Chief Executive’s review

The year under review has been a time of challenges and opportunities: there were challenges that have been and that continue to be tackled in conjunction with our various stakeholders and there are opportunities that I am confident have the potential to enhance the sustainability of our operations.

Though, for clarity’s sake, this review separates the various material issues of sustainability, our fundamental approach is necessarily holistic. Our approach is designed to benefit all our stakeholders fairly and with contributions that can continue long after our existing mines have reached the ends of their productive lives. We are also highly sensitive to our need to operate sustainably so as to ensure our legal and social licences to operate.

Material sustainability issues are comprehensively reported elsewhere in this report and in this review I prefer to deal generally with the strategies that will take our Group into a successful and sustainable future.

As a member of the UNGC, Sibanye is committed to the implementation, disclosure and promotion of the 10 universal principles, which we fulfil through the publication of our Sustainability Report. Business decisions are informed by the Group’s values, which are aligned with the 10 principles of the UNGC.

SAFETY AND HEALTH

Deep-level mining can be seen to be more risky than many other mining or industrial enterprises. But the safety of our employees is, without a doubt, the most important aspect of our approach to sustainability. Our target is one of ‘zero harm’. Our people have the right to return home safely and unharmed at the ends of their working shifts. And we will never allow production to take precedence over safety.

It is with deep regret that I have to report the deaths of nine of our colleagues. Our sympathies go to the families, friends and colleagues of:

  • Mr Msabeli Mabhozana and Mr Siboniso Delani who lost their lives in accidents at our Beatrix Operation;
  • Mr Gilbert Morema, Mr Bonginkosi Mqityana and Mr Thabiso Mpuke, taken from us in accidents at Driefontein; and
  • Mr Manuel Salvador Tamele, Mr Moses Mmoshe Marumo, Mr Raul Zacharias Cossa and Mr Mechaque Miguel Mpsanganhe whose lives were accidentally lost at the Kloof Operation.

Their passing will be remembered by Sibanye.

What I find encouraging is that, on many other measures, safety on our mines has continued to improve. Further details are contained elsewhere in this report, but in 2013 our mines’ lost-time injury frequency rate (LTIFR) fell to 6.13 per million hours worked from 2012’s 6.90; the fatal-injury frequency rate (FIFR) was 0.10 per million hours worked (2012: 0.17); and the serious/reportable injury frequency rate (SIFR/RIFR) fell to 3.50 per million hours worked (2012: 3.67).

I am confident, and it is my earnest hope, that through the combined efforts of all our people, safety at our mines will continue to improve steadily.

Unless properly protected and aware, our employees can be exposed to occupational health hazards such as noise-induced hearing loss (NIHL) or silicosis as well as to non-occupational diseases such as HIV/AIDS and associated tuberculosis (TB). All of our mines have adequate safeguards against these health challenges, reinforced by continuous awareness campaigns.

MANAGING OUR ORE RESOURCES AND RESERVES

At Sibanye we never lose sight of the fact that the sustainability of our operations depends on the optimal and profitable management of our ore resources. Growth is an important factor but not for the sake of size alone. Operating profitably is more important. And, during 2013, we set about two processes to underpin this strategy ‘by restructuring our operations and by adding resources beyond our mines’ boundaries.

At Beatrix, Driefontein and Kloof, we have focused on extending the lives of the operations by reducing costs and converting more resources to reserves. We have achieved this in the short space of a year by restraining costs, by placing management closer to the mines and by extracting ore at lower paylimits. Our strategy began with a restructuring of operations through the removal of unnecessary cost overheads. This was accompanied by a flattening of the managerial structure and the transfer of our corporate offices from Johannesburg to a new site at the defunct Libanon mine in the vicinity of Driefontein and Kloof.

We also separated Driefontein and Kloof into two separately managed entities so that managers would not be spread too thinly. Strategic decisions can now be made and implemented quickly where they are needed, at and near the shaft heads. In the process of these changes we have introduced a sharper focus on the operational side of safe and efficient mining.

Along with these changes, we reduced the number of people working on our mines, largely through natural attrition but also by making less use of outside contractors. This helped limit the impact of job cuts on our own employees.

The second pillar of adding to our resources was initiated through the acquisition of Gold One and of its 74% owned Cooke operations along with its key surface tailings retreatment skills and facilities. Once approvals have been received for the transaction, operational imperatives will be implemented expeditiously and integrated with operations at Driefontein and Kloof to turn their surface tailings to account. Apart from the direct economic benefits, reprocessing and re-siting the old tailings will significantly improve the local environment.

In the Free State, our expansion included the acquisition of Wits Gold and its comparatively shallow ore on unworked properties adjacent to our Beatrix Operation. The aim is to extend the life of our southern Free State operations through the full use of the Beatrix shaft and processing facilities.

