2009 performance

Health and safety performance

TRIR - AECI employess

Safety and occupational health performance is expressed as the Total Recordable Incident Rate (TRIR).

It is gratifying to report that in 2009 AECI achieved its lowest level of employee injuries and illnesses in recent years. The rate of 0,78 is a 7% reduction from the level recorded in the prior reporting period. Notably, almost across the whole Group, contractor incident rates are at significantly lower levels than in recent years.

Regrettably, a contractor fatality occurred during the year when demolition work was underway at Heartland's Potchefstroom site. The fatality was the result of a worker being struck on the back of the neck by a piece of steel plate.

AECI benchmarks itself against an appropriate grouping of international companies, with "zero incidents" being the ultimate target. Given the need for continual improvement, AECI's Executive Committee has adjusted the maximum tolerable level for TRIR for 2010 down to 0,95 from 1,00 in prior years.

The benchmarked TRIR graph presented below has been compiled by an independent consultant from the latest information available from the various companies' websites at the time of writing. These companies were selected on the basis of their operations being similar to those of AECI's businesses. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA's Occupational Safety and Health Administration system of reporting, which is the basis for AECI's own reporting.

Certain of the companies have modified their reporting criteria and some have restructured their business operations. It is not always possible, therefore, to compare rates meaningfully with those reported in previous years.

A noticeable trend is the increase in the number of companies which report incident rates for all workers (both employees and contractors). These include some of the better-performing companies. AECI will report on this basis from 2010.

TRIR PERFORMANCE BY AECI BUSINESS

The employee TRIR for AEL Mining Services (AEL) has returned to 2007's levels of below 0,60, the company's maximum targeted limit, although incident rates for contractors remain slightly higher. Chemical Services (Chemserve) has continued its improving trend, with the employee rate falling from 1,0 to 0,96; the contractors' rate has fallen dramatically from the very high levels of 2008. Employee and contractor incident rates for Heartland are now well within acceptable limits, a significant improvement on the prior year. Incident rates at SANS Technical Fibers (STF), in the USA, are above acceptable limits. It should be noted, however, that the nature of the incidents was not serious, in the main. This notwithstanding, interventions planned for 2010 should result in an improvement.

Benchmarked TRIR

OCCUPATIONAL ILLNESSES

Occupational illness rate - AECI emplyees

The number of occupational illnesses reported in 2009 continued to decline. An employee at SANS Fibres, in Bellville, was diagnosed with asbestosis during his exit medical examination. A case of noise-induced hearing loss was reported at STF.

• a mobile manufacturing unit belonging to AEL overturned, resulting in the spillage of 3 tons of base emulsion and 300kg of ammonium nitrate prill;
• 1 000l of oil leaked from a pipe in AEL's nitrates complex at Modderfontein into a stormwater system, and then into a dam within Modderfontein;
• nitric acid was spilled into the stormwater system while a tanker was being loaded at AEL's nitrates complex;
• 2,5 tons of ImproChem's chemical products were spilled on a national highway, leading to the temporary closure of the road, after a container on a truck split.

In all cases, clean-up was carried out successfully.

This section deals with current operations and excludes waste arising from land remediation activities. AEL's operations outside of Modderfontein are not included. STF is included for the first time in this report. Furthermore, Group figures include the performance of SANS Fibres, Bellville, for the first three months of 2009 before manufacturing operations ceased. However, in the graphs showing performance by business, the Bellville figures are excluded as the plant is no longer in operation.

Water usage (million litres per year)
Water usage by business (%)

The Group's total water usage for 2009 decreased significantly, largely as a result of the closure of the Bellville plant. AEL's consumption fell by 16%, with most of this accounted for by lower production rates at the nitrates complex. STF's water usage accounted for less that 1% of the Group total.

Hazardous waste generated (thousand tons per year)
Hazardous waste arisings by business (%)

The volume of hazardous waste generated remained static year-on-year. With SANS Fibres at Bellville only having operated for the first quarter of the year, there was a commensurate reduction in waste generation from that site (excluding that resulting from demolition activities). However, AEL reported an increase in waste generation because emulsion waste arisings were included in the statistics for the first time. Chemserve, too, has seen a small increase in waste generation. STF's hazardous waste generation amounted to less than 1% of that generated by the Group.

The need to report greenhouse gas emissions is becoming increasingly evident globally and South Africa is no exception. In the past, AECI has provided data related to certain aspects of this, including electricity consumption and carbon dioxide (CO2) emissions.

