Alexkor Limited Parliamentary Portfolio Committee- DPE 20 October 2004

INDEX

• Location

• Corporate Structure

• Financial Review

• Challenges

• Mining

• Litigation

• Way Forward

LOCATION

Northern CapeSemi desert with limited agricultural potentialSmall seasonal tourist industryLocal economy mineral driven

CORPORATE STRUCTURE

CORPORATE STRUCTURE

Alexkor Limited

Alexander Bay Mining (ABM) Social Infrastructure Alexander Bay Trading (ABT)

North Mine

South Mine

River Mine

Shallow Marine

Deep Marine

Hospital

Schools

Recreation

437 Houses

Dairy Farm

Oyster Farm

Citrus Farm

Ostritch Farm

Guest Houses

Airport

FIANCIAL REVIEW

ResultsCompared to FY’03

• Earnings per share up 570% to 71.5 cents • Return on shareholders funds of 89%• Operating expenses well contained up 0.2% to R238 million• US$ price per carat up 9%• Diamond production up 0.6% to 79,725 carats• US$ exchange rate down 22%• Cash and cash equivalent at year end up 6% to R71.4 million• Profit margin rose from 2.14% to 13,50%• The current ratio at 1:4.96• Diamond production income decreased from R265.2 million to R219.79

million.• Net asset value per share improved from 27.2 cent to 90.36 cents.• ABT reduced the operating loss by 98% to R82,276 from R5.02 million• Capex (Replace of property, plant and equipment) up 43% to R15.9 million • Exploration spend up 497% to R13.5 million• Net tangible value up to 358 cents/share from 316 cents/share

NET PROFIT/(LOSS)

Net Profit / (Loss)

13.6 9.7 10.7 6.5

-24.2

-67.1

-45.8 -45.4

1.77 6.27

-3.9

35.73

-11.95

-80

-60

-40

-20

0

20

40

60

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Years

Mill

ion

s

Net Profit / (Loss)

Diamond prices achievedDiamond Prices

0

100

200

300

400

500

600

700

Jul-0

2

Oct-

02

Jan-

03

Apr-0

3Ju

l-03

Oct-

03

Jan-

04

Apr-0

4Ju

l-04

Oct-

04

Jan-

05

Apr-0

5Ju

l-05

Oct-

05

Jan-

06

Apr-0

6Ju

l-06

Oct-

06

Jan-

07

$/C

t

Budget Actual

FY'03 FY'04 FY'05 FY'06 FY'07

Net operating expenses(R millions)

0

50

100

150

200

250

300

350

1997 1998 1999 2000 2001 2002 2003 2004

Available Cash as at 30 June 2004

BANK BALANCE MOVEMENT 2002/2004

R -

R 20

R 40

R 60

R 80

R 100

R 120

Mill

ions

TOTAL Poly. (TOTAL)

R/$ Exchange Rates

0.00

2.00

4.00

6.00

8.00

10.00

12.00

24-J ul-

02

28-

Aug-02

25-

Sep-02

23-Oct-

02

27-

Nov-02

15-J an-

03

05-Feb-

03

05-

Mar-03

02-Apr-

03

07-

May-03

05-J un-

03

09-J ul-

03

07-

Aug-03

04-

Sep-03

09-Oct-

03

06-

Nov-03

11-Dec-

03

15-J an-

04

11-Feb-

04

10-Mar-

04

07-Apr-

04

12-

May-04

07-J un-

04

Series1

Diamond % Comparison

0

10

20

30

40

50

60

SMALLS 3-6GR +8GR

SMALLS 33 28 45 49 47 44 43 46 37 38 27 22 31 21 26 26 31 28 24 26 21 34 30 28 19 32 33

3-6GR 35 37 36 33 38 36 36 32 36 34 34 32 32 34 36 36 34 33 31 35 34 32 31 37 34 37 38

+8GR 33 35 19 18 16 20 21 20 29 29 39 47 37 46 38 38 36 39 45 39 43 34 39 35 47 31 29

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

3

RevenueTotal Revenue R264 million

71%

8%

7%

14%

Marine mining Land mining Beach mining Agriculture and other

ABM operating profit

2004 2003R '000 R '000

Total operating profit 26,117 58,843 (6,476) (10,989)

