Transparency and accountability


A joint board manages the Glencore-Merafe Chrome Venture, which consists six members – three representing Merafe and three representing Glencore. The management of the Venture’s plants and mines, marketing, finance, sustainability and transformation are all represented on the Executive Committee, which reports into the joint board.

The Venture subscribes to King III and reports on its performance based on King III. The sustainable development framework in place, which is the Glencore Xstrata Corporate Practice (GCP) Framework is based on a precautionary philosophy, that is, the idea of taking action before something goes wrong. It is integrated with a risk management strategy and with all other aspects of the Venture’s operational and business strategy. The framework undergoes a regular assessment process to assure stakeholders that the Venture is living up to its policies and its corporate practice.

The sustainability assurance programme applied in the Venture checks that principles and standards are being maintained and that material risks are being identified and managed effectively. This information is crucial to understanding if there is a need to make any changes to the sustainable development policy to improve its effectiveness. Each audit it undertakes helps to identify potential improvements and suggestion actions we can take to enhance our sustainable development performance.

  Risk management

The Venture’s priority is to maintain a constant and determined focus on its material risk factors to help it act decisively and quickly to keep it business in lines with an exception risk record and policy.

Its comprehensive risk and crisis management framework means that it continually assesses its performance from the ground level up and updates its risk registers. The Venture undertake an annual risk review which is used to decide annual business strategies and plans. This is in line with Glencore's policy to regularly review and public report on material sustainable development risks that may affect its ability to deliver its business strategy effectively and the controls in place to keep these risks at bay. Regular risk reviews are conducted for insurance purposes and annual workshops are held to share best practice.

Principal risks and uncertainties affecting Merafe and its investment in the Glencore-Merafe Chrome Venture

Socio-polictical climate in South Africa

Risk and impact Mitigation
Labour unrest could negatively impact the Venture’s productivity and profitability Relationships with and recognition of trade unions and relationships with employees and establishing employee are critical to the Venture
If the Venture does not win broad support for our activities from local communities, our projects could face delays, which could impact on operating profit, development costs and our reputation. Severe disruptions would impact on our profitability and our growth plans If the Venture does not win broad support for our activities from local communities, our projects could face delays, which could impact on operating profit, development costs and our reputation. Severe disruptions would impact on our profitability and our growth plans

Merafe and the Venture invest in our social and labour plan commitments, which include local economic development, healthcare and education projects. We also invest in corporate social responsibility initiatives

Commodity price volatility

Risk and impact Mitigation
Negative impact on earnings Our preventive actions include managing production levels, including scaling down mining and smelting activities during downturns in global demand. In addition, close relationships with customers and the technical expertise to predict and plan for upturns and downturns in demand, help Merafe and the Venture to mitigate the impact of downturns and take advantage of the opportunities provided by upturns

Fluctuation in currency exchange rates

Risk and impact Mitigation
Currency exchange rate fluctuations impact on our operating profit We are exposed to rand/US dollar fluctuations. Containing production costs by means of process improvement initiatives and investments to reduce costs, helps us mitigate the impact of currency fluctuations

Downgrade of credit risk

Risk and impact Mitigation
A downgrading of Merafe’s credit status could materially and adversely affect our financial position and growth plans At Merafe we maintain a strong balance sheet, low gearing and a good reputation and relationship with our bankers. We also have tangible assets to secure financing. We hold regular meetings with our bankers to proactively assess terms and conditions before potential problems arise. Our partner in the Venture, Glencore, takes a considered approach to debt management

Non-compliance and/or changes to laws, regulations, taxes, royalties and mining rights

Risk and impact Mitigation
Any non-compliance or changes in legislation can result in extensive disruption to operations, loss of revenue and fines. Loss of mining rights could affect our business The Venture maintains an extensive, transparent and open relationship with regulators and local, regional and national government bodies.

