UNLOCKING OUR FULL POTENTIAL DISCIPLINED GROWTH FOR A SUSTAINABLE FUTURE - KUMBA IRON ORE LIMITED - Anglo American ...

 
UNLOCKING OUR FULL POTENTIAL DISCIPLINED GROWTH FOR A SUSTAINABLE FUTURE - KUMBA IRON ORE LIMITED - Anglo American ...
KUMBA IRON ORE LIMITED
SUSTAINABILITY REPORT 2018

UNLOCKING
OUR FULL
POTENTIAL
DISCIPLINED
GROWTH FOR
A SUSTAINABLE
FUTURE
UNLOCKING OUR FULL POTENTIAL DISCIPLINED GROWTH FOR A SUSTAINABLE FUTURE - KUMBA IRON ORE LIMITED - Anglo American ...
INTRODUCTION

                                                                                                   OUR APPROACH TO REPORTING

                                                                                        Navigating our 2018 reports                                              Online
                                                                                                                                                                 Each of these reports, with additional updated information, is available on our website:
                                                                                        Our integrated reporting suite
                                                                                                                                                                 www.angloamericankumba.com
                                                                                        comprises the following reports:

                                                                                                    KUMBA IRON ORE LIMITED
                                                                                                    SUSTAINABILITY REPORT 2018
                                                                                                                                                            CONTENTS
                                                                                                                                                            INTRODUCTION                                                         BUILDING SOCIAL CAPITAL

                                                                                                                                                             1 About this report                                                  42 Upholding high social standards
KUMBA IRON ORE LIMITED SUSTAINABILITY REPORT 2018

                                                                                                    UNLOCKING
                                                                                                    OUR FULL
                                                                                                    POTENTIAL
                                                                                                    DISCIPLINED

                                                                                                                                                             2 Our values                                                         46 Making a positive social contribution
                                                                                                    GROWTH FOR
                                                                                                    A SUSTAINABLE
                                                                                                    FUTURE

                                                                                                                                         SUSTAINABILITY
                                                                                                                                                             3 Creating shared value for stakeholders
                                                                                                                                         REPORT (SR)                                                                             MANAGING ENVIRONMENTAL
                                                                                                                                                            OUR APPROACH                                                         IMPACTS
                                                                                        Reviews our approach to managing
                                                                                        our significant economic, social
                                                                                                                                                             4 Who we are                                                         54    Environmental management
                                                                                        and environmental impacts, and to
                                                                                        addressing those sustainability issues of                            6 Social, Ethics and Transformation                                  59    Water
                                                                                        interest to a broad range of stakeholders.                             Committee Chairperson’s review                                     61    Climate change
                                                                                                                                                            10 Our business model and integrated                                  64    Mine closure, rehabilitation and biodiversity
                                                                                                    KUMBA IRON ORE LIMITED
                                                                                                    INTEGRATED REPORT 2018
                                                                                                                                                               value chain                                                        68    Air quality
                                                                                                                                                            12 Chief Executive’s review                                           70    Mineral and non-mineral waste
                                                                                                                                                            14 Measuring our performance
                                                                                                                                                            16 Our strategy                                                      APPENDICES
                                                                                                    UNLOCKING
                                                                                                    OUR FULL
                                                                                                    POTENTIAL
                                                                                                    DISCIPLINED
                                                                                                    GROWTH FOR
                                                                                                                                                            19 Governance and management approach                                72     Performance tables
                                                                                                    A SUSTAINABLE

                                                                                                                                                            22 Stakeholder engagement
                                                                                                    FUTURE

                                                                                                                                         INTEGRATED                                                                              81     B-BBEE scorecard
                                                                                                                                         REPORT (IR)                                                                             82     Summary GRI table
                                                                                                                                                            OUR PEOPLE
                                                                                        A succinct review of our strategy                                                                                                        87     Independent assurance report
                                                                                        and business model, operating                                       24 Safety and health                                                 90     Reporting criteria
                                                                                        context, governance and operational                                 37 Workforce culture and capability                                  91     External review panel – summary report
                                                                                        performance, targeted primarily at                                                                                                       92     Glossary of icons, terms and acronyms
                                                                                        current and prospective investors.
                                                                                                                                                                                                                                IBC     Administration

                                                                                                                                                            DISCIPLINED GROWTH FOR
                                                                                                    KUMBA IRON ORE LIMITED
                                                                                                    ANNUAL FINANCIAL STATEMENTS 2018

                                                                                                                                                            A SUSTAINABLE FUTURE
                                                                                                    UNLOCKING
                                                                                                    OUR FULL
                                                                                                    POTENTIAL                                                                                   Cover images
                                                                                                                                                                                                1. Johannes Banda, a Strata Control Officer and Eduan Hattingh, a Geotechnical Engineer at the
                                                                                                    DISCIPLINED
                                                                                                    GROWTH FOR
                                                                                                    A SUSTAINABLE
                                                                                                    FUTURE
                                                                                                                                                                                                   Kapstevel pit in Kolomela mine selecting the scan area for the ground probe SSR-FX radar to
                                                                                                                                         ANNUAL FINANCIAL                                   6      monitor high wall stability.
                                                                                                                                         STATEMENTS (AFS)                   1           5       2. Otladisa Mokhutsane, a laboratory technician in the quality control laboratorium at Kolomela
                                                                                                                                                                                                   mine.
                                                                                                                                                                   8            2               3. Kuruman Field band performing at a mine visit.
                                                                                        Detailed analysis of our financial results,                                                 3           4. Moabi Tau instructing students, Mapole Melokwe and Nicholas Bohitile at the Tsipi skills and civil
                                                                                                                                                             7
                                                                                        with audited financial statements,                                                                         training centre on the band saw machine.
                                                                                                                                                                                            4   5. Elisa Natlhare, receiving an eye exam from Andrew Magam at Sishen’s Batho Pele mobile clinic.
                                                                                        prepared in accordance with International                                                               6. The “Thaba Tots” Early Childhood Development (ECD) centre, funded by Kumba, opened in
                                                                                        Financial Reporting Standards (IFRS).                                                                      2014 for children from the Thabazimbi community.
                                                                                                                                                                                                7. Poliena Melakeso nurse at the UGM clinic in consultation with a patient.
                                                                                                                                                                                                8. Eugine Matlhare, Reginah Konman and Veronica Seleke, all members of the Rerokela Sechaba
                                                                                                                                                                                                   Primary sewing and beading cooperative in Groenwater situated near Kolomela.

                                                                                                    KUMBA IRON ORE LIMITED
                                                                                                    ORE RESERVE (AND SALEABLE PRODUCT)
                                                                                                    AND MINERAL RESOURCE REPORT 2018

                                                                                                                                         ORE RESERVE         DIRECTORS’ RESPONSIBILITY
                                                                                                                                         (AND SALEABLE       The Kumba Board, supported by the Audit Committee, has overall accountability for this
      KUMBA IRON ORE LIMITED ORE RESERVE (AND SALEABLE PRODUCT) AND MINERAL RESOURCE REPORT 2018

                                                                                                    UNLOCKING
                                                                                                    OUR FULL
                                                                                                                                         PRODUCT)            report. It delegated the responsibility to oversee the reporting process to its Social, Ethics and
                                                                                                    POTENTIAL
                                                                                                    DISCIPLINED
                                                                                                    GROWTH FOR
                                                                                                    A SUSTAINABLE                        AND MINERAL         Transformation Committee, which was assisted by a Steering Committee comprising executive
                                                                                                                                                             managers and a dedicated reporting team. The Board collectively reviewed the content of
                                                                                                    FUTURE

