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 2015-12-31

Balance SheetIncome StatementCash Flow

20-F 1 sbgl-20151231x20f.htm 20-F sbgl_Current_Folio_20F

As filed with the Securities and Exchange Commission on 21 March 2016


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

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

For the fiscal year ended 31 December 2015

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
Ordinary shares of no par value each
American Depositary Shares, each representing four ordinary shares

Name of Each Exchange on Which Registered
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 916,140,552 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     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 

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.  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  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 

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 an 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 

(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

 

 

 

 


 

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

 

Annual Financial Report—Overview——Five year financial performance

 

76-77

 

 

(b)    Capitalisation and indebtedness

 

NA

 

NA

 

 

(c)    Reasons for the offer

 

NA

 

NA

 

 

(d)    Risk factors

 

Further Information—Risk Factors

 

183-195

4

 

Information on the Company

 

 

 

 

 

 

(a)    History and Development of the Company

 

Annual Financial Report—Administrative Details—Administration and corporate information

 

182

 

 

 

 

Integrated Annual Report—About Sibanye’s reports

 

12

 

 

 

 

Integrated Annual Report—Group profile

 

13-14

 

 

 

 

Integrated Annual Report—Perspective from the Chair

 

18-19

 

 

 

 

Integrated Annual Report—Chief Executive’s review

 

20-23

 

 

 

 

Annual Financial Report—Accountability—Directors’ report

 

111-115

 

 

 

 

Annual Financial Report—Overview——Five year financial performance

 

76-77

 

 

 

 

Integrated Annual Report—Capitals overview and business model

 

24-25

 

 

 

 

Integrated Annual Report—GrowAcquisitions and funding model

 

72

 

 

 

 

Annual Financial Report— Overview—Management’s discussion and analysis of the financial statements—Acquisitions

 

80-82

 

 

 

 

Annual Financial Report—Annual Financial Statements—Notes to the consolidated financial statements—Note 12: Acquisitions

 

151-153

 

 

 

 

Further Information—Acquisition Assets

 

202-207

 

 

(b)    Business Overview

 

Integrated Annual Report—Group profile

 

13-14

 

 

 

 

Integrated Annual Report—Capitals overview and business model

 

24-25

 

 

 

 

Integrated Annual Report—Optimise

 

39-50

 

 

 

 

Integrated Annual Report—Sustain—Manage environmental impact

 

60-64

 

 

 

 

Integrated Annual Report—Material issues

 

26-38

 

 

 

 

Annual Financial Report—Overview——Five year financial performance

 

76-77

 

1

 


 

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

 

 

Further Information—Environmental and Regulatory Matters

 

208-212

 

 

(c)    Organisational structure

 

Integrated Annual Report—Group profile

 

13-14

 

 

 

 

Annual Financial Report—Annual Financial Statements—Notes to the consolidated financial statements—Note 1.3: Consolidation

 

133-134

 

 

(d)    Property, plant and equipment

 

Integrated Annual Report—Optimise—Optimise and integrate operations

 

39-45

 

 

 

 

Further Information—Reserves of Sibanye as of 31 December 2015

 

196-201

 

 

 

 

Further Information—Acquisition Assets

 

202-207

 

 

 

 

Further Information—Environmental and Regulatory Matters

 

208-212

 

 

 

 

Annual Financial Report—Annual Financial Statements—Notes to the consolidated financial statements—Note 11: Property, plant and equipment

 

146-150

4A

 

Unresolved staff comments

 

NA

 

NA

5

 

Operating and financial review and prospects

 

 

 

 

 

 

(a)    Operating results

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements

 

78-95

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated income statement

 

127

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated statement of financial position

 

128

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated statement of cash flows

 

130

 

 

(b)    Liquidity and capital resources

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statementsLiquidity and capital resources

 

91-94

 

 

(c)    Research and development, patents and licences, etc.

 

NA

 

NA

 

 

(d)    Trend information

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements

 

78-95

 

 

(e)    Off-balance sheet arrangements

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statementsOff balance sheet arrangements and contractual commitments

 

94

 

 

(f)     Tabular disclosure of contractual obligations

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statementsOff balance sheet arrangements and contractual commitments

 

94

 

 

(g)    Safe harbour

 

Forward-looking statements

 

9

 

2

 


 

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

6

 

Directors, senior management and employees

 

 

 

 

 

 

(a)    Directors and senior management

 

Annual Financial Report—Accountability—Board of directors and management

 

98-102

 

 

(b)    Compensation

 

Annual Financial Report—Accountability—Remuneration report

 

118-125

 

 

(c)    Board practices

 

Annual Financial Report—Accountability—Corporate governance report

 

103-108

 

 

(d)    Employees

 

Integrated Annual Report—OptimiseDevelop productive, skilled and engaged workforce

 

46-50

 

 

(e)    Share ownership

 

Annual Financial Report—Accountability—Remuneration report

 

118-125

 

 

 

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Share-based payments

 

89

 

 

 

 

Annual Financial Report—Annual Financial Statements—Notes to the consolidated financial statements—Note 6: Share-based payments

 

139-142

7

 

Major Shareholders and Related Party Transactions

 

 

 

 

 

 

(a)    Major shareholders

 

Annual Financial Report—Administrative Details—Shareholder ownership

 

180-181

 

 

 

 

Integrated Annual Report—Group profile

 

13-14

 

 

 

 

Further Information—The Offer and Listing

 

214-215

 

 

(b)    Related party transactions

 

Annual Financial Report—Accountability—Directors’ report

 

111-115

 

 

 

 

Annual Financial Report—Annual Financial Statements—Notes to the consolidated financial statements—Note 34: Related-party transactions

 

177-178

 

 

(c)    Interests of experts and counsel

 

NA

 

NA

8

 

Financial information

 

 

 

 

 

 

(a)    Consolidated statements and other financial information

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements

 

78-95

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated income statement

 

127

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated statement of financial position

 

128

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated statement of cash flows

 

130

 

 

 

 

Annual Financial Report—Accountability—Directors’ report—Financial affairs—Dividend policy

 

112

 

3

 


 

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

 

 

Further informationFinancial informationDividend policy and dividend distributions

 

213

 

 

(b)    Significant Changes

 

NA

 

NA

9

 

The Offer and Listing

 

 

 

 

 

 

(a)    Offer and listing details

 

Further Information—The Offer and Listing

 

214-215

 

 

(b)    Plan of distribution

 

NA

 

NA

 

 

(c)    Markets

 

Further Information—The Offer and Listing

 

214-215

 

 

(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

 

216

 

 

(c)    Material contracts

 

Further Information—Additional Information—Material Contracts

 

216-218

 

 

(d)    Exchange controls

 

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

 

223

 

 

 

 

Further Information—Environmental and Regulatory Matters—Exchange Controls

 

212

 

 

(e)    Taxation

 

Further Information—Additional Information—Taxation

 

223-226

 

 

(f)     Dividends and paying agents

 

NA

 

NA

 

 

(g)    Statement by experts

 

NA

 

NA

 

 

(h)    Documents on display

 

Further Information—Additional Information—Documents on display

 

226-227

 

 

(i)    Subsidiary information

 

NA

 

NA

11

 

Quantitative and qualitative disclosures about market risk

 

Annual Financial Report—Annual Financial Statements—Notes to the Consolidated Financial Statements—Note 33: Risk Management Activities

 

173-177

12

 

Description of securities other than equity securities

 

 

 

 

 

 

(a)    Debt securities

 

NA

 

NA

 

 

(b)    Warrants and rights

 

NA

 

NA

 

 

(c)    Other securities

 

NA

 

NA

 

 

(d)    American depositary shares

 

Further Information—Additional Information—American Depositary Shares

 

218-223

13

 

Defaults, dividend arrearages and delinquencies

 

NA

 

NA

14

 

Material modifications to the rights of security holders and use of proceeds

 

NA

 

NA

 

4

 


 

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

15

 

Controls and procedures

 

Further Information—Controls and Procedures

 

228

16A

 

Audit Committee Financial Expert

 

Annual Financial Report—Accountability—Corporate governance report—Board committees—The Audit Committee

 

105-106

16B

 

Code of ethics

 

Annual Financial Report—Accountability—Corporate governance report—Key Standards and Principles

 

103

16C

 

Principal accountant fees and services

 

Annual Financial Report—Accountability—Report of the Audit Committee

 

109-110

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

 

Annual Financial Report—Accountability—Corporate governance report—Corporate Governance

 

108

16H

 

Mine safety disclosure

 

NA

 

NA

17

 

Financial statements

 

NA

 

NA

18

 

Financial statements

 

Annual Financial ReportAccountability—Report of Independent Registered Public Accounting Firm

 

117

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated income statement

 

127

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated statement of financial position

 

128

 

 

 

 

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

 

129

 

 

 

 

Annual Financial Report—Annual Financial Statements—Consolidated statement of cash flows

 

130

 

 

 

 

Annual Financial Report—Annual Financial Statements—Notes to the consolidated financial statements

 

131-178

19

 

Exhibits

 

Exhibits

 

229-230

 

 

 

 

5

 


 

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Historical Consolidated Financial Statements

Sibanye Gold Limited (Sibanye) is a South African company and all of our existing 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 Johannesburg Stock Exchange (JSE) and the New York Stock Exchange (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 US dollars. Sibanye has prepared the annual financial statements contained in this annual report on Form 20-F for the fiscal years ended 31 December 2015, 2014 and 2013 and as at 31 December 2015, 2014 and 2013 in accordance with IFRS. 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.

The audited consolidated financial statements of Sibanye as at and for the fiscal years ended 31 December 2015, 2014 and 2013 (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 Group). In addition, the Consolidated Financial Statements include historical charges from Gold Fields Limited (Gold Fields). The Consolidated Financial Statements have been prepared under the historical cost convention, except for 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 “Annual Financial Report—Overview—Five year 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 “Annual Financial Report—Overview—Five year 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.

Operating costs is defined as cost of sales excluding amortisation and depreciation. 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 “Annual Financial Report—Overview—Five year financial performance—Footnote 1” and “Annual Financial Report—Overview—Five year financial performance—Footnote 2” for more information.

Conversion Rates

Certain information in this annual report presented in Rand has been translated into US dollars. Unless otherwise stated, the conversion rate for these translations is R15.54/US$1.00 which was the closing rate on 31 December 2015. By including the US dollar equivalents, Sibanye is not representing that the Rand amounts actually represent the US dollar amounts shown or that these amounts could be converted into US dollars at the rates indicated. 

The Acquisitions of the Rustenburg Operations and Aquarius

On 9 September 2015, Sibanye announced that it entered into an agreement with Rustenburg Platinum Mines Limited (RPM), a wholly owned subsidiary of Anglo American Platinum Limited (Anglo American Platinum) to acquire the Bathopele, Siphumelele (including Khomanani), and Thembelani (including Khuseleka) mining operations, two concentrating plants, an on-site chrome recovery plant, the Western Limb Tailings Retreatment Plant, associated surface infrastructure and related assets and liabilities on a going concern basis (the Rustenburg Operations) (the Rustenburg Transaction).

