Group profile

G4:

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Primary brands, products, and services
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Location of headquarters
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Number and name of countries where organisation operates and has significant operations that are relevant to sustainability topics
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Nature of ownership and legal form
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Markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries)
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Scale of the organisation, including: number of employees, number of operations, net sales, total capitalisation broken down in terms of debt and equity, quantity of products or services provided
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Composition of the workforce
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Significant changes during the reporting period regarding size, structure, ownership or supply chain
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Externally developed economic, environmental and social charters, principles or other initiatives to which the organisation subscribes or endorses
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Memberships of associations (such as industry associations) and national or international advocacy organisations
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Entities included in consolidated financial statements or equivalent documents or not covered by the report

WHY SIBANYE?

The word ‘Sibanye’ means ‘we are one’ in the isiXhosa language.

Sibanye owns and operates high quality gold operations in South Africa – consolidated into one Group with one vision and strategy. People are its most important asset and its workforce is skilled and experienced. The long-term success of Sibanye as a business and as a responsible corporate citizen is dependent on all stakeholders working together as one.

OVERVIEW OF THE ORGANISATION

Sibanye is an independent, South African domiciled and focused mining group, which currently owns and operates three underground and surface gold operations, namely the Driefontein Operation (Driefontein) and the Kloof Operation (Kloof) in the West Witwatersrand region and the Beatrix Operation (Beatrix) in the southern Free State. In addition to its mining activities, the Group owns and manages significant extraction and processing facilities at its operations, which beneficiate the gold bearing ore mined.

SIBANYE’S OPERATIONS

Sibanye’s operations [graph]

Sibanye is the largest individual producer of gold from South Africa and is one of the world’s 10 largest gold producers. In 2013, the Group produced 44,474kg or 1.43Moz of gold at an average all-in cost of R354,376/kg (US$1,148/oz) and invested R2.9 billion in capital at its operations. At 31 December 2013, Sibanye held gold resources of 65.0Moz and gold reserves of 19.7Moz, respectively 13% lower and 46% higher than in 2012. Uranium resources of 68.8 million pounds (Mlb) and reserves of 43.2Mlb were also declared.

In 2013, the Group entered into an agreement with Gold One International Limited (Gold One) to acquire its West Witwatersrand Cooke underground and surface operations (Cooke) and made an offer to acquire 100% of Witwatersrand Consolidated Resources Limited (Wits Gold), a JSE and Toronto Stock Exchange (TSX) listed gold and uranium exploration company with significant gold resources in South Africa. These acquisitions will increase Sibanye’s annual gold production, enhance existing operational flexibility and provide Sibanye with the potential to significantly extend its operating life.

OWNERSHIP STRUCTURE

Ownership structure [graph]

SHAREHOLDERS

Sibanye is headquartered close to Westonaria, in the Gauteng province, near its West Wits operations. The Group’s primary listing is on the JSE, trading under the share code SGL, where it has been included as a member of the JSE’s Socially Responsible Investment (SRI) index in 2013. The Group also has a secondary listing of American Depositary Receipts (ADRs) on the New York Stock Exchange (NYSE), which trade under the ticker code SBGL. Each ADR is equivalent to four ordinary shares.

At 31 December 2013, Sibanye had an issued share capital of 735,079,031 shares (1,000,000,000 authorised) and a market capitalisation of approximately R9.0 billion (US$874 million). On 22 April 2014 Sibanye’s market capitalisation had risen to R19.2 billion (US$1,877 million).

The Group has a diverse shareholder base, which at 31 December 2013 predominantly comprised institutional investors located in South Africa (45%), the United States of America (36%), Luxembourg (3%), United Kingdom (2%) and others (14%).

The Group has a 100% free float and its three largest institutional shareholders (holding 34.8% of the Group) at 31 December 2013 were Allan Gray Proprietary Limited (14.7%), Investec Asset Management Holdings Proprietary Limited (14.2%) and Van Eck Associates Corporation (5.9%). The successful acquisition of the Cooke operations from Gold One will result in Gold One holding a 17% interest in Sibanye after the conclusion of the transaction.

One will result in Gold One holding a 17% interest in Sibanye after the conclusion of the transaction.

PRODUCTS AND MARKETS

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

Sibanye’s primary direct customers are bullion banks acting as intermediaries in the gold market.

Sibanye’s gold sales are predominantly in US dollars. Although this exposes the Group to transaction and translation exposure from fluctuations in foreign-currency exchange rates, Sibanye does not generally hedge this exposure. It may do so in specific circumstances, such as to protect cash flows at time of significant capital expenditure, for financing projects or to safeguard the viability of higher-cost operations.

