Dear shareholder and stakeholder
At the time of my last report, the world was coming to terms with the impact of the Covid-19 pandemic.
In the past 18 months, approximately 4.8 million lives have been lost globally and many lessons have been learnt. One of the most important lessons has been the crucial role that the private sector plays in collaborating with government to manage the impact of Covid-19 and improve outcomes for all stakeholders.
We are pleased to report a 136% increase in headline earnings as our diversified portfolio stood us in good stead with higher iron ore and PGM prices more than offsetting the impact of a stronger rand versus the US dollar exchange rate.
While implementing the stringent Covid-19 standards and protocols, we continued to focus on activities that are under our control and to safeguard the health and wellbeing of our employees and secure the sustainability of our businesses.
In line with our strategy of delivering competitive returns and benefiting all stakeholders, we focused on:
Capital allocation remained a priority across our businesses as we invested in our existing businesses and in value-creating growth opportunities.
We are pleased to have declared a total dividend of
R30.00 per share for F2021 which was 150% higher than
the prior-year dividend of R12.00. Our capital allocation
guiding principles are discussed in the financial review
here 
.
We remain committed and focused on ensuring a safe and healthy work environment. We also proactively reduced the spread of Covid-19 through strict measures that include health screening and testing. Sadly, we lost 34 colleagues to Covid-19 in F2021.
All our operations are supporting the national vaccination rollout programme with campaigns promoting vaccination being rolled out at our corporate offices and all our operations. Five mining operations were selected as vaccination sites under the government-led vaccine rollout programme. At these sites, we are vaccinating employees, contractors and members of the communities living near our mining operations. At the time of preparing this report, approximately 37% of our employees had been vaccinated.
Our safety performance improved during the year under review. Regrettably, two of our colleagues were fatally injured in separate accidents at Modikwa Mine in the first half of the financial year. We extend our sincere condolences to the families, colleagues and friends of the employees who lost their lives.
Unit production costs remained under pressure, with above-inflation increases across all operations except Two Rivers Mine and Sakura Ferroalloys.
The modernisation and expansion of Black Rock Mine was delayed due to Covid-19 restrictions. Unit production costs, however, are expected to improve as we complete and ramp-up the Black Rock and Gloria projects to achieve higher efficiencies.
We continue to proactively manage costs across our portfolio of assets, which includes investing in volume growth at the Two Rivers and Modikwa mines.
In F2021, we invested R4 105 million in capital expenditure on a segmental basis of which R695 million was expansionary capital. Included in our growth projects is adding 40 000 tonnes per month of milling capacity at Two Rivers Mine, which will enable the mine to ramp up to 360 000 6E PGM ounces per annum by F2023. At Modikwa Mine, we are investing development capital to enable the mine to ramp up production to around 380 000 6E PGM ounces per annum in the next three to four years.
A highlight of the year was shareholder approval of the Merensky project at Two Rivers Mine, which involves mining the Merensky Reef. Total capital expenditure of R5.7 billion (100% basis) will be spent over three years to achieve annual production volumes of 182 000 6E PGM ounces, 1 600 tonnes nickel and 1 300 tonnes of copper.
Merensky underground mining is planned to begin in the fourth quarter of F2022, while the plant is set for commissioning in the second quarter of F2024.
The ARM workforce comprised approximately 21 000 employees and contractors in F2021. In line with our commitment to an appropriately skilled and diverse workforce, we invested R239 million (F2020: R225 million) in skills training across our operations in F2021, or 6.9% of payroll.
We are committed to ensuring that our workforce and management represent South Africa’s demographics as an inclusive and multiracial workforce enriches both our company and our country. At year end, 68% of management at all levels was represented by historically disadvantaged South Africans.
Nkomati Mine was placed on care and maintenance in March 2021. Engagements with all affected stakeholders were managed responsibly and in compliance with regulations. We updated the mine’s rehabilitation and decommissioning provisions to ensure responsible environmental management and compliance with applicable regulations.
To mitigate the economic and social impact of the pandemic, our operations have provided extensive support to hospitals, municipalities and communities neighbouring our operations.
In addition, we continued to invest in initiatives focused on ensuring the sustainability of our host communities.
