Country Risk

Since the rapid depreciation of the rand in 1996, the value of the currency has stabilised. The
government has committed itself to a tight monetary policy, which has led to high real interest
rates. As a result, lowered inflation has aligned South Africa better in comparison with its major
trading partners. The rand floats freely and is far from being overvalued. These adjustments have
diminished future currency risk considerably. Banks are independent and in the private sector.
They carry a burden of bad loans estimated at just 2% of the total, far smaller than that of many
Asian countries.

Political risk and instability are still a concern in investments. The market has already reacted to
political change, but some foreign investors still see the upcoming presidential election in 1999
as a test of economic stability.

Coal Mining

According to the 2010 BP Statistical Energy Survey, South Africa had end 2009 coal reserves of
30408 million tonnes, 3.68% of the world total. South Africa has Africa's only significant coal
reserves.

South Africa had 2009 coal production of 250.02 million tonnes, 4.13% of the world total. The
world's major producers are China, the USA, India, Australia, Russia, Indonesia and South
Africa.

South Africa had 2009 coal consumption of 99.43 million tonnes oil equivalent, 3.03% of the
world total. South Africa is Africa's only significant coal consuming nation.

South Africa is currently the fifth largest coal producing country in the world, producing, on
average, around 224 million ton of marketable coal each year. Currently, about 77% of South
Africa’s primary energy needs are provided by coal. Due to the relative lack of suitable
alternatives, this situation is unlikely to change over the next 10 years.

Coal’s role as a fossil fuel is likely to become increasingly important in a world in which
concerns over energy security are rising and demand for energy is growing strongly. According
to the World Coal Institute, proven coal reserves are sufficient to sustain production at current
levels for 147 years.

According to the 2009 BP Statistical Energy Survey, South Africa had 2008 coal production of
250.39 million tonnes, 4.24% of the world total. South Africa’s coal production was valued at
approximately R59.9Bn in 2009.

According to the 2009 BP Statistical Energy Survey, South Africa had end 2008 coal reserves of
30408 million tonnes, 3.68% of the world total. This figure differs somewhat from those
published by Eskom in 2009, which state that South Africa’s coal reserves are estimated to be 53
billion tonnes.
South Africa is the world’s third largest coal exporting country, exporting 25% of its production
internationally. South Africa uses 53% of the balance of its coal production for electricity
generation, 33% for petrochemical industries (Sasol), 12 % for metallurgical industries (Iscor)
and 2% for domestic heating and cooking. Eskom is the 11th largest electricity generator in the
world, while Sasol is the largest coal-to-chemicals producer.

The main challenge to the ongoing use of coal as an energy source is environmental concerns.

About 51% of South African coal mining in carried out underground, with the balance produced
by open cast methods. The industry is highly concentrated, with a handful of companies
producing about 80% of the saleable coal production. More than 58 000 workers are employed in
this industry.

Most of the country’s coal is currently mined in the Highveld, Witbank and Ermelo coalfields
located in Mpumalanga province. Geology has determined that the Witbank coalfield is by far
the most important source of South Africa’s mined coal at present. However, the future of South
Africa’s coal industry depends on the development of the Waterberg deposits, which extend into
Botswana.

Companies active in South Africa

BHP Billiton Energy Coal South Africa Ltd, one of the largest energy coal exporters in the
world, owns and operates four collieries (Douglas, Khutala, Klipspruit, Middelburg) in the
Mpumalanga Province in South Africa. BHP Billiton Energy Coal South Africa is one of the
largest suppliers to the seaborne energy coal market. This coal is sold into Europe, the Far East,
India, Africa and South America. Coal is also sold to South Africa’s local utility company,
Eskom. BHP Billiton Energy Coal South Africa is one of Eskom’s largest suppliers.

Anglo American's thermal coal business owns and operates nine mines and has a 50% interest in
the Mafube colliery and Phola washing plant. The Zibulo project is under construction and
includes a 50:50 joint venture coal washing plant with BHP Billiton Energy coal South Africa.
The project is on track to deliver 6.6 Mtpa of export and Eskom coal from 2012.

With a complementary mix of 13 underground and open cut mines which produce thermal,
coking and semi-soft coal products, Xstrata Coal is South Africa's third largest coal exporter.

The 6.7m tonne-per annum Goedgevonden Colliery, a joint venture between ARM Coal and
Xstrata Coal, has signed a 17-year coal supply agreement with South Africa’s national power
utility, Eskom.

In terms of the contract, Goedgevonden will supply approximately 60 million tonnes of thermal
coal (3.5 million tonnes per annum) to Eskom’s Majuba coal-fired power station from December
2009 through to 2026.

Exxaro Coal’s eight managed coal mines produced 45,2Mtpa of power station, steam and coking
coal in 2009. Exxaro’s Grootegeluk, in the Waterberg coal field, is one of the most efficient
mining operations in the world. This mine is currently being expanded at a cost of R9 billion.
Exxaro also has another greenfields development, expected to supply 10 mtpa for the export
market by 2018.

Anglo Coal is also investigating a coal bed methane project in the area.

Sasol’s Thubelisha coal mine near Secunda is due to reach full mining production in 2015. The
mine is expected to have a lifespan of between 32 and 35 years.

