Eskom’s new capacity build projects and a lack of critical maintenance at its existing stations, has resulted in regular supply interruption, which is likely to continue for the foreseeable future.

 

 

LOGO

 

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While we have identified and implemented numerous measures that have enabled us to reduce electricity consumption by approximately 20% since 2007, spiraling capital costs, have led to rapidly escalating power costs for consumers as Eskom has consecutively implemented punitive annual cost increases. Power costs as a percentage of operating costs at Sibanye, have swelled from approximately 9% in 2007 to over 20% in 2015, with supply irregular and uncertain.

 

In order to mitigate the short term risk, we have continued to work with Eskom to manage and minimise the impact of load shedding on our operations. It was already clear in 2013 though, that security of electricity supply and rising costs would remain an issue for many years to come and in order to mitigate this risk, we began exploring a number of alternative supply options to reduce reliance on Eskom.

 

In 2014 we completed a pre-feasibility study investigating the potential of solar power as an alternative power source. The pre-feasibility study confirmed that solar power provides an economically competitive solution to Sibanye’s electricity requirements, which will partially insulate us from the effects of interruptions in ESKOM supply. We are contemplating a phased R3 billion investment, with involvement of financial partners, in establishing solar photovoltaic generating plant with a peak generating capacity of 150 MW. This represents a substantial portion of Sibanye’s overall 500MW power demand, and will provide around 10% of our electrical energy requirements when averaged over the course of a day. A site large enough to host a 150MW installation with limited potential for other land use has been identified close to Driefontein. We intend to launch permitting applications early in 2015, and anticipate that we will be able to start independent generation of captive electricity for our operations during 2017.

 

Sibanye has undertaken several studies into other alternative energy sources that we consider reliable and over which we will be able to exercise some control. To this end, we are completing an in depth investigation into coal fired power stations varying in size from 200MW to 600MW. A key aspect of this will be ensuring reliable quality coal sources. We are also engaging with technology partners in order to develop a deeper insight into independent power generation. It is our intention to become fully independent of Eskom over the next few years, as this will make a material difference to production costs.

  

A MORE CERTAIN REGULATORY ENVIRONMENT

Regulatory compliance has been another area which has caused concern amongst investors as certain elements of the Mining Charter are ambiguous. We welcome the upcoming mining sector audit process by the DMR, and expect it to provide welcome clarity and greater certainty. We have deployed significant resources and effort in the last two years to ensuring the Group’s compliance with the Mining Charter, and we are confident of our compliance and legal position ahead of the audit by the DMR.

 

CONCLUSION

Sibanye, underpinned by its high quality operations, which generate solid, consistent cash flow, will continue to deliver superior value for all stakeholders, consistent with its vision. Sibanye is well positioned to sustain its cash flow by developing organic projects and is well positioned financially and strategically to take advantage of any acquisition opportunities which meet our investment criteria and support our dividend strategy.

 

2015 poses some challenges, particularly in the first six months, but we believe we have positioned the Group well to endure and overcome any scenarios we might face. We should emerge in the latter part of the year with a clearer understanding of our position, particularly in relation to our labour relations environment and regulatory compliance. This is positive and will allow us to make the strategic decisions which will allow us to achieve our long term goals.

 

I would like to thank my Executive colleagues and the Board for its support and guidance throughout the year and would like to thank the rest of our team at Sibanye for the commitment and cooperation shown throughout the year. I am positive that by continuing to embrace our CARE values and working together as a team, we can build on the foundation we have laid and develop Sibanye into the leading South African mining company it can be.

 

 

 

 

Neal Froneman

Chief Executive Officer

23 March 2015

  

 

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STRATEGIC LEADERSHIP CFO’S REPORT

 

 

 

CFO’S REPORT

 

 

 

LOGO

 

 

 

 

  

 

The year under review was operationally and financially consistent with our forecast. A solid production result again underpinned delivery of an industry leading dividend yield to shareholders. This consistency resulted in our share price significantly outperforming most listed global gold companies and the gold price ending the year as one of the top performing stocks on the JSE. Our share price increased by 83% in 2014, lifting our market capitalisation to R20.3 billion by 31 December 2014.

 

This performance reflects growing market acceptance of our ability to deliver on Sibanye’s strategy as well as an appreciation of our inherent value offering. We have proven the effectiveness of our operating model and structures, and our ability to turn around mature mines. This places us in an excellent position to maintain the performance at our existing operations as well as growing the company through smart, value-accretive acquisitions.

 

GOLD PRICE AND EXCHANGE RATE

In 2014, the average US dollar gold price received declined by 10% to US$1,267/oz (2013: US$1,408/oz) while the 13% increase in the average exchange rate to R10.82/US$ (2013: R9.60/US$), meant the rand price of gold received was 1% higher at R440,615/kg (2013: R434,663/kg).

