Slide 1Opportunities in the Resource Industry Dr Con Fauconnier Chief Executive Kumba Resources Limited The New Minerals Legislative Framework in South Africa: Opportunity or Threat ? Sasfin Frankel Pollack Securities’ Asset Management Forum Sandton Sun 20 August 2003

Slide 2Opportunities in the Resource Industry CONTENTS Opening remarks The legislative environment Specific requirements of the Mining Charter How does/will Kumba achieve the objectives of the Charter? Is the market overreacting? Conclusion

Slide 3Opportunities in the Resource Industry Introduction / Opening Remarks The mining legislative environment has changed significantly Corporate governance and sustainable development pressures are increasing Management’s responsibility towards the company : recognise the legitimate interests of all stakeholders. Redressing imbalances of the past in South Africa is a business imperative for long term sustainable value The Sustainable Development imperative created the framework for the current legislation. Kumba is fully supportive of the MPRDA – our business philosophy and culture fully aligned with the fundamental principles of the Act and its associated Charter.

Slide 4Opportunities in the Resource Industry Mineral And Petroleum Resources Development Act Objects of the Act: Equitable access to mineral resources Expand opportunities for HDSA’s to enter and benefit from minerals industry Promote employment and economic welfare Socio-economic development of mining areas

Slide 5Opportunities in the Resource Industry Mining Charter / Scorecard / Royalty Bill Charter, required in terms of Sect. 100 of the Act, deals with: Human resource development Employment equity Migrant labour Mine community and rural development Housing and living conditions Procurement Ownership and joint ventures Beneficiation Scorecard Administrative tool to give effect to Mining Charter Mineral and Petroleum Royalty Bill Will regulate royalty payments

Slide 6Opportunities in the Resource Industry How Do We Achieve The Objectives? Human Resource Development Charter / Scorecard : Every employee be given the opportunity to be functionally literate by 2005 Career paths for HDSA employees, including skills development plans Mentoring systems for empowerment groups Scholarships and more learnerships for HDSA’s Kumba Philosophy: People development is a sine qua non for long term success Kumba in Practice: Company sponsored, voluntary ABET programs at all mines – since 1992 Bridging school : 25 learners per year to prepare for tertiary education Since 1995 – 202 learners (Maths = 101 A’s, 45 B’s ; Science = 125 A’s, 56 B’s) Currently : 125 bursaries - 62% HDSA Kumba trains 24% of all apprentices in the SA mining industry Investment in HRD is 6.2% of payroll, well above industry and national norms

Slide 7Opportunities in the Resource Industry How Do We Achieve The Objectives? Employment Equity Charter / Scorecard : HDSA’s in management: 40% within 5 years Identify and fast-track talent pool Women in mining: 10% within 5 years Kumba Philosophy: Not only do we have a responsibility to correct the legacies of the past, unlocking this vast untapped resource pool is also a long-term strategic imperative Kumba in Practice: Measured and evaluated quarterly up to Board level HDSA’s specifically catered for in succession planning and development processes Current HDSA’s: All management categories – 20% General Managers – 33% Board – 27%, including Chairman Women – 10%

Slide 8Opportunities in the Resource Industry How Do We Achieve The Objectives? Migrant Labour Charter / Scorecard : Non-discrimination against foreign migrant labour Kumba Philosophy: Equal opportunity for all employees in Kumba Kumba in Practice: No discrimination against any foreign migrant worker Very few foreign migrant workers employed (6 in workforce of 9800) Emphasis on recruitment of local people

Slide 9Opportunities in the Resource Industry How Do We Achieve The Objectives? Mine Community and Rural Development Charter / Scorecard : Integrated development plans co-ordinated with government for mining communities and major labour sending areas Kumba Philosophy: Social stability and welfare where we operate have tangible long-term business benefits Sustainability of communities after cessation of mining operations Kumba in Practice: Integrated development plans for Thabazimbi, Mutale, and Vhembe Councils and Kgalagadi Development Node (4 municipalities) Kumba projects: Deben Hostel, Tshona Leather Craft & Tannery, Kgalagadi charcoal project, Tshipi and Ditirileng skills training centers, SMME business centers, Focus areas: HIV/AIDS, Environment, and Education, especially maths, science, etc. Skills training and ABET provided for unemployed Skills training for government institutions.

