GOLD-MINING-PERCEPTIONS-AND-MISCONCEPTIONS-RBS.pdf

Produced by: Nedbank Capital

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Important disclosures can be found in the Disclosures Appendix.

Gold Mining

Perceptions and misconceptions

Popular perceptions often present a doom-and-gloom scenario with little hope of salvation for South African gold equities. While the sector's long-term performance is not overly impressive, gold shares have shown impressivereturns when exposure is timely and restricted to the shorter term.

Key recommendations & forecasts

Reuters Year end Recom Price Targetprice

EPS1fcst

PE1fcst

AngloGold ANGJ J Dec 2010 Hold R336.99 R360.00 13.99 24.10 Gold Fields GFIF.J Dec 2010 Sell R120.99 R121.00 6.05 20.00 Harmony HARJ.J Jun 2011 Hold R80.00 R94.00 5.29 15.10 P.A Resources PANJ.J Jun 2011 Buy R1.09 R1.44 0.19 5.90 Great Basin Gold GBGJ.J Dec 2010 Sell R20.09 R22.00 -0.40 n/a DRDGold DRDJ.J Jun 2011 Hold R3.42 R4.00 0.36 9.50

Source: Company data, Nedbank Capital forecasts

Raising our gold price forecast Having been too cautious in our previous update (‘Every dog has its day’, published 20 September 2010) we raise our gold price forecasts to US$1,350/oz (previously US$1,200/oz) for 2011 and US$1,250/oz (US$1,100/oz) for 2012. Our long-term forecast remains US$900/oz (real). The impact of these increases on our valuations is partially neutralised by our stronger rand forecast.

Perceptions are often misconceptions We looked at some popular beliefs about South Africa’s gold sector, and found that while most are true in the longer term, they often deter investors from acting on attractive shorter-term opportunities. We also consider the infamous ‘gold premium’ overhyped as, according to our calculations, gold equities trade at a discount to their NPV when valued at spot rates. In addition, we believe the strong rand’s impact on sector profitability is often exaggerated as near record high rand gold prices are yielding healthy margins. Furthermore, we note that the rand often weakens when the price of gold drops, thereby protecting margins.

We still prefer a shorter-term trading strategy Our analysis of these beliefs about the gold sector confirms our preference for a shorter-term trading strategy. We believe that exposure is best selected based on relative performance and the valuation of individual shares and the major and junior sectors.

Recommendation changes We downgrade AngloGold Ashanti to Hold (previously Buy) and reduce our target price to R360 (R388); we downgrade Gold Fields to Sell (Hold) and lower our target price to R121 (R130); we maintain Harmony as a Hold with a new target price of R94 (R95); Pan African Resources, still our top pick in the sector, remains a Buy with a higher target price of R1.44 (R1.16); we downgrade Great Basin Gold to Sell (Hold) and maintain our target price of R22 and DRDGold remains a Hold and we maintain our target price of R4.00. The risk profile of all our ratings is high.

6 December 2010

Analyst

Christian Siebert South Africa +27 11 295 8212 [email protected] 7/F Corporate Place 135 Rivonia Road, Johannesburg, South Africa http://research.rbsm.com

Gold Mining | Table of Contents | 6 December 2010

2

Contents

Raising our gold price forecast 3 Like a catchy but annoyingly repetitive tune, key catalysts for gold remain: QE and related potential for the debasement of fiat currencies, deflationary pressures, sovereign default risk, low interest rates, anaemic economic growth and underperforming equity markets.

US$ losing relevance 3

ETFs continue to increase accessibility of gold 5

Changes to our forecasts 5

Popular misconceptions 7 In this chapter we test the validity of some popular beliefs about the South African gold sector. Often these perceptions are based on long-term trends that we believe do not detract from shorter-term opportunities.

Gold shares always underperform 7

Gold shares are a long-term investment 8

The strong rand is accelerating the industry’s decline 9

South African mines are the highest cost producers 10

Gold shares trade at a premium to their NPV 11

Investment stance 13 While gold keeps testing new highs, equities remain range bound and give little indication of reaching new highs. We see no near- to medium-term catalysts to change this. For now we pin our hopes to juniors that can still create value through growth from a lower base.

