Dear Fellow Shareholder,
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Introduction
Operationally, 2011 has been an encouraging year for the Company in which we have reaped the benefits of the operational turnaround we undertook in 2009 and 2010. Lonmin is a fundamentally healthier business, and is moving in the right direction towards clear goals.
However, against the backdrop of a fast changing South African environment the year has not been without its difficulties either, and I will address these later in this report.
There are areas which affect our business which we, like our peers, do not control – the Rand, the price of platinum and, of course, the global economy in which an international business like Lonmin operates to name but three. In the last year the entire Lonmin team, from mine to market, has focused relentlessly on those things we can control and in taking as much uncertainty out of the business as possible.
I am, therefore, pleased to be able to report that we achieved our revised Platinum sales guidance of 720,000 ounces and revised unit cost guidance of around 11%. Encouragingly, the mines hoisted ore containing 720,000 Platinum ounces, whilst metals in concentrate was 719,000 Platinum ounces, ahead of 715,000 and 694,000 Platinum ounces delivered last year respectively. These results are particularly pleasing given the safety issues and illegal strike we experienced.
For ten of the twelve months of the year our business delivered according to plan. In the two months where it did not, we saw factors around safety and an illegal industrial action at Karee affect performance. The operational review covers these events in more detail. Those ten months of delivery demonstrate that when these events do not affect us we are a fundamentally sound and successful operation. Our challenge is to ensure that those events become rare or are eradicated in future.
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Safety
After many years of improving safety we lost six colleagues in separate fatal incidents at Marikana in the first seven months of 2011.
Lonmin, and mining, has been my working life for many years. The shock of losing colleagues never changes, and the loss of Jonas Thomage Kgwatlha, Modisaotsile Edward Setlhare, Afiado Mazive, Hermanus Potgieter, Rafael Macamo and Alpheus Mogane Moerane was felt across the entire business.
Whilst our safety performance was unacceptable I believe that our fundamental approach to safety management has been sound and our commitment to zero harm and safe production remains undiminished. We carried out a root and branch review of all of our safety procedures. This review re-affirmed our basic safety strategy, but we identified five key areas where we must improve: leadership development, systems development and simplification, safety culture, enabling environment and contractor safety management.
I’m pleased to say that our safety performance following the cluster of fatalities mid year improved. Lost Time Injury Frequency Rate (LTIFR) for 2011 showed a 19.8% annual improvement. All employees and management were however in breach of the balanced score card disqualifier of four fatalities and as a result, no bonus was allocated for this target. In the last five months of the year, at a time when we sought to increase our throughput, we achieved four million fatality free shifts across all of the Lonmin operations, an achievement which we last achieved in 2009 during a time when production was contracting as a result of the restructuring programme. I am also particularly pleased to report that Rowland shaft’s safety record now leads in the industry having achieved twelve million fall of ground fatal free shifts over a ten year period.
The journey to zero harm will take time and require the continued commitment and dedication of both management and employees.