On 6 October 2015, Sibanye announced a cash offer of US$0.195 per share for the entire issued share capital of Aquarius (the Aquarius Transaction and, together with the Rustenburg Transaction, the Acquisitions). Aquarius owns stakes in the Kroondal mine and Platinum Mile retreatment facilities near Rustenburg in South Africa and the Mimosa joint venture with Impala Platinum in Zimbabwe. Both Acquisitions remain subject to conditions precedent.

This annual report contains operational and financial information regarding the Rustenburg Operations and the operations of Aquarius which have been extracted without material adjustment from the publicly available information regarding these operations published by Anglo American Platinum and Aquarius, respectively. Sibanye has not independently verified the completeness or accuracy of this information and such information was not prepared for the purpose of this annual report.

The ore reserve statements of the Rustenburg Operations and Aquarius have not been included in this annual report because they have not been prepared in accordance with Industry Guide 7. Management believes that the Acquisitions will add a substantial amount of platinum group metals (PGMs) (4E) to Sibanye’s ore reserves.

 

6

 


 

Investors should note that the Acquisitions remain subject to conditions precedent, including obtaining clearances from the DMR with regard to the Rustenburg Operations.

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.

 

 

7

 


 

DEFINED TERMS AND CONVENTIONS

In this annual report, all references to “we”, “us” and “our” refer to Sibanye and the Sibanye 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 (the Spin-off). The Spin-off was achieved by way of Gold Fields making a distribution on a pro rata basis of one Sibanye share for every one Gold Fields share (whether held in the form of shares, American Depositary Receipts (ADRs) or international depositary receipts) to Gold Fields shareholders, registered as such in Gold Fields’ register at close of business on 15 February 2013, in terms of section 46 of the South African Companies Act, 2008 (Act No 71 of 2008) (the Companies Act), section 46 of the Income Tax Act and the JSE Listing Requirements. The board of directors of Gold Fields passed the resolution necessary to implement the Spin-off on 12 December 2012, and Sibanye shares were listed on the JSE as well as on the NYSE on 11 February 2013. As of the Spin-off date, Gold Fields and Sibanye were independent, publicly traded companies and with separate public ownership, boards of directors and management. Results of operations for the periods prior to the Spin-off date are for GFIMSA when it was operated as a wholly-owned subsidiary of Gold Fields.

In this annual report, all references to “fiscal 2016” and “2016” are to the fiscal year ending 31 December 2016, all references to “fiscal 2015” and “2015” are to the audited fiscal year ended 31 December 2015, all references to “fiscal 2014” and “2014” are to the audited fiscal year ended 31 December 2014 and all references to “fiscal 2013” and “2013” are to the audited fiscal year ended 31 December 2013.

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

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” and “SA cents” refers to subunits of the South African Rand, “$”, “US$”, “US dollars” and “dollars” refer to United States dollars and “US cents” refers to subunits of the US dollar, “£”, “GBP” and “pounds sterling” refer to British pounds and “pence” refers to the subunits of the British pound.

 

8

 


 

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the US 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:

·

the occurrence of labour disruptions and industrial actions;

·

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

·

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

·

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

·

changes in relevant government regulations, particularly environmental, tax, health and safety regulations and new legislation affecting water, mining, mineral rights and business ownership, including any interpretation thereof which may be subject to dispute;

·

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

·

power disruption, constraints and cost increases;

·

the ability of Sibanye to comply with requirements that it operate in a sustainable manner;

·

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

·

the completion of the Acquisitions of the Rustenburg Operations and Aquarius and the risks associated with platinum mining;

·

supply chain shortages and increases in the price of production inputs;

·

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

·

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

·

failure of Sibanye’s information technology and communications systems;

·

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

·

the success of Sibanye’s business strategy, exploration and development activities;

·

the availability, terms and deployment of capital or credit;

·

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;

·

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.

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.

·

 

 

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TABLE OF CONTENTS

 

 

 

 

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Integrated annual report

Contents

 

 

 

 

 

 

 

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ABOUT SIBANYE’S REPORTS

THE 2015 SUITE OF REPORTS

covers the financial year

from 1 January 2015 to 31 December 2015.

Sibanye Gold Limited (Sibanye or the Group) is listed on the Main Board of the Johannesburg Stock Exchange (JSE) (ordinary shares) and on the New York Stock Exchange (NYSE) through an American Depositary Receipt (ADR) programme.

REPORTING PHILOSOPHY

The reports are produced to provide stakeholders with transparent insight into the Group’s strategy, the business and its performance over the past year. Stakeholders are thus able to make informed decisions on Sibanye’s ability to create and sustain value.

In this integrated report, Sibanye has endeavoured to build on the information provided in last year’s report. The Group has also sought to be more focused and concise in its reporting. In this regard, Sibanye has produced its annual financial statements as a separate document, the Annual Financial Report 2015. This report is focused on Sibanye’s strategy, its most material risks and issues, and its related performance and outlook.

The theme of this year’s integrated annual report is based on the strategic enablers ‘optimise, sustain and grow’, illustrating how Sibanye has optimised its business so as to sustain and grow the value it creates, and its dividends in particular. The integrated annual report provides an account of Sibanye’s most material risks and opportunities. The Group’s materiality determination process is explained in Integrated Annual Report–Material issues.  Sibanye considers an issue to be material if it substantially affects the Group’s ability to create and sustain value in the short, medium and long term. Where external entities substantially influence Sibanye’s business, their real and potential impacts are also discussed in the report.

 

 

 

 

 

 

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Group PROFILE

Sibanye is a  primarily South Africa-focused mining company committed to paying industry-leading dividends.

Sibanye is an independent mining group – domiciled in and focused on South Africa – which currently owns and operates high-quality gold and uranium operations and projects throughout the Witwatersrand Basin. The Group’s corporate office is located close to Westonaria, in the province of Gauteng, near its West Wits operations.

As a responsible corporate citizen, Sibanye fosters and maintains constructive engagement with all stakeholders in order to deliver on its vision to deliver superior value to all of its stakeholders, to maintain its licence to operate, and ultimately for the long-term success and sustainability of the business.

The Group currently owns and operates four underground and surface gold operations in South Africa – the Cooke, Driefontein and Kloof operations in the West Witwatersrand region, and the Beatrix Operation in the southern Free State province. In addition to its mining activities, Sibanye owns and manages significant extraction and processing facilities at its operations, where gold-bearing ore is treated and beneficiated to produce gold doré.

Sibanye is currently investing in a number of organic projects. Those currently being developed include the Kloof and Driefontein below infrastructure projects on the West Rand and the Burnstone project on the South Rand of Gauteng province. Engineering design is underway on the West Rand Tailings Retreatment Project (WRTRP) and financing options are being considered for this project, which awaits environmental permits before it is submitted to the Board for approval. A dedicated projects team continues to assess and refine plans for projects, including Beisa, Bloemhoek and De Bron Merriespruit in the Free State. For a more detailed account of these projects, see Integrated Annual Report–Sustain–Project Development and Capital Allocation.

In line with Sibanye’s strategy to create value for stakeholders and enhance or sustain its dividend, it entered into two separate transactions to acquire the Rustenburg platinum assets from Anglo American Platinum Limited (Rustenburg Operations) and Aquarius Platinum Limited (Aquarius) in 2015. These transactions are expected to be finalised during the course of 2016.

Shareholder base and information

The Group’s primary listing is on the JSE, trading under the share code SGL, where it is a constituent of the FTSE/JSE Responsible Investment Index. The Group has a secondary ADR listing on the NYSE, trading under the ticker code SBGL. Each ADR is equivalent to four ordinary shares.

At 31 December 2015, Sibanye had issued share capital of 916,140,552 shares (2014: 898,840,196) –1,000,000,000 authorised – and market capitalisation of approximately R20.9 billion (2014: R20.3 billion) or US$1.3 billion (2014: US$1.8 billion).

The Group’s diverse shareholder base predominantly comprises institutional investors in China (20%), South Africa (32%), the United States (35%), the United Kingdom (5%), the rest of Europe (5%) and the rest of the world (3%) at 31 December 2015. Sibanye has 80% free float and its three largest institutional shareholders (holding 23% of the Group) at 31 December 2015 were the Public Investment Corporation (SOC) Limited (PIC) (8%), Allan Gray Proprietary Limited (Allan Gray) (8%) and Van Eck Associates Corporation (7%).

The Group is committed to transformation and is guided by the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry (Mining Charter). In 2004, Gold Fields of South Africa 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 (GFI Mining South Africa), to Mvelaphanda Gold Proprietary Limited (Mvelaphanda Gold). In 2010, a further 10% of equity was allocated to an employee share ownership plan (ESOP) and another 1% in an empowerment deal. At the end of 2015, 26,444 employees were participants in the ESOP.

OUR PRODUCTS AND MARKETS

Sibanye mines, extracts and processes gold ore to produce a beneficiated product, doré, which 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.

In addition, Sibanye derives uranium ore as a by-product of gold production from the Cooke operation and keeps it separate from other gold ores by way of a dedicated stream into the uranium section of the Ezulwini gold and uranium plant. The uranium ore is first treated for uranium and then subsequently to recover gold. Production of uranium as a by-product enables Cooke’s gold Mineral Resources to be optimised. Revenue from the sale of uranium is offset against gold production costs, thereby allowing lower-grade gold resources to be mined profitably.

 

 

 

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Picture 30

 

 

 

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STRATEGY

Picture 31

 

 

 

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Sibanye’s care values underpin its strategy, how it conducts its business and interacts with stakeholders.

In living these values, we show that we care about safe production, our stakeholders, our environment, our company and our future.

Our approach is holistic with clear focus on delivery of all strategic imperatives critical to Sibanye’s long-term success.

Sibanye recognises that:

·

safety, costs, volumes and grade are the primary operational deliverables underpinning our business

·

strong cash flow supports the dividend paid to shareholders and underpins our growth

·

growth (organic and acquisitive) ensures the long-term delivery of sustainable value to all stakeholders.

Holistic and integrated strategy

Sibanye strives to deliver value to shareholders through consistent, industry-leading dividends and capital appreciation by applying its holistic, efficient operating model at its operations and by investing in value-accretive growth.

Sibanye’s commitment to paying industry-leading dividends underpins and informs its corporate strategy and decisions, and is supported by an inclusive approach to stakeholder relations.

Sibanye’s strategy is not limited to the gold sector – it will pursue value-accretive opportunities in other mining sectors.

Responding to shareholders

Sibanye’s shareholder base is broad and diverse, and its shares were actively traded in 2015. An average of 3,024,491 ordinary shares and 1,110,883 ADRs were traded daily on the JSE and NYSE respectively. As at 31 December 2015, the top eight shareholders (including ADR depositary) held around 60% of the issued capital.

Engagement with shareholders is regular and proactive, which is consistent with Sibanye’s strategy and vision to deliver value to all stakeholders.