 

PRODUCTION

Sibanye produced 49,432kg (1.59Moz) of gold in 2014. This was in line with prior guidance, despite the loss of over 500kg due to the underground fire at Driefontein early in the year and the impact of Eskom load shedding in the latter half of the December quarter on the operations.

 

Uranium production from Cooke continued uninterrupted from May 2014, resulting in inventory of approximately 180,000lb at year end. No uranium was sold during the year.

 

FINANCIAL PERFORMANCE

Revenue increased 13% to R21.8 billion, from R19.3 billion in 2013. The 11% year-on-year increase in production translated into R2.2 billion additional revenue. The higher gold price contributed R300 million to revenue for the year.

 

Operating costs increased by R2.3 billion or 20% year-on-year, primarily due to the incorporation of Cooke from June 2014. Cooke added R1.7 billion to operating costs. Costs at Beatrix, Driefontein and Kloof rose by R0.6 billion or 5% mainly due to increased volumes treated. Operating cost on a per kilogram basis at Beatrix, Driefontein and Kloof rose by only 4% due to the 1% increase in gold production.

    

 

The average All-in sustaining cost per kilogram, the total cost of producing each kilogram of gold, rose by 3% at Beatrix, Driefontein and Kloof. This was substantially below the national consumer price inflation rate of 6.1%, and reflected operational restructuring and our focused approach to containing or reducing costs. This modest increase indicates that the Group managed to overcome the substantial increases in labour and electricity costs that, respectively, contribute some 47% and 19% of total operating costs and which are beyond the Group’s control.

 

Labour costs increased by 8% year-on-year due to the inclusion of the Cooke assets for seven months. Labour cost at Beatrix, Driefontein and Kloof, however, reduced year-on-year mainly due to the operational rightsizing undertaken during the 2013 year. The overall cost of electricity rose by 18%, again due to the inclusion of the Cooke assets. Excluding the Cooke assets, the increase was only 5%, which was significantly lower than the regulated tariff increase. The fact that unit costs rose by a substantially lower rate than those of labour, power and general inflation is indicative of our strict control of costs and the progressive, non-disruptive rightsizing of our employee base.

 

For the 2015 financial year and with the full integration and consolidation of Cooke, we are targeting average unit cost increases of between 5% and 6%. Again, this should be seen against our expectation of above inflation increases. We will, however, be relentless in our efforts to work out these inflationary increases.

 

Operating profit of R7.5 billion was in line with the R7.4 billion reported the year before. Profit for the year, however, dipped 11% to R1.5 billion from R1.7 billion in 2013 mainly as a result of a net loss on the 33.1% share in Rand Refinery of R480 million.

 

Earnings attributable to the owners of Sibanye for 2014 of R1.6 billion compared with R1.7 billion in 2013 were affected by the loss on Rand Refinery, share-based payments, losses on financial instruments and foreign exchange, impairments, tax and royalties.

 

Headline earnings, after adjusting earnings for a R120 million impairment charge in respect of Sibanye’s investment in Rand Refinery, a R114 million impairment of the Python Plant and a R360 million impairment reversal of Beatrix West Section, were 39% lower at R1.4 billion.

 

Like-for-like comparisons between earnings per share (EPS) and headline earnings per share (HEPS) for the year ended 31 December 2014 and the comparable period in 2013 are distorted as a result of a 28%

 

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increase in the weighted average number of shares year-on-year. This difference is primarily due to the fact that, until its unbundling from Gold Fields in mid-February 2013, Sibanye only had 1,000 shares in issue. The weighted average number of shares in issue in 2013, was 650.6 million, compared with the 735.1 million shares in issue at 31 December 2013.

 

For the acquisition of the Cooke assets during May 2014, Sibanye also issued 156.9 million new ordinary shares to Gold One, which resulted in the weighted average number of shares in issue for the year ended 31 December 2014 being 835.9 million with 898.8 million shares in issue at year end.

 

Mainly as a consequence of the difference in the weighted average number of shares between the periods, EPS and HEPS for the year ended 31 December 2014 were 28% and 52% lower respectively than the reported EPS of 260 cents per share and HEPS of 355 cents per share for the year ended 31 December 2013. At 31 December 2014, EPS was 186 cents per share and HEPS was 170 and cents per share.

 

DEBT

Group debt increased from R2.0 billion to R3.2 billion mainly due to the inclusion of the Burnstone Debt and the funding of Rand Refinery. The R1.1 billion debt attributable

    

to the Burnstone project has no recourse to Sibanye’s balance sheet and is ring-fenced to the Burnstone project. The cash inflows from the Burnstone mine will be applied to reduce this debt.

 

Sibanye repaid R656 million debt assumed through the acquisitions of Wits Gold and Cooke, and repaid R900 million under the R4.5 billion Facilities. On various dates during 2014, Sibanye made additional drawdowns of R500 million and, on 18 December 2014, Sibanye borrowed a further R385 million to fund its portion of the Rand Refinery loan, increasing its debt under the R4.5 billion Facility to just below R2.0 billion.

