| Tue 15 Dec 2009, 8:16 | | LON - Lonmin - Annual Report and 2010 Annual General Meeting |
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LON
LOLMI
LON - Lonmin - Annual Report and 2010 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 : GB0031192486
("Lonmin" or the "Company")
14 December 2009
Annual Report and 2010 Annual General Meeting
On 16 November 2009 Lonmin announced its Final Results for the year ended 30
September 2009. The announcement made on that date included inter alia a
condensed set of financial statements and a management report, as required by
DTR 4.1.
Lonmin has today posted to shareholders and, in accordance with LR 9.6.1 R, has
submitted to the Financial Services Authority printed copies of the following
documents:
* Annual Report and Accounts for the year ended 30 September 2009 (the "Annual
Report")
* Circular relating to the Annual General Meeting to be held on 28 January 2010
* Forms of Proxy for shareholders on the UK and SA registers
These documents will shortly be available for inspection at the Document Viewing
Facility (from 9:00 am to 5.30 pm on every weekday except bank holidays) which
is situated at the following address:
UK Listing Authority
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
As required by DTR 6.3.5 R (3), the Company confirms that the Annual Report and
the Circular relating to the Annual General Meeting are now available to view or
download in pdf format from the Lonmin website, www.lonmin.com.
Pursuant to DTR 6.1.2 R, Lonmin confirms that one of the resolutions to be
proposed at the Annual General Meeting is the adoption of new Articles of
Association. A description of the material changes is contained in the
circular relating to the Annual General Meeting, which contains the Notice of
Meeting. In accordance with its obligations under LR 13.8.10 R, Lonmin
confirms that copies of the blacklined articles of association showing the
proposed changes will shortly be lodged with the Document Viewing Facility and
are available from the Company Secretary`s Office, Lonmin Plc, 4 Grosvenor
Place, London SW1X 7YL and, on the date of the Annual General Meeting, at the
Church House Conference Centre, Dean`s Yard, Westminster, London SW1P 3NZ from
at least 15 minutes before the commencement of the meeting until its conclusion.
The appendix to this announcement contains additional information which has been
extracted from the Annual Report and Accounts for the year ended 30 September
2009 (the "Annual Report and Accounts") for the purposes of compliance with the
Disclosure and Transparency Rules and should be read together with the Final
Results Announcement, which can be downloaded from the Company`s website
at 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 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 internal control and the principal risks and uncertainties
* A statement on related party transactions
* Certain financial statements
APPENDIX
Internal Controls and Risk Management
This section explains the Group`s internal control environment, how we assess
its effectiveness and how we identify, evaluate and manage risk. There is also a
discussion of the principal risks and uncertainties facing the Group, the
consequences if these are not managed and the mitigations currently relied upon
by management.
Internal controls
The Company complied throughout the year under review and continues to comply
with the provisions of the Combined Code on internal controls and the relevant
parts of the Turnbull and Smith guidance. While the Board has overall
responsibility for the Company`s system of internal control, management is
responsible for implementing agreed Board policies. It is important to recognise
that systems of internal control can only be designed to manage, rather than
eliminate, the risk of failure to achieve the business objectives and cannot
provide absolute assurance against material mis-statement or loss.
Key features of the Company`s internal control framework, which supports the
financial reporting process, include:
* a schedule of matters reserved for the Board`s decision;
* detailed terms of reference for the Board Committees;
* a Code of Business Ethics and external whistle-blowing hotline;
* Human Resources policies which establish a consistent set of values and
standards for managing employees and contractors throughout the group;
* a document summarising the delegation of authority cascade from the Board to
the various levels of Group management;
* documented policies and procedures for certain key group-wide matters,
including treasury, capital investment, risk management, human capital and
procurement, supported by local policies and procedures as necessary;
* the Group strategy and Life of Business Plan, supported by the mineral
resource database and model, and annual technical and financial budgets;
* systems including the SAP enterprise resource planning system, a bespoke
metallurgical tracking system and a detailed mine planning system;
* management reporting against plans, budgets and forecasts;
* external audit and other assurance, including a biennial audit of mineral
reserves and resources; and
* internal audit and other in-house review processes.
