Anglo Platinum 2010 Annual Report Basic Materials South Africa 2010 ANGLO PLATINUM LIMITED ANNUAL REPORT Financial, social and environmental performance PLATINUM, A PRECIOUS METAL FOR A PRECIOUS PLANET THE BUSINESS ENVIRONMENT IN 2010 MANAGING RISKS Anglo Platinum Limited is exposed to various risks and uncertainties that may have a negative impact on the group’s operations, financial performance and position or reputation, and that may also undermine the achievement of its social, economic and environmental objectives. Understanding these risks, and developing and executing appropriate responses to them, is crucial in ensuring the group’s sustainability. As a result, risk management is an integral part of the group’s strategic and business processes. Anglo Platinum Limited appreciates that successful business is not about avoiding risk altogether. Rather, it is about understanding the potential effect of uncertainty on our objectives, and finding ways to mitigate negative impacts while capitalising on opportunities. could damage our reputation, and could also affect our ability to obtain mining property rights, thus limiting our growth opportunities. Community relations, especially those arising from the Eastern Limb programme, continue to have an impact on capital projects and on the company’s reputation. Anglo Platinum Limited has developed, and continues to refine, a process for effective stakeholder engagement with communities. It actively seeks engagement with all affected by the Group’s operations and, based on the lessons it has learnt, continually reviews the processes followed in community resettlement. THE REGULATORY ENVIRONMENT During 2010, Anglo Platinum Limited’s old-order mineral rights were formally converted into new-order rights. The company is now seeking to complete the administrative process required for the execution of these rights. The company is also monitoring and implementing the requirements of the Mining Charter, and continues with negotiations around some of its prospecting rights, in order to ensure security of tenure. The group’s relationship with the South African Government is actively managed via Anglo Platinum Limited’s Executive Committee and through structures and arrangements in place with Anglo American South Africa. The company continues to monitor developments in Zimbabwe, where Unki Mine is now operational. a systematic manner. Interaction takes place directly and through various industry forums, including the Energy Intensive User Group, the National Business Initiative and the Chamber of Mines. Targets for electricity consumption have been developed for each operation and communicated to all engineering managers. Consumption against these targets is tracked on a monthly basis. All our operations have completed risk assessments and developed business continuity management plans in response to the possibility of a sustained power outage. Preparation measures have been implemented, including the installation of additional emergency-power generators and the establishment of a crisis command centre to manage a significant national electricity (or other) crisis. information on leading health indicators. The capture and reporting of occupational health incidents is being aligned with the safety incident reporting system. The business environment in 2010 COST BASE The group’s long-term sustainability and competitiveness depend on its ability to reduce its operating and capital cost bases and to move its mines down the industry cost curve. Failing this, it will have only limited ability to weather future economic downturns and generate free cash flow after investing for growth. Steep future escalations in the electricity tariff in South Africa are expected to place further upward pressure on the cost base. The secondary impact of these increases on general producer price inflation is unknown. Cost management remains a key focus area. The company has specific asset optimisation projects in place to manage the consumption of production resources at its operations; and continues to leverage the scale of its operations through its inbound supply-chain process, to optimise prices paid for goods and services. Operational review forums take place regularly at various levels of the organisation. WATER Water-supply constraints are projected in all the regions where we operate in the medium to long term, and will impact on existing operations and is expected to constrain growth. Anglo Platinum Limited continues to focus on water conservation measures on a sustained basis. Through our participation in various regional water-user forums, we are exploring measures to mitigate risks to the water supply. STRATEGIC RISKS THE GLOBAL ECONOMY Anglo Platinum Limited is exposed to considerable revenue cash flow volatility as a result of changes in metal prices and in the Rand/ US dollar exchange rate. As a result of the high level of fixed costs incurred by our operations, our free cash flow is to a large extent geared to changes in price and exchange rate. This requires us to have a strong balance sheet in order to be able to invest for the future and to provide our investors