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MINING STRATEGY UPDATE
AECI LIMITED
15 NOVEMBER 2011
PROGRAMME
08:30 Arrival and refreshments
09:00 Introduction and AECI overview Graham Edwards
09:30 AEL Mining Services strategy review Tobie Louw
10:30 Tea
11:00 Mining chemicals strategy review Mark Dytor/Theunis Botha
12:00 Safety briefing Frans Labuschagne
12:15 Lunch (dry)
13:00 Depart for Senmin site
15:30 Return to Emerald Resort
3
OVERVIEW
INTRODUCTION AND AECI OVERVIEW
• Introduction to the team
• An overview of drivers of growth – not a trading update
• Mining in context for AECI
• Heartland valuation discussion
• B-BBEE transaction
• Economic outlook
• AEL presentation
4
MINING SECTOR IN CONTEXT
• 51% of revenue in ’10 • Core to strategy going forward • Expanding geographic footprint
beyond SA • R1,8bn investment in 3 years
– Specialty chemicals R1,1bn – Explosives R695m
• Plants mechanically complete and pleasing ramp-up overall
5
HEARTLAND
Ha Value (R000/s)
OMIGPI Remarks
TOTAL LAND VALUATION 4 165 2 445 280 Valuation date – May ’08
SOMERSET WEST ADJUSTMENTS
Somerset West original landholding 1 110
Disposal to end-’08 324
Somerset West (Gross area for development) 786
Adjusted Gross to Net (341) (infrastructure and environmental)
TOTAL SOMERSET WEST LAND VALUATION 445 450 000 Net rate of R101/m2
6
Note: Gross area at SW valued by OMIGPI 715 450 000 Gross rate of R63/m2
HEARTLAND
Ha Value (R000/s)
OMIGPI Remarks
MODDERFONTEIN ADJUSTMENTS
Modderfontein original landholding 4 236
Disposal to end-’08 882
Modderfontein (Gross area for development) 3 354
Currently NOT surplus to operations (934) (262 500)
Modderfontein Reserve (275) (159 500) Gross rate of R58/m2
Adjusted Gross to Net (785) (infrastructure and environmental)
MODDERFONTEIN LAND SUB TOTAL 1 360 1 468 800 Net rate of R108/m2
Deduct for Investment Portfolio (116) (260 000) Land hectares, income valuation
MODDERFONTEIN ADJUSTED TOTAL 1 244 1 208 800
7
Note: Gross area valued by OMIGPI 3 450 1 995 280
HEARTLAND
• Demand for property remains weak • “Property clock” in “minimal
construction” area
• Heartland updating Old Mutual valuation of May ’08
• New business models for Heartland and different approaches for land sales continually evaluated
• Evaluation process driven by considerations of:
– Risk vs return, and
– Liquidity vs value
• Significant sales of land not expected this year
B-BBEE TRANSACTION
• Announced 26 July
– R1,1bn: EST and CST – 27,4% B-BBEE equity ownership
• Full terms announcement published 13 October • Record date to be eligible to vote at General Meeting 18 November • Last date to lodge forms of proxy 13:00 on 22 November • General Meeting of Ordinary Shareholders 13:00 on 24 November
– Participation by conference call possible • Results of General Meeting released on SENS 24 November • Expected listing of new Ordinary Shares on JSE on/about 2 December
ECONOMIC OUTLOOK
• Despite political resolve, conclusion of European debt crisis risk will still involve increasing levels of unwanted turmoil
• Developed world domestic markets will persist with limited investment and basic
employment levels in the face of austerity measures, bank recapitalisations and/or limited-effect government stimuli
• Chinese economic management now complex: limiting inflationary escalations while guarding against a potentially catastrophic housing-centered credit crisis will require dynamic management
• A shift to normality will depend on significant social-political and economic changes around the globe. Progress to sustainable stability likely to be painful and slow
AEL Mining Services Investor Presentation 15 November 2011
WEALTH UNEARTHED
Contents
• Dimensioning
• Strategy
• Global Scene
• South African Business
• Africa Business
• International Business
• Operating Platforms
• Innovation Value
AEL Mining Services - Dimensions
• Established 1896
• Revenue over USD700 million
• No. 1 in Africa
• Head office – Johannesburg
