Merafe Resources Integrated Annual Report 2018

MERAFE RESOURCES INTEGRATED ANNUAL REPORT 2018 40 We support and agree with King IV which states that the governing body of an organisation should be transparent in the manner in which it exercises its governance role and responsibilities, that it must govern in a way that supports an ethical culture and further that the governing body must try to ensure that the organisation is seen as a responsible corporate citizen. CHRIS MOLEFE Chairperson Safety Safety remains the number one priority of Merafe and the Venture. It is with deep regret that we report a fatality at the Venture's Thorncliff Mine on 27 August 2018. Our condolences are extended to the family, friends and colleagues of Mr Ntandazo Diela who sustained fatal injuries. This unfortunate event occurred despite the considerable effort that the Venture has placed into embedding a safety culture into its operations. In this regard see the safety section on page 31 of this report for further details, as well as the Manufactured capital section on page 18. 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 Company has again benefited from its investment in the Lion ferrochrome plant and other projects as previously reported. This investment in the Lion ferrochrome plant has improved the Venture’s sustainability by increasing its cost efficiency and production capacity. As reported last year we will continue to assess opportunities outside ferrochrome where this makes commercial sense. In this regard see the report of the Chief Executive Officer on page 10. The Board, together with our Venture partners, continues to consider the impact of losing our key empowerment shareholder in 2015. We remain committed to ensuring the long-term sustainability of both Merafe and the Venture and complying with legislation and the challenges brought about by amendments to the Mining Charter and to the BBBEE Codes of Good Practice. 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 page 59 of this report for information on Merafe and the Venture’s assurance and review processes. Our commitment to good governance and sustainability has always been reflected in our inclusion in the JSE Socially Responsible Investment ("SRI") Index since its inception in 2003 with the Company often being a top 10 performer. Since 2015, however, the SRI Index assessment by the JSE was only performed on the Top 100 companies on the JSE by market capitalisation and Merafe was therefore not assessed. We continue to believe that all companies listed on the JSE need to again be subjected to this assessment and not only the top 100. Overview I am pleased to report that despite the challenging business environment the Company once again, produced a solid set of results in 2018. South Africa has had another eventful year. In previous commentaries I mentioned the necessity for ethical leadership in high profile organisations in both the public and private sectors. We hope that a combination of the appointment of a new president together with new ministerial appointments and the evidence emanating from the various commissions of enquiry followed by action and accountability will herald in an era of better governance and accountability in government and public enterprises. The corruption in government and the public sector has had a profound and negative impact on our business and our industry. South Africa requires ethical leadership and a period of stability. The country urgently needs to get back to investment grade to attract investment and funding. This is a necessity if we wish to grow the economy and address the key challenges of unemployment and income disparity. In our 2017 report I stressed the need for certainty and clarity around the MPRDA and the Mining Charter. The new incumbent, Minister Gwede Mantashe introduced the amended Mining Charter late last year. The key points are dealt with elsewhere in this report but this is a step forward and at least government, labour and industry have again started engaging in a more positive manner. On the global front, our Chief Executive Officer mentions in her report on page 10, issues that impacted the performance of the Company in 2018. These included trade wars primarily between the USA and China. The flight of capital from emerging markets to developed zones has generally been negative for the resources sector as it led to both volatility in pricing and exchange rate fluctuations. Despite an ever changing world and business environment, we are again reminded to remain focused on making our business a success so that we are able to provide a positive contribution to our stakeholders and the broader society. Financial performance As I mentioned in the introduction, Merafe produced another fine set of results in 2018 and was again able to pay a dividend for the year under review. The financial performance of the Company has been addressed in the Chief Executive Officer’s report on page 10 and the Financial Capital section of this report on page 14. The Chief Executive Officer has also provided comment on the strategy of the Company going forward and the benefit the Company has gained from its focus on ferrochrome, maximising cash flows from the Venture and the fact that it has minimal debt. TRANSPARENCY AND ACCOUNTABILITY Chairperson's report