Lonmin

ENVIRONMENTAL & SOCIAL REVIEW SUMMARY

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Project number 24803
CountrySouth Africa
RegionSub-Saharan Africa
SectorAll Other Metal (Including Tin, Tantalum, Tungsten, etc.)
Department
Company nameLonmin
Environmental categoryA
Date ESRS disclosedOctober 12, 2006
Last Updated DateSeptember 16, 2014
StatusActive
Previous EventsInvested: April 11, 2007
Signed: March 13, 2007
Approved: December 19, 2006


Overview of IFC's scope of review
The appraisal team reviewed the South African platinum operations of Lonmin plc. Key focus was a review of Lonmin’s Safety, Health, Environment, Community and Security (SHECS) management, organization and systems. This includes the Lonmin Environmental Management System (EMS), information and other documents related to management of environmental, social and labor issues. Environmental Management Program Reports (EMPRs) for each South African operation, Environmental Impact Assessments (EIAs) prepared for certain new developments within these operations, closure plans, key monitoring data, the New Era Labor Agreement (NELA) were all reviewed. Discussions were held with Lonmin management (UK and RSA-based) and particularly with the SHECS Department, representatives of the Madibeng Local Municipality, the Bapo Ba Mogale Traditional Authority, Landmark (consultancy focused on transformation of the company and stakeholder relations), ward councillors, traditional councillors, local health workers, local school teachers and members of the Lonmin Development Trust.

Site visits involved a cross-section of Lonmin’s facilities and operational areas, including: mechanized and non-mechanized shafts (underground) at Karee and Western Platinum Limited (WPL); Baobab Shaft at Limpopo Division (underground); tailings dams at WPL; WPL smelter and base metal refinery; WPL and Limpopo concentrators; Precious Metal Refinery (PMR Brakpan, near Johannesburg); several Lonmin Development Trust project sites (schools, clinics, agricultural operation), Madibeng Local Municipality (Brits), Bapo Ba Mogale Traditional Authority Headquarters (Bapong), Wonderkop Hostel and community. Several other communities within the Greater Lonmin Community were visited.

Project description
Lonmin plc is the world’s third largest platinum producer and has its origins in Lonrho, founded in 1909 and which had extensive mining and other diverse operations across Africa. In recent years these other businesses have been disposed of and the company has focused on Platinum Group Metals (PGMs). The centre of operations is in the Marikana area, east of Rustenburg in South Africa’s North West Province. There are two interlinked operations (Western Platinum Ltd and Eastern Platinum Ltd), which include 13 major shafts, eight concentrators plus a smelter and Base Metals Refinery (BMR) in this area. Development of these mines started in 1971 and today they employ around 25,000 (including contractors). In 2005, Lonmin acquired the much smaller Messina Platinum Mines Ltd Limpopo mine which is located about 300 km north of Johannesburg in the Limpopo Province and employs around 2500 (including contractors).

Lonmin also operate a Precious Metals Refinery (PMR) at Brakpan in the East Rand area employing 280. In the Marikana district approximately 350,000 people live around and on the mine lease areas which extend along a 30 km strike length. Just over 100,000 of these live on areas over which Lonmin holds a mining licence and Lonmin and its stakeholders have defined these people as the Greater Lonmin Community (GLC). In the Limpopo Province, there are a further estimated 250,000 people living in the broader mine area. Unemployment rates are high and there are many social problems not least of which is HIV/AIDS (prevalence rate estimated at 26% in the Lonmin workforce).

Lonmin wishes IFC to assist it with international perspective and expertise in four technical assistance areas, namely business linkages, HIV/AIDS management, integrating women into the workforce and tribal/municipal revenue management. The IFC PEP Africa (Private Enterprise Partnership) - Technical Assistance teams, which are divided up according to the four components listed above, have completed a scoping exercise involving Lonmin, the local municipality, the principal traditional authority and other key stakeholders.

It is intended that this TA package will be complemented by a loan investment on IFC’s own account and an equity investment. The loan investment will be used for expansion within the existing footprint through the part funding of projects including the mechanization of mining operations, increased mining throughput and processing expansion.

The IFC commercial investment will, in part fund the upgrading or improvements to the existing infrastructure such as mechanization of underground operations and smelter upgrades both of which will have a positive impact on working conditions and safety and will thus not cause any major direct new impacts on the communities. Any new developments such as large new infrastructure would be subject to the requirement for an ESIA under both South African legislation and IFC Policy & Performance Standards.

