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PROSPECTS FOR THE SOUTH AFRICAN COAL INDUSTRY Presentation by Sipho Nkosi CEO, Exxaro Resources

OCTOBER 2010. PROSPECTS FOR THE SOUTH AFRICAN COAL INDUSTRY Presentation by Sipho Nkosi CEO, Exxaro Resources Coaltrans Europe 2010, Amsterdam. Disclaimer.

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PROSPECTS FOR THE SOUTH AFRICAN COAL INDUSTRY Presentation by Sipho Nkosi CEO, Exxaro Resources

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  1. OCTOBER 2010 PROSPECTS FOR THE SOUTH AFRICAN COAL INDUSTRY Presentation by Sipho Nkosi CEO, Exxaro Resources Coaltrans Europe 2010, Amsterdam

  2. Disclaimer Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the “Company”) to differ materially from those expressed or implied in the forward looking statements. Financial forecasts and data given herein are estimates based on the reports prepared by experts who in turn relied on management estimates. Undue reliance should not be placed on such opinions, forecasts or data. No representation is made as to the completeness or correctness of the opinions, forecasts or data contained herein. Neither the Company, nor any of its affiliates, advisors or representatives accepts any responsibility for any loss arising from the use of any opinion expressed or forecast or data herein. Forward-looking statements apply only as of the date on which they are made and the Company does not undertake any obligation to publicly update or revise any of its opinions or forward looking statements whether to reflect new data or future events or circumstances.

  3. Content Whither the SA coal industry? Covering some of the background and history of the SA coal industry, The growth of the industry players, aspects of the MPRDA and the Mining Charter and the introduction of BEE players. Investment and development in South African coal industry Hopefully shedding light on rail and port status, the future of logistics/infrastructure, the attractiveness of SA as an investment destination, some comments on skills. Whither Exxaro? Where is Exxaro growing to? 2

  4. Whither the SA coal industry? 3

  5. SA - rail and port • RBCT port • 1972 - TCOA contract with JSM - 27 Mt of coal over 10 years • 1976 - RBCT Commissioned – 12 Mt/a (rail 4.2 Mt/a) • 1979 - Phase II Expansion - 24 Mt/a • 1984 - Phase III Expansion - 44 Mt/a • 1991 - Phase III Upgrade - 53 Mt/a • 1995 - Capacity enhancements - 63 Mt/a • 1999 - Brownfields expansion - 72 Mt/a • 2008 - Official design capacity increase – 76 Mt/a • 2010 – (1 May 2010) design capacity increased – 91 Mt/a • TransFreightRail (TFR) – coal line • Approx 2 000 employees operating rolling stock of 7 400 wagons and 235 locomotives • Average distance from the Witbank / Middelburg coalfields to RBCT is 600 km • TFR contracted in 2010 for 10yrs @ 81MT • TFR’s estimation to achieve rail capacity of 91 Mt/a by 2014/15 • Capital investment required of approx. US$ 2.8 bn • 2009 tariff increase average of 38% (back-dated to July 2008), 2011 similar increase to cover increased capital costs Source RBCT website and Mining Weekly - 3 September 2010, TFR industry presentation 4

  6. Basic description of SA coalfields WATERBERG Limpopo province 75.7Bt or more than 40% of South Africa’s coal resources Significant coal deposit with good quality power station and metallurgical coals Exxaro is the only company mining in this area. With LOM: > 75 years Medupi is currently being constructed, one of the first such new power stations Challenges – infrastructure, environmental stewardship WITBANK Witbank, main coal producing Coalfield in SA Majority of the export quality coal is produced here 40% of remaining reserves ERMELO Variable coal seam thickness and quality Not significant volumes is of export quality. SOUTPANSBERG Potential high quality coal reserve BUT Highly disturbed which leads to difficult mining KWAZULU-NATAL Historically a thriving anthracite & coking coal mining area. Currently contains reserves which are small, of generally lower quality and are difficult to mine. HIGHVELD Hosts the world’s largest CTL complex, Producing fuels and petrochemicals. SA has the potential to remain in coal exports into the future

  7. SA coal – 2000 to Date Please note: 85% of Domestic sales prices are driven by domestic power coal (+/- 4000kCal) 6

  8. SA coal – 2000 to DateSaleable production per company (2009) Source: DME Source XMP consulting 2009 2009 saleable production ~ 249.7 mill tons Anglo, Exxaro, Sasol, BHP Billiton & Xstrata = 79% of the coal saleable production

  9. SA Coal - BBBEE entry in South Africa Early empowerment period (1994 – 2000), characterised by: - Ad-hoc transfer of equity Indications of wide-scale privatisations National Empowerment Fund Private sector schemes encouraging broad-based black participation. Focused empowerment (2000 – present), more formalised approach, characterised by: - Broad Based Black Economic Empowerment Act The development of industry-specific charters The DTI Codes of Good Practice BEE scorecards Mining Charter (2002) min black ownership 15% by 2009 and 26% by 2014 Limited time for old to new conversion else the mining rights revert back to the State Mining Charter – requirement that ownership measured by attributable units of production. The offset of Historically Disadvantaged South Africans ownership commitments 8

