smart platinum mining

NOTICE OF ANNUAL GENERAL MEETING AND ABRIDGED ANNUAL REPORT 2016

CONTENTS NOTICE OF THE 2016 ANNUAL GENERAL MEETING

1

ANNEXURES Summarised 2016 audited financial statements and extracts from the chief executive’s review

13

2

Details of directors

22

3

Remuneration report of the social, ethics and human resources (SE&HR) committee

25

4

Share option scheme and share incentive plan

37

5

Salient features of the PLIM

42

6

Stated capital, shareholding and directors’ interest

50

7

Financial assistance

54

8

Events after reporting date

58

1

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NOTICE OF ANNUAL GENERAL MEETING AND ABRIDGED ANNUAL REPORT 2016

Annual integrated report 2016

Notice of AGM and abridged annual report 2016

smart platinum mining

REVIEWED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2016

Reviewed preliminary results for the year ended 30 June 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING NORTHAM PLATINUM LIMITED (Registration number 1977/003282/06) JSE share code: NHM ISIN code: ZAE000030912 Debt issuer code: NHM1 Bond code: NHM002 Bond ISIN: ZAG000129024 Bond code: NHM003 Bond ISIN: ZAG000129032 (“Northam” or the “group” or the “company”) Notice is hereby given in terms of section 62(1) of the Companies Act, No. 71 of 2008 (as amended), (the Companies Act) that the annual general meeting (AGM) of shareholders of Northam (notice) will be held at Glenhove Conferencing, 52 Glenhove Road, Melrose Estate, Johannesburg, South Africa on Wednesday, 9 November 2016 at 10:00 for the following purposes: Considering and, if deemed fit, adopting, with or without modification, the ordinary and special resolutions set out below:

ORDINARY RESOLUTIONS • receiving, considering and adopting the audited group annual financial statements of Northam for the year ended 30 June 2016; • re-electing directors; • re-appointing external auditors; • re-electing audit and risk committee members; • approving the group remuneration policy; and • approving amendments to the Northam share incentive plan.

SPECIAL RESOLUTIONS • approval of amendments to the existing Memorandum of Incorporation (MOI) – fractional entitlements; • approval of amendments to the existing MOI – distributions; • approval of non-executive directors’ remuneration for the year ending 30 June 2017; • financial assistance; and • general authority to repurchase issued shares. Transacting any other business as may be conducted at an AGM.

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AND ABRIDGED ANNUAL REPORT 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING CONTINUED RECORD DATES In terms of section 59(1)(a) and (b) of the Companies Act, the board of directors of the company (board) has set the record date for the purpose of determining which shareholders are entitled to: • receive the notice (being the date on which a shareholder must be registered in the company’s securities register) as Friday, 16 September 2016; and • participate in and vote at the AGM (being the date on which a shareholder must be registered in the company’s securities register in order to participate in and vote at the AGM) on Friday, 4 November 2016.

ORDINARY RESOLUTIONS ORDINARY RESOLUTION NUMBER 1: ADOPTION OF THE ANNUAL FINANCIAL STATEMENTS “Resolved that the audited annual financial statements for the year ended 30 June 2016, including the reports of the directors, auditors and the audit and risk committee, be and are hereby adopted.” The summarised audited annual financial statements for 2016 as per Annexure 1 are contained in this document, of which this notice forms part. The complete 2016 annual integrated report, containing the audited annual financial statements and the relevant reports for the year are available at www.northam.co.za or may be obtained from the company’s registered office on request.

ORDINARY RESOLUTION NUMBERS 2.1, 2.2, 2.3 AND 2.4: RETIREMENT AND RE-ELECTION OF DIRECTORS “Resolved that Mr CK Chabedi, who retires by rotation in terms of clause 33.5.1 of the company’s MOI and being eligible and offering himself for re-election, be and is hereby re-elected as a director.” “Resolved that Mr PL Zim, who retires by rotation in terms of clause 33.5.1 of the company’s MOI and being eligible and offering himself for re-election, be and is hereby re-elected as a director.” “Resolved that Ms HH Hickey, who retires by rotation in terms of clause 33.5.4 of the company’s MOI and being eligible and offering herself for re-election, be and is hereby re-elected as a director.” “Resolved that Mr TI Mvusi, who retires by rotation in terms of clause 33.5.4 of the company’s MOI and being eligible and offering himself for re-election, be and is hereby re-elected as a director.” Brief summaries of their curricula vitae are set out in Annexure 2 contained in this document, of which this notice forms part. Mr AR Martin, who retires by rotation in terms of clause 33.5.1 of the company’s MOI, has not made himself available for re-election as a director and as such his retirement shall become effective following the conclusion of the AGM, in accordance with clause 33.5.8.

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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ORDINARY RESOLUTION NUMBER 3: RE-APPOINTMENT OF EXTERNAL AUDITORS “Resolved that Ernst & Young Inc (with the designated registered auditor being Mr M Herbst) be and is hereby re-appointed as the independent external auditor of the company.” The audit and risk committee has evaluated the performance of Ernst & Young Inc and recommends their re-appointment as independent auditors of the company.

ORDINARY RESOLUTION NUMBERS 4.1, 4.2 AND 4.3: RE-ELECTION OF THE MEMBERS OF THE AUDIT AND RISK COMMITTEE “Resolved that Mr R Havenstein, being eligible and offering himself for re-election, be and is hereby re-elected a member of the audit and risk committee.” “Resolved that Ms HH Hickey, being eligible and offering herself for re-election, be and is hereby re-elected a member of the audit and risk committee, subject to her re-election as a director pursuant to ordinary resolution number 2.3.” “Resolved that Ms TE Kgosi, being eligible and offering herself for re-election, be and is hereby re-elected a member of the audit and risk committee.” Brief summaries of their curriculum vitae are set out in Annexure 2 contained in this document, of which this notice forms part.

ORDINARY RESOLUTION NUMBER 5: APPROVAL OF GROUP REMUNERATION POLICY “Resolved, as a non-binding resolution, that the group remuneration policy be and is hereby approved by way of a non-binding advisory vote, as recommended in the third King Report on Corporate Governance for South Africa 2009, commonly referred to as King III.” The remuneration report of the SE&HR committee is set out in Annexure 3 of this document, of which this notice forms part.

ORDINARY RESOLUTION NUMBER 6: APPROVAL OF AMENDMENTS TO THE NORTHAM SHARE INCENTIVE PLAN “Resolved that, in accordance with schedule 14 to the JSE listings requirements, the company be and is hereby authorised to amend the rules of the Northam share incentive plan (rules).” The amended rules will be tabled at the AGM and initialled by the chairman for identification purposes. In terms of the JSE listings requirements, the passing of this ordinary resolution requires the approval of a 75% majority of the votes cast by shareholders present or represented by proxy at the AGM, excluding existing participants in the Northam share incentive plan (SIP).

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AND ABRIDGED ANNUAL REPORT 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING CONTINUED Reason and effect Northam is proposing the introduction of a new incentive mechanism, comprising the BEE transaction incentive plan (BIP) and the cash incentive bonus in respect of the BEE transaction (collectively the PLIM). The PLIM has been designed to incentivise the performance of the company’s key executives, so as to, inter alia, mitigate certain financial risks arising from the BEE transaction and retain the skills and expertise of the key management team. The company proposes to amend the rules in order to incorporate the terms of the BIP. These amendments require the approval of shareholders. Furthermore, in addition to the amendments required for the introduction of the BIP, certain other amendments are proposed to the rules in order to provide for practical matters related to the administration of the SIP and to simplify the rules. The purpose of the amendments to the rules and a summary of the salient features of the proposed PLIM are set out in Annexure 5 of this document, of which this notice forms part. The amended rules will lie open for inspection at the company’s registered office, during normal business hours.

SPECIAL RESOLUTIONS SPECIAL RESOLUTION NUMBER 1: APPROVAL OF AMENDMENTS TO THE EXISTING MOI – FRACTIONAL ENTITLEMENTS “Resolved that the existing clause 16.3 of the MOI is deleted and replaced with the following new clause: 16.3 If, on any capitalisation issue, shareholders would, but for the provisions of this clause 16.3, become entitled to fractions of shares, the board shall, subject to any contrary provisions in the resolution authorising the capitalisation issue, be entitled to round off the number of capitalisation shares, as permitted in terms of the JSE listings requirements.”

Reason and effect The reason for and the effect of this special resolution is to provide that all fractional entitlements arising from corporate actions, the shares are to be rounded down to the nearest whole number, in accordance with the latest JSE listings requirements.

SPECIAL RESOLUTION NUMBER 2: APPROVAL OF AMENDMENTS TO THE EXISTING MOI – DISTRIBUTIONS “Resolved that the existing clause 45 of the MOI is deleted and replaced with the following new clause:

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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45 DISTRIBUTIONS 45.1 Subject to the provisions of the Companies Act and this MOI, the board may declare any distribution and a shareholders’ meeting may declare any distribution which is authorised by a resolution of the board. All distributions shall comply with the JSE listings requirements. The company may not make it a condition of a distribution that all or part of the amount of that distribution may be called up again by the company in its discretion. 45.2 Distributions (in the form of a dividend or otherwise) are to be declared by the board in accordance with the Companies Act. 45.3 The company shall transmit any distribution or amount payable in respect of a share by electronic bank transfer to such bank account as the registered holder thereof may have notified the company in writing for this purpose, and the company shall not be responsible for any loss in transmission. In the case of joint holders, the bank account of the first named in the register (or sub register, as the case may be) in respect of such joint holdings, the details of which bank account were furnished to the company by such person, and the electronic transfer of the distribution or amount payable into such bank account shall be a good discharge by the company in respect thereof. For the purposes of this clause 45.3, no notice of change of bank account or instructions as to payment being made into any other bank account which is received by the company after the date on which a holder must be registered in order to qualify for a distribution or other amount payable or which would have the effect of changing the currency in which such payment would be made, shall be effective in respect of such payment. A shareholder who is a South African resident shall only be entitled to supply a Rand denominated bank account of a bank registered to operate such account in the Republic. In the event that a shareholder has failed to furnish the company with a valid bank account as envisaged in this clause 45.3, the distribution or other amount payable shall be deemed unclaimed distributions in accordance with clause 45.5. 45.4 The company shall not be responsible for a shareholder’s loss arising from any fraudulent, diverted or incorrect electronic funds transfer of distributions or other amounts payable to a shareholder unless such loss was due to the company’s gross negligence or wilful default. 45.5 Any distribution or other money payable on or in respect of a share, 45.5.1 which is unclaimed, may be retained by the company and held in trust indefinitely until lawfully claimed by such shareholder/s or until the shareholder’s claim therefor prescribes in terms of clause 45.5.3; 45.5.2 which is unclaimed for a period of three years from the date on which they were declared may be declared forfeited by the board for the benefit of the company. The directors shall be entitled at any time to annul such forfeiture upon such conditions (if any) as the board deems fit;

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AND ABRIDGED ANNUAL REPORT 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING CONTINUED 45.5.3 which is retained and unclaimed for three years, should the company be wound up or deregistered, after the payment date of the distribution or money in question, shall be forfeited and revert to the company or its assigns and may be dealt with by the directors or such assigns as they deem fit; and 45.5.4 shall not bear interest against the company, and the board shall, for the purpose of facilitating the winding up or deregistration of the company before the date of any such forfeit, be entitled to delegate to any bank, registered as such in accordance with the laws of the Republic, the liability for payment of any such distribution or other money, payment of which has not been forfeited in terms of the aforegoing. 45.6 Distributions (in the form of a dividend or otherwise) shall be paid to shareholders registered as at a record date subsequent to the date of declaration or, if applicable, date of confirmation of the distribution, whichever is the later date.”

Reason and effect The reason for and the effect of this special resolution is to provide that distributions (in the form of a dividend or otherwise) to shareholders, be paid by means of electronic funds transfer into a bank account designated for such purposes by shareholders, with payments by cheque no longer being permissible unless the shareholder has specifically requested that such payments be made by cheque.

