The South African Mining Industry ANGLOVAAL MINING LIMITED CEO’s evening : 2 November 2000

MINING IN SOUTH AFRICA Exceptional geological deposits Political transition after 1990 Modernise the industry Result: leaner, more focused, more competitive and internationally active industry Major transformation challenge remains Continues to be a highly successful cluster in South African economy Most major minerals have experienced long-term growth Mining is a significant contributor to employment creation, rural economies and regional (SADC) development

Large, expanding industries MINING IN SOUTH AFRICA Hidden inside SA’s aggregate mining statistics are large, expanding industries Production: coal, PGMs and chrome sectors have doubled in size since 1980 During the same period, mining other than gold, grew faster than the rest of the economy World-class support industries (electricity, chemical, engineering) Large, expanding industries

MINING IN SOUTH AFRICA South African reserves and production in key minerals 1998 (% of world) (1) Manganese (1) Chrome ore (1) PGMs (1) Vanadium (1) Gold (1) Alumino-silicates (1) Titanium minerals Vermicullte (2) (2) Zirconium minerals (3) Fluorspar (4) Uranium (4) Antimony (5) Coal (5) Nickel Iron ore (8) Reserves (6) Zinc Production (9) Phosphate rock 10% 20% 30% 40% 50% 60% 70% 80% Source: Chamber of Mines

60% of South Africa’s exports MINING IN SOUTH AFRICA 60% of South Africa’s exports Mining and related beneficiation accounts for over half of SA’s exports Mining remains the most important earner of foreign exchange Growth in manufacturing exports is based on mining activities

MINING IN SOUTH AFRICA Extent of beneficiation Beneficiation process % of production % of exports beneficiated beneficiated Antimony concentrate to antimony troxide 65 80 Chrome ore to chromium alloys 57 71 Copper concentrate to copper metal 92 89 Iron ore to iron and steel 30 15 Manganese ore to manganese metal and 49 43 alloys Nickel matte to nickel metal and sulphate 100 100 Phosphate concentrate to phosphoric acid 52 37 and phosphatic fertilisers Zinc concentrate to zinc metal 100 100 Diamond sorting/valuing to cutting/polishing 100 52

Composition by sector of South African export earnings MINING IN SOUTH AFRICA Composition by sector of South African export earnings

Source: Minerals Bureau MINING IN SOUTH AFRICA Africa 1% Export destinations for SA’s processed minerals South America 2.5% North and Central America 28% Europe 38% Pacific Rim Middle Countries East 25.8% 4.8% Source: Minerals Bureau

Percentage contribution to GDP by sector: MINING IN SOUTH AFRICA Percentage contribution to GDP by sector: 1975 - 1998 Mining / manufacturing is inter-related

Source: SA Reserve Bank MINING IN SOUTH AFRICA Contribution to mining GDP, 1998 Gross fixed capital formation continues to be significant Large portion of capital investment in SA over past decade has been into the minerals complex (Alusaf, Columbus, RBM, Saldanha Steel, Sasol, etc) Coal PGMs 21% 27% Diamonds Gold 7% 45% Source: SA Reserve Bank

Principal ally against poverty MINING IN SOUTH AFRICA Principal ally against poverty For five million South Africans, mining is the principal ally against poverty Latest census - one in seven men with a formal sector job in 1996 employed in mining industry Mining industry is the conduit for money and opportunity to some of the poorest areas in Southern Africa

Principal ally against poverty MINING IN SOUTH AFRICA Principal ally against poverty 1996 population census - more than one sixth of the aggregate income of wage earners is derived from mining in 56 magisterial districts These 56 districts are SA’s “mining nation” These areas include poor rural districts from which mine workers are recruited. Total population of these areas is 5,7 million: on average, more than a quarter of all income earned by men is earned from mining

Principal ally against poverty MINING IN SOUTH AFRICA Principal ally against poverty 4 8 K i l o m e t r s R u s t e n b u r g K r i e l J o h a n n e s b u r g O b e r h o l z e r P e r c n t o f a l i m L s h 4 % 8 1 6 3 2 M

Proportion of workers at various formal education levels MINING IN SOUTH AFRICA Proportion of workers at various formal education levels New mine workers 30% 20% Less than primary 10% Matric 0% 85 90 95 98 Source: Chamber of Mines

Employees on Chamber of Mines gold mines MINING IN SOUTH AFRICA Employees on Chamber of Mines gold mines 95,000 Unskilled wages 20,000 90,000 15,000 Skilled wages Rands per annum Unskilled wages Rands per annum 85,000 10,000 80,000 Skilled wages 5,000 75,000 1970 1980 1990 1998 Source: Chamber of Mines

MINING IN SOUTH AFRICA Sector 1970s 1980s 1990s Average Average Contribution of direct taxes to the government revenue (per cent of total revenue) Sector 1970s 1980s 1990s Average Average Average Coal 0,29 0,52 0,60* Gold & uranium 10,02 12,51 1,13 Diamonds 1,45 0,56 0,09 * 1990’s figure includes coal and other mining

Key to economic development MINING IN SOUTHern AFRICA Key to economic development Over last 20 years, two major economic shortcomings have forced African economies to depend on multilateral aid agencies: 1. Owing to inability of governments to generate tax revenues, African countries have saved at less than half the rate of other developing countries. cont….

Key to economic development MINING IN SOUTHern AFRICA Key to economic development 2. With limited exports, less foreign exchange to purchase machines and computers required for export-led growth. Root cause of this: political instability, weak institutions, poor policies Mining can play a critical role in Africa’s economic renaissance

MINING IN SOUTHern AFRICA Key to economic development Tanzania Zambia Zimbabwe Mozambique Namibia Botswana Key to economic development in southern Africa South Africa

MINING IN SOUTHern AFRICA Recent mining FDI* in selected SADC countries 1995 - 1999 (US$ millions) Source: Business Map/SACS - FDI database FDI : Foreign direct investment

South Africa is well positioned MINING IN SOUTHern AFRICA South Africa is well positioned SA mining companies are leading the resurgence of mining activity in the region Extensive African exploration is underway Johannesburg may reclaim position as global centre of mining technology, specialist services and supplies It is estimated that half of investment made in large-scale projects in southern Africa is returned to SA through purchase of services and supplies

South African firms are at the centre... MINING IN SOUTH AFRICA South African firms are at the centre... SA provides sophisticated inputs and services to the global mining industry SA firms have become globally prominent in three areas: 1. Technology providers 2. Providers of knowledge- based mining services 3. Specialist mining contractors

Conclusion / looking forward MINING IN SOUTH AFRICA Conclusion / looking forward The contribution of mining to the economy must be seen as coming not only from mining operations, but also from upstream and downstream activities and the huge multiplier effects the industry has at economic, social and political levels Mining represents the most successful “cluster” in SA’s economy