AECI took part in the Carbon Disclosure Project in 2009, which is being promoted in South Africa by the National Business Initiative.

During the reporting year, a decision was taken to develop a carbon footprint for the Group so as to provide a more meaningful summary of AECI's impact in this area. Due to the significance of nitrous oxide emissions at AEL's nitric acid plants they are included in the footprint calculation and, furthermore, are commented on separately.

The carbon footprint has been developed with the assistance of external consultants, making use of the 2006 International Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol's Corporate Accounting and Reporting Standards, as developed by the World Resources Institute and the World Business Council for Sustainable Development.

The term carbon footprint is commonly used to describe the total amount of CO2 and other greenhouse gas emissions for which an organisation is responsible. The footprint developed for AECI currently includes Scope 1 emissions (direct emissions from, for example, the consumption of fuels in stationary equipment) and Scope 2 emissions (indirect emissions, which arise from the generation of the electricity consumed by the Group). Data for Scope 3 emissions (indirect emissions related to product delivery and employee business travel) are not available at present.

The organisational boundaries for which this footprint has been determined are as follows:

• AEL's Modderfontein operations, together with the footprint associated with rock-on-floor contracts;
• all Chemserve operations;
• all Heartland operations;
• STF's operations.

AECI's carbon footprint, measured in tons of CO2 equivalent, is shown in the table below:

Emissions other than CO2 can also have a significant impact in terms of global warming potential.

Ammonium nitrate is used extensively in the explosives and fertilizer industries and is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein, the No. 9 and No. 11 plants. Nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the ammonia burners of AEL's nitric acid plants.

Most of the gas generated is in the form of nitric oxide, which is absorbed by water to form nitric acid. Some of the gas produced is in the form of nitrous oxide, which is typically released into the atmosphere as it does not have any economic value or toxicity at typical emission levels. However, it is a greenhouse gas with a global warming potential approximately 300 times per unit mass that of CO2.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reduce their emissions of greenhouse gases, or to engage in emissions trading were they to maintain or increase emissions of these gases.

Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (CDM) projects, which allow participants in developing countries to generate Certified Emissions Reductions (CERs) by lowering their emissions of greenhouse gases. CERs can then be sold to those entities that are under an obligation to reduce greenhouse gases but are unable to achieve the required reductions.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change. These are for the No. 9 and No. 11 nitric acid plants, and they were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants, below the primary gauze catalyst.

This secondary catalyst decomposes the residual nitrous oxide without affecting the production of nitric acid.

During 2009, the secondary catalyst on No. 9 nitric acid plant achieved a reduction of 50,3% in nitrous oxide emissions, with a total of 163 tons emitted; that on No. 11 plant achieved a 70% reduction, with a total of 270 tons emitted. When converted to CO2 equivalent, this amounts to 50 500 tons and 83 700 tons respectively

The lower efficiency achieved on the No. 9 plant is as a result of it being an older, high pressure plant. It is notoriously difficult to achieve high levels of emission abatement through the use of secondary catalysts in high pressure plants. The No. 11 plant would normally have achieved a higher level of efficiency, but a cracked catalyst basket led to significant bypassing for a six week period, before operational considerations allowed the taking off line of the plant.

To place these reductions in perspective, the reduction in CO2 equivalent emitted annually by AEL from these two plants is equivalent to the quantity of CO2 emitted by 60 000 medium-sized cars travelling an average of 25 000km per annum.

The guiding principles underlying AECI's remediation activities are to protect human health and the environment; to use good science, proven concepts, and best available techniques not entailing excessive cost; and to work with regulatory authorities and share information with interested and affected parties.

A risk-based approach guides the remediation process and human health and environmental risk assessments are undertaken at appropriate stages in individual projects. These assessments influence subsequent activities.

As explained in the operational review, the property business of AECI has been restructured. As a result, the execution of remediation activities is now managed by Heartland.

Spending on remediation and related environmental management activities in 2009 amounted to R13 million, significantly down on that of previous years. The reasons for this were two-fold. The bulk of AECI's environmental legacy remediation spend is now complete. Further, market conditions were such that little land was required to be released for sale, and thus remediation requirements were restricted since the timing of such activities is closely aligned to that of the sale of parcels of land. This low level of remediation spending is likely to continue in 2010.

At end-2009, the environmental liability for the Group was estimated at R144 million for remediation and was fully provided for.