SPECIAL RESOLUTION NUMBER 3: APPROVAL OF NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR THE YEAR ENDING 30 JUNE 2017 “Resolved that the following remuneration for non-executive directors be and is hereby approved for the year ending 30 June 2017: Proposed increase

Proposed fees 2016 AGM

Approved fees 2015 AGM

Board

%

(R per annum)

(R per annum)

Board chairman*

10

149 100

135 500

Lead independent director

6

106 600

100 500

Board members

6

67 100

63 300

Board meeting attendance fees – per meeting

6

43 400

40 900

Committee chairman*

10

66 800

60 700

Committee members

6

32 300

30 400

Committee meeting attendance fees – per meeting

6

21 000

19 800

Audit and risk committee

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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Proposed increase

Proposed fees 2016 AGM

Approved fees 2015 AGM

%

(R per annum)

(R per annum)

Committee chairman*

10

53 400

48 500

Committee members

6

25 300

23 800

Committee meeting attendance fees – per meeting

6

16 900

15 900

Committee chairman*

10

53 400

48 500

Committee members*

10

26 200

23 800

6

16 900

15 900

Committee chairman

6

54 800

51 700

Committee members

6

25 300

23 800

Committee meeting attendance fee – per meeting

6

16 900

15 900

Committee chairman

6

51 400

48 500

Committee members

6

25 300

23 800

Committee meeting attendance fees – per meeting

6

16 900

15 900

Ad hoc fees – per hour

6

3 360

Board Health, safety and environmental committee

Nomination committee

Committee meeting attendance fees – per meeting Social, ethics and human resources committee

Other board appointed committees

3 170.”

Reason and effect The reason for and the effect of this special resolution is to approve increases in non-executive directors’ fees for the period ending 30 June 2017. * The SE&HR committee commissioned an independent firm to conduct a benchmarking exercise on Northam’s nonexecutive directors’ fees against a peer group of JSE listed mining companies. The results have indicated that the majority of directors are paid within acceptable ranges to the median, however some of the directors’ fees lag the market considerably. In an attempt to ensure internal parity, it is proposed fees for these directors be adjusted by 10%. In considering the adjustment, affordability was considered.

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AND ABRIDGED ANNUAL REPORT 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING CONTINUED SPECIAL RESOLUTION NUMBER 4: FINANCIAL ASSISTANCE IN TERMS OF SECTION 45 OF THE COMPANIES ACT “Resolved that the board be and is hereby authorised in terms of and subject to the provisions of section 45 of the Companies Act, to cause the company to provide any financial assistance in any form or amount to any company or corporation which is related or inter-related to the company (as defined in the Companies Act), on the terms and conditions that the board may determine from time to time.”

Reason and effect The reason for and the effect of this special resolution, which is required in terms of section 45 of the Companies Act, is to grant the directors of the company the authority to cause the company to provide financial assistance by way of loans, guarantees, the provision of security or otherwise, to any company which is related or inter-related to Northam i.e. its subsidiaries. The special resolution does not authorise the provision of financial assistance to a director or prescribed officer of the company. The provision of financial assistance to subsidiaries of Northam is necessary for the sustainability of the business of the group, taking into account that the financial performance of the operations is dependent on numerous external factors, which include the prices of platinum group metals, and the rand/US$ exchange rate. The board is satisfied that immediately after granting the abovementioned financial assistance, the company will satisfy the solvency and liquidity test set out in the Companies Act and that the terms under which the financial assistance is proposed to be given are fair and reasonable to the company as referred to in Annexure 7 which forms part of this document.

SPECIAL RESOLUTION NUMBER 5: GENERAL AUTHORITY TO REPURCHASE ISSUED SHARES “Resolved, as a special resolution, that a mandate be and is hereby given to the company (or any one of its wholly-owned subsidiaries) providing authorisation, by way of a general authority, to acquire the company’s own issued shares, upon such terms and conditions and in such amounts as the directors may from time to time decide, but subject to the MOI of the company, the Companies Act and the JSE listings requirements, and subject further to the following terms and conditions: a Any repurchase of shares must be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counter-party. b At any one time, the company may only appoint one agent to effect any repurchase. c This general authority shall be valid until the company’s next AGM, provided that it shall not extend beyond 15 months from date of passing of this special resolution. d An announcement shall be published as soon as the company has cumulatively repurchased 3% of the initial number (the number of that class of share in issue at the time that the general

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

8

authority is granted) of the relevant class of securities and for each 3% in aggregate of the initial number of that class acquired thereafter, containing full details of such acquisitions. e Repurchases by the company and/or its subsidiaries in aggregate in any one financial year may not exceed 20% of the company’s issued share capital as at the date of passing of this special resolution or 10% of the company’s issued share capital in the case of an acquisition of shares in the company by a subsidiary of the company. f Repurchases may not be made at a price greater than 10% above the weighted average of the market value of the shares for the five business days immediately preceding the date on which the transaction was effected. g Neither the company nor its subsidiaries may repurchase securities during a prohibited period as defined in the JSE listings requirements unless it has in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed and full details of the programme have been submitted to the JSE, in writing, prior to the prohibited period.” In respect of the general authorities to be granted in terms of this special resolution, the directors will not undertake either of these activities until such time as they have applied the solvency and liquidity test required in terms of section 4 of the Companies Act and confirm that for a period of at least 12 months following the repurchase: • the assets of the company and group, fairly valued, exceed the liabilities of the company and group, fairly valued, the assets and liabilities being recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements; • share capital and reserves of the company and group will be adequate for ordinary business purposes; • working capital for the company and group will be adequate for ordinary business purposes; • the company will be able to pay its debts as and when they become due in the ordinary course of business; and • for the purpose of determining the fair value of the company’s and group’s assets and liabilities, due cognisance has been taken of any contingent assets and liabilities that may arise as a consequence of the distribution.

Reason and effect The reason for this special resolution is, and the effect thereof will be to grant, in terms of the provisions of the Companies Act, the JSE Listings requirements and subject to the terms and conditions embodied in the said special resolution, a general authority to the directors to approve the acquisition by the company of its own shares, or by a subsidiary of the company of the company’s shares, which authority shall be used by the directors at their discretion during the course of the period so authorised.

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AND ABRIDGED ANNUAL REPORT 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING CONTINUED ADDITIONAL DISCLOSURE REQUIREMENTS IN TERMS OF THE JSE LISTINGS REQUIREMENTS: In terms of the JSE listings requirements, the following information refers: Major shareholders – refer to Annexure 6. Stated capital of the company – refer to Annexure 6. Directors’ responsibility statement – The directors, whose names are given in Annexure 2, collectively and individually accept full responsibility for the accuracy of the information pertaining to the resolutions set out above and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement in these resolutions false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the notice contains all information required by law and the JSE listings requirements. Material change – Other than the facts and developments reported on in this summarised annual report, there have been no material changes in the affairs, financial or trading position of the company and its subsidiaries since the end of the financial period. The company’s products are priced in US dollars and therefore volatility in the rand/US dollar exchange rate could affect the company’s revenues.

TO TRANSACT ANY OTHER BUSINESS AS MAY BE CONDUCTED AT AN AGM APPROVALS REQUIRED FOR RESOLUTIONS The ordinary resolutions 1 to 5 contained in this notice require the approval of more than fifty percent (50%) of the total votes cast on the resolutions by shareholders present or represented by proxy at the AGM. Ordinary resolution 6 and the special resolutions contained in this notice require the approval of at least seventy-five percent (75%) of the total votes cast on the resolutions by shareholders present or represented by proxy at the AGM.

TELEPHONIC PARTICIPATION For the benefit of shareholders who are unable to attend the AGM but wish to participate therein, a simultaneous audio link will be available at the following numbers: South Africa: UK: Other countries:

+27 11 535 3600 0800 200 648 (toll-free) 0808 162 4061 (toll-free) +27 11 535 3600

The costs for use of the telephonic participation will be borne by the shareholder or proxy so utilising the telephonic participation.

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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Please note that whilst it is possible to participate in the AGM through this medium, there is no facility for electronic voting and, accordingly, shareholders and their proxies are advised to follow the instructions below in respect of proxies and voting.

PROXY All shareholders who are entitled to attend, speak and vote at the AGM may appoint one or more proxies to attend, speak and vote in their stead. A proxy need not be a member of the company. Should shareholders, both certificated and dematerialised, be unable to attend the AGM and wish to be represented thereat, they should appoint one or more proxies to attend, speak and vote in their stead. However, those shareholders who hold their certificated shares in the name of a nominee or shareholders who have already dematerialised their shares and have not selected own name registration and wish to attend the AGM, should timeously arrange with their nominee or their Central Securities Depository Participant (CSDP) or their broker to furnish them with the necessary authorisation to attend and vote at the AGM. Should these shareholders not wish to attend they may, pursuant to the terms of the agreement entered into with their nominee, CSDP or broker, instruct such nominee, CSDP or broker how they wish their votes to be cast in respect of any matter to be considered at the AGM. Shareholders who are unsure of their status or the action they should take, are advised to consult their CSDP, broker or financial adviser. A proxy form is attached for use by registered certificated shareholders and dematerialised shareholders with own name registration. To be effective, a proxy form must be executed in terms of the company’s MOI and in accordance with the relevant instructions set out on the form, and must be lodged with the transfer secretaries not less than 24 hours before the time set down for the AGM. If required, additional proxy forms may be obtained from the transfer secretaries.

VOTING On a show of hands, every shareholder of the company present in person or represented by proxy shall have only one (1) vote. On a poll, every shareholder of the company shall have one (1) vote for every share held in the company by such shareholder. Treasury shares, as defined by the JSE listings requirements, will not have their votes at the AGM taken into account for purposes of resolutions proposed in terms of the JSE listings requirements.

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AND ABRIDGED ANNUAL REPORT 2016

NOTICE OF THE 2016 ANNUAL GENERAL MEETING CONTINUED PROOF OF IDENTIFICATION REQUIRED Any shareholder or proxy who intends to attend or participate at the AGM must be able to present satisfactory identification at the AGM for such shareholder or proxy to attend and participate in the AGM. A bar coded identification document issued by the South African Department of Home Affairs, a driver’s licence or a valid passport will be accepted as sufficient identification. By order of the board.

PB Beale Company secretary 23 September 2016

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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ANNEXURE 1

SUMMARISED 2016 AUDITED FINANCIAL STATEMENTS 30 June 2016 R’000

30 June 2015 R’000

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Sales revenue Cost of sales Operating costs Concentrates purchased Refining and other costs Depreciation and write-offs Change in metal inventories Operating profit Share of (losses)/earnings from associate and joint venture Investment revenue Finance charges excluding preference share dividends Sundry income Sundry expenditure Profit/(loss) before preference share dividends Amortisation of liquidity fees paid on preference shares Preference share dividends Loss before tax Taxation Loss for the year

13

6 097 070 (5 713 722) (5 007 233) (350 514) (133 186) (403 545) 180 756 383 348 (32 253) 265 258 (39 634) 180 928 (92 122) 665 525 (18 088) (918 806) (271 369) (236 894) (508 263)

6 035 535 (5 439 722) (4 342 571) (602 395) (199 470) (339 949) 44 663 595 813 28 769 72 043 (145 170) 268 250 (1 587 264) (767 559) – (100 767) (868 326) (165 619) (1 033 945)

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 1

SUMMARISED 2016 AUDITED FINANCIAL STATEMENTS CONTINUED

30 June 2016 R’000

30 June 2015 R’000

19 822

(4 482)

(3 947)

(4 482)

Other comprehensive income Items that may be subsequently reclassified to profit or loss Share of associate’s exchange differences on translating foreign operations and foreign currency translation Reclassification of other comprehensive income from associate to profit or loss Total comprehensive income for the year Loss attributable to: Owners of the parent Non-controlling interest Loss for the year Total comprehensive income attributable to: Owners of the parent Non-controlling interest Total comprehensive income for the year

23 769

–

(488 441)

(1 038 427)

(508 263) – (508 263)

(1 035 649) 1 704 (1 033 945)

(488 441) –

(1 040 131) 1 704

(488 441)