In the year under review, our operations invested R170 million in community projects near our mines with an emphasis on supporting women, youth, historically disadvantaged people and those living with disabilities.
These initiatives included projects in:
Our operations provided adult education and training to 150 community members. We contributed to increasing the pool of trade-specific and entrepreneurial skills in these communities and also supported small and medium business development.
Globally, the relationship between mining companies and host communities remains under pressure as poor and marginalised people make increasing demands on mining companies to create jobs and alleviate poverty. This is particularly evident in developing countries with struggling economies, where governments are falling behind in service delivery and the economic restructuring that will support job creation and growth.
Despite ongoing local investment and inclusive engagements, mining companies like ARM that are members of the International Council on Mining and Metals (ICMM) face similar demands and pressures. We continue to work with our community forums, municipalities, the Department of Mineral Resources and Energy (DMRE) and other local and international stakeholders to find solutions for the poverty and unemployment challenges facing our host communities.
Mining remains an important contributor to South Africa’s fiscus. In the 2020 calendar year, the industry employed over 451 000 people, contributed R362 billion or 8.2% to gross domestic product (GDP) and exported R575 billion or around one-quarter of the country’s total export sales. The industry paid over R148 billion in wages, salaries and benefits to employees who, in turn, support an estimated 4.5 million dependants.
Importantly, in a country with shortages of technical and specialised skills, the industry is a major contributor to skills development, investing R5 billion each year in education, training and development for employees and community residents, particularly youth and women, at both basic and higher education levels.
The development and growth of our mining industry is important for the economy and its inhabitants and contributes to the South African economy being globally competitive and attractive to domestic and international investment.
1 Statistics as per the Minerals Council South Africa Facts and Figures 2020, published in February 2021.
In line with the ICMM Sustainable Development Framework and associated position statements, including the Climate Change Position Statement, all our operations apply global good practice in managing scarce natural resources and protecting our environment.
Last year, our tailings storage facilities were externally reviewed to ensure their stability and we are implementing the recommended improvements. In addition, the latest annual structural stability audits confirm that tailings facilities at ARM-managed operations are stable.
We also initiated a dam-breach analysis of these facilities to understand the potential impact on infrastructure and stakeholders, including local communities and the environment. These reports will inform enhanced emergency-response planning.
Our broader environmental initiatives are focused on responsible use of water, energy efficiency and reducing carbon emissions.
Natural events over the past years from floods to droughts and wildfires have underscored that climate change is probably the most critical global challenge of our time, one that will have a long-term and lasting impact on businesses, communities and the world.
We are participating in the global response to reduce carbon emissions and mitigate the physical impacts of climate change. Importantly, ARM produces metals that are critical to creating a low-carbon future.
Across our operations, we continue to identify opportunities to reduce carbon emissions through improved energy and fuel efficiency.
We are actively developing technologies and processes to enhance energy efficiency and reduce our carbon footprint, aiming to achieve net zero greenhouse gas mining by 2050. Realistic and effective transitional measures are also being identified to make significant progress in advance of our 2050 net zero greenhouse gas target.
Further details are included in the operational reviews in
this report and in our 2021 ESG report.
The skills and expertise on our board have been invaluable as we navigated the challenges presented by the pandemic to our operations continuing to be sustainable and profitable.
I would like to express my immense gratitude to each of our directors for their ongoing advice, guidance and valuable contributions.
The ongoing support and cooperation of our shareholders, employees and their representative organisations, host communities and all other stakeholders are deeply appreciated.
I am grateful to our employees and world-class management for their hard work and sacrifices. In particular, I thank Mike Schmidt for the good work that he is doing as CEO and the leadership that he is providing to our management team.
The pandemic continues to have pronounced health, economic and societal impacts across the globe, and its effects are expected to be with us for years to come.
Encouragingly, most countries are making progress in their vaccine rollouts and recording reduced severity of Covid-19 infections.
ARM continues to prioritise the health, safety and wellbeing of all our employees. They are key to the long-term sustainability of our business.
This is the content for Layout P Tag
Dr Patrice Motsepe
Executive chairman
8 October 2021
