Wrap Text
Annual Report and 2018 Annual General Meeting
Lonmin Plc (Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number 1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN : GB00BYSRJ698 ("Lonmin")
LEI: 213800FGJZ2WAC6Y2L94
30 January 2018
Lonmin Plc ("Lonmin" or the "Company")
Annual Report and 2018 Annual General Meeting
On 22 January 2018 Lonmin announced its Final Results for the year ended 30
September 2017 (the "Final Results Announcement"). The announcement made on that
date included inter alia a condensed set of financial statements, a management report and
a directors' responsibility statement, all as required by DTR 4.1.
Lonmin has today submitted to the National Storage Mechanism a copy of the Annual
Report and Accounts for the year ended 30 September 2017 (the "Annual Report and
Accounts"). These documents will shortly be available for inspection on the National
Storage Mechanism www.morningstar.co.uk/uk/nsm.
As required by DTR 6.3.5 R (3), the Company confirms that the Annual Report and
Accounts are also available to view or download in pdf format from the Lonmin website,
www.lonmin.com.
Copies of the Annual Report and Accounts will be posted in due course to shareholders
who have opted to receive hard copies.
The appendix to this announcement contains additional information which has been
extracted from the Annual Report and Accounts for the purposes of compliance with DTR
6.3.5 and should be read together with the Final Results Announcement, which can be
downloaded from the Company's website, www.lonmin.com. This announcement should
be read in conjunction with and is not a substitute for reading the full Annual Report and
Accounts. Together these constitute the information required by DTR 6.3.5. which is
required to be communicated to the media in full unedited text through a Regulatory
Information Service. Page and note references in the text below refer to page numbers
and notes in the Annual Report and Accounts:
• A statement on the principal risks and uncertainties
• A statement on related party transactions
Lonmin also announces that its 2018 Annual General Meeting will be held on 15 March
2018 at The Lincoln Centre, 18 Lincoln’s Inn Fields, London WC2A 3ED. The Circular
relating to the Annual General Meeting will be despatched to shareholders in due course,
along with forms of proxy.
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APPENDIX
LONMIN'S PRINCIPAL RISKS AND UNCERTAINTIES
These risks have been ranked considering the magnitude of potential impact, probability
and taking into account the effectiveness of existing controls. The risks represent a
snapshot of the Company’s current risk profile. This is not an exhaustive list of all risks the
Company faces. As the macro environment changes and country and industry
circumstances evolve, new risks may arise or existing risks may recede or the rankings of
these risks may change.
1 FAILURE TO COMPLETE TRANSACTION WITH SIBANYE-STILLWATER
Description
The Group’s loan facility agreements require it to test two covenants related to its tangible
net worth (TNW) every six months. At 30 September 2017 the TNW of the Group, after
recognising impairment charges in the year of $1,053 million was $674 million some $426
million below the TNW covenant threshold of $1,100 million. After the year end the
Company’s lenders have agreed to a waiver of the TNW covenants for the period from 30
September 2017 to 28 February 2019 on the condition that the Company cancels $66m of
its undrawn credit facilities and leaves the remainder undrawn. The waiver is conditional
on, among other things, the completion of the acquisition of the Group by Sibanye-
Stillwater. The long stop date of this acquisition is 28 February 2019. The conditions to the
transaction in South Africa and other jurisdictions include receipt of the relevant
clearances from the competition and regulatory authorities; approval from Lonmin and
Sibanye-Stillwater shareholders following all regulatory approvals; and court approval of
the scheme of arrangement to implement the transaction. The outcome of these approvals
and the risk that the Group net cash position could be materially impacted by a significant
economic downturn or operational factors represents a material uncertainty to the
completion of the transaction going concern assumption.
Impact
The potential impact of failure of the acquisition of the Group by Sibanye- Stillwater could
give rise to a breach in its financial covenants and the potential loss of its banking
facilities. These factors together represent a material uncertainty that may cast significant
doubt about the Group’s ability to continue as a going concern such that the Group may
be unable to realise its assets and discharge its liabilities in the normal course of
business.
Mitigation
In the event that the deal does not complete the covenant waivers allow for a 4 week
grace period whilst other options are pursued. During the 4 week grace period a default
will not occur provided that the Company engages with the lenders and, in addition to the
possibility of negotiating further waivers form the lending banks, the feasibility of an asset
sale to Sibanye- Stillwater, as contemplated in the 2.7 announcement , as well as any
other alternative transactions will have to be assessed by the Board.
