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INTEGRATED ANNUAL REPORT 2017

Our value-creation journey

OUR OPERATIONS AND PROJECTS

A view from the top

PERSPECTIVE FROM THE CHAIR

Following what has been a highly successful 2017, we embark on 2018 full of confidence in the sustainability of our operations. I am personally grateful for the unstinting efforts of all our people to make ours the great company that it is.

Sello Moloko – Chairman

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CHIEF EXECUTIVE’S REVIEW

Over the course of the past two years, primarily in 2017, the Group has fundamentally changed, from a gold mining company with its asset base located entirely in South Africa, into a geographically diversified, international precious metals company.

Neal Froneman – Chief Executive Officer

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CHIEF FINANCIAL OFFICER’S REPORT

The year 2017 was dominated by the acquisition and integration of Stillwater Mining Company and associated financing of the transaction.

Charl Keyter – Chief Financial Officer

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MANAGING OUR MATERIAL RISKS

“Understanding our risks and ensuring we have appropriate measures in place to mitigate and manage these risks, which enable us to take decisive action to realise opportunities in pursuit of our strategy, is vital for us to continue delivering sustainable value.”

Neal Froneman – Chief Executive Officer

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Creating value

In 2017, Sibanye-Stillwater used …

A skilled, motivated workforce, supported by training and development and relevant technologies, enhances our operational efficiency; we have a framework of policies, systems and processes in place to ensure employee safety, health and wellbeing

… did the following:
  • Employed 66,472 (2016: 74,531) people (including contractors) – decline in total employee numbers from 2016 was due to cost optimisation undertaken that included retrenchment and downscaling of selected gold and PGM operations in the SA region
  • Prioritised employee engagement at newly-acquired assets
  • Initiated safety awareness campaigns and enhanced monitoring of safety compliance
… achieved these milestones:
  • Improved safety performance:
    Fatalities: 11 (2016: 14)
    LTIFR: 5.78 per million hours worked (2016: 6.26)
  • 79.6 hours of training and skills development on average per employee in the SA region
  • Improved gender diversity: 13% of employees are female (2016: 12%)
  • Successfully implemented our organisational model and rolled out our values at newly acquired operations
  • Wage agreements finalised at Kroondal, Stillwater and East Boulder
  • Continued to progress the executive leadership development programme to ensure solid effective leadership
… created value:
  • Paid salaries and wages paid to employees totaling R18.5bn (2016: R9.3bn) equivalent to 42% of cost of sales before amortisation and depreciation
  • Spent R549m on training and development across the Group (2016: R403m), including R17.3m (US$1.3m) in the US region. The increase is mainly due to inclusion of SA PGM operations for 12 months in 2017 versus partial inclusion in 2016
  • Began second phase of the Care for iMali indebtedness programme at the SA gold operations and by year-end, had reduced illegal garnishee deductions by R1.34m since 2015
  • Improved health and wellbeing of employees – 12% decline in TB incidence (new and relapse) in the SA region

Funds operating expenses, training and development, acquisition of natural resources and mining infrastructure, land rehabilitation, socioeconomic initiatives and enhances the performance of manufactured capital.

Availability of financial capital – is achieved through ensuring the right combination of equity, debt and operating cash flows –its efficient management is critical

… did the following:
  • Had cash and cash equivalents of R968m at the beginning of the year
  • Acquired Stillwater for US$2.2bn (R29.3bn at R13.31/US$)
  • Raised US$2.65bn bridge loan to conclude acquisition
  • Net debt: adjusted EBITDA of 2.6 times following refinancing
  • Began the year with an enterprise value of R32bn
… achieved these milestones:
  • Generated revenue of R46bn from sales of metals produced (2016: R31bn)
  • Incurred cost of sales of R36bn (2016: R25bn)
  • Capital expenditure of R6.1bn (2016: 4.1bn) for the Group
  • Bridge loan successfully refinance through a US$1bn equity rights issue, US$1.05bn corporate bonds and US$450m convertible instruments, thereby ensuring a more appropriate capital structure
  • Debt of R26.0bn (2016: R6.3bn)
… created value:
  • Had cash and cash equivalents of R2,062m at year end
  • Acquisitions and capital restructuring has better positioned the company to unlock and create future value
  • Ended the year with an enterprise value of R58bn