To ensure that the Audit and Risk Committee has full oversight of the work of
the internal audit function, the Head of Internal Audit reports to the Chairman
of the Audit and Risk Committee, with a joint reporting line to the VP, Treasury
and Risk. The Audit and Risk Committee meets regularly with both the internal
and external auditors to discuss internal control and other matters arising from
the assurance process.
The Board is responsible for reviewing the effectiveness of the system of
internal control, including financial, operational and compliance controls and
systems for the identification and management of risk. This task is carried out
on behalf of the Board by the Audit and Risk Committee, which has undertaken a
review of the internal control environment following the year end. To do so, the
Committee assessed the following:
* responses provided by circa eighty senior managers in management confirmation
letters completed at the end of the financial year, designed to provide
assurance on the effectiveness of internal controls and compliance with Group
policies and procedures;
* a number of external parties providing assurance on different parts of the
business and its control environment;
* progress made by management in identifying and mitigating the key risks facing
the Group;
* routine management reporting on business performance and results; and
* reports provided to the Audit and Risk Committee by both internal and external
auditors and other specialist advisors in relation to the Group`s risk and
control environments.
Action has been, or is being, taken where necessary to address as far as
practicable any significant failings and weaknesses identified in the reviews of
effectiveness of internal controls whether they are financial, operational or
compliance.
Risk management
There is an ongoing process in place for identifying, evaluating and managing
the significant risks facing the Group that has been in place throughout the
year under review and to the date of approval of the accounts. This process has
been reviewed regularly by the Audit and Risk Committee on behalf of the Board,
and accords with the guidance appended to the Combined Code.
The approach taken is systematic and combines both a "top-down" and a "bottom-
up" review and approval process. All senior managers are responsible for
managing and monitoring risks that could impede the achievement of business
objectives and these are recorded in a risk register. It is mandatory for this
process to take place at least once a year, but in practice a more frequent
review takes place in most business areas. For each risk identified, management
also assesses the root causes, consequences and mitigating controls in relation
to the risk. An assessment is then made of the maximum risk exposure and the
effectiveness of the controls in place to mitigate that risk. A numerical
scoring matrix is used to derive a risk score and priority after taking account
of mitigating controls. Where the risk score and priority remain high after
mitigating controls are taken into account, action plans are devised to reduce
these risks further and progress against these plans is regularly reviewed.
Each of the business areas is supported by an Operational Risk Champion who co-
ordinates all risk management activity in that business area and ensures that
actions are implemented appropriately. Progress against action plans is also
reviewed regularly by the Audit and Risk Committee and reported to the Board.
Lonmin groups risks into strategic, financial, external and operational risks.
The key risks faced by Lonmin, based on our current understanding, along with
their potential impact and the mitigation strategies developed are detailed on
the following pages. There is no implied ranking in the order of disclosure.
The Company`s strategy takes into account these known risks, but risks will
exist of which we are currently unaware and the severity or probability of the
occurrence of known risks may change from time to time.
Strategic Risk
Impact - Ineffective or poorly executed strategy fails to create shareholder
value or fails to meet shareholder expectations.
Risk Impact Mitigation
Corporate & Non-delivery of our Social and community
Social Social and Labour programmes are monitored by
Responsibility* plan could result the Executive Committee and
in the withdrawal the Safety and
of our Mining Sustainability Committee.
Licence. Clear KPIs set and measured
on a regular basis. Ongoing
dialogue with the relevant
authorities.