with superior equity returns. We therefore continue to focus on cost management; on the prioritisation and rationing of capital expenditure; and on maintaining a flexible approach to production in response to market demand. OPERATIONAL RISKS SAFETY PERFORMANCE Failure to adopt high levels of safety management can result in numerous adverse outcomes, including unacceptable injuries to our employees and contractors. Failure to meet our safety objectives has an impact on the well-being of our employees and their families, on employee morale, on the achievement of production targets and on the reputation of the group. Over the past few years we have adopted a multifaceted risk mitigation approach. This includes the embedding of our safety-related and other values; the implementation of our safety standards; training and management systems that provide leading indicators of safety issues; participation in the Anglo American plc peer-review programme; compliance with the fatal risk standards; and the implementation of safety-risk management processes. MEETING PRODUCTION TARGETS Failure to meet production targets affects our profitability. The group’s resources are aligned with a production target that has been set for each operation for the next three years, taking into account our view of the platinum market and our customers’ requirements. Failure to meet production targets dilutes our margins. Progress on the actions identified for each focus area is reported on monthly, while production results are monitored on a daily, weekly and monthly basis. Following on the outcomes of these reviews, action plans are updated and production plans revised. A monthly meeting of the Board’s Operations Committee oversees the group’s operational performance. PROJECT PORTFOLIO MANAGEMENT Anglo Platinum Limited is focusing on delivering the right projects on schedule, within budget, safely and to scope. We need to ensure that our project portfolio results in our being well placed to seize opportunities to increase our market share and to deliver into market opportunities. The group has ranked and prioritised its projects portfolio, using applicable metrics, to ensure optimal allocation of capital and resources. The resourcing of projects, organisational structure and reporting have also been reviewed and are being optimised. LEGISLATION The Environmental Protection Agency in the United States and the European Environmental Agency have proposed new exposure levels for platinum-bearing materials that are substantially lower than current levels. The proposals require changes in the labelling and packaging of the metal and in occupational workplace practices. These developments are monitored and Anglo Platinum Limited is represented on various forums that influence their course. ORGANISATIONAL RISKS COMMUNITY ENGAGEMENT The nature of Anglo Platinum Limited’s mining operations is such that disputes in relation to community matters may arise. These disputes cannot always be predicted and may cause disruption to projects or operations. The company’s operations may also have an impact on local communities including, from time to time, a requirement for relocation. Failure to manage relationships with local communities, the Government and non-governmental organisations POWER Shortages in electrical power can place sustained production, safety and growth at risk. The unavailability of infrastructure may also delay projects and result in unexpected costs. Electricity-related risk events include load shedding; localised outages; externally imposed longer-term reduced consumption; the non-approval of electricity supply for new projects; and a significant increase in electricity costs. Anglo Platinum Limited is part of a broader Anglo American plc team working closely with Government departments, the national regulator and Eskom. The group is considering various proposals in SKILLS The shortage of available skills will impact on the Company’s ability to deliver on production targets in the medium to long term. Various processes are in place to mitigate this risk. These include a pipeline of young professionals; various fast-tracking processes; focus on attraction and retention initiatives; and various in-house and external development programmes. EMPLOYEE HEALTH The unmitigated exposure of employees to airborne pollutants and physical stressors in the workplace results in the impairment of employee health and may lead to long-term financial and reputational liabilities for the company. Anglo Platinum Limited has implemented a health-management system that includes training in health standards and provides 30 ANGLO PLATINUM LIMITED 2010 ANGLO PLATINUM LIMITED 2010 31 pp 30-31 Anglo Platinum provide details of the key risks which could affect the business, discussing the potential impact and giving details of practices the Company has put in place to mitigate against these risks. There is no separation between financial and non-financial risks with: community engagement; water; safety; and employee health, all stated under the headings of either ‘organisational’ or ‘operational’ risks. www.blacksunplc.com © Black Sun Plc 2011 47