Slide 10Opportunities in the Resource Industry How Do We Achieve The Objectives? Housing and Living Conditions Charter / Scorecard : Improving the standard of housing, upgrading of hostels, conversion of hostels to family units and home ownership options for mine employees Kumba Philosophy: Home ownership a key element in the upliftment of our own employees and the surrounding communities Kumba in Practice: Company housing policy focusing on home ownership employees (35%) still live in hostels employees assisted to become owners of company housing Further housing units available for home ownership over 4 years Sishen developing more than 500 new low cost family units All hostels converted to family-type units by 2008

Slide 11Opportunities in the Resource Industry How Do We Achieve The Objectives? Preferential Procurement Charter / Scorecard : Has the company given HDSA’s preferred supplier status? Has the company identified current level of procurement from HDSA companies and shown commitment to a progression of procurement from HDSA companies over a 3 – 5 year time frame? Kumba Philosophy: Kumba has had policies in place since 2001 and believe this to be one of the most effective areas for broad-based empowerment. Kumba in Practice: Co-founder of SA National Preferential Procurement Forum FY 2002: R40 m FY 2003: R125 m FY 2004: R600m (est.) – 15% of discretionary spend

Slide 12Opportunities in the Resource Industry How Do We Achieve The Objectives? Ownership and Joint Ventures Charter / Scorecard : HDSA ownership for equity or attributable units of production of 15% in HDSA hands within 5 years and 26% in 10 years  Most visible Seemingly glamorous Has some merit…. BUT Has inherent difficulties if it is only an exercise to slice the existing pie in different ways, particularly if acquisition of a slice for HDSAs is funded with debt

Slide 13Opportunities in the Resource Industry Sustainable empowerment transactions need to be based on value- growth propositions: Investment in the underlying assets Grow the size of the pie  New projects in underlying assets – value through growth curve  Synergies – share synergy benefits disproportionately  Value add by HDSAs eg. new markets  New reserves – source of participation by HDSAs Farm-in arrangements  Employee ownership schemes  Subcontracting arrangements Facilitation required by companies Joint approach to banks Guaranteed by companies’ balance sheet Returns on sustainable empowerment transactions will take time How Do We Achieve The Objectives? Kumba Philosophy:

Slide 14Opportunities in the Resource Industry Empowerment Progress At Kumba Kumba in Practice: 4.8% equity stake by Tiso-Kgalagadi Consortium (R 400m)  Tiso Capital  Northern Cape Mining Partnership  Nozala Investments  J&J Group  Other 50/50 development of Kalbasfontein Coal Mine with Eyesizwe Coal – MOU Sishen South – Tiso-Kgalagadi + Others Heavy Minerals – 20% stake : Tiso + Others (KZN) Zinc – Rosh Pinah Mine: X % Namibian Interest

Slide 15Opportunities in the Resource Industry How Do We Achieve The Objectives? Beneficiation Charter / Scorecard: Has the mining company established its base line level of beneficiation and indicated the extent that this will have to be grown in order to qualify for an offset? Clarity on the definition and qualifying criteria is still outstanding. Kumba Philosophy: Kumba beneficiates only where it can add value. Kumba in Practice: Cost-plus supply agreements with Iscor aligned with this principle ZnERGY zinc-air fuel cells Atomised ferro-silicon

Slide 16Opportunities in the Resource Industry ROYALTIES The Royalties Bill Based on Revenue Different rates for different mineral resources The Risk Although the State’s right to impose royalties is recognised, this is an added fixed cost to existing mining operations and new projects, threatening the objectives of the MPRDA :- employment and new jobs - sterilisation of ore bodies - competitiveness and investments The Opportunity. Based on profits Offset the royalties against investments in broad–based socio-economic transformation projects and other requirements of the charter

Slide 17Opportunities in the Resource Industry Kumba Share Price Performance Weakening of Rand Intensive buying by Anglo Mining Charter leaked Strengthening of Rand Royalty Bill Control premium disappeared SA cents Is The Market Overreacting?

Slide 18Opportunities in the Resource Industry Opportunity Or Threat? Conclusion: What is required, is: A long-term view of the company’s future A broad view of the company’s role in broader society Against this background: There are costs but, if handled correctly, there are more oppor- tunities than threats in the current transformation legislation But: We all need to work together with hearts, hands and minds

Slide 19Opportunities in the Resource Industry