• Over 80 locations internationally
• Over 4 000 employees and contractors
• Full product range and technology offering
• Experienced in all key mining sectors
• Active investment in research and development
ASSETS AMMONIUM NITRATES PLANTS, BULK EMULSION PLANTS, INITIATING SYSTEMS PLANTS AND ON-MINE SITE DELIVERY SYSTEMS
Customer Value – safety, unit cost, speed, environment
SHE Commitment
AEL Group Employees TRIR
Focus • Safety and Health • Environmental impact reduction
Strategy
AEL Mining Services AEL Mining Services
`
Africa Southern Africa
International
Leveraging AEL’s Africa leadership position and international brand for multi-regional growth: • South African value
• Africa expansion
• International start-ups
• Effective operating platforms
• Innovative value
Total Business Shape and Drivers
Key Drivers • Region • Commodity • Mining method
Platinum29%
Coal20%
Gold14%
Industrial Nitrates
11%
Quarry, construction &
Civil8%
Diamonds5%
Copper, Cobalt, Chrome, Nickel
4%
Iron Ore4%
Other5%
Sectors
-
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
2006 2007 2008 2009 2010 2011
Indicative Business Splits Jul 2011
SA revenue Africa revenue Int revenue
-
2 000 000
4 000 000
6 000 000
2006 2007 2008 2009 2010 2011
Indicative Product Group Splits Jul 2011
Other (Incl ROG) revenue IS revenueExplosives revenue
General Economic Perspectives
• Debt crisis risk will still involve an increasing level of unwanted turmoil
• Limited investment, austerity measures, bank recapitalisations, limited-effect government stimuli
• Chinese economic management complex: Limiting inflationary escalations, potentially catastrophic housing centered credit crisis, demand remains positive
• Shift to normality will be dependent on significant social-political and economic changes around the globe, sustainable stability is likely to be painful and slow
Mining Industry Economic Perspectives
• Growth favouring established mining areas and politically stable regions and where ore grade really favours it
• Mining industry will respond by mining higher grade ores on existing mines wherever possible
• Realignment among mining houses likely to continue
• State mining companies and/or state participation in mining investments is set to escalate
Mining Industry Economic Perspectives
• Despite good growth potential and healthy balance sheets, uncertain future will weigh heavily on large capital investment decisions
• Expansion of recent years and project lead times likely to restrain investment levels in the short term
• Possible exception is coal, where the future of alternative energies might encourage early exploitation of opened reserves
• Larger mining houses will continue to broaden their resource portfolios given any opportunity
• Mining volume long-term rate of 1,6% per annum, short-term growth likely at 4,4%. Africa growth estimated at 6% to 12%
Sector Growth Potential
Metals Favourable economic circumstances in recent past have resulted in high exploration activity and the mining pipeline being filled with potential projects
Coal High energy demands, high oil prices, poor (current) economics of alternative energies and uncertainty around nuclear power have seen coal demand grow Source: Raw Materials Database, September 2011 se, September 2011
AEL South African Business
Dimensions • Largest explosives supplier • Over USD380 million revenue • Over 500 people directly supporting
customers • Full service offering • Surface mining is largest – value add • Underground mining – safety and
efficiencies • Mining sector-focused business units • Lead innovation
June 2011 Sectors
Platinum
Coal Gold
Other
Infra- structure
Wholesale Iron Ore
Diamonds Manganese
June 2011 Sectors
Platinum
CoalGold
Othher
Infraa-struccture
WWholesaleIron Ore
Diamonds Manganese
AEL South African Business
Narrow reef shock tube market conversion • Completed – product performing well • Some capped fuse for other markets
Business balance enhanced • Mining sector and product group splits good