 

Net debt, excluding the Burnstone Debt, increased from R0.5 billion to R1.5 billion. This increase is post cash outflows of unusually high royalty, tax and dividend payments of approximately R3.0 billion due to the timing of the year end, the repayment of R1.6 billion debt and the R415 million purchase consideration for Wits Gold.

 

CASH FLOW

Cash generated by operating activities was steady year-on-year at R7.1 billion. Net cash inflows from operating activities decreased from R6.4 billion in 2013 to R4.1 billion in 2014. The items contributing to the year-on-year decrease of R2.3 billion were due to the factors in the table below:

 

    

CAPITAL EXPENDITURE

Capital expenditure during the year under review amounted to R3.3 billion and was largely devoted to maintaining infrastructure and to developing ore reserves. ORD has increased substantially in the past two years as we continue to increase flexibility at our operations in order to ensure sustainability of production.

 

Of the R3.3 billion capital expenditure in 2014, almost two thirds or R2.1 billion was directed towards ORD across the Group. Of the remainder, some R1.0 billion was directed towards maintaining infrastructure with the balance of R133 million spent on projects at the Cooke operations and the Burnstone mine.

 

Capital expenditure is planned to increase by 10% to R3.6 billion largely due to a R400 million increase in expenditure on projects to extend the operating lives of the mines and on growth projects such as Burnstone.

 

DIVIDENDS

Reflecting the Board’s confidence in the outlook for the Group, a final dividend of 62 SA cents per share was declared on 19 February 2015 in respect of the six months ended 31 December 2014. This brought the full year dividend to 112 SA cents per share which, at 44% of normalised earnings, was above the range of between 25% and 35% defined by Sibanye’s dividend policy. Normalised earnings are defined as basic earnings excluding gains and losses on foreign exchange and financial instruments, non-recurring items and its share of results of associates after taxation.

 

CONCLUSION

2014 was a year of financial and operational consistency. The industry leading dividend of 112 SA cents per share was underpinned by solid production results and our relentless efforts to mitigate inflationary cost pressures. All-in sustaining cost for the Group of R372,492/kg (US$1,071/oz) was in line with guidance, and annual increases were maintained at well below historical mining inflation rates.

 

 

Charl Keyter

Chief Financial Officer

23 March 2015

             

 

R million  

 

    

Increase in cash generated by operations mainly due to increase in gold production

   241        

 

Increase in cash-settled share-based payments paid

   (163)       

 

Decrease in release from working capital

   (354)       

 

Decrease in interest paid

   132        

 

Increase in royalties paid1

   (401)       

 

Increase in taxes paid1

   (1,042)       

 

Increase in dividends paid

   (733)       

 

Other

   13        

 

Decrease in cash flows from operating activities

   (2,307)       

 

1   The increase in royalties, taxation and dividends paid was due to additional payments made during 2014 compared with 2013.

 

Free cash flow – cash from operating activities before dividends, less additions to property, plant and equipment at R1.8 billion – was 52% lower due to the aforementioned factors.

 

Cash outflows from investing activities increased from R3,072 million in 2013 to R4,309 million in 2014 mainly due to an increase in capital expenditure of R349 million, the acquisitions of Wits Gold, Cooke and Burnstone for R616 million and the loan advanced to Rand Refinery of R385 million.

 

Cash and cash equivalents at year end amounted to R0.6 billion.

    

 

Sibanye Gold Integrated Annual Report 2014       33                     


Table of Contents

 

STRATEGIC LEADERSHIP MANAGEMENT

 

 

 

MANAGEMENT

 

 

SHADWICK BESSIT (52)

SENIOR VICE PRESIDENT: UNDERGROUND

OPERATIONS – KLOOF AND DRIEFONTEIN

National Higher Diploma, Technikon

Witwatersrand

Executive Development Programme, Gordon

Institute of Business Science

South African Mine Manager’s Certificate

of Competency

 

Prior to joining Gold Fields on 6 July 2012, Shadwick Bessit pursued personal business interests from 2010 to 2012 and was Executive Director: Operations at Impala Platinum Holdings Limited (Implats). He occupied this position from 2005 to 2010 after joining Implats in November 2002 as General Manager. Previously, he was employed at AngloGold Ashanti from 1986 to 2002 where he moved through the ranks to General Manager level at the Deelkraal, Elandsrand and Savuka mines.