Identified applicable performance standards
The following Performance Standards (PS) are applicable to this project:

- PS1: Social & Environmental Assessment and Management Systems
- PS2: Labor & Working Conditions
- PS3: Pollution Prevention & Abatement
- PS4: Community Health, Safety & Security
- PS5: Land Acquisition & Involuntary Resettlement
- PS6: Biodiversity Management & Sustainable Natural Resource Management
- PS8: Cultural Heritage

Environmental and social categorization and rationale
The main driver for IFC involvement is a TA package with a supporting commercial investment in the form of corporate financing. Environmental, Health & Safety and Community issues, both positive and negative have been assessed for the existing operations together with issues associated with Lonmin’s future operations. IFC’s commercial investment will be used for the development and expansion of the current Lonmin operations. This investment is expected to have beneficial results for the workforce and surrounding communities. However, the diverse and extensive nature of the investment program means that there are potential significant impacts.

Management of all these issues by Lonmin has been assessed as consistent with international good practice and the IFC Policy & Performance Standards. In this context, IFC’s due diligence concluded that the community has been benefiting from the mining operations and that relationships between Lonmin and the communities are improving. Considerable material has already been publicly disclosed (see links within this document) but in any large mining project such as this there are still inherent risks associated with many facets of the operation and for these reasons it is considered that 60 days disclosure would be beneficial in further strengthening relationships.

The key environmental, social and occupational health & safety and community aspects and issues associated with this project include:

- Social & environmental assessment & management;
- Labor & working conditions;
- Pollution prevention & abatement;
- Waste management;
- Resource conservation;
- Emergency preparedness & response;
- Community health, safety & security;
- Social development;
- Protection and conservation of biodiversity, and cultural heritage.

Application of IFC’s Environmental & Social Review Procedure to this suite of aspects and issues has resulted in this project being classified as Category A.

Key environmental and social issues and mitigation
Lonmin has presented plans and management systems which address these aspects and issues and demonstrate that the operations comply with the environmental, health & safety and social regulations, policies and guidelines of South Africa and the IFC. The information about how these potential impacts are being or will be addressed by Lonmin is summarized in the paragraphs that follow. [Further information is provided in the documentation links.]

- Social & Environmental Assessment & Management

Assessment:

Environmental Management Program Reports (EMPRs) – the South African equivalent of an Environmental & Social Impact Assessment (ESIA) for mining projects – were completed for each of Lonmin’s Marikana operations in 1996. Each EMPR contains an Environmental Management Plan (EMP) containing agreed management commitments with respect to environmental and social mitigation measures arising from the assessment process. Updated and consolidated EMPRs for the Marikana operations, including various licenses, permits and addendums submitted since 1996, were completed in November 2005 and publicly disclosed. The updating process allowed these reports to be aligned with the new Mineral and Petroleum Resources Development Act, 2002 (No. 28 of 2002) and the Mineral and Petroleum Resources Development Regulations (Government Gazette No. 26275, 2004). An EMPR was approved for the Limpopo Division mine in 2002, when it was still operated by Southern Era. Lonmin has updated this EMPR and it currently awaiting approval of this document by the Department Minerals & Energy.

Lonmin was recently notified of the successful conversion of their old order mining rights to new order mining rights for its Marikana operations. Lonmin is the first major platinum company in South Africa to receive the new order mining licenses. The company will work with the Department of Mines and Energy to set a timetable for the fulfillment of the undertakings in the Social and Labor Plan portion of their conversion application. Meeting these objectives will ensure that they are in compliance with the South Africa Mining Charter.

Management:

Lonmin has extensive management capacity in the areas of Safety, Health and Environment. The company is steadily increasing its management capacity to similar levels in the areas of Community Relations and Social Development. Environmental and social management across Lonmin’s operations is implemented by the Safety, Health, Environment, Community and Security (SHECS) Department. This department is headed by a Vice-President (reporting directly to the President of South African Operations) and managed by five senior managers who are responsible for Safety, Health, Environment, Community Development (Lonmin Development Trust) and Security, respectively. There is also a Manager in the Safety section dealing with Emergency/Rescue Services. Lonmin has received ISO 14001 and OHSAS 18001 certification for all its Marikana operations, the certification process for Limpopo is expected to be complete in 2007.

- Labor & Working Conditions


Lonmin’s Human Rights Policy is outlined in the website and states that the company supports the protection of human life and dignity within their sphere of influence by subscribing to the principles laid down in the United Nation’s Declaration of Human Rights. The company commitment to human rights is disclosed in the Code of Business Ethics and the Board of Directors is responsible for the management of the Code. Any person who becomes aware of any existing or potential violation of this Code is required to promptly notify the Company Secretary. Employees can also contact the Ethics Hotline to report activities that they feel are not consistent with the spirit of the Code of Ethics. Training programs on human rights are included in the induction training portfolio, while security staff are subjected to special training relevant to their line of work. The company has a Social and Labor Plan which outlines commitments relating to the workforce, including training, grievance mechanisms and reporting and monitoring.


