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i n v e s t o r p a c k

i n v e s t o r p a c k. Market Information. JSE Top 40 index position: #22 Free float 41% Market cap $3.1bn Daily value traded $6.1m for past 12 months Annualised turnover 77% of total issued shares Major shareholders LNM Group 50.01% (#2 global steel producer)

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i n v e s t o r p a c k

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  1. i n v e s t o r p a c k

  2. Market Information • JSE Top 40 index position: #22 • Free float 41% • Market cap $3.1bn • Daily value traded $6.1m for past 12 months • Annualised turnover 77% of total issued shares • Major shareholders • LNM Group 50.01% (#2 global steel producer) • IDC 8.8% • Institutional 41% • South Africa 28% • International 13% Good liquidity and high turnover

  3. Company Profile • 1928 – Iscor established as parastatal • 1989 – Iscor privatised and listed on JSE • 1994 – Start of major re-engineering program • 2001 – Unbundling of mining division as Kumba Resources • 2001 – LNM Holdings N.V. buys initial stake in Iscor • 2002 – Iscor enters into BAA with LNM • 2004 – LNM/Iscor merger approved; LNM holding goes over 50% • 2004 – Name changed to Ispat Iscor • Steel industry ranking • Africa #1 • Global #29 Largest regional steel producer

  4. Successful Restructuring History • Major re-engineering 1994-2001 • significant headcount reduction (30 000 people) • steel grades down from 302 to 50 • inefficient capacity closed (1mtpa) • moved to lowest quartile on global cost curve • Value added products: • Flat 61% • Long 72% • Mining division (Kumba) unbundled November 2001 • iron ore mining rights retained to ensure supply at cost • Market value increase* since unbundling (Nov ‘01): 500% * Including effect of rights issue in April 2002 Major value release

  5. Long 31% Flat 69% Production • Operations • 3 integrated steel mills • 1 steel mini-mill • surplus coke batteries producing market coke • captive iron ore (toll-mined by Kumba Resources) • Output • Steel: 6.4 mtpa • Market Coke: 400 ktpa for ferro-chrome industry Largest regional steel producer

  6. Geographic Location Flat Products • Vanderbijlpark  3.1 Mtpa final product • Saldanha  1.3 Mtpa final product Long Products • Newcastle  1.7 Mtpa final product • Vereeniging  0.3 Mtpa final product 6.4 Mtpa final product Market Coke • Vanderbijlpark and Newcastle  400 ktpa Iron ore supply at cost + 3%  6.25 Mtpa iron ore from Sishen  2 Mtpa iron ore from Thabazimbi Overview of operations Thabazimbi Johannesburg Vanderbijlpark Vereeniging Newcastle Sishen Durban South Africa Saldanha Cape Town Steel plants Captive iron ore source Southern African location

  7. Geographic Sales South Africa Rest of Africa Total Africa Far East European Union North America 1H’03 Middle East 2H’03 1H’04 Other % 0 10 20 30 40 50 60 70 80 Switch to better paying markets

  8. Quarterly consumption Steel imports Consumption trend Domestic Market • Sound South African economic fundamentals • Good prospects for long-term sustainable growth • Underlying demand recovery throughout 2004 • Other Africa market share growing strongly • Domestic margins $100/t > non-African exports Imports % ’000t 1 700 14% 12% 1 500 10% 1 300 8% Consumption Imports 1 100 6% 900 4% 700 2% 0% 500 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Switch to sustainable growth

  9. Domestic Pricing Policy • Domestic prices based on International Parity Principle • Downstream industry support programme ($70m pa) through: • export rebates • strategic concessions • long-term contracts (auto industry, packaging) • Competition Commission (Feb 2004) ruling that Iscor pricing policy is fair and reasonable: complainants have lodged appeal • Government has asked for review of downstream support programme • Current import duty – 5% • risk of removal considered low • SA’s duty amongst lowest in world International parity pricing model

  10. Invoiced Export Prices US$/t (c&f) 630 Hot rolled coil Low carbon wire rod 580 530 480 Based on order book & expectations 430 380 330 280 230 180 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Ispat Iscor Record high prices

  11. Global Steel Demand ‘mt WSD forecast 1 200 China +1% +4% Rest of world +3% +3% +7% 1 000 +6% +3% +6% +6% +6% 0% +8% +4% +10% 800 +22% +21% +2% +22% 600 400 +0% +4% +2% +3% +6% +9% +2% +3% -4% 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: World Steel Dynamics China driving growth in steel demand