                                                                                                                                         RESOURCE REPORT
                                                                                                                                         (ORMR)*             this report and confirms that it believes this Sustainability Report 2018 addresses our material
                                                                                                                                                             issues, and is a balanced and appropriate presentation of the sustainability performance of the
                                                                                        Reported in accordance with the                                      group. The Kumba Board approved this report on 15 March 2019.
                                                                                        South African Code for the Reporting
                                                                                        of Exploration Results, Mineral
                                                                                        Resources and Mineral Reserves                                       Buyelwa Sonjica
                                                                                        (SAMREC Code – 2016 edition).                                        Chairperson: Social, Ethics and Transformation Committee
                                                                                                                                                             15 March 2019
                                                                                                   * Published on 19 February 2019.
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INTRODUCTION PERFORMANCE HIGHLIGHTS AND ABOUT THIS REPORT

PERFORMANCE HIGHLIGHTS

 7 high-potential safety                         1.80                                      Fatality-free

                                                                                                                                                 Introduction
                                                          total recordable
 incidents                                       case frequency rate                       since May 2016
 2017: 21                                        (TRCFR)
                                                 2017: 3.23
                                                                               
 24% women in                                    23%      women in total                   130ha
 management                                      workforce                                 rehabilitated during 2018
 2017: 22%                                       2017: 21%                                 2017: 75ha

                                                                                                                             
 R123.5 million                                  R11.8 billion                             R1.4 billion
 spent on direct social                          spent on procurement from                 spent on suppliers in host
 investment                                      HDSA businesses                           communities
 2017: R106.7 million                            2017: R9.3 billion                        2017: R520 million
                                                                                                                             

FTSE Russell confirms that Kumba has been independently assessed
according to the FTSE4Good criteria, and has satisfied the requirements       For more information, please refer to:
to become a constituent of the FTSE4Good Index Series. Created by the         www.issgovernance.com/esg/ratings/corporate-rating/
global index provider FTSE Russell, the FTSE4Good Index Series is
designed to measure the performance of companies demonstrating
strong Environmental, Social and Governance (ESG) practices.

ABOUT THIS REPORT
PURPOSE AND SCOPE OF THIS REPORT                                          In addition, we have published an Integrated Report (IR),
This report is produced in order to provide our key stakeholders          Annual Financial Statements (AFS), and Ore Reserve (and
– namely our shareholders, employees, local communities,                  Saleable Product) and Mineral Resource (ORMR) report. The
non-governmental organisations (NGOs), investors, customers,              reporting process for all our reports has been guided by the
partners, suppliers and government – with a transparent account           principles and requirements contained in International Financial
of how we addressed the most material sustainability issues               Reporting Standards (IFRS), the IIRC’s International 
the Company faced during 2018. The scope of this report                   Framework, the GRI’s Standards, the King Code on Corporate
covers our Sishen and Kolomela operations, corporate office               Governance 2016 (King IV), the JSE Listings Requirements and
in Centurion, the Saldanha port and our marketing activities in           the Companies Act, 71 of 2008.
London and Singapore, for the period 1 January to 31 December
2018. Thabazimbi, our operation in Limpopo was transferred to             We use a combined assurance model to provide us with
ArcelorMittal SA on 1 November 2018.                                      assurance obtained from management and from internal and
                                                                          external assurance providers. PricewaterhouseCoopers (PwC)
Our sustainability reporting criteria have been compiled in               has provided independent assurance over selected sustainability
accordance with the GRI’s Sustainability Reporting Standards              key performance indicators.
(core compliance) and their Mining Sector Supplement.
Our reporting is also aligned with the AA1000 stakeholder                 PwC’s assurance statement is provided on page 87.
engagement standard, the sustainable development principles
and reporting framework of the International Council on Mining            Please address any queries or comments on this report to
and Metals (ICMM), and the principles of the United Nations               Bheki Masondo (email: bheki.masondo@angloamerican.com).
Global Compact (UNGC).
                                                                                       Kumba Iron Ore Limited Sustainability Report 2018     1
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INTRODUCTION OUR VALUES

OUR VALUES

Safety and health are always first on our agenda
We are committed to zero harm. We believe that all fatalities and injuries
are preventable and that by working together we can make safety and
health a way of life, inside and outside of the workplace.

                                                                                               Image: Employees performing an isolation
    CARE AND                                                                                     and lock-out procedure at the life-of-
                                                                                                    mine truck workshop at Sishen.
    RESPECT
    We always treat people with
    respect, dignity and common
    courtesy – regardless of their
    background, lifestyle or position.
    We are building trust through
    open, two-way communication
                                                                                                                        ACCOUNTABILITY
    every single day.
                                                   INNOVATION                                                                We take
                                           Challenging the way things                                                  ownership of
                                         have always been done is a key                                               our decisions,
                                       priority. By actively developing new                                          our actions and
                                        solutions, encouraging new ways
                                        of thinking and finding new ways
                                                                                                                        our results.
                                         of working, we are significantly                                     We deliver on our promises
                                             improving our business.                                               and acknowledge our
                                                                                                                 mistakes. Above all, we
                   INTEGRITY                                             COLLABORATION                                 never pass blame.
           Integrity demands taking                                  No one here is on their own.
           an honest, fair, ethical and                               We are one company with a
            transparent approach in                             shared ambition – all working together
            everything we do. It is not                             to make appropriate decisions
         about being popular; it is about                                and get things done
          always doing the right thing.                                   more effectively.

                                                                            Image: Zenovia Bekend
                                                                          and Marian Jobs, plant
                                                                       operators carrying out
                                                                    maintenance on the conveyors at
                                                                 the Kolomela primary crusher.

2         Kumba Iron Ore Limited Sustainability Report 2018
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INTRODUCTION CREATING SHARED VALUE FOR STAKEHOLDERS

CREATING SHARED VALUE
FOR STAKEHOLDERS
                                              SHAREHOLDERS AND INVESTORS

                                                                                                                                          Introduction
    New dividend policy, target               Dividends paid to                           Total dividends paid to BEE
    pay-out ratio range of between            shareholders in 2018                        shareholders since Kumba’s
                                                                                          inception in November 2006
    50 to 75%                                 R12.5 billion
    headline earnings
                            of

                                              (2017: R6.7 billion)
                                                                                          R29 billion
                                                                                          (2018: R26 billion)

                                                                               CUSTOMERS
                                                                          Reinforce our reputation for
                 COMMUNITIES                                                quality and consistency

               R123.5 million spent on                               Product quality – average Fe content %

                                                                               65.1%
           direct social investment in 2018
        HIV-related services supplied to
      more than 10,000 community members
                                                                                Lump:Fine ratio
       through the Ulysses Modise (UGM)
                 Wellness Clinics
         TB screening services supplied to
                                                                                68:32
            6,024 community members

                                                                                                            EMPLOYEES
                                                       SUPPLIERS                                   Total labour costs of R4,627 billion
                                                                                                          paid to our employees
                                         R11.8 billion spent on procurement
                                      from HDSA businesses (2017: R9.3 billion)                        Employment of local people
                                                                                                             Sishen – 86%
                                        R1.4 billion spent on suppliers within                              Kolomela – 63%
                                        host communities (2017: R520 million)
                                                                                                   HDSA and women in management
                                                                                                     HDSA in management – 68%
                                                                                                    Women in management – 24%
GOVERNMENT
                                                                                                      Women in core mining – 20%
TOTAL TAX CONTRIBUTION                                                                                 Training and development
Rand million                         2018                                                             Number of participants – 839
Corporate income tax                 4,078                                                             Expenditure – R232 million
Mineral royalties                      983                                                                    % HDSA – 97
Payroll tax                          1,093                                                                   % women – 32
Skills levy                             42
UIF                                     22
Total                                6,218

                                                                               Kumba Iron Ore Limited Sustainability Report 2018     3
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OUR APPROACH WHO WE ARE

