Regulation and mineral legislation

Regulation and mineral legislation

Material issue

MINING LICENCES AND BLACK ECONOMIC EMPOWERMENT

Anglo American Platinum Limited, having achieved execution on 14 out of 15 mining licences, remains committed to meeting the requirements of South Africa’s Mineral and Petroleum Resources Development Act and the Mining Charter. The Group is proud of the contribution it has made to empowerment in South Africa through the numerous transactions it has facilitated since 2000. These have resulted in the significant and meaningful empowerment of historically disadvantaged South Africans (HDSAs) in various operations and projects. Below is a brief summary of these transactions:

Date Summary of transactions
August 2000 Sale of a 17.5% (and facilitation of an additional 5%) in Northam to Mvelaphanda Resources.
August 2001 Formation of 50:50 Modikwa JV with ARM Mining Consortium, an empowerment company that includes the Mampudima and the Matimatjatji communities of approximately 60,000 rural residents as broad-based participants.
August 2002 The establishment in July 2002 of a 50:50 unincorporated joint venture with Royal Bafokeng Nation over the Bafokeng-Rasimone Platinum Mine (BRPM) and the Styldrift project area. Following the restructuring of the BRPM joint venture in December 2009, Royal Bafokeng Platinum Limited (RB Plat) acquired a 67% interest as well as operational control of the BRPM Joint Venture on 4 January 2010. RB Plat listed on the JSE Limited on 8 November 2010 and the Group currently holds a 12.6% equity interest in RB Plat, in addition to the 33% direct interest in BRPM.
February 2003 The formation, in August 2002, with Lonmin plc, of the Pandora Joint Venture, which includes the participation of the Bapo-Ba-Mogale Mining company and Mvelaphanda Resources (on behalf of Northam) as empowerment partners, each having a 7.5% interest in the joint venture.
December 2005 The disposal in October 2005 of the rights on the property Elandsfontein 440 JQ to Eland Platinum Mines (EPM), with the Ngazana Consortium holding a 26% interest in EPM.
July 2006 The development of a chromite recovery plant at the Group’s Union Mine with Siyanda Chrome Investments, an HDSAcompany.
November 2006 The transaction, in December 2006, with the Bakgatla-Ba-Kgafela (Bakgatla), who are the traditional community at Union Mine, giving the Bakgatla a 15% stake in Union Mine as well as a 26% stake in the Magazynskraal project and a 55% stake in the Rooderand project.
September 2007 The announcement of The Group’s sale to Anooraq Resources Corporation (Anooraq) of an effective 51% of Bokoni Platinum Mine (Bokoni) and an additional 1% of the Ga-Phasha, Boikgantsho and Kwanda Joint Venture projects. Anooraq now owns and controls an effective 51% of Bokoni, Ga-Phasha, Boikgantsho and Kwanda. This transaction gave Anooraq control over the third-largest PGM resource base in South Africa.
September 2007 The disposal of the Group’s 50% interest in the Booysendal project and of its 22.4% interest in Northam to Mvelaphanda Resources, for a total consideration of R3.7 billion. Mvelaphanda Resources injected the Booysendal project into Northam in return for Northam shares, resulting in Mvelaphanda Resources acquiring majority control of Northam. This transaction gave Mvelaphanda Resources control over the fifth-largest PGM resource base in South Africa.
September 2007 Announcement of the establishment of an employee share ownership plan (ESOP) that effectively owns 1.5% of Anglo American Platinum Limited to benefit all permanent employees not participating in any other Company share scheme. More than 90% of the scheme’s beneficiaries are HDSAs.
December 2008 The Group swapped its 37% interest in the Western Bushveld Joint Venture for a 26.6% equity interest in Wesizwe Platinum Limited (Wesizwe), an HDSA company.
February 2011 Announcement of the Group’s R3.5 billion (circa. 2.33% of market capitalisation) community economic empowerment transaction, Project Alchemy. See details in Project Alchemy and the community share ownership scheme - Project Alchemy.

MINERAL RIGHTS UNDER CONTENTION

Anglo American Platinum Limited is geared for growth should market demand for PGMs increase, with an exploration right-holding of 856.6 Moz 4E in South Africa and Zimbabwe. However, 8.3% of Anglo American Platinum Limited’s exploration ground is subjected to legal contestation and as a result the Company is at the advanced stage of engagement with the DMR to amicably resolve these disputes. None of mineral resources associated with the rights under dispute are included in Anglo American Platinum Limited’s declared resource estimates. These disputes relate to exploration rights to the following properties, Middellaagte 382 KQ, Brakspruit 299 JQ, a portion of Tigerpoort 426 KS, Rooderand 46 JQ and the Modikwa deeps.

