Rand Merchant BankMorgan Stanley: Big 5 Investor Conference

Wim de KlerkFinance Director

15-17 September 2010

2

Contents

• Our country– Today– Risks and challenges

• Our industry– Today– Risks and challenges

• Our business– Today– Risks and challenges

• Conclusion

• Addendum

Doing business in South Africa

3

South Africa in the world

• 45th most competitive economy out of 133 countries

• Stable constitutional democracy

• 3,3% average growth p/a 1994 -2009

• CPI inflation under control and mostly within target range

• South Africa economy: 3,2% real GDP growth in 4Q09 Labour participation rate of 42%

• Financial markets ranked SA highly for sophistication and protection of investors

• Strong currency - low interest rates

• 2010 Soccer World Cup (9 out of 10)

• The country is ranked 90 out of 133 for labour market efficiencySouth Africa’s key figures

Population : 49 million

GDP : $287 billion

GDP per capita : $5,600

Unemployment : 25,2% (conservative)

State grants : More than 12 million

No of taxpayers : ± 7,5 million

(5.4 individual)

Education budget : 20% of revenue

4

Risk 1 : Double dip recession

• Euro zone fiscal solvency• Global financial stability• US and China’s property bubble• SA GDP and exports strongly dependent on world economy• In 2009 exports were equivalent to 27,5% of SA GDP

5

Risk 2: Political stability

• Government– Positives

• Openness to foreign investment• Macro-economic management• Strong and independent Reserve Bank

– Negatives

• Influence on policy by the “left”• Pressure toward developmental state• Threat to press freedom• Industrial action

• Regulatory environment• Increased bureaucracy• Allocation of property rights and farm land• Continuing debate on nationalisation of mines• Unresolved matters - mineral rights application, permits and licences

"We reiterate that nationalisation is not government policy" President Zuma in parliament in a reply to debate on his state-of-the-nation address February 2010

“Political risk can simply be defined

as the risk of losing money due to

changes that occur in a country’s

government or regulatory

environment”. John Christie

6

Risk 3: Infrastructure

Constraints• Ageing road, water and electricity

infrastructure• Bottlenecks due to insufficient capital

spending• Lack of infrastructure in rural areas• Inefficient service delivery • Wastage and unauthorised use • Inadequate billing management

Opportunities• Proven success with mega projects• Government aggressively invests:

– Railway: five year R93.4bn capital investment plan

– Water: R30bn investment required by 2025

– Power: R263bn by 2020

Eskom electricity supply and demand (TWh)

Fixed investment as % of GDP 2009

0

5

10

15

20

25

30

35

40

45

1970 1980 1990 2000 2009 2015 2025

% o

f G

DP

China Japan South Africa United States

ForecastActual

255259 258

266

250

259

265

273

280

250

260

270

280

290

300

2010 2011 2012 2013 2014

280

Supply available

Energy required

Supply gap

7

Risk 3: Infrastructure - electricityScenarios based on average NERSA projected tariffs*

Scenarios compared to capacity*Electricity sales by Eskom to SA industry 2008 #

# Source: Frost and Sullivan

• Electricity prices in SA will increase

significantly• The degree to which industry in SA adapts

to higher prices will determine new

generation capacity• Greater energy efficiency is inevitable and

will contribute to the continued

competitiveness of industry

* Sources: Energy Information Administration, NERSA, IHS, CIA Factbook, Exxaro Analyses

8

Risk 4: Human capacity

• Growth too slow to tackle >20% unemployment

• Income inequality (Gini-coefficient 0,59)

• >27% South Africans live < $1,25 per day

• Unskilled and unemployed youth• Mathematics and science proficiency• Xenophobia: estimated at 4 million

illegal immigrants • Family structures: mothers at school

and child headed households• Fraud and corruption• Transformation and equality• One out of 5 people will successfully

be absorbed into the formal sector - Bruggemans

Sustainable, balanced and labour absorbing economic growth is key to reducing unemployment and poverty - creation of meaningful employment