(1 038 427)

(508 263) (57) – 11 185 –

(1 035 649) (892) (7 105) 17 493 (26 804)

– – 21 024 (13 610) (3 116) (492 837)

(922) 2 525 – 261 488 (5 097) (794 963)

Reconciliation of headline loss per share information Loss attributable to shareholders Profit on sale of property, plant and equipment Profit on sale of associate’s investment Impairment of associate’s assets Negative goodwill on assets acquired by associate’s associate Foreign currency differences on repayment of long-term receivables from associates foreign operations reclassified to profit or loss Impairment of property, plant and equipment Loss on sale of investment in associate (Reversal of impairment)/impairment of non-core assets Tax effect on above Headline loss

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1

30 June 2016 R’000 (145.3) (145.3) (140.9) (140.9) –

Loss per share – cents Fully diluted loss per share – cents Headline loss per share – cents Fully diluted headline loss per share – cents Dividends per share Weighted average number of shares in issue Fully diluted number of shares in issue Number of shares in issue Treasury shares in issue Shares in issue adjusted for treasury shares

30 June 2015 R’000 (264.3) (264.3) (202.9) (202.9) –

349 875 759 349 875 759 509 781 212 159 905 453 349 875 759

391 834 708 391 834 708 509 781 212 159 905 453 349 875 759

30 June 2016 R R’000

30 June 2015 R’000

14 110 084 7 853 993 5 614 094 192 164 6 51 341 89 717 93 647 60 345 10 445 144 332

13 367 048 7 065 352 5 636 478 275 847 6 10 000 94 503 49 092 52 122 11 037 172 611

4 867 779 1 330 270 375 204 3 105 080 57 225

5 784 288 1 126 550 498 854 4 138 189 20 695

18 977 863

19 151 336

CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets Non-current assets Property, plant and equipment Mining properties and mineral resources Interest in associates and joint ventures Unlisted investment Land and township development Long-term receivables Investments held by Northam Platinum Restoration Trust Fund Environmental Conservancy Trust Buttonshope Conservancy Trust Deferred tax asset

Current assets Inventories Trade and other receivables Cash and cash equivalents Tax receivables Total assets

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AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 1

SUMMARISED 2016 AUDITED FINANCIAL STATEMENTS CONTINUED

30 June 2016 R R’000

30 June 2015 R’000

Equity and liabilities Total equity Stated capital Treasury shares Retained earnings Equity settled share based payment reserve Share of other comprehensive income from associate

Non current liabilities Deferred tax liability Long-term provisions Preference share liability Long-term loans Long-term share based payment liability Domestic medium-term notes

Current liabilities Current portion of long-term loans Short-term share based payment liability Domestic medium-term notes Tax payable Trade and other payables Short-term provisions Total equity and liabilities

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8 727 984 13 778 114 (6 556 123) 631 545

9 216 425 13 778 114 (6 556 123) 1 139 808

874 448 –

874 448 (19 822)

9 072 179 590 637 272 820 7 429 549 275 513 84 373 419 287

7 310 753 521 452 187 217 6 492 655 39 963 69 466 –

1 177 700 13 201 56 704 – 104 072 877 935 125 788

2 624 158 3 801 61 019 1 370 000 102 072 959 996 127 270

18 977 863

19 151 336

1

Stated capital R’000

Equity settled share based Retained payment earnings reserve R’000 R’000

Other comprehensive income from associates R’000

Noncontrolling interest R’000

Total R’000

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Balance as at 30 June 2014

9 178 688 2 223 135 Acquisition of noncontrolling interest – (46 815) Total comprehensive income for the year – (1 033 945) Loss for the year – (1 033 945) Other comprehensive income for the year – – Dividends declared* – (2 567) Issue of new shares 4 599 426 – Treasury shares (6 556 123) – Share based payment reserve – –

Balance at 30 June 2015 Total comprehensive income for the year Loss for the year Other comprehensive income for the year

Balance at 30 June 2016

–

(15 340)

5 389 11 391 872

–

–

– –

(4 482) –

1 704 (1 036 723) 1 704 (1 032 241)

– – – –

(4 482) – – –

– (4 482) (3 908) (6 475) – 4 599 426 – (6 556 123)

874 448

–

–

874 448

(3 185)

(50 000)

7 221 991

1 139 808

874 448

(19 822)

–

9 216 425

– –

(508 263) (508 263)

– –

19 822 –

– –

(488 441) (508 263)

–

–

–

19 822

–

19 822

7 221 991

631 545

874 448

–

–

8 727 984

* Non-controlling interest’s portion of dividends declared by entities within the Northam group.

17

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 1

SUMMARISED 2016 AUDITED FINANCIAL STATEMENTS CONTINUED

30 June 2016 R’000

30 June 2015 R’000

CONSOLIDATED STATEMENT OF CASH FLOWS Cash flows from operating activities Loss before taxation Adjusted for the following non cash items as well as discloseable items Depreciation and write-offs Changes in provisions Changes in long-term receivables Investment revenue Finance charges excluding preference share dividends Finance charges on preference shares Liquidity fees on the preference shares Equity settled share based payment expense Movement in share based payment liability (Reversal of impairment)/impairment of investment in associates Share of losses/(profits) from associate Loss on sale of investment in associate Amortisation of participation interest in the Pandora joint venture Profit on sale of property, plant and equipment Other Change in working capital Additions to land and township development Investment revenue Taxation paid

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

18

839 081 (271 369)

340 950 (868 326)

403 545 50 221 4 786 (265 258) 39 634 918 806 18 088 – 10 592 (13 610) 32 253 21 024 2 600 (57) 1 395 (162 131) (41 341) 265 258 (175 355)

339 949 52 823 (456) (72 043) 145 170 100 767 – 874 448 (38 350) 239 054 (28 769) – 2 600 (892) (788) (221 248) – 72 043 (255 032)

1

30 June 2016 R’000

Cash flows utilised in investing activities Property, plant, equipment , mining properties and mineral reserves Additions to maintain operations Addition to expand operations Disposal proceeds Additions to land and township development Investment in associate – cash distributed Additional investment made in associate Proceed on the sale of investment in Trans Hex Group Limited Increase in investments held by Northam Platinum Restoration Trust Fund Increase in investments held by Environmental Contingency Fund Movement in investment held in Buttonshope Conservancy Trust Fund

Cash flows (utilised)/generated from financing activities Proceeds from issue of shares Transaction costs Liquidity fees paid Acquisition of non-controlling interest Interest paid Dividends paid Movement in long-term loans Domestic medium-term notes issued Domestic medium-term notes repaid (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

19

30 June 2015 R’000

(1 126 793)

(1 101 462)

(369 636) (804 344) 4 235 – 24 (20 601) 81 815

(322 980) (779 068) 1 551 (203) 12 918 (9 623) –

(10 655) (8 223)

(2 624) (1 098)

592 (745 397) – – – – (39 634) – 244 950 419 287 (1 370 000) (1 033 109) 4 138 189 3 105 080

(335) 4 232 645 4 600 000 (574) (163 903) (50 000) (145 170) (3 908) (3 800) – – 3 472 133 666 056 4 138 189

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 1

SUMMARISED 2016 AUDITED FINANCIAL STATEMENTS CONTINUED

EXTRACTS FROM THE CHIEF EXECUTIVE’S REVIEW 6Moz into the market. Nevertheless, Northam expects platinum demand to continue to grow at a rate similar to the growth in world gross domestic product. The decline in South African primary supply is likely to be steady over the next 10 or so years owing to under-investment in new projects. For Northam, this creates a particularly attractive investment thesis, in that we anticipate that our Northam is moving into a growth phase funded by significant cash holdings and internally

growth projects will start delivering production into a rising platinum market.

THE OPERATING ENVIRONMENT

generated cash flows.

Challenges in the labour relations arena are

HEALTH AND SAFETY

likely to persist in the near to medium term,

Our operations completed the past financial

even though labour relations at our two

year with no fatal accidents. The mechanised workings at Booysendal provide the differentiator in terms of a safe working environment and contributed to Booysendal achieving two million

operating mines were largely stable in the wake of the three-year wage agreements secured at the end of the previous financial year.

fatality free shifts. Zondereinde’s performance

I believe that these agreements illustrate

was exemplary and was rewarded with five

that competition between unions can be set

million fatality-free shifts.

aside for the overall benefit of employees. Longer-term agreements provide a platform

PGM MARKETS

for a stable operating environment, which is a

The past year has been one of the most challenging this industry has faced. Metal prices have languished at levels not seen since 2009.

fundamental tenet of our business strategy. Civil unrest in the Steelpoort valley resulted in many days of production losses at Booysendal

Recent research has indicated that the 2016 calendar year will end with an overall platinum supply deficit of 455 000 ounces based on

when passage for employees to get to work was too dangerous. We are optimistic that the task team set up to deal with community issues

forecast demand of 8.26Moz and supply of 7.80Moz. Newly-refined production is projected to fall in each of the four principal platinum

will generate some fresh impetus and that these concerns will be resolved.

producing regions as mining firms curtail output

The situation at Zondereinde was potentially

of unprofitable ounces and deliver just shy of

more serious in early June, when a mine

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

20

1

employee was killed in the neighbouring

at Booysendal North and development of the

Northam town. This was followed by the death

Booysendal South mining complex have been

of another employee, raising tensions on the

approved and are progressing well. We are also

mine and resulting in eight days’ underground

extending and optimising our processing capacity.

production losses. This issue is still being actively

The smelter expansion at Zondereinde is in

managed by mine management.

progress, and due for completion towards the end

My thanks, and those of the board, go to all

of calendar year 2017.

the stakeholders who contributed to resolving

LOOKING AHEAD

the immediate situation at Zondereinde, in

Looking ahead, Northam is confident that

particular the SAPS and the Minister of Mineral

the fundamentals of the PGM markets will

Resources, Mr Mosebenzi Zwane.

reassert, giving impetus to a stronger pricing

FINANCIAL AND OPERATING PERFORMANCE The introduction of Zambezi Platinum as a 31.4% shareholder in the company along with the capital injection it brought, has been fully absorbed into our accounts contributing to the

environment. The perceived threats to demand are receding and South African primary supply is under pressure. Northam’s investment in new production through the cycle is intended to deliver into a rising market.

healthy cash position of R3.1 billion shown on

APPRECIATION

our balance sheet at the financial year’s end.

Everyone at Northam gave unstintingly to the

In line with our focus on core business activities, we disposed of the company’s 20.3% stake in the Trans Hex Group Limited, further strengthened the balance sheet by issuing medium term notes to the value of R425 million

company’s development this past financial year. I am confident that they will do the same in future. For this I extend my thanks and assure all of my colleagues that they will continue to enjoy my full support.

and welcomed the Industrial Development

I recognise the contributions of all Northam’s

Corporation of South Africa as a strategic funding

people at all levels in the organisation. Together,

partner. This financial strength provides the

we will succeed in taking Northam forward.

basis for funding future and existing expansion projects that will eventually take our annual PGM production profile to 800 000 ounces. Each one of our mines has ore reserves sufficient for at least 20 years of production. We have completed the ramp-up of Booysendal UG2 North’s operations to full capacity and are carrying

Paul Dunne

out deepening projects at both Zondereinde

Chief executive

and Booysendal North. The Merensky mine

23 September 2016

21

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 2

DETAILS OF DIRECTORS

PL Zim (56) BCom (Hons); MCom Non-executive chairman Joined the board in 2007 Mr Zim is the chairman of Zambezi Platinum (RF) Limited (Zambezi Platinum), and a director of Atisa Platinum (RF) Proprietary Limited, Sanlam Limited and Sanlam Life Insurance Limited. He is also a past president of the Chamber of Mines of South Africa. Previously chairman of Telkom SA SOC Limited, he has also held senior executive positions at Anglo American South Africa Limited, M-Net Supersport and MTN Group Limited. He was voted African Business Leader of the Year in 2005 and is an Honorary Colonel in the South African Army. Member of the nomination committee R Havenstein (60) MSc (Chemical Engineering); BCom Lead independent director Joined the board in 2003 Mr Havenstein currently serves on the board of Murray and Roberts Holdings Limited and Omnia Holdings Limited. He was previously chief executive officer of Anglo American Platinum Limited, prior to which he was an executive director of Sasol Limited responsible for Sasol Chemical Industries. Member of the audit and risk committee Chairman of the health, safety and environmental committee, the investment committee and, the nomination committee PA Dunne (53) (British) BSc (Hons); MBA Chief executive officer Joined the board in 2014 Prior to joining Northam, Mr Dunne was employed by Impala Platinum Holdings Limited (Implats) as executive director responsible for all mining, concentrating and smelting operations at Implats’ Rustenburg and Marula mines. Mr Dunne is also a director of Zambezi Platinum. Member of the health, safety and environmental committee AZ Khumalo (51) BCompt (Hons); CA (SA) Chief financial officer Joined the board in 2010 Mr Khumalo, a chartered accountant by profession, has extensive mining and corporate finance experience. From September 2008 he was the group finance executive of Coal of Africa Limited. Prior to that, from 2004 to 2008, he was director: finance of Aquarius Platinum (South Africa) Proprietary Limited. Mr Khumalo is also a director of Zambezi Platinum.

