95% of our production comes from our operations in Marikana.

Our Company

Lonmin is a primary producer of Platinum Group Metals (PGMs), which are principally used in the automotive and jewellery industries. Our core operations operate under new order mining rights granted by the South African government, which remain valid until 2037 and are renewable to 2067. Our value chain includes the exploration, mining, refining and marketing of PGMs, with platinum positioned as our principal product, generating 60% to 70% of our revenue in a typical year.

Who
we are
32,793 people work at the Company – 25,296 (77%) permanent employees and 7,497 (23%) contractors
Women constitute 9% of permanent employees
Approximately 126,0001 people live in the areas immediately adjacent to our operations
Platinum sales of 735,747 ounces
Shared business services offer administrative support to mining and process operations
Mining
operations
95% of our production comes from our flagship operations located at Marikana
There are 10 active shafts at Marikana, one of which is on care and maintenance, as well as opencast operations
An additional mine at the Limpopo operations is under care and maintenance
Pandora, a joint venture operation in which Lonmin has a 50% interest, contributes 5% of our annual production
Exploration in South Africa and internationally
1 Based on the assumption that every employee and contractor (2014 headcount) supports 3.3 dependants based on the results of the South African Census 2011 – Statistical Release (revised) PO301.4 by Statistics South Africa.
Process
operations
Smelter, laboratory and a base metal refinery (BMR) at Marikana
Six operational concentrators, one on care and maintenance at Marikana, and one concentrator in Limpopo
A bulk tailings treatment project is under construction
Precious metal refinery (PMR) at Brakpan, Gauteng
Where
we do it
Operations are based in the North West, Limpopo and Gauteng provinces of South Africa
We continue with exploration at the Akanani Mining (Proprietary) Limited (Akanani) project to develop a viable operation
Small exploration projects in Canada and Northern Ireland
Head office in Johannesburg, South Africa and a registered office of the parent company in London, United Kingdom
Primary listing on the London Stock Exchange (LSE); secondary listing on the Johannesburg Stock Exchange (JSE)

Platinum Group Metals (PGMs)

The PGMs mined by Lonmin include platinum, palladium, rhodium, ruthenium and iridium, of which platinum is the principal product. PGMs are durable precious metals that are valuable due to their robust catalytic and electrical properties, long life cycle and high recyclability.

The primary production of PGMs is an energy-intensive process, offset by the important roles these metals play in reducing pollutants from the combustion of fuel through technologies like catalytic converters. Mining also brings a range of socio-economic benefits, which include creating employment, socio-economic development investment, tax contributions and helping to develop local and national economies.

Demand for PGMs globally1

1 SFA (Oxford) estimates.

Lonmin PGMs refined production (ounces)

  2012 2013 2014 2015 2016
PGMs refined produced 1,349,802 1,336,109 882,094 1,447,364 1,440,724

Environmental, social and governance key statistics

Refer to Annexures.

Business model

Lonmin is one of only three integrated primary platinum producers globally

Our aim

Our fundamental aim is to create long-term value for our shareholders and all our stakeholders as we move through the economic cycle.

Innovative approach

We continue to seek ways to maximise value with new initiatives in the processing operations such as the smelter clean-up and the other precious metals plant, which have already resulted in the release of additional PGMs. Other projects underway, such as the bulk tailings treatment project, will improve PGM recovery rates and increase volumes of chrome production. We are utilising our excess processing capacity by sourcing new toll treatment contracts.

While there will inevitably be short-term volatility in the prices of one or more of the PGMs, we believe that the long-term fundamental economics of these metals remain highly attractive. Our strategy is to preserve cash and be able to sustainably withstand the current low price environment for the next few years.

What we do

Lonmin explores, mines, refines and markets PGMs – platinum, palladium, rhodium, iridium, ruthenium and gold.

Platinum is our principal product, and in a typical year is the source of 60% to 70% of our revenues. Palladium is our second biggest source of revenue. By-products from PGM mining include chrome, nickel, copper and cobalt.

We aim to generate value from our operations in four stages:

1 2 3 4  
By securing prospecting and mining rights to areas which have PGM mineralisation. We hold rights to significant areas of the Bushveld Igneous Complex in South Africa, the world’s largest deposit of PGMs and home to around 80% of the world’s known platinum resources.
We maintain a modest and flexible international exploration budget, operating largely in areas of known prospectivity for PGMs which we hope will provide us with new economic sources of PGMs in other areas of the world, improving our geographical diversity.
By developing these areas into resources and reserves and managing mining operations.
With more than 40 years’ experience in mining PGMs in South Africa, Lonmin has developed superior conventional mining methods and relevant process technologies.
By developing industry leading processing and refining techniques.
We were the first in our industry to commercialise the separate treatment of UG2 ore and to use our know-how and technology to create value by putting our ore through the full, vertically integrated processing chain, producing high purity refined metals for sale.
By maintaining close relationships with key customers we acquire market intelligence and an understanding of market trends.
PEOPLE MAKE THE DIFFERENCE. In our employee relations we aim to develop and retain the best people via our workplace relationships and the way we work, and to ensure as safe and stable a workplace environment as possible.

