Reviews and reports

Black economic empowerment status report

Assore strongly endorses the broad-based economic imperatives contained in the Minerals and Petroleum Resources Development Act (the MPRD Act) and the Broad-based Socioeconomic Empowerment Charter for the South African Mining Industry issued thereunder (the Mining Charter), and since their inception has embarked on a number of initiatives aimed at meeting these requirements at its mining operations, as set out below.

The MPRD Act has changed the previous common law and statutory position in South Africa in terms of which mineral rights could be held privately. Instead, pursuant to the MPRD Act and with effect from 1 May 2004, the state has assumed sovereignty and custodianship of all mineral rights in South Africa and will grant prospecting rights and mining rights to applicants based on the merits of their applications (which are designated as new order rights). A transitional period commencing in May 2004 and ending in May 2014 is provided for, during which holders of existing mineral and exploration rights (designated as old order rights), upon meeting certain requirements, may convert such existing in-use old-order rights into new-order rights, or in the case of unused rights may apply for new order rights.

The Mining Charter is intended to facilitate the entry of historically disadvantaged South Africans (HDSAs) into the mining industry. The scorecard which the state has issued pursuant to the Mining Charter requires, inter alia, that mining companies achieve 26% HDSA ownership of mining assets within 10 years (ie by 1 May 2014). This has been maintained by the Department of Mineral Resources (DMR), following a review of the Mining Charter in September 2010, as the target required to be achieved by mining companies. The Mining Charter also requires, inter alia, that mining companies provide plans for achieving employment equity at management level and procuring goods and services from black empowered organisations on a preferential basis in accordance with the predetermined criteria set out in such plans. Since 2004, with a view to meeting the Charter’s requirements, Assore, through its various group companies, has achieved the following empowerment milestones:

• Concluded an empowerment transaction with Mampa Investment Holdings (being the commercial arm of the Mankwe Development Foundation) (Mampa) in April 2004, pursuant to which new-order mining rights for the chrome operations in Rustenburg Minerals Development Company Proprietary Limited (RMDC or Rustenburg Minerals) on the farms Zandspruit and Groenfontein were obtained;
• Concluded empowerment transactions with the Bokamoso Trust in February 2006 and March 2010, representing control of Assore’s issued ordinary shares of 3,26% and 11,02% respectively;
• Through Assmang, applied for and obtained new-order mining rights on the iron ore deposits mined at Khumani. Conversion of the old-order rights to new-order rights on the manganese deposits at Black Rock (comprising Assmang’s Nchwaning and Gloria Mines) was obtained and applications for the conversion of all remaining old-order rights to new-order rights, in particular, iron ore (Beeshoek), chrome ore (Dwarsrivier), both in Assmang, and pyrophyllite (Wonderstone), which were submitted prior to 1 May 2009, and are being finalised;
• Implemented a preferential procurement policy at all its operations (refer “Preferential procurement”); and
• Developed social and labour plans (SLPs) for each of its operations, as well as local economic development (LED) projects which support the integrated development plan of the relevant local authority. The plans, which have received the approval of the relevant departments, include the construction of schools and crèches, food security projects and presentation of programmes on adult education, health and safety and environmental awareness.

The extent of compliance with the Charter is reported on and monitored on a regular basis, both at the Excom level and by the board, through the Audit and Risk Committee and specifically on new order mining rights, which are subject to audit by the DMR. No significant issues of non-compliance have been reported by the DMR.

Following the introduction of the MPRD Act, Assore has, specifically at a holding company level, entered into the following empowerment-related transactions:

• In February 2006, the Assore group entered into empowerment transactions effecting the acquisition of 15,02% of its issued ordinary shares at that date by two BEE entities, namely:
  • Shanduka Resources, a subsidiary of Shanduka Group Proprietary Limited (Shanduka), a black-owned and managed investment holding company, which purchased 11,76% (16 464 450 shares) of Assore’s ordinary shares in issue at that date. As part of Assore’s strategy to ensure that the black-empowered control resulting from its empowerment transactions is broad-based, these shares were sold to a special-purpose vehicle (SPV) on 19 August 2011, as part of the first phase of its third empowerment transaction (refer below). As the group’s empowerment partner for approximately six years, Shanduka realised a profit in excess of R2,3 billion upon the sale of its interest in the company; and
  • the Bokamoso Trust (refer “The Bokamoso Trust” below), which has been formed to benefit HDSAs and HDSA community groupings, residing in areas surrounding the group’s mining activities, which purchased 3,26% (4 568 550 shares) of Assore’s ordinary shares in issue at that date.
• In March 2010, Assore entered into its second empowerment transaction, in terms of which:
  • 13 618 265 shares, representing 9,88% of the issued ordinary shares at that date, were acquired by an entity in which the Bokamoso Trust (the Trust) and Assore have a 51% and 49% interest respectively; and
  • a specific issue of 1 748 735 treasury shares was effected, which resulted in the Trust achieving control of 14,28% (19 935 550) of the issued ordinary shares after the transaction.
• In February 2012, the second phase of the company’s third empowerment transaction was completed, in terms of which the control of the shares previously held by Shanduka, and subsequently sold to the SPV (refer above), were vested as to 51% and 49% in the Fricker Road Trust and the Assore Employee Trust respectively (refer “The Fricker Road Trust and the Assore Employee Trust” below). Assore has, at its own risk, assumed funding required for the acquisition of these shares in the amount of R2,8 billion, and has guaranteed the debt in the SPV. The extent of funds available to the trusts depends on Assore’s continued ability to declare dividends, which impacts the debt obligation by the SPV to Assore directly.

