PROSPECTS FOR THE SOUTH AFRICAN COAL INDUSTRY

Presentation by Sipho Nkosi

CEO, Exxaro Resources

Coaltrans Europe 2010, Amsterdam

OCTOBER 2010

Disclaimer

Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties.

Changing information or circumstances may cause the actual results, plans and objectives of Exxaro

Resources Limited (the “Company”) to differ materially from those expressed or implied in the

forward looking statements. Financial forecasts and data given herein are estimates based on the

reports prepared by experts who in turn relied on management estimates. Undue reliance should not

be placed on such opinions, forecasts or data. No representation is made as to the completeness or

correctness of the opinions, forecasts or data contained herein. Neither the Company, nor any of its

affiliates, advisors or representatives accepts any responsibility for any loss arising from the use of

any opinion expressed or forecast or data herein. Forward-looking statements apply only as of the

date on which they are made and the Company does not undertake any obligation to publicly update

or revise any of its opinions or forward looking statements whether to reflect new data or future

events or circumstances.

Content

• Whither the SA coal industry?

Covering some of the background and history of the SA

coal industry, The growth of the industry players, aspects of the MPRDA and the Mining Charter and the introduction of BEE players.

• Investment and development in South African coal industry Hopefully shedding light on rail and port status, the future of logistics/infrastructure, the attractiveness of SA as an investment destination, some comments on skills.

• Whither Exxaro?Where is Exxaro growing to?

3

Whither the SA coal industry?

4

SA - rail and port

RBCT port1972 - TCOA contract with JSM - 27 Mt of coal over 10 years

1976 - RBCT Commissioned – 12 Mt/a (rail 4.2 Mt/a)

1979 - Phase II Expansion - 24 Mt/a

1984 - Phase III Expansion - 44 Mt/a

1991 - Phase III Upgrade - 53 Mt/a

1995 - Capacity enhancements - 63 Mt/a

1999 - Brownfields expansion - 72 Mt/a

2008 - Official design capacity increase – 76 Mt/a

2010 – (1 May 2010) design capacity increased – 91 Mt/a

TransFreightRail (TFR) – coal line Approx 2 000 employees operating rolling stock of 7 400 wagons and 235 locomotives Average distance from the Witbank / Middelburg coalfields to RBCT is 600 km TFR contracted in 2010 for 10yrs @ 81MT TFR’s estimation to achieve rail capacity of 91 Mt/a by 2014/15 Capital investment required of approx. US$ 2.8 bn 2009 tariff increase average of 38% (back-dated to July 2008), 2011 similar increase to cover

increased capital costsSource RBCT website and Mining Weekly - 3 September 2010, TFR industry presentation

5

Basic description of SA coalfields

40% of remaining reserves

WATERBERGLimpopo province 75.7Bt or more than

40% of South Africa’s coal resources

Significant coal deposit with good quality

power station and metallurgical coals

Exxaro is the only company mining in this

area. With LOM: > 75 years

Medupi is currently being constructed, one

of the first such new power stations

Challenges – infrastructure, environmental

stewardship

SOUTPANSBERGPotential high quality coal reserve

BUT

Highly disturbed which leads to

difficult mining

HIGHVELDHosts the world’s largest CTL

complex, Producing fuels and petrochemicals.

WITBANKWitbank, main coal producing

Coalfield in SAMajority of the export quality coal is

produced here

ERMELOVariable coal seam thickness and

quality Not significant volumes is of export

quality.

KWAZULU-NATALHistorically a thriving anthracite & coking

coal mining area.

Currently contains reserves which are

small, of generally lower quality and

are difficult to mine.