 

HARTLEY DIKGALE (54)

SENIOR VICE-PRESIDENT: GENERAL COUNSEL

AND LEGAL, COMPLIANCE AND ETHICS

BIuris, University of the North

LLB,HDip (Company Law), University of the Witwatersrand

LLM, Vista University

 

Hartley Dikgale is an admitted advocate of the High Court of South Africa and has more than 30 years of corporate experience as a business executive. He has served on more than 20 boards of directors of listed and unlisted companies. He was introduced to the mining sector in 2004 when he was appointed to the Board of Pamodzi Gold Limited (Pamodzi) as a non-executive director. He has worked for, among others, Sanlam Limited (Sanlam), Old Mutual, the Independent Communications Authority of South Africa, Rand Water Board and Pamodzi Investment Holdings Proprietary Limited. In recent years (from 2010 to 2012), Hartley has worked for Rand Uranium Proprietary Limited (Rand Uranium) in an executive capacity as Senior Vice President: General Counsel. When Gold One acquired Rand Uranium, Hartley joined Gold One as Senior Vice President: General Counsel from 2012 to 2013. Hartley joined Sibanye in May 2013 where he now serves in a similar capacity.

  

CAIN FARREL (65)

CORPORATE SECRETARY

MBA, Southern Cross University, Australia

FCIS

 

Cain Farrel was appointed to his position on 1 January 2013. Before then, and from 1 May 2003, he was Company Secretary at Gold Fields. Previously, Cain served as Senior Divisional Secretary at Anglo American. He is a Past President and former director of the Southern African Institute of Chartered Secretaries and Administrators (SAICSA).

 

NASH LUTCHMAN (52)

SENIOR VICE PRESIDENT:

PROTECTION SERVICES

BA (Hons) (Criminology),

University of KwaZulu-Natal

 

Nash Lutchman has more than 25 years’ experience in the policing and security environment. He enlisted in the South African Police Service (SAPS) in 1987 and rose through the ranks from Constable in 1988 to Brigadier in 1999. During his time with the SAPS, Nash served in various divisions at senior level. In 2004, he joined the De Beers group as Security Manager in Kimberley and held other key positions as Group Crime and Intelligence Manager, Regional Security Manager, Group Investigations and Crime Information Manager, before being appointed to head the Security division at De Beers Consolidated Mines Limited (De Beers). In 2008, Nash joined Gold Fields as Manager: Special Investigations and was appointed Senior Manager and Head of Gold Fields Protection Services in July 2009. In March 2014, Nash was appointed as Senior Vice President responsible for developing and delivering a holistic protection strategy for Sibanye.

  

DAWIE MOSTERT (45)

SENIOR VICE PRESIDENT:

ORGANISATIONAL EFFECTIVENESS

Diploma in Labour Relations

MDP (Adv Labour Law)

MBA, University of South Africa

 

Dawie Mostert, who has more than 18 years’ experience in the mining industry, was appointed to his position on 1 January 2013. Prior to joining Sibanye, he served as Vice President: Commercial Services at Gold One in 2012 and Vice President: Human Capital at Great Basin Gold from 2006 to 2012. Prior to joining Great Basin Gold in 2006, he was Executive: Organisational Development and Employee Relations at Harmony from 2002 to 2006. Dawie joined Harmony in 1996 as part of the acquisition transformational team and was appointed Mine Manager at Elandsrand mine from 2001 to 2002.

 

ADAM MUTSHINYA (51)

SENIOR VICE PRESIDENT: HUMAN CAPITAL

BAdmin (Hons) (Industrial Psychology),

University of Venda

 

Adam Mutshinya was appointed to his position on 1 March 2013. Prior to this appointment, from 1 December 2012, he was Vice President and Head of Human Resources: South Africa Region for Gold Fields. Before that he was Vice President and Head of Group Talent Management at Gold Fields. Prior to joining Gold Fields in November 2011, Adam was with the South African Forestry Company Limited (South African Forestry Company) as Group Executive: Human Resources and Senior Group Executive: Human Capital from September 2006 to June 2011. He has also held various positions at Amplats where he was Human Resource (HR) Manager: Platinum Expansion Programme, HR Manager: Smelter Operations and Group HR Manager: Transformation between October 2003 and August 2006.

 

                    34    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP MANAGEMENT

 

 

 

 

 

DICK PLAISTOWE (65)

SENIOR VICE PRESIDENT: METALLURGY AND

SURFACE OPERATIONS

BSc (Hons) (Mining Engineering), University of

Nottingham

South African Mine Manager’s Certificates of

Competency (Metalliferous and Fiery Coal Mines)

Programme for Management Development,

Harvard Business School

Programme for Management Development,

University of South Africa

 

Dick Plaistowe has more than 40 years’ experience in the mining industry with extensive strategic, operations and project management experience. He also has 20 years’ experience in the surface retreatment business and was CEO responsible for the listing of Crown Consolidated Gold Recoveries (now incorporated within DRDGOLD Limited) on the JSE in 1997 and the formation of Mine Waste Solutions Proprietary Limited in 2000 where he was CEO until 2005. He was recruited by Gold One in August 2011 to develop a surface retreatment business following Gold One’s acquisition of Rand Uranium in 2011. Dick joined Sibanye in June 2014.