Sustainable operations profitably accessing/ exploiting natural resources – economically viable orebodies – is fundamental to the sustainability of our business. In addition, natural resources – land, water, air – are impacted by our mining and processing activities

… did the following:
  • Acquired PGM reserves (2E) of 21.903Moz with the Stillwater acquisition
  • Deposited 39.36Mt of waste (2016: 32.61Mt)
  • Replaced a substantial portion of depleted Mineral Reserves in the SA region, a result of mining and the removal of Cooke, under a tighter set of economic parameters, thus maintaining a sustainable production profile
  • Completed almost 20km of ore reserve development across the Group
  • Energy consumption was higher at 6.01TWh (2016: 4.72TWh), largely due to inclusion of SA PGM operations for full year, and acquisition of US PGM operations
… achieved these milestones:
  • Mined/milled 36.08Mt of ore in total
  • Reported a 37% reduction in environmental incidents
  • Reduced energy intensity and GHG emissions by 43% and 41% respectively – the reduction was due to Cooke being placed on care and maintenance, the inclusion of SA PGM operations for a full year and acquisition of US PGM operations
  • Reduced potable water consumption to 18,284Ml in the SA region (2016: 19,663Ml)
… created value:
  • With the acquisition of Stillwater have increased 2E PGM Mineral Reserves and Mineral Resources by 21.903Moz and 84.4Moz respectively
  • DRDGOLD transaction establishes a commercial vehicle suited to securing long-term environmentally friendly tailings deposition on the West Rand

Given mining’s impact, stakeholder alignment is essential for operational sustainability and our ability to continue to deliver value to all our stakeholders.. Honest, transparent stakeholder engagement ensures that we earn and maintain our social and legal licences to operate

… did the following:
  • Engaged with key stakeholders on:
    • Mining Charter
    • Proposed acquisitions
    • Occupational lung disease
    • Community development
    • Safety
  • Continued with remaining SLP projects
… achieved these milestones:
  • The Good Neighbour Agreement in force in the US region is a good example of how co-operation with stakeholders can be beneficial to maintaining a social licence to operate – aspects of which will be applied in the SA region
  • Enterprise development centres being established in the SA region to promote and assist with sustained economic activity in communities
… created value:
  • Paid R903m to governments in taxes and royalties (2016: R1,733m)
  • Invested R1,161m in socio-economic development, of which R1,159m was in the SA region (2016: R656m)
  • Procurement spend of R24.7bn
  • BEE procurement spend in the SA region of R10.6bn or 79% of discretionary spend (2016: R7.6bn or 77% respectively)

Acquiring, maintaining and developing the infrastructure (plant, property and equipment) required by a mining company and optimised processes are essential to cost-efficient operations

… did the following:
  • Spent R1.3bn at group level on sustaining capital, including maintenance, of which R1.1bn was in the SA region
  • Spent R593m on growth projects in the SA region
  • Acquisition of the Stillwater and East Boulder mines, the Blitz project and the Columbus Metallurgical Complex
  • Announced proposed acquisition of additional PGM assets (Lonmin) and of potential gold tailings retreatment partnership with DRDGOLD
… achieved these milestones:
  • Blitz project commissioned three months ahead of schedule
  • Repositioned and diversified the Group geographically, operationally and with regard to product mix
  • Invested R13m in research and development
  • Invested R395m on further development of Burnstone
… created value:
  • Created a unique, leading, global precious metals producer
  • Became a top three global PGM producer
  • Plans in place to establish a full mine-to-market pipeline for PGM operations in the SA region

Performance review

HIGHLIGHTS 2017

  • 47%

    Growth in revenue year on year reflecting Sibanye- Stillwater’s transformation into a global precious metals company

  • 14%

    Improvement in safety performance (serious injury frequency rate – SIFR) in the Southern Africa region

  • R1bn

    Savings achieved from synergies implemented at the PGM operations in the Southern Africa region

  • 37%

    Fewer environmental incidents (level 3+) reported in the Southern Africa region

MESSAGE FROM THE CEO

“The year 2017 was operationally and strategically significant for Sibanye-Stillwater”

Neal Froneman – Chief Executive Officer
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Production

Gold

1.4Moz 2016:1.5Moz

PGMs

1.2Moz 2016:0.5Moz

All-in sustaining cost

Gold

$1,128/oz 2016:$954

PGMs

$782/oz 2016:$709

We invest in projects which meet a real internal rate of return (IRR) of 15%

MESSAGE FROM THE CEO

“Our people make a difference and give Sibanye-Stillwater a competitive edge.”