What Sibanye offers investors:

·

leverage to commodity prices

·

robust cash flow

·

capital expedience and discipline

·

industry-leading sustainable dividends and capital appreciation

Continuous interaction and communication with investors on Sibanye’s performance against its strategic objectives is essential. Its aim is to ensure that they are appropriately and timeously informed and aware of plans to transform Sibanye into a multi-commodity mining company without falling foul of regulatory authorities or compromising the transactions.

In this report, Sibanye’s performance is measured and considered in the context of the following strategic factors:

 

 

 

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Picture 2048

 

 

 

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PERSPECTIVE FROM THE CHAIR

There is an old Latin saying, ex Africa semper aliquid novi, that roughly translates as ‘out of Africa, there is always something new’. This is what it has felt like as we have undergone the dynamic changes that are core to Sibanye’s activities.  

In just two years, the Group and its mature gold assets, which were spun out of Gold Fields, have developed more deeply into gold and organically into uranium. During the latter part of 2015, Sibanye positioned itself to naturally leverage its regional advantages and extend its tabular, hard-rock mining skills into the platinum sector. The developments have been imaginative, well-considered and founded firmly on the precepts of extending the lives of our operations and growing the business in support of our vision to create superior value for all the Group’s stakeholders.

As with the gold operations we acquired in 2014, on conclusion of the transactions, the smooth integration of the platinum assets into the Group will be the primary focus of the executive management team with the aim of realising synergies between the platinum assets and Sibanye’s existing assets. To manage this complex process while retaining our operational focus, the Group has been restructured into focused operating divisions that are serviced by a central CEO’s office and central shared services. Although management at the gold and uranium division will remain largely the same, we will be appointing people to critical positions in the platinum division and, in anticipation of these corporate developments, we have been building capacity at senior management level. I am confident that Sibanye’s diverse and technically competent team, headed by Neal Froneman, is one on which Sibanye stakeholders can depend for the continued delivery of value.

In my role as Chairman, I continue to have the benefit of a Board with a vast assortment of skills and experience, not only in mining but also in such areas of expertise as finance, human resources, corporate governance and general business management. This balance of skills and experience means that the Board can effectively and robustly interrogate the strategic and operating plans of the executive management team, and has the capacity to deal competently with risk, which proved to be particularly effective during the year as we considered the strategic basis for, and probed the opportunities and risks of, entering the platinum sector.

The Board has also adopted a considered approach to the prospect of obtaining a more secure electricity supply with independent power producers (IPPs) to support the low-risk strategy of developing a solar power plant at Driefontein and Kloof.

As was the case in 2014, we continued to maintain a conservative approach to our financing, ensuring at all times that, whatever debt we carry on our balance sheet, can be managed with little stress no matter what direction metal prices take. We shall not deviate from this strategy, which will be co-ordinated with our commitment to paying industry-leading dividends.

The macro-economic environment in which we operate remained increasingly challenging. Globally, sluggish economic growth, in China in particular, the resultant decline in demand for commodities and the impending increase in interest rates in the US have played havoc with the currencies of emerging and resource-based economies such as South Africa’s. Not even increased geopolitical uncertainty has helped boost the dollar price of gold. The dollar gold price continued to decline, falling by 14% between January and December while, at the same time, our operations were exposed to cost pressures well in excess of inflation. It is only the weakening of the local currency, the rand, against the dollar, which provided some relief with the average rand gold price increasing 8% to R475,508/kg in 2015 compared with 2014.

In South Africa, these challenges are not limited to the macro-economic environment. The global financial crisis and downturn in commodity prices has resulted in the mining sector and the economy as a whole contracting. Growth rates continue to be revised downwards and unemployment levels are increasing as the mining sector restructures and cuts back so as to limit and contain cost increases. This has resulted in various socio-economic challenges, particularly in the vicinity of mining operations with knock-on effects that could potentially have a significant impact on the future of the South African mining industry.

The labour environment in South Africa remains challenging and, while we continue to engage directly with our unions and employees so as to maintain harmonious relations, we experienced relatively limited disruptions during 2015. Aside from the clashes between two prominent unions, the Association of Mineworkers and Construction Union (AMCU) and the NUM, at Beatrix early in the year, the biggest disappointment was our inability to achieve a broad-reaching economic and social agreement with labour as part of a three-year wage agreement with all unions. Nevertheless, we continue to engage proactively with our employees, having implemented the final three-year wage agreement reached with three of the unions across all our operations. We will continue to do whatever we can to maintain harmonious labour relations and to limit disruptions in the workplace.

A primary concern is, and will remain, the health and safety of our employees and members of our communities with the aim of zero fatalities on our mines and diminishing accident rates so it was pleasing to note a further improvement in our safety performance.

Regrettably, there were seven fatalities during the year and it is with a heavy heart that I extend the condolences of the Sibanye Board to the families, colleagues and associates of those who were fatally injured in the workplace during the year. These employees (David Matsie, Bonno Keiditswe, Thomas Ndzimande, Sikoko Vuyosile, Sejakgomo Mokhali, Kagiso Rabola and Alberto Constantino) were our colleagues and we will take cognisance of the events that led to their deaths, and work harder to prevent their recurrence in future. Nevertheless, the fatal injury frequency rate (FIFR) continued to fall during the year, declining by 50% in 2015 to 0.06 fatalities per million man hours worked. This is comparable with average fatality rates in the US mining industry of 2014, and is a credible performance considering the depth at which our mines operate and the number of employees who work daily at our operations.

A critical programme to ensure the safety of our employees, particularly as our mines become ever deeper and more complex, is the development of appropriate new technology. Our Safe Technology programme is advancing technical innovation by designing and developing machines to be deployed underground to make mining at depth safer. This machinery, to be operated remotely,

 

 

 

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will enable us to work and mine safely at greater depths and in more onerous conditions than has previously been possible. This will have longer-term benefits for our operations and for the country as a whole.

Stakeholder engagement is essential to the sustainability of our business. Beyond the mine gates, we continue to engage with our communities on issues as wide ranging as housing, the environment, and the provision of utilities and infrastructure. Our policy is to buy as much as possible from businesses in our host communities and, as far as is feasible, buy products from local businesses. On this basis we have, for example, made direct interventions to assist with the establishment of farming ventures that can sell and deliver food to the mines or to local people. Less directly, we offer programmes to improve the financial knowledge of our employees and their families to facilitate their escape from or avoidance of the traps of injudicious indebtedness. These financial-wellness programmes are long-term and open to all, and we encourage our unions to bring their members onto the programme.

And, as changes to the regulatory environment are mooted or implemented, we maintain relations with government authorities directly and indirectly (through the Chamber of Mines). We are determined that our voice is heard and clearly understood in any debate over legislative change. In particular, we have engaged on matters that include the ownership principle in the Mining Charter and the proposed carbon tax.

It would be remiss of me not to recognise the part played by Neal and his team in taking Sibanye forward. The Group is South Africa’s largest producer of gold, it ranks high on the list of uranium producers, it is heavily engaged in reprocessing residue dumps, thereby helping to improve the environment, and it will soon be moving in the direction of a new commodity, platinum. This would not have been possible without the wholehearted commitment of the entire workforce with whom it is a privilege to be associated. My gratitude goes to all of my Sibanye colleagues.

Sello Moloko

Chairman

18 March 2016

 

 

 

 

 

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CHIEF EXECUTIVE’S REVIEW 

I am very pleased to recommend to shareholders and other stakeholders our third integrated annual report.  

While it is perhaps customary to thank stakeholders in the business at the end of a report, it is my view that this must be our starting point. And I do so with humility because we share Sibanye’s success with all of our stakeholders.

Strategy remains in place

Despite the volatility and flux in the global mining sector over the past few years, and despite Sibanye’s own significant corporate developments, our strategy continues to be guided by our vision:

To create superior value for all of our stakeholders through a culture of caring.

As we stated in our 2014 integrated report, our strategy is underpinned by our commitment to pay our shareholders sustainable, industry-leading dividends, and we will achieve this vision by optimising our current operations and extending their operating lives, and by using existing infrastructure to enhance the inherent value of brownfields and greenfields projects.

In addition, we have consistently said that we would pursue acquisitive growth options if they were value accretive and enhanced our ability to pay or sustain the dividend to shareholders.

Reporting theme

Our theme for this year’s report – optimise, sustain and grow – reflects the implementation of our strategy since listing in February 2013 and, through this report, we provide shareholders with insight into the progress we have made, despite the mining industry having to adapt to some of the most challenging times experienced in the global commodities markets.

Sibanye’s values, which underpin our caring culture, are an integral part of the way we do business and the way in which we create superior value for all of our stakeholders, and are captured in the acronym CARE – commitment, accountability, respect and enabling. These are the values we would like all Sibanye employees to internalise and live by – see Integrated Annual Report–Strategy.

Our corporate strategy, culture and values are symbolised by the indigenous Umdoni tree (Syzygium cordatum). The fundamental roots of Sibanye are in our values and CARE culture, which provide a solid basis for the way we do business. The trunk of the tree represents the material strength that holds Sibanye together (our intellectual capital and the support provided by employees in upholding our operating model and business strategy), which is underpinned by the fundamentals of safety, health and wellbeing, costs, grade and volume. The leaves on the branches of the tree represent all our stakeholders, who rely on and influence the future success of Sibanye. The tree’s seeds and fruits signify the varying benefits that our success will bring to all stakeholders.

Health and safety

It is an incontrovertible fact that, at their workplaces and beyond them, healthy employees are more aware of safety and are more productive than would otherwise be the case. I have deliberately placed the words ‘safety’ and ‘productive’ in that particular order.

It is pleasing therefore to note that, despite the incidence of events such as underground fires and seismicity at our mines, in 2015 we achieved a 50% reduction in the FIFR per million man hours worked across our mines. Comparisons such as these are invidious but our safety performance, insofar as our FIFR is concerned, is now comparable with the US mining industry averages despite their mines generally being shallower, and less hazardous and labour-intensive. I regret to report though that, despite this improvement, at Sibanye we mourn the loss of seven of our colleagues at work during the year. The safety of our employees is paramount and we continually strive to improve our health and safety standards in order to achieve our goal of zero harm.

An area of concern and one which will receive significant management attention is the continued incidence of disabling accidents that lead to lost working time and which has regressed during the year. Every accident is one accident too many, and we will continue to examine the situations that lead to each accident as well as to near-accidents in order to devise ways to prevent recurrences.

Accidents at work are not only injurious to our employees but also result in lost working time, which can have a significant effect on our performance. While we continue to try and reduce accidents in the workplace, we have also revised our approach to healthcare.

We aim to provide employees who are injured or fall ill with treatment or medication as quickly and conveniently as possible. As such, we have moved away from the conventional industry approach of running centralised mine hospitals, which is not our core business or expertise, in favour of establishing primary health and safety clinical facilities, which are located at each shaft. In this way, minor injuries and other less serious illnesses can be treated promptly and efficiently. Employees with more serious traumas or illnesses are transferred to regional hospitals (some of which used to be owned by Sibanye) where they are assured of first-rate treatment at facilities run by dedicated healthcare experts – our people know that, when they are in need, they can count on receiving the best possible medical care.

