smart platinum mining ANNUAL INTEGRATED REPORT 2016 CONTENTS WE BELIEVE IN OUR COUNTRY, COMPANY SNAPSHOT 2016 OUR COMPANY, Focus on the Northam group 2 Focus on strategy 7 OUR PEOPLE Focus on the business 8 Focus on delivery 10 AND OUR Focus on leadership 18 PRODUCT BUSINESS PERFORMANCE Chairman’s statement 20 Chief executive’s review 22 Chief financial officer’s review 24 F Financial capital 30 M Manufactured and intellectual capital 38 H Human capital 44 S Social capital 60 N Natural capital 68 GOVERNANCE Managing risks and opportunities 96 2016 Corporate governance report 102 REPORTING SUITE Remuneration report 107 Independent assurance report 116 2016 KPIs identified for limited assurance 120 Reporting in line with GRI 122 ANNUAL FINANCIAL STATEMENTS Financial statements and notes 135 Annual integrated Notice of AGM and Reviewed preliminary Directors’ report 138 report 2016 abridged annual results for the year report 2016 ended 30 June 2016 Report of the audit and risk committee 153 Approval and company secretary’s confirmation 155 IBC Scan the QR bar code with your smart ADMINISTRATION AND CONTACT INFORMATION phone or tablet to download the suite of 2016 Northam reports www.northam.co.za smart platinum mining SCOPE REPORTING PARAMETERS overview provides a summary of the business, its performance Northam Platinum Limited (Northam or Northam Platinum and the value it creates for stakeholders and an assessment of or the group or the company) is listed on the JSE Limited the group’s governance, economic, social and environmental (JSE) in South Africa. This integrated report, together with impacts and performance during the reporting period. the company’s notice of annual general meeting (AGM) The primary purpose of our integrated report is to explain and abridged annual financial statements, is published in how we create value over time, through a combination of compliance with the JSE’s listings requirements and the quantitative and qualitative information. We have chosen to use provisions of the South African Companies Act No 71 of 2008 the capitals concept to convey this information, as we believe (Companies Act). this provides users of the report with a good understanding Northam is committed to reporting in line with the King Report of how we create value for all stakeholders. The International on Corporate Governance in South Africa 2009 (King III). The Integrated Reporting Framework defines capitals as stocks of application of these guidelines is reviewed in the corporate value that are affected or transformed by the activities and governance section of this report on page 102. outputs of an organisation. In our report, we have focused on financial, human, social and natural capital and combined In its financial disclosure, the group reports in terms of manufactured and intellectual capital. International Financial Reporting Standards (IFRS), the Companies Act and the South African Code for Reporting of Exploration In formulating our strategy and determining our strategic priorities, Results, Mineral Resources and Mineral Reserves (SAMREC). we continue to consider those issues that are most material to the business and stakeholders, influence the sustainability Northam’s financial year runs from 1 July to 30 June. In this of our business and the social, economic and physical 2016 financial year (the 2016 reporting period), Northam environments in which we operate and which fundamentally has continued with its integrated approach to reporting, first influence the assessments and decisions of stakeholders. embarked upon in FY2012. This approach seeks to present to stakeholders a holistic overview of the group’s financial The financial statements include the group’s subsidiaries, joint and non-financial performance for the reporting period ventures and associates. The non-financial disclosure is limited and incorporates the recommendations of the International to the group’s two wholly-owned operations, the Zondereinde Integrated Reporting Council (IIRC) and the Global Reporting and Booysendal mines. Discussion on performance is confined Initiative (GRI) fourth generation (G4) guidelines. This holistic to those entities where the group is the operator. AUDITING AND ASSURANCE G4. The group reports in line with the ‘core’ format. The Northam’s internal and external auditing functions are critical reporting process has also been underpinned by the AA1000 AccountAbility Principles Standards 2008, which include areas of governance. The internal audit function is outsourced Inclusivity, Materiality and Responsiveness. The independent to KPMG Services Proprietary Limited (KPMG) for independent assurance report can be found on page 116 of this report. appraisal. KPMG’s specific tasks are to: • examine and evaluate