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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2

CK Chabedi (48) MSc (Mining Engineering) MDP Independent non-executive director Joined the board in 2009 Mr Chabedi has more than 20 years’ mining experience having worked for Anglo American for 12 years in both their underground and surface mining operations. He is currently a senior lecturer in the School of Mining Engineering at the University of the Witwatersrand. Member of the health, safety and environmental committee, the investment committee and, the social, ethics and human resources committee HH Hickey (Ms) (62) B Compt (Hons), CA (SA) Independent non-executive director Joined the board in 2016 Ms Hickey currently serves as an independent director on the boards of African Dawn Capital Limited, Cashbuild Limited, Omnia Holdings Limited and Pan African Resources Plc. She has 35 years’ experience in auditing, risk management and governance and is a past chair of the South African Institute of Chartered Accountants. Member of the audit and risk committee As recommended by the nomination committee, Ms Hickey, subject to her re-election and appointment as a director, shall replace Mr Martin as chairman of the audit and risk committee. Mr Martin shall retire as a director following the conclusion of the AGM. TE Kgosi (Ms) (62) BCom (Hons) Independent non-executive director Joined the board in 2004 Ms Kgosi is the cluster manager in Supply Chain Operations, Eskom Group Commercial. She has extensive experience in the banking sector mainly in a treasury operations environment, having held positions at a number of South Africa’s main banking groups as well as Credit Suisse First Boston (NY). Member of the audit and risk committee and, the nomination committee Chairperson of the social, ethics and human resources committee

23

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 2

DETAILS OF DIRECTORS CONTINUED

AR Martin (78) BCom; CA (SA) Independent non-executive director Joined the board in 2009 Mr Martin is a director of Datacentrix Holdings Limited and Trans Hex Group Limited. Member of the investment committee and the nomination committee Chairman of the audit and risk committee Mr AR Martin shall retire as a director following the conclusion of the AGM. KB Mosehla (44) BCompt; CA (SA) Non-executive director Joined the board in 2015 Mr Mosehla is the chief executive of Mosomo Investment Holdings Proprietary Limited, a director of Zambezi Platinum, Malundi Resources (RF) Proprietary Limited and Coal of Africa Limited. Member of the investment committee and, the social, ethics and human resources committee TI Mvusi (61) BA; ELP; MAP and PDP Independent non-executive director Joined the board in 2016 Mr Mvusi currently holds the position of chief executive: group market development at Sanlam Limited (Sanlam). Mr Mvusi has served on the board of Sanlam since 2009, and holds a number of Sanlam group directorships and is also the chairman of Iemas Financial Services (Co-Operative) Limited. Prior to joining Sanlam, he was the general manager of Gensec Property Services Limited and was a marketing manager at Franklin Asset Management.

NORTHAM NOTICE OF ANNUAL GENERAL MEETING

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ANNEXURE 3

REMUNERATION REPORT OF THE SE&HR COMMITTEE

REMUNERATION REPORT OF THE SE&HR COMMITTEE The members of the SE&HR committee are Ms Kgosi, chairperson, Messrs Chabedi and Mosehla, the majority of whom are independent non-executive directors. Mr Mosehla was appointed as non-executive director on 19 August 2015 and Mr ME Beckett retired on 11 November 2015. The board, through the SE&HR committee or the committee, is ultimately responsible for establishing a remuneration policy and for its implementation, to ensure that competent individuals are appointed as senior managers and to ensure that the group’s leadership is adequately rewarded for delivering on the group’s strategic targets. In addition, the committee is responsible for mandating management on appropriate wage increase thresholds for union negotiations and advises on the scale of fees to be paid to non-executive directors, which are submitted to shareholders for approval. The terms of reference of the committee, containing detailed information regarding the committee’s responsibilities and mandate, are available on the company’s website www.northam.co.za.

EMPLOYEES REPRESENTED IN TERMS OF COLLECTIVE BARGAINING ARRANGEMENTS There are various unions representing workers at the group’s operating mines. The majority of the group’s employees, approximately 80% at Zondereinde, are contributing members of the National Union of Mineworkers (NUM) – primarily in the category 2 to 10 bargaining units. Their salary levels, annual increases, allowances and benefit packages are negotiated on a collective basis. At Booysendal, approximately 90% of the workforce is covered by collective bargaining agreements through the contractor companies used at the operation. Approximately 70% of unionised contractor companies’ employees belong to the Amalgamated Mine and Construction Workers Union (AMCU). Northam also engages with other unions representing smaller groups of employees. The group’s labour relations policies provide for organisational rights to any union which meets a 15% representation threshold within a bargaining unit. When a registered union reaches a representative threshold of 33.3% within a bargaining unit, it acquires the right to bargain for that particular unit. Northam’s objective is to engage in good faith in order to reach agreement on matters such as wages, substantive conditions of service and other matters of mutual interest. In addition to their wages, employees also earn various forms of bonuses to incentivise performance.

25

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 3

R EMUNERATION REPORT OF THE SE&HR COMMITTEE CONTINUED

EXECUTIVE DIRECTORS, MANAGEMENT AND NON-UNION STAFF Executive directors, including corporate and operational management are treated in accordance with their contracts of employment and the remuneration and benefit schemes and practices applicable to their job grades. Salaries are reviewed annually, effective 1 July. Salary increases are determined individually, according to individual performance, retention and market-matching criteria. All non-union staff, managers and executives have detailed job profiles which stipulate the key performance areas of their positions. These serve as the basis for performance management, measurement and performance-linked salary increases and bonuses. Remuneration takes the form of: • appropriate salary packages, including those of the executive directors which incorporate basic remuneration pay (BRP) including death, disability, medical aid and pension contribution benefits; • various allowances; • various short-term incentive bonus schemes depending on the grade of the employee; • a long-term incentive scheme launched in 2011 which replaced the prior share option scheme (see page 33); and • Key person insurance cover is available for the executives and the general managers of the group.

REMUNERATION POLICY Pay levels are determined in terms of the group’s remuneration policy. Through fixed and variable remuneration, the group aims to attract, retain, incentivise and reward top quality staff at all levels, particularly where scarce or critical skills are involved. The group’s remuneration policy is designed to support its strategic goals in a way that aligns the interests of employees, managers, executives and directors with those of stakeholders. The remuneration policy is not intended to be a ‘one size fits all’ statement of rules and procedures, but rather to serve as the basis for a flexible approach to the variable and changing needs of a dynamic and competitive mining employment environment. The policy is underpinned by the following key principles: • harmonising working conditions, salaries and wages throughout the group; • compliance with all statutory and regulatory requirements and a commitment to applying best practice guidelines in all aspects of remuneration and benefits; • attracting and retaining core skills, such as artisans, engineers and management; and • offering remuneration packages that are competitive, fair, and reasonable in all respects and at all levels.

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3

FEATURES OF THE REMUNERATION PRACTICES Employment contracts are concluded on a permanent basis as a general principle (i.e. for an indefinite period), except where fixed-term or short-term temporary contracts are required for specific projects. The notice period for the termination of employment contracts is typically one month, but for critical positions this can be extended by mutual agreement to a maximum of one year. Northam’s objective is to provide a market-competitive basic salary plus compulsory medical aid and retirement fund membership. Various fixed and variable allowances are paid at certain job/ grade levels or to certain job categories. The job grading system is based on the Paterson model. Remuneration experts are consulted from time to time as circumstances dictate. Job grades, salary scales and employee benefits are benchmarked against mining industry standards and are reviewed annually. The midpoints of the group’s salary scales are compared with industry percentiles and adjusted annually, in line with the changing size, structure, financial performance and general circumstances of the group over time. The group’s salary scales have a range of between 12.5% and 57% which allow an overlap on scales which have steps of 15% between grade ranges to allow for the appropriate positioning of individuals according to qualifications, experience, performance, growth, development and market imperatives. However, in a competitive market where skills are scarce, market comparisons may result in pay amounts above the range being considered and paid. The committee approves salary increases for all categories of staff in advance each year. Any material changes to allowances, benefits, bonus schemes, or any other aspect of remuneration policy are approved by the committee prior to implementation. In the case of retrenchment, the group’s policy at all job levels is to pay the contractual notice period (if not worked) and severance pay in line with legislation (the Basic Conditions of Employment Act), being one week’s remuneration per completed year of service with the group. Severance payments upon termination of service are governed by legislation, agreements with unions, individual contract and/or group policy and practice. No provision is made for special retirement benefits for group employees other than the standard benefits in terms of two of the group’s recognised retirement funds, with the exception of employees in Category 9 and above who were in service with the group on 31 December 1998. In respect of these employees, a contribution is made to a post-retirement healthcare fund. These contributions cease when the employee leaves the service of the group. All components of the group’s remuneration system are subject to regular internal and external audits, as well as routine monitoring by the South African Revenue Services. The committee is satisfied that the group is compliant with all pertinent regulations.

27

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 3

R EMUNERATION REPORT OF THE SE&HR COMMITTEE CONTINUED

EXECUTIVE DIRECTORS’ SERVICE CONTRACTS The chief executive, Mr PA Dunne has a service contract with the company which is subject to a notice period of one year. The chief financial officer, Mr AZ Khumalo has a service contract with the company which is subject to a notice period of three months. Severance pay is governed by employment (labour) legislation and there are no special severance package arrangements in terms of these contracts except that they are governed by legislation. The executive directors’ remuneration is determined on an annual basis by the SE&HR committee.

ELEMENTS OF REMUNERATION FOR EXECUTIVE DIRECTORS AND SENIOR OFFICIALS FIXED REMUNERATION: COST TO COMPANY Executive directors are paid market-related salary packages on a cost to company basis which represents their guaranteed pay. Increases are generally offered and determined annually by the committee in July. Increases take account of the group’s economic performance, the prevailing inflation rate and may include a merit component of no more than 2% in addition to the inflation rate. The chief executive’s basic remuneration increase of 8% in July 2015 takes account of his forfeiture of an increase in July 2014, given that his contract with the company started in March 2014. The chief financial officer received an 11% increase following a benchmarking exercise.

Executive directors – total remuneration outcomes and remuneration mix FY2016 Executive director

Basic remuneration %

Benefits %

Bonus %

Gain on shares %

*Total %

PA Dunne

54.3

7.3

38.4

–

100.0

AZ Khumalo

31.4

4.6

25.4

38.6

100.0

* Refer to the directors’ report in the annual integrated report 2016 for directors’ remuneration in rand terms.

Mr Dunne did not have any retention or performance shares vesting as his tenure at the company remains below the three-year vesting period.

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3

VARIABLE REMUNERATION: SHORT-TERM Employee bonuses The group has a variety of bonus schemes for employees. Bonuses are not guaranteed and are based on agreed formulae. Executive directors and senior management may earn a bonus based on the extent to which they have achieved the targets and objectives set for them by the committee and/or the board of directors. Bonuses are payable half-yearly.