Failure to Results in a Full engagement with the
comply with deteriorating DMR in South Africa and
Black Economic relationship with further engagement with all
Empowerment the Department of other stakeholders to
(BEE) codes in Mineral Resources ensure compliance.
relation to (DMR) in South
mining e.g. Africa.
failure to
achieve BEE
equity
participation
of 26% by 2014
Investment and Shareholder value Review of strategy and
business not optimised. financial returns at Board
decisions fail level on an annual basis.
to deliver Consistent investment
shareholder appraisal process applied
value to new capital spend.
Opportunities have been
taken to restructure the
business by stopping
production of unprofitable
ounces to maximise
shareholder value. A
comprehensive defence
strategy is in place.
Access to a Could impact on the Measurement of water usage
secure supply ability to run and water saving
of water current operations initiatives implemented.
and deliver future Plans aligned with long
expansion plans. term strategy of the
Company and additional
water suppliers for key
areas to be secured
accordingly.
Access to a Could impact on the Measurement of energy usage
secure supply ability to run and energy saving
of electricity current operations initiatives implemented.
and deliver future Load shed and contractual
expansion plans. agreements in place with
Eskom (SA energy supplier).
Continuity planning in
place and additional supply
for key areas to be secured
accordingly.
* see Sustainable Development Review in Annual Report and Accounts for more
detailed disclosure
Financial Risk
Impact - Asset performance and/or excessive leverage results in the Group not
being able to meet its financial obligations.
Risk Impact Mitigation
Foreign Significant Current policy is not to
exchange risk fluctuations in hedge this currency pair.
(specifically exchange rates to There is a long term
US Dollar/ SA which the Group is correlation between US
Rand) exposed could have Dollar / SA Rand and PGM
a material adverse basket price, although
effect on the this can dislocate over
Group`s future the shorter term.
financial
condition.
Commodity Significant Current policy is not to
price risk fluctuations in hedge PGM basket prices.
commodity prices to There is a long term
which the Group is correlation between US
exposed could have Dolla r/ SA Rand and PGM
a material adverse basket price, although
effect on the this can dislocate over
Group`s future the shorter term.
financial Hedging of base metals is
condition. undertaken under the
remit of the Price and
Risk Committee.
Uncompetitive Could have a High cost per ounce
gross and / material adverse assets put on care and
or unit costs effect on the maintenance. Cost base
Group`s competitive tailored to fit the
position and future current environment
financial through the recent
condition. restructuring programme.
Clear understanding of
our competitive position
and required productivity
improvement plans in
place.
Access to The Group may not Tenure of debt extended.
cost be able to obtain Rights issue completed
effective cost effective this year to strengthen
funding** funding when the balance sheet, key
required which covenants in banking
could impact on the lines constantly
ability of the monitored through rolling
Group to meet its cash flow forecasts with
liabilities as they appropriate covenant
fall due. waivers in place for
FY10. Regular contact
with our banking group.
** see Financial Review in Annual Report and Accounts for more detailed
disclosure
External Risk
Impact - The political, industry or market environment may negatively impact on
the Group`s ability to independently manage and grow its business.
Risk Impact Mitigation
Changing The occurrence of Ongoing dialogue with the
political such a change could relevant government at all
landscape have a material levels and other key
in any of adverse effect on the stakeholders. Effective
the Group`s future communications programmes
countries operational with key stakeholders.
in which performance and Other PGM mining companies
we operate financial condition. would face the same issue.
negatively
impacts
the
business
PGM supply Significant changes Gathering market
& demand to either / both the information from customers
volatility supply and demand and other sources.
side in the PGM Monitoring market segments
industry (e.g. and trends in the industry.
production Continue to support
substitution or initiatives to develop
supply side existing and new markets
constraints) could for PGMs. Longer term
have a material volume contracts with key
adverse effect on the customers.
Group`s future
operational
performance and
financial condition.
Operational Risk
Impact - Operational event impacting staff, contractors, communities or the
environment leading to loss of revenue and/or reputation or increased costs.