  12. China – Supply and Demand ‘mt WSD forecast 350 Consumption China forecast to become net exporter by 2008 Production 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: World Steel Dynamics China expected to become net exporter

  13. China takes off! World Steel Consumption Trends World Steel Consumption and GDP Per Capita, 1950-2010 2010 7 000 Phase 3 6 500 6 000 Asian crisis 1999 2004 5 500 2002 Collapse of USSR led 1997 to steel consumption 1994 5 000 1989 collapse in Eastern Phase 2 Europe 4 500 1983 1979 Post war expansion to $US/capita ($1995) 4 000 1975 1970 led to predictions 1973 1971 of seemingless 1970 3 500 endless growth 3 000 1961 First and second oil prices and 2 500 1954 subsequent recessions led to Phase 1 massive light-weighting of steel- 2 000 containing products 1 500 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 kg steel/capita Source: Macquarie Research Per capita steel demand entering growth phase

  14. Global Input Price Trends Based to 100 Based to 100 170 800 Coking coal - contract (LHS) Freight rates (RHS) Iron ore fines - contract (LHS) Coke (RHS) 160 700 Scrap (RHS) 150 600 140 500 130 400 120 300 110 200 100 100 90 0 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Source: Ispat Iscor Global input prices still under pressure

  15. Iron ore 92% 3% 5% Coke 100% - - Coal 8% 55% 37% Scrap 81% 19% - DRI 98% 2% - Raw Material Integration Domestic supply agreements Internally sourced (at cost) Imported Actual 1H’04 data Cost benefit for raw material integration

  16. 464 CI savings (Rm) 13 303 6.1 - percentage 0.2 4.3 12 072 Number of employees (’000) 13 045 12 539 1 686 HRC cash cost - R/t 1 756 1 637 254 - US$/t 221 231 1 543 Billet cash cost - R/t 1 535 1 529 231 - US$/t 193 217 61 Percentage value-add exports- flat 37 44 72 - long 60 72 Key Performance Indicators 1H’03 2H’03 1H’04 Exchange rate impacting good productivity performance

  17. Headline Earnings Rm 1H’03 2H’03 1H’04 10 544 Revenue 9 312 9 175 2 948 Comparable operating profit 1 871 1 504 (14) Financing cost - net interest expense (31) (16) # (133) - long-term provision top-up (28) (53) (914) Tax (608) (492) 179 Equity earnings* 48 67 (4) Minority interest 1 (3) 2 062 Comparable earnings 1 253 1 007 311 - in US$m 156 145 (511) BAA remuneration* (429) Restructuring costs* (116) Power contract settlement* (110) Headline earnings 1 143 462 1 551 * After tax # Lower discount rate accounts for R100m Record earnings

  18. Comparable Headline Earnings Trend Rand million US$ million 240 1 500 1 393 212 210 1 350 1 200 180 1 050 150 900 120 750 669 655 99 657 97 596 600 90 79 77 450 352 60 48 300 30 150 0 0 1Q’03 2Q’03 3Q’03 4Q’03 1Q’04 2Q’04 1Q’03 2Q’03 3Q’03 4Q’03 1Q’04 2Q’04 * R8.32/$ R7.73/$ R7.40/$ R6.72/$ R6.75/$ R6.57/$ * Average R/US$ spot rate Steel cycle overshadows Rand strength

  19. Key Result Drivers Negative Positive 1H’04 vs 1H’03 • HRC cash cost per tonne (Rands) -4% • Domestic sales volume +22% • HRC US$ price +40% • Exchange rate +21% • Operating margin* 20% 28% * Excluding BAA remuneration (1H’04) & power contract settlement (1H’03) Strong Rand only negative factor

  20. International steel price 197 134 30 ±$10/tonne 18 Exchange rate 79 ±10c 116 Domestic sales 187 127 29 ±10% Sensitivity Analysis Operating Income* Headline Earnings* EPS (SAc)* Variable Change * Based on impact for full six months forecast July-December 2004 Significant gearing to major variables

  21. 18 8 Operating margin (%) 21 20 16 - on comparative basis (%) 28 23 13 EBITDA margin (%) 26 25 22 - on comparative basis (%) 33 Revenue/invested capital (times) 1.3 1.3 1.4 18 7 Return on equity (%) 23 20 16 - on comparative basis (%) 30 Net cash/equity (%) 5.8 0.2 9.7 Financial Ratios 1H’03 2H’03 1H’04 Margins approaching cyclical peak levels