The Venture keeps abreast of all changes to legislation and ensures any changes to laws or regulations are addressed and we closely monitor compliance with legislation. The Venture works in partnership with its employees and local communities in order to earn and maintain our social licence to operate. Merafe maintains an extensive, transparent and open relationship with regulators and local, regional and national government bodies. We follow and implement any changes to laws or regulations and closely monitor compliance with legislation. Merafe and the Venture regularly engage with SARS, DTI, DMR and other regulators

Investors’ negative perceptions of the South African mining industry

Risk and impact Mitigation
This could impact on investors’ appetite for investment in South African mining stocks Merafe focuses on maintaining relationships with our existing investors and building new relationships including our overseas investors. To achieve this our team travels to Europe, the United States and Asia to meet with and make presentations to European, American and South African investors and potential investors to address any concerns. We also keep investors informed through our website

Health of global economy

Risk and impact Mitigation
The possibility of a meltdown in the Eurozone could impact on South Africa and South African companies We need to maintain our position as the lowest-cost ferrochrome producer in South Africa and have the flexibility to react quickly to changing economic circumstances

Loss of key and skilled employees in Merafe and the Venture

Risk and impact Mitigation
Loss of key and skilled employees, particularly to competitors, could result in financial loss and reputational damage Our policy is to invest in future key contributors and to implement adequate notice periods and lock-ins bonus and share incentives

Empowerment credentials

Risk and impact Mitigation
Loss of empowerment credentials if Royal Bafokeng Resources Holdings Limited (RBRH) sell their shares in Merafe The mining industry is governed by the Mining Charter which requires mining companies to have empowerment credentials. RBRH has been a shareholder in Merafe for over ten years. Merafe ensures RBRH is kept informed, regularly meets with its representatives and RBRH is represented on the board

Operational risks

Risk and impact Mitigation
The Venture’s operations are affected by a number of factors that are outside our control. These include the availability and costs of raw materials, water and power, unusual ground conditions, climatic conditions resulting from climate change (e.g. drought or flooding)

These factors could adversely affect our operating performance, production levels, unit costs and operating profit
The Venture has in place a comprehensive programme to identify, understand and manage the risks that affect our business and our operations. We undertake an annual risk review, and the risk registers of Glencore, Merafe and the Venture are regularly updated

Chrome ore

Risk and impact Mitigation
Chrome ore exports to China could undermine the South African ferrochrome industry and the beneficiation of chrome ore in South Africa The Venture and the ferrochrome industry continue to engage with government to develop a solution that will support government’s beneficiation and job creation strategies and ensure the sustainability of South Africa’s ferrochrome producers

Cost control

Risk and impact Mitigation
The Venture’s competitiveness and long-term profitability depend significantly on our ability to maintain low-cost efficient operations. Above inflation increases in input costs may negatively impact Merafe’s earnings We pride ourselves on being a low-cost producer. Cost performance is regularly reported to the Executive Committee and is a key management performance measurement. The Venture’s development of lower-cost proprietary technology has played a significant part in cost reduction. We are also engaging with government regarding carbon taxes, electricity costs and steps to ensure the sustainability of the ferrochrome beneficiation industry in the future

Security of energy supplies

Risk and impact Mitigation
Lack of energy supply could impact on the Venture’s ability to operate or threaten planned future expansion of our operations or the development of new mines The Venture has an ongoing programme to assess and monitor energy- related risks, including scenario analyses. We manage the risk through implementing energy efficiency plans and assessing the risks associated with energy supply at the design phase of our projects. Our investment in process technology to achieve efficiencies and reduce energy consumption has allowed us to become the lowest-cost ferrochrome producer in South Africa

Emissions and climate change regulation

Risk and impact Mitigation
There is uncertainty concerning carbon taxes and the interpretation and application of any legislation relating to these taxes in South Africa

They may have a material adverse impact on our ability to maintain profitability

Water scarcity has also become a global issue and could in future affect the Venture’s ability to operate
The Venture continually engages with government and key policymakers to advocate a rational approach to carbon taxes