WHO WE ARE

                                                                         WHO WE
                                                                          ARE
                                                              Kumba is a supplier of high-
                                                             quality iron ore (64.5% average
                                                           Fe) to the global steel industry. We
                                                     operate primarily in South Africa, with mining
                                                    operations in the Northern Cape, a head office in
LISTED ON THE                                   Centurion, Gauteng, and a port operation in Saldanha Bay,
                                                                      Western Cape.
JSE LIMITED
                                          Kumba has a 76.3% interest in Sishen Iron Ore Company Proprietary
                                           Limited (SIOC), an entity that we manage. SIOC, in turn, owns the
                                                           operating assets of the Company.
                                                    The remaining 23.7% interest in SIOC is held by our
                                                      black economic empowerment (BEE) partners
                                                         Exxaro Resources Limited, a leading BEE
                                                          company listed on the JSE (20.6%), and
                                                            the SIOC Community Development                         BEING A
                                                                 Trust, a trust that funds                        PARTNER
                                                                     projects in local
OUR VISION                                                                                                        OF CHOICE
                                                                      communities
                                                                          (3.1%).                            Building lasting beneficial
To be a successful and sustainable African                                                                      relationships is core
supplier of quality iron ore to global and local
                                                                                                              to our success. We are a
markets while delivering superior value to our
stakeholders.
                                                                                                               significant employer in
                                                                                                               the region in which we
                                                                                                            operate, and we work with
                                                                                                               communities and local
OUR AMBITION                                                                                              governments to create lasting
                                                                                                          positive change in these areas.
• Eliminate fatal incidents through a
                                                                                                             As at the end of 2018 we
  culture of zero harm
• Sustainably extend the life of our assets                                                                     had 12,050 people in
  beyond 2035                                                                                                employment, comprising
• Significantly improve margins by                                                                         6,005 permanent employees,
  US$10/tonne to remain globally                                                                               5,557 contractors and
  competitive and sustainable                                         WHAT WE DO                                  488 learnerships.
• Become the employer of choice,
  through a high-performance culture                     We produce high-grade iron ore, with a
  driven by healthy employees                          Lump-to-Fine ratio of 68:32 in 2018. This ore
                                                    is mined at our operations. Export ore is shipped
                                                to customers across the globe from the port operation in
                                              Saldanha Bay. We also have a marketing office in Singapore,
                                           integrated with Anglo American marketing BU, and one in London,
     For more on these
                                             wholly owned by Kumba. In total, around 92% of our product is
     relationships see pages                    exported, and around 8% comprises domestic sales. The
     37 to 41 of the SR.                         revenue generated from these sales is used to grow and
                                                   sustain the business, which shares its success with
                                                                  various stakeholders.
                                                              To learn more about our operations
                                                                  see pages 66 to 68 of the IR.

4         Kumba Iron Ore Limited Sustainability Report 2018
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KUMBA IRON ORE LIMITED
OWNERSHIP STRUCTURE

                                                                                                                                   Our approach
                                                      ANGLO
                                                     AMERICAN
                                                        PLC
                                                       100%

      PUBLIC                  INDUSTRIAL              ANGLO                       OTHER
                                                                                                                FOREIGN
   INVESTMENT                DEVELOPMENT           SOUTH AFRICA               SOUTH AFRICAN
                                                                                                             SHAREHOLDERS
   CORPORATION               CORPORATION           PROPRIETARY                SHAREHOLDERS
                                                                                                                 10.0%
       1.1%                      12.9%               LIMITED                       6.3%
                                                      69.7%

                                                                           Anglo American Group companies
                                                      KUMBA                BEE partners
                                                     IRON ORE              Government-related bodies
                                                      LIMITED
            Empowerment partners*                      76.3%               South African shareholders
                                                                           Foreign shareholders
                     23.7%

                                                                    *	 Total deemed empowerment shareholding of 29.79%
  EXXARO RESOURCES            SIOC COMMUNITY                             consisting of Exxaro Resource Limited (20.6%), SIOC
       LIMITED                 DEVELOPMENT                               Community Development Trust (3.1%),
        20.6%                    TRUST 3.1%            SIOC              Envision I (3%, unwound November 2011), Envision II
                                                                         (3.09%, unwound November 2016).

    43.1 Mt
    production (2017: 45.0 Mt)
                                           40.0 Mt
                                           export sales (2017: 41.6 Mt)
                                                                                     12,050
                                                                                     employees (2017: 10,727)

    292.5 Mt                               3.3 Mt
                                                                                     Customers in South Africa, China,
                                                                                     India, Japan, South Korea, Europe
                                                                                     and the Middle East
    total tonnes mined                     domestic sales (2017: 3.3 Mt)
    (2017: 271.3 Mt)

                                                                          Kumba Iron Ore Limited Sustainability Report 2018    5
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OUR APPROACH SOCIAL, ETHICS AND TRANSFORMATION COMMITTEE CHAIRPERSON’S REVIEW

SOCIAL, ETHICS AND TRANSFORMATION
COMMITTEE CHAIRPERSON’S REVIEW

                                                                               It gives me pleasure to introduce
                                                                               Kumba’s annual sustainability report
                                                                               and to present the Social, Ethics and
                                                                               Transformation Committee (Setco)
                                                                               review. I have had the privilege of
                                                                               serving on the Board of Kumba since
                                                                               2012 and am honoured to assume
                                                                               the role of chairperson of Setco,
                                                                               since May 2018. I thank my
                                                                               predecessor, Dolly Mokgatle, for her
                                                                               leading example.

                                                                               independently facilitated stakeholder panel, in which we
                                                                               receive very constructive input on our reporting activities
                                                                               (see page 91).

                                                                               DRIVING A CULTURE OF ZERO HARM
                                                                               Kumba upholds a sacred covenant code with the families
                                                                               of all our employees to do our utmost to ensure that
Buyelwa Sonjica                                                                every employee and contractor at our operations returns
Chairperson: Setco                                                             home unharmed after every day’s work. I am pleased to
                                                                               report that in 2018 we maintained a strong safety and
                 Our responsibility as Setco is to monitor and guide           health performance and ensured ongoing improvements.
                 Kumba’s performance relating to safety, health and            We have operated fatality-free since May 2016 and our
                 the environment, the provision of a positive social           ongoing focus on implementing our comprehensive
                 contribution, promotion of transformation and sound           “elimination of fatalities framework” continues to have a
                 ethical practices. The Committee also receives                positive knock on effect in preventing injuries.
                 feedback from Kumba’s human resources team on
                 its activities relating to workforce engagement, talent       Building on our progress in 2017, we have seen a further
                 management and promotion of a strong organisational           decrease in the number and severity of injuries recorded
                 culture.                                                      at our operations and achieved almost all of our safety-
                                                                               related targets for 2018. There were 41 recordable injuries
                 This has been another very encouraging year for Kumba,        at our operations in 2018, of which 21 were lost-time
                 with the Company’s strong operational and financial results   injuries, and no major disabilities sustained. We continue
                 accompanied by a predominantly positive sustainability        to prioritise the prevention of transportation and materials
                 performance. In this opening review, I reflect on some        handling incidents. Our total recordable case frequency
                 of the key highlights and challenges relating to Kumba’s      rate of 1.80 was a 45% improvement on our rate in 2017
                 sustainability performance over the year and share some       and exceeded our targeted 2.75.
                 forward-looking perspectives. We remain committed to
                 ensuring that Kumba creates and shares value across           We are taking decisive steps to advance further towards
                 its stakeholder groups. To do so without harm is our          achieving our goal of zero harm at our operations. The
                 ongoing intent.                                               emphasis we continue to place on visible felt leadership
                                                                               interactions and interventions at Sishen and Kolomela
                 I encourage you to please share your views with us, both      has supported an encouraging increase in the number of
                 in terms of Kumba’s performance and the quality of            high-potential hazards (HPH) reported and addressed to
                 disclosure. Frank feedback from stakeholders is essential     effect more robust controls. This in turn has supported a
                 to foster greater accountability and helps us deliver         67% decrease in the number of high-potential incidents
                 more effectively on our sustainability goals. Recognising     recorded. It is nonetheless unacceptable that such
                 the value of external feedback, each year we host an          incidents still occur as they expose our employees and

