| Mon 12 Dec 2011, 17:43 | | LON - Lonmin Plc - Annual Report and 2012 Annual General Meeting |
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LON
LOLMI
LON - Lonmin Plc - Annual Report and 2012 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")
12 December 2011
Lonmin Plc ("Lonmin" or the "Company")
Annual Report and 2012 Annual General Meeting
On 14 November 2011 Lonmin announced its Final Results for the year ended 30
September 2011. 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 National Storage Mechanism, printed copies of the following
documents:
Annual Report and Accounts for the year ended 30 September 2011
Circular relating to the Annual General Meeting to be held on 26 January
2012
Forms of Proxy for shareholders on the UK and SA registers
These documents will shortly be available for inspection on the National Storage
Mechanism www.Hemscott.com/nsm.do.
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.
The appendix to this announcement contains additional information which has been
extracted from the Annual Report and Accounts for the year ended 30 September
2011 (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 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 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
The Directors` Responsibility Statement
ENDS
APPENDIX
Lonmin`s Principal Risks and Uncertainties
Lonmin`s principal risks are detailed below together with their potential impact
and mitigating strategies. These risks have been ranked according to magnitude
of potential impact before mitigating actions. These risks represent a snapshot
of the Company`s risk profile at this time. They are not intended to represent
an exhaustive list of all risks. As the macro environment changes and country
and industry circumstances evolve, new risks may arise or recede or the rankings
of these risks may change according to severity and probability of occurrence.
For investors in Lonmin, the main risk to be aware of is that the Company is a
focused producer of PGMs and therefore, while this allows for economies through
specialisation, Lonmin does not benefit from commodity diversification. Further,
since the commodities Lonmin mines are all from one geographic region, its
performance is influenced by the political, social and economic factors that
affect South Africa. This includes significant exposure to the US Dollar/Rand
exchange rate. As such, volatility in metal prices and exchange rates can have a
material impact on the financial performance of the Company, which can be both
positive and negative.
Principal Risk Impact Mitigation
Failure of Could result Commitment from Board and senior management
safety in a towards creating a safe culture throughout
routines or catastrophic the Group. The Safety & Sustainability
safety loss of life, Committee monitors the implementation of the
strategy severely safety strategy on behalf of the Board.
disrupt Processes in place for safe production
operations include:
and have a Employee engagement strategy and safety
material training standards, both of which are
adverse monitored regularly;
effect on the Clearly defined safety protocols
Group`s including safe behaviour observations in
financial place;
position. Regular third party audits and peer
reviews conducted; and
Balanced scorecard measures incentivise
appropriate safety behaviour.
Resource A negative Ongoing dialogue with key stakeholders and
Nationalism outcome as a government at all levels to understand and
consequence address concerns.
of resource
nationalism,
which can
take many
different
forms, could
have a
material
adverse
effect on the
Group`s
future
operational
performance
and financial
position.
Skills Lack of Processes for individual development
shortages appropriate programmes, succession planning and scarce
skills could skills allowances are in place. There is a
negatively focus on bursaries, graduate development and
impact upon mentorship.
safety,
production
and the
ability to
deliver
against
targets.
Non-delivery Could results We engage with all our stakeholders including
of in the South African government. Targets are set
Transformation deteriorating and monitored on a regular basis by the Exco,
relationships the Safety & Sustainability Committee and the
with Transformation Committee. The Balanced
stakeholders Scorecard incentivises delivery against
and place certain targets.
mineral
rights at
risk.
Access to Could impact Measurement of energy usage and energy saving
secure energy, on the initiatives implemented. Load shedding and
electricity ability to contractual agreements in place with Eskom
and water run current (SA energy supplier). Likewise, measurement
operations of water usage and water saving initiatives
and deliver implemented. Plans aligned with long term
future strategy. Electricity and water supplies
expansion secured for key areas of the business. Active
plans. participation in relevant industry bodies.
Failure to Shareholder Strong capital projects department built up
deliver on value may not to implement long term capital plans.
long term be optimised Borehole drilling, magnetic surveys and 3D
capital plans over the long seismic surveys are conducted to ensure full
term. understanding of the geology on Lonmin
properties. Independent peer reviews of the
long term plan are carried out. Balanced
Scorecard incentivises appropriate reserve
development.
US Dollar Significant Lonmin gathers market information from a
metal price changes in number of sources to monitor market segments
and currency the supply and trends in the industry. Longer term
volatility and demand of volume contracts with key customers mitigate
(specifically PGMs (e.g. if off-take risk. Historically there has been a
US Dollar/ SA there is long term correlation between US Dollar/ SA
Rand) product Rand and PGM basket price, although this can
substitution dislocate over short periods. Current policy
or supply is not to hedge.
side
constraints)
can create
volatility in
PGM prices
making long
term planning
difficult.
Likewise,
significant
fluctuations
in exchange
rates to
which the
Group is
exposed can
also make
planning
difficult and
have a
significant
effect on the
Group`s
financial
position.
Access to cost The Group may Headroom and key covenants in banking lines
effective not be able are constantly monitored through rolling cash
funding to obtain flow forecasts. The current bank debt
cost facilities were re-negotiated during the year
effective allowing greater flexibility.
funding when
required
which could
impact the
ability of
the Group to
meet its
liabilities
as they fall
due.