Neal Froneman – Chief Executive Officer
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Number of Employees

SA region

64,447 2016: 74,531

US region

1,970

Corporate office

55

Wages

SA region

R13.7bn 2016: R9.3bn

US region

US$114.7m

MESSAGE FROM THE CEO

“We are making steady progress on our journey to improve safety, health and wellbeing in the workplace and to achieving zero harm.”

Neal Froneman – Chief Executive Officer
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Key figures

Fatalities

11 2016: 14

FIFR

0.07 2016: 0.10

LTIFR

5.78 2016: 6.62

SIFR

3.59 2016: 4.16

TRIFR

2.60 2016: 3.85

Safety Achievements 2017

SA region
  • Four million fatality-free shifts: PGM operations
  • Three million fatality-free shifts: Gold operations (achieved 4 January 2018), Kroondal, Kroondal (Kopaneng)
  • Two million fatality-free shifts: Kroondal (Simunye), Driefontein 2 and 4
  • One million fatality-free shifts: Beatrix, Driefontein 5

In addition, Beatrix and Driefontein were recognised at the annual MineSAFE awards in August 2017. They were placed second and third, respectively for having recorded the most improved safety performance during 2016/17.

US region
  • Achieved 1.84 million fatality-free shifts
  • Base Metals Refinery achieved 500,000 hours worked without a lost-time injury
  • During 2017, East Boulder received the Montana Mining Association’s Safe Work Practices Award for 2016
MESSAGE FROM THE CEO

“Ultimately, our aim is to leave a sustainable socio-economic legacy for host communities once mining has ceased”

Neal Froneman – Chief Executive Officer
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Socio-economic development spend

SA region

R1,159m 2016: R656m

US region

$194,785
From May – December 2017

Local procurement

SA region

R10.6bn 2016: R7.6bn

US (Montana) region

US$63.9m

SIBANYE COMMUNITY DEVELOPMENT TRUST

A new community trust has been set up, aimed at enhancing the impact of socio-economic projects on communities by augmenting and optimising our community development programmes. The trust will enable us to facilitate regional development programmes in collaboration with other stakeholders by optimising our SLP projects and other value-adding development initiatives. It will promote the use of local suppliers to unlock, create and share value in the communities.

The trust is being set up by Sibanye-Stillwater, which will be the principal funder. Suppliers and other corporates will also contribute to funding. The trust, to be implemented in 2018, will have six trustees, all of whom will be employees of Sibanye-Stillwater.

MESSAGE FROM THE CEO

“As a responsible corporate citizen, we aim to minimise our impact on the environment and support economic activity once mining has ceased.”

Neal Froneman – Chief Executive Officer
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Land management

Reportable incidents
SA region

12 2016:19

US region

6

Waste to landfill
SA region

38.10Mt 2016:32.61Mt

US region

12.60Mt

Water footprint

Water withdrawal

125,135ML 2016:111,693ML

Water discharged

70,586ML 2016:65,833ML

Volumes treated

41.83Mt 2016:26.80Mt

Water intensity

1.31ML/tonne 2016:1.71/tonne

Air quality

Energy consumption

6.01TWh 2016:4.72TWh

Energy intensity

0.69GJ/tonne 2016:0.68GJ/tonne

NO2 & SO2 emissions

611 tonnes 2016:667 tonnes

CO2e intensity

0.13t/t milled 2016:0.22/t milled

Construction of a photovoltaic plant on track to commence in H22018, estimated to reduce our carbon footprint by 120,000t CO2e per 50MW phase

Additional information

The integrated report is the primary report in our 2017 suite of reports.

It covers the operational, financial and non-financial performance of the operations and activities of Sibanye-Stillwater over the year to 31 December 2017.

Supplementary files

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Fact sheets