Slide 1: Site Visit to Sishen Mine
Site Visit to Sishen Mine 14 April 2010
Slide 2: Agenda
Agenda Overview of Kumba Iron Ore Iron Ore market outlook Kumba’s Growth pipeline Q&A 2
Slide 3: Overview of Kumba Iron Ore
Overview @) Kumba ~~ n B matS ae r oe @@0@ KUMBA IRON ORE A member of the Anglo American plc group
Slide 4: Kumba – value-adding supplier to the steel industry
Kumba – value-adding supplier to the steel industry • Kumba is a South-African based pure iron ore company • Mining for more than 70 years • Operates two opencast mines • Sishen Mine • Thabazimbi Mine • Production capacity in excess of 40Mtpa • ~80% of South African production • ~4% of global seabor
Slide 5: Kumba – strong financial performance since 2006
Kumba – strong financial performance since 2006 US$m FY09 FY08 FY07 FY06 CAGR (%) Revenue 2819 2575 1635 1286 30 Operating profit (before special items) 1526 1618 835 796 24 Operating margin (%) 54 63 51 62 – Attributable earnings (Anglo) 544 555 278 322 19 Cash generated from operations 1533 1630 8
Slide 6: Kumba Iron Ore ownership structure
Kumba Iron Ore ownership structure International Development Corp Anglo American plc Minority Interests 13.95% 62.76% 24.29% Kumba Iron Ore 74% 26% BEE ownership Exxaro Resources Limited: 20% Sishen Iron Ore Company SIOC Community Development SPV: 3% SIOC Employee Share Participation Scheme (Enivisi
Slide 7: Kumba – a significant contributor to AA plc
Kumba – a significant contributor to AA plc ANGLO AMERICAN OPERATING PROFIT 10000 • Kumba generated US$1,526 million of US$ million operating profit in 2009 despite the 7500 ~40% decline in benchmark export 5000 iron ore prices • Of which US$709 million is 2500 attributable to the shareholders of AA
Slide 8: Safety
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Slide 9: Safety: We are committed to Zero Harm
Safety: We are committed to Zero Harm • Commitment to zero harm returning visible achievements • LTIFR reduced by 32% since 2002 (weighted average p.a. reduction) • 2009 achievements: – Substantial improvement in LTIFR: 42% down to 0.07 – Sishen: Fatality-free for the first time in 5 yrs – Thabazimb
Slide 10: Kumba's operations
Kumba’ Saag s OSE ee as A member of the Anglo American plc group
Slide 11: Sishen Mine – a successful growth story
Sishen Mine – a successful growth story Mt FY09 FY08 FY07 FY06 CAGR (%) Total tonnes mined 128.3 108.8 104.4 90.7 12 - Ore 46.2 44.6 38.9 31.3 14 - Waste 82.1 64.2 65.5 59.4 11 Production 39.4 34.0 29.7 28.7 8 - DMS plant 29.0 28.4 29.5 28.7 0.3 - Jig plant 10.4 4.7 0.2 - - Other - 0.9 - - Stripping
Slide 12: Sishen Mine – export sales 17% CAGR 2006-9
Sishen Mine – export sales 17% CAGR 2006-9 Mt FY09 FY08 FY07 FY06 CAGR (%) Railed to port 34.6 27.8 24.6 24.3 13 Total sales 38.2 30.5 30.5 27.4 12 - Export 34.2 24.9 24.0 21.5 17 - Domestic 4.0 5.6 6.5 5.9 (12) EXPORT SALES (Mt) 34.2 35 30 Mt 24.9 25 24.0 21.5 20 2006 2007 2008 2009 12
Slide 13: Sishen Mine – amongst the lowest cost producers
Sishen Mine – amongst the lowest cost producers 2010 FOB Real Cost US$/t 80 Pelletizing Transport 70 Royalties Processing 60 Marketing Mining 50 40 30 20 10 0 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950 1,000 1,050 1,100 Sishen Mine Source: AME 2010 13
Slide 14: Sishen Mine – % contribution to unit costs
Sishen Mine – % contribution to unit costs • Labour and mining contractor costs account for c.40 – 50% of Sishen Mine’s unit cash costs 100 12 90 17 17 2 2 4 3 80 3 8 4 7 70 11 13 15 60 11 13 % 50 18 11 40 18 18 30 19 20 27 25 10 22 - 2007 2008 2009 Period Labour Outside services* Maintenance Fuel D
Slide 15: Sishen Mine – ore offers superior physical properties
Sishen Mine – ore offers superior physical properties • Lump ore is highly valued by steelmakers Brazil as it can be fed directly into a blast Australia Tumble index* furnace without the need for sintering or Africa 100 pelletizing India Canada 95 Rio – Hamersley • Lump ore is a rare commodity, with
