FOR THE YEAR ENDED 31 DECEMBER 2014
The directors have pleasure in submitting their third report and the consolidated annual financial statements of Sibanye Gold (the Company) and its subsidiaries (together referred to as the Group) for the year ended 31 December 2014.
BUSINESS OF THE GROUP
Sibanye is a producer of gold and a major holder of gold resources and reserves in South Africa. The Group is primarily involved in underground and surface gold-mining and related activities, including extraction, and processing. All of the Group’s operations are located in South Africa. The Group has gold reserves of 28.4Moz and resources of 103.9Moz as at 31 December 2014.
REVIEW OF OPERATIONS
The activities of the various Sibanye operations are detailed in the Chief Executive Officer’s Report.
The information on the financial position of the Group for the year ended 31 December 2014 is set out in the financial statements of this report. The income statement for the Group shows a profit of R1,507 million for the year ended 31 December 2014 compared with R1,698 million in 2013.
COMPOSITION OF THE BOARD
On 16 May 2014, Messrs Chris Chadwick and Robert Chan were appointed as non-executive directors. They are eligible and available for election.
The membership of the Board and its sub-committees is disclosed in the Corporate governance report.
DIRECTORS’ AND OFFICERS’ DISCLOSURE OF INTERESTS IN CONTRACTS
During the year under review, no contracts were entered into in which directors and officers of Sibanye had an interest and which significantly affected the business of the Group.
Related party information is disclosed in note 44 of the consolidated financial statements.
ROTATION OF DIRECTORS
Directors retiring in terms of the Company’s Memorandum of Incorporation (MOI) are Chris Chadwick, Robert Chan, Timothy Cumming, Richard Menell and Jerry Vilakazi.
All the Directors are eligible and offer themselves for re-election.
The Boards of Directors of various subsidiaries of the Company comprise some of the executive officers and one of the executive directors, where appropriate.
Sibanye adopted a dividend policy to pay between 25% and 35% of normalised earnings as dividends. Normalised earnings are defined as profit for the year excluding gains and losses on foreign exchange, financial instruments, non-recurring items and share of associates after royalties and taxation.
For the year under review, the Group paid a total dividend of R1,005 million compared with R272 million in 2013.
On 19 February 2015 a final dividend in respect of the financial period ended 31 December 2014 of 62 cents per share was approved by the Board, payable on 23 March 2015.
In terms of Clause 4 of the Company’s MOI, the borrowing powers of the Company are unlimited. As at 31 December 2014, the borrowings of the Company and the Group, excluding the Burnstone Debt, totalled R1,980 million and R2,036 million respectively compared to total borrowings of R1,991 million at 31 December 2013.
Sibanye is subject to financial and other covenants and restrictions under its credit facilities from time to time. Such covenants may include restrictions on Sibanye incurring additional financial indebtedness and obligations to maintain certain financial covenant ratios for as long as any amount is outstanding under such facilities.
20 February 2014: Sibanye declares maiden final dividend of 75 cents per share for six months ended 31 December 2013, resulting in a total dividend of 112 cents per share in 2013.
23 April 2014: Sibanye reports operating results for the quarter ended 31 March 2014.
8 May 2014: Sibanye announces the closing of the acquisition of Gold One International Limited’s West Rand Operations.
19 May 2014: Sibanye’s Board resolved to establish, with immediate effect, a Risk Committee as a Board sub-committee.
29 May 2014: Sibanye produces and ships its first consignment of uranium from its Cooke operations.
4 June 2014: Sibanye releases a trading statement and updated production forecast for the six months ending June 2014 and year ending 31 December 2014.
25 July 2014: Sibanye releases a trading statement for the six months ended 30 June 2014.
31 July 2014: Sibanye reports operating and reviewed condensed, consolidated interim financial statements for the six months ended 30 June 2014.
12 September 2014: Sibanye advises shareholders that the Group will enter into a consultation process, in terms of Section 189A of the Labour Relations Act with organised labour and other relevant stakeholders in order to initiate formal consultations aimed at identifying and implementing sustainable solutions to ensure delivery of the required productivity and profitability levels at the Cooke 4 operation.
15 September 2014: Sibanye advises shareholders that it has published a new investor presentation, to be presented at the Denver Gold Forum, on the Group website.
22 October 2014: Sibanye advises shareholders that it will report an operating update for the September 2014 quarter on Tuesday, 28 October 2014, rather than on Thursday, 23 October 2014.