  22. Distribution to Shareholders In view of our strong cash flow: • Current distribution policy being reviewed • Capital reduction proposal to be put to shareholders before end-2004 • Programme of capital reduction to be instituted • Current stated capital R14/share • No interim dividend declaration Surplus capital to be returned to shareholders

  23. 3-Year Focus • Further quantum reduction in costs • Increase production from current assets by 1mtpa • Focus on value-add projects • Lowest quartile producer (delivered EU cost basis) • Defer South African steel industry consolidation Join select group of steel companies earning in excess of WACC

  24. Outlook for 2004 • Positive steel business environment • ongoing global consumption growth • prices increasing from current levels • continued strength in domestic demand • Operations • ongoing cost reduction • increased throughput • Earnings • Q3 up on Q2 Positive outlook

  25. Investment Case • Competitive producer • vertically integrated • lowest cost quartile focus • part of major global steel group • naturally protected domestic market • Growth potential • growing, more profitable regional market • sweat current assets for extra 1mtpa • expansion of market coke operations • domestic steel industry consolidation • Gearing to Chinese growth • steel market fortunes dependent on continued Chinese growth • Ispat Iscor revenue directly linked to international steel prices Competitive low-cost producer

  26. M a r k e t D a t a

  27. China Steel Steel Equity Performance Base to 100, all prices in US$ 600 Ispat Iscor Gerdau CSN 500 POSCO 400 Severstal Bluescope Arcelor 300 Nucor US Steel 200 100 0 Aug ‘04 Aug ‘03 Dec ‘03 Jun ‘04 Jun ‘03 Aug ‘02 Feb ‘03 Apr ‘03 Dec ’02 Oct ‘03 Apr ‘04 Jun ‘02 Feb ‘04 Oct ‘02 Source: Bloomberg Ispat Iscor amongst best performers

  28. Steel Equity P/E’s (Forward) 14 12 10 8 6 4 2 0 CST CSN SAIL TISCO POSCO NUCOR GERDAU ARCELOR US STEEL BAOSHAN SEVERSTAL INT’LSTEEL ISPAT ISCOR CHINA STEEL VOESTALPINE THYSSENKRUPP STEEL DYNAMICS BLUESCOPE STEEL ONESTEEL LIMITED Source: Bloomberg, 24 August 2004 Ispat Iscor still attractively valued

  29. Steel Equity Price/Book 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 CST CSN TISCO POSCO NUCOR GERDAU ARCELOR US STEEL BAOSHAN ONESTEEL LIMITED INT’LSTEEL SEVERSTAL ISPAT ISCOR USIMINAS SA CHINA STEEL VOESTALPINE THYSSENKRUPP STEEL DYNAMICS Source: Bloomberg, 24 August 2004 Ispat Iscor still attractively valued

  30. Steel Equity Market Capitalisation US$m 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 CST CSN TISCO POSCO NUCOR GERDAU US STEEL ARCELOR BAOSHAN STEEL DYNAMICS ONESTEEL LIMITED SEVERSTAL ISPAT ISCOR USIMINAS SA CHINA STEEL VOESTALPINE INTERNATIONAL STEEL THYSSENKRUPP BLUESCOPE STEEL Source: Bloomberg, 24 August 2004 Mid-sized market cap

  31. e x t r a s l i d e s

  32. Relationship with LNM • Iscor’s long-term desire to link-up with a major steel group • Business assistance agreement signed with LNM (Jan ‘02) • remuneration linked to performance • target cost savings (excl. labour + first 1%) R350m to R700m pa • LNM reward: 5-10% Iscor issued shares or cash equivalent • Sustainable savings to June 2004 – R1 326m per annum • cost savings target exceeded by 132% • R613m (value of 25.7m shares) paid to LNM Dec ‘03 • R731 (value of 18.9m shares) paid to LNM Aug ’04 • BAA expires at end-2004 • allowance for renegotiation • approval of minority shareholders required Value from international tie-up

  33. Dec ‘02 644 82% Dec ‘03 687 115% Jun ‘04 1 326 232% 10.0% 18.9 731 Aug ‘04 Business Assistance Agreement Savings achieved Remuneration due % of max target Cum % of shares Number of shares (m) Rm pa* Rm Settled Jun ‘03 388 58% 5.8% 25.7 613 Dec ‘03 (cash) (cash) Dec ‘04 Further savings expected 44.6 1 344 * Measured from Jul-Dec ’01 base, indexed BAA payback approximately 1 year