6        Kumba Iron Ore Limited Sustainability Report 2018
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contractors to fatal risks. Our leading indicators reflect         In 2018 we strengthened our approach to supporting
steady improvements in mitigating risks associated with            employees in managing mental health-related issues,
our most challenging areas – transportation and mobile             which has driven an encouraging increase in the number
machinery, and working at heights.                                 of employees seeking assistance, and reduction in the
                                                                   severity of issues presenting problems.
In striving for zero harm, we are continually exploring new
opportunities for improved methods to make mining safer.           In managing TB and HIV/Aids our performance is in
I am proud of the leading example Kumba continues to               line with World Health Organisation and Department
demonstrate in developing and adopting technologies                of Mineral Resources (DMR) expectations and we are
to reduce potentially fatal risks and improve our ability          making progress towards meeting ambitious targets,
                                                                   including the UNAIDS 90/90/90 targets for 2020. Despite

                                                                                                                                       Our approach
to achieve our zero-harm goal. For example, this year
                                                                   steady improvements in our case detection, reporting and
we collaborated in developing the industry’s first vehicle
                                                                   disease management in the workplace, we regrettably
intervention system to detect a potential collision and
                                                                   diagnosed 38 new HIV infections and 25 new cases of
automatically slow down or stop a haul truck to prevent
                                                                   non-occupational TB in 2018, 11 of which were sero-
a collision. In driving modernisation, we are also advanced
                                                                   conversions. The estimated prevalence of HIV infection
in the use of drones, mobile devices and digitisation.
                                                                   within our permanent workforce in 2018 was 4.5%. Our
                                                                   TB incidence rate decreased by 27% year-on-year, to
Managing health risks in the workplace, entrenching                184 per 100,000 of the employees and contractors, which
our critical control management process and mitigation             is significantly below the South African average.
measures are realising a steady reduction in levels of
occupational exposure to health hazards. In particular             Our community healthcare initiatives continue to improve
to noise and dust, our two main health risks – and fewer           access to quality medical and healthcare services and to
health incidents at both Sishen and Kolomela. We do not            alleviate some of the mounting pressure on health service
have any machinery at our mines that emit noise levels             delivery by government. In 2018 we celebrated a decade
above 107 dB(A), and for a consecutive year we did not             of partnering with the Gamagara Municipality and the
record any new cases of noise-induced hearing loss.                Provincial Department of Health in operating the UGM
                                                                   Wellness Clinic in Kathu. The clinic represents one of the
Sishen continues to address challenges with PM10 dust              most successful public-private partnership initiatives in
emissions and is implementing an action plan that will             the Northern Cape and has a proud history of accolades
drive further reductions to ensure compliance with legal           from organisations including the South African Business
limits. This year we focused on installing dust suppression        Coalition on HIV/AIDS, the World Health Organization and
and extraction technology in high-risk areas across                United Nations International Children’s Emergency Fund. As
our operations, which has enabled us to decrease the               examples of positive impact, an average of 1,400 community
number of workers potentially exposed to dust above                members receive ARV on a monthly basis from the clinic.
the occupational exposure limit to 104, compared to                More than 480,000 people have been educated through the
136 in 2017. We also made ground-breaking progress by              clinic on healthy lifestyles, general hygiene, HIV and other
devising innovative design interventions that have ensured         conditions, and more than 306,000 people have conducted
                                                                   HIV testing and know their HIV status.
that no visible dust is emitted during RC drilling – a feat that
was considered to be unachievable.
                                                                   VALUING OUR PASSIONATE WORKFORCE
                                                                   In striving to be an employer of choice we have made
We recorded five cases of occupational disease in 2018,
                                                                   valuable progress in developing an organisational culture
of which four were work-related musculoskeletal injuries
                                                                   that fosters safety, diversity, innovation and performance.
and one a case of post-traumatic stress disorder following         Consequently we have seen great energy and
a truck accident at Kolomela. All individuals have been            commitment which has had a positive impact on delivery.
rehabilitated and returned to work. For a consecutive year,
we did not record any new cases of diagnosed occupational          Our engagements with employees have reinforced our
respiratory disease, including occupational TB.                    recognition that a compelling culture is dependent on
                                                                   leadership being inspiring and motivating as well as taking
Mitigating chronic disease rates in our workforce remain           interest in personal development of each and every worker.
a challenge and area of focus. About 2,800 employees               To support the delivery of our Tswelelopele objectives – our
and contractors are suffering chronic diseases, the                ambitious strategy to radically transform our business and
main conditions being carrying too much body weight,               ensure sustained value creation for our shareholders and
hypertension, and high cholesterol levels. Our ongoing             stakeholders – a strategic focus has been the introduction
efforts were supported by specific campaigns including             of a leadership and culture “architecture”. This has included
weight loss and obesity, smoking, and substance abuse.             the rollout and embedding of our Kumba Culture and

                                                                         Kumba Iron Ore Limited Sustainability Report 2018         7
UNLOCKING OUR FULL POTENTIAL DISCIPLINED GROWTH FOR A SUSTAINABLE FUTURE - KUMBA IRON ORE LIMITED - Anglo American ...
OUR APPROACH GOVERNANCE AND MANAGEMENT APPROACH

SOCIAL, ETHICS AND TRANSFORMATION
COMMITTEE CHAIRPERSON’S REVIEW
CONTINUED
Leadership Code at all levels, assessing to what extent our leaders      We place an emphasis on progressively increasing levels of
are “showing up” on the Leadership Code, and taking actions to           procurement from localised suppliers. This is supported by
address identified weaknesses. Other focus areas are building            our supplier and enterprise development initiatives. In 2018,
leadership capability, with a particular focus on enhancing front line   we spent R1.4 billion on localised procurement with more
supervisor capability, revitalised team development processes, and       than 260 suppliers surrounding our mining operations, against
promoting our desired inclusion culture.                                 an ambitious target of R1 billion, and we aim to increase this
                                                                         expenditure to R2 billion by the end of 2019. In 2018, we spent
Achieving sustainable and tangible transformation is a business          R11.8 billion on HDSA businesses, accounting for 81% of our
imperative and is core to our licence to operate. We are pleased         discretionary payments.
to exceed all the South African Mining Charter II’s minimum
requirements across the organisation and currently meet the              In 2018, we spent R360 million on the housing and
Mining Charter 2018 (MC 2018) targets on Board, Exco, middle             accommodation for employees, which is a pillar of our
management, junior management (HDSA), and core levels. We                contribution to the wellbeing of our host communities and
are lagging in our performance against MC 2018 targets for               employees. Kumba’s three-pronged housing strategy encourages
HDSA and female representation at senior management, and                 home ownership, offers house rentals, and facilitates alternative
female representation at junior management levels. Our talent            accommodation options for employees. Affordability presents
pool and pipeline support our progress, with 97% of employees            a challenge for many employees interested in home ownership
participating in our training and development programmes                 and we continue to seek opportunities to partner in mitigating
being historically disadvantaged South Africans, and 32% being           challenges.
women. We invested a total of R232 million on training and
development, amounting to 6% of total payroll.                           In direct social investments, we spent R123.5 million. On SLP
                                                                         projects, we spent R55.1 million. We have continued to maintain
We have continued to foster strong and trusting relations with           good relations with our host communities and communicate
our employees. A focus in 2018 was on closing out all outstanding        effectively about our SLPs and other social commitments.
items from the wage negotiations concluded in 2017, which was
successfully achieved. Of our total workforce, 91% are local, a          In pursuing longer-term socio-economic development
level we have maintained since 2016. Our employee turnover               initiatives, Sishen is investing in opportunities identified to
rate – the number of permanent employee resignations as a                optimally use its non-operational land to benefit the mine and
percentage of total permanent – was 4.14%, well below the                surrounding communities. The proposed land-uses centre
7.6% industry benchmark.                                                 around game breeding, cattle farming, conservation of land,
                                                                         eco-tourism and education, land restoration, and leasing and
The pleasing turnaround of the business in 2017 was                      selling of land. These site-level activities dovetail with the early
underpinned by an extensive organisational restructuring                 stages of us implementing Anglo American plc’s Collaborative
process followed by targeted initiatives to increase productivity        Regional Development programme. This approach recognises
at Sishen and Kolomela. These continued throughout 2018,                 the limitations of companies acting in isolation to promote
promoting further improvements and an energised workplace.               development in host areas, and the potential for collaboration to
In July 2018, we enthusiastically launched our new broad-based           enable people to work at scale. The innovative approach starts
employee share ownership scheme, “Karolo”, which ensures that            by identifying socio-economic development opportunities with
permanent employees below middle and senior management                   the greatest potential in a region through spatial planning and
level can be active stakeholders by having a direct interest in the      analysis. This provides a visualisation of what the future can
Company’s profit. We have granted share awards and provided              bring and creates the catalyst for forging partnerships with a
training on the new scheme to all participants.                          broad range of stakeholders to plan, finance and deliver those
                                                                         opportunities. It is about developing and realising a shared vision
MAKING A POSITIVE SOCIAL CONTRIBUTION                                    that supports national, regional and local planning processes and
To be productive, safe, responsible and sustainable, our mines           is aligned with the UN Sustainable Development Goals (SDGs).
must operate alongside thriving communities. Our approach
focuses on leveraging core business activities and delivering            MANAGING SOCIAL RISKS AND IMPACTS
benefits through partnerships to support sustainable job creation        We are very pleased with the successful relocation of the
and effective public service delivery, with the longer-term aim          Dingleton community to Siyathemba, a new purpose-built suburb
of reducing the dependency of municipalities, communities and            in Kathu, to enable the expansion of Sishen. The process began
small, medium and micro enterprises (SMMEs) on our mines.                in 2014 and has been carefully managed in close collaboration
A key mandate of Setco is to ensure that our host communities            with the people of Dingleton, the Dingleton resettlement working
are able to remain sustainable beyond life-of-mine.                      group, the Gamagara local municipality, and the Northern Cape