Slide 16: Sishen Mine – niche product's capture value
Sishen Mine – niche product’s capture value • Unique characteristics of Kumba iron ore allows production of a tailored-sized, niche product portfolio, to add value in our customers’ processes • Kumba developing the 6.3x10mm (super reducible lump) product to capture further value from its niche produ
Slide 17: …and a global customer spread
…and a global customer spread • Balanced geographical spread • Traditional export sales mix: 60% China, 20% Japan/Korea, 20% Europe • 2009 export sales mix: 74% China, 26% Japan/Korea/Europe • Future likely export sales mix as Kolomela ramps up: >60% China, <20% Japan/Korea, <20% Europe United Kingd
Slide 18: Thabazimbi Mine – LOM extended to 2016
Thabazimbi Mine – LOM extended to 2016 Mt FY09 FY08 FY07 FY06 CAGR (%) Total tonnes mined 19.5 12.2 22.3 21.7 (4) - Ore 3.1 2.8 3.3 3.1 – - Waste 16.5 8.9 19.0 18.6 (4) Production 2.5 2.7 2.7 2.4 1 Stripping ratio 5.3 2.8 5.8 6.0 (4) Sales - domestic 1.8 2.5 2.4 2.4 (9) 18
Slide 19: Asset Optimisation and procurement capturing value
Asset Optimisation and procurement capturing value • Asset Optimisation delivering benefits: US$185 million contribution to 2009 operating profit – US$168 million through revenue enhancement – US$17 million through improving operating efficiencies • Procurement capex and operating costs benefits: US
Slide 20: Kumba's Ocean Freight Management – 2009 saw shift in market
Kumba’s Ocean Freight Management – 2009 saw shift in market % of export volumes 60 63 40 25 20 19 17 0 2005 2006 2007 2008 2009 Volumes shipped (Mt) 30 20 21.6 10 6.2 4.0 4.1 0 2005 2006 2007 2008 2009 Shipping profits (USD m) 100 95.3* 81.8# 62.0 62.8 50 14.6 28.6 0 2005 2006 2007 2008 2009 * US$95
Slide 21: Legal Update
Legal Update • Kolomela (Sishen South) – Arbitration complete – ArcelorMittal South Africa not entitled to equity participation – Significant EBIT preservation • Faleme – Awaiting determination (expected Q2 2010) • Lithos – Action in the SA High Court postponed 21
Slide 22: ArcelorMittal South Africa – Sishen Supply agreement
ArcelorMittal South Africa – Sishen Supply agreement • 5th February 2010: Sishen Iron Ore Company (‘SIOC’) notified ArcelorMittal South Africa (‘Mittal’) that, as Mittal had failed to convert its 21.4% undivided share in the old order mining rights which it held in relation to the Sishen Mine, Kumba
Slide 23: Iron Ore market outlook
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Slide 24: Iron Ore: Outlook is robust
Iron Ore: Outlook is robust • Global GDP to recover from 2009 levels, driven by China and recovery in RoW • Steel demand to recover robustly, partly due to restocking • New projects expected to be approved in medium-term but long lead-times could result in effective deficit for number of years • A s
Slide 25: The Role of Chinese production: steepening the cost curve
The Role of Chinese production: steepening the cost curve The growth of demand in China has required supply from high cost domestic sources this has steepened the cost curve and raised prices. Indexed Cost Curve Change Over Time 300 2005 Indexed Cost Curve 275 2008 Indexed Cost Curve 2009 Indexed Co
Slide 26: Chinese imports of seaborne iron ore increasing
Chinese imports of seaborne iron ore increasing CHINESE CRUDE STEEL PRODUCTION (Mt) Mt 650 +27% 600 +14% CHINESE SEABORNE IRON ORE 550 Mt IMPORTS (Mt) 700 +47% 500 +41% 650 450 600 550 400 2008 2009 2010* 500 CHINESE DOMESTIC IRON ORE 450 Mt 350 PRODUCTION (Mt) 400 350 300 -5% 300 -26% 2008 2009 201
Slide 27: Trends in benchmark pricing