A remediation project at the Umbogintwini Industrial Complex (UIC) was initiated in 1995 to address the contamination of land and groundwater resources due to historical activities associated with the manufacture, storage and distribution of chemicals, agrochemicals and fertilizers.

In 2009, the project's progress was recognised in the biodiversity category of the annual eThekwini Mayor's Award for Excellence. The motivation for the award focused on best practice remediation, conservation and education work to address legacy issues. In particular, the Vumbuka Reserve, a 27 hectare area in the north-west portion of the UIC was highlighted. This area was previously used for the disposal of liquid and semi-solid wastes generated from manufacturing activities at the UIC from the mid-1950s until 1998.

The Vumbuka Reserve includes:

• a series of effluent precipitation and settling dams;
• two disused, partially-lined mercury sludge dams; and
• the drums area, where drums originally containing chlorinated hydrocarbon wastes were buried.

STRATEGY

Remediation to address soil and groundwater impacts began in 1995 when the area was classified as a waste site to enable AECI to meet its legal and constitutional obligations to avoid nuisance and harm to others, to improve the environment and to comply with good governance requirements. In the process, a rehabilitation strategy for the Vumbuka Reserve evolved into the UIC's Environmental Management Plan.

The principles prioritised in formalising and implementing the strategy were:

• the protection of human health and the environment is paramount;
• commitment to the use of good science;
• the efficacy of scientific solutions must be demonstrated;
• AECI must balance its duty to shareholders with its duty to protect human health and the environment by utilising the best available techniques, not entailing excessive cost;
• a risk-based approach, founded on comprehensive risk assessments, must be followed;
• regular liaison with regulatory authorities must take place; and
• information must be shared with interested and affected parties, and they must be encouraged to participate in the problem-solving process.

The strategy has six technical elements together with community participation, the over-arching management element.

PROCESS

To prevent groundwater contamination, boreholes were sunk to abstract water from sludge in and around the settling and precipitation dams and adjacent to the site boundary with the neighbouring community. The idea was to create a hydraulic barrier to control the migration of the groundwater plume off-site. Water is treated prior to safe disposal to sea via a marine outfall. Dewatering of the sludge also served to reduce the head of pressure that was driving groundwater beyond the boundaries of the dams and the UIC. Agricultural drains were installed to capture seepage around the dams and in the neighbouring residential area of Ezimbokodweni.

Leaching is managed with standard engineering interventions such as drains, conduits and pipes and, where appropriate, surface profiling has been undertaken to promote run-off of excess precipitation and to ensure the appropriate drainage of clean stormwater.

In the drums area, additional boundary wells were installed to intercept and abstract groundwater to control its off-site migration. All arisings are captured and transferred to the UIC's effluent treatment plant prior to safe disposal to sea.

Avoiding the recharge of the dewatered dams by the infiltration of rain was always recognised as being key to the clean-up of Vumbuka. In evaluating options for capping the dams, the project developed what is arguably its most distinctive intervention. As it became apparent that vegetation was re-establishing itself unaided in the area, extensive work was undertaken to determine whether this natural process could be sustained and enhanced to benefit long-term clean-up. This led to the eventual choice of a vegetative, evapo-transpiration (ET) cover as the preferred option for the Reserve's dam area. The drums area was capped with a conventional, engineered cover.

The ET cap provides long-term, natural sustainability for remediating the dams area of Vumbuka since the microbial action associated with vegetation and its growth reduces maintenance and provides contaminant source reduction as roots grow deeper into the waste body.

RESULTS

Effluent precipitation and settling dams, after closure.

The Vumbuka Reserve today.

Investigations undertaken by independent consultants show that waste in the former effluent dams can sustain a variety of plant and animal life and that waste below the root zone is being biodegraded into less hazardous substances. Indigenous plant life is flourishing in what was considered to be an extremely unfavourable environment, and is controlling infiltration whilst simultaneously aiding general clean-up of chemical contamination.

The ET cover has been approved by the Department of Water Affairs, subject to its effectiveness being monitored as part of the project's Environmental Management Plan into the future.

To reduce contamination at source in the drums area, augmented natural attenuation was the preferred remedial option. A bio-barrier was created to contain and, eventually, reduce pollutants in the source zone to acceptable levels. To create the bio-barrier nutrients and additional micro-organisms were introduced into the subsurface via injection wells in 2008 and early in 2009. The aim was to augment natural processes at work. Initial results are tentative but encouraging, indicating a good probability that by augmenting natural processes already underway, the time spans to effect clean-up can be shortened appreciably. The success of the work will continue to be monitored closely and it is hoped that the results of analyses to be carried out in 2010 will confirm the positive trend noted.