Short term incentive – executive directors, senior officials’ bonus scheme The board of directors, through the committee, determines the performance targets and objectives of the chief executive and the chief financial officer, conducts their performance assessments and decides the quantum of their performance bonuses. The chief executive also has input into the evaluation of the chief financial officer. The chief executive and the committee determine the performance targets and objectives of senior managers, conduct their performance assessments and determine the quantum of performance bonuses for approval by the board of directors. Bonuses are paid subject to the achievement of targets, and an individual performance rating. Variability of the bonus amounts per grade is based on the relative BRPs of executive directors and senior officials. Annual bonuses actually paid as a percentage of basic remuneration plus benefits in FY2016 were as follows: Executive director

*2016 bonus as % of (basic pay + benefits)

PA Dunne

62.2

AZ Khumalo

70.7

* Refer to the directors’ report in the annual integrated report 2016 for directors’ remuneration in rand terms.

29

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 3

R EMUNERATION REPORT OF THE SE&HR COMMITTEE CONTINUED

Typically, the bonus scheme is based on a weighted combination of targets which are largely under the control of management. Through the provision of bonuses, the committee intends to incentivise management in areas/targets that they are able to influence. In this way, management is encouraged to manage the group to achieve best performance for the benefit of stakeholders. These targets are usually a weighted combination of safety performance, linear metres achieved, square metres achieved, total tonnes milled, recoverable metals produced, cash or total operating costs, personal performance which includes transformation (referring to social employment quotas/criteria that must be met in terms of employment legislation in South Africa).

Short-term incentives – details of the executive directors’ and senior officials’ bonus scheme Committee approved formula

Achievement (excess or shortfall of actual over target), rated in terms of achievement factors (i.e. below 90% achievement = zero achievement factor and above 110% = 125% achievement factor) by (x) weighting of key performance area (scoring) x BRP x weighting of the two mines (on production) – this is calculated half yearly and per annum – all annualised = bonus of executive directors and senior management.

Payment frequency

Bonuses are paid twice annually based on the actual results achieved for each of six months ending December and June. 75% of the calculated bonus is paid for each six-month period with the final 25% being calculated on the results for the full year.

Performance conditions

Set during the financial year by the committee and the board. Corporate office bonuses are paid on a weighted basis based on the performance of the two operating mines, Zondereinde and Booysendal. Performance criteria and weightings for FY2016 and FY2017.

Minimum and maximum possible bonus opportunity

Minimum can be zero and maximum 125% of BRP.

Proposed changes for FY2017

Only for the Booysendal mine - weighting of targets as indicated in the table below. This change in certain targets reflects the anticipated steady-state production levels in FY2017.

SE&HR committee discretion

In consultation with chief executive, the committee may vary both the formula, targets and or the amounts payable.

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3

Executive directors’ and senior officials’ bonus scheme – elements of bonus – payable for year end June 2016:

ZONDEREINDE

Key performance area

Unit

Score by applying weighting

%

%

%

%

TIIR

30

96.0

60.0

18.0

m

10

85.0

–

–

2

10

92.0

20.0

2.0

tonnes

10

93.0

30.0

3.0

Safety Linear metres Square metres Total tonnes milled

Achievement Achievement actual vs factors Weighting target applied

m

Recoverable metals

kg

15

96.0

60.0

9.0

Total cash cost

R000s

15

111.0

125.0

18.8

Personal performance

Rating

10

–

–

Net weighting – percentage of BRP for period and for mine payable

– 50.8

BOOYSENDAL

Key performance area

Safety

Unit

Achievement Achievement actual vs factors Weighting target applied

Score by applying weighting

%

%

%

%

LTIIR

25

136.0

125.0

31.3

Capital development metres

m

20

98.0

80.0

16.0

m2

10

92.0

20.0

2.0

ROM milled

tonnes

10

99.0

90.0

9.0

Sweeping and vamping

tonnes

5

94.0

40.0

2.0

Square metres

Concentrator metals produced

kg

5

97.0

70.0

3.5

Total cash cost

R000s

15

99.0

90.0

13.5

Personal performance

Rating

10

–

–

Net weighting – percentage of BRP for period and for mine payable

– 77.3

Applicable formula: see table above.

31

AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 3

R EMUNERATION REPORT OF THE SE&HR COMMITTEE CONTINUED

CORPORATE OFFICE AND SHARED SERVICES STAFF Net weighting – percentage of BRP for period and for corporate office and shared services payable is 59.0% The table below indicates the performance targets or criteria set for the FY2016 and FY2017 bonuses: Weighting % Zondereinde

Weighting % Booysendal

Performance criteria

Unit

FY2017

FY2016

FY2017

FY2016

Safety (LTIIR/RIIR or TIIR)

TIIR

30

30

20

25

Linear metres/capital development decline metres

m

10

10

–

20

m2

10

10

30

10

Total tonnes milled

tonnes

10

10

15

10

Sweepings and vampings

tonnes

–

–

–

5

kg

15

15

15

5

Total cash cost

R000s

15

15

10

15

Personal performance

rating

10

10

10

10

100

100

100

100

Square metres

Recoverable metals

Based on the cost to company, being the basic remuneration package plus pension contribution, the average group bonus paid under this scheme was 58.4% of group remuneration cost in FY2016 (FY2015: 50.4%). In FY2016, executive directors and corporate office staff bonuses were paid for the first time (originally corporate office staff was paid on the Zondereinde mine) on a weighted basis relative to the performance of the two operating mines, Zondereinde and Booysendal.

Short-term incentives: retention bonus scheme – including executive directors The bonus is designed to retain skills within the company. Accordingly, any employee who is discharged or resigns before such bonus becomes payable forfeits the total amount accumulated. An amount equal to 20% of the annual BRP is accumulated monthly over 24 months and paid after two years’ service in terms of this scheme. On retirement or retrenchment all accumulated bonuses are payable to employees. Employees taking early retirement will receive this bonus on a proportional basis in line with the same percentages as the share incentive plan rules.

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All officials within the D3 Paterson grading and higher, including executive directors, are eligible to participate in the scheme. In FY2016 the average group retention bonus paid was 11.1% (FY2015: 10.5%) of the group cost to company remuneration.

Long-term incentives: details of share incentive plan and share option scheme for executive directors and senior management The group currently operates the Northam share incentive plan (SIP or plan). The Northam share option scheme has been discontinued owing to its dilutive nature. The share options issued before its discontinuance will be allowed to run their course until October 2017. Details of the options issued under the scheme are more fully disclosed in Annexure 4 which forms part of this document. Remuneration of executive directors in terms of both basic pay and the Northam SIP payouts are disclosed in the directors’ report which forms part of the annual integrated report 2016. The SIP was introduced in 2011 in order to attract, incentivise and retain skilled senior managers. The target group for the SIP includes all senior officials and executives in job grades D1 and above. The committee approves the annual allocation of shares based on an approved formula, as well as any changes to the SIP rules.

Long-term incentive – details of the share incentive plan Instruments used

• Conditional shares with a three-year vesting period • Retention shares (without performance conditions) – no more than 25% of the total award; and • Conditional shares with performance conditions – at least 75% of the total award • Forfeitable shares Participants do not have to pay for any awards received under the SIP.

Eligibility levels

Executive directors and all senior officials in Paterson D grade and above

Performance conditions and performance measurement

See table below for typical combination of performance conditions, each factor weighted accordingly. From FY2015 onwards these include a rate of return performance target/ factors with a weighting of at least 30%.

Vesting period

Three years for all shares

Company and individual limits

Total company limit of approximately 19.9 million shares and approximately 2.0 million shares per cycle for individuals. See salient features of the PLIM more fully disclosed in Annexure 5 which forms part of this document. 33

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ANNEXURE 3

R EMUNERATION REPORT OF THE SE&HR COMMITTEE CONTINUED

Minimum and maximum possible share payout

Minimum is the value of retention shares (as they have no performance conditions attached) and maximum largely depends on operational performance of the company when targets are measured against actual performance for conditional shares. This determines the shares eventually allocated, (which are normally lower than those awarded because of the performance conditions test) as well as the share price when shares vest. On measurement of the achievement of these targets/factors, each factor’s achievement rank depends on the extent of achievement for each factor over the three-year period, ranging from: a ranking of 1 (which represents a 90 to 100% achievement of target). This could mean, for example, a 100% award of conditional shares. This rises up to a ranking of 4, which, for example might be an achievement of over 105%, which may equate to a share number allocation of up to 135% of the original award.

Executive directors: November 2012 allocation, vesting November 2015 Factor and weighting and year

Safety 30%

Recoverable metals 40%

Unit cash cost 30%

FY2013

Score

110

96

100

FY2014

Score

87

79

93

FY2015

Score

111

88

94

Total

Score

111

88

96

135

–

100

Achievement per factor Weighted

41%

Percentage shares paid out

–

30%

Total

71% 71%

Executive directors – number of shares 98 000#

69 580*

* Final numbers of shares vested paid out in December 2015. #

The initial/original number of shares awarded or granted to directors. The initial award is largely based on the share price at the time of award.

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3

The first three-year cycle of performance shares post the launch of the SIP in 2011 was completed in November 2014. The performance conditions were measured with the result determining the allocations of shares that vested and therefore determined the payout. The retention awards of FY2011 however vested in 2013. For Zondereinde mine, corporate office and shared services (including executive directors) 70% of the awards were allocated and paid. For Booysendal this amounted to 78%. In the next cycle paid out in December 2015, 71% of the awards were allocated for Zondereinde, corporate office and shared services and 51% for Booysendal. The awarding of shares is determined by means of a share option formula, approved by the SE&HR committee, which was provided to Northam by external experts after a review of industry share schemes in 2011. The formula takes into account factors such as the share price on award or grant date and the vesting period of the shares to be awarded. Both retention shares (without performance conditions) and performance shares (with performance conditions) are awarded. However retention shares are limited to a maximum of 25% of the total number of awarded shares for all grades of staff including executive directors. Usually the awarded shares are not the number of shares that eventually vest, but the allocated shares (that is, the awarded shares after measurement against the performance conditions, three years later) are the number that vest and are paid out. The FY2016 three-year award performance targets/factors set in November 2015 are as follows: • an improvement of 10% over the previous financial year’s safety record, with a weighting of 25%; • estimated recoverable metals meeting production volumes, weighted at 25%; • unit cash costs – achieving the budgeted unit costs for the current year or less with a weighting of 20%; • a rate of return measure (each with a weighting of 15%): • absolute total shareholder return (group) in excess of 14.7% (weighted average cost of capital) +1.3%; and • relative total shareholder return (group) – Northam share price performance exceeding the platinum index return on the JSE All with the sum of the weightings totaling 100%. An achievement of less than 90% of target results in no shares being allocated at all. Every year the committee, with the assistance of management, assesses the allocation of both retention and conditional performance shares per employee. Full details of the shares granted to the executive directors during the year are set out in the 2016 annual integrated report.

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ANNEXURE 3

R EMUNERATION REPORT OF THE SE&HR COMMITTEE CONTINUED

The salient features of the PLIM (including its two parts, the BIP and the CIBB) and the proposed amendments to the SIP are provided in Annexure 5 which forms part of this document.

EMPLOYEE PARTICIPATION SCHEMES Toro Employee Empowerment Trust The group operates an employee profit share scheme for eligible employees at the Zondereinde mine in terms of which 4% of the Zondereinde after-tax profits are contributed to a registered trust fund (The Toro Employee Empowerment Fund). Eligible employees receive payment at the end of each five-year cycle, with the first payments having been made in FY2013.

BEE shareholding in Northam Employees and communities are participants in the BEE transaction approved in FY2015 in terms of which communities hold 5% of Northam shares and eligible group employees (excluding management) own 3% of Northam (this is in addition to the 4% share of Zondereinde after tax profits through the Toro Trust).