 

 

 

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Our commitment to safety, health and employee wellness, and our CARE culture, also encompasses the way in which we are seeking to address occupational health issues such as noise induced hearing loss (NIHL) and occupational lung disease (OLD), which includes silicosis. We have introduced some of the most innovative and consistent measures to limit occupational health issues, which has resulted in the prevalence of NIHL and OLD (see Integrated Annual Report–Sustain–Health and safety focus) declining dramatically, and we ensure that employees have access to appropriate treatment where required. Yet we know that exposure to silica dust over long periods of time may only manifest as silicosis decades after first exposure and often long after employees have left our employ or indeed the industry. To assist past employees who may suffer from silicosis and other forms of OLD, we are working closely with other gold companies to address the shortcomings in the existing publicly run compensation system, the Occupational Diseases in Mines and Works Act, 1973 (Act 78 of 1973) (ODMWA) and, for current and future employees, we are engaged with government about their transfer to the better compensation system, the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No 130 of 1993) (COIDA).

2015 IN REVIEW

At the beginning of the year under review, we anticipated that the operating environment would be challenging – a view which proved to be correct.

A number of operational issues in the first two months resulted in production for the first quarter falling well short of our forecasts and, despite the operations delivering more representative and consistent results for the rest of the year, we were unable to claw back production lost in the first quarter. Other factors which contributed to operational targets not being met included load shedding during the first and second quarters as Eskom attempted to catch up on maintenance, and the wage negotiations which, while not resulting in direct operational disruptions, require significant time and focus from management and serve to distract employees from their primary jobs.

Gold production for the year of 47,775kg (1.54Moz) was as a result of the lower-than-forecast production at the beginning of the year with All-in sustaining cost of R422,472/kg or US$1,031/oz (based on the year’s average R:$ exchange rate) commensurately higher than forecast. While there was some relief from a higher gold price in the second half of the year, as the rand weakened by 28% between 30 June 2015 and 31 December 2015, lower production in the first half of the year resulted in cash generated from operating activities decreasing 24% to R5,420 million compared with 2014 from which R3,345 million was disbursed on the capital projects that underpin the Group’s longer-term future and R658 million or 72 cents per share (ZAR) was paid as dividends to shareholders.

challenges in 2015

Conflict between members of AMCU and NUM at Beatrix in February 2015, which resulted in injuries to nine employees, was a portent of the difficulties we would experience during the wage negotiations scheduled for mid-year. Management’s reaction was swift and unequivocal. We suspended operations at the Beatrix North and South shafts until calm had been restored, and the rival groups had been successfully reintegrated.

Gold-industry wage negotiations, which are undertaken centrally under the auspices of the Chamber of Mines, began in June 2015 and finally concluded in September – taking longer than we had expected. While there were no formal work stoppages, these negotiations served to distract employees from their jobs, thereby negatively affecting our operational performance. While the eventual agreement reached with three of the unions was not optimal, it was affordable and, we believe, satisfactory.

In consideration of the significant headwinds our industry continues to face – a stagnant or falling gold price, fast-rising operating costs, steadily declining ore tonnages and grades, changing union dynamics and rising stakeholder expectations – we sought to approach wage negotiations differently in 2015.

At the start of negotiations, we and other gold companies represented by the Chamber attempted to introduce a fresh approach, founded on the concept of an economic and social compact, which took the impact on all stakeholders into account. While many of the ideas we proposed found resonance with our union counterparts, they were not prepared to abandon the traditional positional-bargaining approach and, while we will continue to try and engage on the compact, it will be some time before the precepts underlying the sustainability of the industry will be fully embedded in our ongoing engagement.

Despite significant attempts on our part to reach a single settlement with all four representative unions, we were only able to reach agreement for a period of three years with three of the unions – the NUM, Solidarity and UASA – who collectively represented around 49% of employees in the collective bargaining units at our operations. AMCU leadership remained obdurate throughout the process and did not move from its initial demands. It was clear that we were not going to reach agreement with AMCU and, in the interests of fairness and maintaining a harmonious and safe working environment, we elected to implement the agreed wage increases for all employees irrespective of their union membership. To have excluded those who were members of AMCU (42% of employees in the collective-bargaining unit) would, in our view, have been unjust and could have sparked further inter-union rivalry and violence.

AMCU’s leadership has reserved its position and ended the year repeating that it would consider embarking on industrial action ‘at the appropriate time’. Our view remains that there is little appetite for industrial action by the members of any union and this has been borne out to date.

I personally believe that there is a realisation that unrealistic demands are unsustainable and more likely to lead to job losses than to permanent improvements for all. This was illustrated in the platinum sector where the losses from the five-month strike of 2014 remain fresh in the minds of those who participated.

Having said this, I should add that, while we do not expect a strike at our gold operations in 2016, we have detailed and robust plans to deal with such an eventuality. We will maintain our approach to the social and economic consequences that surround these issues, and we will not allow the threat of industrial action to distract us from our primary focus areas.

 

 

 

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A critical and growing imperative for sustainability is community relations and engagement. We will be placing great emphasis on improving engagement with local and labour-sending communities, and ensuring delivery of high-impact, sustainable projects in these communities. We are confident that the support of our communities and the commitment of our employees will underpin our development into the South African mining champion.

Another challenge relates to the legal suit brought by the Chamber on the industry’s behalf on the continuing consequences of BEE transactions post 2004. Sibanye is supportive of the Chamber’s initiative to seek clarity through a declaratory order by the courts although we are confident of the validity of the BEE transactions. Policy and regulatory certainty is critical for our industry and our stakeholders, and continued dilution (should the consequences of previous BEE transactions not be recognised) will severely undermine the value of an already struggling sector.

An issue that does need addressing by the industry as a whole is the extent to which the DMR imposes Section 54 closures in the event of accidents. We, at Sibanye, fully agree with the need for operational closures when the causes of accidents need to be investigated, and when it is necessary to ensure that safety conditions and procedures are rigorous. But we believe that the Section 54 stoppages should be restricted to the immediate area of an accident’s occurrence and not involve the complete closure of a shaft, which can have a detrimental impact on the viability of an entire mine.

achievements of 2015

Turning to our achievements in the past year, the most far-reaching was our entry into the platinum sector – a sector we had already identified as offering potential value in early 2014. Our moves to acquire Anglo American Platinum’s Rustenburg Operations and Aquarius were well-considered investment decisions and, we believe, are transactions that are sufficiently robust to withstand all likely vagaries of the platinum sector at market and operational levels.

The acquisitions will deliver a substantial amount of PGMs (4E) reserves. By 2017, Sibanye will rank as the world’s fourth largest PGM producer. More importantly, the Rustenburg Operations and Aquarius’ Kroondal mine are contiguous, which will allow for significant realisation of operational synergies in addition to cost savings we expect from rationalising replicated services and other overhead costs.

We maintain a conservative and innovative approach to financing acquisitions and, before making the decision to advance the platinum acquisitions, we made sure that our balance sheet was sufficiently robust and flexible, and that our cash flows would be more than adequate to service any debt we would be taking on. The Rustenburg transaction has been defensively structured to give us downside protection from lower PGM prices until 31 December 2018 and has limited recourse to the central balance sheet. Debt reduction will continue to be central to our approach after we take control of the platinum interests, just as it was when Sibanye first became an independent group.

On 31 December 2015, Sibanye’s net debt was a modest 0.21 times multiple of EBITDA. Even taking into account the expected US$250 million partial draw on our US$350 million revolving credit facilities and the US$150 million additional financing facility provided by HSBC for the Aquarius acquisition, the approximate multiple will remain 1.0 times, indicating how conservatively we have managed the financing of these acquisitions. In order to maintain financing flexibility, however, we will consider restructuring our financial position soon after concluding both transactions. Further financial detail and other parameters relating to the acquisitions are contained elsewhere in this report.

Through these proposed acquisitions, we are increasing our footprint in South Africa and this is with good reason. We are comfortable with the operating environment and confident that there will be further opportunities, which will allow us to continue delivering sustainable value for all of our stakeholders.

SUSTAINABLE VALUE FOR STAKEHOLDERS

·

We have significant experience operating in South Africa and understand the regulatory environment

·

South Africa contains one of the most valuable resource endowments in the world

·

Our geology is well-understood and simple

·

There is an abundance of skilled and experienced mining practitioners

·

The areas in which we operate are supported by first-class infrastructure

·

The established mining industry is serviced by well-developed and innovative supply as well as associated industries

While policy uncertainty and regulatory inefficiency have been signalled by investors as factors which have inhibited investment in recent years, the country also has sound financial and judicial systems and a world-class Constitution, which protects individual and corporate rights.

There are various conditions to be met before our acquisitions are finally consummated. However, we shall become engaged operationally, particularly in the platinum sector’s wage-negotiating round, to ensure that we shall have a sound labour-relations foundation when we start what will be the synergistic merger of the Aquarius and Rustenburg properties.

Energy

The reliability of supply and cost of electricity has become a primary risk factor for industry in South Africa. It is our policy to minimise the risk factors beyond our direct control. We have developed an integrated and co-ordinated strategy to mitigate the associated risk for the near term and for the longer term.

In 2013, we identified the risk that Eskom, the state-owned power monopoly, would be unlikely to supply the entire power needs of the country reliably, affordably and without interruption. Electricity costs have been rising annually at rates significantly higher

 

 

 

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than inflation since 2007 with power costs at Sibanye increasing from about 9% in 2007 to some 18% of our 2015 costs. With supply remaining inconsistent and further above-inflation increases highly likely in coming years in order to finance Eskom’s capital programmes, it is clear that alternatives are required in order to ensure the sustainability of our mines. The more we can reduce our reliance on Eskom power, the more secure and more cost-efficient will be our core operations.

In late 2013, we began to investigate the potential of solar photovoltaic generation to reduce our reliance on Eskom, and have demonstrated the technical and economic feasibility of constructing a 150MW plant. We have now launched the development phase of the project, which encompasses applications for all the required permits, basic engineering design and establishment of the most appropriate commercial model to optimise the financial benefits. We expect this will require significant involvement of financial partners to fund the project capital. We remain on track to start generating electricity late in 2017. Solar photovoltaic electricity remains only a partial solution and we have continued to explore other alternative sources of electricity.

Sibanye is also investigating various opportunities to support a coal-based IPP platform devoted exclusively to delivering power to our operations.

Gold production for the year ending 31 December 2016 is forecast to increase to approximately 50,000kg (1.61Moz) with total cash cost forecast at approximately R355,000/kg and All-in sustaining cost at approximately R425,000/kg. The recent sharp depreciation of the rand to over R16.00/US$ means that costs in dollar terms are likely to be significantly lower than in 2015, assuming an average exchange rate of R15.00/US$ for 2016. Total cash cost is forecast at US$735/oz and All-in sustaining cost at US$880/oz. All-in cost is forecast to be R440,000/kg.