Juniors continue to outperform 13

Valuation methodology 13

Company profiles AngloGold Ashanti 16

DRDGold 22

Gold Fields 27

Great Basin Gold 32

Harmony Gold 37

Pan African Resources 42

Gold Mining | Investment View | 6 December 2010

3

Raising our gold price forecast

Like a catchy but annoyingly repetitive tune, key catalysts for gold remain: QE and related potential for the debasement of fiat currencies, deflationary pressures, sovereign default risk, low interest rates, anaemic economic growth and underperforming equity markets.

In our last sector report (Every dog has its day, 20 September 2010) we forecast stronger gold prices in the final quarter, but the rush to gold over the past few months has surpassed our expectations.

In particular, inconsistent equity markets reacting to fleeting news flow – regarding issues ranging from sovereign debt crises to bail-out packages – has led excess liquidity to flee to gold. In this context, gold’s safe haven status is reflected in its low correlation to developed equity markets.

Chart 1 : R2 coefficient between gold and equity indices

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0.67

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Dow Jones S&P 500 FTSE 100 Nikkei 225 Ha ng Seng MSCI EM JSE ALSI

RS

Q fa

ctor

Gold JSE Gold Index Phily Au & Ag

Source: Bloomberg, Nedbank Capital

The aforementioned largely macro-economic factors are supported by recovering jewellery demand in India and strong growth in China. While saving rates and economic growth are high in these markets, the simple fact that gold is generally expected to climb higher should bolster demand.

US$ losing relevance A weak US$ no longer automatically implies a stronger gold price. Over time the correlation between the two has weakened considerably as a wide variety of new catalysts has emerged. Since end-2009, the R2 coefficient between the US$ and gold (measured since 2000) has declined from a statistically relevant 0.758 to far less significant 0.5407.

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Chart 2 : Correlation between gold and the US$ (2000 to date)

y = 0.0004x + 0.947R2 = 0.5306

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

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200 300 400 500 600 700 800 900 1 000 1 100 1 200 1 300 1 400 1 500

Gold price (USD/oz)

EUR

/USD

2000 - date 2000 2001 2002 20032004 2005 2006 2007 20082009 2010 Linear (2000 - date)

Source: Nedbank Capital, I-Net

The bull gold cycle certainly coincides with the US$ weakening significantly against all major currencies. A weaker US$ makes gold cheaper in other currencies, and buys more of those currencies when it strengthens again. Leading up to the economic and financial crises and the ensuing collapse of Lehman Brothers in September 2008 this was the dominant catalyst for gold.

Chart 3 : US dollar performance (2002 to date) Chart 4 : Gold price performance (2002 to date)

2 .1%

(19 .6%)

(5.3 %)

2.9%

(25.1%)

(35 .9%)

(47.0%)

(40.5%)

(36.1%)

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(31. 6%)

(60. 0%) (50 .0%) (40 .0%) (3 0.0%) (20 .0%) (1 0.0%) 0 .0% 1 0.0%

USD/TRY

USD/ CNY

USD/IN R

USD/ RUB

USD/BRL

USD/ CAD

USD/ AU D

USD/ZAR

USD/JPY

USD /CHF

USD/ GBP

USD/ EU R

USD Index

40 0.2%

2 94.2%

36 4.1%

404. 2%

266 .8%

214.2%

159.7%

190.9%

2 13.1%

196.2%

3 57.3%

229.2%

390.1%

0.0% 10 0.0% 200.0% 300 .0% 400.0% 500.0%

TRY/oz

CNY/oz

IN R/oz

RUB/oz

BRL/oz

CAD/oz

AUD/oz

ZAR/oz

JPY/oz

CHF/oz

GBP/oz

EUR/oz

USD/oz

Source: Nedbank Capital, I-Net Source: Nedbank Capital, I-Net

Since then, we believe that gold has been supported by quantitative easing (QE), which has flushed the market with liquidity, the debasement of fiat currencies, anaemic economic growth and the prospect of interest rates remaining low.

Shorter-term trends confirm that gold has decoupled from the US$, gaining against all currencies even as the dollar strengthens.