SA has the potential to remain in coal exports into the future

SA coal – 2000 to Date

Please note: 85% of Domestic sales prices are driven by domestic power coal (+/- 4000kCal)

7

SA coal – 2000 to DateSaleable production per company (2009)

Source: DME

2009 saleable production ~ 249.7 mill tons

Anglo, Exxaro, Sasol, BHP Billiton & Xstrata = 79% of the coal saleable production

Anglo, 24.39

Exxaro, 17.45BHP Billiton, 14.58

Xstrata, 7.20

Sasol, 15.72

Umcebo, 2.45

Stuart, 0.75

Delmas Coal, 0.67

NuCoal, 0.65

Others (24), 3.24

Optimum Coal, 4.50

Shanduka, 3.74

Total Coal, 0.84

Sudor, 1.19

Kangra, 1.25

Vulna, 1.39

Source XMP consulting 2009

SA Coal - BBBEE entry in South Africa

Early empowerment period (1994 – 2000), characterised by: -• Ad-hoc transfer of equity

• Indications of wide-scale privatisations

• National Empowerment Fund

• Private sector schemes encouraging broad-based black participation.

Focused empowerment (2000 – present), more formalised approach, characterised by: -

• Broad Based Black Economic Empowerment Act

• The development of industry-specific charters

• The DTI Codes of Good Practice

• BEE scorecards

• Mining Charter (2002)– min black ownership 15% by 2009 and 26% by 2014

– Limited time for old to new conversion else the mining rights revert back to the State

– Mining Charter – requirement that ownership measured by attributable units of production.

– The offset of Historically Disadvantaged South Africans ownership commitments

9

SA Coal - BBBEE entry in South Africa (cont)

Between 1997 & 2009 up to 100 BEE companies attempted to enter the coal industry in any one year.

However, success was not as easily attained, mainly due to: -

1. Accessibility to coal reserves

2. Funding

3. Mining and operating skills

4. Marketing skills

5. Coal expertise

6. Legislation

7. Economic and logistical conditions

Source XMP consulting 2009

10

SA Coal - BBBEE entry in South Africa (cont)

Source: DME 2006

0.88%

0.77%0.75%

0.70%

0.62%

0.60%

0.51%0.50%

0.34%

7%

4%

4%

4%

3%

2%

1.1%

1.0%

1%

1%

1%

0.002%

0.02%0.26%

0.34%

65%

Exxaro

Shanduka

Leeuwfontein Colliery

Elcoal Mining

Halfgewonnen Colliery

Delmas Coal

Koornfontein Mines

NuCoal

Polmaise Colliery

Mmakau Mining

Riversale

Sumo

Eastside Coal Company

Springlake Colliery

Black Wattle Colliery

DelmasColiery - Stuart

Groenvallei Colliery

Magdalena & Aviemore

leeuw Vallkrantz

Mashala Resources

Ilanga Coal Mines

Coastal Fuel

Umlabu Colliery

Nkomati Anthracite

Mining Contractors Vryheid

increasing production fragmentation

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How did it go?• In 2002 only two BBBEE companies produced 10% of SA coal (increased to 29 in 2008

resp. for almost 50%)

What drove them?

• Changes in the mining legislative framework

• The nature of coal mining in South Africa - MPRDA's use-it-or-Iose-it principle.

• The pre-requisite 26% BEE ownership of mining companies for the conversion of old-order mining rights to new-order mining rights.

• The granting of prospecting and mining rights for new projects

Were they successful?

Yes, especially when considering the community involvement, employment and benefits emanating from well-structured corporate social responsibility programmes

But what do you see in your own BBEEE counter-parties

SA Coal - BBBEE entry in South Africa (cont)

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Investment and development in South African coal industry

13

SA - rail and port

SA - rail and port

So where is the coal ?

The mines are there and waiting in terms of potential and actual production capacity

The ports are built and waiting (RBCT, TCM, BC) – RBCT specifically 91Mt installed capacity

But….. Rail (TFR guarantee’s 65Mt for 2010)

We are limited!!

15

SA – rail and port constrained?

So what does the future have in store?