MINING CHARTER

The end of 2011 marked seven years since the Mining Charter and its associated scorecard for broad-based socio-economic empowerment for South Africa took effect. Anglo American Platinum Limited remains committed to the transformation of the South African mining industry and welcomed the release of the revised Mining Charter in September 2010. The charter retained the requirement, set in 2002, of a historically disadvantaged South African (HDSA) ownership of 26% by 2014. The revised charter provides clarity in a number of areas, for instance in its definition of the term ‘beneficiation’. This is the first year in which we are reporting against the new Mining Charter scorecard.

The Company continues to meet all its Mining Charter obligations. The mining scorecard reference table provides a summary of its performance against the charter. It also shows where to obtain more information regarding particular sections of the new scorecard.

PROJECT ALCHEMY

An multibillion rand economic empowerment transaction, called Project Alchemy, has been designed to promote long-term sustainable development in host communities and key labour-sending areas that are not currently benefiting from the Company’s extensive BEEprogrammes. This groundbreaking initiative heralds a new approach that emphasises broad-based black economic empowerment and engagement with communities.

Alchemy is a R3.5 billion transaction aimed at ensuring the long-term sustainable development of four of our host communities and major labour-sending areas. The transaction is notionally vendor-financed over 10 years at a fixed 9.5% notional interest rate and includes an upfront discount of 5%. Anglo American Platinum Limited has issued a total of 6,290,365 ordinary shares of 10 cents each to the Lefa La Rona (“Our Inheritance”) Trust. The market value of such shares (inclusive of the 5% discount) is R528.59 per share, determined with reference to the share price immediately prior to the announcement date for the transaction. The Alchemy shares issued represent 2.33% of Anglo American Platinum Limited ordinary shares in issue prior to the issue of the former.

The Lefa La Rona Trust has been established to act as a conduit between the Company and four development trusts (Development Trusts), to be set up for the benefit of host communities within an approximate radius of 15 km from the Amandelbult, Rustenburg, Twickenham and Mogalakwena mines (collectively “the Mines”) and a non-profit company (Non-profit Company) incorporated for the benefit of the labour-sending areas. The Development Trusts and the Non-profit Company will benefit from the following cash flows: annual dividend receipts; a guaranteed minimum dividend flow of R20 million per annum to provide an annual cash amount to the Development Trusts and the Non-profit Company, after taking into consideration the annual dividends received; rechannelled CSI spend of R30 million to the extent that the Development Trusts secure approval for development projects within the host communities; health and safety cash-flow benefits for the Development Trusts if key performance indicators relating to on-and-off-mine health and safety targets are achieved; proceeds from the potential increase in the Anglo American Platinum Limited share price after settling of the notional vendor funding, to the extent that the shares are disposed of by the Development Trusts and the Non-profit Company at the expiry of the term of the transaction.

The Company’s ultimate ambition in this transaction is to make a meaningful and sustainable contribution to the ability of those communities to thrive well beyond the life of our mining operations.

MINE NATIONALISATION – SOUTH AFRICA

The African National Congress (ANC), South Africa’s ruling political party, has completed research into the pros and cons of mine nationalisation in South Africa. In 2011, the ANC appointed researchers to conduct a global study into mine nationalisation models. A first draft report was tabled in November 2011. The ANC’s secretary general has asked the researchers to make amendments to the report and it is expected that the document will be made public in the first half of 2012. Thereafter, the ANC will debate the matter of mine nationalisation at its policy conference in mid-2012.

We continue to work with representative bodies of the mining industry in order to be able to make a contribution to finding, together with the ruling party and other stakeholders, a collective and sustainable model capable of addressing the country’s current challenges of poverty, unemployment and inequality in a constructive manner. We remain of the opinion that mine nationalisation will not solve the economic and transformational challenges South Africa faces, but will instead have a negative impact on the country’s economy and ability to create jobs.

INDIGENISATION ACT – ZIMBABWE

The Indigenisation and Economic Empowerment Act (Indigenisation Act) was signed into law on 9 March 2008 and seeks to ensure that at least 51% of the shares of every public company and any other business is owned by indigenous Zimbabweans. The Minister of Youth Development, Indigenization and Empowerment, published regulations for the mining sector on 25 March 2011. The regulations apply to every mining business not controlled or 51% owned by indigenous Zimbabweans. Such businesses were required to submit an indigenisation plan by 9 May 2011 and were also required to dispose, by 25 September 2011, of at least 51% of their shares to entities specifically designated in the regulations.