Lonmin has roughly 27 500 employee and contractor staff across its South African operations. Of these, 1 850 employees and 700 contractor staff are based at Limpopo Division, with the balance located in the Marikana area. Many of these employees are migrants from other South African provinces - especially the Eastern Cape - as well as from neighboring countries such as Mozambique, Lesotho and Botswana. Employees are housed locally in mine hostels or within local communities. Lonmin is currently undertaking an aggressive program of housing development and hostel conversion so as to be able to provide improved living conditions for its staff. Lonmin does not employ child or forced labor at any of its operations.

There are three accredited labor unions active at Lonmin operations in the Marikana area, and three at the Limpopo Division. The two which are common to both operations are the National Union of Mineworkers (NUM) and United Association of South Africa (UASA). The third at Marikana is Solidarity, and the third at Limpopo Division is the Building, Motor, Electrical and Allied Workers Union (BMEAWU). All workers are guaranteed Freedom of Association as part of a formal agreement between Lonmin and these unions. Lonmin signed a New Era Labor Agreement (NELA) on June 21st 2005 with all of its employees for a five year term (2005-9). Key issues covered include an inflation related annual wage increase, a productivity based incentive scheme, equalization for conditions of employment across the Marikana operations, payment of a minimum housing allowance, implementation of a Lonmin Medical Aid scheme and creation of an improved grievance management process. A very similar agreement has been signed at Lonmin’s Limpopo Division, although the conditions vary slightly due to slightly different historical arrangements. The NELA is regarded as a ‘live’ document, implying ongoing dialogue with unions. Lonmin has a Retrenchment Policy but prefers to rely upon natural attrition and other measures – e.g. early retirement packages - to avoid retrenching employees.

South Africa’s new mining legislation puts a premium on the employment of Historically Disadvantaged South Africans (i.e. non-Whites), and has set HDSA targets which companies must comply to. Lonmin is in the process of transforming its workforce to meet this requirement, and has made significant progress over the past two years. There is also a specific set of targets for the employment of women. To date, Lonmin has made good progress in employing women in surface roles – i.e. at the refinery and smelter, and in offices - but faces further challenges with underground positions although increased mechanization underground is expected to create more opportunities for talented women. As of May 2006, a total of 914 women were employed in mining operations, representing less than 5 % of the total workforce. This is one of the aspects in which IFC has been asked to assist the company. The mining regulations enshrine protection for migrant workers (i.e. non-discrimination clauses), to which Lonmin adheres.

Prior to starting work, all employees pass through basic Safety, Health & Environment induction training (identical for all employees) with further induction and training as appropriate for specific job roles. All Lonmin employees are provided with appropriate Personal Protective Equipment (PPE) and undergo annual medical check-ups. Lonmin has adopted a ‘zero harm’ target and has introduced Fatal Risk Protocols to focus risk prevention around high risk tasks. Both fatalities and Lost Time Injury Frequency Rate (LTIFR) figures have been steadily reducing, by example there have been 4 fatalities to date in the current Financial Year (compared with 6 in FY05, 8 in FY04 and 12 in FY03) across the Marikana and Limpopo operations. Industrial theatre and focused training is being used to raise health & safety awareness and performance amongst the at-risk mining teams. The projected shift to mechanized mining is yielding substantial safety benefits, as workers will no longer be active at the rock face – remote controlled machines will be responsible for drilling shot holes and roof bolt holes, lowering the risk of rock falls onto employees. LTIFR figures for areas which have been mechanized are roughly half those of conventional areas.

The Limpopo Division underground mine has a steeply dipping reef (58°) which makes mining conditions more challenging but easier to mechanize. Since taking over this mine in 2005, Lonmin has changed the mining method used, undertaken significant re-design measures to improve occupational health & safety and re-designed PPE issued to staff to suit local conditions. Lonmin operates a 200-strong medical staff, a hospital and three clinics in the Marikana area and a clinic at Limpopo Division. Focus areas include occupational health – e.g. pre-employment & annual examinations, heat tolerance testing - occupational hygiene, i.e. monitoring of exposures such as workplace gas, dust & heat, and health maintenance facilities. Patients are referred to private hospitals when specialized treatment is required. There are ambulance services, paramedics, rescue teams and emergency air evacuation teams available at all times to deal with accidents and health emergencies.

Twenty six percent (26 %) of the Lonmin workforces is estimated to be HIV-positive, the incidence of HIV infection is still increasing but should level off, AIDS rates are predicted to follow this trend as per currently used predictive models. The company has lost 109 employees to HIV/AIDS over the past nine months (September 2005–June 2006). Lonmin provides a Voluntary Counseling & Testing (VCT) service and provides free Anti-Retroviral Treatment (ART) to its employees, and has recently launched a Lonmin Medical Scheme for employees and their dependents. Where dependents are registered on this scheme, they are also afforded the opportunity for ART. Tuberculosis (TB) also occurs within the workforce, and is commonly associated with HIV/AIDS. The prevalence rate is roughly 1 % of the workforce, and Lonmin is currently providing treatment to over 150 employees. The company has rolled out a Wellness Program over the past two years involving education and support on common afflictions such as diabetes, hypertension and high blood pressure.