(US$915/oz) due, inter alia, to the initiation of the Kloof and Driefontein below infrastructure projects, and the development of the Burnstone mine, which were approved in 2015. Costs in dollar terms are significantly lower at the current average exchange rate of over R16/US$.

Total capital expenditure for 2016 is planned at R3.9 billion (US$265 million).

Due to the weaker rand, and a recovery in the dollar gold price, the rand gold price year to date is on average approximately R100,000/kg higher than in 2015. While we provide no forecast of the future gold price, should this gold price persist throughout 2016, the Group total cash cost margin will increase to approximately 38% and the All-in sustaining cost margin to approximately 25%.

THE FUTURE

Following the significant changes that took place or were initiated in 2015, 2016 will be a year of considerable restructuring, integration and consolidation. At the most basic level, we will re-evaluate all our gold assets on a shaft-by-shaft basis with a view to determining whether the primary focus might be on gold or uranium. On a developmental level, the focus will be on incorporating the PGM assets into Sibanye so as to obtain the maximum possible cost and other synergies.

The successful integration of these substantial platinum assets will ensure that we continue to deliver acceptable and sustainable benefits to our shareholders in the form of dividends and capital appreciation in order to remain an investment of choice. For it is only by being an investment of choice that we can be sure to attract the rating and the funds needed to pursue further profitable growth prospects and projects.

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 sufficiently solid foundation in the past two years to allow this.

Neal Froneman

Chief Executive Officer

18 March 2016

 

 

 

 

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CAPITALS OVERVIEW AND BUSINESS MODEL

Successful implementation of Sibanye’s strategy depends on effective management of various capitals, which include resources and relationships.

These capitals are necessary inputs into the business model and their judicious management enables Sibanye to deliver on its strategy. While this report is not structured according to the capitals, it does provide insight into Sibanye’s current capabilities in terms of these capitals as well as related challenges affecting delivering on its strategy to create superior value for all stakeholders. A discussion of the capitals follows, explaining how they affect Sibanye, including cross references to supplementary information.

financial CAPITAL

The management of financial capital is essential for the sustainability of any business. At Sibanye, financial-capital management will enable the generation of sustainable cash flow, which will support regular, consistent, industry-leading dividend payments and allow long-term capital value accretion. This is underpinned by profitable operations and growth, both organic and inorganic. Positive free cash flow is necessary to fund the dividends and growth.

In order to extend its operating life and sustain dividend payment for longer, Sibanye has not only committed to the development of organic projects but also made strategic, value-accretive acquisitions. Organic projects and acquisitions are predominantly funded through operational cash flow and, where necessary, by debt and other financial instruments. While the downturn in the commodity cycle and negative investor sentiment towards the resources sector can make accessing equity capital a challenge, Sibanye has sufficient debt facilities and the recent increase in the rand gold price will ensure that dividend payments to shareholders can be maintained. Should the opportunity arise, restructuring of debt or raising equity capital may be considered.

Similarly, revenue and earnings are used as the basis for value creation and derivatives of these determine what value will be distributed to stakeholders: salaries and wages (employees), dividends (shareholders), social and local economic development (communities), and taxation and royalties (government and the national fiscus).

Insights into

The management of financial capital, and Sibanye’s financial performance and position, are provided in Integrated Annual Report–Sustain–Project development and capital allocation.

human CAPITAL

Deep-level gold mining is labour-intensive and Sibanye’s employees play an integral part in the successful delivery on Sibanye’s operating model and strategy. Sibanye’s people work at great depth and under physically demanding conditions – their safety and wellbeing are priorities. We strive to develop a transformed, productive, skilled and engaged team of people at Sibanye. South Africa, and the mining sector specifically, has faced intense challenges regarding industry and labour relations due to legacy issues as well as the difficult socio-economic environment, inequality and unemployment in the country. South Africa has well-developed industrial-relations processes and practices with strong trade unions representing employees in different sectors on issues such as, inter alia, remuneration, other benefits and workplace issues. Employees are Sibanye’s most important asset and are key stakeholders in the business. Aligning employees with Sibanye’s values and strategy will ensure the sustainability of the business and that it is able to deliver superior value for all of its stakeholders.

Insights into

Sibanye’s people are provided in Integrated Annual Report–Optimise–Develop a productive, skilled and engaged workforce and Integrated Annual Report–Sustain–Health and safety focus.

intellectual CAPITAL

Allied to human capital is Sibanye’s intellectual capital. Its operating model is vital to its ability to turn around unprofitable mines and extend their economic lives. This is underpinned by its operating processes and employees’ expertise, which together contribute to the intellectual capital required to successfully operate its mining portfolio. Ultimately, Sibanye sees its strategy and operating model as its differentiators in the mining sector.

Sibanye’s ability to remain competitive depends on future innovations relating to Safe Technology and modernisation of its mines. Over the past two years, the Group has invested in research and development (R&D) in these two areas. Sibanye also works closely with suppliers on innovative development of identified technologies. Technological advances will make Sibanye’s workplaces safer, improve productivity and facilitate the conversion from resources to reserves of deeper-level and secondary ore bodies through the development of new products and technologies.

Insights into

Sibanye’s operating model are provided in Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Grow–Secure alternative energy sources and Integrated Annual Report–Grow–Modernisation and technological innovation.

 

 

 

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social AND RELATIONSHIP CAPITAL

Proactive, positive and constructive stakeholder engagement is necessary to identify and manage stakeholder concerns and expectations, together with any associated material risks and opportunities, and to effectively respond to and address them. Sibanye’s stakeholder engagement programmes are vital in building relationships and maintaining a positive reputation with stakeholders by promoting and delivering on its value-creation proposition.

Sibanye is committed to creating shared value for its surrounding communities and labour-sending areas beyond its Mining Charter and Social and Labour Plan (SLP) commitments.

Insights into

Sibanye’s stakeholder engagement, key stakeholder insights and progress against its Mining Charter and SLP commitments are provided in Integrated Annual Report–Material issues and Integrated Annual Report–Sustain–Social upliftment and community development.

Natural CAPITAL

Mining has a significant impact on the environment and the environment can in turn materially affect mining operations and activities. Various programmes have been put in place at Sibanye to reduce and mitigate the impact of mining on the environment. This is not only done for compliance purposes but to ensure that it does not create value at the expense of the environment.

Access to strategic inputs, such as water and electricity, is essential to Sibanye’s operations, and the availability and cost of these inputs is critical to long-term profitability and viability. Electricity supply and costs are a particular concern with the deep-level gold mines required to cool and ventilate the mines and deal with the ingress of water, which is pumped to surface, treated and either used in production or discharged safely into the environment. Efforts continue to be made to reduce the consumption of electricity – consumption at Sibanye has declined by 20% since 2007. In order to reduce reliance on the state utility, Eskom, and control power costs, Sibanye is investigating self-generation, primarily through solar and coal-fired generation projects.

Insights into

Natural capital are provided in Integrated Annual Report–Sustain–Manage environmental impact and Integrated Annual Report–Grow–Secure alternative energy sources.

manufactured CAPITAL

Sibanye has continued to make the investment required to maintain its infrastructure and plants in order to ensure the sustainability of its operations. The Group continues to assess and will upgrade its infrastructure where necessary.

The acquisition of the Rustenburg Operations and Aquarius assets, in the process of being finalised, will deliver a substantial amount of PGMs (4E) reserves. The purchase and optimisation of its newly acquired mines will depend on Sibanye’s funding model and integration approach.

Insights into

Manufactured capital are provided in Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Sustain–Project development and capital allocation,  Integrated Annual Report–Grow–Secure alternative energy sources and Integrated Annual Report–Grow–Acquisitions and funding model.

 

 

 

 

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MATERIAL ISSUES

managing Material issues

Sibanye considers an issue to be material if it substantially affects the group’s ability to create and sustain value in the short, medium and long term.

Picture 2051

Business environment

Analysis of the business environment in which the organisation operates.

THE GOLD PRICE AND THE RAND

Sibanye’s revenue is driven by commodity prices and the rand exchange rate relative to the US dollar. The primary commodity price driver in 2015 was the dollar gold price, which has been under pressure since mid-2013 and continued to test lows not seen

 

 

 

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since 2010. Over the past year, lacklustre physical demand and the liquidation of above-ground stocks, predominantly in the form of exchange traded funds (ETFs), were the primary drivers of the price weakness, with anticipation of a recovery in the US economy rising US interest rates and a strong dollar, perceived as being negative for gold demand.

The sharp decline in the oil price in the latter half of 2015 and weaker-than-expected economic data out of China, coupled with significant political turmoil globally, and negative real interest rates in a number of countries, seem to have restored gold’s safe-haven status somewhat and the dollar gold price appears to have stabilised recently.

The lower gold price has resulted in significant restructuring in the global gold industry and the rationalisation of overhead costs, reduced capital expenditure, the sale of non-core assets and restructuring of debt on balance sheets. Restructuring in the gold-mining sector preceded that in the non-gold mining industry with the result that gold producers are significantly better placed to weather the current phase of the commodity cycle. Low prices will continue to constrain growth and the ability to pay dividends to shareholders.

South African gold producers have been protected, to a large extent, from the declining US dollar gold price by the rand, which has depreciated as the US dollar strengthened. A deteriorating outlook for the South African economy, coupled with recent politically related changes in the South African finance ministry, were poorly received by the market and resulted in a significant structural deterioration in the rand/US dollar exchange rate. The weaker rand has translated into a substantial increase in the rand gold price received at year end, and significantly expanding margins for South African gold producers.

The outlook for the dollar gold price remains positive. Increasing global political and economic uncertainty are likely to be supportive and gold continues to be regarded as an important reserve asset by central banks globally.

SOUTH AFRICAN ECONOMY

The economic outlook for South Africa deteriorated markedly in 2015, partly due to the fall out experienced by all emerging market economies as economic growth in China continued to stall, but was exacerbated by South Africa-specific economic and political issues and concerns.

The increasingly negative outlook for the country’s prospects were reflected in the final weeks of 2015, when three rating agencies lowered their assessments of South African sovereign debt to just above junk status, adding to weakness in the currency.

POLICY AND REGULATORY CERTAINTY

Policy and regulatory issues are cited by international investors as being primary concerns and barriers to investment in the South African gold-mining sector. Of most concern is the continued delay in passing the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill into law, and uncertainty around its final contents, particularly as related to compliance with the Department of Trade and Industry (DTI) Codes of Good Practice. During 2015, the previous Minister of Mineral Resources suspended the Bill’s passing into law, pending further review. In late 2015, the Department of Mineral Resources (DMR) announced that the mining industry would be exempt from compliance with the DTI codes until the Bill had been finalised.

The DMR’s assessment of mining companies’ compliance with the Mining Charter, and in particular equity ownership by historically disadvantaged South Africans (HDSAs), has given rise to a difference of opinion between the department and the industry. An independent analysis commissioned by the Chamber of Mines indicates that all Chamber members had met this requirement. However, the DMR’s interpretation indicated lower levels of compliance. The discrepancy lies in the interpretation of ‘continuing consequences’ of BEE transactions concluded since 2004. At issue is those transactions in which the BEE shareholding has not remained at 26% as, given changes in market circumstances, the BEE partner had either sold or departed from the transaction.