Trends in benchmark pricing China landed iron ore prices, $/t 62% fe 200 Benchmark delivered China 190 180 The Steel Index 170 Platts 160 Metals Bulletin 150 140 130 120 110 100 90 80 70 60 0 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 • In a typical year, Kumba sell
Slide 28: Projects
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Slide 29: Projects pipeline to support growth strategy
Projects pipeline to support growth strategy • Kumba’s project pipeline can add 29% to the current export operations, with the potential to produce around 70Mtpa by 2019 • From 2007 Kumba expected to double exports and this is on track for c.47Mt by 2013 75 6.0 70.0 70 13.0 Production 65 60 Jig plan
Slide 30: Kolomela Mine
Kolomela Mine • Kumba will expand its participation in seaborne iron ore with the Kolomela greenfield project in South Africa’s Northern Cape Province (70km from Sishen) Map of Northern Cape Province • Total mineral resource of 373Mt at 60% Fe cut-off grade BOTSWANA and 408Mt at 55% Fe cut-off Kathu
Slide 31: Kolomela Mine: Progress to date
Kolomela Mine: Progress to date • Project continues on time and on budget • 3.8 million LTI-free hours for 2009 and 4.3 million LTI-free hours since the last LTI in November 2008 • First blast took place on 17 September 2009 – 2.3Mt waste material moved (17Mt expected in 2010) • Project 45% complete
Slide 32: Planned capital expenditure (US$)
Planned capital expenditure (US$) • 96% increase in capital expenditure to US$494 million in FY09 • SIB capex peaks at US$256- – US$321 million in 2011, reducing to average of US$192 million p.a. thereafter 1,000 Total Total 770 Total 618 666 US$m 494 553 500 421 449 Total 2779* 343* 321 410 252 395
Slide 33: In Summary
In Summary • Kumba is a leading value-adding iron ore supplier to the global steel industry • Kumba has low-cost, long-life mining assets, supported by a significant growth pipeline • Kumba is focused on revenue enhancement and cost management through Asset Optimisation, with savings already deliver
Slide 34: Questions and Answers
Questions and Answers “We see what could be” 34
Slide 35: Appendix
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Slide 36: Kumba – executive committee
Kumba – executive committee Chris Griffith Kumba CEO Christo van Virginia Tebello Aart Francois Andrew Emmy Vincent Loggerenberg Tyobeka Chabana Vusani van den Louw Loots Leeka Uren Executive Executive Executive Mali Brink Executive GM of GM of Kumba Head, Head, Head, Company GM of Head, Sishen Thab
Slide 37: Summary Financials (Rand million)
Summary Financials (Rand million) Rm FY09 FY08 FY07 FY06 CAGR (%) Revenue 23 408 21 360 11 497 8 654 39 Operating profit 12 880 13 513 5 978 3 935 48 Operating margin (%) 55 63 52 45 Headline earnings (Kumba) 6 955 7 276 3 062 2 125 48 Cash generated from operations 12 622 14 519 5 806 4 277 43 Capi
Slide 38: Capital expenditure analysis
Capital expenditure analysis • 56% increase in capital expenditure to R4.0 billion in FY09 • SIB capex peaks at R2.0 – R2.5 billion in 2011, reducing to average of c.R1.5 billion p.a. thereafter 7,000 Total 6,000 Total Total 6 000 5,000 5 200 Total 3 996 4 700 4,000 4 200 Rm 2 563 22779* 779* 3 200
Slide 39: Substantial cash returned to BEE shareholders
Substantial cash returned to BEE shareholders • Since 2007, SIOC has paid cash dividends to its BEE partners, the Community Trust and employees in the share ownership scheme: • R3,951m to Exxaro (20% of SIOC) Community • R593m to Community Trust (3% of SIOC) Trust • R593m to Envision (3% of SIOC) 21
Slide 40: Operating profit sensitivity
Operating profit sensitivity Sensitivity Analysis - EBIT (Rm) Currency Export price Sales volume On-mine costs Distribution costs -2500 -2000 -1500 -1000 -500 0 500 1000 1500 2000 2500 Key business drivers – Negative impact Positive impact Operating profit impact Sensitivity 10% change (Rm) (Rm) Cur