 

WAYNE ROBINSON (52)

SENIOR VICE PRESIDENT: UNDERGROUND

OPERATIONS – BEATRIX AND COOKE

BSc (Mechanical Engineering),

University of Natal

BSc (Mining Engineering), University of the

Witwatersrand

PrEng

South African Mine Manager’s Certificate

of Competency (Metalliferous)

South African Mechanical Engineer’s

Certificate of Competency

 

Wayne Robinson has worked in the South African gold and platinum mining sectors for more than 25 years with experience in underground mine management. Prior to joining Sibanye, he was the Executive Vice President of Cooke Operations and served on the Gold One Executive Committee from 2012 to 2014. He has held senior management positions at Eastern Platinum Limited from 2006 to 2012, Richards Bay Minerals, from 2005 to 2006 and Gold Fields, having qualified as a mechanical and mining engineer.

  

RICHARD STEWART (39)

SENIOR VICE PRESIDENT:

BUSINESS DEVELOPMENT

BSc (Hons), PhD (Geology),

University of the Witwatersrand

 

Richard Stewart has over 15 years’ experience in South Africa’s geological and mining industries, and is a professional natural scientist registered with the South African Council for Natural Scientific Professions. Prior to joining Sibanye in 2014, he held management positions in the Council for Scientific and Industrial Research (CSIR) Mining Technology division, Shango Solutions, Uranium One and as an investment consultant for African Global Capital Proprietary Limited. In 2009, Richard joined Gold One where he served as Executive Vice President: Technical Services. He was also CEO of Goliath Gold.

 

PETER TURNER (58)

SENIOR VICE PRESIDENT: TECHNICAL SERVICES

National Higher Diploma (Mechanical

Engineering), Vaal Triangle Technikon

South African Mine Manager’s Certificate

of Competency (Metalliferous)

South African Mechanical Engineer’s

Certificate of Competency

 

Peter Turner was appointed to this position in 2015. He has more than 39 years’ experience in the mining industry as a senior executive at Anglo American, AngloGold Ashanti and Gold Fields prior to joining Sibanye. Peter has worked in deep-level and open-pit operations throughout Africa, including Mali, Ghana, Namibia and Tanzania. He began his career as an engineering trainee at Vaal Reefs in 1975, having qualified as a mechanical and mining engineer.

  

ROBERT VAN NIEKERK (50)

SENIOR VICE PRESIDENT:

ORGANISATIONAL EFFECTIVENESS

National Higher Diploma (Metalliferous

Mining), Technikon Witwatersrand

BSc (Mining Engineering), University of the

Witwatersrand

South African Mine Manager’s Certificate

of Competency

 

Robert van Niekerk was appointed to this position in February 2013. Prior to joining Sibanye, he was the Senior Vice President and Group Head of Mining at Gold Fields from November 2011. He previously occupied several senior management positions at Gold Fields (from September 2009 to November 2011) and Amplats as well as management positions at Uranium One and Gold One. Robert began his mining career in 1982 as a Barlow’s Learner Official and progressed through the mining ranks at a number of South African underground and surface operations.

 

JAMES WELLSTED (45)

SENIOR VICE PRESIDENT: INVESTOR RELATIONS

BSc (Hons) (Geology), University of

the Witwatersrand

PDM, Wits Business School

 

James Wellsted was appointed to this position on 1 January 2013. Prior to joining Sibanye, and from 2011, he was a mining analyst at JP Morgan Securities South Africa Proprietary Limited, covering the South African diversified mining sector. James was also Executive Head of Investor and Media Relations at Mvelaphanda Resources Limited for seven years until its unbundling in 2011. Between 1998 and 2004, James was an analyst at JP Morgan, covering South African and African gold mining companies, and contributing to JP Morgan’s supply and demand and gold price forecasts.

 

Sibanye Gold Integrated Annual Report 2014     35                     


Table of Contents

 

STRATEGIC LEADERSHIP MANAGING RISK, IDENTIFYING OPPORTUNITIES

 

MANAGING RISKS, IDENTIFYING OPPORTUNITIES

 

 

 

RISK MANAGEMENT OVERSIGHT, RESPONSIBILITY AND GOVERNANCE

Sibanye’s Risk Management Policy, strives to manage risk effectively to protect the Group’s assets, stakeholders, environment and reputation to ensure that we achieve our business objectives. The aim of the risk management framework is to achieve a fuller understanding of the reward/risk balance and seek to reduce the likelihood and consequences of adverse effects to levels that are within our risk appetite/tolerance, and to achieve continuous improvement in the management of our risks, thereby enhancing the degree of certainty of achieving our objectives.