Amzim Holdings Limited, the holding company for the Zimbabwean investment, submitted its indigenisation plan in line with these deadlines. At year end, negotiations with the Minister of Youth Development, Indigenization and Empowerment, regarding this plan were still in progress. As part of its overall plan to comply with the requirements of the Indigenisation Act, Unki made a $10 million donation to the Tongogara Rural District Community Share Ownership Trust. This trust was established by Amzim Holdings Limited to advance the empowerment of the Unki Platinum Mine host communities. It is also envisaged that, subject to conclusion of negotiations with the Zimbabwean Government, the trust will subscribe for shares equivalent to 10%, on a fully diluted basis, of the issued share capital of Amzim Holdings Limited.

WATER USE LICENCE

Our operations with approved water use licences (WUL) are Twickenham Platinum Mine, Polokwane Metallurgical Complex, Mogalakwena Mining area and the Mototolo Concentrator and Der Brochen Project (whose integrated WUL was approved in April 2011. Although submitted as far back as 2004, three of our operations, Rustenburg, Union and Amandelbult, located in the North West Province of South Africa, remain without approved WULs. These operations have valid water permits under the old Act. We continue to engage with and support the regulator, Department of Water Affairs, both at the regional level and at National level through our Government Relations department, in relation to the approval of our WULs.

Mining scorecard reference table

Description Measure 2011 target 2011 progress against target Compliance target by 2014 Section
Reporting
Has the Company reported the level of compliance with the charter for the calendar year? Documentary proof of receipt from the department March 2012 Reports submitted on a quarterly basis Annually
Ownership
Minimum target for effective HDSA ownership Meaningful economic participation   A plan was established and 53% was achieved at the end of 2011 26% Mining licences and black economic empowerment
Full shareholder rights   Good progress to achieving 2014 target 26% Mining licences and black economic empowerment
Housing and living conditions
Conversion and upgrading of hostels to attain the occupancy rate of one person per room Percentage reduction of occupancy rate towards 2014 target 25% The housing strategy has been adopted by organised labour as the key beneficiary of the houses. All hostels have been converted. Promotion of home-ownership programmes continues and plans are in place to build 20,000 homes by 2017 Occupancy rate of one person per room Housing
Conversion and upgrading of hostels into family units Percentage conversion of hostels into family units 25% All hostels converted Family units established Housing
Procurement and enterprise development
Procurement spent from BEE entity Capital goods 10% 48% 40% Sustainable development
in supply chain
Services 40% 44% 70% Sustainable development
in supply chain
Consumable goods 15% 34% 50% Sustainable development
in supply chain
Multinational suppliers’ contribution to the social fund Annual spend on procurement from multinational suppliers 0.5% This programme is currently being addressed and work is underway. The identification of suppliers is complete. The next step is to develop a strategy for the management of the funds. 0.5% of procurement value
Employment equity
Diversification of the workplace to reflect the country’s demographics to attain competitiveness Top management (Board) level 25% 44% 40% Employment performance
Senior management (Exco) 25% 41% 40% Employment performance
Middle management 35% 56% 40% Employment performance
Junior management 40% 63% 40% Employment performance
Core skills 20% 81% 40% Employment performance
Sustainable development and growth
Improvement of the industry’s environmental management Implementation of approved EMPs   Regulation 55 performance reviews are done by the environmental managers and are submitted to the DMR by the operations. The schedules are aligned with the EMPR commitments 100% Compliance
Improvement of the industry’s mine health and safety performance Implementation of the tripartite action plan on health and safety   Implementation of action plans aligned with existing OHSAS 18000 systems 100% Safety
Utilisation of South African-based research facilities for analysis of samples across the mining value chain Percentage of samples in South African facilities   100% of all environmental samples analysed in South Africa 100%
Beneficiation
Contribution of a mining company towards beneficiation (this measure is effective from 2012) Additional production volume contributory to local value addition beyond the base-line   The Company continues with implementation of its beneficiation strategy. The offset guidelines have not been finalised by the Department of Mineral Resources and therefore the Group cannot calculate what offsets it qualifies for. Furthermore the DMR released its beneficiation strategy but with no reference to base-line levels and targets. Section 26 of the MPRDA (percentage above baseline )
Human resource development
Development of requisite skills, incl support for South African-based research and development initiatives intended to develop solutions in exploration, mining, processing, technology efficiency (energy and water use in mining), beneficiation as well as environmental conservation and rehabilitation HRD expenditure as percentage of total annual payroll (excl mandatory skills development levy) 3.5% 6.3% has been achieved against this target 5% People development
Mine community development
Conduct ethnographic community consultative and collaborative processes to delineate community needs analysis Implement approved community projects   Projects in communities surrounding our operations implemented to the value of R186,5 million Up-to-date project implementation Community engagement and development