- Pollution Prevention & Abatement

Lonmin applies specific pollution prevention and control plus waste management practices consistent with good international practice. Greenhouse Gas Emissions (GHG) emissions are assessed, Lonmin has committed to the ICMM (International Council Mining & Minerals) position on climate change and has also committed to reduce energy consumption by 10 % in 2007 compared with 2003 baseline levels. Certain areas of the project do have the potential to impact ambient conditions (eg: dust from tailings dams and smelter emissions). Appropriate strategies to minimize these and other impacts have been taken, for example measures to minimize dust from tailings dams (see below) whilst SOX emissions from the smelter have been reduced from 30 tons per day to 3 tons per day over the past 5 years.

Other environmental management initiatives currently underway are as follows:

- Air Quality: Emissions inventory/Air Quality Management Plan
- Mine Closure: Sinking Trust Fund with Bank guarantee for shortfall
- Lif Cycle Assessment: Cradle to Grave on PGM metals Platinum, Palladium and Rhodium

There is an explosives factory at WPL, the only one for Lonmin Platinum, which is situated in the western portion of the WPL property. ANFO (Ammonium Nitrate-Fuel Oil) type explosives are manufactured at the factory which is designed, built and operated in accordance with all legal requirements for such facilities.

- Waste Management

Lonmin has a well developed approach to waste management which encompasses avoidance, minimization, recovery, reuse and environmentally sound disposal. Lonmin have committed to reduce waste by 20% in 2007 compared with a 2003 baseline.

Large volume wastes consist of waste rock, smelter slag and tailings from both concentrators and refineries. The small opencast areas do not have permanent residue deposits but rather temporary overburden stockpiles. The material is stockpiled along the length of strike to be mined and is returned, within a period of approximately one year, back into the voids from which they were excavated. The replaced overburden is then covered with topsoil and the area rehabilitated. The rocks in these stockpiles contain no detectable amounts of sulphides, oxides or native metals and thus there is no risk of oxidisation, leaching, acid drainage, or heavy metal contamination.

Management of the permanent waste sites is excellent with some innovative features (noted below) that exceed current industry practice.

Waste Rock Dumps: A Code of Practice (CoP) has been written for the waste rock dumps at the various Lonmin Platinum mines. The waste rock is hoisted from underground via the shafts and then transported onto the various waste rock dumps. Some waste rock is re-used as a building aggregate. The Waste Rock Dumps are characterized in terms of geotechnical and chemical parameters. Since the Bushveld complex ores contain no sulphur or sulphide ores, using the Acid Rain Leaching Procedure has confirmed the waste samples classify as nonhazardous (ie: non acid generating). All dumps have qualitative and quantitative risk assessments undertaken by qualified geotechnical engineers on a regular basis.

Tailings Dams:

Each operation has several tailings dams (WPL has five of which two are currently active). The South African Bureau of Standards (SABS) Code of Practice (Code 0286: 1998) provides a method for classifying mine residue deposits according to the potential consequences of failure and it differentiates between dams of high, medium or low hazard potential. The EMPR’s provide full details of all dams together with management and monitoring protocols. All dams are managed by professional dam contractors and independently monitored by suitably qualified consultants in line with IFC Performance Standards.

Slag Dumps:

There are two slag dumps in the Marikana area, the Base Metals Refinery (BMR) Slag Dump and the Rowland Shaft Slag Dump. Slag is transported by conveyor belt or trucks from the Smelter area to these two areas.

All low volume wastes are segregated at source and recycled or safely disposed of as appropriate. The low volume waste management facilities consist of industrial and domestic waste disposal sites. For example, in the Marikana area there are two sites, the Mooinooi waste disposal site which is classified as a Class 2 site (permitted) which is used for the disposal of all waste types excluding hazardous and toxic materials (specifically listed in the Permit, for example acids, alkaline, copper compounds; etc). The second site is the Middelkraal waste disposal site is approximately 6ha in size and is used for the disposal of household waste from the worker hostels, as well as industrial waste from the shafts, concentrator, BMR plant and smelter. The waste is off loaded with a tipper trailer at the working face of the operating cell. The method of waste disposal used is both land building and land filling by means of the cell method. During wet spells, an easily accessible wet weather cell is used. Waste at both disposal sites must be covered on a daily basis to achieve sanitary land filling and to reduce impacts from particulate emissions, wind scatter, odors and leachate generation due to rain water incursion into the waste. A monitoring committee reviews the performance of both waste disposal sites on a regular basis.

Hazardous materials are used by the various processes ranging from explosives (mining operations), process chemicals and reagents (concentrators) to acids (refineries) plus fuels and oils.