Upon the completion of the third empowerment transaction, the entire shareholding controlled by empowered entities is now broad-based in nature, which ensures that the benefits derived from the respective trusts flow directly to the relevant communities, as specified in the trust deeds. In addition, the interest that these trusts hold in Assore cannot be realised or disposed of unless changes to the MPRD Act are brought about that release mining companies from the requirement to have HDSA control.

The control by HDSAs of Assore’s shares at 30 June 2012 is as follows:

The Bokamoso Trust

The Bokamoso Trust (the Trust) was established for the benefit of HDSAs and broad-based HDSA community groupings residing in the areas in which the Assore group’s mines and beneficiation plants are located. The majority of the Board of Trustees (the Trustees) are independent and, in terms of the second empowerment transaction, the Trust is entitled to an annual flow-through payment of at least R2 million per annum to the beneficiaries irrespective of the commitments to the Assore group with regard to the funding of the transaction. The Board of Trustees of the Trust is as follows:

Dr TG Sibiya (Chairman)*
CJ Cory^#
Ms K Makhaya*
LS Matsimela^#
Ms Mtshali*
Ms TPJ Ngxulelo*

* Independent trustee
^# Founder trustee

Assore concluded a relationship agreement with the Trust in order to regulate the respective relationships between the parties to ensure, in so far as is possible, the continued compliance by the Trust (as the Assore group’s BEE partner) with the direct ownership requirements of the Mining Charter.

To date, and pursuant to the trust deed, the Trustees have approved projects to the value of R3,7 million, details of which are as follows:

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The Fricker Road Trust and the Assore Employee Trust

Pursuant to the completion of the third empowerment transaction, these trusts have been established, the activities of which are summarised below:

The Fricker Road Trust

As part of Assore’s commitment to the social and economic development and empowerment of the beneficiaries, the sole object of the Fricker Road Trust is to facilitate the group’s activities pursuant to its trust deed, with specific focus on the areas of health and education. The beneficiaries of the Fricker Road Trust are the members of the communities comprising HDSA persons who are living, working or operating in and around the mining and beneficiation operations of the Assore group. At current dividend levels, and allowing for necessary expenses, the Fricker Road Trust will have approximately R10 million available for distribution per annum. As the objectives of the Fricker Road Trust and the Bokamoso Trust are aligned, the group is in the process of merging the two trusts, and registering the merged trust as a Public Benefit Organisation (PBO). This registration will allow for the efficient combination of these trusts, both in terms of their assets as well as their respective trust deeds, and will result in optimising the awarding of benefits.

The Assore Employee Trust

The Assore Employee Trust was established by Assore for the purposes of economically benefiting the nonmanagerial employees of the Assore group by facilitating their participation in the dividend income distributed by Assore and also participating in the increase in the value of Assore’s ordinary shares listed on the JSE. The beneficiaries of the Assore Employee Trust are full-time, permanent non-managerial employees of the Assore group, and exclude senior management and board members.

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Preferential procurement

Assore is committed to bringing previously disadvantaged South Africans into the mainstream of the economy and the mining industry by identifying and developing business opportunities by making them available to BBBEE suppliers at all its operations. Without compromising on quality, Assore has adopted a policy of precluding vendors who do not have valid empowerment credentials from supplying goods and services to its operations. A summary of the percentage BBBEE procurement measured against total discretionary procurement is presented in the table below:

The significant increase of the proportion of BBBEE expenditure in Assmang is mainly due to the inclusion of procurement conducted from state-owned enterprises, which comprises a significant proportion of Assmang’s expenditure.

While the percentages for Wonderstone and African Mining and Trust show pleasing developments, those for Rustenburg Minerals and Zeerust have declined due to the failure of the mining contractor, appointed at both operations to conduct the opencast mining activities, to renew its empowerment credentials. As opencast activities are scheduled to reduce significantly in the short term, due mostly to Rustenburg Minerals’ strategy to conduct mining operations underground into the future. It is therefore impractical to obtain the services of another BEEaccredited contractor for the remaining opencast mining activities and, accordingly, the group’s procurement department has embarked on a process to assist the contractor concerned to obtain the necessary accreditation.