8         Kumba Iron Ore Limited Sustainability Report 2018
provincial government, with great care taken at all times to ensure   I am particularly pleased about the significant progress we have
no violation of human rights. The resettlement has involved           made at Sishen in integrating mine closure planning with our
517 households accommodating approximately 3,500 people,              operational strategies, with a particular focus on progressive
and included building new homes and providing additional              rehabilitation of mine impacted land. The operation has rapidly
schools and public facilities. The post-resettlement working          scaled up its rehabilitation progress and during 2018, we
group continues to monitor and promote projects to ensure the         reshaped 85ha at Sishen, against a target of 50ha, and 44.7ha at
sustainability of the community. As at year-end, we continue          Kolomela, against a target of 48ha.
to negotiate a settlement with one resident in Dingleton who
remains resistant to moving and is demanding higher levels of         Sishen continues to face dust emission challenges due to high
compensation.                                                         winds and dry conditions, but has ensured steady, significant

                                                                                                                                                 Our approach
                                                                      improvements over the last three years. In 2018, we recorded
During 2018, social tensions intensified around our operations,       an 80% year-on-year reduction in the number of exceedances.
as anticipated ahead of the national elections in 2019. We            We are implementing additional controls to mitigate the main
experienced various political parties mobilising marches and          contributors of dust, which are haul roads, crushing activities, and
strike action in the area where Kumba operates, and this is           waste dump activities. We aim to have achieved the necessary
expected to continue until the elections are held. Fortunately,       reduction in emissions to ensure full compliance with relevant
protests undertaken during the review period were all carried         legislative requirements by 2020.
out peacefully.
                                                                      In ensuring responsible environmental stewardship, we engage
The transfer of the mining right for Kumba’s Thabazimbi mine to       regularly with government at all levels to ensure compliance with
ArcelorMittal South Africa was approved by regulatory authorities     environmental authorisations and related requirements, including
in October 2018 after regulatory conditions were met. We ceased       any instances of environmental incidents or grievances. Sishen
operations at the mine in September 2016 and continued to             and Kolomela have environmental management systems that are
invest in maintaining public services in Thabazimbi. ArcelorMittal    certified against the ISO 14001: 2015 standard.
is now responsible for the mine’s closure and rehabilitation, and
all social commitments and environmental obligations attached to      In 2018, we were issued three pre-non-compliance notices;
the mining rights have been transferred in full. Kumba continues      two at Kolomela for illegal clearing of vegetation and one at
to participate in the Thabazimbi Trust and to engage with             Sishen regarding poor hydrocarbon and waste management.
ArcelorMittal on its progress in managing the transition.             For a third successive year there were no “medium” or “high
                                                                      impact” (levels 3 to 5) reported, indicating good management
PROMOTING RESPONSIBLE ENVIRONMENTAL                                   of environmental controls across the operations. In managing
STEWARDSHIP                                                           low-level incidents, we focus on mitigating hydrocarbon spillages,
It is our responsibility to leave the environment in a good state     dust-related incidents, and water leakages/spillages.
for future generations. Our strategy also drives a positive
contribution, including through supporting community water            IN APPRECIATION
security, promoting conservation awareness and education, and         In closing, I thank my colleagues on the Committee, the executive
delivering positive biodiversity conservation gains.                  team, under the leadership of Themba Mkhwanazi and Kumba’s
                                                                      employees for their work in delivering on Kumba’s sustainability
A highlight in 2018 was the launch of Sishen’s Education Centre       commitments, and for their contribution to the encouraging
at Tamaga Lodge, situated on the recently proclaimed Sishen           performance that we have seen this year. I also wish to express
Nature Reserve, outside of Kathu. The opening of the centre on        my appreciation to the Board led by the Chairperson, Dr Mandla
the reserve creates a wonderful opportunity for Sishen to make a      Gantsho, for its support and commitment. The latter sentiment
positive impact towards environmental education of the youth in       is extended to all those external stakeholders who have shared
the Northern Cape. The Education Centre will be run in partnership    their views on Kumba’s sustainability performance and who have
with the Wildlife and Environmental Society of South Africa           continued to engage with the Company as it strives to meet
(WESSA) and we see this initiative as a long-term community           its commitments relating to zero harm, transformation, socio-
investment project that will uplift the communities surrounding       economic development and environmental protection.
the Kumba mines, even beyond the life of Sishen.
                                                                      Buyelwa Sonjica
We have maintained a good performance across all key areas,           Chairperson: Social, Ethics and Transformation Committee
although increased production at our operations resulted in
our water withdrawal intensity increasing to 151ℓ/t compared          15 March 2019
to 147ℓ/t in 2017 and we emitted 0.96 million tonnes of
CO2‑equivalent (Mt CO2e), a 4% decrease on 2017 and achieved
a 7.4% energy saving mainly due to diesel use efficiencies.