Unemployment rate per age group (%)

Source: UCT 2009

Mathematics National Benchmark Test levels SA February 2009

Seifsa Chairman report 2008

Basic 20%

Intermediate73%

Proficient7%

0

20

40

60

80

No education Grade 1-8 Grade 9-11 Grade 12 Dipl/cert Degree

18-24 25-34

9

Risk 5: Reliance on the state

• Legacy of inadequate black education• Low participation in the labour force

contributes to low productivity and sustained high poverty levels

• People receiving social support grants increased from 2,4million to 13million since 1997

• Child support grants went from zero in 1997 to 8,8million in 2009

• 5,2% of GDP currently goes towards social grants

Remuneration of labour is ultimately determined by skills which are in turn a function of education and training

Individual income taxpayers and social welfare recipients

Source:UCT 2009

0

2

4

6

8

10

12

14

2004 2005 2006 2007Taxpayers Social grant recipients

10

Contents

• Our country– Today– Risks and challenges

• Our industry– Today– Risks and challenges

• Our business– Today– Risks and challenges

• Conclusion

• Addendum

Doing business in South Africa

11

Mining in South Africa

• Creates 1 million jobs*• Accounts for ~ 18% of GDP* and investment*• Critical foreign exchange earner - >50%• Attracts foreign investments >30% of JSE value• Represents 18,5% of corporate tax receipts• 50% volume of Transnet’s rail and ports • Generates 93% of electricity via coal power plants• Constitutes15% of electricity demand• Key foundation industry - enabled South Africa to become the most industrialised

country in Africa• Significant contributor to transformation in the economy

182

129

64

26

21

21

20

19

18

3

0 20 40 60 80 100 120 140 160 180 200

China

USA

Australia

Brazil

South Africa

Canada

Russia

India

Chile

Colombia

The global top ten mining countries as measured by Mining GDP (2008, US$ billions)

Rank1

2

3

4

5

6

7

8

9

10

South Africa has the world’s fifth largest mining sector measured by real GDP

Source: Global Insight

South African reserves for key minerals (% of global)

Global top 10 mining countries - mining GDP (2008 US$bn)

* Direct and indirect

SA dropped 12 places to 61st in the 2009/10 Fraser Institute of Mining Companies’ survey.

0 10 20 30 40 50 60 70 80 90 100

PGM'sManganese

ChromiumGold

Alumino-SilicatesVermiculiteVanadium

Zirconium MineralsTitanium minerals

FluorsparAntimony

Phosphate rockNickel

UraniumLeadCoalZinc

SiliconIron ore

% of global .South African reserves for key minerals, 2008

1

1

1

1

1

2

2

2

2

2

4

4

5

5

6

8

8

8

9

South Africa, is not mature mining real estate! The country still has significant geological potential

Global rank

12

SA’s mining performance

• From 2001 to 2008 global mining grew by >5% per annum

• SA mining declined by 1%

• If SA mining had grown at 5% in this period, direct value would increase by $8billion, creating about 45 000 additional mining jobs

• The gross value added by mining sector had shrunk from R103bn in 1993 to R92bn in 2009

• The number of people employed fell from about 830k in 1987 to just below 500k because of the global recession and domestic issues like amongst others, electricity shortages

• SA capital investment expanded by a factor of two from 2000 to 2009 compared to an Australian factor of five

South Africa’s mining sector has underperformed in terms of economic growth relative to peers

19

12

10

8

7

7

7

7

6

4

-1

-5 0 5 10 15 20

China

Chile

Russia

Indonesia

India

Colombia

Australia

Brazil

Peru

Venezuela

South Africa

The global top ten mining countries as measured by growth in mining value added (2001-2008 real US$ terms)

Source: Global insight

1

2

3

4

5

6

7

8

9

10

13

Rank

Source: Global Insight

Global top 10 mining countries by growth in mining value added (2001 - 2008 real US$ terms)

