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Kumba Iron Ore Limited Kolomela MINE SEAT REPORT 2014

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Kumba Iron Ore Limited Kolomela MINE SEAT REPORT 2014 KUMBA IRON ORE LIMITED KOLOMELA MINE SEAT REPORT 2014 Delivering on our promises with pride KUMBA IRON ORE LIMITED Front page: Happy learners play outside the Asmandia Primary Grade R facility, built by Kolomela mine. A WORD BY THE GENERAL MANagER “We are passionate about making a difference in society and feel privileged to have been able to make a significant contribution to improve the lives of our host community over the past three years.” - Aart van den Brink, General manager: Kolomela mine One of the key pillars of Kolomela mine’s commitment to mine Discussions with other stakeholder representatives in focus iron ore responsibly is to maximise our contribution to the social group sessions centred on issues and impacts relating to and economic development of our host community. Socio- economic benefits through local procurement and business economic assessments help us to understand the impact of development by the mine, as well as social issues focusing our activities and guide our initiatives to invest in community the health and education sector, and vulnerable groups in the development. Since our first socio-economic assessment in community. These discussions provided valuable insights into 2010/11, construction of the mine has been completed, we specific concerns and challenges. became fully operational and, the socio-economic environment and economic market outlook have changed significantly. The We are passionate about making a difference in society socio-economic assessment conducted at the end of 2014, and feel privileged to have been able to make a significant and described in this report, was therefore critical to revisit contribution to improve the lives of our host community over the impact of our activities in the Tsantsabane area. the past three years. The purpose of this report is not only to provide feedback on the findings of the socio-economic The assessment provided a voice for stakeholders to assessment, but also to share details of the initiatives that share their concerns, challenges and needs. Contributions we have undertaken over the last three years to maximise made by participants during the assessment informed our socio-economic benefits through our social performance. understanding of how stakeholders experience the presence of Kolomela mine, and of the realities that they face. The report includes our planning for the next three years to enhance our positive impacts, minimise negative impacts I would like to express my sincere gratitude to all and address issues raised by stakeholders. These plans are participants in this socio-economic assessment. Kolomela unfortunately impacted significantly by the volatile global mine appreciates your time and effort to articulate your economic environment in which Kumba Iron Ore (Kumba) views on a host of issues. We strongly believe in openness, does business. transparency and robust discussions to build and maintain mutually beneficial relationships. Your feedback, input and The sharp decline in the price of iron ore since the second even criticism have been very constructive. half of 2014 has put Kumba and all its mining operations under severe pressure to implement cost cutting measures We appreciate the contribution from the Tsantsabane Local and develop more efficient and effective ways of running Municipality’s leadership which helped shape our understanding the business. The global iron ore price fell with almost 60%, of the municipality’s challenges, and expectations of Kolomela which means that our product is sold for more or less half mine as a partner in community development. than was the case 12 months ago. KOLOMELA SEAT REPORT 2014 Introduction This situation impairs Kumba’s ability to grow and sustain We need our stakeholders to walk this challenging journey the business and to ensure sustainable profits to with us, and help and support us in our drive to keep on shareholders, including employees and host communities. pursuing high performance while operating more efficiently Kumba had no other option but to cut the operational and cost-effective. Our commitment to support our host budgets of its mining operations, including Kolomela mine, community and embark on community development initiatives and to initiate a restructuring process to reduce staff at head remain unchanged, despite the fact that we will have to think office and mining operations. At Kolomela mine we have and work smarter with the limited resources to our disposal. implemented measures to reduce the unit cost of iron ore production and to manage the operation in a more I am confident that through ongoing engagement, cost-effective manner. Current indications are that collaboration and partnerships with you, our valued the negative market outlook for iron ore will remain stakeholders, we will endure and survive this difficult for the foreseeable future. phase, and be much stronger than before. AART VAN DEN BRINK General manager: Kolomela mine January 2016 Late afternoon view over mining activity in the pit. Introduction KOLOMELA SEAT REPORT 2014 INTRODUCTION TO THE REPORT THE PURPOSE AND BENEFITS OF KOLOMELA MINE’S 2014 SOCIO-ECONOMIC ASSESSMENT Kumba Iron Ore (Kumba) is a member of the Anglo 1. Increase understanding of the needs and realities of the American group of companies1 and as such, all its mining host community. operations conduct socio-economic assessments every 2. Identify key socio-economic impacts and issues that need three years, as required by the Anglo American Social Way to be managed. policy. This policy defines the governing framework for all 3. Inform future planning and the mine leadership’s operations’ social performance. response to the identified issues and impacts. 4. Provide a platform to share the outcomes of the Socio-economic assessments are guided by Anglo assessment with stakeholders to stimulate meaningful American’s Socio-Economic Assessment Toolbox (SEAT) ongoing engagement and increase trust and goodwill which is the cornerstone of Anglo American’s framework to between the mine and stakeholders. manage mining impacts, socio-economic issues, community relations, stakeholder engagement, and sustainable This report describes the findings of the socio-economic development. The SEAT methodology provides a structured assessment carried out during the period October 2014 process for operations to assess socio-economic impacts, to February 2015. It describes how the assessment was including consultation with stakeholders. The outcomes of conducted, profiles Kolomela mine’s operational activities and the process inform operations’ Social Management Plans outlines the stakeholder landscape. It further describes the (SMPs) to address impacts and stakeholder issues, and to mine’s impact on stakeholders and stakeholder issues that contribute to community development. influence their relationship with the mine. It also demonstrates the mine leadership’s response to identified issues and Kolomela mine’s second socio-economic assessment was impacts, in the mine’s SMP for the period 2016 to 2018. commissioned in October 2014 and covers the period 2012 to early 2015. The key objectives of the assessment were to: ¹ Refer to Section 1 for an explanation of the company structure. The publication of the report was held back during 2015 due to a sharp decline in commodity prices impacting the entire mining industry. Iron ore was the worse impacted, creating significant uncertainties within the Kumba Iron Ore business environment. The very low and fluctuating iron ore price resulted in a number of cost control measures, reduced targets and budgets, as well as restructuring at Kumba Iron Ore’s operations as some of the key initiatives to become more efficient and competitive in difficult market conditions. Kolomela mine’s strategy as well as its Social and Labour Plan were amended – delaying the finalisation of the mine’s SMP as a key outcome of the socio-economic assessment process. Readers of this report are advised that the international iron ore market remains in flux, and that further changes in Kolomela mine’s operating environment are to be expected to ensure business sustainability. As this publication was going to print, Anglo American as the majority shareholder announced its intention to give up its interests in Kumba – meaning that a very uncertain period is now ahead for Kumba Iron Ore, its operations, employees, and stakeholders. A process is underway to look at various options to separate Anglo American and Kumba, yet at the time of publication no transaction had been announced yet. Kolomela employees arriving for another productive work day. KOLOMELA SEAT REPORT 2014 Introduction ROLE PLAYERS IN THE SOCIO-ECONOMIC ASSESSMENT Kolomela mine appointed G3 Business Solutions, an SEAT steering committee external service provider specialising in stakeholder George Benjamin, SEAT champion management and socio-economic assessments, to conduct Public Affairs Manager the assessment as an independent third party. Members of the Kolomela SEAT Steering Committee The mine appointed a SEAT Steering Committee to Mining Neil Rossouw oversee the assessment. This cross functional committee Finance Rhoshaan Jina was responsible to enable the assessment with access to information and participation in work sessions. As subject Human resources Chesley Madlala matter experts in their respective departments, Steering Environment Jaco Lambrechts Committee members were required to give input during the assessment, especially with regard to the development Mining Hennie
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