Uncompetitive Could have a Lonmin has a clear understanding of its
gross or unit material competitive position and required
costs adverse productivity improvement plans are in place.
effect on the Balanced Scorecard incentivises cost control.
Group`s
competitive
position.
Poor employee Could result A full engagement strategy with the unions
relations due in an and employees is in place, which is governed
to internal unstable through a clearly defined Industrial
and external workforce Relations structure. Recognition agreements
factors that that severely are in place.
could result disrupts
in strike operations
action and has a
material
adverse
effect on the
Group`s
financial
position.
Poor community Civil unrest A full engagement strategy with community
relations due could representatives, unions and employees is in
to internal severely place.
and external disrupt
factors that operations
could result and have a
in civil material
unrest. adverse
effect on the
Group`s
financial
position.
Inadequate Could The Pyromet furnaces provide an element of
smelting severely back-up capacity. Spare capacity in Number
performance disrupt One furnace currently gives some ability to
and back-up operations catch up. Number One furnace includes
capacity and have a improved monitoring and fault detection
material technology. The Number two furnace is
adverse currently under construction and should
effect on the become operational in May 2012.
Group`s
financial
position.
Excessive Could have a Grade targets set and reported. Technical
dilution and material service function reviews management
poorly adverse information and quality control of data
optimised effect on the capture and measurement. Third party audits
plant leading Group`s and peer reviews conducted to guide grade
to recoveries financial target levels. Plant maintenance programmes
not in line position. ensure plant stability to assist in
with plan optimising recoveries. Further investments
made to enhance metallurgical recoveries.
Experienced management teams and clear
benchmarks set. Balanced Scorecard
incentivises maximisation of recoveries.
Lack of short Shareholder Performance measured against budget and
term ore value not reported through the Exco to the Board. An on
reserve optimised shaft independent technical services function
development over the long provides support to the mining teams.
planning term. Balanced Scorecard incentivises reserve
development. Internal reviews regularly
conducted.
Impact of Climate Lonmin has a comprehensive Response Strategy
climate change change is an to Climate Change in place. This includes
on the international operational plans to manage and monitor
business problem that energy, electricity and water efficiencies
including the could lead to and includes participation in climate change
impact of a devastating forums.
carbon pricing consequences
system which are as
yet not
completely
understood.
Coupled with
the proposed
introduction
of carbon
taxation it
is likely
that climate
change will
have a
financial
impact upon
the business.
Failure in Could Lonmin has a clear organisational structure
internal severely with appropriate segregation of duties and
controls or disrupt independent internal and external audits with
accounting operations follow up. The Internal Audit work plan is
processes and have a closely aligned to the risk management
material framework and risk profile of the Group. From
adverse an inventory evaluation perspective, grade
effect on the targets are set and reported against. Samples
Group`s are analysed at the assay laboratory. Stock
financial counts are carried out every six months, with
position. the oversight of external and internal
auditors. Metals are tracked electronically.
TRANSACTIONS WITH RELATED PARTIES
There was one transaction with a related party during the year, other than those
of a revenue nature in the ordinary course of business. This involved the loan
of R80 million to Incwala Platinum (Pty) Limited, the Company`s BEE partner.
Note 26 Related parties
The Group has a related party relationship with its Directors and key management
(as disclosed in the Remuneration Report and in note 5) and its equity accounted
investments (note 13).
The Group`s related party transactions and balances are summarised below:
2011 2010
$m $m
Purchases from joint venture 46 42
- Pandora
Amounts due from joint 1 1
venture - Pandora
Amounts due from associate - 2 2
Incwala
Dividends to minorities - 10 22
Incwalai
Interest accrued from HDSA 15 9
investors in Incwala
Subscription paid to the 14 12
Platinum Jewellery
Development Associationii
Purchases made from 1 2
Xstrataiii
Sales to Xstrataiii 15 5
Amounts due to Xstrataiii - 2
Amounts due from Xstrataiii 3 4
Amounts due from HDSA 351 342
investors in Incwala
All related party transactions are priced on an arm`s length basis.
Footnotes:
i A Group company has made a series of non-interest bearing loans to Incwala
Platinum (Pty) Limited (IP). IP is a substantial shareholder in the
Company`s principal operating subsidiaries, and is a subsidiary of Shanduka
Group (Pty) Limited, a company controlled by Cyril Ramaphosa, a Director of
the Company. Advanced dividends in the sums of R25m, R79m, R79m and R80m
were made to IP on 28 September 2009, 29 March 2010, 29 September 2010 and
30 September 2011 respectively. IP has authorised the relevant Group
company to recover these amounts by reducing future dividends that would
otherwise be payable to all shareholders.
ii The subscription paid by Lonmin is material to the Platinum Jewellery
Development Association of which Lonmin is a member.
iii Xstrata Zinc BV has a 24.9% shareholding in Lonmin Plc.
STATEMENT OF DIRECTORS` RESPONSIBILITY
The following responsibility statement is repeated here solely for the purpose
of complying with DTR 6.3.5. This statement relates to and is extracted from
page 101 of the Annual Report and Accounts. Responsibility is for the full
Annual Report and Accounts and not the extracted information presented in this
announcement or the Final Results Announcement.
"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
Simon Scott
Chief Financial Officer"
Date: 12/12/2011 17:43:01 Produced by the JSE SENS Department.
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