28 October 2014: Sibanye releases an operating update for the quarter ended 30 September 2014.
The consolidated financial statements have been prepared using appropriate accounting policies, supported by reasonable judgments and estimates. The directors believe that the Group has adequate resources to continue as a going concern for the foreseeable future.
Refer to note 46 of the consolidated financial statements for further details on the Group’s liquidity position at 31 December 2014.
OCCUPATIONAL HEALTHCARE SERVICES
Occupational healthcare services are made available by Sibanye to employees from its existing facilities. There is a risk that the cost of providing such services could increase in the future, depending upon changes in the nature of underlying legislation such as the ruling by the Constitutional Court in February 2011 against Anglo American Limited in favour of a claimant, who suffered from silicosis. Increased costs, should they transpire, are currently indeterminate. The Company is monitoring developments in this regard. Further information is provided below under the Litigation paragraph and in note 40 to the consolidated financial statements.
SPECIAL RESOLUTIONS ADOPTED BY SUBSIDIARY COMPANIES
The following special resolutions were passed by subsidiary companies during the year ended 31 December 2014.
1. K2013164354 PROPRIETARY LIMITED
Special resolution passed by the sole shareholder of K2013164354 Proprietary Limited approving that the board of directors of the company be and is hereby authorised, subject to compliance with the provisions of section 45 of the Companies Act, 2008 and the Company’s MOI, to approve the provision of direct or indirect financial assistance by the company to Southgold Exploration Proprietary Limited, which authority shall endure for a period of two years from the date of this resolution unless earlier revoked by the shareholder(s) of the company.
2. SIBANYE GOLD EASTERN OPERATIONS PROPRIETARY LIMITED
Special resolution passed by the sole shareholder of Sibanye Gold Eastern Operations Proprietary Limited in terms of sections 16(1) and 16(5)(a), of the Companies Act that the board of directors of the Company propose to the shareholder of the company that the existing MOI of the company, that is, the memorandum and articles of association of the company, be replaced in its entirety by a new MOI.
3. WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED
Special resolution passed by the sole shareholder of Witwatersrand Consolidated Gold Resources Limited approving that the board of directors of the company be and is hereby authorised, subject to compliance with the provisions of Section 45 of the Companies Act and the Company’s MOI, to approve the provision of direct or indirect financial assistance by the company to Southgold Exploration Proprietary Limited, which authority shall endure for a period of two years from the date of this resolution unless earlier revoked by the shareholder(s) of the company.
4. NEWSHELF 1114 PROPRIETARY LIMITED
Special resolution passed by the majority shareholder of Newshelf 1114 Proprietary Limited approving that the board of directors of the company may at any time and from time to time during the 2 (two) years from the passing hereof authorise the company, in terms of and subject to the provisions of section 45(3) (b) of the Companies Act, to provide any type of direct or indirect financial assistance as defined in Section 45(1) of the Companies Act, to any company or corporation that is related or inter-related to the company, on such terms and conditions and for such amounts as the board of directors may determine.
5. SPECIAL RESOLUTION PASSED BY SUBSIDIARY COMPANIES
Special resolution passed by the sole shareholder of the subsidiary companies listed below, approving that the board of directors of the company may at any time and from time to time during the 2 (two) years from the passing hereof authorise the company in terms of and subject to the provisions of section 45(3)(b) of the Companies Act, to provide any type of direct or indirect financial assistance as defined in Section 45(1) of the Companies Act, to any company or corporation that is related or inter-related to the company, on such terms and conditions and for such amounts as the board of directors may determine.
- Agrihold Proprietary Limited
- Bushbuck Venture Proprietary Limited
- Golden Hytec Farming Proprietary Limited
- Golden Oils Proprietary Limited
- Living Gold Proprietary Limited
- M Janse van Rensburg Proprietary Limited
- Milen Mining Proprietary Limited
- Oryx Ventures Proprietary Limited
- Sibanye Gold Academy Proprietary Limited
- Sibanye Gold Nursing College Proprietary Limited
- Sibanye Gold Protection Services Limited Proprietary Limited
- Sibanye Gold Shared Services Proprietary Limited
- West Driefontein Gold Mining Company Limited
- Witwatersrand Deep Investments Limited
- Ezulwini Mining Company Proprietary Limited
- Rand Uranium Proprietary Limited
- St Helena Hospital Proprietary Limited
- Sibanye Gold Eastern Operations Proprietary Limited
- Puma Gold Proprietary Limited
The Group provides occupational healthcare services to its employees through its existing facilities at the various operations. There is a risk that the cost of providing such services could increase in future, depending upon changes in the nature of underlying legislation and the profile of employees. Any such increased cost cannot be quantified. The Group is monitoring developments in this regard.