19

80

19

82

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

19

84

19

92

19

90

19

88

19

86

400 000

300 000

200 000

100 000

115 000

105 000

95 000

85 000

Gro

ss value ad

ded

(Rm

)

Gro

ss f

ixed

cap

ital

fo

rmat

ion

(R

m)

SA mining & quarrying capital investment / value added - real 2005 values

Gross fixed investment

Gross fixed investment Gross value added

13

Access to capital

South African and Exxaro’s mining business risks

“Developments in South Africa's mining sector will not lead to changes to the country's sovereign rating and outlook, international ratings agencies Moody's and Standard & Poor's.”INet Bridge17 August 2010.

Financial Compliance

OperationalStrategic

Climate change concerns

Cost management

Access to secure energy

Capital allocation

Resource nationalism Skills

shortage

Price and currency volatility

Infrastructure access

Maintain social license to operate

Source: Adjusted from Ernest and Young

SA View

Exxaro view

Governance and regulatory efficiency

14

Mining stakeholders’ response to these risks

• Agreement by tripartite leadership to develop “Strategy For Sustainable Growth And Meaningful Transformation Of The South African Mining Sector” to be developed by tripartite under auspices of The Mining Industry Growth, Development and Employment Task-team (MIGDETT) (including other key government departments) will:– Address macro-economic issues that could impact the industry’s competitiveness – Limit retrenchments– Develop human capital– Develop infrastructure in time for the next up-cycle

• Substantive tripartite declaration on 13 topics signed on 30 June 2010, e.g.– Promoting growth and transformation– Innovation, productivity and cost competitiveness– Sustainable development in mining

• The Chamber of Mines has the role to ensure addressing of:– Lack of clarity in laws (review of Mineral and Petroleum Resources Development Act)– Time periods for processing and granting rights raised– Understanding the refusals and rejections