                                                                                   Kumba Iron Ore Limited Sustainability Report 2018         9
OUR APPROACH OUR BUSINESS MODEL AND INTEGRATED VALUE CHAIN

OUR BUSINESS MODEL AND INTEGRATED
VALUE CHAIN
OUR OUTPUT
43.1 Mt high-quality haematite iron ore, with a lump-to-fine ratio of 68:32 (2017: 66:34). Sishen produced
products with an average Fe content of 64.6% and Kolomela averaged 64.3% for 2018. Our product portfolio
includes niche lump products, as well as standard fines and standard lump
            COMPETING ON REVENUE
                              OUR REVENUE

                                  Iron ore prices                 Iron ore sales volumes                    Rand/US$ exchange rate
                                  securing a premium for                                                    higher US$ iron ore prices partially offset
                                                                  hampered by logistical challenges
                                  our higher quality ore                                                    by a marginally stronger Rand

                            Our value proposition                                      OUR ACTIVITIES (See page 14 of the IR)
                                                                                       • Exploration: Identifying potential new resources, primarily in the
                                                                                         Northern Cape
                                     CUSTOMER VALUE PROPOSITION                        • Mining: Extracting iron ore in the Northern Cape
                                                                                       • Beneficiation: Improving the final product quality, using dense media
                                                                                         separation (DMS), jig technology and ultra-high density media
                               The reliable supply of high-quality iron ore              separation (UHDMS)
                                                                                       • Blending and outbound logistics: Providing and transporting niche
                                                                                         products
                                                                                       • Shipping, marketing and selling: Servicing markets in South Africa
                                     EMPLOYEE VALUE PROPOSITION                          and globally
                                                                                       • Rehabilitation and environmental stewardship: Across all relevant
                                                                                         stages of the production process
                               The opportunity to earn, learn and grow in
                               a zero-harm environment, supported by a
                                                                                       KEY RESOURCES AND RELATIONSHIPS
 HOW WE CREATE VALUE

                               high-performance culture
                                                                                       • The quality and availability of certain natural resources, such as iron ore,
                                                                                         land, water and energy
                                     SOCIETAL VALUE PROPOSITION                        • Concluded prospecting and mining rights – awarded by national
                                                                                         government
                                                                                       • Regulatory permits and licences – from national, provincial and local
                               Improving people’s lives through our                      government
                               innovation-led approach to sustainable                  • Social licence to operate – provided by communities, their
                               mining that converts mineral resources                    representatives and NGOs
                               into long-term value, contributes to socio-             • Financial capital – from shareholders and lenders
                               economic transformation, and fosters
                                                                                       • Infrastructure and support services – including especially the rail and
                               inclusive and environmentally responsible
                               economic growth                                           port services provided by Transnet
                                                                                       • Positive relationships with employees and trade unions
                                                                                       • Technical, commercial and managerial skills and experience – amongst
                                                                                         employees, management and leadership teams
                                     SHAREHOLDER VALUE PROPOSITION                     • Exploration, mining and processing technology and techniques – in
                                                                                         technical teams and contractors
                                                                                       • Key service providers and suppliers – with a strong focus on building
                               Provide sustained and growing financial                   BEE and a strong local supplier base
                               returns and dividends throughout the                    • High levels of customer satisfaction within a loyal customer base
                               commodity cycle, through responsible
                                                                                       • Strong reputation – including particularly with the media and financial
                               management and good governance
                                                                                         analysts

                               OUR OPERATING CONTEXT:                                  OUR COSTS
                              Issues impacting value                                   TO MAINTAIN THE CURRENT VALUE PROPOSITION
                              • Iron ore price volatility                                DISTRIBUTION (rail, port and freight)             LABOUR
                              • Flattening of the producer cost curve globally           ENERGY (liquid fuel and electricity)            CONSUMABLES
                              • Impact of external variables
                              • Rising expectations across stakeholder groups            CAPITAL EXPENDITURE               MAINTENANCE
                              • A strong sector-based commitment to eliminate
                                fatalities                                               MINING AND NON-MINING CONTRACTORS
                              • Group-wide drive for operational excellence and          SOCIAL INVESTMENTS               REHABILITATION
                                sustainable development
                              • Maintaining the quality of iron ore reserves and         BENEFICIATION           DRILLING AND BLASTING
                                life of asset
                              • Challenges in the regulatory and policy                TO EXPAND THE VALUE PROPOSITION
                                environment
                                                                                         CAPITAL EXPENDITURE               EXPLORATION             MARKETING

10                     Kumba Iron Ore Limited Sustainability Report 2018
POTENTIAL FOR REVENUE
DIFFERENTIATION                                                                        SENSITIVITY ANALYSIS

            Ability to achieve quality and lump premia
           for superior ore quality (64.5% Fe vs 62% Fe

                                                                                                                                                                                                                                                                    Our approach
            benchmark)
                                                                                        1% change to key operational drivers, each
            Price differential potential due to higher                                  tested independently
           lump:fine ratio (68:32 vs global average
            of 20:80)                                                                      Sensitivity analysis (1% change) – EBITDA impact (Rm)

            Ability to respond quicker to market                                                           (260)        Export volume                            260

            volatility than competitors due to greater
           operational flexibility as a result of our size                                                (375)          Export price                                       375

            and superior ore quality
                                                                                                          (400)             Currency                                                400

            Stronger price realisation, driven by
           effective marketing activities
                                                                                        (600)       (400)               (200)                0                200                     400              600

OUR                    1. Third-party      2. Commodity        3. Safety and

                                                                                                                                                                                                                                          STAKEHOLDER PERCEPTIONS
                          infrastructure      markets and         Health               CHANGE PER UNIT OF KEY
TOP 10                                        exchange rate                            OPERATIONAL DRIVERS,

                                                                                                                                                                                                              THE OPERATING ENVIRONMENT
RISKS                                         fluctuations                             EACH TESTED INDEPENDENTLY

4. Stakeholder         5. Socio-economic   6. Cyber risk       7. Legislation
   relations and          and governance                          and regulatory
   social licence to      current                                 compliance
   operate                challenges                                                    Sensitivity analysis                Unit change                       2018 EBITDA impact
                                                                                        Currency (R/US$)                        R0.10/US$                                                    R300m
                                                                                        Export price (US$/t)                        US$1.00/t                                                R520m
8. Managing            9. SIOC             10. Resource        For more information     Volume (kt)                                    100 kt                                                       R65m
   change                 empowerment          depletion and   see page 36 of the IR
   (transformation        status               securing our                                                                 Unit change                  Breakeven price impact
   of the business)                            growth                                   Currency (R/US$)                        R1.00/US$                                                 US$3.00/t

POTENTIAL FOR COST DIFFERENTIATION
                                                                                       BREAKEVEN PRICE
            Scope for differentiation through UHDMS
           technology
            Further leverage in operating costs through                                  Breakeven price
           enhanced operating efficiencies
                                                                                                                                                                                            2          41
            Ability to deliver costs reductions in the                                                                                                                    4
           supply chain
                                                                                          40      (2)
                                                                                                               (1)              2          39
                                                                                                                                                        (4)

            Further diversify customer portfolio with
           sales in regions utilising direct-charge
            materials
            Higher stripping ratio due to inherent
                                                                                         2017

                                                                                                   Cost
                                                                                                savings

                                                                                                                Price
                                                                                                             premium

                                                                                                                            SIB

                                                                                                                                         Total after
                                                                                                                                       controllables

                                                                                                                                                          Lump
                                                                                                                                                       premium

                                                                                                                                                                       Escalation

                                                                                                                                                                                          Freight

                                                                                                                                                                                                       2018

           characteristics of the ore body resulting
            in higher mining costs
            Higher costs associated with distance from
           ports, and Australian competitors closer to
            key market in China

                                                                                                                          Kumba Iron Ore Limited Sustainability Report 2018                                                                                 11
OUR APPROACH CHIEF EXECUTIVE’S REVIEW