Risk Impact Mitigation
Inadequate and / Significant changes Bore hole sampling and
or poor quality to our assessment of seismic surveys conducted
ore reserves the quality and under the supervision of
extent of our ore specialist geologists
reserves could have a coupled with independent
material adverse audits of reserves. Quality
effect on the Group`s in-house technical team with
future operational multiple internal review
performance and processes.
financial condition.
Lack of long term Shareholder value not Independent peer review of
ore reserve optimised over the Long Term Plan before
depletion long term. submission to the Board.
planning
Lack of short Could severely Technical Services functions
term ore reserve disrupt operations acting independently of mine
development and have a material management located at mine
planning adverse effect on the shafts scrutinising
Group`s financial flexibility and working
condition. areas. Performance measured
and reported to the Board.
Recoveries Could have a material Grade targets set and
throughout adverse effect on the measured by assay and
operations not Group`s financial sampling in Mining. In
maximised condition. Processing, plant
maintenance programmes
ensure plant stability to
assist in optimising
recoveries. Technical
Services functions acting
independently of operational
management scrutinise
management information.
Experienced management teams
and clear benchmarks set.
Inadequate backup Could severely Pyromets provide an element
smelting capacity disrupt operations of back-up capacity. Spare
and have a material capacity in No. 1 furnace
adverse effect on the currently gives ability to
Group`s financial catch up. Re-design of No. 1
condition. furnace includes improved
monitoring and fault
detection technology. Study
initiated into how this risk
could be further mitigated.
Major fault on Could severely Plant maintenance programmes
key piece of disrupt operations coupled with an on-site
equipment and have a material stock of critical spares.
adverse effect on the
Group`s financial
condition.
Contamination and Could lead to health Emissions monitored by
/ or emissions concerns in local regular sampling. Scrubber
impacting on the communities, systems in place. Long term
surrounding withdrawal of disposal strategy for
environment and relevant licences and calcium sulphite
communities potential litigation. established. Re-lining of
tailings dams to prevent
groundwater pollution.
Fraud and / or Could have a material Fraud awareness training and
theft of product adverse effect on the security reviews supported
Group`s financial by a code of ethics and
condition. whistle blowing programme.
Security and Investigations
department operations in key
areas on the business.
Failure of safety Could put lives at Safety & Sustainability
routines and / or risk, severely Committee oversees all
safety strategy disrupt operations safety matters. Safety
and have a material standards set and monitored
adverse effect on the regularly throughout the
Group`s financial Company. Clearly defined
condition. safety protocols including
Safe Behaviour Observations.
Plant maintenance programmes
supported by critical spares
inventory. Regular
independent safety audits
and inspections by the DMR.
Deteriorating Could severely Full engagement strategy
industrial disrupt operations with the unions and
relations and / and have a material employees supported by our
or union adverse effect on the other external
disruption Group`s financial relationships.
condition.
Failure of Could severely Clear organisational
internal controls disrupt operations structure with appropriate
and have a material segregation of duties.
adverse effect on the Independent internal and
Group`s financial external audits with follow
condition. up of outstanding action
points.
Related Party Transactions
Pursuant to DTR 4.2.8 R Lonmin confirms that it is not party to any related
party transactions, either entered into during the year ended 30 September 2009,
or prior to that period.
Statement of Directors` responsibility
The following responsibility statement is repeated here solely for the purpose
of complying with Disclosure and Transparency Rule 6.3.5. This statement relates
to and is extracted from page 91 of the Annual Report and Accounts.
Responsibility is for the full Annual Report and Accounts not the extracted
information presented in this announcement or the Final Results Announcement.
"Responsibility statement
We confirm that to the best of our knowledge:
* the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
* the directors` report includes a fair review of the development and
performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal
risks and uncertainties that they face.
Roger Phillimore
Chairman
Alan Ferguson
Chief Financial Officer"
Ends
Date: 15/12/2009 08:16:19 Produced by the JSE SENS Department.
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