Ms TE Kgosi Chairperson 23 September 2016

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ANNEXURE 4

SHARE OPTION SCHEME AND SHARE INCENTIVE PLAN

NORTHAM SHARE OPTION SCHEME (THE SCHEME) The scheme was established on 4 January 1995 with the objective of attracting and retaining employees with appropriate levels of ability and expertise who make a significant contribution to the operations of the company. The scheme was discontinued in 2011 owing to its dilutionary nature, although share options issued before its discontinuance will be allowed to run their course until 2017. Options were offered at the volume weighted average price at which Northam shares traded on the JSE on the trading day immediately preceding the offer date. Options not exercised within seven years of the offer date shall lapse. In March 2013 the JSE approved a change to the rules of the scheme in terms of which option holders may elect, at the time of exercising their option, to receive either the shares over which an option has been granted or a cash payment equivalent to the difference between the volume weighted average price at which Northam shares traded on the day preceding the exercise date and the exercise price. A summary of the options held at 30 June 2016 is as follows: Price per share (R)

Total number of options

27 November 2010 and 26 November 2015

32.38

70 000

5 November 2011 and 4 November 2016

36.95

380 000

1 July 2012 and 30 June 2017

45.59

125 000

12 October 2012 and 11 October 2017

46.57

2 050 000

Claw back rights options

40.00

Earliest and latest exercise date

Number of options held at 30 June 2015

102 916 2 727 916

Number of options forfeited during the year

(337 740)

Number of options exercised during the year – cash settled options

(249 409)

Number of options held at 30 June 2016

2 140 767

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ANNEXURE 4

SHARE OPTION SCHEME AND SHARE INCENTIVE PLAN CONTINUED

At 30 June 2016 the outstanding options were exercisable as follows:

Price per share (R)

Total number of options

Options vested at 30 June 2016

Options vested at 30 June 2016 at claw back offer price of R40.00

5 November 2011 and 4 November 2016

36.95

275 390

265 000

10 390

12 October 2012 and 11 October 2017

46.57

1 865 377

1 795 000

70 377

2 140 767

2 060 000

80 767

Earliest and latest exercise date

Full details of the cash settled options exercised during the year are set out in the annual integrated report, and are summarised as follows: Number of options exercised including claw back shares

Exercise price R

Total gain paid to participants R’000

5 November 2009

119 508

58.52

1 380

12 October 2010

129 901

48.50

393

Grant date

249 409

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1 773

4

The SIP was approved in 2011 when shareholders approved a proposal that the scheme be discontinued and replaced by the SIP, as the scheme no longer served the primary purpose of attracting and retaining employees. The SIP is a full share-type plan which incorporates a combination of a conditional share plan (CSP) and a forfeitable share plan (FSP). The key features that are common to both the CSP and the FSP are as follows: • all senior officials and executives, including executive directors, in job grade D1 and above are eligible; • non-executive directors are not eligible to participate; • employees will not be required to pay for shares granted to them; • in the event of a change of control of the company, all awards will vest; • in the event of a variation in share capital such as a capitalisation issue, subdivision of shares, consolidation of shares, liquidation etc, employees will continue to participate in the SIP. The committee may make such adjustment to awards or take such other action to place employees in no worse a position than they were prior to the happening of the relevant event, and to ensure that the fair value of awards immediately after the event is materially the same as the fair value thereof immediately before the event; • the issue of shares as consideration for an acquisition or a vendor consideration placing will not be regarded as a circumstance that requires any adjustment to awards; • where necessary, the auditors of the company will confirm to the company and JSE that the adjustments are calculated on a non-prejudicial basis; • any adjustments made will be reported in the company’s annual financial statements in the year during which the adjustment is made. In order to avoid any future dilution, all shares will either be cash settled or equity settled through purchases in the open market.

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ANNEXURE 4

SHARE OPTION SCHEME AND SHARE INCENTIVE PLAN CONTINUED

Key features of the CSP and FSP are as follows:

CSP • shares will be awarded to employees once a year; • the number of conditional shares awarded, and the extent to which they will be subject to performance conditions, will primarily be based on the employee’s annual salary, grade, performance, retention requirements and market benchmarks or some combination thereof; • both the retention shares and the performance shares will vest after three years; and • performance conditions will be set by the SE&HR committee before an award is made, and will be based on appropriate company performance measures at the time.

FSP • shares, which have no performance conditions attached, can only be awarded or granted in exceptional circumstances, approved by the SE&HR committee, for purposes of attracting key new employees; • the number of forfeitable shares to be made to an employee will primarily be based on the employee’s annual salary, grade, performance and retention or attraction requirements; • the forfeitable shares will be delivered to the employees, free of charge, subsequent to the award date, with them enjoying all shareholder rights from inception; • awards will, however, be subject to restrictions that will prevent the forfeitable shares from being disposed of, ceded, transferred or otherwise encumbered before vesting; and • vesting of the forfeitable shares will only be subject to the particular employee remaining in the employ of a group company for predetermined vesting period. No company performance conditions will apply. No forfeitable shares have been awarded since the inception of the SIP. Further details on changes to the SIP rules refer to Annexure 5 which forms part of this document. The SE&HR committee, which is charged with overseeing the group’s remuneration policy, reviews the performance criteria annually and revises them as economic and operational circumstances dictate.

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4

No shares were allocated under the FSP during the year under review, whilst the details of the shares allocated under the CSP are set out below.

Grant date

Details

Total number of shares

Retention shares

Performance shares

5 690 000

1 345 200

4 344 800

Balance at 30 June 2015 11 November 2015

Shares awarded

3 527 900

890 300

2 637 600

Shares forfeited

(587 200)

(178 000)

(409 200)

(2 141 300)

(645 500)

(1 495 800)

6 489 400

1 412 000

5 077 400

Total number of shares

Shares to be settled in FY2017

Shares to be settled thereafter

897 000

897 000

–

Shares cash settled Balance as at 30 June 2016

At 30 June 2016 the following awards were outstanding:

Grant date

Details

6 November 2012

Performance shares

4 November 2014

Retention shares

4 November 2014

Performance shares

11 November 2015

Retention shares

11 November 2015

Performance shares

Balance as at 30 June 2016

600 200

–

600 200

1 775 100

–

1 775 100

811 800

–

811 800

2 405 300

–

2 405 300

6 489 400

897 000

5 592 400

Full details of the shares granted during the year are set out in the annual integrated report 2016.

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ANNEXURE 5

SALIENT FEATURES OF THE PLIM

As more fully described below, Northam was requested by certain of its key institutional shareholders to consider the creation of a mechanism which would appropriately incentivise Northam’s senior management to address the financial risks associated with the guarantee provided by Northam in favour of the Zambezi Platinum preference shareholders (guarantee). Pursuant to this request, Northam proposes, subject to the approval of its shareholders, the implementation of a new proposed lock-in and incentive mechanism (PLIM) which is specifically structured to incentivise the mitigation of those risks introduced by and unique to the guarantee, as well as, retaining key members of Northam’s senior management as employees until the redemption of the Zambezi Platinum preference shares (preference shares) in May 2025. Accordingly, at the forthcoming AGM, Northam shareholders will be asked to consider and approve certain amendments to the rules (rules) of the company’s existing share incentive plan (SIP). The SIP was last approved by shareholders at the 2014 AGM. These amendments consider the incorporation of (the PLIM) into the rules, as well as certain general amendments that have been proposed in order to facilitate the efficient administration of the SIP (general amendments). Amendments to the rules proposed pursuant to the PLIM are unrelated to the general amendments.

PROPOSED LOCK-IN AND INCENTIVE MECHANISM 1.

BACKGROUND TO THE PLIM

During the course of FY2015 the company concluded a black economic empowerment (BEE) transaction (BEE transaction) in terms of which Northam provided the guarantee to the holders of the preference shares issued by Zambezi Platinum for purposes of funding the BEE transaction. The preference shares will, subject to early redemption in certain instances, be redeemed on 18 May 2025 and Zambezi Platinum will therefore be required to redeem the preference shares and settle any dividends accumulated in respect of the preference shares that remain unpaid after making adequate provision for or paying any taxes arising in relation to the redemption of the preference shares (redemption amount). Subject to certain exceptions, Zambezi Platinum may settle the redemption amount by distributing, disposing of and/or raising external funding encumbering the Northam ordinary shares (shares) held by it. Zambezi Platinum’s ability to settle the redemption amount is therefore highly dependent upon the share price on or about the preference share redemption date (redemption date) and, therefore, the share (share) price growth over the period preceding the redemption date. To the extent that the value of the shares held by Zambezi Platinum amounts to less than the redemption amount and Zambezi Platinum is unable to raise external funding to settle the redemption amount, Northam will be required to settle the balance of the redemption amount on

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behalf of Zambezi Platinum by either: (i) capitalising Zambezi Platinum by way of a subscription for shares in Zambezi Platinum; or (ii) making payment and/or issuing new shares to the preference shareholders (guarantee liability). The guarantee liability may be settled in cash or, subject to certain exceptions, by the issue of new shares. Accordingly, if a guarantee liability arises, the value of shares may be diluted by a further issue of new shares or reduced by the related payment of cash to settle the guarantee liability. The SIP currently incentivises Northam’s management over the short to medium term (three years) and is primarily focused on motivating the achievement by management of various technical and financial targets. Although these measures are appropriate and essential to the viability of the group, the SIP does not allow for performance measures relating to the guarantee liability. This requires a longterm incentive mechanism premised on the exact variables which will determine the guarantee liability. It is further recognised that Northam’s market position relative to its peers has altered significantly with Northam having become a sizable and respected market participant. This success increases the risk of Northam losing members of its senior management, making it a strategic imperative for the company to retain management and prevent the loss of critical skills before the redemption date. In the circumstances, Northam and the relevant committees of its board of directors (board) have resolved to amend the rules to incorporate the PLIM, with a view to appropriately incentivising the management team in order to prevent the guarantee liability from materialising and simultaneously lock-in their skill-set until the redemption date. This objective is consistent with the interests of Northam’s shareholders. The PLIM comprises two separate mechanisms structured with specific reference to the terms of the BEE transaction and, more specifically, the potential guarantee liability:

1. Long-term BEE transaction incentive plan (BIP) The BIP addresses the long term incentivisation and retention of its participants by aligning their interests with shareholders through equity participation. The BIP is to be implemented through the SIP which will be amended to incorporate the specific elements of the BIP. The BIP will be implemented in addition to the SIP and will not replace or affect the SIP.

2. Short-term cash incentive bonus in respect of the BEE transaction (CIBB) In light of the exceptionally long term of the BIP incentive (i.e. 10 years) and the benefit of compounded growth in the share price over this period, the CIBB considers the short term incentivisation of management to continuously maintain the long term objectives introduced by the BIP. Importantly, the CIBB also acts as a strong retention tool by financially penalising CIBB recipients that leave the employ of the group.

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ANNEXURE 5

SALIENT FEATURES OF THE PLIM CONTINUED

The combination of the BIP and CIBB provide the company with an effective mechanism for addressing the guarantee liability risk, motivating shareholder value creation over the long term and retaining essential skills in a competitive market. Implementation of the BIP requires ordinary resolution number 6 to be approved by Northam’s shareholders. The CIBB is not required to be approved by Northam’s shareholders. In the event however that the amendments to the SIP rules, to implement the BIP, are not approved, Northam may reconsider the PLIM in its entirety, including the CIBB.

2. DETAILS OF THE BIP TO BE INCORPORATED INTO THE SIP 2.1 Terms and conditions The BIP will be effected through the SIP and therefore certain amendments are required to be made to the rules. Subject to certain exceptions, shares to be awarded in terms of the BIP (BEE CPS) will be subject to the same terms and conditions as the “conditional shares” under the current rules.

2.2 Participants The company will limit participants in the BIP to the key members of Northam’s current and future key executive management team including, the chief executive officer (CEO), chief financial officer (CFO), chief commercial officer (CCO), chief geologist (CG), chief technical officer (CTO), executive officer HR (EHR) and the senior general managers of Booysendal and Zondereinde mines (GM) (participants). The positions of the CG and CTO have not been filled and remain subject to the employment of suitable candidates by the group and the BEE CPS allocated to these positions will not be issued in the event that they are not filled.

