Chairperson's report
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| I would like to thank the Merafe team and our partners Glencore, for their hard work during the year, which resulted in the Company producing an excellent financial, operational and safety performance in difficult circumstances. |
Overview
2015 was again an eventful year in many respects. On
the global front the oil price continued to fall as did other
commodity prices. Political uncertainty, terrorism and conflict
continued to dominate world news. At home, the business
environment in the resources sector was also difficult and
challenging due to the state of the global economy and
demand for our products as well as local issues such as
legislative uncertainty and increasing costs. The year saw
many previously sound mining companies being either
forced into business rescue, re-scheduling their debt or
embarking on rights issues at substantial discounts, The
perception of South Africa as a safe investment destination
by overseas investors was also dealt a blow by sudden
changes to the Minister of Mineral Resources and the
Minister of Finance – both at critical times – without
adequate and proper explanation to local or overseas
stakeholders. In such difficult times, we are again reminded
to remain focused on making our business a success so
that we are able to provide a positive contribution to all our
stakeholders and broader society.
I am pleased to report that despite a challenging business environment Merafe produced an excellent set of results in 2015, and was again able to pay a dividend for the year under review.
The financial performance of the Company has been addressed in the CEO’s report and the Financial capital section of this report. The CEO has also provided detailed comment on the strategy of the Company going forward, the completion of the restructuring process and the focus on ferrochrome and maximising cash flows for the benefit of all stakeholders.
Safety
As safety remains the number one priority of Merafe and
the Venture, I am very pleased to report that there were no
fatalities in the year under review. The considerable effort
that the Venture has placed into embedding a safety culture
into its operations appears to be bearing fruit which is also
reflected in the improved safety statistics. In this regard see
the safety section of this report for further details.
Strategy
We continue to take a long-term view of our business. In
terms of achieving our strategic objectives, our ferrochrome
interests were profitable and the completion of the second
phase of the Lion ferrochrome plant has further improved
the Venture’s sustainability by increasing its cost efficiency
and production capacity.
Our approach to sustainability and assurance
The directors have followed the materiality determination
processes described in this report and have applied the
results of these processes to formulate the material issues
in this report. Merafe relies on the Venture and Glencore
to obtain quantitative data with regard to sustainability
indicators. I would refer you to the Sustainability review
and assurance summary on Sustainability review and assurance summary of this report for
information on Merafe and the Venture’s assurance and
review processes.
Our commitment to good governance and sustainability has also always been reflected in our inclusion in the JSE Socially Responsible Investment (SRI) Index since its inception in 2003, the Company often being a top 10 performer. In 2015, however, the SRI Index assessment was only performed on the Top 100 companies (as it was in 2014) on the JSE by market capitalisation and Merafe was therefore unfortunately not assessed. We believe that all companies listed on the JSE need to again be subjected to this assessment.
The Board
The CEO has provided a detailed commentary on the
restructuring of the Company and the strategic focus of the
Company in this report.
As Chairperson of our unitary Board I am responsible for the overall effectiveness of the Board and its committees and for ensuring that we provide Merafe with effective leadership, uphold ethical standards, and are responsible, accountable, fair and transparent. I am also responsible for ensuring that we implement strategies aimed at achieving our economic, social and environmental performance objectives.
There is a clear separation between my responsibilities and those of the CEO, which is documented in our Board charter. Our CEO is expected to focus on our business and ensure it is run effectively and in accordance with the strategic decisions of the Board.
We interact with shareholders at our Annual General Meetings and at presentations made by our executive management team when our interim and annual results are released. This year we again increased our focus on stakeholder relationships and in particular our relationships with our shareholders and our Venture partner. The Board has delegated the responsibility for engagement with our shareholders and potential investors to the CEO and the Financial Director.
My thanks to our non-executive and executive directors for your contribution to the Merafe Board’s deliberations and decision-making during 2015.
Royal Bafokeng Holdings
Despite all efforts by ourselves and our Venture partners
Glencore, we were saddened to lose RBH as our major
shareholder in 2015. RBH invested in the Company in 2001
and has been a key and valued shareholder since then.
I take this opportunity personally and on behalf of the Board
and all stakeholders to extend our gratitude and thanks for
their commitment to the Company over the years and for the
excellent relationship which we always enjoyed with RBH
as shareholders and with their elected directors who served
on the Board of the Company. The Board, together with
our Venture partners, is considering the impact of losing a
key empowerment shareholder and remains committed to
ensuring the long-term sustainability of both Merafe and the
Venture and complying with legislation.
Merafe team and Glencore
On behalf of the Board, I would like to thank the Merafe
team and our Venture partner Glencore, for their hard work
during the year, which resulted in the Company producing
an excellent financial, operational and safety performance
under difficult circumstances.
I would also like to thank, personally and on behalf of the Board, the outgoing directors for their commitment and valuable service to Merafe over the years. Their contribution to make the Company what it is today will always be appreciated. Post the year end we also sadly said goodbye to Zed van der Walt. Zed was previously an executive director of Merafe for seven years before he retired in February 2008. He re-joined Merafe as a non-executive director in July 2011. The Board wishes to thank Zed for his invaluable contribution to the Company. During the year we welcomed Shaun Blankfield to our Board.
Further, I welcome Glencore BV as a key and major shareholder in the Company.
Future outlook
I am again pleased to report that Merafe is well positioned
for the year ahead with a strong balance sheet. The
Venture is also well positioned despite difficult global
conditions as a result of it being the lowest-cost
producer in South Africa. Its investment over the years
in new and more efficient technology has increased
its competitiveness among South African ferrochrome
producers. We believe the Venture and Merafe will reap the
benefits of this commitment to investing in energy efficient
technology in the years to come.
Chris Molefe
Chairperson