Increased capacity on RBCT Coalline

Increased capacity in RBCT above 91MT

Coega and IDZ – Port Elizabeth

Trans-Kalahari rail corridor initiative

Upgrade of rail from Limpopo to export line

Maputo Corridor development

Mozambique ports (Beira – refurbish & rebuild, increase capacity @ Maputo, new port along south Moz’ coast)

Increased Saldanha line capacity

16

Investment in SA mining industry?

17

Investment in SA mining industry (last 5yrs)

Coal

• Optimum Coal – $1,2 billion listing on JSE

• Anglo - Zibulo = $0,5 billion; New Largo = $1,7 billion (Mining Weekly)

• BECSA – DMO = $0,975 billion; Klipsruit (Phola) = $0,5 billion

• Sasol – Thubelisha project = R4,5 billion & Impumulelo = R1,5 billion

• Riversdale – Mozambique Benga Coal Project = $0,27 billion

• Vale – Mozambique Moatize = $1,3 billion

• CoAL, Shanduka

….but its not only in Coal ….

You don’t need to look far to recognise continued confidence in the SA mining industry

18

Skills in the SA mining industry

WHAT’S THE WORRY?

• The required skills are being lost/diluted due to: -

– Reduced investment, competing international markets and exchange rates

– Legislation, environmental concerns and skills

– Increased international commodity and energy demand

– the SA ‘Brain drain”

• Exxaro and the industry is in the midst of a ‘skills war”

• The third biannual Mining Survey by Landelahni Business Leaders in South Africa indicated that

– the SA mining industry faces serious skills shortages

– 1998 to 2008, passing degree and diploma graduates totaled 13.7% of enrollments

– These results not even speaking of the artisan skills required in the industry.

SO WHAT

• CSR and governance requirements.

• The availability of skills facilitates proper operation of assets.

The future of the industry is at stake!!19

SOUTH AFRICA – whither EXXARO

20

Exxaro growth and expansion

Carbon • Expected level of 80 million tons a year to 90 million tons a year in the next 10 to

15 years

– Grootegeluk Medupi Expansion Project

– Pre-feasibility studies to continue in 2010 (Thabametsi, Mafutha, Belfast and market coke

– Char production – Phase 2

– Moranbah South (Australia)

Energy • Wind and solar - renewable energy, gas

– Solar power station

– Wind project (West coast of SA and Tsitsikamma)

– Coal Bed Methane (Botswana)

21

Exxaro growth and expansion

Ferrous

• Iron ore

• AlloyStream™

Base metals and mineral sands

• Bankable feasibility study will be undertaken on the Fairbreeze project at KZN Sands

• Optimisation of assets - during the envisaged 2011 divestment

22

Phase 2: Thabametsi Mine

• Greenfields development - new open pit coal mine

and beneficiation complex and a new coal-fired

(clean technology) power station

(5 000MW)

– 16Mtpa to power station (PF)

– 2,5Mtpa to other markets

– Time-frame: 2014 to 2017

Phase 3: Exports / Synfuels

• Greenfields coal mine

– 10 Mtpa for exports

– Time-frame: 2015 to 2018

Other downstream opportunities

• Char plant

– Phase 1 in operation

– Phase 2 in planning

• Market coke

– Feasibility study in progress

• Electricity generation

– Including co-generation

Phase 1: Grootegeluk Mine

• Completed GG6 plant in 2006 -720ktpa to other

markets

• Brownfields expansion of Grootegeluk coal mine

near Lephalale with Medupi power station

(4 800MW)

– 14,6Mtpa to Medupi power station

– Time-frame: 2009 to 2015

The Waterberg … SA’s coal-fired future? Exxaro’s development plan

23

Concluding remarks

• Yes! Exxaro is a large, exciting and expanding company but we are part of an exciting and stable country – South Africa

• Continued and new investment in the South African coal industry will sustain South Africa’s enviable position of being able to supply both the East and West of the globe with a significant commodity and mineral range of products

We are proud to be South African and look forward to your business!

24

Concluding remarks

Recall the World Cup?

And expectations?

… WAIT …

There is more…..

25

THANK YOU

www.exxaro.com