Preserving our values

Governance – we have created and maintain a robust internal control and reporting environment, with strong processes for risk identification and mitigation, implemented by a dynamic management team and overseen by an experienced Board of Directors. Culture – we are seeking to develop a value-based culture where the behaviour of all employees, managers, Directors and others help to promote an ethical, responsible and fair approach to how we do business. Relationships – we work hard at establishing relationships with a wide range of stakeholders from employees and their trade unions, through communities and local government, suppliers, contractors, customers and other business counterparties, to national government in its many guises and the providers of our funding – lending banks and our shareholders. Sustainability – we believe that there is only one way to sustain success: by taking all critical risks into account when we are planning ahead. Working safely, respecting those with whom we work and protecting the environment are all part of our core processes. Transformation – we embrace transformation as a business imperative. We endeavour to play our full part in addressing historic inequalities and creating the conditions in which current and future generations can succeed in creating shared purposes.

How we spend the cash we earn

We recognise that our business requires inputs from, and has an effect on, a number of stakeholders. We see it as crucial that each group feels that their relationship with Lonmin is positive, and that they achieve some net gain, whether financial or otherwise. The analysis below shows how the US$1.1 billion of cash earned in the financial year was distributed.

Shareholders received no dividend during the year, and none is recommended for 2016. In 2016 we met costs of 89 cents for every Dollar we earned, predominantly in South Africa. Payments for community projects and donations amounted to 1 cent per Dollar earned and we spent 2 cents per Dollar earned on interest and fees to the banks who lent us money. Further information on payments to communities is available in Social Licence to Operate.

1 A significant portion is wages paid to contractors. We estimate around 60% of our costs are labour related.

Our business

Description Explore for potentially economic PGM mineralisation
Output measurement Mineral resources (PGMoz)
Effectiveness measurement Increase or replace mineral resources
Quality measures In situ PGM grade and tonnes
Efficiency measures Resources converted to reserves
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Underground and surface mining of two reefs, Merensky and UG2, each approximately one metre thick
Output measurement Millions of tonnes
Effectiveness measurement

Tonnes hoisted
Ore reserves

Quality measures Underground head grade, per ore type (grammes per tonne)
Efficiency measures Cost per ounce
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Crushing ore brought to the surface to liberate contained PGMs
Output measurement Millions of tonnes
Effectiveness measurement Tonnes milled
Quality measures Milled head grade (grammes per tonne)
Efficiency measures Cost per tonne milled
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Separation of metalliferous particles from host rock using basic physical chemistry
Output measurement Kilogrammes (kg) of PGMs in concentrate
Effectiveness measurement PGMs in concentrate (kg)
Recovery rate (% of contained PGMs recovered)
Quality measures Concentrate grade (grammes per tonne)
Efficiency measures Cost per ounce recovered
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Further separation of metals (matte) from silicate host rock (slag) using electrically generated heat
Output measurement Kilogrammes of PGMs in smelter matte
Effectiveness measurement Primary tonnes smelted recovery rate (% of contained PGMs recovered)
Quality measures Converter matte grade (grammes per tonne)
Recovery rate (% of contained PGMs recovered)
Efficiency measures Cost per tonne smelted
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Chemical and electrochemical separation of base metals (for sale in finished or semi-finished form) from PGMs within the matte
Output measurement Troy ounces of PGMs in BMR matte
Effectiveness measurement Recovery rate (% of contained PGMs recovered)
Quality measures Base metal purity (%)
PGM (%)
Recovery rate (% of contained PGMs recovered)
Efficiency measures Cost per refined ounce
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Chemical separation of the individual PGMs contained in BMR matte and refining to purity of 99.9% or better for sale in various finished forms
Output measurement Troy ounces of finished metals
Effectiveness measurement PGMs in saleable form
Recovery rate (%) of contained PGMs recovered
Quality measures Purity (%)
Efficiency measures Cost per refined ounce
First pass recoveries (% of each metal recovered)
Throughput time
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
Description Three principal customers with global corporations
Six customers for base metals
Output measurement Troy ounces of finished metals purchased
Effectiveness measurement Revenues per PGMoz achieved relative to price in spot market
Quality measures Quality of product confirmed by customer as complying with specification
Efficiency measures Days from delivery of PGMs to cash settlement
Supply chain The Company has 3,334 discretionary suppliers registered in its data base. Of these suppliers, 70% are based in South Africa (5.1% are from the GLC1) and 30% are internationally based. The discretionary spend on suppliers during 2016 was R7.6 billion (2015: R8.6 billion).
1 GLC refers to the Greater Lonmin Community, being those communities situated close to our operations.

View the supplementary report on the supply chain.