  34. BAA Savings Analysis By Savings Annualised Savings (Rm) % Efficiencies 858 65% Procurement 468 35% Total BAA Savings 1 326 100% By Plant Annualised Savings (Rm) % Vanderbijlpark 506 38% Saldanha 251 19% Newcastle 378 29% Vereeniging 190 14% Total BAA Savings 1 326 100% BAA savings spread over group operations

  35. Currency Strength • Rand has strengthened 37% against US$ over past 24 months • Rand relatively stronger than currencies of competitor countries • Costs 65% Rand-based • Focus to maintain position on cost curve • 3-yr programme • restructuring • improvement projects • efficiency programmes Pro-active initiatives to counter strong Rand

  36. Capital Projects Planned Completion • Newcastle • pulverised coal injection 1H’05 • Vanderbijlpark • Blast Furnace C – throat armour repair Completed • Blast Furnace D – interim repair 2H’04 • Roofer galvanising line* 1H’06 • Coke & chemicals • market coke expansion* 2H’06 • Thabazimbi • iron ore mine: life expansion project* * Still to be approved Significant spend for value-add

  37. Environmental • Environmental master plans approved • All steel operations ISO 14001 certified • Major environmental projects in progress • Vanderbijlpark • main water treatment plant • coke oven gas & water cleaning • Newcastle • reverse osmosis water treatment plant Focus on environmental compliance

  38. Cash generated by operations 2 302 2 022 3 452 Working capital (48) (292) (1 069) Asset sales 41 46 13 BAA remuneration (613) Capex (780) (499) (405) Finance cost (96) (9) (22) Tax (55) (1 032) (273) Dividends (446) (446) (334) Net cash flow 918 (823) 1 362 Cash Flow Rm 1H’03 2H’03 1H’04 Strong cash flow

  39. Value adding 219 124 82 378 Replacement 452 300 267 352 Environmental 109 75 56 130 Total 780 499 405 860 Depreciation 451 469 478 519 Capital Expenditure Fcast Rm 1H’03 2H’03 1H’04 2H’04 Increased value-add and environmental spend

  40. 3 225 3 034 1 210 1 483 1 603 290 264 232 1 319 1 358 1 601 1H’03 2H’03 1H’04 Sales Volumes ’000t 3 500 Export 3 101 Domestic DSP* Domestic other 3 000 2 500 2 000 1 664 1 569 1 509 1 500 588 722 470 984 960 939 1 000 176 134 150 622 565 548 500 443 390 500 395 438 350 787 792 923 460 496 594 114 114 98 0 72 70 84 1H’03 2H’03 1H’04 1H’03 2H’03 1H’04 1H’03 2H’03 1H’04 Vanderbijlpark Saldanha Long products Total * Duferco Steel Processing – re-roller mainly for export Strong domestic sales growth

  41. 1H’03 1H’03 1H’03 1H’03 2H’03 2H’03 2H’03 2H’03 1H’04 1H’04 1H’04 1H’04 Liquid Steel Production ’000t 4 000 3 595 3 490 3 477 3 500 3 000 2 500 1 870 1 829 2 000 1 811 1 500 1 073 1 085 1 080 1 000 645 606 563 500 0 Vanderbijlpark Saldanha Long products Total Production affected by Saldanha breakout

  42. Flat Product Prices – Hot Rolled Coil US$/t c&f 850 US Midwest Germany 750 Far East 650 550 450 350 250 150 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: CRU Geographical divergence

  43. Long Product Prices - Wire Rod US$/t c&f 750 US Midwest Germany Far East 650 550 450 350 250 150 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: CRU Geographical divergence

  44. Ispat Iscor Cash Cost Base General Iron ore 6% 7% Coal : Local 7% Labour 15% Coal : Import 7% Services Scrap/DRI/Pellets 3% 6% Consumables Other raw material 4% 4% Electricity, gas & petroleum 10% Alloys & coating 9% Spares & repairs Refractories 4% 8% Transport 10% Total production cost base H12004: R6.5 billion Cash cost breakdown

  45. Raw Material and Energy Impact US Integrated plant – without coke US Integrated plant – with coke 350 350 +$135/ton +$81/ton 300 300 250 250 200 200 $/ton $/ton 150 150 100 100 50 50 0 0 Q1 02 Q2 04 Q1 02 Q2 04 US Minimill –flat products Ispat Iscor 350 400 300 350 +$199/ton 300 250 +$40/ton 250 200 $/ton $/ton 200 150 150 100 100 50 50 0 0 Q1 02 Q2 04 Q3 02 Q2 04 Coking coal Coke Iron ore/sinter/pellets Pig iron Scrap DRI Energy Source: World Steel Dynamics Iscor’s cost push relatively muted

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