We have made climate change issues a high priority and the Venture reviews climate change strategy regularly. We have reduced the carbon emissions attributable to the electricity we purchase by improving the energy efficiency of our operations and investigating the use of renewable energy sources. The Venture is undertaking feasibility studies on a number of potential energy efficiency projects. +The Venture’s emissions are reported to the Carbon Disclosure Project (CDP)

The Venture has successfully taken steps to reduce its water consumption

Health, safety and the environment

Risk and impact Mitigation
The Venture’s operations are subject to extensive health, safety and environmental (HSE) regulations and legislation and community expectations

In South Africa HIV and AIDS and associated diseases remain the major healthcare challenges facing our industry

Any breach of regulations or non- compliance with the Venture’s own best practice standards in health, safety and environmental performance and community relations could affect our licence to operate

If the Venture’s employees suffer from the symptoms associated with HIV and AIDS, it could have a negative impact on the Venture’s production levels and our profitability
We give these three issues priority and significant resources are committed to providing a safe and healthy workplace, keeping our impact on the environment to a minimum and addressing the impact of HIV and AIDS on our employees and the communities in the vicinity of our operations

All operations are regularly independently audited through the Sustainable Development Assurance Programme and they manage the risks that could affect the Venture’s operations

Project development

Risk and impact Mitigation
The Venture’s ability to develop our project pipeline and expand our operations with new, lower-cost operations will impact future revenues, costs and its reputation for successful project development Cost control is a key consideration in project development and the Venture has an excellent track record of delivering major capital growth projects on time and on budget. We have a comprehensive project approval process which governs project management at each stage of a project. Approval processes ensure that all risks are fully assessed and, where possible, are mitigated before the project can proceed to the next phase


Risk and impact Mitigation
Our mine reserves decline as chrome ore is extracted and not all reserves may be mined as profitably as originally anticipated. In order to develop reserves, mining rights must be obtained for our chrome ore mines

Successful exploration and development activities and access to new properties containing economically recoverable reserves are important to the Venture’s future success. If it cannot obtain the necessary exploration and mining rights, our ability to develop reserves will be adversely affected
The Venture annually updates the quantity and quality of our estimated proven and probable reserves to reflect the extraction of chrome, additional drilling or other data. Our policy is to ensure five years of proved ore reserves at any time. The Venture continually investigates alternative sources of supply of chrome ore, the acquisition of additional reserves and the possibility of exploiting alternative seams within its existing mines, such as MG4. The Venture has also secured UG2 supply agreements with platinum producers. The Venture is well-positioned in terms of the conversion of its mining rights as set out in the Mineral Resources and Reserves section of this report

Lack of business diversification

Risk and impact Mitigation
Diversification into other commodities would provide us with a buffer against the cyclical nature of ferrochrome, which can and has impacted our profitability in certain years The board of Merafe has approved a diversification strategy. Merafe can use its empowerment credentials to seek diversification transactions which will enhance shareholder value and smooth returns

  Human rights

The principles of the UN Universal Declaration of Human Rights, the ILO Conventions and the UN Global Compact have been embedded in Glencore's code of conduct, which is applied in the Venture. South African labour legislation prohibits the employment of children younger than 18 years of age. The Venture’s operations report on their adherence to this legislation, which is monitored through its internal audit and risk management programme.

The Venture has the grievance processes in place to ensure that any breaches of human rights can be reported, investigated and, where necessary, the appropriate corrective action can be taken. In addition, employees can use the ethics line to report any activities which they believe are not in line with the company’s policies on human rights. Employees of the Venture, and security personnel in particular, undergo training in human rights.

To ensure the highest levels of human rights practice within the Venture’s supply chain it expects all its major suppliers and contractors to comply with its code of conduct and significant business partners undergo screening on their human rights practices.

The Venture’s Sustainable Development Standards require its operations to maintain community relations strategies that uphold and promote human rights and respect cultural considerations and heritage.

  Compliance, policies, charters & assurance


Corporate office

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