Change
This risk was not included in the risk profile published in the FY16-17 annual report.
2 LIQUIDITY – THE AVAILABILITY OF FUNDS TO MEET BUSINESS NEEDS
CAN AFFECT THE GROUP’S ABILITY TO CONTINUE AS A GOINGCONCERN
AND/OR CAUSE A BREACH OF CERTAIN BANK COVENANTS
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Description
The availability of funds to meet business needs can affect the Group’s ability to continue
as a going concern and/or cause a breach of certain bank covenants. Key factors
affecting the Group’s liquidity position are weak metal prices, a stronger USD/ZAR
exchange rate, lower than planned production and escalation in operating cost.
Impact
The impact on the balance sheet has been a reduction in net cash resources from $173
million at 30 September 2016 to a net debt position $103 million at 30 September 2017.
Mitigation
? Regular engagement with banks at principal and lower levels;
? Identification of impact of risks and opportunities on cash flow forecasted period;
? Sensitivity testing based on exchange rate changes or production losses;
? Liquidity dashboard monitoring as part of the Price Risk Committee;
? Detailed monitoring of covenants;
? Analysis of cashflow variances to the prior forecast period;
? Diversification of funding partners.
Change
Exposure to this risk remains unchanged as more challenges are experienced in terms of
the liquidity status of the Company.
KPI
Free Cash Flow
3 PRICE AND MARKET VOLATILITY – FLUCTUATIONS IN THE USD/ZAR
EXCHANGE RATE MAY RESULT IN UNFAVOURABLE CASH FLOWS
Description
Flat commodity prices and strong ZAR currency contributed to the uncertainty in
managing the financial risks associated with our business. This is especially because
mining requires long term planning for the development of new mines and the decisions
regarding the expansion and contraction of existing operations whilst seeking value
creation for stakeholders. These decisions often need to be made based on assumptions
regarding future metal prices (which drive revenue) and exchange rates (in our case
primarily the USD/ZAR exchange rate as the majority of our cost and capital expenditure
are incurred in South African Rand whilst revenue is earned in US Dollars). The impact of
unforeseen adverse movements can have a significant negative financial impact on the
business.
Impact
The inherent uncertainty relating to the metal price and exchange rate assumptions used
in long-term planning can lead to incorrect planning decisions and have negative financial
consequences. In addition, volatile metal prices may lead to structural changes to the
supply and demand fundamentals whereby customers seek substitution. Sustained low
prices continue to impact the Company’s revenues and profitability.
Mitigation
? Adopting conservative planning metrics under Operational Review – ZAR basket
prices forecast to remain depressed in the short to medium term;
? Quarterly review of supply and demand dynamics of key products and the factors
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that could affect metal price volatility & forecasting processes;
? Long-term relationships and contracts with key customers to mitigate off-take risk;
? Weekly short term cash flow forecasts to manage liquidity and pro-actively flag
negative cash flow impacts;
? Management of overall costs;
? Monthly Price Risk Committee Meetings;
? Implementation of selective hedging strategy to reduce the cash flow uncertainty;
? Use of an in-house market intelligence portal to assist in price forecasting
methodologies; and
? Refocus on market development strategy to focus on areas with maximum
potential.
Change
Risk in this area remains unchanged from 2016 although it has dropped in ranking as a
result of the new risk number 1. Metal and currency markets remain volatile. Increases in
PGM prices were more than offset by a weaker Rand (refer to Financial Review).
KPI
Pt $ Price, R/$ FX, Basket Price
4 SAFETY PERFORMANCE – A POOR SAFETY PERFORMANCE CAN RESULT
IN LOSS OF LIFE AND SERIOUS INJURY TO OUR EMPLOYEES. IT CAN
ALSO NEGATIVELY IMPACT PRODUCTION, AFFECT COSTS, CAUSE
REPUTATIONAL DAMAGE AND RESULT IN UNFAVOURABLE REGULATORY
INTERVENTION
Description
Safety incidents can cause loss of life and injuries to employees. Work stoppages and
Section 54 stoppages will impact the Company’s ability to achieve production and
financial targets.
Impact
A failure in safety processes could result in injury or loss of life, which would have tragic
implications for employees, their families and the communities. It would also severely
disrupt operations and could result in safety stoppages which have a direct impact on the
people, cost and reputation. The failures in safety procedures may be caused by
employees or poor management practices. Work stoppages and Section 54 stoppages
have an impact on the working rhythm, cost, production at the operations and could result
in suspension of Lonmin’s operating licence.