CHIEF EXECUTIVE’S REVIEW

                                                                             Despite a challenging operating
                                                                             environment, this has been a year
                                                                             of solid performance for Kumba,
                                                                             in which we achieved some
                                                                             important milestones in our
                                                                             “Tswelelopele” strategy of unlocking
                                                                             Kumba’s full potential and delivering
                                                                             on our core purpose of providing
                                                                             superior value to our stakeholders.
                                                                             From a sustainability perspective,
                                                                             it is particularly pleasing to report
                                                                             that we have met our commitment
                                                                             to remaining fatality-free and
                                                                             achieved significant improvement
                                                                             across multiple safety and
                                                                             occupational health indicators,
                                                                             as well as delivering positive
Themba Mkhwanazi
Chief Executive
                                                                             progress on our social and
                                                                             environmental commitments.
               During 2018 the mining industry in South Africa               These results, which make us the most improved business
               regrettably experienced a high rate of fatalities, while      in the Anglo American plc group, reflect the dedication
               globally 2019 started with the devastating incident at        of Kumba’s managers and employees in making safety
               Vale’s operations in Brazil. We are deeply saddened           a top priority and embedding our fatalities elimination
               by this tragic loss of lives of our peers, and extend our     framework. While this safety performance is pleasing,
               thoughts and prayers to their families and loved ones.        we recognise that we cannot let up on our efforts in
               As a sector, we are looking to learn from this tragic         striving for zero harm. To further emphasise that safety
               incident, which brings home the reality of the risks in       is non-negotiable, Kumba has linked safety to business
               mining, and so clearly highlights why the safety of our       performance through its incentive structure.
               people is our first priority.
                                                                             In addition to driving safety, we have been managing the
                                                                             health and wellbeing of our people, and implementing
               Against this background, it is pleasing to report that we
                                                                             measures to safeguard the environment. We have seen
               have had another fatality-free year, honouring our sacred
                                                                             a steady reduction in levels of exposure to our primary
               covenant code and ensuring that every employee and
                                                                             occupational health hazards, namely noise and dust, as
               contractor returns home safely, making it two and a half
                                                                             well as fewer health incidents at both Sishen and Kolomela.
               years without a fatal incident. We have seen a significant
                                                                             This year five new cases of occupational health diseases
               further improvement in our leading and lagging safety
                                                                             were diagnosed and reported; we have seen a marked
               indicators, reducing the number of high-potential incidents
                                                                             improvement in awareness of HIV with 91% of employees
               (HPIs) by 67% and achieving a total recordable case
                                                                             having undergone HIV testing and counselling. We also
               frequency rate (TRCFR) of 1.80, well below our target of
                                                                             saw good results from our environmental programme.
               2.75. This positive safety performance has been achieved
                                                                             No major environmental incidents were reported for the
               through the focused implementation of our “elimination of
                                                                             third consecutive year and we have successfully scaled up
               fatalities framework”, which seeks to ensure a step change
                                                                             our rehabilitation programme. Although Sishen continues
               in our management of high-level safety risks. In addition
                                                                             to face dust emission challenges due to high winds
               to driving a strong safety mindset, we have harnessed
                                                                             and dry conditions, the operation has delivered steady
               new technologies to improve our safety performance,
               such as the automation of braking on trucks and collision     improvements over the last three years.
               avoidance systems, and the use of drones to inspect areas
               of work during high-risk activities such as blasting.

12     Kumba Iron Ore Limited Sustainability Report 2018
We have made some good progress this year with the                the government’s national transformation objectives
relocation of members of the Dingleton community in full          and I believe that, along with our parent company Anglo
alignment with the International Finance Corporation’s            American plc, we have a long and proud track record in
(IFC) performance standards. Of the 517 original families         promoting socio-economic transformation in the country.
at Dingleton, only 10 households remain to be resettled           We are certainly committed to continuing that journey.
in the new purpose-built suburb of Siyathemba in Kathu.
Kumba has invested around R3 billion in establishing              Through our activities this year we have been delivering
Siyathemba, building houses, a school, clinic, police station     on our key objective of providing superior value to all our
and associated infrastructure, and establishing effective         stakeholders:
community representative forums. Engagements with the             • our employees, who are at the heart of our business,

                                                                                                                                     Our approach
remaining households at Dingleton are ongoing and the                received R4.6 billion in salaries and benefits
legal process remains on track.                                   • we created R12.5 billion of value in cash dividends for
                                                                     our shareholders – including employees and our
In October 2018, the transfer of the mining right for                empowerment partners Exxaro and the SIOC
Kumba’s Thabazimbi mine to ArcelorMittal South Africa                Community Development Trust – and delivered
was approved by regulatory authorities. Responsibility               headline earnings of R30.28 per share, an excellent
for the mine’s closure and rehabilitation, and for meeting           outcome given the challenges experienced this year
required social and environmental obligations, now rests          • the South African fiscus received around R4 billion in
with ArcelorMittal. Kumba continues to participate in the            income tax, as well as royalties of R1 billion
Thabazimbi Trust and to engage with ArcelorMittal on its          • we continued to promote local businesses with close
progress in responsibly managing this transition.                    to R12 billion of products and services procured from
                                                                     BEE suppliers, of which R1.4 billion was spent with
Building a world-class operator that is resilient and agile,         267 businesses within our host communities,
requires that we develop and leverage the talent of our              40% above what we targeted for the year; in line with
people. Following the successful completion of the                   our aspiration to create five jobs for every permanent
extensive organisational restructuring process, undertaken           job, these businesses created around 2,700 new jobs
from 2016 to 2017, we have been implementing                         and provided income for over 16,000 people
various initiatives aimed at developing and embedding             • communities in the Northern Cape also benefited from
an organisational culture that fosters safety, diversity,            R123.5 million in social investment projects
innovation and performance. We have been rolling out
the Kumba Culture and Leadership Code across the                  Underpinning our ability to deliver on our strategy, and
Company, undertaken a comprehensive leadership                    progress towards our goals, has been the relentless focus
assessment process, launched a leadership capability              and dedication of our 12,000 workers. Our positive results
development programme, and introduced a revitalised               this year reflect the quality both of the leadership team
team development process across Kumba to build                    and the amazing people across the Company, who have
team cohesiveness and effectiveness. In July 2018,                displayed a strong commitment to fostering teamwork,
we introduced our new broad-based employee share                  driving accountability, and showing good natured
ownership scheme, “Karolo”, for permanent employees               enthusiasm in the execution of their duties. I wish to thank
below middle and senior management level. We have                 each and every one of Kumba’s employees and contractors
granted share awards and provided training on the new             for this commitment that provides the foundation for
scheme to all participants.                                       ensuring the Company’s continued success.

Kumba welcomes the gazetting of Mining Charter 2018               Finally, I extend my appreciation to my colleagues on the
by the Minister of Mineral Resources in September 2018,           Kumba Board and executive team for their counsel and
and we appreciate the efforts made by the Minister and his        support in developing and delivering on Kumba’s strategic
team to engage with stakeholders in finalising this Charter.      ambitions. This has been another encouraging year for
While we appreciate the significant improvements on the           the Company, which I believe sets us up well for further
earlier draft, we nevertheless believe that there are some        value growth.
aspects that may negatively affect the sustainability of the
industry and undermine our ability to create and share
value. We are also concerned that, in certain respects, the       Themba Mkhwanazi
Charter will be difficult to implement legally and practically,   Chief Executive
resulting in unintended, adverse consequences for the
sector. Kumba has consistently affirmed its support for           15 March 2019

                                                                       Kumba Iron Ore Limited Sustainability Report 2018        13
OUR APPROACH MEASURING OUR PERFORMANCE

MEASURING OUR PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER

           VALUE PILLAR
                                           SAFETY AND HEALTH                                 ENVIRONMENT                        SOCIO-POLITICAL

              STRATEGIC
                                                           CSR                         CSR                                    CSR
            FOCUS AREAS
                                       Elimination        Provide       Provide       Provide   Proactively     Focus        Provide   Proactively     Provide
                                       of fatalities    leadership     extensive    leadership    engage        on the     leadership    engage       extensive
                                         through             on         support          on      with key      Northern         on      with key       support
                                       a culture of    responsible       to our    responsible stakeholders     Cape      responsible stakeholders      to our
                                       zero harm        citizenship   employees     citizenship                            citizenship               employees

                                         2018            2017          2016          2018         2017          2016        2018         2017          2016

 Positive outcome             KPI      Fatal injury frequency rate (FIFR)  Energy consumption                           Social way assessment scores
                                                                              (million GJ)                                  (out of five) (for detail refer to
= Neutral outcome                                                                                                           page 43 of the SR)

 Negative outcome
                                            0               0          0.016          8.85         8.94          8.45        3.0           3.1           3.3

                               KPI      Total recordable case                      GHG emissions (Mt CO2-
                                         frequency rate (TRCFR)                      equivalent)

                                          1.80            3.23          3.90          0.96         1.00          0.94

                               KPI      New cases of occupational                  Total water withdrawals
                                         disease (for detail refer to                (million m3) (for detail refer to
                                         page 31 of the SR)                          page 77 of the SR)

                                            5               2            12           30.8         33.2          24.1

                               KPI                                                  Number of level 3, 4 or 5
                                                                                     environmental incidents

                                                                                        0            0            0
* Including retrenchments for 2016.