Improved optimisation and electronics • New generation electronics and new centralised
underground blasting control system launched
Bulk emulsion explosives systems • Cutting edge underground solutions and systems • Further enhanced and cost reduced surface bulk
Supply and capacity • Ammonia supply and logistics • Customer positions strengthened, new volume
growth
Shock Tube
Electronic Detonators
Underground Bulk Explosives
Mobile Manufacturing Units
S
AEL Africa Business Outside of South Africa, Lesotho, Swaziland and Namibia
Dimensioning AEL Africa: • In Africa since 1970s • Revenue over USD220 million • Over 500 people • 6 focused regions • Over 12 countries
West Africa
North Africa
Africa - Development
East Africa
Central Africa
Botswana, Zimbabwe,
Mozambique
Africa Complexity and Potential in Perspective
Source: AEL Mining Services projects database, September 2011
Africa Infra Structure Growth Requirements
Source: IFR 2010
Source: IFR 2010
Africa Infrastructure – Rail Logistics
Source: Bullock 2009
AEL Africa Business Outside of South Africa, Lesotho, Swaziland and Namibia
Dimensioning AEL Africa: • In Africa since 1970s • Revenue over USD220 million • Over 500 people • 6 focused regions • Over 12 countries
West Africa
North Africa
Africa - Development
East Africa
Central Africa
Botswana, Zimbabwe,
Mozambique
AEL International Business Off the Africa continent
Dimensions • Over USD70 million
revenue
• Selling in over 10 countries
• 2 Regional offices
• Over 400 people
• 4 Channel partners
• 10 Plants
- Bulk and assembly
`
Africa Southern Africa
International
`
Africa Southern Africa
International
AEL International Business - Focus
Key Focus Areas • South East Asia – Indonesian hub • Latam - channels • Europe and Scandinavia channels
Growth • Good • Shaping AEL’s offering and
appeal • Organisational capability
enhanced • Gaining sound international
perspectives and experience
AEL International - Indonesia positions
AEL Indonesia HEAD OFFICE
Dahana’s AEL STA Plant, Subang
THIESS MELAK COAL PROJECT – Q4 09
THIESS
BUMA GBP COAL PROJECT – Q4 09
AEL Indonesia Balikpapan Office
KPC Sangatta COAL PROJECT – Q4 09
PETROSEA GBP COAL PROJECT - Q2 10
AEL Indonesia
LCI MSJ PROJECT – Q1 11
Indonesian Coal - Exports driven. Growth estimated at 6% to 8%
BUMA
KPC Bengalon COAL PROJECT – Q4 09
LCI MSJ PROJECT –
PETROSEA SB COAL PROJECT - Q4 10
Source: AEL Mining Services projects database, September 2011
AEL International Business - Indonesia
Indonesia • Regional ammonium nitrate
supply extended and diversified
• KPC contract extended - secured new growth
• Seven mine sites operational • Positioned for enhanced coal
growth from 2012 • Supply chain settling
Increased local ammonium nitrate capacity coming on line • Strengthened customer
positions, value offerings
Source: AEL Mining Services projects database, September 2011
AEL International - Investment
• AEL capital investment R158m since 2008 • 6 emulsion manufacturing plants • 16 mobile manufacturing units • Support infrastructure for 7 mine sites
• Shock tube assembly plants in the UK, Chile, Peru and Jakarta will
assemble in excess of 12 million units in 2012 • Deployed 9 UBS units into Europe • Explosives volumes increased to in excess of 100 000 tons in 2012 • Staff complement in excess of 400 people
• Investment in channel partnerships
• Contracts, relationships and joint market development • Product and technology roll out
Effective Operating Platforms
South African Operations • South African Nitrates Complex • South African Initiating Systems
Complex • Remote Sites • Compliance and commitment Services • Multi-regional orientation • Remote deployment is key • Retain strong focus locally • Competitive positioning and risk
management
Aerial View of the ISAP Complex, Modderfontein, Johannesburg
ISAP Update - Initiating Systems Automated Plant
Aerial View of the ISAP Complex, Modderfontein, Johannesburg
ISAP
Capital Progress
• All 3 main plants running and handed over
