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Lonmin is a primary producer of Platinum Group Metals (PGMs). These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery. Saleable by-products produced from our PGM mining include gold, copper, nickel, chrome and cobalt. Our core operations, consisting of eleven shafts and inclines, are situated in the Bushveld Igneous Complex in South Africa, a country which hosts nearly 80% of global PGM resources. We have been granted a New Order Mining Licence by the South African government for our core operations, which runs to 2037 and is renewable to 2067. We have resources of 183 million troy ounces (3PGE + Au) and 36 million ounces (3PGE + Au) of reserves. Contents 02 Key Features 01 / Strategic Report A summary of the changing landscape we operate in, and how that has shaped our strategy and financial position. Plus a review of performance against our goals and our approach to running a sustainable business. 04 06 08 10 22 26 34 36 Chairman’s Letter Chief Executive Officer’s Letter Our Business Model Our Strategy Market Review Principal Risks and Viability Key Performance Indicators Performance 36 Safety 38 Financial Review 44 Operations 44 Mining 48 Processing 49 Capital Expenditure 50 Social and Labour Plans 51 Farlam Commission of Inquiry Report 51 People 54 Living Conditions 55 Transformation through Enterprise Development and Procurement 56 Community Relations and Our Corporate Citizenship Agenda 57 Our Environment 02 / Governance We explain how we are organised, what the Board has focused on and how it has performed, our diversity practices, how we communicate with our shareholders and how our Directors are rewarded. 60 62 64 76 85 87 89 91 96 Board of Directors Executive Committee Corporate Governance Report Audit & Risk Committee Report Nomination Committee Report Safety, Health & Environment (SHE) Committee Report Social, Ethics & Transformation (SET) Committee Report Directors’ Report Directors’ Remuneration Report Lonmin Plc Annual Report and Accounts 2015 / 01 Contents 01 / How we are Accelerating Our Strategy Strategic Report Financial Statements The statutory financial statements of both the Group and the Company and associated audit reports. 04 / A Deeper Look 05 / Shareholder Information Additional information for shareholders including our forthcoming reporting calendar 186 Consolidated Group Five Year Financial Record 187 Operating Statistics – Five Year Review 193 Mineral Resources and Mineral Reserves 196 198 198 199 200 ibc 03 / Key financial and operational statistics over the past five years and a summary of our mineral resource and mineral reserve information Governance 03 / 02 / Throughout this Annual Report we tell you how we are delivering on our strategic vision. Details of the Group’s debt facilities can be found in the Financial Review on page > 38 Underlying cost of sales analysis in both Dollar and Rand can be found on page > 173 A breakdown of the cost of production per PGM ounce (unit costs) can be found on page > www.lonmin.com 192 Shareholder Information > 191 05 / Details of the impairment of non-financial assets can be found in Note 31 on page 187 A Deeper Look > 04 / Tonnes mined on a shaft-by-shaft basis can be found on page Shareholder Information Corporate Information Reporting Calendar Acronyms and Abbreviations The Sixteen-Eight Memorial Trust Lonmin Charter Financial Statements 126 Independent Auditor’s Report to the Members of Lonmin Plc only 130 Responsibility Statement of the Directors in Respect of the Annual Report and Accounts 131 Consolidated Income Statement 131 Consolidated Statement of Comprehensive Income 132 Consolidated Statement of Financial Position 133 Consolidated Statement of Changes in Equity 134 Consolidated Statement of Cash Flows 135 Notes to the Accounts 178 Lonmin Plc Company Balance Sheet 179 Notes to the Company Accounts / 02 Lonmin Plc Annual Report and Accounts 2015 Performance Highlights Key Features • Safety – – Regrettably three fatalities in the second half of the year after 18 months fatality-free Lost Time Injury Frequency Rate (LTIFR) increase to 5.41 from 3.34 • Operational achievements – – – – – – Saffy shaft ramped up to steady state full production as planned Platinum sales of 751,560 ounces – the highest since 2007 and above market guidance of 730,000 ounces Platinum metal-in-concentrate for the year was 740,315 saleable ounces Mined production of 704,776 Platinum ounces – impacted by a loss of 48,000 ounces due to Section 54 safety stoppages Operational flexibility maintained with available ore reserves at an average of 22 months production Outstanding instantaneous recovery rates improved to 87.2% • Business Plan – – Business Plan developed to address low PGM pricing and retain flexibility Right sizing now 50% complete within six months with 3,136 workers exited (2,120 employees and 1,016 contractors) • Financial Results – Decisive action taken on operational and cost savings – – – – – – Cost of production per PGM ounce reduced to R10,339 per PGM ounce – lower than guidance of R10,800 Tightly controlled capital expenditure of $136 million – lower than original guidance of $250 million Net debt of $185 million with available committed facilities of $543 million (net debt of $29 million in 2014) Net assets attributable to equity shareholders valued at $1.6 billion after impairment charge of $1.8 billion Underlying loss before tax $143 million ($46 million profit in 2014) Underlying loss per share of 16.2 cents versus earnings 5.4 cents in prior year • Guidance for 2016 to 2018 – – – – Platinum sales of c.700,000 ounces for 2016, and c.650,000 for each of 2017 and 2018 Reduction in the size of the Group’s workforce and overheads planned to deliver 2016 cost reduction of c.R0.7 billion and c.R1.6 billion for 2017 (in real terms) Unit costs to be broadly flat on 2015 in nominal terms at c.R10,400 for three more years to 2018 Capital expenditure limited to c.$132 million for 2016, $110 million for 2017 and $188 million for 2018, of which $43 million third party funding to be used for the Bulk Tailings Treatment plant • Strengthening of Balance Sheet – – The Rights Issue is expected to raise approximately $407 million (in gross proceeds) Conditional amended banking facilities with all existing lenders for $370 million