Mitigation
? Focus by the operations on leading indicators that trigger risk awareness and
proactive action;
? Lonmin life rule monitoring and safety key performance indicators established per
mine manager
? Management interaction with the workforce through Visible Felt Leadership;
? OPSCO weekly engagement of overall organisation wide safety performance;
? Enforcement of contractor safety management protocols;
? Behaviour based intervention focussing on employee behaviour;
? Implementation of Incident Cause Analysis Method findings post-investigation;
? Ongoing cross site and compliance audits that measure the safety maturity of each
operational business unit and learnings are shared across operations;
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? General Manager Safety led Improvement Plans implemented with an enhanced
focus on accident analysis and pro-active preventive measures;
Change
The Company lost five employees due to fatal accidents during the year. Lost Time Injury
Frequency Rate (LTIFR) improved by 9% from 4.97 in FY16 to 4.52. There were 373 Lost
Time Injuries (LTI) (FY16:409) in 2017 and 509 medical treatment cases (FY16:657). The
number of Section 54 stoppages has decreased during the year, as did the number of
shifts lost due to these stoppages. (42 vs 50 section 54 stoppages in FY16).
KPI
LTIFR
5 OPERATIONAL EXECUTION – THE ABILITY TO DELIVER REQUIRED
OPERATIONAL PERFORMANCE (PRODUCTION AND EFFICIENCY) COULD
ADD OR DESTROY VALUE TO COMPANY SHAREHOLDERS
Description
Failure to deliver against production and cost targets can result from a variety of reasons,
including poor productivity, high absenteeism, safety stoppages, industrial action, difficult
geological conditions as well as ineffective control of operational expenditure.
Impact
Poor operational delivery can lead to not achieving the Business Plan deliverables which
includes a decline in profitability and cash generation, which in turn poses a threat to our
liquidity position and impacts profitability. Covenants in the existing debt facilities specify
minimum liquidity levels, increasing the significance of this risk.
Mitigation
? Enhanced focus on improving operational attendance levels which includes the
root cause analysis and mitigation of absenteeism;
? Operations Co-ordinator (“OPSCO”) monitoring of sick leave and absent without
official permission (“AWOP”) dashboards;
? Implementation of the Labour Management Programme;
? Empowerment of frontline supervisor intervention;
? Implementation of an Operational Turn Around Plan and operational reviews;
? Rigorous performance monitoring against Business Plan targets (cost and
production);
? A cost restructuring review process has also been initiated;
? Continued Department of Mineral Resources (DMR) engagement to address
safety stoppages and increased operational focus to improve overall safety
performance and culture; and
? Operational oversight was improved through rigorous tracking of crew
performance by the Business Support Office.
Change
This risk has reduced relative to the prior year’s ranking. We have seen a significant
reduction in the number of Section 54 stoppages (FY16:50 vs. FY17:42) as well as the
days lost (FY16:164 vs. FY17:86). The DMR has issued localised Section 54 stoppages
which means only sections of a shaft or plant are stopped and not the whole operations.
Other factors which can affect production execution include community unrest, poor
productivity, absenteeism, safety stoppages, industrial action, difficult geological
conditions and operational expenditure.
KPI
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LTIFR
6 COMMUNITY RELATIONS – A SOUND RELATIONSHIP WITH SURROUNDING
COMMUNITIES WILL ENHANCE RELATIONS AND ORGANISATIONAL
REPUTATION WHILST A FAILURE TO DO SO COULD RESULT IN
DISRUPTION OF OPERATIONS OR COMMUNITY UNREST
Description
There may be occasions where expectations by a host community cannot be met and
may result in conflict and unrest. The relationship with host communities is particularly
vulnerable due to differences in the leadership structures of the stakeholders that the mine
engages with. This results in different splinter groups engaging the mine with different and
unrealistic expectations.
Impact
This might result in failure to deliver Social and Labour Plan (SLP) commitments which
impact the Company’s licence to operate and may trigger protests or cause corporate
reputational damage. Lonmin acknowledges the important role of communities as a critical
stakeholder and has implemented various engagement platforms and development
initiatives to ensure appropriate upliftment. Procurement and employment have become
focus areas as communities view them as opportunities to improve their livelihood through
improved income. Lonmin has identified this need and has introduced procurement and
employment opportunities for the communities.
