Chairperson's report

  Chris Molefe  
  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.  

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.

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.

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