All hazardous waste is collected and disposed of by an accredited contractor (Waste Tech) to a licensed landfill site. All contractors are obliged to adhere to the Lonmin Environmental Policy and Codes of Practices. Used oil is removed by a recycling company and recycled. Lonmin undertakes life-cycle audits on waste disposal paths.

- Resource Conservation

The Six-Sigma program analyses all operations for resource conservation and operational efficiencies. This program has delivered significant cost savings over the past couple of years. Steps undertaken to date involving resource conservation are as follows:

Power:

All geysers have recently been fitted with off-switches, for no-use times. All underground compressors are now switched off after shifts and on weekends. Ventilation systems are also switched off during these times. These changes have led to significant power savings.

Water: All underground water is now recycled. Filters have been installed to screen out mud which has been found to contain significant PGM content. This has led to additional revenue whilst water costs have been lowered. Lonmin have also committed to a 10% reduction in fresh water use (2007 compared with 2003 baseline) and zero discharge from its facilities.

- Emergency Preparedness & Response

Lonmin is committed to establishing and maintaining procedures to identify potential emergency situations, to respond to emergencies and to mitigate any resulting safety, health and environmental impacts. Each operation has an Environmental Emergency Plan (EEP) which describes the procedures in place with regards to the preparedness and response to environmental emergencies. The SHEC policy aims at prevention of emergencies and therefore all possible measures are taken to eliminate or reduce the potential causes of emergencies.

This SHE Management Procedure describes the planned response to emergency situations. It comprises:

- Identification of potential accident and emergency situations and events;
- Roles and Responsibility;
- Planned response;
- Provision of equipment and facilities;
- Reporting of emergencies; and
- Review of procedures.

Significant environmental aspects and their associated environmental impacts have been identified for all operational areas. In the process of identifying the environmental aspects and associated impacts and in formulating the EEP the following factors were taken into consideration:

- All significant environmental aspects identified under emergency conditions;
- Historic emergency events of activities, products and services on/off the site;
- Chemicals, oils and other materials used on site;
- Activities of contractors;
- Concerns of communities and authorities, where submitted;
- Proximity to sensitive areas such as residential areas, schools, wetlands, rivers, etc;
- Availability of local emergency services;
- Availability of trained, on-site personnel for emergency situations; and
- Input, where necessary from Lonmin Emergency Services.

Potential emergency situations identified include petrochemical/chemical spillages, hazardous material spillages, radioactive source incidents, fires, tailings spillages and tailings dam failures, untreated effluent spillages, explosions and natural disasters. Emergency plans have been documented for each of these stipulated emergencies, which include responsibilities in emergency situations, corrective and preventative actions and the reporting of such emergencies.

All employees and contractors are responsible for reporting any accident/emergency to their supervisor immediately, and if required to notify the emergency response teams according to the Lonmin emergency call out procedure.

Responsibilities in environmental awareness training lie with the Lonmin Environmental Center and the Lonmin Training and Development Center. The Lonmin Environmental Center provides guidance to the Training Center on training needs analysis and the training material. The Lonmin Training and Development Center undertakes the generalized environmental awareness training, and components of the specialized environmental training. The Lonmin Environmental Center is also responsible for the annual testing and review of the applicable emergency response procedures in conjunction with the Rescue Team.

- Community Health, Safety & Security

The effects of noise, air quality (i.e. dust and gases such as SO2) and water pollution on surrounding communities are monitored by independent consultants on a regular basis and presented to community leaders. For example, SO2 badges are disseminated in areas surrounding the smelter and periodically collected for analysis, results are disclosed but generally results are within applicable limits (occasional excursions are usually due to climatic conditions). Crack surveys are also conducted around opencast operations to check whether peoples’ houses and other structures have been affected by vibration from blasting activities. Communities have recently requested and been allowed to participate in the selection of independent consultants for water and air quality monitoring.


Special efforts have been directed to vegetating all dormant tailings dams in order to address community concerns about airborne dust during the dry winter months. In addition, Lonmin has installed a system of sprinklers on the operating slimes dams which are automatically turned on when threshold wind speeds are exceeded. Lonmin’s medical department has extended its Wellness Program to surrounding communities in collaboration with the Department of Health, in order to raise community awareness of health risks such as HIV-AIDS, hypertension, diabetes and high blood pressure. A Health & Environment focus group has been formed as a result of the stakeholder engagement process which meets regularly and has various ongoing projects, including construction of a new R5 million community clinic in Wonderkop.

Should an emergency situation arise on the Lonmin property there is a well established communication system to notify local authorities such as Police, Fire and Emergency Department, Environmental authorities and local communities.