The Group recently exercised the option to acquire the Burnstone mine from the liquidators of Great Basin Gold.

OUR EMPLOYEES

The past year has been one of significant change on the labour front and we have sought to manage issues, such as the mid-year biennial wage negotiations, that arose by engaging with our employees through their representative unions as well as through direct interactions. We suffered a three-day strike at Kloof and part of Beatrix during the wage negotiations. Driefontein was not affected. The stoppage had an insignificant impact on production as we milled stockpiles. The robust negotiations, managed under the auspices of the Chamber of Mines of South Africa, were settled with wage increases of between 7% and 8%. They are higher than the country’s 6% inflation rate, and higher than we might have liked, but they are manageable in our restructured operational environment.

At the outset of the year, the National Union of Mineworkers (NUM), United Association of South Africa (UASA) and Solidarity were recognised as representing employees at our mines. As the year progressed, however, the Association of Mineworkers and Construction Union (AMCU) garnered significant majority support and gained recognition at Beatrix and Driefontein. Regrettably, AMCU did not participate in the final wage settlement which was eventually applied to all employees irrespective of union affiliation. Nevertheless we have worked and continue to work on building healthy relations with AMCU, along with other unions, and to demonstrate to it the advantages of centralised bargaining that has served all sides of the gold industry for many years. As 2014 started, we were threatened by a strike by AMCU’s members, relating to the 2013 wage negotiations, but the action was set aside when the court determined that such action would be unprotected.

Our approach to labour relations remains inclusive. We support employees’ rights to freedom of association and to be represented as they choose. Our approach to labour relations is set out more fully in the section on Human capital.

SOCIO-ECONOMIC DEVELOPMENT

While ultimate responsibility for social investment in our host communities and labour sending areas lies with local, provincial and national governments to which we contribute through a range of taxes, we recognise our own responsibilities and seek to integrate our efforts with those of the authorities. We are proud of the contributions we make to our communities, though these are sometimes not as successful as we might have hoped when counterparties’ capacity constraints delay complete delivery on mutually agreed social projects (see section on Social capital). As it was, we have discussed the difficulties with our counterparties to find means of overcoming delivery delays. Nonetheless, our socio-economic development (SED) expenditure during 2013 was R1,050 million (2012: R853 million).

MIGRANT LABOUR AND ACCOMMODATION

The gold industry has long relied on migrant labour, and changing a system that is ingrained and that has given rise to many unintended adverse consequences can be neither simple nor quick. Our approach to ameliorating the system’s drawbacks is to provide adequate housing or allowances to employees on our mines and to members of our host communities. However, we also reach out to the rural areas from which we attract employees with initiatives ranging from housing through social infrastructure to appropriate job-creation initiatives. When employees leave us they can look forward to decent accommodation and even job prospects back home.

Our strategy has two thrusts. The first is founded on assisting employees to own their own homes in places of their own choice. The second is on assisting in the creation of long-term business initiatives through, for example, training in portable skills or in developing small businesses such as farming or the processing of our mine residues into saleable products.

PROTECTING THE ENVIRONMENT

Mining has an inevitable impact on the environment. For Sibanye that is not only on our mines or in their vicinity but further afield through, for example, carbon emissions caused by our use of grid electricity generated in coal-fired power stations.

Our environmental approach extends further than mere compliance with relevant laws or regulations – we do not believe that merely ticking boxes is adequate. Our approach, then, is collaborative and based on prevention being better than a cure. We regularly discuss mutual concerns with our stakeholders and use inputs from those interactions to improve our environmental performances and to mitigate our impacts. We interact regularly with authorities to ensure that we manage impacts that affect our environmental footprint and keep them within acceptable limits. As I have mentioned above, our expansion projects will contribute to responsible environmental management.

EMPOWERMENT

Sibanye is totally committed to the letter and spirit of BEE as enshrined in the Mining Charter. This, like all else, is interlinked and coordinated with our overall sustainability strategies. This commitment extends beyond the narrow confines of employment equity and diversity. As I have mentioned earlier, one of our strategies is to stimulate local socio-economic development and enterprise by providing training in portable skills, by supporting the start-up of entrepreneurial businesses and, to the fullest possible extent, by purchasing goods and services from these enterprises. Our initiatives are described more fully elsewhere in this report, but they are diverse and wide-reaching and have been developed in consultation with our various communities. Ours are, we believe, true partnerships.

RECOGNITION

Sibanye employs a holistic approach to sustainability, an approach that would not be possible without the support and collaboration of all our stakeholders. In conclusion, then, I would like to express my appreciation for the inputs of all involved and, in particular, to my colleagues.

Neal Froneman

CEO
25 April 2014