Mitigation
? Revised SLP Project implementation plans have been shared with the DMR. The
regulator has been engaged regarding the backlog in the commitments that will not
be delivered as per originally agreed time frames;
? A structured process for employment opportunities was made available to
surrounding communities;
? Continuous engagement of Municipal leadership and capacitation (support on
technical matters related to SLP);
? Structured Greater Lonmin Community ward councillors (Bapo and Non Bapo)
engagements;
? Community Value Proposition being rolled out to address infrastructure
requirements and education requirements;
? Implementation of revised project risk management process which incorporates
stakeholder requirements; and
? Greater consultation with stakeholders which includes upliftment measures being
initiated. This approach will increase community ownership of both the challenges
facing communities and the solutions provided as part of the SLP implementation
plan.
Change
Our relationships with local communities that surround our operations improved prior to
the 2014 transaction, however, have deteriorated to some extent due to tensions within
the Bapo community. The socio-economic challenges that face the Bojanala district in
which Lonmin operates have placed increased pressure on the community and its
leadership. The procurement opportunities given to the Bapo community, particularly the
visible bus service, have given hope to the communities but profitability is under threat.
KPI
SLP Expenditure: Health, Education and Social Infrastructure, Stakeholder Engagement
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and Management
7 CHANGES TO THE POLITICAL, LEGAL, SOCIAL AND ECONOMIC
ENVIRONMENT, INCLUDING RESOURCE NATIONALISM
Description
The Company is subject to the risks associated with conducting business in South Africa,
including but not limited to changes to the country’s laws and policies regarding taxation,
royalties, divestment, repatriation of capital and resource nationalism. The latter is a broad
term that describes the situation where a government attempts to assert increased
authority, control and ownership over the natural resources located in its jurisdiction. The
Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill is
currently anticipated to be published in the first half of 2018. Beneficiation is a major
consideration as it is likely that the Minister will be granted discretion to declare certain
minerals as strategic, to determine the percentage of strategic minerals that are to be
made available locally, determine the developmental price at which strategic minerals are
to be sold, and determine the conditions applicable to export permits. In addition, the
Davis Commission continues to look at the current tax regime with a view to determining
whether additional taxes including a carbon tax should be imposed on mining companies.
The mining industry is also awaiting clarity of the interpretation of the applicability of the
“Once Empowered Always Empowered” (OEAE) principle which was argued before the
High Court in November 2017 and where judgement is awaited. Finally, a High Court
review application will be heard in February 2018 to consider the contents and
applicability of Charter III. Pressure remains on the DMR to demonstrate that it is taking
action to monitor compliance with undertakings made in the SLPs submitted by mining
companies. Lonmin received a s93 notice in respect of its SLP obligations and continues
to negotiate with the DMR in an attempt to reach a constructive solution. In addition, the
Department of Trade and Industry is attempting to legislate a policy of creating black
industrialists.
Impact
The ongoing disputes in respect of the applicability of Mining Charter III and the pending
introduction of an amended MPRDA have created policy uncertainty, leading to a
significant decline in investor appetite for South African investment. The amended
MPRDA may lead to additional taxes and sale of metals at discounted developmental
prices. The obligation to sell locally could impact long-term supply agreements with our
customers. The implications of a judgement in favour of the DMR in relation to Mining
Charter III include the imposition of additional royalties based on revenue streams;
increased equity empowerment, procurement and employment equity levels; the writing
off of loans owed by BEE investors in the event that they are not repaid via dividends
received from the relevant mining company; 1% of turnover being payable to BEE
shareholders; participation of BEE shareholders in the trading and marketing of the
proportionate share of production they will be entitled to; and BEE owned companies
being granted a right to match any sale of mining assets.
Mitigation
? The declaratory order application brought by the Chamber of Mines on behalf of
the industry to determine the validity of the OEAE principle in respect of which
judgement is awaited;
? The review application being brought in February 2018 to determine the
reasonableness and applicability of Charter III;
? Chamber communications strategy to make the public aware of the implications of
Charter III;
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? Appropriate governance structures in the form of Executive and Board Committees
have been established to ensure ongoing reporting of progress against agreed
SLP targets.
Change
The risk in this area has increased due to continued uncertainty regarding certain policy
decisions i.e. BEE requirements and strategic minerals. There remains a DMR focus on
SLP compliance and Lonmin is currently subject to a s92 Notice in this regard. Cyril
Ramaphosa was elected as the new party president at The African National Congress
(“ANC”) Elective Conference held in December 2017. It is uncertain whether there will be
a change in policy following this conference and the election of the new ANC president.