2.3 Number of shares to be allocated In terms of the BIP an aggregate of 5 million shares will be conditionally awarded to the participants through the creation and award of 5 million BEE CPS under the SIP. The CEO will receive 1 500 000 BEE CPS, the CFO will receive 700 000 BEE CPS, each of the CCO, CG, CTO and EHR will receive 500 000 BEE CPS and each GM will receive 200 000 BEE CPS. The quantum of the BEE CPS awards are provisional and may be reduced, but not increased, at the time that the award is made. The aggregate number of BEE CPS to be issued represents less than 1% of Northam’s current issued share capital and may be settled in cash or shares at the election of the independent committee of the board responsible for administering the SIP at that time (committee).

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2.4 Vesting Vesting will be subject to the satisfaction of the performance condition that Zambezi Platinum: • fully settles the redemption amount; and • fully settles or makes adequate provision for all its tax liabilities arising from settlement of the redemption amount, on the basis that no guarantee liability will arise and no member of the group will be required to give any direct or indirect financial assistance for the purposes of or in connection with the settlement of the redemption amount (BIP performance condition). Vesting of BEE CPS will occur 30 business days after the date on which the BIP performance condition is fulfilled (which is expected to be 18 May 2025) or, in the event that vesting of the BEE CPS is accelerated in certain exceptional instances, as set out in the current rules in relation to conditional shares, including a change of control of Northam (see below), an earlier date determined in accordance with the rules (vesting date). In the event that the BIP performance condition is not satisfied, the BEE CPS will, subject to certain exceptions, not vest. If BEE CPS do not vest, they will not be settled and no value will accrue to participants. Upon vesting, BEE CPS may be settled either through the issue of no more than the 5 million new shares or in cash at the election of the committee. If cash settlement is elected the settlement amount will be established using the 60 day volume weighted average price (VWAP) of a share calculated on the day preceding settlement. To allow for equity settlement, the number of new shares allowed to be issued pursuant to the SIP has been increased by 5 million. In the event that the preference shares are redeemed before the expected redemption date (i.e. 18 May 2025) and if the BIP performance condition is satisfied at that time, the BEE CPS will vest pro rata to the number of years of the performance period that has been completed at that time. Those BEE CPS that do not vest in such circumstances will lapse. In the event that Northam undergoes a change of control, all the BEE CPS that have not vested will be treated in the same manner as other conditional shares and vest in full at that time irrespective of whether the BIP performance condition has been met or not. This is consistent with the existing rules.

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ANNEXURE 5

SALIENT FEATURES OF THE PLIM CONTINUED

2.5 Termination of employment In order to retain key management, BEE CPS will lapse if a participant leaves the employ of the group before the vesting date unless their employment is terminated by reason of a no fault termination or early retirement. No fault termination includes, inter alia, termination of employment by reason of a participant’s death, retrenchment, retirement, ill health, injury, disability or any reason that is not a fault termination. A fault termination comprises termination of employment by reason of, inter alia, resignation or dismissal. In the event that a participant leaves the employ of the group by reason of no fault termination or early retirement before the vesting date, and such date is: • prior to 18 May 2020, then the BEE CPS which have not vested will lapse immediately; or • after 18 May 2020, the participant will retain a proportionate amount of their BEE CPS which have not vested, calculated by reference to what proportion of the period from 18 May 2020 to 18 May 2025 has elapsed prior to the termination of employment. This provision is further illustrated in the table below: Termination of employment between years:

Percentage of BEE CPS retained

0 –  6

 0

6 –  7

20

7 –  8

40

8 –  9

60

9  – 10

80

BEE CPS retained in these instances will remain subject to the BIP performance condition and will only vest and be settled on the vesting date, together with BEE CPS held by other participants. In the event that a participant’s employment is terminated as a result of death, injury or ill-health, and the committee is of the reasonable opinion that the BIP performance condition is likely to be fulfilled, it may, in exceptional circumstances, allow that participant’s BEE CPS to vest and be settled immediately. The rationale for retention by a participant of a portion of their BEE CPS after year 6 is that the key strategic decisions and actions affecting the value of a share over the BIP performance period are likely to be made during the first 5 years of this period. Thereafter, value delivery will depend upon, amongst other factors, the successful execution of such decisions as planned. Accordingly, it is

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5

deemed appropriate to allow for continued participation post year 5 notwithstanding termination of employment. In the event that a participant leaves the employ of the group before the vesting date by reason of fault termination, that participant’s BEE CPS that have not vested will lapse.

3. DETAILS OF THE CIBB The CIBB is intended to comprise an incentive mechanism and a retention mechanism and further aligns management with the interests of Northam’s shareholders. Participants in the CIBB will include the participants (as defined in paragraph 2.2 above) and may include, from time to time, other employees of the group deemed to be critical to the group’s operations and strategy. Participants in the CIBB, other than participants, will be required to be recommended for participation by management subject to approval by the committee. Payments under the CIBB will be made annually, subject to the fulfilment of the CIBB performance conditions, as set out below, as at the 31st trading day following the publication of the company’s financial results for each financial year (condition date). Participants will receive, on an annual basis, 15% of their cost to company remuneration excluding performance bonuses, if the value of a share at the condition date (calculated as the 60 day VWAP of a share) is equal to or greater than the redemption amount per preference share. Furthermore, participants will receive, on an annual basis, an additional 15% of their cost to company remuneration excluding performance bonuses, if the aggregate value of the shares held by Zambezi Platinum at the condition date (using the 60 day VWAP of a share) is sufficient to, in addition to fully settle the redemption amount, fully settle or make adequate provision for all of Zambezi Platinum’s tax liabilities arising from settlement of the redemption amount, on the basis that no guarantee liability will arise and no member of the group will be required to give any direct or indirect financial assistance for the purposes of or in connection with the settlement of the redemption amount. This will effectively incentivise achievement of the CIBB performance conditions on an annual basis. For the avoidance of doubt, no CIBB payment will be made unless the CIBB performance conditions are achieved in that year. The CIBB will also act as a robust employee retention mechanism. In the event that a CIBB recipient leaves the employ of the group within 12 months of receiving a CIBB (restraint period) for reason of a fault termination, that person will be required to repay to the company, before the deduction

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ANNEXURE 5

SALIENT FEATURES OF THE PLIM CONTINUED

of PAYE, the pro rata amount of the CIBB received (calculated according to the number of months remaining in the restraint period) (CIBB refund). The CIBB refund penalty will dissuade CIBB participants from leaving the employ of the group by financially penalising them if they leave. The CIBB will be terminated upon settlement or lapse of the BEE CPS.

ADDITIONAL AMENDMENTS TO THE SIP In addition to those amendments to the rules required for purposes of implementing the BIP, certain amendments to the SIP are proposed. These additional amendments serve to clarify certain rules and will facilitate management and implementation of the SIP on a continued basis. These amendments are summarised below: a)

The SIP currently allows participants to elect how their awards are settled (i.e. in cash or in shares). The amendments will instead allow the committee to elect to settle all new SIP awards of conditional shares in cash or with shares and forfeitable share awards will only be settled through the issue of shares, as was the original intention of the SIP. This allows the committee to more effectively manage cash commitments and shareholder dilution arising pursuant to the settlement of awards under the SIP on the group’s behalf. The election to cash settle awards of forfeitable shares has been removed in its entirety in order to ensure that a participant’s interests remain aligned with those of shareholders.

b)

The SIP currently provides for a settlement amount established using the volume weighted average price (VWAP) of a share calculated on the day preceding settlement. The rules have been amended to provide for a settlement amount established using the 30 day VWAP of a share calculated on the day preceding settlement.

c)

The rules of the SIP relating to the issue, acceptance and settlement of awards during prohibited periods have been amended to allow for deferred issue, acceptance and settlement of awards as a result of a prohibited period preventing these actions. Furthermore, if settlement of an award is deferred, the value to be used when settlement actually occurs will be the same values that would have been used if settlement had not been deferred and rather taken place on the last date allowed under the rules (i.e. the 30th day following vesting).

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d)

The ‘good leaver’ and ‘bad leaver’ definitions and related rules have been replaced with the ‘no fault termination’ and ‘fault termination’ definitions. These do not materially differ from the previous rules.

e)

Currently, if a participant retired before the age of 60, a portion of their awards would lapse. This resulted in employees that were required (for financial reasons related to the rules governing their retirement funds) to retire early, potentially being penalised despite only retiring a few days or weeks before their retirement date. Although arguably the current rules cater for these exceptional circumstances, the relevant provisions are ambiguous. The rules have therefore been amended to clearly provide that, in the event a participant retires within one year of their prescribed retirement date, the committee may resolve to deem this to be retirement as opposed to early retirement. This amendment more clearly allows for the penalties attached to early retirement to be avoided in instances where they would unfairly prejudice a participant.

f)

The rules will be amended to allow the committee to delay the making, of an award and/or settlement or vesting of conditional shares or forfeitable shares as a result of labour unrest, strikes or similar events affecting the group.

In the event that the resolution regarding the amendments to the rules is not passed, the SIP shall continue to operate in its current form save for the introduction of those of the amendments unrelated to the BIP that do not require shareholder approval. A copy of the rules incorporating all the amendments thereto is available at the company’s registered office.

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ANNEXURE 6

S TATED CAPITAL, SHAREHOLDING AND DIRECTORS’ INTEREST

STATED CAPITAL During the current financial year there were no changes to the stated capital of the company. The authorised stated capital of the company as at 30 June 2016 amounted to 2 000 000 000 shares (2015: 2 000 000 000 shares) at no par value. The issued share capital of the company remained unchanged at 509 781 212 shares. In terms of the Northam BEE transaction 112 195 122 shares (equivalent to 22% of Northam’s issued share capital) were allotted and issued to Zambezi Platinum. These shares were supplemented by 47 710 331 shares (equivalent to 9.4% of Northam’s issued share capital) sold to Zambezi by the Public Investment Corporation SOC Limited (PIC), a long-standing Northam shareholder. These shares are treated as treasury shares for accounting purposes. No shares were allotted and issued to participants of the Northam share option scheme or the Northam share incentive plan during the current year (2015: no shares).

REPURCHASE OF ISSUED SHARES At the annual general meeting (AGM) held on 11 November 2015 shareholders approved a special resolution granting a general authority for the repurchase of ordinary shares by the company (or any one of its wholly owned subsidiaries), subject to the JSE listings requirements and the provisions of the Companies Act. No shares were repurchased in the current or prior year. This general authority is valid until the company’s next AGM or for 15 months from the date of the aforementioned resolution (being 11 February 2017) whichever period is the shorter. Approval to renew this general authority will be sought at the AGM to be held on Wednesday, 9 November 2016. The text of the necessary special resolution, as well as the reasons therefor and the effects thereof, appear in the notice of AGM which forms part of this document.

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6

DIRECTORS’ INTERESTS According to information available to the company after reasonable enquiry, the interests of the directors and their families in the shares of the company at 30 June 2016 were as follows: Direct beneficial holding

Indirect beneficial holding

Total 2016

Total 2015

ME Beckett*

–

–

–

30 000

CK Chabedi**

–

204 000

204 000

204 000

TE Kgosi**

–

635 000

635 000

635 000

7 500

–

7 500

– –

AZ Khumalo*** KB Mosehla

–

64 000

64 000

KB Mosehla**

–

5 116 974

5 116 974

–

PL Zim**

–

17 547 097

17 547 097

17 547 097

7 500

23 567 071

23 574 571

18 416 097

*** Mr ME Beckett retired as a director on 11 November 2015. *** Pursuant to the Northam BEE transaction, Ms Kgosi, Messrs Chabedi, Mosehla and Zim acquired beneficial interests in the ordinary share capital of Zambezi Platinum. This resulted in them and their associates acquiring effective interests in Northam shares. *** As at 30 June 2016, Mr Khumalo also owned 500 Zambezi Platinum preference shares. The SENS announcements for directors’ dealings in securities are available on the Northam website at www.northam.co.za. There have been no changes in these holdings from 30 June 2016 to the date of this report.

