KUMBA IRON ORE LIMITED INTEGRATED REPORT 2013 FOCUSED ON DELIVERY SECURING THE FUTURE IN PARTNERSHIP IRON ORE Other sources FOCUSED ON DELIVERY of information 2013 was a year in which we revised our strategy to ensure it gave us the flexibility our business required. You can find this report and additional information We undertook extensive studies to about Kumba Iron Ore Limited help revise our mine plans, and we on our corporate website. For more information visit www.angloamericankumba.com/ initiated intensive stakeholder investor_fin_reports.php engagement to gain insight into how people see us. With all this planning and understanding behind us, in 2014 we will be focused on execution of the revised strategy to yield results. PERFORMANCE HIGHLIGHTS CONTENTS HIGHLIGHTS 02 Our approach to integrated reporting Production SAFETY Mt (2012: 2 fatalities) 2009 Our business and external environment 42.0 No loss of life 04 Our business 07 Salient features 2010 43.3 08 Our business model 10 Chairman’s review 2011 14 Integrating what we do 41.3 REVENUE (2012: R45.4 bn) 16 Our strategy 2012 20 Managing our risks and opportunities 43.1 30 Stakeholder engagement and material issues 2013 R54.5bn 42.4 Performance against objectives 38 CEO’s review 42 Financial review Dividend per share HEADLINE EARNINGS 48 Key financial indicators Rand per share (2012: R12.5bn) 60 Sustaining our business 2009 60 • Operational review 14.60 64 • Safety and health 2010 R15.4bn 68 • Employment and employees 34.50 72 • Supporting sustainable communities 2011 74 • Environment 44.20 78 Growing our business DIVIDENDS PAID 84 Accessing our markets 2012 (2012: R18.0bn) 31.70 86 Securing our future 2013 88 Ore Reserves and Mineral Resources 40.04 R13.7bn Governance 114 Board and executive committee 118 Corporate governance review Cover Image The pit at Sishen mine is 129 Remuneration and performance PAID TO SOUTH AFRICAN one of the five largest in 138 Report of the audit committee the world. It is currently FISCUS being extended to follow 141 PwC report the ore body that is (2012: R6.2bn) dipping towards the southwest. Kobus Ellis Administration and Kefentse Molotsane observe waste mining in 142 Shareholders’ information the southwestern part of R8.3bn 143 Administration the pit from one of the viewpoints. 144 Notice of annual general meeting Opposite Form of proxy (insert) Supervisor James Kolai oversees the loading of a train at Kolomela mine in the Northern Cape. The mine produces direct-shipping ore for the export market. Kumba Iron Ore Limited Integrated Report 2013 01 OUR APPROACH TO INTEGRATED REPORTING OUR APPROACH TO INTEGRATED REPORTING OUR APPROACH TO INTEGRATED REPORTING Reporting scope and boundary This report provides insight into the primary operations This is the third year Kumba Iron Ore Limited (Kumba or owned and managed by the group – Sishen, Kolomela and the company or the group) has produced an integrated Thabazimbi mines – as well as the company’s logistics and report. Both the report and our integrated reporting process marketing operations and its corporate office. While the have been shaped by the internal and external feedback we report concentrates on the 2013 financial year, historical received on our 2012 reporting suite, as well as what we information, targets and objectives are provided as context have learnt from the previous processes. Our reporting is and to give the reader the complete picture of Kumba. For extensive and reflects input from individuals at various more information on Kumba and its activities see Our levels and in different disciplines in the company, as well business on page 04. as our stakeholders, and we believe this provides us with In line with the IIRC guidelines this report is aimed primarily at more insight into how all the elements of our business providers of capital funding. The material issues discussed work together. within the report, however, impact and/or are impacted by key This report is aligned with the International Integrated stakeholders, who are considered when compiling the report. Reporting Council’s (IIRC’s) <IR> Framework, released in For more on this see Determining our material issues on December 2013, as well as the King Code of Governance page 36 and Stakeholder engagement on page 30. Principles and the King Report on Governance (King III). We During 2013 we adopted International Financial Reporting endeavour to provide readers with a holistic view of the Interpretations Committee (IFRIC) 20 Stripping costs in the company through our integrated reporting and to tell production phase of a surface mine, resulting in a restatement Kumba’s story – not only of our performance in 2013, but of the 2012 financial results. An explanation of this and its also where we hope to go in the future. This Integrated impact can be found in the Financial Review on page 42and Report should be read in conjunction with our Annual the Annual Financial Statements 2013. Where necessary, the Financial Statements and Sustainable Development Report. 2012 numbers have been restated to reflect this change. 