KPI
Not applicable
8 EMPLOYEE AND UNION RELATIONS – OPTIMAL RELATIONS CAN
SIGNIFICANTLY ENHANCE OPERATIONAL EXECUTION AND IMPROVE
EMPLOYER–EMPLOYEE RELATIONSHIPS, WHILST A BREAKDOWN IN
RELATIONS COULD RESULT IN PRODUCTION STOPPAGES AS WELL AS
A BREAKDOWN OF TRUST
Description
The industrial relations environment has stabilised over the last 12 months as evidenced
by the improved dialogue between unions and company management. Whilst the
environment has remained stable, the potential for volatility remains, which could result in
disruptions to operations and have a material adverse effect on the Company’s financial
position. A major concern is internal differences or rivalry within Association of
Mineworkers Construction Union (AMCU) resulting in infighting and lack of cohesiveness
in leading their members and engagement with Lonmin management.
Impact
Various internal as well as external factors could influence the employee relations space
and could lead to a breakdown of employer-union relations. A key contributor to this is
current internal AMCU challenges that have a risk of being violent and could result in loss
of life and potentially impact on production.
Mitigation
? Structured engagement forums with unions across all levels e.g. Senior leadership
and Shaft forums;
? Legally required Future forum established;
? Pertinent issues being discussed with organised labour at present are poor
operational performance, future of the mine, absenteeism and sick leave abuse,
over-complement labour and dealing with this, rental payments for infill apartments
as well as rationalisation of union branch structures ahead of union leadership
elections;
? Engagement with AMCU at all levels, and with relevant authorities to enhance
safety and security in the area; and
? As part of improving employer relations, the established relationship building
programme and charter to govern relations between unions and the Company are
also under review.
Change
Despite improvement experienced in terms of engagement processes with the major
union, the industrial relations environment still remains a challenge due to new union
leadership elections being conducted.
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KPI
ER structures (Number of meetings)
9 UTILITIES – ACCESS TO SECURE ENERGY AND WATER AS WELL AS THE
OPTIMAL USE OF THE INPUT RESOURCES ARE CRITICAL FOR MINING
OPERATIONS
Description
The higher than inflation tariff based increases in electricity and water are set to continue.
Efforts are continuing to improve efficiency of the use of these utilities to ensure that costs
are contained as best as possible year on year. A stable electricity environment, in terms
of pricing, is critical in ensuring long term sustainability. The deteriorating financial position
of ESKOM and the potential cost impacts to industry in an attempt to try and claw back
revenue lost, due to lower power sales and the increasing burden of expansion program
interest charges, remains a real concern and cost threat. Near term uncertainty is set to
continue with continued pressure for above inflationary increases. Water utilization has
also been challenging, both from an infrastructure point of view as well as availability.
Capacity deterioration within local municipalities is also adding to this challenge. The
establishment of informalsettlements resulted in communities requesting water and
electricity supply as a basic need and keeps adding to the burden of local municipalities
and industries for service delivery. Reduced dependency on Rand Water Board (RWB)
supply, to the Lonmin operations, is set to be an ongoing strategic drive.
Impact
Supply constraints in respect of energy or water could impact upon our ability to operate
effectively and meet our production targets. Furthermore, cost increases in respect of
these utilities impact our margins. Water availability is becoming a critical component of
any business to survive and still remains a basic human need. The risk associated with
water is higher than the risk associated with electrical supply. RWB supply is forecasted to
run dry in Gauteng during 2019. ESKOM is currently in an oversupply, and with the
continued low to no economic growth, this is set to continue. The risk regarding electricity
is the potential spiralling cost escalations to try and compensate for less power sales year
on year. Changes in peak and non-peak power rates are also a real threat and peak
power rates could be increased significantly going forward.
Mitigation
Ongoing implementation of the electricity conservation programme as well as water
optimisation through demand management. An integrated water management plan for
Lonmin has been developed with the goal to reduce RWB reliance as far as possible,
within the operations, and to maximise the recovery and re-use of all other sources of
water. Longer term plans to treat some streams of these alternative sources to potable
level to make the business more independent of RWB. Lonmin is exploring further
opportunities to supply communities out of such streams. As part of ensuring optimal
electricity usage, Lonmin is a member of the ESKOM energy intensive user groups
(“EIUG”), as well as conducting monthly and daily electricity consumption and reporting.
Additional initiatives to ensure optimal usage are the electricity conservation programme
and loadshedding contractual agreements to manage supply side constraints. As part of
ensuring appropriate continuity during an outage, the Company has implemented risk
based scenario planning based on available ESKOM capacity. From a water optimisation
perspective, the Company has implemented water conservation and demand
management initiatives. The process as to how water is being monitored and managed is
aligned with how power is being managed in the business. Substitution of RWB with other
water sources will remain an ongoing focus, so to reduce the reliance on this supply.