Analysis of shareholders at 30 June 2016 Shareholding range

Number of shareholders

Total of shareholding

Percentage holding (%)

1 – 5 000

4 542

3 548 249

0.70

5 001 – 10 100

222

1 654 921

0.32

10 001 – 50 000

338

8 182 853

1.61

50 001 – 100 000

132

9 335 494

1.83

100 001 – 1 000 000

224

66 746 393

13.09

68

420 313 302

82.45

5 526

509 781 212

100.00

1 00 001 and more

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AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 6

S TATED CAPITAL, SHAREHOLDING AND DIRECTORS’ INTEREST CONTINUED

Geographical analysis of shareholders Australasia Europe and United Kingdom North America Far East South Africa Rest of Africa

Total shareholding

Percentage holding (%)

147 906

0.03

9 219 206

1.81

28 352 569

5.56

129 056

0.03

458 435 325

89.93

1 363 486

0.27

12 133 664

2.37

509 781 212

100.0

Number of shares

Percentage holding (%)

159 905 453

31.37

Coronation Asset Management

151 283 082

29.68

Public Investment Corporation

36 943 174

7.25

Sanlam Investment Management

29 874 306

5.86

Foord Asset Management

27 168 473

5.33

Clients of Allan Gray

25 542 896

5.01

Shareholders spread at 30 June 2016

Number of shareholders

Percentage holding (%)

Other

Major shareholders at 30 June 2016 Owner Zambezi Platinum (RF) Limited Fund manager

Public

5 520

68.54

Zambezi Platinum (RF) Limited

1

31.37

Directors

5

0.09 100.0

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BLACK ECONOMIC EMPOWERMENT (BEE) TRANSACTION Northam is a fully empowered PGM producer. Historically disadvantaged South African (HDSA) ownership levels in the company are pegged at 31.4% following the conclusion of the R6.6 billion BEE transaction, which included the successful raising of R4.6 billion in cash. The transaction was announced in October 2014 and approved by Northam shareholders in March 2015. In May 2015 Northam issued 112 195 122 new shares (equivalent to 22% of Northam’s issued share capital) to a special purpose BEE vehicle Zambezi Platinum. These shares were supplemented by 47 710 331 shares (equivalent to 9.4% of Northam’s issued share capital) sold to Zambezi by the PIC, a long-standing Northam shareholder. Zambezi Platinum comprises a range of HDSA shareholders, including an employee trust, two community trusts, a women’s group and a core of strategic partners, with a 10-year lock-in period from May 2015. The Northam shares held by Zambezi represent a 31.4% HDSA holding in Northam’s issued share capital, in excess of the 26% required by the Mining Charter. Zambezi Platinum financed the acquisition of shares in Northam through a preference share arrangement. Apart from this function, Zambezi Platinum will not conduct any operational business. Zambezi’s preference shares are listed on the JSE Limited.

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AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 7

F INANCIAL ASSISTANCE

At the forthcoming AGM, shareholders will be asked to approve a special resolution to authorise the granting of the necessary financial assistance as set out below. The text of the special resolution is contained in the notice of AGM which forms part of this report. Section 45 of the Companies Act requires that shareholders approve the granting of financial assistance by a company to, inter alia, any of its subsidiaries. At the date of this report, Northam had granted the following financial assistance to its subsidiaries in accordance with the Companies Act:

Approved facility at 30 June 2016

Additional amount to be Balance at advance in the 30 June 2016 coming year

New loan facility to be granted

R’000

R’000

R’000

R’000

Booysendal Platinum Proprietary Limited

4 970 000

2 262 163

(1 500 000)

3 470 000

Booysendal Platinum Proprietary Limited loan advanced by Khumama Platinum Proprietary Limited

3 400 000

2 355 843

–

3 400 000

Norplats Properties Proprietary Limited – fixed term loan

34 300

24 456

–

34 300

Norplats Properties Proprietary Limited – general loan

44 000

37 724

10 000

54 000

Windfall 38 Properties Proprietary Limited

15 800

14 590

–

15 800

Mvelaphanda Resources Proprietary Limited*

42 000

1 047

–

42 000

Mining Technical Services Proprietary Limited

20 000

15 002

–

20 000

1

1

–

1

8 526 101

4 710 826

Khumama Platinum Proprietary Limited Total loan facilities

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(1 490 000)

7 036 101

7

Below are the various guarantees summarised as follows together with the additional guarantees which will be tabled at the forthcoming AGM: Additional amount to be Current guaranteed in guarantee the coming year R’000

Total guarantee to be granted

R’000

R’000

Zambezi Platinum (RF) Limited

7 535 944

–

7 535 944

Booysendal Platinum Proprietary Limited

3 000 000

500 000

3 500 000

Khumama Platinum Proprietary Limited

3 000 000

500 000

3 500 000

41 680

15 000

56 680

13 577 624

1 015 000

14 592 624

Mvelaphanda Resources Proprietary Limited Total guarantee

ZAMBEZI PLATINUM (RF) LIMITED The redemption of the BEE preference shares issued by Zambezi Platinum has been secured by Northam in terms of a financial guarantee, in terms of which Northam will be responsible for the payment of all amounts which Zambezi Platinum has contracted but failed to pay in terms of the BEE preference share terms. Should a liability arise under the Northam guarantee, Northam may settle this liability by capitalising Zambezi Platinum with cash and/or Northam shares before the redemption amount becomes due or making payment directly to the preference shareholders. The manner of settlement is however not contractually specified. Included in the financial statements of Northam is a guarantee of R7.5 billion which will stay unchanged during FY2017.

BOOYSENDAL PLATINUM PROPRIETARY LIMITED Northam currently has finance facilities available in the form of a revolving credit facility of R1.0 billion with Nedbank Limited, and has issued R425.0 million on the debt capital market (DMTN). Booysendal Platinum as well as the intermediate holding company, Khumama Platinum has signed a letter of guarantee with regards to both these facilities. Management has started renegotiating the Nedbank revolving credit facility and has signed an indicative term sheet which will increase the facility to R1.5 billion over a five year period. There is currently also an interest free loan between Northam and Booysendal Platinum which is settled as and when cash is available. The intercompany loan is planned for settlement in full by FY2020.

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ANNEXURE 7

F INANCIAL ASSISTANCE CONTINUED

KHUMAMA PLATINUM PROPRIETARY LIMITED With the acquisition of the Booysendal mineral rights, the statutory entity Booysendal Platinum together with its holding company Khumama Platinum was also acquired. A loan was issued to Booysendal Platinum by Khumama Platinum amounting to R2.4 billion. This loan is interest free and has no fixed terms of repayment and has remained unchanged for several years. In addition to the above Khumama Platinum is also a party to the guarantees that have been issued in terms of the Nedbank Limited revolving credit facility as well as the DMTN facility.

NORPLATS PROPERTIES PROPRIETARY LIMITED – FIXED TERM LOAN In terms of the agreement with the Nederlands Financierings Maatschappij voor Ontwikkelingslanden NV (FMO), Northam is required to fund 30% of house sales values and debt consolidation amounts, and as such this fixed-term intercompany loan may not be repaid until such time as the loan from the FMO has been repaid in full. A fixed term loan facility of R34.3 million, repayable in September 2026 was granted by Northam to Norplats Properties, with an interest rate of 2.0% below prime. It is proposed that the Norplats Properties facility be renewed to ensure compliance with the terms of agreement with FMO.

NORPLATS PROPERTIES PROPRIETARY LIMITED – GENERAL LOAN Norplats Properties is Zondereinde mine’s employee home ownership project (Mojuteng project) in the town of Northam. In order for Northam to comply with their homeowner strategy, it is proposed that this facility be increased by R10.0 million to R54.0 million.

WINDFALL 38 PROPERTIES PROPRIETARY LIMITED Windfall 38 Properties was acquired by Northam during the 2010 financial year and purchased certain freehold property, at a cost of R12.9 million relating to the Booysendal mine, with the consideration being funded by a loan from Northam. During the 2012 financial year further freehold was purchased at an additional cost of R2.1 million. The balance of the loan from Northam therefore amounts to R14.8 million, with no further acquisitions anticipated. The company entered into a fixed-term loan agreement with Northam, with an interest rate of 2.0% below prime, and also entered into a long-term lease agreement with Booysendal Platinum over the agricultural land. All amounts received in terms of the long term lease agreement is used as repayments on the outstanding loan balance.

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MVELAPHANDA RESOURCES PROPRIETARY LIMITED On 25 September 2014 Northam provided a guarantee to ensure that Mvelaphanda Resources would meet its financial obligations as and when they fall due as the company’s liabilities exceeded its assets. The guarantee will remain in full force and effect as long as the liabilities (including contingent liabilities) exceed its assets, fairly valued, and will lapse forthwith upon the date that the assets, so valued, exceed its liabilities.

MINING TECHNICAL SERVICES PROPRIETARY LIMITED The facility of R20.0 million is proposed to remain in force. During the current year Mining Technical Services acquired a 20% investment in SSG Holdings Proprietary Limited (SSG Holdings) to facilitate the company’s growth projects. The loan is interest free and has no fixed terms of repayment. It is also important to note that Northam has issued a letter of support (non-binding) stating that Northam will not demand repayment of the intercompany loan within the next 12 months and will continue to provide the company with sufficient funds for it to meet its obligations as and when they fall due.

SOLVENCY AND LIQUIDITY TEST Taking into account the 12-month cash flow forecasts (including the letter of support/guarantees issued), the board has assessed that the various statutory entities will continue as going concerns for the foreseeable future. The company therefore believes that it has satisfied the solvency and liquidity test, as contemplated in section 45 of the Companies Act and detailed in section 4 of the Act, and determined that post such assistance the company was solvent and liquid and the terms under which this assistance was provided were fair and reasonable to the company.

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AND ABRIDGED ANNUAL REPORT 2016

ANNEXURE 8

E VENTS AFTER REPORTING DATE

Subsequent to the year-end, the group renegotiated a five year R1.5 billion revolving credit facility with Nedbank Limited to replace the existing R1.0 billion facility which will mature in November 2016. The group further increased its investment in SSG Holdings by 10% and now holds a total of 30%. Apart from these events there have been no other events subsequent to the year-end which require disclosure or adjustment to the financial statements.

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NOTES

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AND ABRIDGED ANNUAL REPORT 2016

NOTES

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ADMINISTRATION AND CONTACT INFORMATION NORTHAM PLATINUM LIMITED (Registration number 1977/003282/06) JSE share code: NHM ISIN code: ZAE000030912 Debt issuer code: NHM1 Bond code: NHM002 Bond ISIN: ZAG000129024 Bond code: NHM003 Bond ISIN: ZAG000129032

REGISTERED OFFICE Building 4, 1st Floor Maxwell Office Park Magwa Crescent West Waterfall City Jukskei View 2090 South Africa PO Box 412694 Craighall 2024 South Africa Telephone +27 11 759 6000 Facsimile +27 11 325 4795

WEBSITE www.northam.co.za

COMPANY SECRETARY

TRANSFER SECRETARIES

PB Beale Building 4, 1st Floor Maxwell Office Park Magwa Crescent West Waterfall City Jukskei View 2090 South Africa

Computershare Investor Services Proprietary Limited 70 Marshall Street Johannesburg 2001 South Africa

PO Box 412694 Craighall 2024 South Africa e-mail: [email protected]

BANKERS Standard Bank of South Africa Limited 30 Baker Street Rosebank Johannesburg 2196 South Africa

PO Box 61051 Marshalltown 2107 South Africa Telephone: +27 11 370 5000 Facsimile:  +27 11 688 5238 E-mail: [email protected]

SPONSOR AND DEBT SPONSOR One Capital 17 Fricker Road Illovo 2196 Johannesburg South Africa

PO Box 61029 Marshalltown 2107 South Africa

PO Box 784573 Sandton 2146 South Africa

AUDITORS

INVESTOR RELATIONS

Ernst & Young Inc 102 Rivonia Road Sandton 2146 Johannesburg South Africa

Russell & Associates PO Box 1457 Parklands 2121 Johannesburg South Africa

Private Bag X14 Sandton 2146 South Africa

Telephone: +27 11 880 3924 e-mail: [email protected]

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www.northam.co.za