  10. SA Coal - BBBEE entry in South Africa (cont) Between 1997 & 2009 up to 100 BEE companies attempted to enter the coal industry in any one year. However, success was not as easily attained, mainly due to: - Accessibility to coal reserves Funding Mining and operating skills Marketing skills Coal expertise Legislation Economic and logistical conditions Source XMP consulting 2009 9

  11. SA Coal - BBBEE entry in South Africa (cont) increasing production fragmentation 10 Source: DME 2006

  12. How did it go? In 2002 only two BBBEE companies produced 10% of SA coal (increased to 29 in 2008 resp. for almost 50%) What drove them? Changes in the mining legislative framework The nature of coal mining in South Africa - MPRDA's use-it-or-Iose-it principle. The pre-requisite 26% BEE ownership of mining companies for the conversion of old-order mining rights to new-order mining rights. The granting of prospecting and mining rights for new projects Were they successful? Yes, especially when considering the community involvement, employment and benefits emanating from well-structured corporate social responsibility programmes But what do you see in your own BBEEE counter-parties SA Coal - BBBEE entry in South Africa (cont) 11

  13. Investment and development in South African coal industry 12

  14. SA - rail and port

  15. SA - rail and port So where is the coal ? The mines are there and waiting in terms of potential and actual production capacity The ports are built and waiting (RBCT, TCM, BC) – RBCT specifically 91Mt installed capacity But….. Rail (TFR guarantee’s 65Mt for 2010) We are limited!! 14

  16. SA – rail and port constrained? So what does the future have in store? Increased capacity on RBCT Coalline Increased capacity in RBCT above 91MT Coega and IDZ – Port Elizabeth Trans-Kalahari rail corridor initiative Upgrade of rail from Limpopo to export line Maputo Corridor development Mozambique ports (Beira – refurbish & rebuild, increase capacity @ Maputo, new port along south Moz’ coast) Increased Saldanha line capacity 15

  17. Investment in SA mining industry? $ $ RmB $ Yen 16

  18. Investment in SA mining industry (last 5yrs) Coal Optimum Coal – $1,2 billion listing on JSE Anglo - Zibulo = $0,5 billion; New Largo = $1,7 billion (Mining Weekly) BECSA – DMO = $0,975 billion; Klipsruit (Phola) = $0,5 billion Sasol – Thubelisha project = R4,5 billion & Impumulelo = R1,5 billion Riversdale – Mozambique Benga Coal Project = $0,27 billion Vale – Mozambique Moatize = $1,3 billion CoAL, Shanduka ….but its not only in Coal …. You don’t need to look far to recognise continued confidence in the SA mining industry 17

  19. Skills in the SA mining industry WHAT’S THE WORRY? The required skills are being lost/diluted due to: - Reduced investment, competing international markets and exchange rates Legislation, environmental concerns and skills Increased international commodity and energy demand the SA ‘Brain drain” Exxaro and the industry is in the midst of a ‘skills war” The third biannual Mining Survey by Landelahni Business Leaders in South Africa indicated that the SA mining industry faces serious skills shortages 1998 to 2008, passing degree and diploma graduates totaled 13.7% of enrollments These results not even speaking of the artisan skills required in the industry. SO WHAT CSR and governance requirements. The availability of skills facilitates proper operation of assets. The future of the industry is at stake!! 18

  20. SOUTH AFRICA – whither EXXARO 19

  21. Exxaro growth and expansion • Carbon • Expected level of 80 million tons a year to 90 million tons a year in the next 10 to 15 years • Grootegeluk Medupi Expansion Project • Pre-feasibility studies to continue in 2010 (Thabametsi, Mafutha, Belfast and market coke • Char production – Phase 2 • MoranbahSouth (Australia) • Energy • Wind and solar - renewable energy, gas • Solar power station • Wind project (West coast of SA and Tsitsikamma) • CoalBed Methane (Botswana) 20

  22. Exxaro growth and expansion • Ferrous • Iron ore • AlloyStream™ • Base metals and mineral sands • Bankable feasibility study will be undertaken on the Fairbreeze project at KZN Sands • Optimisation of assets - during the envisaged 2011 divestment 21

  23. The Waterberg … SA’s coal-fired future? Exxaro’s development plan • 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 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 • Phase 3: Exports / Synfuels • Greenfields coal mine • 10 Mtpa for exports • Time-frame: 2015 to 2018 • Other downstream opportunities • Char plant • Phase 1 in operation • Phase 2 in planning • Market coke • Feasibility study in progress • Electricity generation • Including co-generation 22

  24. Concluding remarks • Yes! Exxaro is a large, exciting and expanding company but we are part of an exciting and stable country – South Africa • Continued and new investment in the South African coal industry will sustain South Africa’s enviable position of being able to supply both the East and West of the globe with a significant commodity and mineral range of products We are proud to be South African and look forward to your business! 23

  25. Concluding remarks Recall the World Cup? And expectations? … WAIT … There is more….. 24

  26. THANK YOU www.exxaro.com

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