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Change
Current supply constraints and proposed tariff increases in respect of energy and water
have a significant impact on the Company’s ability to operate effectively and to meet our
production targets. From an energy perspective, the risk in this area remains unchanged
due to aging municipal infrastructure that could result in an increase in the amount of
unplanned outages, however from a water perspective it has increased due to lower
precipitation levels and ongoing impact of climate change. The expectations of
surrounding communities especially on water supply and services, are ever increasing
and the inability of local and provincial governments structures to address the
expectations will continue to transfer the pressure on mining operations to step into this
gap and supply their requirements in various ways and forms in communities around their
operations.
KPI
Water and Electricity usage
10 LACK OF GEOGRAPHICAL AND PRODUCT DIVERSIFICATION
Description
Lonmin’s principal operating subsidiaries are concentrated in one geographical location,
which increases the level of risk of localised disruptions having an impact on the majority
of our operations. In addition, Lonmin is a platinum-group metals (“PGM”) producer and
does not have exposure to other commodities or sectors.
Impact
Local events in the vicinity of Marikana have the potential to disrupt Lonmin’s operations
in this area, which represent all of the Company’s operating mines as well as the majority
of our processing operations. Such a disruption could significantly impact the Group’s
operating and financial performance. The Group is also a focused PGM producer and has
limited exposure to other commodities. When the PGM market is depressed, the
Company’s financial performance is likely to be negatively impacted as it does not have
material exposure to alternative commodities that may have a different economic cycle
and offset this PGM pricing weakness.
Mitigation
? Recommended • offer by Sibanye-Stillwater will provide geographical and
commodity diversification
? The Company continues to review its portfolio of projects and opportunities.
Change
The risk has reduced due to the recommended offer by Sibanye-Stillwater.
KPI
Not applicable
11 LOSS OF CRITICAL SKILLS
Description
The loss of critical skills remains a challenge for the Company. The uncertainties related
to the Company’s financing and sustainability remain and these are amplified by the
continued uncertainty in the mining sector. Under these conditions, the loss of key skills is
a significant risk to the organisation.
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Impact
The loss of critical skills in key positions could play a significant role in our ability to deliver
against production and financial targets. In order to retain our skilled labour, we
continuously review our remuneration packages and the incentive and retention schemes.
This allows our pay structures to remain in line with the packages offered by our peers. An
inherent risk of attracting and retaining employees of the required calibre is that it can
result in increased costs.
Mitigation
? Individual Development Plans, succession planning and retention strategies for
scarce skills have been established as part of ensuring the development and
retention of critical skills;
? Ongoing monitoring of remuneration practices which matches Lonmin peers;
? Retention programmes for key skills
? Categorisation of skills, establishment of promotional pools and career paths
reviews to remain relevant to the organisation have been established; and
? Graduate development, mentorship programmes and internship programmes have
also been established to ensure development of existing and future human
resources capacity.
Change
The retention of critical skills remains a key risk to the organisation. One of the key
safeguards at the moment is the fact that a large part of the mining sector is experiencing
similar challenges to the ones that Lonmin is experiencing which has limited the number
of opportunities that are available. The risk for Lonmin is that it may not always be able to
replace the critical skills understanding the business and the environment with resources
available in the market.
KPI
Employee relations
TRANSACTIONS WITH RELATED PARTIES
The Group has a related party relationship with its Directors and key management (as
disclosed in the Remuneration Report and in note 4) and its equity accounted investment
(note 11).
The Group’s related party transactions in the year and balances at 30 September are
summarised below:
2017 2016
$m $m
Transactions in the year:
Purchases from joint venture – Pandora 33 30
Amounts due from joint venture – Pandora 6 5
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Amounts due from associate – Incwala 1 1
Interest accrued from HDSA investors in Incwala 26 27
Subscription paid to the Platinum Jewellery 5 7
i
Development Association
Balances at 30 September:
ii
Amounts due from HDSA investors in Incwala 416 376
All related party transactions are priced on an arm’s length basis.
Footnotes:
i The subscription paid by Lonmin is material to the Platinum Jewellery Development Association of which Lonmin is a member.
ii Refer to note 12 for details regarding the amounts due from HDSA investors in Incwala. This amount is before deducting the accumulated
impairment charge of $416 million.
END`
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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