the group’s systems of internal control Except where specifically stated otherwise, Northam reports in the mitigation of business and financial risks; and ore resources, reserves, production and grades in terms of its platinum, palladium, rhodium and gold elements/metal content. • assist members of management with discharging their This is expressed as 3PGE+Au or 4E. duties effectively. In this report, employees are those people directly employed The group’s consolidated annual financial statements have by Northam. Indirect employees are those people employed been audited by the external auditor, Ernst & Young Inc. The by contracting companies i.e. providers of specialised and/or independent auditor’s report may be found in the annual technical services to the operations. financial statements starting on page 135. Both ZAR and R signify rands, the South African currency. Certain non-financial key performance indicators in this report have also been assured by independent assurance provider Non-financial reporting indicators are defined in a glossary Ernst & Young Inc in respect of Northam’s application of GRI’s available on the Northam website at www.northam.co.za The primary purpose of our integrated report is to explain how we create value over time NORTHAM ANNUAL INTEGRATED REPORT 2016 1 COMPANY SNAPSHOT 2016 FOCUS ON THE NORTHAM GROUP NORTHAM OPERATIONS ON THE BUSHVELD COMPLEX Location of the Bushveld Complex, South Africa The Zondereinde mine is an established, long-life operation which produces Limpopo approximately 280 000oz of refined PGMs annually. Gauteng Mpumalanga North West 280 000oz Free State OF REFINED PGMs KwaZulu-Natal Northern Cape Eastern Cape Western Cape Operations on the Bushveld Complex Booysendal UG2 North mine Wholly-owned came into production in July 2013 operations and has now ramped up to full Joint ventures production of some 160 000oz Other operations per annum. N Polokwane Cities/towns PP Rust Main roads Mokopane Lebowa PRODUCTION OF Limpopo Twickenham Dwaalkop Marula Amandelbult Thabazimbi Modikwa 160 000oz Mashishing PER ANNUM Zondereinde Union Bela Bela Two Rivers Pilanesberg Northam Chrome Mototolo Der Brochen Sedibelo Groblersdal Booysendal BRPM Implats Pandora Brits Rustenburg Eland RPM Crocodile Pretoria Witbank Eastern & River Western Plats Johannesburg 050 100 km 2 CORE ACTIVITIES existing Booysendal operation has begun, which will allow Northam is an independent, fully empowered, mid-tier, the group to begin extracting value and developing the new integrated PGM producer with two primary operating assets, Booysendal South mine. Zondereinde and Booysendal platinum group metal (PGM) Northam Chrome is a wholly-owned subsidiary of Northam. mines in the South African Bushveld Complex. The Zondereinde lease area is also the location for Northam’s metallurgical Northam Chrome produces chrome from Zondereinde mine’s operations, which include a smelter and base metals recovery UG2 tailings. plant. Northam Chrome Proprietary Limited (Northam During the year under review, Northam acquired a 20% interest Chrome) is a wholly-owned subsidiary of Northam Platinum. in SSG Holdings Proprietary Limited, a company providing ASSETS AND RESOURCES security services to both the operating mines. A further 10% interest was acquired subsequent to year end. The Zondereinde mine is an established, long-life operation which produces approximately 280 000oz of refined PGMs The company holds a 7.5% interest in another PGM mining annually. The mine is located on the northern end of the western operation in the Bushveld Complex, the Pandora joint limb of the Bushveld Complex near the town of Thabazimbi. venture (JV), in partnership with Anglo American Platinum Zondereinde has a life of mine (LoM) in excess of 20 years. Limited and Lonmin plc. The shallower mechanised Booysendal UG2 North mine Northam also owns a 50% interest in the Dwaalkop JV and is located near the town of Mashishing (formerly Lydenburg) a 51% initial participatory interest in the Kokerboom JV on the eastern limb of the Bushveld Complex. The mine came into production on 1 July 2013 and has now ramped up to exploration project in the Northern Cape. full production of some 160 000oz per annum. The 105Moz The group milled a total of 4.2Mt (Zondereinde: 2.0Mt, orebody at Booysendal lends itself to brownfields expansion Booysendal North: 2.2Mt) in the year under review to produce opportunities, which are currently being established on the 13 591kg of metal, which has been processed to realise sales property. These include a deepening project at the existing UG2 North mine and the development of the Booysendal revenue of R6.1 billion (FY2015: R6.0 billion) – an increase of Merensky North mine on the property. 1.0% year on year. The higher