• All ancillary plants fully operational
• Capital project will be closed by end 2011
• Total final capital cost remains R695 million
Ramp up
• Shock Tubing Plant - exceeding expectation for over a year
• Detonator Plant - new record with over 10 million per month proven capacity in Sep 2011 - targeting 12 mill - inventories at required levels - further product range development work given priority
• Auto-Assembly Plant - new record at 2 million assemblies per month, targeting 5 as main focus. Quality meets expectation and customer satisfaction high
• Semi-automated assembly cells upgraded and enhanced, cost benefits
ISAP continued
Largest single market conversion ever • Project started in 2006 to address pending mass shock tube market
conversion
• Most ambitious AEL project, market, technology and plant wise
• Highest level of technology and safety features internationally
• Up at 70% ramped up on average across the plants
• Original retrenchment phasing delayed - fire on conventional plant, strike, exports growth
• Expected total 2011 retrenchments to be c. 500 people
• Progress made on R10 million per month saving but bulk still to come
• Plant will be fully loaded
• Project returns softened, volume demand lower than original model
Customer Focused Innnovation
AEL’s four value propositions � Improved Mining Safety � Improved Mining Optimisation
� Improved Security of Supply � Buying the Future
AEL’s First “Vertical Drop” Underground Emulsion Solution
Surface Portal
Underground storage tank
Underground mobile unit
Graphic representation of Vertical Drop
Above ground portal
Thank You
42
SPECIALTY CHEMICALS
SPECIALTY CHEMICALS STRATEGIC OBJECTIVES
Southern Africa and Africa • Optimise current business
– Sales, margins, costs – Cash generation – Organic growth, agencies, bolt-on acquisitions – Sell new project capacities (PAM, xanthates, surfactant)
• Acquire new businesses (R250m ytd ’11) – T&C Chemicals ImproChem/SAPC (Feb) – Qwemico: Agricultural chemical distribution Plaaskem (March) – Cobito remaining 20% Lake (July) – Croxton: Bulk caustic soda business Crest (Sept) – Sunbird (Instavet and CombiPharm) Chemfit (Nov) – A major food additive company Lake (final Board approval) – GE water (Africa distribution agreement) ImproChem (Nov)
43
SPECIALTY CHEMICALS STRATEGIC OBJECTIVES CONT.
• Expand appropriate businesses into Africa – Senmin mining chemicals – Chemicals cluster
• Markets of interest – Mining chemicals – Water, energy, oil, gas – Food additives – Agriculture – Green chemistry
• International expansion – Brazil being evaluated
44
SPECIALTY CHEMICALS REVENUE BY MARKET SECTOR (1H11)
45
Mining 23%
Agriculture 10%
Food & beverage 9%
Chemical industry 7%
Paper & packaging 6%
Oil & refining6%
Coatings, ink & adhesives 5%
Detergents 5%
Automotive 5%
Other 24%
Toiletries, cosmetics, pharmaceuticals 5%
Explosives 5%
Plastics & rubber 4%
Construction 2%
Appliances & furniture 2% Engineering & foundry 1% Textiles & leather 1% Steel & metals 1%
Various other 3%
R3,3bn
STRATEGY MINING CHEMICALS
• Market – Large, expanding and exciting
– Target: Africa, Australasia, South America
– Value added minerals: Au, diamonds, Cu, PGMs, uranium, nickel
• Value added model (full service) – Total chemical reagent package
– High technical service
– Capital investment at customer sites
• Supply chain – Strategic raw material supply and production capability (capital investment)
• Technology chain – Continual development of in-house technology
– Fill the gaps in technology basket
– New technology for the future
MINING INDUSTRY TOTAL CHEMICAL SOLUTION
MINING CHEMICALS REVENUE
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
'03 '04 '05 '06 '07 '08 '09 '10 1H11
Ran
d
CAPITAL PROJECT REVIEW
R1,1bn investment • Guar plant
– Brought on line 3Q08 – Capacity of 14 000t/a verified
• CS2
– Brought on line 3Q09 – Capacity of 20 000t/a verified
• PAM – Brought on line 3Q10 – Capacity of 20 000t/a verified