Optimum Coal has purchased a 49.998% interest in Siyanda Coal, which owns the Koornfontein
mines. This will take Optimum Coal’s interest in Koornfontein to 91%.

The farms Vetleegte 304LQ and Olieboomsfontein 220LQ are located in the Waterberg or
Ellisras coalfield in the Limpopo Province. This coalfield is becoming increasingly important as
coal reserves in the Witbank, Highveld and Ermelo coalfields of the Mpumalanga Province,
which currently supply the majority of Eskom's coal power stations, become depleted over the
next 20-30 years. The coalfield is being investigated by State-owned Sasol and PetroSA to
supply potential coal-to-liquids and gas-to-liquids projects; while Anglo Coal over the last 15
years has established considerable reserves of coal bed methane gas.

Firestone Energy and joint venture partners Sekoko Coal have been granted approval to
commence a small scale mining operation in this area. Mining operations were due to commence
at the end of 2009 at a rate of 60 000tpm ROM, which is expected to yield between 30 000 and
40 000tpm of saleable coal. This small operation will provide a starter pit for a larger scale
operation planned to commence in 2011.

Facilities linked to Coal Mining in South Africa (67)

 Coal Mine (66)  Coal Terminal (1)

Premium Entry Upgraded Entry Updated Entry Basic Entry

 Grootegeluk mine (Coal  Balgarthan Colliery (Coal  Dorstfontein (Coal Mine)

Mine) Mine)  Douglas Colliery (Coal
 Springlake Colliery (Coal  Bank (Coal Mine) Mine)
Mine)  Bankfontein Opencast  Duiker (Coal Mine)
 Vaalkrans (Coal Mine) (Coal Mine)  Durnacol Colliery (Coal
 Alpha Anthracite (Coal  Boschmans Colliery (Coal Mine)
Mine) Mine)  Duvah Coal Mine (Coal
 Arnot Colliery (Coal Mine)  Bosjesspruit (Coal Mine) Mine)
 Arthur Taylor Colliery  Brandspruit (Coal Mine)  Elandsfontein Colliery
(Coal Mine)  Delmas Colliery (Coal (Coal Mine)
 Arthur Taylor Opencast Mine)
Mine (ATCOM) (Coal
Mine)
Iron Ore

According to the USGS, South Africa produced 53 million metric tons of iron ore in 2009,
making it the world’s 7th largest producer. It also estimated, in 2009, that South Africa has 1000
million tonnes of crude ore reserves and 650 million metric tonnes of iron content reserves.

Most of South Africa’s iron ore reserves are located in the Northern Cape, adjacent to the
massive Kalahari manganese field. Following the unbundling of Iscor in 2001, Kumba Resources
has emerged as the new vehicle for Iscor's mining aspirations.

Kumba Iron Ore operates two open cast mines - Sishen Mine and Thabazimbi Mine. 80% of
their current production (in the region of 40 mtpa) is for South African production. Kumba is the
4th largest supplier for the global seaborne trade. More than 34mt of superior ore was exported
from Saldanha Bay in 2009.

Kumba Iron Ore anticipates increasing its output form 39.4 mtpa to 70 mtpa by 2019.

Kumba Iron Ore has a third mine under development in the Northern Cape Province. The
Kolomela Mine has a total mineral resource of 373mt and scheduled reserves estimated to be in
the region of 255mt. It is expected that first production will take place in 2012, with full
production by the end of 2013.

The Khumani iron ore project in the Northern Cape is jointly owned by African Rainbow
Minerals and Assore. This project is currently being expanded and once completed, in the second
half of 2011, will see an output of 16mtpa.

Assmang’s iron ore division mines iron ore at Beeshoek in the Northern Cape Province. Most of
the ore is exported through the port of Saldanha Bay. Production is currently in the region of six
million tons per annum. Beeshoek South, a southern extension of the Beeshoek iron ore mine
was commissioned during 1999 on the farms of Beeshoek and Olynfontein. This mine now
provides a substantial portion of Assmang’s iron ore production.

Magnetite iron ore is supplied to Highveld Iron and Steel’s iron plant from its Mapochs open cast
mine near Roossenekal, 140 kilometres north east from Witbank (Emalahleni). Strip mining
methods are used and the ore is crushed, washed and screened before being railed to Highveld.

Companies and Organisations linked to Iron Ore Mining in South Africa (13)
Premium Entry Upgraded Entry Updated Entry Basic Entry

 Argent Industrial  Kumba Iron Ore  Assmang Limited  Thabazimbi Iron

Limited Ltd  Kermas South Ore Mine
 BJM Mining  MDM Technical Africa (Pty) Ltd
Resources Africa Pty Ltd  Phoenix Steel
 Exxaro Resources  Metmin (Pty) Ltd
 Limited  APS-fabinox (Pty)  Sishen Iron Ore
 KDB Trading Ltd Company (Pty)
Ltd

http://www.mbendi.com/indy/ming

Competitors

Primary carbon steel producers in South Africa

ArcelorMittal South Africa

Highveld Steel & Vanadium

Scaw Metals
Vanderbjilpark

Vereeniging

Saldanha

Newcastle

Mozambique steel mill

ArcelorMittal Coke & Chemicals

Mapochs mine

Cape Gate
Cape Town Iron & Steel Works

Sharon Wire Mill

Orenwire

Davsteel

Stainless steel producers in South Africa

Columbus Steel
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