Merafe Resources Integrated Annual Report 2018

MERAFE RESOURCES INTEGRATED ANNUAL REPORT 2018 9 MATERIALITY DETERMINATION PROCESS • The Board sets and approves three-year strategic plans for the Company. On an annual basis the Board reviews and adjusts the strategic plan where necessary. • The Board, through the Audit and Risk Committee and Board strategic workshops, annually considers the risks (see page 58 of this report) the Company may face and a risk matrix listing the risks and their importance is updated quarterly. There are approximately four Board and separate Board committee meetings during a year and further separate executive, management and Board strategy sessions to set a new strategic plan and/or assess the current plan in operation. • Key to our process is consultation with stakeholders (see page 4 of this report). Stakeholder feedback is then discussed at management, executive and Board strategic meetings and incorporated into the strategic plan and risk register. • The executive and management of Merafe participate in the Venture (including participation in executive and Board meetings of the Venture), which assists with the assessment and consideration of the Venture’s material issues (see page 48 of this report). • During the integrated reporting process, the Board and its committees assess the report to ensure that our reporting is aligned in terms of strategy, key risks and issues material to both Merafe and its stakeholders. Issue Possible impact Our response Our social licence to operate Dissatisfied communities embarking on action to remove the Venture’s social licence to operate would create an unsustainable working environment as well as cause significant reputational damage. Communities, investors, DMR, employees and local municipalities would all be affected. Community social issues are addressed regularly with goodwill, commitment and leadership. By addressing social issues, the South African mining industry can achieve a more sustainable environment for itself and the communities in which it operates. See pages 36 to 38 of this report. Chrome ore exports to China Ferrochrome sales to China are impacted by the export of unbeneficiated chrome ore from South Africa, which is facilitating the growth of a ferrochrome industry in China (see page 12 of this report). Profitability would be negatively impacted and shareholders, Merafe management, Merafe employees, Venture partners, Venture employees and communities, as well as government stakeholders (for example SARS) would feel the effects of this issue. The strategy of being the lowest-cost producer mitigates this risk. The Venture further believes that market forces over the medium term will reduce this risk. Power prices and the availability of electricity Loss of sales is highly likely if increased costs make our product prices uncompetitive. A further possible impact is a loss of production because of electricity shortages. Should the Venture be unable to secure electricity supply for new projects, it would be unable to grow its operations. This issue could impact shareholders, Merafe management and employees as well as Venture management, employees, communities and customers. The Venture’s continued development and application of energy- efficient technology allows it to maintain its position as South Africa’s lowest-cost producer of ferrochrome and therefore the most competitive South African producer. The Venture regularly engages with Eskom and is represented on the Energy Intensive User Group (see page 23 of this report). Climate change Climate change can impact business continuity and profitability; health and safety and environmental aspects. The Venture’s operations give rise to a significant quantity of indirect and direct greenhouse gas (GHG) emissions and are also exposed to the potential impacts of climate change resulting from GHGs. The Venture continually engages with legislators, researchers and industry bodies to track and evaluate the situation and develop an improved awareness of and preparation for the risks associated with climate change. The Venture continues to take steps to reduce its carbon footprint. These include the development of energy- efficient technology and research into the use of alternative sources of energy. See pages 22 to 26 of this report. Water Water is an important input in our operations. All stakeholders are impacted by this issue. With regard to water we ensure that we have adequate supply and storage facilities. We have access to different water schemes, we reuse a large proportion of water and we have access to underground water. In 2017, the Venture embarked, as part of its water conservation and water demand management strategy, to implement compressive model base water balance at all our sites. All of the mines and two of the smelters were completed during 2017 and the rest of the smelters will be completed during 2018. The water reticulation is comprehensively mapped and assimilated into the model to ensure all water streams are covered. The models also have a predictive function which simulates any process changes to assess the impact on the whole water reticulation. See page 25 of this report.