We successfully commissioned the other Precious Metals plant at the PMR during the year.

Aligning our strategy to our operational context

Much has been achieved and the Company is now well positioned for an upturn and to maximise value for shareholders. In the long term, our strategy is to generate value from our mine-to-market business by utilising our value chain, especially our processing infrastructure and capabilities.

Our strategy focuses on the following four pillars which take into account our responsibilities around social and community investment:

  1. Operational excellence;
  2. Our people and relationships;
  3. Enhance balance sheet strength; and
  4. Our corporate citizenship agenda.

The end of 2015 saw the implementation of our Business Plan, the amending of our debt facilities and the undertaking of a Rights Issue to strengthen the Group’s balance sheet. These actions were designed to enable the Group to operate in the low PGM pricing environment, whilst at the same time preserving its long-term value.

Delivery of the Business Plan is reported under the four pillars, but is primarily concerned with:

  • removing high cost production ounces and, importantly, eliminating associated fixed and variable costs;
  • reducing fixed costs by right-sizing the Group’s workforce and reducing overhead costs and support services structures;
  • improving operational efficiencies;
  • reducing capital expenditure to the minimum required to sustain the efficient running of the Group’s operations while satisfying regulatory and safety standards and limiting the number of development projects to Generation 2 shafts;
  • maintaining operational and strategic flexibility through sufficient immediately available ore reserves;
  • creating, preserving and enhancing long-term equity value by retaining long-term expansion opportunities; and
  • continuing to improve relationships with key stakeholders.

We have positioned and will continue to reposition the business to withstand the volatile market conditions. Going forward, we continue to operate for value, not volume, generating and preserving cash to enhance our liquidity.

Operational excellence

Our main priority remains the performance of our Marikana operations, which are some of the best in the industry in terms of quality, safety and efficiency. We believe our Marikana operations remain amongst the best hard rock narrow tabular mining operations in the Western Limb.

Profitability and returns are crucial. The Group is highly geared to the PGM pricing environment and the Rand/US Dollar exchange rate. Given the present PGM market, we believe that the priority in the short term is to make sustainable improvements in productivity and cash and bolster liquidity.

To improve cash margins, we strive to ensure that our core Generation 2 shafts reach the most efficient and profitable positions in terms of safety, costs, production and productivity as the Generation 1 shafts reach the end of their lives.


Safety remains at the heart of all that we do. Our ambition to achieve Zero Harm starts with the safety, health and wellbeing of our employees and extends to everything we do, including minimising the environmental impact of our operations.

Our approach to safety is defined in the Lonmin Safety and Sustainable Development Policy, Sustainable Development Standards, the Fatal Risk Control Protocols and the Lonmin Mining Life Rules, a set of non-negotiable rules that target the risk areas responsible for the majority of fatal or serious accidents.

Removing high cost production ounces

The Business Plan accelerates our core strategy of focusing on our larger Generation 2 shafts and will result in a reduction of the sales profile for the Group to approximately 650,000 to 680,000 platinum ounces for 2017 as high-cost production continues to be wound down. Our guidance has been revised upwards marginally to account for initiatives like the smelter clean-up.

The closure of inefficient areas and shafts will continue throughout 2017. As previously noted, our Hossy shaft remains on track for planned care and maintenance closure in 2017. Our Newman shaft has now ceased production from Lonmin crews. Newman is currently being mined by contractors and future extraction of the remaining ore reserves using contract mining will be assessed annually.

Two Generation 1 shafts, E1 and W1, were initially intended to be put on care and maintenance. These contractor-managed shafts were subsequently allowed to continue mining following a revised cash generative contractor development plan and more favourable terms. These shafts continue to produce profitable ounces and, as such, are expected to remain operational under the current contractor model for financial year 2017. The viability of these shafts is reassessed annually.

Reducing fixed-cost expenses

We remain vigilant in containing our costs. Overheads and support services structures are constantly reviewed to align with the reduced sales profile. Further details are provided in the Annual Report and Accounts 2016.

Maintaining reduced capital expenditure

Capital expenditure will be maintained at the minimum level required for the safe and efficient running of the Group’s operations.

The Group continues to utilise capital portfolio optimisation tools with the aim of ensuring that capital expenditure is invested only in the most cash generative development projects available to the Group with the aim of predominantly funding capital expenditure through free cash flow generated by operating activities. Further detail is available in the Annual Report and Accounts 2016.

Maintaining operational and strategic flexibility

We intend to maintain a clear strategic focus on the Group’s mineral resources, mining and processing infrastructure at Marikana. Prior investment in this area means as at 30 September 2016 the Group had immediately available ore reserves equating to 22.4 months of mining at planned levels of production. This provides Lonmin with a competitive advantage, giving operational and strategic flexibility for a market upturn.

Creating, preserving and enhancing long-term equity value

We seek to identify projects which add value by making use of our excess processing capacity. As part of these efforts, and in line with our focus on low cost ounces and near term cash, work is underway on the bulk tailings treatment (BTT) project.

The BTT involves the re-mining of Lonmin’s Eastern Tailings Dam and the reprocessing of 26 million tonnes of tailings material at a rate of 300,000 tonnes per month. Once at steady state, the project is expected to deliver the lowest cost ounces in the Lonmin portfolio, producing about 29,000 ounces of Platinum per year or some 55,000 ounces of PGM (from tailings with a grade of 1.42 grammes per tonne with a recovery rate of 35%). The project is expected to be mined by a contractor over a seven-year period and to be commissioned and ramped up to full production during the 2018 financial year. Further detail can be found in the Annual Report and Accounts 2016.

Post year end we signed a Sale and Purchase Agreement to acquire Anglo American Platinum’s (AAP) 42.5% stake in the Pandora Joint Venture. Further detail is available in the Annual Report and Accounts 2016 and on the Company’s website.