 

The Board believes that Sibanye’s risk-management policies, practices and management systems are sound, well-established and entrenched at the operations. The Group has implemented an Enterprise Risk Management guideline, which is aligned with the ISO 31000 international risk-management standard and the governance principles enshrined in King III.

 

Our objectives are:

 

  to identify, assess and manage risks in an effective and efficient manner;

 

  to make decisions based on a comprehensive review of the reward-to-risk balance;

 

  to provide greater certainty on the delivery of objectives; and

 

  to fulfil corporate governance requirements.

 

Underpinning these objectives, the Group has implemented the following actions:

 

   introduction of a comprehensive and systematic risk-assessment and reporting process across the organisation;

 

  creation of an environment where risks are controlled and mitigated within the accepted and approved Sibanye risk-tolerance levels;

 

  integration of the outputs of specialist risk functions to provide an informed view of the risks associated with the business activities;

 

  achieved appropriate risk-management awareness in business processes with emphasis on risk management instilled in all associated stakeholders;

 

  fostered a culture of continuous improvement in risk management by aiming to achieve best practice standards, supported by audit and review processes; and

 

  creation of an appropriate risk-financing programme based on the risk profiles developed in the assessment process.

 

PROCESS AND SYSTEMS

The strategic risk register maintained at corporate level is reviewed twice a year by the Risk Committee. In addition, the operations have a formal quarterly risk-review process, which follows a formalised responsibility structure and includes support services, engineering, health and safety and environmental staff – where the risk registers are discussed and updated. Should any additional risks be identified, plans to address them are implemented. At the operations, risk assessment is a daily activity and work areas are assessed daily in terms of their compliance with the requirements.

 

At corporate level, the risk owner is represented on the Executive Committee (Exco). Responsibility for mitigating risks is given to representatives of relevant departments. Emphasis is placed on the business taking ownership of risk.

 

The Internal Audit Department is responsible for conducting annual audits on mitigation actions, and reports four times annually to the Audit Committee.

   
 

 

                    36    Sibanye Gold Integrated Annual Report 2014


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STRATEGIC LEADERSHIP MANAGING RISK, IDENTIFYING OPPORTUNITIES

 

 

 

LOGO

 

LOGO

 

Sibanye Gold Integrated Annual Report 2014     37                     


Table of Contents

 

STRATEGIC LEADERSHIP MANAGING RISK, IDENTIFYING OPPORTUNITIES

 

 

 

 

MANAGING RISK, IDENTIFYING OPPORTUNITIES

CONTINUED

 

 

   LOGO

 

 

  Risk

 

     

 

Mitigation

 

  LOGO   

 

Labour relations/wage negotiations

Sibanye’s operations and profits may be adversely affected by disruptions arising from strikes and union activity, especially during the upcoming wage negotiations.

  

 

  Information gathering capability and contingency planning

 

  Contingency planning for safety and security of employees

 

  Contingency strike plan

 

  Create opportunities for employees to share in Group’s profits through improved labour productivity

 

  Employee relations practices and policies

 

  Improved communications with workforce

 

  People at Sibanye model

 

  Update risk assessment and emergency procedure

 

 

LOGO   

 

Power constraints and cost increases

Power stoppages, fluctuations and usage constraints may force Sibanye to halt or curtail operations, and increased power cost increases may adversely affect Sibanye’s operational results.

  

   Focus on power saving target of 3% reduction in 2015

 

   Investigate own power generation project

 

   Monthly meetings with Eskom

 

   Quality-of-supply contract in place

 

   Reduce use of compressed air and water on all shafts

 

   Regular interaction between Eskom and management on maintenance plan

 

 

LOGO   

 

Failure to deliver on operational and financial plans

Due to the nature of deep level gold mining and poor labour productivity, operational production targets may not be met, which will affect the profitability of Sibanye’s operations and the cash flows generated by those operations.

 

  

   Improve rates of development

 

   Specific work arrangements

 

   Surface operations: ongoing mineral resource management evaluation

 

LOGO   

 

Profitability of Cooke operations

To the extent that Sibanye seeks to expand through acquisitions, it may experience delays or other issues in executing acquisitions or managing and integrating the acquisitions with its existing operations.

  

   Business and strategy planning process

 

   Communication with internal stakeholders

 

   Cooke integration project

 

   Stakeholder engagement

 

 

 

                    38    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP MANAGING RISK, IDENTIFYING OPPORTUNITIES

 

 

 

  Risk      Mitigation
LOGO   

 

Mine accidents and seismicity-related incidents

Due to the nature of deep-level gold mining, industrial and seismicity accidents may result in operational disruptions, such as stoppages, which could result in increased production costs as well as financial and regulatory liabilities.