Less: Hospital (2,757) (3,317) Municipality (3,637) (2,599) ABT (82) (5,072)

32,593 69,831

TOTAL ALEXKOR

2004 2003 VARIANCE

Carats 79,725.51 79,269.00 0.60%

Price 402.69 369.00 9%

Exchange rate 6.80 8.90 -24%

$:Revenue $32,104,666 $29,250,261 9%

R: Revenue 218,311,729.00 261,327,323.00 -16%

Needed = 96,000 Carats to be in line with the Previous Year

NON - OPERATIONAL COST FOR YEAR - ENDING JUNE 2004

Down - scaling 2,080,000 Not budgeted

Incentive Bonus 2,154,195 Provision

Alexkor Rehabiliation Trust Fund 1,260,000 DME increase from R100,000 to R230,000

Price Deviations 587,936 Consignment belonging to Barlows and Komatsu

Bad Debt 1,032,997 Bad Debts from prior years

Legal Costs 3,440,379 Richterveld case, Nabera , etc.

10,555,507

RSC Levies 713,241 From prior years

TOTAL 11,268,748

MAIN REASONS FOR CARATAGE SHORT FALL

Ruslyns Unilateral Withdrawal

- Noordsif (9,027 ç) - Witvoorkop (7,487 ç)

( 16,511 ç)

Midmarine contract

(5,892 cts)

Shallow Marine - Boat Units

(17,969 ç)

Total Caratage shortfall FY' 04 = 40,372 ç

Loss in Diamond Income = R111 million

MINING

CARAT PRODUCTION 2003/2004

(10%) Land

(15%) Beach

Marine (74%)

CARAT PRODUCTION 1928: 537 968 CT 1994/5: 216 000 (15 MONTHS)

0

50000

100000

150000

200000

250000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Land Sea 2005 Land 2005 Sea

Marine Mining

SHALLOW WATER SEA DAYS

0

2

4

6

8

10

12

14

Jul AugSep Oct NovDec Jan FebMar AprMayJun

Sea

Day

s actual

budget

CUMMULATIVE CARAT PROJECTION LAND AND MARINE

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

CA

RA

TS

Land

Marine

Land 52030 64500 72700 72700 72700

Marine 66000 72500 87000 87000 87000

FY2005 FY2006 FY2007 FY2008 FY2009

5 Year Carat Plan

Revenue/Profit PlanALEXKOR LTD

CONSOLIDATED OPERATING BUDGET

THREE YEAR PROJECTION

DESCRIPTION BUDGET FY '05 ACTUALS BUDGET FT BUDGET BUDGET BUDGET

(9 months) Mar-04 Mar-04 FY'06 FY'07 FY'08

TOTAL INCOME 291,743,729 265,027,222 430,219,945 446,559,347 485,253,648 503,362,270

DIAMOND INCOME 211,633,100 182,464,834 313,974,472 333,336,325 365,237,244 376,144,882

OTHER INCOME 31,050,068 36,988,633 47,275,792 43,884,096 46,517,142 49,308,170

INTERNAL INCOME 49,060,561 45,573,755 68,969,681 69,338,926 73,499,262 77,909,218

TOTAL EXPENSES 268,052,449 233,590,176 399,799,839 379,738,244 385,387,073 404,746,761

PERSONNEL EXPENSES 40,794,668 37,356,916 53,215,789 57,656,464 61,115,852 64,782,803

CONSUMABLES AND MAINTENANCE 29,896,302 25,964,708 34,057,042 42,253,440 44,788,647 47,475,965

GENERAL EXPENDITURE 25,791,170 19,779,809 47,453,747 36,321,871 38,187,446 40,155,542

DEPRECIATION 8,010,953 7,197,159 12,595,480 11,322,147 12,001,476 12,721,565

PROFESSIONAL SERVICES 25,779,086 14,112,219 27,052,836 36,434,442 38,620,508 40,937,739

REVENUE SPLIT CONTRACTORS 87,054,751 83,885,895 156,454,902 124,057,812 114,679,554 118,119,940

INTERNAL CHARGES 50,725,519 45,293,470 68,970,043 71,692,067 75,993,591 80,553,207

OPERATING PROFIT / (LOSS) 23,691,280 31,437,046 30,420,106 66,821,104 99,866,575 98,615,509

CHALLENGES

Major Challenges

• Massive replacement Capex

• Extensive exploration on land

• Land Claims case

• Litigation

• Long term liabilities

Timeline• Timeline:

– 18 Dec 2003, DPE Min, N.C Premier, Dep. Min Land Affairs + RV community + LRC

– 23 Dec 2003, RV Community submitted proposal to Government.