Enhance balance sheet strength

At the beginning of financial year 2016, we carried out a Rights Issue and amended debt facilities to strengthen the balance sheet.

Our stated aim at that time was to manage the business to be cash flow positive after capital expenditure whilst maintaining optionality to grow production over time when pricing improves.

We achieved this in 2016 and intend to deliver on this going forward. Our balance sheet will be managed prudently and conservatively with future capital expenditure being funded from free cash flow generated by operations.

Our people and relationships

Black economic empowerment (BEE)

Our BEE equity ownership is at least 26% and we strive to maintain this in line with the requirements of the Mining Charter.

Continuing to improve relationships with key stakeholders

Our efforts to solidify and improve relations with our employees and their representative trade unions continue. We accept that building trust and strong relationships is a never-ending journey.

We continue to enhance our role as the primary source of communication by seeking to communicate directly with employees. We believe that this direct engagement, through the existing line management structures and periodic communication forums, forms part of the way we work and the basis of creating empowered, high performance teams. Through the leadership development and team effectiveness training programmes, we continue to encourage our managers to manage this direct engagement.

Management and unions continue to engage on a regular basis at different levels to ensure timely communication and resolution of issues at appropriate levels.

We also have regular engagements with our majority union, the Association of Mineworkers and Construction Union, in line with our Relationship Charter.


Lonmin embraces transformation as a business imperative and has made significant progress in this regard. We are committed to playing our part in addressing historic inequalities and creating the conditions in which current and future generations can succeed in creating a shared purpose. The Mining Charter requires a focus on increasing the number of Historically Disadvantaged South Africans (HDSAs) in management and the number of women in mining.

Transformation is monitored and overseen at Board level by the Social, Ethics and Transformation Committee. Transformation considerations are incorporated into recruitment, succession, skills development and talent management functions to develop an internal pipeline of HDSAs, including women. Lonmin’s bursary and graduate development programmes prioritise HDSAs in order to build the future supply of appropriate candidates. Targets relating to transformation are included in the Corporate Balanced Scorecard that is used to measure performance for the incentive scheme.


Our mining model is labour intensive and our people make the difference and are the vehicle by which our strategy is effected through the day-to-day operations.

The Company values the contribution made by all its employees and recognises that morale and retention remain under pressure as a result of the reorganisation and continuing cost constraints, which have limited salary increases and development opportunities.

We believe that our employees deserve decent living standards and should have a choice of how and where they want to live. These choices should allow for personal circumstances, affordable and market-related rates and integration into the broader society during their employment with us. Lonmin and its organised labour are reviewing employee living standards as part of its new human settlement strategy.

Progress against our human resources targets is measured through monthly reporting of key internal indicators as well as integrating certain targets as part of the Lonmin corporate objectives. Lonmin’s human resources strategy, policies and procedures align with our operating country’s labour laws and other relevant frameworks, guidelines and codes of practice. These include in South Africa, the social development requirements of the Minerals and Petroleum Resource Development Act (MPRDA) that are defined in the Company’s Social and Labour Plan (SLP), the human rights provision in the International Council on Mining and Metals principles of sustainable development and the United Nations Global Compact.

The Company also reports to the Department of Mineral Resources (DMR) against the broad-based economic development requirements of the Mining Charter, which include housing and living conditions, employment equity and human resource development.

As announced in October 2013, Lonmin remains committed to spending R500 million over the five-year period to 2018 towards employee accommodation and community bulk services.

Our corporate citizenship agenda

Stakeholder engagement

Our business begins and ends with relationships and the quality of those relationships are central to our success and that of our stakeholders. Genuine stakeholder engagement and relationship building has allowed us to understand stakeholder expectations and to communicate on key issues transparently, consistently and in a timely manner.

Social licence to operate

Maintaining our social licence to operate through securing the trust and acceptance of communities and stakeholders is material as they host our operations. This is achieved through:

  • stakeholder engagement to ensure realistic expectations are understood and managed;
  • community investment initiatives to address social issues;
  • transformation initiatives to meet the government’s social and economic development goals;
  • ethical business practices that include a commitment to upholding human rights; and
  • corporate and community partnerships.

This is very much work in process and is based on an acknowledgement that trust must be restored and communities healed.

Human rights

Lonmin is committed to respecting the human rights of both its workforce and those who may be affected by its operations, and continues to seek to implement the United Nations Guiding Principles on Human Rights (the Guiding Principles) throughout its operations. Refer to Social Licence to Operate.

Our sustainability approach

Lonmin’s sustainability is entrenched in the operations and actions of the business. Our approach is informed by and aligns with the International Council on Metals and Mining’s (ICMM) 10 Principles of sustainable development and considers the United Nations Global Compact (UNGC) principles.

The Lonmin’s strategic pillars of operational excellence, our people and relationships and our corporate citizenship agenda explicitly recognise the importance of sustainability issues, including the importance of our role as a responsible corporate citizen and the critical importance of a working and trusting relationship with employees, communities and regulators. Striving for Zero Harm in safety, health and environment is a critical aspect of demonstrating operational excellence. Our fourth strategic pillar, enhance balance sheet strength, requires the participation of investors and other providers of financial capital, many of whom place significant emphasis on sustainable development criteria.

The sustainability approach is defined in the Lonmin Sustainable Development Standards1, and the Safety and Sustainable Development Policy2 sets out our commitments towards sustainable development.

1 Please see supplementary report on Lonmin Sustainable Development Standards.
2 Please see the Safety and Sustainable Development Policy.

Sustainability is incorporated into the Lonmin strategy and life of business plan (LoBP), which spans in excess of 40 years, (excluding any future planned shafts), detailing operational plans to mine and process the Company’s long-life mineral resources.