Throughout the project, a policy of transparency has been applied. During the evolution and implementation of the rehabilitation strategy, risks associated with historical chemical-related activities at Umbogintwini and resultant levels of contamination have always been made known to relevant parties. Progress is reported annually at stakeholder forum meetings and groundwater monitoring will be an agenda item at the UIC's quarterly Licence Advisory Forum meetings.

CONSERVATION AND EDUCATION

The Vumbuka Reserve has been transformed from a series of waste disposal dams into a conservation area with over 10 000 indigenous flora and increasingly diverse wildlife. When combined with the other already well established conservation areas at the UIC, namely Umbogavango and Mamba Valley, 77 hectares or 30% of the UIC's developed land is now a green belt. Some fencing at Umbogavango has been removed, creating a link with Vumbuka and allowing the free movement of wildlife, including the Cape Clawless Otter, between the various green belt areas. Umbogavango is characterised by coastal forest, secondary grassland and a herbaceous wetland. Vervet monkeys abound and Banded and Water Mongoose, Blue Duiker, and Spotted Genet are also seen. Over 200 bird species have been identified.

An alien vegetation eradication programme that began at Umbogavango in 2005 is being expanded to cover extensive new areas. A portion of the recreation area has been upgraded, with a section being paved to allow easy wheelchair access. Adjacent areas have also been re-grassed.

Two disused explosives magazines are within Umbogavango. One is being used to provide owl houses and perches, the other to establish a bat roost.

Thanks to the sponsorship of a number of site companies, the Umbogavango Resource Centre is made available to the Wildlife and Environment Society of South Africa for its environmental outreach programme.

Umbogavango, Mamba Valley and Vumbuka are open to visitors by appointment.

Responsible Care* is the global chemical industry's voluntary initiative for continuous improvement of performance in safety, health and environmental practices. It is a public commitment to responsible management and stewardship of products and services throughout the lifecycle of products. It is also the vehicle used by the industry in its pursuit of improved performance in the areas of safety, health, the environment and product stewardship.

Responsible Care* was launched by the Canadian Chemical Producers' Association in 1984 and has now been adopted in 53 countries. The Chemical and Allied Industries' Association, chaired by an executive director of AECI, is the custodian of Responsible Care* in South Africa. The Responsible Care* Standing Committee, currently chaired by an AECI senior manager, is responsible for guiding the programme. In line with the guidelines of the International Council of Chemical Associations, the South African programme is based on eight fundamentals:

1. a formal commitment by each member company to a set of guiding principles;
2. a series of codes, guidance notes and checklists to help companies fulfil their commitment;
3. the development of indicators against which improvements in performance can be measured;
4. open communication on safety, health and environmental matters with interested parties, both inside and outside the industry;
5. opportunities for companies to share views and exchange experiences on implementing Responsible Care*;
6. consideration of how best to encourage all member companies to commit themselves to, and participate in, Responsible Care*;
7. a title and logo which clearly identify national programmes as being consistent with, and part of, the Responsible Care* concept; and
8. procedures for verifying that member companies have implemented the measurable or practical elements of Responsible Care*.

AECI, AEL and all the companies in Chemserve are signatories to Responsible Care*. In South Africa, signatories have their compliance with the management practice standards verified by third party auditors. The majority of signatory companies within the AECI Group have been audited successfully against these standards.

In the broader arena of broad-based corporate responsibility, it was most pleasing that AECI was included in the JSE Limited's Socially Responsible Investment Index for the first time in 2009.

King III, which comes into effect in 2010, calls for the sustainability aspects of a company's annual report to be independently assured. Accordingly, KPMG Inc. was appointed to conduct an assessment of the completeness and verifiability of the data underlying the SHE section of this report, to enable management to prepare adequately for this requirement.

It is intended that this assurance will be in place for the 2010 report, so that an independent assurance provider will be able to provide assurance over both the accuracy and the completeness of the report.

The AECI Group continues to face a number of challenges in the corporate citizenship arena. Nonetheless, it has been pleasing to be able to report that the improved SHE performance of 2008 continued through 2009. The Group is committed to sustaining this trajectory in 2010.

* Trademark

Gary Cundill

Group manager: technology and SHEQ
Woodmead, Sandton

30 March 2010