PEOPLE

At the end of 2013, Sibanye employed 36,274 people; 33,773 of whom were permanent employees (93%) and 2,501 contractors (7%). Employees are drawn from local communities in the regions in which the Group operates (25.0%), from other regions in South Africa (44.4%) and from other southern African countries (30.6%).

Sibanye’s experienced Board is largely comprised of independent non-executive directors, and is chaired by an independent non-executive Chairman. The highly experienced management team has more than 150 years’ combined experience in the South African mining industry.

Sibanye is committed to becoming a fully transformed South African mining Group and its approach is guided by the Broad Based Socio-economic Empowerment Charter for the South African Mining and Minerals Industry (Mining Charter). In 2004, Gold Fields Limited (Gold Fields) undertook a black economic empowerment (BEE) transaction, transferring an amount equivalent to 15% of its equity from Sibanye, formerly GFI Mining South Africa Proprietary Limited, to Mvelaphanda Gold Proprietary Limited (Mvelaphanda Gold). In 2010, 10% of equity was allocated to an Employee Share Ownership Plan (ESOP) and another 1% in an empowerment deal. At the end of 2013, 32,219 employees were participants in the ESOP.

Sibanye recognises that it has a diverse workforce. It is committed to meeting the targets required by the Mineral and Petroleum Resources Development Act, 2002 (Act No 28 of 2002) (MPRDA) and its associated Mining Charter, including the appointment of historically disadvantaged South Africans (HDSAs) in management positions and employing women in core mining positions in the Group. Sibanye has invested significantly in empowering HDSAs and women at all levels, particularly in leadership roles.

SUSTAINABILITY LEADERSHIP

Pursuant to the separation of the Group from Gold Fields in February 2013, Sibanye is developing and finalising specific policies and procedures relating to its sustainability practices. These policies and practices will form an integral part of the management of the Group.

Sibanye is guided by the spirit of transformation as defined in the MPRDA and Mining Charter.

Strategic policy initiative guidance is also provided through the United Nations Global Compact (UNGC). This is a practical framework, which was launched in 2000 for companies committed to sustainability and responsible business practices. As a leadership initiative endorsed by chief executives, the UNGC seeks to align business operations and strategies everywhere with 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption.

All transactions relating to BEE, finalised under Gold Fields, are still applicable to Sibanye. In this regard, Sibanye transferred equity equivalent to 26% to BEE entities, constituting 15% Mvelaphanda Gold, 10% ESOP and 1% transformation shares.

The Board is responsible for sustainability but has delegated specific responsibility for oversight of various sustainability issues to the Audit Committee, the Safety, Health and Sustainable Development Committee, and the Social and Ethics Committee.

Apart from the Safety, Health and Sustainable Development Committee where the Chief Executive Officer (CEO) is also a member, all the Board committees are composed exclusively of independent non-executive directors.

GOLD SUPPLY AND DEMAND IN 2013

The past year has seen gold retreating from a high of US$1,693.75/oz set at the afternoon price fix in London (on 2 January 2013) to end the year at US$1,204.50/oz on 31 December 2013 – an overall fall of almost 29% in dollar terms. The effect will have been less marked in rand terms as the South African currency weakened against the dollar.

On the global front, there were periodic recoveries from the falling trend as 2013 progressed, particularly after the US$1,192 on 28 June 2013. However, they were not sustained. By 20 December 2013, spot gold was trading at a low of US$1,195 before ticking up slightly at year end. Movements in 2014 would seem to confirm the continuation of this trend with price recoveries not accompanied by subsequent follow through.

The dollar price of gold is largely driven by investment and speculative demand – boosted when traders seek safe-haven investments with low opportunity costs, and depressed when security is less of a factor and opportunity costs are rising.

This is the position in which the gold sector now finds itself. Investors have become increasingly cautious as shown in 2013 by sales of bullion by exchange-traded funds (ETFs). After peaking at a record global figure of over 1,300 tons (t) at the end of 2012, ETF bullion holdings were soId down steadily during 2013 with ETF holdings essentially halving with a drop of some 700t over 2013.

According to some analysts, the ETF sales were largely absorbed by central banks in developing economies, particularly in China. However, these central bank stocks are now essentially long-term gold holdings with none of the urgency that dominates investment and speculative gold demand, which adds to the metal’s price volatility.

Investors have been anticipating an end to the US Federal Reserve’s quantitative easing programme that has underpinned the economic recovery from the depths that followed the financial recession of 2008. Interest rates have been at record lows across the globe, taking their cue from those of the US Federal Reserve and linked to quantitative easing.

Sibanye does not hedge its gold production, nor will it. The Group believes that price volatility can be managed by controlling operating costs and the cost of producing each ounce of gold.