• Dry xanthate capacity – Ramp-up continues – Targeting 16 000t/a of xanthate pellets
49
Mining chemicals update Senmin
Agenda
� Introduction
� Business model
� Strategy
� Capital projects
Supply specialty chemicals to mineral concentrators, mainly for …
� Flotation � Collectors � Frothers � Depressants
� Tailings treatment � Flocculants
Chemical basket – reagents
� Xanthates
� Specialty collectors
� Formulated surfactants (frothers)
� CMC/guar polymer depressants
� Polyacrylamide (PAM) waste thickening polymers
� Tailings polymer rheology modifiers
Business model
Engagement with customers
� Transactional � Commodity trading
� Consultative
� Technical advice
� Full service � Seamless application
Consultative model
� Technical advice
� On-site product and process evaluation
� Ore sampling and metallurgical evaluations
� Product optimisation and development
� Bench scale and pilot plant evaluations for feasibility studies
� Trials and statistical evaluation
� Data validation and reports
� Contractual agreements and commercial terms
Full service model
� Seamless application
� Manage reagents
� Optimise process
� Install and manage equipment
� Staffing on concentrator
� Health and Safety
� Customer management reporting
Reagent control for full service model
168
229 234
211
147
174156
171 172 179
230
159168 166
128
44
175 171
144 152
126
180
229
186167
195
165182 186
178
141158
177
0
50
100
150
200
250
Ja
n-0
5
Fe
b-0
5
Ma
r-0
5
Ap
r-0
5
Ma
y-0
5
Ju
n-0
5
Ju
l-0
5
Au
g-0
5
Se
p-0
5
Oc
t-0
5
No
v-0
5
De
c-0
5
Ja
n-0
6
Fe
b-0
6
Ma
r-0
6
Ap
r-0
6
Ma
y-0
6
Ju
n-0
6
Ju
l-0
6
Au
g-0
6
Se
p-0
6
Oc
t-0
6
No
v-0
6
De
c-0
6
Ja
n-0
7
Fe
b-0
7
Ma
r-0
7
Ap
r-0
7
Ma
y-0
7
Ju
n-0
7
Ju
l-0
7
Au
g-0
7
Se
p-0
7
TARGET 175BP 2009
SIBX BULK LIQUID GRAMS PER TON MONTH
179 176193 187
172 173
224210
189175
183 177 176 176 177 175 175 172 176 176 175 176189
0
50
100
150
200
250
Se
p-0
7
Oc
t-0
7
No
v-0
7
De
c-0
7
Ja
n-0
8
Fe
b-0
8
Ma
r-0
8
Ap
r-0
8
Ma
y-0
8
Ju
n-0
8
Ju
l-0
8
Au
g-0
8
Se
p-0
8
Oc
t-0
8
No
v-0
8
De
c-0
8
Ja
n-0
9
Fe
b-0
9
Ma
r-0
9
Ap
r-0
9
Ma
y-0
9
Ju
n-0
9
Ju
l-0
9
TARGET 175BP 2009
SIBX BULK LIQUID GRAMS PER TON MONTH
234234234234234250250250250250
T Before
250250250250250250
T After
Benefits
� Yield improvements and plant stability
� Enhanced business for supplier
� Provide stable platform for trials
� Further extraction opportunities – better grade and recoveries
� Industry standard service model
� Win-win
� Improved relationships
Integrated bulk supply – all reagents
Strategy
Geographic market
West and North Africa
Morocco
Mauritania
Mali
Burkina Faso
Sierra Leone
Ivory Coast
Ghana
Egypt
� Mostly gold flotation plants � Major customers
� Adamus � Anglogold Ashanti � Golden Star � Goldfields � Newmont � Redback
East Africa and Islands
� Uranium in Malawi
� Gold in Tanzania
� Coal in Mozambique
� Nickel in Madagascar
� Some new projects in the region
Zimbabwe
� Great Dyke � Platinum at Mimosa, Ngezi and Unki � Exciting future with expansion of Ngezi
from 2 to 4 million t/a milled
Central Africa – Zambia
� Mainly copper � Total copper production in
Zambia: 900 000t/a � Established mines, new
concentrators added recently
Central Africa – DRC
� Copper and cobalt � Multinationals
� ENRC � Forrest � Freeport McMoran � Glencore � Metorex
� Many oxide leach plants that use no reagents, but some treating sulphide and mixed oxide sulphide ores
� Total copper production: 450 000t/a
Namibia and Botswana
� Namibia � Rossing Uranium � Langer Heinrich Uranium � Exploration projects in gold and copper � Mainly flocculants business
� Botswana
� Beside diamonds, gold and copper already established
� Interest now in Maun area � New diamond deposits
Capital projects
Projects identified - 2006
Project Need
Guar depressants Import replacement
Carbon disulphide (CS2) Raw material
Xanthate formulations Expansion
Flocculants (PAM) Import replacement
Xanthate pellets Export potential
Investment rationale
Growing local demand from ’06 for reagents