The principal health risks associated with Sibanye’s mining operations in South Africa arise from occupational exposure to silica dust, noise, heat and certain hazardous chemicals. The most significant occupational diseases affecting Sibanye’s workforce include lung diseases (such as silicosis, TB, a combination of the two and chronic obstructive airways disease, as well as noise-induced hearing loss. The Occupational Diseases in Mines and Works Act governs the compensation paid to mining employees who contract certain illnesses, such as silicosis. Recently, the South African Constitutional Court ruled that a claim for compensation under Occupational Diseases in Mines and Works Act does not prevent an employee from seeking compensation from its employer in a civil action under common law (either as individuals or as a class). While issues, such as negligence and causation need to be proved on a case-by-case basis, it is possible that such ruling could expose Sibanye to claims related to occupational hazards and diseases (including silicosis), which may be in the form of a class or similar group action. If Sibanye were to face a significant number of such claims and the claims were suitably established against it, the payment of compensation for the claims could have a material adverse effect on Sibanye’s results of operations and financial position. In addition, Sibanye may incur significant additional costs arising out of these issues, including costs relating to the payment of fees, levies or other contributions in respect of compensatory or other funds established (if any) and expenditures arising out of its efforts to resolve any outstanding claims or other potential action.
On 21 August 2012, a court application was served on a group of respondents that included Sibanye (the August Respondents). On 21 December 2012, a further court application was issued and was formally served on a number of respondents, including Sibanye (the December Respondents) and, together with the August Respondents, the Respondents, on 10 January 2013, on behalf of classes of mine workers, former mine workers and their dependants who were previously employed by, or who are currently employed by, among others, Sibanye, and who allegedly contracted silicosis and/or other occupational lung diseases (the Classes). The court application of 21 August 2012 and the court application of 21 December 2012 are together referred to below as the Applications.
These Applications request that the court certify a class action to be instituted by the applicants on behalf of the Classes. The Applications are the first and preliminary steps in a process where, if the court were to certify the class action, the applicants may, in a second stage, bring an action wherein they will attempt to hold the Respondents liable for silicosis, and other occupational lung diseases and resultant consequences. In the second stage, the Applications contemplate addressing what the applicants describe as common legal and factual issues regarding the claim arising from the allegations of the entire Classes. If the applicants are successful in the second stage, they envisage that individual members of the Classes could later submit individual claims for damages against the respective Respondents. The Applications do not identify the number of claims that may be instituted against the Respondents or the quantum of damages the applicants may seek.
With respect to the Applications, Sibanye filed a notice of its intention to oppose the application and instructed its attorneys to defend the claims. The two class actions were consolidated into one action during 2013. Sibanye and its attorneys further engaged with the applicants’ attorneys and the court in both Applications to try to establish a court-sanctioned process to agree the timelines. Such a process was agreed upon and timelines imposed by means of a timetable. Sibanye has thus far filed all its papers opposing the Applications. The date for the hearing of the Applications is currently the weeks of 12 and 19 October 2015.
Anglo American South Africa, AngloGold Ashanti, Gold Fields, Harmony and Sibanye announced in November 2014 that they had formed an industry working group to address issues relating to compensation and medical care for OLD in the gold mining industry of South Africa.
The companies have begun to engage all stakeholders on these matters, including government, organised labour, other mining companies and legal representatives of claimants who have filed legal suits against the companies. These legal proceedings are being defended.
Essentially, the companies are seeking a comprehensive solution, which deals both with the legacy compensation issues and future legal frameworks and which, while being fair to employees, also ensures the future sustainability of companies in the industry.
At this stage, Sibanye cannot quantify the potential liability from the action as the Application is currently for certification of a class nor the timing of possible outflow.
Cain Farrel was appointed Corporate Secretary of Sibanye with effect from 1 January 2013.
With effect from 11 February 2013, Computershare Investor Services Proprietary Limited became the Company’s South African transfer secretaries and Capita Asset Services became the United Kingdom registrars of the Company.
The Audit Committee has recommended to the Board that KPMG Inc continues in office in accordance with Section 90(1) of the Companies Act. Jacques Erasmus is Sibanye’s lead partner at KPMG Inc, accredited by the JSE.
Details of major subsidiary companies in which the Company has a direct or indirect interest are set out in note 1 of the consolidated financial statements.