"We are definitely not going to nationalise mines" Susan Shabangu 8 July 2010

• Our country– Today– Risks and challenges

• Our industry– Today– Risks and challenges

• Our business– Today– Risks and challenges

• Conclusion

• Addendum

15

Contents

Doing business in South Africa

16

Exxaro Resources : history

16

2001 2006

Restructuring ensures compliance to South Africa’s mining charter

2008

NAMAKWASANDS

17

Exxaro Resources : Corporate structure17

Anglo American

ExxaroResources Ltd

Sishen Iron Ore 4th largest supplier

in international seaborne trade

Exxaro Coal4th largest SA coal

producer:9 mines, 45Mtpa

Free floatBEE

HoldCo

Employees’ Shareholding

trust

9.9% 34.2% 52.9% 3%

20%

Exxaro Base Metalsonly zinc producer in

SA: 3 operations in

3 countries

Exxaro Sands3rd largest mineral

sands producer:3 operations in

2 countries

100%

SA’s largest Black Economically Empowered resources company

18

Exxaro at a glance

• One of the largest South African diversified resource companies

• Top 40 companies on the JSE

• Employ about 10 000 people

• Access to significant strategic assets and quality resources

• 50%+ BEE owned business

• Healthy financial metrics

– 10% increase in revenue

– 43% increase in net operating profit

– 73% increase in attributable earnings

– Decrease in cost in real terms

– Strong cash flow and balance sheet

– Decrease net debt by R857m

– Net debt/equity 19%

– R4,5bn undrawn Medupi facility

• Extensive growth pipeline and stable platform for growth opportunities

* Interim results for 6 months ended 30 June 2010

19

Still a positive view on pigment & zircon over the long term

Exxaro commodity ranking

CriteriaFe

Ore Pt CuMetall. Coal Oil

Mn Ore

Titanium Pigment Zr

Steam Coal Ni

Titanium Feedstock U3O8 Zn

Market 4 3 4 4 4 3 3 3 4 3 3 2 3Demand 4 4 5 4 4 4 4 4 4 4 4 4 4Historical returns 5 4 3 4 4 4 3 3 3 3 2 2 2Price 4 4 4 4 4 4 3 4 4 3 3 3 3Barriers to entry 4 4 4 4 4 4 5 3 3 3 3 3 3Industry structure 4 4 3 4 4 4 4 4 3 4 4 3 2Momentum 3 3 4 3 3 3 3 3 3 3 3 3 4Substitution 4 4 3 3 3 3 4 4 3 3 4 4 3Cost Curve 4 4 4 4 4 4 3 3 4 3 3 4 3Environmental 3 4 3 3 2 3 3 3 2 3 3 3 3Total 39 38 37 37 36 36 35 34 33 32 32 31 30Ranking 1 2 3 3 5 5 7 8 9 10 10 12 13

Notes: 4-5Adapted from models by ABN Amro and Deutsche Bank 3Higher numbers denote more favourable positions 1-2

Exxaro: LOM on the basis of resources, reserves and UBS estimates

Exxaro’s mineral resource

20* Source: UBS investment research

SA diversified miners - LOM on the basis of resources, reserves & UBS estimates (based on 2010 production

rates)

21

Exxaro’s strategy

• Safety first, always

• Exxaro will remain a diversified resources group

• Coal

– Remain a major reliable supplier to Eskom

– Consider mega-mine opportunities to grow the coal business

– Increase export allocation and de-bottleneck logistical chain

– Develop downstream value-adding products such as char and market coke

– Increase volumes to metals markets

• Mineral Sands

– Complete detailed studies on strategic fit

– Advance bankable feasibility study on Fairbreeze

– Ramp-up of pigment expansion

• Base Metals

– Progress divestment initiatives

• Iron ore

• Energy

– Energy security

– Clean and renewable alternatives

22

Contents

• Our country– Today– Risks and challenges

• Our industry– Today– Risks and challenges

• Our business– Today– Risks and challenges

• Conclusion

• Addendum

Doing business in South Africa

23

Global steel production

The China era to be followed by the era of the “next two billion” – India, Brazil, Indonesia, Mexico, Nigeria, etc.

Global steel production since 1920

0

200

400

600

800

1000

1200

1400

1600

180019

20

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

Pro

du

ctio

n (

Mt)

The emerging eraPre-1945 2.8% pa

The golden era1945 -1973 6.2% paMaterials-intensive

gowth and reconstruction in Japan and Europe

The efficiency era1974 -1994 0.2% pa

The China era1995 - 2007 4.9% pa

Oil shocks

Fall of communism

Copper and iron ore long term view

Source: Barclays Capital

Ultra long-term real 2009$ copper price

2000

4000

6000

8000

10000

12000

14000

16000

18000

1908

1913

1918

1923

1928

1933

1938

1943

1948

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

2003

2008

2013

Prc

e (U

S$/

t)

Ultra long-term real 2010$ fine iron ore prices

20

40

60

80

100

120

140

160

1900

1905

1910

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

Pri

ce (

Rea

l 20

10 U

S$/

t)

US Price (cif) Aus-Japan Price (fob)

Materials intensive infrastructure and (re)construction

investment

25

Conclusion

• Debate on political issues should not be confused with government policy

• Risks around the mining industry have increased

• Super tax policies the norm of the future?

• Environmental pressures around mining industry will increase further

• Long term growth driven by China and still very healthy

• India to play an important future role

• China is becoming a major investor in Africa including South Africa, securing access to

future minerals

• Good quality resources and assets the key for companies to survive these realities

• Great investment opportunities available in South Africa

Very strong long term growth opportunities still available in South Africa’s mining industry

THANK YOU

www.exxaro.com

Contents

• Our country– Today– Risks and challenges

• Our industry– Today– Risks and challenges

• Our business– Today– Risks and challenges

• Conclusion

• Addendum

27

Addend

um

Doing business in South Africa

28

Why coal?