14         Kumba Iron Ore Limited Sustainability Report 2018
PEOPLE                          PRODUCTION (Mt)                                COST                                  FINANCIAL

                                                                                                                                                                    Our approach
    CSR

   Provide     Implement      Provide    Implement    Extend life   Compete      Unlock full Sustainably       Use         Unlock full Sustainably       Use
 leadership       the        extensive      the       of current    through    infrastructure  operate     technology    infrastructure  operate     technology
      on        operating     support     operating     mines       premium       potential     mines       to extract      potential     mines       to extract
responsible      model         to our      model                    products                  at a lower    maximum                     at a lower    maximum
 citizenship                employees                                                          unit cost    ore value                    unit cost    ore value

  2018          2017         2016          2018        2017         2016         2018          2017         2016           2018          2017         2016
 Voluntary labour turnover (%)*          Sishen mine (for detail refer to    Sishen mine free-on-rail                   Return on capital employed
                                           page 66 of the IR)                  (FOR) cash unit cost                      = (ROCE) (%) (for detail refer to
                                           (Mt)                                                                            page 54 of the IR)
                                                                               = Rand/tonne (for detail refer to
                                                                                 page 56 of the IR)

   4.1            4.4         49.5         29.2         31.1         28.4        290.0         287.3         296.2           49            53           51

 Women in management (%)                = Kolomela mine                       = US$/tonne (for detail refer to           Earnings per share
                                           (Mt)                                  page 56 of the IR)                        (Rand per share) (for detail
                                                                                                                           refer to page 54 of the IR)

    24            22           21          13.9         13.9         12.7         21.9          21.6         20.2          30.08         38.63         26.98

 Women in workforce (%)                                                       Kolomela mine FOR cash unit                Attributable free cash flow
                                                                               cost                                        (Rm) (for detail refer to
                                                                                                                           page 58 of the IR)
                                                                               = Rand/tonne (for detail refer to
                                                                                 page 57 of the IR)

    23            21           21                                                248.6         236.7         201.1         7,817        12,338        11,183

 Historically disadvantaged                                                   = US$/tonne (for detail refer to
  South Africans (HDSAs)                                                         page 57 of the IR)
  in management (%)

    68            66           62                                                 18.8          17.8         13.7

                                                                                                Kumba Iron Ore Limited Sustainability Report 2018              15
OUR APPROACH OUR STRATEGY

OUR STRATEGY

Our strategy known as Tswelelopele is structured around key focus areas and delivered
over three horizons to guide our actions to achieve our ambition of US$10/tonne margin
enhancement and extend the life of our assets beyond 20 years

                                            OUR VISION
      To be a successful and sustainable African supplier of quality iron ore to global and local
                    markets while delivering superior value to our stakeholders
STRATEGIC
AMBITION
                                                                                                                                BECOME THE EMPLOYER
                                                          IMPROVE MARGINS BY                                                    OF CHOICE, THROUGH A
                        ELIMINATE FATAL                      US$10/TONNE TO                                                      HIGH-PERFORMANCE
                      INCIDENTS THROUGH                     REMAIN GLOBALLY                    SUSTAINABLY EXTEND                CULTURE DRIVEN BY
                       A CULTURE OF ZERO                    COMPETITIVE AND                      THE LIFE OF OUR                 HEALTHY MOTIVATED
                             HARM                             SUSTAINABLE                      ASSETS BEYOND 2035                    EMPLOYEES

                 WE DELIVER OUR STRATEGY OVER THREE HORIZONS THROUGH OUR TSWELELOPELE PROGRAMME

                                                                                                              HORIZON 3:
 HORIZON 1:                                            HORIZON 2:                                             Expanding the business into
 Operating assets at full potential                    Leveraging endowment                                   attractive adjacencies

                                                                                                                         Identifying and realising
            Sustainably operate mines at a lower unit cost to remain competitive through a reduced
                                                                                                                         opportunities beyond the existing
            cost base and a step-up in productivity
                                                                                                                         asset base

            Compete through premium products to maximise price premium realised
            and to maintain differentiated customer relationships

            Implement the Operating Model
                                                                   Extend life of current assets
            to ensuring the stable and capable
                                                                   through low-grade projects, and
            processes leading to the delivery of
                                                                   business development activities
            business expectations

                                                                   Focus on the Northern Cape, as the
                                                                   region contains the most attractive
                                                                   ore bodies

                                                                   Use technology to extract maximum
                                                                   value from our ore. Focus on
                                                                   step-change opportunities

                                                                   Unlock full infrastructure potential
                                                                   to support maximum export volumes
                                                                   over the medium term

                                                                      KEY ENABLERS

                                                                                                                                             CSR

   Align marketing and                Reinforce product             Proactively engage               Leadership and culture,         Provide leadership
 operational activities to               quality and               with key stakeholders               embedding a culture          through responsible
 ensure product produced                consistency                   to reinforce our                  that fosters safety,       citizenship, displaying
    efficiently matches                                            partnership approach                diversity, innovation       care for safety, health
      customer needs                                                                                    and organisational         and the environment
                                                                                                          effectiveness

16        Kumba Iron Ore Limited Sustainability Report 2018
Through our Tswelelopele (Ore to Awe) programme – aimed at unlocking our
full potential and deliver value for all stakeholders – we are focusing our actions
on making Kumba more competitive within the context of continuing volatility in
global markets.

We recognised the need to enhance our competitive position            Developing trust as a corporate leader, providing ethical value

                                                                                                                                          Our approach
and agreed to embark on a journey to drive the business to its full   chains and improved accountability to the communities we work
potential. Our strategic response has four main ambitions:            with
• achieve our goal of zero fatalities, through a culture of zero
   harm
• sustainably extend the life of our assets beyond 2035
• significantly improve margins by US$10/tonne to remain
   globally competitive and sustainable
• become the employer of choice, through a high-performance
   culture driven by healthy motivated employees

To achieve these ambitions, we have structured our strategy
around three time-based transformation horizons, with key              Building thriving communities with better health, education and
strategic focus areas and key enablers to realise our ambition.       levels of employment

For a detailed review of our strategy please refer to page 3 of the
IR.

SUSTAINABILITY STRATEGY
We have developed our strategy through extensive internal
(with our parent company Anglo American plc) and external
engagement and analysis of critical opportunities and risks,
including the UN Sustainable Development Goals (SDGs).                Maintaining a healthy environment by creating waterless, carbon
Our strategy is about making a more strategic and holistic impact     neutral mines and delivering positive biodiversity outcomes
on the ground and it comprises mutually reinforcing elements
that will positively transform how our stakeholders experience our    These pillars complement our Tswelelopele strategy to ensure
business. The strategy is built around three global sustainability    that we deliver sustainable value to our stakeholders and
pillars:                                                              consistent shareholder returns.
• Trusted corporate leader
• Thriving communities
• Healthy environment

                                                                                Kumba Iron Ore Limited Sustainability Report 2018    17
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