The Chamber of Mines has applied to the High Court for a declaratory order that will clarify the empowerment clauses in the Mining Charter and on whether or not the so-called ‘once empowered, always empowered’ principle applies. The industry remains concerned that, should further equity issues be required to maintain BEE ownership at 26%, there may be further dilution of shareholder value.

These issues, along with the pending alignment of the MPRDA, 2002 (Act No 28 of 2002) and the Mining Charter with those of the BBBEE Act, 2003 (Act No 53 of 2003), and of the DTI codes, continue to create uncertainty and are perceived by investors as an investment risk.

It is hoped that these concerns and many other broader issues will be addressed and settled through the Presidency’s Project Phakisa. Towards the end of 2015, Project Phakisa brought the industry, government and other key stakeholders together for discussions to stimulate collaboration on ways to revitalise the South African mining sector and ensure its survival in the long term. It is encouraging that, in these developments, government has displayed an appreciation of the need for a stable, justiciable and clear regulatory environment. The next step in Project Phakisa will involve the implementation and, where required, the modification of agreed plans, as well as monitoring, reporting and evaluation.

ENERGY AVAILABILITY AND COST

The major challenge facing the mining industry and South Africa as a whole is the reliability of supply and cost of electricity. In South Africa, electricity is supplied by Eskom, the state-owned power utility, which has, owing to a backlog of undercapitalisation, poor project delivery and inconsistent maintenance, been unable to reliably supply power to the country since 2007. In addition, Eskom has implemented significant, above-inflation, electricity price increases, which have seen electricity costs, as a proportion

 

 

 

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of overall costs at Sibanye, rise from 9% in 2007 to about 18% in 2015. Adding to Sibanye’s concern about energy costs is the proposed carbon tax that will be particularly damaging for heavy industrial users of coal-fired electricity.

South Africa’s power difficulties seem likely to persist for some years and Sibanye is proactively developing ways to reduce its reliance on Eskom power. Currently, a 150MW photovoltaic plant, which is expected to begin first production towards the end of 2017, is being developed on Sibanye property at Driefontein and Kloof (see Integrated Annual Report–Grow–Secure alternative energy sources).

LABOUR RELATIONS AND EMPLOYMENT

The South African gold sector has well-established labour relations processes and practices, including its history of collective, centralised bargaining. Industry-wide centralised bargaining takes place under the auspices of the Chamber of Mines, giving rise to an established system of wage and benefits adjustments that are largely the same across all mines.

The 2015 wage negotiations began in June 2015 and were concluded in October 2015 without any industrial action. Agreement on wages and conditions of service was reached with three of the four representative unions and, at Sibanye, the wage agreement was implemented for all employees when it became clear that no agreement could be reached with AMCU, which represented around 42% of employees. Category 4-8 employees and B-lower officials will receive an increase of 12% in year 1, 11% in year 2 and 10% in year 3. Miners, artisans and officials will receive an increase of 6% on standard rate of pay in year 1 and 6% or consumer price index (CPI), whichever is greater, in years 2 and 3. Further detail on the wage agreements is available at www.goldwagenegotiations.co.za

An incident of inter-union rivalry did, however, lead to the closure of operations at Beatrix in February 2015 although the matters were rapidly resolved (see Integrated Annual Report–Material issues–Reflecting on stakeholders–Employees and organised labour).

Enterprise risk management

An overview of Sibanye’s risk-management approach, governance structures and top ERM risks

Risk management is a continuous, proactive and dynamic process designed to identify, understand, manage and communicate risks that may have a negative impact on Sibanye’s ability to achieve its business objectives.

Sibanye’s risk-management process is established and well-considered. Risk-management policies, practices and management systems are reviewed annually by the Board’s Risk Committee, and approved by the Board. Policies, practices and systems are embodied in Sibanye’s ERM Framework, which is aligned with the King III codes and International Organization for Standardization (ISO) 31000 standards, and entrenched at the operations.

BOARD RESPONSIBILITY

The Board is satisfied that governance, risk management and compliance, internal control and compliance with the Sarbanes-Oxley Act (SOX) of 2002 as well as internal audit processes operated effectively for the period under review. Business activities have been managed within the approved risk-tolerance and risk-appetite levels. Primary controls have been implemented and further mitigating action has been taken to improve primary controls.

ENERGY AVAILABILITY AND COST

The Board is ultimately accountable for risk management and is ably assisted by the Risk Committee, see Annual Financial Report–Accountability–Corporate governance report–Board committees–The Risk Committee for our risk reporting structures.

RISK MANAGEMENT

The risk-management process is a systematic application of management policies, procedures and practices in communicating, consulting and establishing the context, and identifying, analysing, evaluating, treating, monitoring and reviewing risk. Risk-management documents include the Risk Policy, Plan and Charter, which sets out the requirements for effective oversight of risks, including the identification, assessment, evaluation, treatment and reporting of risks. The risk-management process is embodied in Sibanye’s Risk Management Framework, which is used for implementation. Sibanye’s ERM process combines operational and strategic risk processes.

During the period under review, Sibanye conducted an independent risk-management effectiveness assessment and maturity review. The results showed some significant progress towards full maturity and support the introduction of the advanced measurement approach Sibanye has adopted.

 

 

 

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Picture 19

stakeholder engagement

An analysis that provides a view of our relationships with key stakeholders and their concerns

The outcomes of stakeholder engagement – the concerns of our primary stakeholders (see Integrated Annual Report–Material issued–Reflecting on stakeholders) – are important determinants of Sibanye’s material issues and hence inform decisions taken to control risk and identify opportunities for the business.

Sibanye is committed to proactive, open and constructive stakeholder engagement, which informs participative decision-making. Our stakeholder engagement aims to:

·

strategically inculcate a culture of effective engagement within the organisation

·

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

·

ensure regular engagement and response to issues material to stakeholders

·

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

·

ensure engagement is conducted in a timely, accurate and relevant manner

·

continuously monitor, review and improve engagement activities.

As a responsible corporate citizen, Sibanye fosters and maintains constructive engagement with all stakeholders in order to deliver on our vision to create superior value for all stakeholders, to maintain our licence to operate, and ultimately for the long-term success and sustainability of the business.

The Board’s performance and interaction with stakeholders is guided by the South African Constitution, including the Bill of Rights, and management is tasked with the development and implementation of corporate citizenship policies and programmes for relevant stakeholders.

Sibanye expects employees and communities to appreciate the importance that a profitable and sustainable business holds for them and the other stakeholders who rely on the mining industry.

REFLECTING ON STAKEHOLDERS

INVESTORS AND MARKET ANALYSTS

Excluding Gold One, which represents a consortium of Chinese investors who have acquired a strategic 20% stake in the Group, Sibanye’s investors are primarily geographically diverse institutional investors, located predominantly in the US and South Africa.

 

 

 

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Engagement is regular and structured with quarterly operational updates, and more detailed six-monthly operational and financial reviews, which enable investors to engage directly with management via live webcast or conference calls. Senior management also undertakes regular global roadshows to interact directly with current and prospective investors. Shareholders expect management to deliver on operational forecasts and the communicated corporate strategy. Adherence to the highest standards of corporate governance are expected. Shareholder investment strategies and tenures differ, making it difficult to target and cater to specific investor groups. A consistent and transparent strategy is crucial to building investor confidence.

Sibanye is widely covered by sell-side analysts who provide investment research and advice to existing and prospective institutional investors. Sell-side analysts tend to do relatively detailed and in-depth analyses of relevant sectors and companies, including peer-group comparisons and benchmarking. Sibanye is comprehensively covered by local and international sell-side analysts from smaller brokers to global, bulge bracket banks. At least nine analysts produce independent research on the Group at any given time.

SUPPLIERS AND CONTRACTORS

Sibanye has categorised its suppliers and contractors into three groups: strategic, tactical and local. Strategic suppliers provide services and products that could have a high impact on Sibanye’s operations, such as reagents and underground support. Without their inputs, production would be seriously hampered. Engagement with them is interactive and contracted to minimise any potential risk to production. Continuous innovation would enhance solutions and drive down costs. A highly interactive partnership ensures that Sibanye’s ability to produce is enhanced.

Tactical suppliers provide Sibanye with the bulk of the day-to-day goods and services required for production. Engagement with these suppliers takes place at an operational level and any issues are managed through the supply chain, which is bound by the Group’s procurement policy. The quality and cost of goods and services are managed through tenders and the ordering process.

Local suppliers are small, medium and micro enterprises (SMMEs) within communities around Sibanye’s operations. Engagement is highly active as the Group needs to develop and grow these suppliers to enable them to support local economic development (LED) and job creation. The skills and experience of local suppliers need to be developed and enhanced to ensure good-quality and sustainable supply of goods and services. These stakeholders expect to play an active and sizeable role in Sibanye’s supply chain.

CHAMBER OF MINES AND INDUSTRY PEERS

Sibanye engages regularly with its peers in the gold, platinum, coal and bulk minerals segments. Collaborative engagement, involving non-competitive issues of common interest, is more prevalent in the gold sector with information and other lessons, particularly sharing health and safety management and community engagement, and collaboration is actively pursued where it can be more effective. The Group also co-operates in strategic industry interventions with potential for synergies. Co-operation is based on agreed mechanisms for and mature rules of engagement. Among gold-mining companies, particularly, co-operation to promote achievement of common goals is strong.

The Chamber of Mines, which plays an important role in expediting peer engagement and in lobbying national government on behalf of the industry, protects the collective interests of mining companies and promotes a positive image of the mining sector as being progressive, transformed and effective, in consultation with other national stakeholders. Chamber membership is voluntary and most major South African mining companies are members.

The Chamber provides a platform, through company representation on collective committee structures, to discuss matters of strategic importance to the mining industry and to provide a mandate to the Chamber. Experts within the Chamber provide leadership in strategic thinking on a broad range of policy domains. Established communication channels are in place to secure strong alignment between the Chamber and its members.

EMPLOYEES AND ORGANISED LABOUR

Sibanye employs 46,269 people with a diverse set of skills, and various educational and cultural backgrounds. They provide services ranging from core mining to processing and support services. Engagement varies, based on the nature of the issue and level of employee. Engagement with management is generally constructive.

Allied to engagement with employees is engagement with organised labour, which includes unions representing certain employee categories, principally those involved in core mining and processing. The unions with whom Sibanye engages are AMCU, the National Union of Mineworkers (NUM), the United Association of South Africa (UASA) and Solidarity. The nature of this engagement is formal. Wage negotiations, conducted collectively for the gold producers under the auspices of the Chamber of Mines, are the most visible subject in union engagement. Inter-union rivalry and its effects are a major concern. Sibanye’s engagement and interaction with the unions is generally respectful and constructive.