Lonmin works closely with communities and the SA Police force (SAP), including on traffic control issues. Key security issues for Lonmin include access control and asset protection, with a focus on the smelters and prevention of cable theft. Lonmin uses contract security firms to control access at its facilities. Lonmin also has reaction units to deal with organized crime, especially with regard to theft of concentrate and underground equipment. These units, by necessity, carry both lethal and non-lethal weapons, i.e. guns and tazers. Lonmin has operational procedures governing the conduct of security personnel, including appropriate use of force. This is backed up by training for all security personnel. Lonmin adheres to the UN protocols in this regard. Lonmin has also established a Business-against-Crime program in the NW Province, in which the majority of its operations fall. Crime is a nationwide problem and one of the main security-related priorities of local communities is to install overhead lighting in crime ‘hotspots’ to make the area safer. A joint project has been established to erect a number of additional lighting masts by Lonmin and interested community members.

- Social Development

The bulk of Lonmin operations is located in the Marikana area, east of Rustenberg in the North West Province. Affected areas fall into either the Madibeng or Rustenberg Local Municipalities. There is one main Traditional Authority present in the affected area, namely the Bapo Ba Mogale. The Greater Lonmin Community, which comprises those communities and households most affected by Lonmin operations, contains just over 100,000 people living in 9 villages, 11 informal settlements, 3 mine hostels and scattered farms. Lonmin’s Limpopo Division is located at Lebowakgomo in Limpopo Province. The affected area falls within the Lepelle-Nkumpi Local Municipality. There are three Traditional Authorities present in the affected area, namely the Ledwaba, which has four villages situated near the existing Baobab Shaft; the Mphahlele, which controls roughly 30 villages, and which will be impacted by the proposed new opencast pit to be developed in 2007; and the Zebediela Ndebele (Kekana), which controls approximately 27 villages in the area to be affected during a future phase of Lonmin’s expansion program. An estimated 250,000 people live within the broader mining area.

Lonmin’s primary vehicle for implementing social development initiatives is the Lonmin Development Trust (LDT). The LDT receives approximately 1 % of pre-tax profit – amounting to approximately R32 million or $4.2 million in 2005 - to spend on a range of social programs. Established two years ago with a Corporate Social Investment (CSI) focus, the Trust is currently being re-oriented and expanded to deliver on Lonmin’s core commitments, i.e. implementation of Social & Labor Plan projects – as required by the Department Minerals & Energy – and assisting local communities to meet their developmental needs. The new approach emphasizes collaboration with the local municipalities, an increased focus on community-driven development and the forging of strategic partnerships with other developmental agencies.


Community input into LDT spending has been amplified via the stakeholder engagement process, which has resulted in some twenty ‘breakthrough’ projects which have been developed and implemented by community members with mentoring and funding from the Trust. LDT focus areas include education, Small & Medium Enterprise (SME) development, healthcare, safety & security and environmental management (e.g. domestic waste management & provision of adequate sanitation facilities). Lonmin has also established the Marikana Housing Development Company to expedite the process of constructing sufficient housing for its employees in the Marikana area and moving away from the single-sex hostel model. The company spent approximately $1.9 million on housing projects in 2005 and intends to establish a process to develop up to $100 million worth of additional local housing stock over the next four years so as to meet its own targets.

Although no physical displacement of households has been reported across Lonmin operations (nor is any planned), surface rental fees are paid to the owners of certain portions of the company’s operational area. These owners include, among others, some of the Traditional Authorities mentioned above. In addition, Lonmin makes annual royalty payments to certain tribal authorities, notably the Bapo Ba Mogale. These payments are based upon pre-tax, pre-capex profit made on ore mined in specific areas where these Authorities held mineral rights in the past. One of the objectives of IFC’s proposed Technical Assistance package to Lonmin involves assistance to the Bapo Ba Mogale Traditional Authority to access and spend its royalties in such a manner as to maximize local economic development in its area of influence.

- Protection & Conservation of Biodiversity & Cultural Heritage

Lonmin specifically addresses Bio-diversity within the EMPR assessment process. Whilst there are no critical habitats or legally protected areas within the mining lease areas, some natural habitats have been impacted including loss of land to infrastructure and mine waste deposits as well as river diversions (although these are returned to their original course on restoration).

Within the property boundaries the main habitat types are grassland, turfveld, agricultural fields and aquatic systems. In the Marikana area the grassland habitat is largely as a result of fallow lands, rehabilitated opencast areas and other previously disturbed areas which have re-established over time. Sensitive habitats include the numerous river systems, mostly non-perennial that transect the boundaries of the mining lease areas and the granite hills and outcrops within the Turf Thornveld.

In terms of flora, two Protected Species under the Transvaal Nature Conservation Ordinance of 1983 (No 12 of 1983) were identified in the area. Three Protected Tree Species in terms of Schedule No. 1042: Government Gazette No. 26752:10 September 2004 were also identified. According to recent studies (CHEMC 2005), relatively high bird species diversity exists due to the aquatic habitats, created by mining related activities, and the remaining ‘natural’ vegetation. However, it was noted that there were low numbers with respect to game-bird species encountered on the mine which may be due to hunting practices in the area. The mine also displays a low mammal and reptile diversity (CHEM C, 2005).