Limited CS2 capacity - key raw material for xanthates and specialty collectors
Old CS2 technology replacement
Opportunity to develop basket of products
� Depressants
� Specialty collector formulations
Opportunity to participate in growth into Africa
� Excess CS2 utilisation for solid xanthate expansion
� Anticipated demand for PAM and capacity constraint
Volume growth and new capacity
90
100
110
120
130
140
150
160
170
180
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2006 2007 2008 2009 2010 2011
Sales volume index (’06 = 100)
Gu
ar plant
Carbon disulphide
PA
M
Xanthate pellets
Natural polymer process plant complete - Guar
Natural polymer conversion
� Technology developed in-house
� Need functional chemical to be added
� Chemically-modified natural
polymers, eg. guar and wood pulp
� Carboxymethylcellulose � Guar � Other natural gums
� Find application in local mines for specific type of ore (mainly platinum)
Depressants Volumes and anticipated demand
0
50
100
150
200
250
300
'06 '07 '08 '09 '10 '11 '12 '13 '14
Import
Local
Sales tons index (’06 = 100)
Xanthate formulations
� Supplied as bulk liquid product
� Intrinsically safe handling of a hazardous material
� Key raw materials
� CS2 � Alcohols
� Developed specifically for local market
� Limited shelf life/transportability
Xanthate formulations Volumes and anticipated demand
CS2
� Design: 20 000t/a
� Methane-based
� High pressure European technology (only unit in Africa)
� Sulphur recovery plant
� Reduced SO2 emissions and electricity consumption
� Completely self-sufficient
� No imports required
CS2 Volumes and anticipated demand
0
50
100
150
200
250
'06 '07 '08 '09 '10 '11 '12 '13 '14
Import
Local
Sales volume index (’06 = 100)
Xanthate pellet plant
Xanthate pellet plant Reactor installation
� Completed ’10
CS2
Alcohol
Caustic
Xanthate pellet plant Process and new drier installation
Xanthate pellets
� Reaction technology developed in-house
� Improved stability for exports beyond Africa
� Various grades developed for different applications
� Specialised dry state technology in early stage of development
Solid xanthate Volumes and anticipated growth with additional pellet type
PAM
� BASF joint venture
� New biotechnology
� Only unit in Africa
� Local utilities - steam
� Continuous production
� Energy efficient
Fermentation plant completion
PAM plant completion
Flocculants (PAM) Volumes and anticipated demand
Senmin Total volumes and anticipated growth with available capacity
Key success factors
� Modern production technology
� Economies of scale
� Availability of raw materials
� Competitive cost
� Met required hurdle rate
� Sufficient capacity for growing demand
� Market acceptance
Investment in capacity
� Right time � Global demand for resource extraction � Growing water scarcity in mining
� Right scale
� World scale in terms of size � Adequate state-of-the-art technology
� Right place
� African commodity renaissance � Raw materials availability
Certifications
Safety
Furnace
Emergency flare Incinerator
Distillation Waste heat boiler
Claus sulphur recovery
CS2 storage
Methane feed
Cooling/ chilling
CS2 plant Schematic layout
PAM plant Schematic layout
Utilities
Tank Farm
Cooling tower
Monomer make-up Bioconversion
Sieving, grinding & bagging
Laboratories & fermentation
Reactors Drier
Acrylamide Acrylic acid Acrylonitrile
Caustic effluent
Warehouse (not shown)
Visitors’ emergency procedures
� Main siren � Intermittent alarm for 15 seconds Internal emergency � Continuous alarm for 30 seconds Off-site emergency � Intermittent alarm for 15 seconds Emergency call-off
� Announcement � The emergency is announced over the intercom system by Security Department
� Action � Follow instructions of the responsible person to gather at closest emergency
assembly point � Cell/mobile phones
� When visiting the plant, cell/mobile phones must be switched off or left in the bus
Aerial view Production site, Sasolburg Enjoy the tour
Right place Right scale Right time