Since listing, Sibanye has made significant effort to re-establish direct lines of communication with its employees. Given the close contact and consistent communication, there has been a shift from an adversarial to a more collaborative approach, albeit with some level of scepticism. Sustainable employment, higher wages and benefits are the main tangible employee expectations. However, they also expect a relationship based on values. Union relationships tend to be more complex with a clear political influence affecting relations. The quality of the relationship with employees is evident in greater participation in Group programmes, feedback and the degree of workplace disruptions.

 

 

 

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COMMUNITY AND CONSULTATIVE FORUMS

Communities in the vicinity of and affected by Sibanye’s operations, together with those in the Southern African Development Community (SADC) labour-sending areas, are an important stakeholder grouping. Engagement is undertaken with formal and informal representatives through community and consultative forums as well as civic groups, non-governmental organisations (NGOs), and other special-interest groups. These forums, which are often multi-stakeholder in nature, comprise local community leaders and representatives as well as local government officials. They address issues of mutual concern, such as employment and LED, especially business development and access to supply-chain opportunities. The forums have introduced greater degrees of transparency and openness between Sibanye and communities. Ongoing, structured engagement facilitates positive dialogue to identify and address the negative impacts of mining on communities. The chief focus is to identify, discuss and resolve issues affecting communities.

REGULATOR, NATIONAL, PROVINCIAL AND LOCAL GOVERNMENT

Sibanye engages with all levels of government and various government departments but principally with office bearers based in the Gauteng and Free State, as well as (following the Burnstone acquisition) the Mpumalanga regional offices of the DMR regarding safety and mining rights. Other departments with which Sibanye engages include environmental affairs, water and sanitation, labour, health and education, among others.

Engagement with the national offices is on an as-and-when-needed basis. Engagement is ongoing and generally robust yet constructive. Inconsistencies in the application of regulatory requirements and individuals’ preferences can be problematic, and engagement at local level is frequently included in the community and consultative forums in which local government is represented.

Other regulators with whom Sibanye engages are the National Nuclear Regulator and National Energy Regulator of South Africa as well as the JSE, the NYSE and US SEC regarding its stock-exchange listings.

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TOP 14 MATERIAL ISSUES

1. LABOUR UNREST AND PRODUCTIVITY

Context

Industrial unrest and union rivalry have featured in the South African mining industry for some time. This undermines Sibanye’s operational efficiency and performance, and negatively affects financial performance. Labour unrest can result in work stoppages. Demand for higher wages results in increased costs often without a corresponding increase in productivity.

Sibanye’s view

Sibanye is concerned that strikes in the major mining companies could damage the South African economy, and hold back growth and employment. This remains a threat to the Group’s operations in light of the implementation of the wage agreement without full acceptance during the negotiations. Union rivalry may further fuel the situation.

Sibanye recognises and respects employees’ rights, including the right to work safely, to develop and contribute, and to associate. Harmonious relations are top of mind.

Sibanye understands its history and the union membership landscape so it has been essential to create and sustain an engagement platform where all represented and recognised unions are allowed equal rights to engage with employees and management. Information is shared and discussed using agreed joint leadership and future forums when rights and obligations are consistently applied.

Sibanye’s vision is to create superior value for all its stakeholders, and this has resulted in processes to modernise employee engagement within and outside the workplace.

Employees understand the positive impact that the operating model has had on extending life of mine (LoM) and thus creating employment opportunities. However, this could be jeopardised by union rivalry, which does not consider or the stability of the business as a top priority.

Strategic response and action

Since inception, post the 2012 unbundling of Sibanye from Gold Fields, the Group proactively tried to win the hearts and minds of employees with the ‘People at Sibanye’ strategy. This integrated approach deals with key employee-related aspects and focuses on implementing integrated solutions.

Elements of the People at Sibanye strategy include:

·

selling Group houses and facilitating affordable housing aligned to home-ownership allowances paid to employees

·

indebtedness programmes focused on moving beyond consolidating debt to personal balance sheet growth and financial wellbeing

·

career development

·

personal wellbeing

·

community development

·

integration

These initiatives are backed by unfiltered dialogue between employees and line managers, supported by frequent factual communication from the desk of the Chief Executive Officer (CEO). Recent employee survey findings have clearly indicated that employees prefer management communication and engagement to gather information as the ‘union rivalry’ phase has created a measure of confusion and distrust.

For further information, see Integrated Annual Report–Optimise–Develop a productive, skilled and engaged workforce and Integrated Annual Report–Sustain–Social upliftment and community development.

2. HEALTH AND SAFETY

Context

Underground mining exposes miners to, among others, heat, dust, noise and injury through fall of ground. Consequently, the industry is subject to stringent health and safety laws and regulations. In addition, the industry is experiencing the negative effects of pandemics, such as HIV/Aids, along with accidents, accident investigations and stoppages, which adversely affect productivity and costs. Furthermore, investors do not want to invest in companies that do not manage their safety and health matters effectively.

Sibanye’s view

Sibanye believes that the safety and health of employees are essential for an engaged, productive workforce and that healthy employees work safely.

 

 

 

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In striving for zero harm at its operations, Sibanye aims to eliminate the potential for accidents and injury, and to minimise hazards inherent in the working environment in a practical manner.

Sibanye has extensive systems of control in place to minimise health and safety risks. About 80% rely on employees taking ownership – from the CEO to line management, supervisors and mineworkers. Sibanye’s integrated safety and health strategy includes adherence to operational standards and responsibility, engineering-out risk initiatives, fall-of-ground initiatives and action plans, improvement of employee wellbeing, application of appropriate technologies, and effective education and training.

Strategic response and action

For further information, see Integrated Annual Report–Optimise–Develop a productive, skilled and engaged workforce, Integrated Annual Report–Sustain–Health and safety focus and Integrated Annual Report–Grow–Modernisation and technological innovation.

3. REGULATORY AND POLITICAL PROCESSES

Context

The South African mining environment is governed by legislation to redress some of the social and economic imbalances of the past. The mineral rights are subject to legislation in terms of the MPRDA, the Mining Charter and SLPs. Policy changes, particularly related to the MPRDA and the Mining Charter, create a framework for the transformation of the mining industry but increase the risk of non-compliance and handicap Sibanye’s ability to deliver value.

It is important to maintain sound relations with the regulator, the DMR, particularly upholding licence conditions. This includes directives, instructions, suspension or cancellation of mining rights.

The political environment is outside of Sibanye’s control but any negatives can be improved by the quality of stakeholder relations.

Sibanye’s view

The threat of policy changes, including amendments to the MPRDA and legislative concerns, such as the outcome of the interpretation of BEE ownership, increases uncertainty and deters investment required for growth and sustainability.

Policy uncertainty is making South African business reluctant to invest in the country and adding to the difficulty of attracting investors.

As 2015 preceded an election year, the DMR was under increasing pressure, particularly from local government officials, to compel mining companies to comply with Mining Charter requirements and SLP commitments. Operations have had to bear the brunt of these demands in the form of stringent compliance inspections. Sibanye made an effort to maintain relations with the regulator to ensure that a neutral platform prevails for issues to be raised before sanctions are considered.

Strategic response and action

In view of the pending local elections in 2016, Sibanye has made an effort to engage with executive mayors in district and local municipalities, particularly in the Free State. This was important to understand the socio-political dynamics on the ground and potential risks for our operations. Executive mayors and councillors were kept in the loop about developments at Sibanye and realistic assessment of projects that can be funded. This engagement is expected to gain momentum in early 2016.

At industry level, differences between the interpretations of the ‘once empowered, always empowered’ principle saw the Chamber of Mines approaching the courts to seek a ‘declaratory order’ on the issue. The matter is still pending. We have yet to engage the new Minister following Cabinet changes made by the President.

The recent promulgation of the BBBEE Amendment Act, 2013 (Act No 46 of 2013) has resulted in the introduction of a ‘trumping’ provision (the Act will trump other laws) in relation to legislation on transformation. The current Mining Charter now needs to be aligned with the BBBEE Amendment Act before it is published. We have been part of the consultation process and will continue to influence the process to ensure that the requirements can be achieved.

For further information, see Integrated Annual Report–Sustain–Social upliftment and community development,  Integrated Annual Report–Sustain–Transformation and Integrated Annual Report–Grow–Secure alternative energy sources.

4. AVAILABILITY AND COST OF ENERGY

Context

National supply of electricity has been constrained due to the shortage of available generating capacity at Eskom. This has resulted in regular load curtailment, especially during the first half of 2015, which interrupted certain production activities, mainly in the milling and processing of low-grade surface sources.

Eskom has been successful in reducing the extent of load curtailment, albeit through extensive use of expensive generating plant, which increases the upwards cost pressure on Eskom tariffs. Electricity tariffs have escalated substantially above general inflation for several years, resulting in electricity costs increasing from 9% of operating costs in 2007 to over 20% in 2015.

 

 

 

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Sibanye’s view

While Eskom expects minimal load curtailment in 2016, risks of load curtailment, with associated impact on production operations, are expected to remain appreciable for the next five years.

Despite the operations reducing energy consumption by 2% to 3% per annum since initiatives to improve energy efficiency and reduce energy wastage, electricity costs have increased to about 18% of operating costs.

Escalation of electricity tariffs is expected to continue well above general inflation for Eskom’s tariffs to remain cost-reflective, as included in the national electricity regulation framework. This escalation will contribute significantly to above-inflation increases in mining costs, which will erode margins and raise pay limits, thereby potentially sterilising Mineral Resources.

Strategic response and action

Electricity tariff escalation is partially offset through continuous effort to reduce electrical energy consumption through efficiency improvement and reduction in wasted energy with a view to continuing to secure a 2% to 3% per annum reduction in energy consumption.

In addition, strategies for complying with load curtailment obligations are being enhanced to lessen the impact on revenue-generating activities. The above-inflation electricity cost escalation that cannot be offset is accommodated in the pay limit calculations that are the basis of declaring Mineral Reserves and annual operational planning.

For the longer term, Sibanye has developed an alternative electricity programme that focuses on establishing private electricity-generating capacity that will provide energy security and cost- competitiveness. In addition to assessing various opportunities to generate base load electricity supply with an independent power producer (IPP), a 150MW photovoltaic project is currently in permitting phase with a target date for first generation of electricity towards the end of 2017.

For further information, see Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Sustain–Manage environmental impact and Integrated Annual Report–Grow–Secure alternative energy sources.

5. STAKEHOLDER RELATIONSHIPS AND REPUTATION

Context

Sibanye’s reputation is determined and defined by stakeholders’ perceptions of the Group, particularly communities in the vicinity of the mining operations. Sibanye recognises that its long-term success is based on establishing and maintaining sound and respectful relationships of trust with a wide range of internal and external stakeholders.

Sibanye recognises that there are enormous challenges and developmental needs among some members of its communities, and recognises its own limitations in terms of what it can do.

Sibanye’s view

Sibanye’s engagement efforts are guided and underpinned by its CARE philosophy and vision. This enables it to immediately hear and validate its stakeholders’ concerns while respectfully affirming the Group’s position.

Through sound stakeholder engagement, the Group is able to make a lasting and meaningful contribution to human development while ensuring that its reputation and business remain intact.