Near-Threatened Red Data species, Atelerix frontalis (South African Hedgehog), have been recorded within the boundaries of WPL. There are no renewable natural resources in the mining lease areas.

Cultural heritage on Lonmin properties has been identified by qualified, independent specialists during the compilation of Environmental Management Program Reports (EMPRs). A Heritage Impact Assessment and associated Management Program have been developed over the past two years to document and manage cultural heritage sites in the Marikana operations area as part of the EMPR update process. Typical examples of cultural heritage include Stone Age and Iron Age sites, as well as graves. The company complies with the requirements of the National Heritage Resources Act (25 of 1999), which include the need to ensure that staff and contractors are aware of the importance of protecting natural and cultural heritage resources, the existence of a formal ‘chance find’ procedure and the fencing off of graves and sensitive sites near mining operations. Thus, when archaeological sites or human remains are encountered, construction activities are immediately stopped until the relevant authorities visit and assess the site.

Where grave relocations are concerned involving graves less than 60 years old, Lonmin complies with the requirements of the Human Tissues Act (65 of 1983) and Ordinance on the Removal of Graves and Dead Bodies (Ordinance 7 of 1925). These graves fall under the jurisdiction of the Department of Health. Approval for exhumation and re-burial is obtained from the relevant provincial MEC as well as from the local South African Police (SAP). Graves 60 years or older fall under the jurisdiction of the National Heritage Resources Act as well as the Human Tissues Act (65 of 1983). Permission to exhume and re-bury these remains are obtained from the South African Heritage Resources Agency (SAHRA), the South African Police Services located at Mooinooi and the Department of Home Affairs.


According to information obtained during IFC’s appraisal mission, isolated graves have been removed and the remains re-interred in the past as a result of Lonmin’s various operations. The next expansion of Lonmin’s surface operations is likely to be at the Limpopo Division in 2007. An area containing roughly 140 graves will be impacted, some of which have proved difficult to identify due to the absence of headstones. Lonmin is working with communities via radio broadcasts, via churches, community centers and use of posters to identify the affected households and the affected graves. The formal procedure for re-interment will then be followed, as outlined above. This process includes compensation payments to affected households to cover the re-burial process, including traditional ceremonies and coffins.

Client's community engagement
Since 2004, Lonmin has undertaken to transform its relationship with surrounding communities and stakeholders. Independent, publicly disclosed, Community Perception Surveys were undertaken in 2004 and 2005 in order to provide management with a better understanding of how the company was viewed by its local stakeholders. These stakeholders include:

- local communities situated within or adjacent to the footprint of Lonmin operations;
- the Madibeng, Rustenberg and Lepelle-Nkumpi Municipalities;
- the Bapo Ba Mogale, Ledwaba, Mphahlele and Kekana Traditional Authorities;
- farmers who own land on or adjacent to Lonmin mining areas;
- local businesses;
- Labor Unions;
- Non-Governmental Organizations (NGOs) and Community Based Organizations (CBOs) operating in the area and service providers such as the South African Police, staff of local schools and staff of local health clinics.

Lonmin has developed a stakeholder database for its areas of influence which is currently being upgraded.

An independent consultancy (Landmark) has been contracted by Lonmin to facilitate the establishment of a Stakeholder Engagement Forum over an initial three year period. The overall objective of this Forum is to build constructive relationships between Lonmin and its local stakeholders and to facilitate ongoing communication and consultation between these parties on an ongoing basis in relation to issues of common concern. This process, referred to as the ‘Lentswe’ (the Voice) process, formally commenced in January 2005 and is ongoing. A ‘Greater Lonmin Community’ (GLC) has been defined by Lonmin and its stakeholders which comprises all of the settlements falling on or adjacent to Lonmin’s immediate operational area. As part of the process, both Lonmin employees and GLC community members have participated in a 4-day Landmark training exercise in order to facilitate their constructive engagement in the Stakeholder Forum. Training sessions are held monthly for between 100 – 150 GLC members. To date, some 5 000 staff and community members have completed training. In addition to discussing important developmental issues, the GLC meets on a regular basis to jointly identify, prioritize and implement development projects which will have a beneficial impact on local quality of life. Lonmin publishes the ‘GLC Voice’, a quarterly newsletter focusing on progress and projects emanating from the Lentswe process. Lonmin staff and community members are currently being selected and trained to be able to continue with the Stakeholder Engagement Forum after Landmark withdraws.

In addition to the Lentswe process, Lonmin has begun to hold regular meetings with the various Traditional Authorities and local municipalities in its direct area of influence. To date, more emphasis has been placed on the Marikana area, although a stakeholder engagement process is now also being developed for the Limpopo Division. The company is currently building its internal capacity to engage with key stakeholders and to more clearly define and focus these interactions to ensure consistent communication. This includes appointing an additional Relationship Manager, clarifying lines of communication and identifying responsible managers within the company to deal with this important aspect of Lonmin’s operations.