2013 SUITE OF REPORTS Kumba’s 2013 suite of reports for the financial year ended 31 December 2013, consists of: • Integrated Report, which speaks to the company’s key operational, financial, economic, social and environmental issues, as well as governance, strategy, material issues and performance during the year. The Integrated Report has been compiled using the recommendations of King III and the <IR> Framework, and is made available to all shareholders. • Annual Financial Statements, which present the audited group and company Annual Financial Statements, prepared in accordance with the International Financial Reporting Standards and International Accounting Standards as issued by the International Accounting Standards Board and IFRIC Interpretation Committee, the South African Companies Act No 71 of 2008, as amended (Companies Act), the Listings Requirements of the Johannesburg Stock Exchange (JSE Listings Requirements), and the South African Institute of Chartered Accountants Financial Reporting Guides as issued by the Accounting Practices Committee. The Annual Financial Statements have been audited by Deloitte & Touche. An unmodified audit opinion was issued and is included on page 25 of the Annual Financial Statements. • Sustainable Development Report, which, for the first time, has been prepared in line with the G4 Guidelines of the Global Reporting Initiative (GRI) and GRI’s Mining and Metals Sector Supplement (MMSS). In line with guidance from the Anglo American Group we have adopted a ‘core’ approach to reporting and certain key performance indicators (KPIs) have been assured by PricewaterhouseCoopers Inc (PwC). This assurance statement can be found on page 100 of the Sustainable Development Report. Both the principles endorsed by the International Council on Mining and Metals and the United Nations Global Compact have been taken into consideration when compiling this report as Anglo American plc is a signatory to both. Furthermore, we have reported on our compliance with the Mining Charter of South Africa. Copies of these reports may be requested from Kumba’s investor relations department contact Esha Mansingh at [email protected] / [email protected]. Alternatively, the reports may be downloaded at www.angloamericankumba.com/investor_fin_reports.php. 02 Kumba Iron Ore Limited Integrated Report 2013 ASSURING OUR REPORTS MATERIALITY Kumba applies a combined assurance model, which seeks to We have again chosen to focus this report on our material optimise the assurance obtained from management and issues, using these as a compass to navigate what is internal and external assurance providers. important to our story. Our material issues were identified and reviewed by management through a rigorous process • External auditors provide assurance for the group. Deloitte & that took into consideration stakeholder concerns and Touche assured the Annual Financial Statements 2013 and included a materiality workshop held during the year, and PwC assured selected sustainability information in the which were approved by the board. For more on this, and to Sustainable Development Report 2013. Key financial read about our Material issues, see page 36. indicators and sustainable development information is included in the Integrated Report 2013. Quoted reserves and Material trade-offs for Kumba resources estimates are assured through a rolling external In order to leverage our driving forces (see below) and create audit schedule by Xstrata Mining Consultants (Australia), a sustained value we must acknowledge there will be some Calibre Group company. material trade-offs between them. For example, our activities can have a negative impact on the environment, but the same • The group’s internal audit function, overseen by the audit activities can allow us to enhance the lives of our people and committee, assesses the adequacy and effectiveness of support our communities. As a result, the mitigation of the group’s financial, operating, compliance and risk something such as environmental impacts should not be management controls and provides the board with viewed in isolation, but rather in the context of all the driving positive assurance on the key areas of the group’s internal forces and how we aim to balance them. Another example of financial controls. this is taking decisions that might impact profitability in the The audit committee reviews the company’s combined short term, but that allow us to focus on long-term financial assurance model and is satisfied that it is complete, that the sustainability, such as ramping up waste mining. Throughout level of unmitigated risks remain appropriate, and that this report we have aimed to show how our business works sufficient internal and external assurance is provided to holistically and provide explanations of similar trade-offs. manage risks and the control environment. The committee also fulfils an oversight role regarding this report and the related processes, and recommended this report for approval to the Kumba board (the board). The report of the audit committee is on page 138.