 

    

  Characterising the time distribution of seismicity to minimise exposure

       

  Engineering out risk initiatives

       

  Fall-of-ground initiatives and action plan

         

  Integrated focus on safety and health strategy

 

LOGO   

 

Non-delivery on the MPRDA, Mining Charter, and social and labour plans

Sibanye’s mineral rights are subject to legislation in terms the MPRDA, the Mining Charter, and social and labour plans. Non-delivery could result in loss of the mining licence and impose significant costs and burdens.

 

    

  Community and labour-sending areas strategy

       

  Development of transformation strategy

       

  Establishment of Securing our Social Licence to Operate committee

       

  Senior counsel opinions on BEE status

         

  Submission and implementation of SLPs

 

LOGO   

 

Volatility in gold price and exchange rates

Changes in the market price of gold, which can fluctuate widely, affect the profitability of Sibanye’s operations and the cash flows generated by those operations. Because gold is generally sold in US dollars, while Sibanye’s production costs are primarily in Rand, Sibanye’s operating results and financial condition may be materially harmed if there is a material adverse change in the value of the Rand.

 

    

  Capital containment

       

  Continuous business re-engineering

       

  High-grade mining in low gold price scenario

       

  Low-cost operating strategy

         

 

  Section 189 of Labour Relations Act, process for structural alignment

 

LOGO   

 

Erosion of All-in cost margins as a result of rising mining input costs

Increases in the prices of production inputs may have a material adverse effect on Sibanye’s operations and profits. Our business is subject to high fixed costs, which may impact its profitability.

    

  Cost reductions identified on ongoing basis

       

  Energy-conservation strategy and initiatives

       

  Procurement: aggressive supplier price negotiations

         

 

  Procurement: economies of scale

 

LOGO   

 

Theft of product, gold-bearing material explosives and copper, as well as illegal mining

Theft of gold and production inputs, as well as illegal mining, occur on some of Sibanye’s properties. These activities are difficult to control, can disrupt Sibanye’s business and could expose Sibanye to liability.

    

  Illegal mining action plan

       

  Improved access controls

       

  Increased guarding complements at shafts

       

  Introduction of low-dosage X-ray scanners

         

 

  Secure Eskom substations

 

LOGO   

 

Aging infrastructure

Due to aging infrastructure at our operations, unplanned breakdowns and stoppages may result in production delays, increased costs and industrial accidents.

    

  Capital expenditure linked to infrastructure risk assessment

       

 

  Maintenance risk register

       

 

  Regular shaft infrastructure maintenance management inspections

       

 

  Non-destructive testing of infrastructure

         

 

  Recovery plan to expedite shaft steelwork maintenance

 

 

Sibanye Gold Integrated Annual Report 2014       39                     


Table of Contents

 

STRATEGIC LEADERSHIP ENGAGING WITH STAKEHOLDERS

 

 

 

ENGAGING WITH STAKEHOLDERS

 

 

Stakeholders are an integral part of our business and meeting stakeholder needs is critical to our sustainability.

 

We believe in proactive, open and constructive stakeholder engagement, which informs participative decision-making.

 

We aim to:

 

   strategically inculcate a culture of effective engagement within our organisation;

 

  develop and implement formal and informal systems of communication for the benefit of the Group and our stakeholders;

 

  ensure that we regularly engage on and respond to issues that are material to our stakeholders;

 

   accurately understand the influence of our business activities on stakeholders and the potential impact stakeholders may have on the business, whether positive or negative, to enhance the engagement process;

 

  ensure that we engage in a manner that is timely, accurate and relevant; and

 

  continuously monitor, review and improve our engagement activities.

 

LOGO

 

                    40    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP ENGAGING WITH STAKEHOLDERS

 

 

 

 

  SIBANYE’S PRIMARY STAKEHOLDERS

 

LOGO

 

Local and provincial

government

  

 

  West Rand District Municipality

 

  Westonaria Local Municipality

 

  Merafong Local Municipality

 

  Matjhabeng Local Municipality

 

  Masilonyana Local Municipality

 

  

 

  Lejweleputswa District Municipality

 

  Gauteng Provincial Government

 

  Free State Provincial Government

 

  Dipaleseng Local Municipality

 

  Randfontein Local Municipality

LOGO   National government   

 

  Department of Mineral Resources

 

  Department of Labour

 

  Department of Education

 

  Department of Higher Education

 

  Department of Environmental Affairs

 

  

 

  Department of Water and Sanitation

 

  Department of Health

 

  Department of Rural Development and Land Reform

 

  Portfolio Committee on Mineral Resources

 

  National Treasury

LOGO

 

Non-governmental

organisations

  

 

  Wildlife and Environment Society of South Africa

 

  Earthlife Africa

  

 

  Federation for a Sustainable Environment

 

  Groundwork South Africa

LOGO

 

Forums/key

institutions

  

 

  Chamber of Mines of South Africa

 

  Suppliers/contractors

 

  West Rand District Mining Forum

  

 

  Merafong Community Mining Forum

 

  Far West Rand Dolomitic Water Association water users’ forum

LOGO   Organised labour   

 