Specific consultation and disclosure relating to environmental & social documentation prepared for operational purposes includes the dissemination of Background Information Documents (BIDs) to key stakeholders, site notifications and newspaper advertisements publicizing the consultation process, registration of Interested & Affected Parties (I&APs) and – where deemed necessary by Lonmin and/or the relevant authorities – public meetings. Regular monthly meetings are held with affected sub-groupings in relation to specific issues, e.g. open cast mining. The final reports are disclosed in public places, e.g. local police stations, Lonmin offices and libraries.

In addition, Lonmin now publishes a monthly Environmental Newsletter and hosts a quarterly Health & Environmental Forum at its Environmental Center where environmental monitoring results are discussed with concerned community members and civil society groups (e.g. conservation and air quality NGOs). Lonmin’s website contains links to its Charter. A toll-free telephonic Hotline has been established for members of the public to raise their concerns or report complaints relating to Lonmin’s operations, especially with regard to environmental, health & safety, community and security issues. A register is kept of these complaints and responses provided. Finally, Lonmin’s website contains links to its Charter, SHEC Policy and a range of associated information (e.g. monthly environmental newsletters) and resources. Lonmin’s Sustainability Report is also available on this website: the 2005 Sustainability Report complies with both the Global Reporting Initiative (GRI) guidelines for companies and the International Council for Mining & Minerals (ICMM) guidelines for mining sector reporting on sustainability issues.

Overall stakeholder perceptions of Lonmin were fairly negative in the 2004 Stakeholder Perception Surveys. In 2005, when the Landmark-facilitated Stakeholder Engagement Process had begun to make an impact, the results of the second Stakeholder Perception Survey were much improved, although Lonmin still received a relatively low overall ‘satisfaction’ rating. Based on a number of meetings with key stakeholder groupings during the appraisal – including selected municipal, Traditional Authority, Landmark and Community representatives – it appears as if the forthcoming 2006 Stakeholder Perception Survey will show a further improvement in broad community support for the company and its operations. Some of the ongoing concerns raised by key stakeholders are included here for reference purposes. Traditional Authorities have issues with royalty and land rental calculation methods as well as the phenomenon of informal settlements associated with mining operations and the construction of housing for migrants on or near traditional lands.


Although generally supportive of Lonmin’s community engagement process, Traditional Authority representatives would prefer to have special treatment as ‘landlords’ and would like Lonmin to pay more careful attention to customary protocols so as not to be seen to undermine their authority. Community members are engaged in the Lentswe process and are impatient to see more project spending and on-the-ground delivery. Local farmers are reportedly concerned about the number of informal settlements – and associated security risks – as well as land take and the impacts of open-cast mining. The Madibeng Local Municipality, in which roughly 80 % of Lonmin’s operations fall, is supportive of Lonmin’s new approach to stakeholder engagement and keen to ensure integrated local development planning, but somewhat concerned that the company’s GLC area may end up being a ‘bubble’ of development amidst poverty.

Listing of client contact details and links to disclosed documentation:

Contact Details:
Alex Shorland-Ball, Vice President
Investor Relations & Communications
Telephone: +44(0)20 7201 6060
Fax: +44(0)20 72001 6150)

2005 Lonmin Sustainability Report:

http://www.lonmin.com/Portals/1/Uploads/About/Reports/SDR_2005.pdf

Lonmin SHEC Policy:

http://www.lonmin.com/Portals/1/Uploads/Sustainable/SHEC_Policy.pdf

Lonmin Charter:

http://www.lonmin.com/Portals/1/Uploads/About/Lonmin_Charter.pdf

Sustainable Development Pages:

http://www.lonmin.com/SustainableDevelopment/tabid/72/Default.aspx

2005 Community Satisfaction Survey  (Marikana):

http://www.lonmin.com/Portals/1/Uploads/Sustainable/Community_Satisfaction_Survey_2005.pdf

2005 Community Satisfaction Survey  (Limpopo): (attached as a PDF)

Example of a Lonmin EIA:

http://www.lonmin.com/SustainableDevelopment/Environment/ImpactAssessments/tabid/389/Default.aspx

Example of the ‘GLC Voice’ quarterly newspaper (attached as a PDF)

Example of a Lonmin monthly Environmental Newsletter:

http://www.lonmin.com/Portals/1/Uploads/Sustainable/Environmental%20Newsletters/February_2006.pdf

The following Documentation has also been disclosed by Lonmin:

- Environmental Management Plans (EMPs) for Eastern Platinum Ltd,
- Western Platinum Ltd, Karee Mine and the Smelter & Base Metal Refinery.

Lonmin Platinum Closure Plan (less financials) – (attached as a PDF)


Client's Documentation