While building and maintaining good relations with stakeholders does not guarantee avoidance of social unrest, this positions Sibanye well to navigate issues that arise within its communities from time to time.

Strategic response and action

Sibanye engages proactively and speedily to avoid the reputational impact that could result from non-responsiveness. It endeavours to form meaningful partnerships with other businesses in its areas of operation in order to pool its resources for greater impact. Collaboration bodes well for all parties and keeps local municipalities in the loop as key stakeholders.

For further information, see Integrated Annual Report–Sustain–Social upliftment and community development,  Integrated Annual Report–Sustain–Manage environmental impact and Integrated Annual Report–Sustain–Transformation.

6. SOCIAL LICENCE TO OPERATE

Context

Sibanye’s social licence to operate is the vehicle that drives government’s transformation agenda in that it revolves around the level of satisfaction within communities adjacent to the operations. At the heart of this agenda is the Mining Charter.

Sibanye’s view

While the Mining Charter expired at the end of 2014, this does not mean that there is no need to continue with the transformation effort. Work currently underway on the new Mining Charter seems to indicate that there will be a renewed sense of urgency in the next few years.

 

 

 

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Strategic response and action

At a minimum, Sibanye will continue to engage with its stakeholders, deliver on its socio-economic development initiatives, share value with all stakeholders, and submit and implement its SLPs.

The Group has continued to engage the DMR to ensure that it remains proactive and compliant with regard to the maintenance of mining rights for all the operations.

The Corporate Affairs department plays a critical role in the Chamber of Mines Charter Reference Group developing industry proposals on the new Mining Charter and alignment with the new DTI codes and the BBBEE Amendment Act.

Sibanye has established relations with structures representing communities in order to streamline processes relating to employment and procurement opportunities in the Free State. The same approach is being tested before rolling out in the Gauteng area. The current partnership, which includes the Matjhabeng Local Municipality, is underpinned by a memorandum of understanding (MoU).

Sibanye has begun engaging with traditional leaders and municipal councillors in rural labour-sending areas as well as representatives of the governments of Lesotho, Botswana and Mozambique. As these stakeholders have potential influence over more than 67% of Sibanye employees, it was important to ensure that they were apprised of Sibanye and how the CARE approach is implemented.

Corporate Affairs has been instrumental in providing guidance and support to the mining operations to ensure that adequate compliance levels are achieved. This includes scanning the internal and external environments for potential and other risks, and identifying and implementing mitigation strategies.

For further information, see Integrated Annual Report–Sustain–Social upliftment and community development,  Integrated Annual Report–Sustain–Manage environmental impact and Integrated Annual Report–Sustain–Transformation.

7. ACQUISITIONS AND THEIR INTEGRATION

Context

Timely and efficient integration of Sibanye’s inorganic acquisitions into the operating model and supply chain will be essential to delivering on the business strategy.

Sibanye’s view

The proposed acquisitions of Anglo American Platinum’s Rustenburg Operations and Aquarius will require significant management focus to align them with the Sibanye operating model. The lessons learnt from the integration of the Cooke operations and Burnstone will be taken into account.

Strategic response and action

Sibanye will integrate the acquisitions based on sound project-management principles and, where applicable, external parties may be contracted to assist with post-acquisition integration and stakeholder communication.

For further information, see Integrated Annual Report–Optimise–Optimise and integrate operations and Integrated Annual Report–Grow–Acquisitions and funding model.

8. RISING COSTS AND SQUEEZED MARGINS

Context

Increasing costs – of power and labour in particular – affect operating margins, inhibit cash flow and profitability, and consequently Sibanye’s ability to pay dividends.

As a result of escalating electricity, wages and other costs, and other input price increases, the mining sector is losing out on opportunities to sustain current jobs or create more jobs. Rising costs and squeezed margins are contributing factors to slowing economic growth and the unemployment rate increasing from 25.0% to 25.5% in 2015.

Sibanye’s view

From Sibanye’s point of view, these are the critical implications of rising costs:

·

increased pay limit (break-even grade)

·

reduction in Mineral Reserves and LoM

·

possible early closure of shafts

·

impairment

·

labour tension due to downsizing

·

reduced cash generation impacting the dividend

 

 

 

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Strategic response and action

Dealing with rising costs is an ongoing initiative, which includes:

·

conservative commodity and exchange-rate assumptions for planning

·

business restructuring

·

cost management and control

·

mining-grade management

·

strategic procurement initiatives

·

short interval reviews

·

stakeholder management (for example, with Eskom)

For further information, see Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Sustain–Project development and capital allocation,  Integrated Annual Report–Grow–Secure alternative energy sources and Integrated Annual Report–Grow–Modernisation and technological innovation. 

9. COMMODITY PRICES AND EXCHANGE RATES

Context

The revenue Sibanye earns is determined largely by the prices received for gold sold and, to a lesser extent, for uranium. Both these prices, over which Sibanye has no influence, are set on global markets in terms of US dollars.

As Sibanye is domiciled and operates in South Africa, dollar receipts for product sold must be converted to South African rand, and the amount received in rands is thus a function of the rand/US dollar exchange rate. Ultimately, rand revenue is then a function of the gold price in dollars and the local exchange rate. As the dollar gold price has continued to weaken over the past three years so too has the rand/dollar exchange rate, which has helped to counter declines in the dollar price of gold in terms of rand revenue earned.

Sibanye’s view

Volatility in the gold price and the rand/US dollar exchange rate in recent years has resulted in financial uncertainty in terms of revenue generated, cash flows and profitability.

Furthermore, the rand/US dollar exchange rate also has an impact on costs incurred, chiefly in rand. A weakening rand contributes to higher rand revenue, to lower costs in terms of US dollars and to increased operating margins. The opposite is also true: a stronger rand implies reduced rand revenue, higher costs in terms of dollars and decreased operating margins. It is therefore vital that the business is managed to counter the effects of this volatility.

Strategic response and action

To counter the effects of market volatility, Sibanye has devised an operating model that, to increase margins, is based on:

·

optimising capital expenditure

·

reducing costs and pay limits

·

optimising LoM plans

For further information, see Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Sustain–Project development and capital allocation and Integrated Annual Report–Grow–Acquisitions and funding model.  

10. TECHNOLOGY AND INNOVATION (PARTNERSHIPS)

Context

Modernisation of mining processes is a means to improve productivity and the safety of employees in the workplace.

Sibanye’s view

Development of new technology or innovation will have a substantial impact on Sibanye’s ability to create value over time. Improved mining methods and cycles will allow extraction of maximum value from assets and resources by lowering cut-off grades, decreasing dilution and increasing production rate. The net result will be higher volumes of better-quality product with substantial reductions in injury-frequency rates, facilitated by reduced employee exposure to danger areas.

Strategic response and action

In order to develop fit-for-purpose technology, Sibanye has developed partnerships with developers and suppliers as well as MoUs governing information sharing with counterparts in the mining industry.

Sibanye established the Safe Technology department in July 2014. It has since facilitated industry-wide due diligence on past, current and future developments with respect to modernising narrow, tabular and steeply dipping ore-body extraction. The

 

 

 

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process yielded a number of technologies that have been actively pursued and are in various stages of investigation, development and implementation.

For further information, see Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Grow–Secure alternative energy sources and Integrated Annual Report–Grow–Modernisation and technological innovation.

11. MAINTAINING SUSTAINABLE INFRASTRUCTURE

Context

Modernisation of mining processes is a means to improve productivity and the safety of employees in the workplace.

Sibanye’s view

Inadequately maintained infrastructure can result in unplanned breakdowns and stoppages with possible production delays, increased costs and industrial accidents.

Strategic response and action

Capital expenditure is linked to infrastructure risk assessment. Sibanye keeps a maintenance risk register and conducts regular shaft infrastructure maintenance management inspections.

For further information, see  Integrated Annual Report–Optimise–Optimise and integrate operations,  Integrated Annual Report–Sustain–Project development and capital allocation and Integrated Annual Report–Grow–Acquisitions and funding model.

12. FINANCING

Context

Appropriate and required financing can be difficult and often expensive. Efficient, sensible funding of acquisitions and aging infrastructure must be planned and co-ordinated, and optimum levels of debt and funding mechanisms determined.

Sibanye’s view

Sibanye is particularly aware that:

·

lack of finance can cause short-term liquidity constraints during periods of low delivery (extended Christmas and Easter breaks) and during strikes (legal/illegal)

·

availability and cost of funding can impact internal organic growth and acquisitive growth

·

the cost of finance can have a severe impact on cash flow and the dividend.

Strategic response and action

Debt facilities are in place at competitive interest rates:

·

R2.5 billion revolving-credit facility

·

R1 billion term-loan facility

·

US$350 million revolving-credit facility

·

US$150 million bridge financing for the Aquarius acquisition

·

restructuring or refinancing of debt will be considered when appropriate.

For further information, see Integrated Annual Report–Sustain–Project development and capital allocation and Integrated Annual Report–Grow–Acquisitions and funding model.

13. MANAGING ENVIRONMENTAL ASPECTS

Context

By its very nature, mining has an impact on its surrounding environment. The South African mining industry is governed by extensive laws and regulations to regulate its use of natural resources and to protect the environment against adverse impacts caused by its activities.

Sibanye’s view

Sibanye believes it is vital that it acts as a responsible environmental steward. Preventing and minimising the environmental consequences of mining activities will also contribute to positive stakeholder relations and will minimise any reputational damage.

Strategic response and action

 

 

 

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Sibanye must make optimal use of natural resources, especially water and energy, conserve land and comply strictly with environmental legislation.

For further information, see Integrated Annual Report–Sustain–Manage environmental impact.

14. ILLEGAL MINING

Context

Illegal mining impacts Sibanye on the surface, and in its underground working areas. These activities are difficult to control, and can disrupt the business and expose it to liability. This negatively impacts employees, production and profitability.

Sibanye’s view

While illegal surface mining holds lesser risks for Sibanye from a reputational, health and safety, and financial perspective, illegal mining in its underground workings is of grave concern. Illegal mining in the underground workings negatively impacts infrastructure, health and safety, equipment, product, production schedules/targets, and people.

In some instances, central blasts are tampered with resulting in lost blasts and therefore lost production. In other instances, winches and other equipment are used by illegal miners and this equipment is often damaged, which incurs repair costs or lost time with a negative impact on production.

Health and safety may be compromised by illegal miners lighting fires, indiscriminately urinating and defecating, smoking, undermining underground support and spiking water supply systems. A major consequence of illegal miner induced anomalies could be statutory stoppage of operations, which results in substantial production and financial loss.

Also of concern is employees (including security employees) being coerced, corrupted or compromised to assist the practice of illegal mining.

Strategic response and action

Illegal mining activities, on the surface and within the underground workings at Sibanye, may be described as manageable. In order to deal with this risk, Sibanye has the following in place:

·

a security roll-out plan to deal with this issue from a preventative, investigative and criminal perspective

·

a highly trained tactical response team to locate and extricate illegal miners from underground workings

·