  Association of Mineworkers and Construction Union

 

  National Union of Mineworkers

  

 

  Solidarity

 

  United Association of South Africa

 

  Sibanye Group Leadership Forum

LOGO   Regulators   

 

  Department of Mineral Resources

 

  Department of Water and Sanitation

 

  Department of Environmental Affairs

 

  National Nuclear Regulator

  

 

  National Energy Regulator of South Africa

 

  JSE

 

  New York Stock Exchange/US Securities and Exchange Commission

LOGO   Communities   

 

  Tin City

 

  Kokosi

 

  Theunissen

 

  Welkom

 

  Virginia

 

  Blybank

  

 

  Hillshaven

 

  Glenharvie

 

  Fochville

 

  Bekkersdal

 

  Simunye

 

  Randfontein

 

  Balfour

 

LOGO   Media   

 

  National media

 

  Regional and local media

  

  Specialist trade media

 

 

  Websites

LOGO   Other   

 

  Sibanye Board of Directors

 

  Employees

 

  Sibanye Executive Committee

 

  Investors/Providers of capital (shareholders and banks)

  

  Retired employees

 

  Families of employees

 

  Mining units

 

  Board committees (Safety, Health and Sustainable Development, Social and Ethics, Audit and Risk)

 

 

Sibanye Gold Integrated Annual Report 2014       41                     


Table of Contents

 

STRATEGIC LEADERSHIP MATERIAL ISSUES

 

 

 

MATERIAL ISSUES

 

 

 

DETERMINING MATERIALITY

In our 2013 report, we described the process we followed to identify our material issues for the business through:

 

  internal and external environmental scanning;

 

  scrutiny of our risk register;

 

  feedback from stakeholders; and

 

  assessment of management.

 

Following the publication of our 2013 report, we embarked on a process to define our report content and aspect boundaries, and in so doing confirmed our material issues.

 

The issues have not changed significantly since 2013, although we have chosen to represent them differently in three stages (below), namely:

 

  Securing today’s business: those issues that are material to the Group and its stakeholders that determine our ability to operate today (short term).

 

  Sustaining the business for tomorrow: those issues that we need to work on today and in the near future so that we can sustain the business in the future (medium term).

 

  Securing tomorrow’s business: those issues that we need to start addressing now so that our business can thrive and grow (long term).

 

These material issues are addressed throughout our report.

 

LOGO

 

                    42    Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

STRATEGIC LEADERSHIP MATERIAL ISSUES

 

 

 

LOGO

 

Sibanye Gold Integrated Annual Report 2014     43                     


Table of Contents

 

BUSINESS PERFORMANCE

 

 

 

Business

performance

 

 

LOGO

 

                    44  Sibanye Gold Integrated Report 2014


Table of Contents

 

BUSINESS PERFORMANCE CONTENTS

 

 

 

 

 

 

 

  CONTENTS

 

 

              

 

 

FINANCIAL CAPITAL

 

     4  6

 

  

 

HUMAN CAPITAL

 

     5  0

 

     

 

 

 

MANUFACTURED CAPITAL AND INTELLECTUAL CAPITAL

 

     7  4

 

  

 

 

 

SOCIAL AND

RELATIONSHIP CAPITAL

 

     8  8

 

     

 

 

 

NATURAL CAPITAL

 

 

     100

 

 

        

 

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Sibanye Gold Integrated Report 2014       45                     


Table of Contents

 

BUSINESS PERFORMANCE FINANCIAL CAPITAL

 

 

 

FINANCIAL CAPITAL

 

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                    46  Sibanye Gold Integrated Annual Report 2014


Table of Contents

 

BUSINESS PERFORMANCE FINANCIAL CAPITAL

 

 

 

LOGO LOGO

 

Sibanye Gold Integrated Annual Report 2014     47                     


Table of Contents

 

BUSINESS PERFORMANCE FINANCIAL CAPITAL

FINANCIAL CAPITAL

CONTINUED

 

 

 

  GLOBAL GOLD MARKET

        
          
 

 

Tonnes

 

  

 

 

 

 

2014

 

 

  

 

  

 

 

 

 

2013

 

 

  

 

  
 

 

Supply

        
 

 

  Mine production

     3,114.4         3,050.7      
 

 

  Net producer hedging

 

    

 

42.1

 

  

 

    

 

(39.3)

 

  

 

  
 

 

 Total mine supply

  

 

 

 

3,156.5

 

  

  

 

 

 

3,011.4

 

  

  
 

 

 Recycled gold

 

    

 

1,121.7

 

  

 

    

 

1,262.0

 

  

 

  
 

 

Total supply

 

  

 

 

 

 

            4,278.2

 

 

  

 

  

 

 

 

 

        4,273.4

 

 

  

 

  
 

 

Demand

        
 

 

Fabrication