– 31 March 2004 Government responds to RV settlement proposal.

– LCC 1st & 2 nd April 2004• New DPE Minister @ Alexkor 15/07/2004

– Main Hearing 2005

RV Settlement Proposal

• 90% of Alexkor Shareholding• 10% Transfer to NAMDA• Restoration of the rights in the subject land

– Ownership of subject land;– The right to minerals in the subject land.– Exclusive beneficial use & occupation of land.

• Compensation for minerals extracted• Repair of and compensation for environmental

damage• NB: Undue burden on the governments LTD

resources.

Government Settlement Proposals• View to attain sustainable settlement of his

matter.• Government seeks to honour and comply with

the letter and spirit of the Constitutional Court Decision.

• End-State Indicated Shareholding– Government 20%– RV 65% (51% allocated to cap

injection through SEP)– Employees 5%– GNC/NAMDA 10% 100%

Richtersveld Community

ESOPS NAMDA/

GNC

RC Company

(Land and Mineral Rights Ownership)

Government

Alexkor Company

Retains management & skills

Retains mining (land and marine) activities

5% 10% 65% 20%

100%

Rationale• Controlling interest to an SEP• Mitigate against over reliance on Government fund• Viability of Mining Activities needs a capital injection of ±R500

million• SEP: Infuse technical & strategic expertise to the company• Government:

– Oversight Role S –T– Exit Strategy L –T– Implementation Spec Period

• Alexkor to invest in other sustainable economic development models

• Government cannot provide seed funding• Participation by RV @ BOD level in carving the final end state of

Alexkor Ltd

Capital additions vs disposalsCAPITAL ADDITIONS VS DISPOSALS

(R MILLION)

0

10

20

30

40

50

60

70

80

1996 1997 1998 1999 2000 2001 2002 2003 2004

ADDITIONS DISPOSALS

Exploration costs (R millions)

1999 - 2004

6.29 6.29

12.92

3.832.26

13.5

-

2.004.00

6.00

8.00

10.0012.00

14.00

16.00

1999 2000 2001 2002 2003 2004

MIL

LIO

NS

1999 - 2004

LITIGATION

NABERA / ALEXKORREMUNERATION FOR VALUE ADDED

MANAGEMENT FEEAND

CHARGEABLE COSTS

Snowden jointly appointed Nabera claimedR3.1 million

¹/з of R357 million

R119 million

Misapplication/Inconsistentapplication of agreed

Valuation Methodology

Technical/Legal advice

Will oppose claim

Internal Auditors

Nabera owes R826,603

Mediation

Parties are prepared to talk

Alexkor put R6.1 Million in trust

WAY FORWARD

Long term liabilities• Provision for post medical retirement aid decreased by R5

million. Total liability is R86.5 million.

200388 employees still on ourbooks. Valuation was based on 2/3contribution, whereas itshould have been 100%.Contribution increase: In service employees 10.2% and pensioners17.5%

2004

As of 1 January 2004:• Capping of medical aid• Pensioners moved from

Executive Option to

Comprehensive Option.

• EMPR, Vol3,CSIR,1994: R17.58 million• @ June 30, 2004 escalated R32.93 million• @ June 30, 2004 Rehabilitation Trust Fund:

R8.8 million• @ October 2003, monthly contribution increased

from R100 000 to R230 000• Prescribed formula in the Aide-Memoire of DME

(R201,518)• Reg 5.16.3 of Mineral Act 50 of 1991

– SPC determining the quantum– Completion towards end of first semester FY’05

Long term liabilities (continued…)