• Healthy fundamentals of coal industry

• Good position in industry with quality assets

• Diversifying and balancing the Exxaro portfolio and mitigates exposure to R/$ exchange

rate

• High quality growth project pipeline

• Access to the Waterberg reserve:

– Volume: 75,7 billion tonnes in-situ inferred resources

– > 50% of remaining SA coal reserves

– Stratigraphic thickness: 115m consisting of 11 coal bearing zones

– Mineable coal seams much thicker than Witbank Mpumalanga coalfields

• Develop opportunities:

– Grootegeluk (including reductants and market coke)

– Medupi

– Thabametsi

– Mafutha

• Geographically well positioned for export to Europe, USA and Far East “The Waterberg is the new jewel in South Africa's minerals crown” Sipho Nkosi

29

Phase 2: Thabametsi Mine

• Greenfields development - new open pit coal

mine and beneficiation complex and a new

coal-fired (clean technology) power station

(5 000MW)

– 16Mtpa to power station (PF)

– 2,5Mtpa to other markets

– Time-frame: 2014 to 2017

Phase 3: Exports / Synfuels

• Greenfields coal mine

– 10Mtpa for exports

– Time-frame: 2015 to 2018

• Mafutha JV with Sasol

– Time-frame: 2013 to 2018

Other downstream opportunities:

• Char plant

– Phase 1 being commissioned

– Phase 2 in planning

• Market coke

– Feasibility study in progress

• Electricity generation

– Including co-generation

Phase 1: Grootegeluk Mine

• Completed GG6 plant in 2006 -720ktpa to other

markets

• Brownfields expansion of Grootegeluk coal

mine near Lephalale with Medupi power station

(4 800MW)

– 14,6Mtpa to Medupi power station

– Time-frame: 2009 to 2015

Exxaro’s development plan for the Waterberg

30

Why energy?

• Kusile expected to be the last coal fuelled power station built by Eskom in South Africa

• Waterberg replacing Mpumalanga coalfields as primary source of new coal supply

• Integrated Resource Plan for electricity due later in the year is expected to include renewable energy and participation of independent power producers in the energy mix

• Renewable Energy Feed-In Tariff guidelines was approved by NERSA in 2009

• Business collaborates with Eskom to ensure electricity supply/demand balance

• Exxaro’s strategy defines the intent also to get involved in renewable energy and reduce our carbon footprint

Wind Solar Co-generation Gas Base Load

Why? • Lower carbon footprint

• Sufficient resources

• Refit R1,25/kWh

• Lower carbon footprint

• Readily available resource in parts of SA

• Refit R2,10/kWh

• Use of readily available waste gas/heat

• Can utilise over the fence distribution option

• Lower carbon footprint than coal

• Utilises non-mineable coal beds

• Contributes to satisfy demand

• Advanced technology• Economically attractive• Exxaro owns significant

coal reserves

What? • 50 MW Wind farm at Brand-se-Baai

• 40 MW Wind Farm at Tsitsikamma

• 200MW concentrating solar power plant at Lephalale

• 15 MW Namakwa Sands cogeneration project in

• A number of other projects, totaling more than 300 MW

• 50 MW coal bed methane gas field and power station in Botswana

• 1800 MW Base Load IPP coal fired power station at Lephalale

31

Why Mineral Sands?

Significant increase forecast - except in USA

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

- 10,000 20,000 30,000 40,000 50,000 60,000

GDP per capita - real 2000 USD

Pig

me

nt

de

ma

nd

pe

r c

ap

ita

- k

g

USA

Rest of N America

Western Europe

Asia Pacific ex China

China

Rest of World

Intensity of use plotted for 1980, 1990, 2000, 2007*, 2015 and 2025**

* 1980, 1990, 2999, 2007 - Solid line** 2015 and 2025 - Dotted line