Chart 5 : US$ performance (4 weeks) Chart 6 : Gold price performance (4 weeks)

3.8%

(0.0%)

3.1%

1.8%

1.9%

(0.1 %)

2.0%

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4 .5%

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(1.0 %) 0.0% 1.0% 2.0 % 3.0% 4.0% 5.0% 6.0%

USD/TRY

USD/ CNY

USD/INR

USD/ RUB

USD/BRL

USD/ CAD

USD/ AUD

USD/ZAR

USD/JPY

USD/CHF

USD/ GBP

USD/ EUR

USD Index

4 .4%

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2.6%

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3.4%

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TRY/oz

CNY/oz

IN R/oz

RUB/oz

BRL/oz

CAD/oz

AUD/oz

ZAR/oz

JPY/oz

CHF/oz

GBP/oz

EUR/oz

USD/oz


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Chart 7 : US$ performance (7 days) Chart 8 : Gold price performance (7 days)

3.3%

0 .5%

1.2%

0.9%

0.8%

0.4%

2.2%

2.4%

0.7%

1.0%

2.7 %

3.8%

2.4%

0.0 % 0.5 % 1.0 % 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

USD/TRY

USD/ CNY

USD/INR

USD/ RUB

USD/BRL

USD/ CAD

USD/ AUD

USD/ZAR

USD/JPY

USD/CHF

USD/ GBP

USD/ EUR

USD Index

4.3%

1.4%

2.2%

1.9%

1.7%

1.4%

3.2%

3 .3%

1.6%

2.0%

3.6%

4 .7%

0.9%

0.0% 1. 0% 2.0% 3.0% 4.0% 5.0%

TRY/oz

CNY/oz

IN R/oz

RUB/oz

BRL/oz

CAD/oz

AUD/oz

ZAR/oz

JPY/oz

CHF/oz

GBP/oz

EUR/oz

USD/oz


ETFs continue to increase accessibility of gold Gold ETFs (exchange-traded funds) continue to find strong support. While holdings in the main funds have remained relatively stagnant, total holdings have grown due to the increasing number of new funds being created globally. Since 2005, the number of gold ETFs has grown from four to more than 18.

Chart 9 : Tonnes held in gold ETFs

0

500

1,000

1,500

2,000

2,500

Jan-

04

Apr

-04

Jul-

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Oct

-04

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-10

Ton

nes

(t)

GLD US Equity GBS LN Equity Others

Source: Bloomberg, Nedbank Capital

Changes to our forecasts With little sign of diminishing support for the metal, we again raise our gold price forecasts. We have significantly hiked our US$-based price forecasts for the next three years, and see further upside risk to our estimates. However, in US$ terms, much of the gains are offset by the stronger rand, limiting the impact on our valuations.

Within the average of US$1,350/oz, we believe gold may well test the US$1,500/oz mark in 2011.

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Table 1 : Changes to our gold price and currency forecasts

2007A 2008A 2009A 2010F 2011F 2012F 2013F Long termGold price (US$/oz) New 696 872 972 1,221 1,350 1,250 1,150 900 (real) Previous 1,176 1,200 1,100 900 (real) %-change 3.8% 12.5% 13.6% 18.7%Gold price (ZAR/kg) New 157,191 229,761 261,086 288,143 324,924 320,016 305,025 +4% Previous 294,746 327,189 308,389 264,878 %-change (2.2%) (0.7%) 3.8% 15.2%Exchange rate (US$/ZAR) New 7.04 8.25 8.40 7.35 7.49 7.96 8.25 +4% Previous 7.79 8.48 8.72 9.07 %-change (5.6%) (11.7%) (8.7%) (9.0%)

Source: Nedbank Capital forecasts, I-Net

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7

Popular misconceptions

In this chapter we test the validity of some popular beliefs about the South African gold sector. Often these perceptions are based on long-term trends that we believe do not detract from shorter-term opportunities.

Gold shares always underperform This depends when you look at it, which shares you look at and which gold price you look at. In the longer term, however, this is certainly the case. During the current bull cycle, South African gold miners have severely lagged, and even the Philadelphia Gold & Silver Index (AUX) has underperformed gold, increasing ‘just’ 287% versus a 391% hike in the price of gold.

Even more concerning is the fact that, despite the highly conducive macro environment, gold shares have severely underperformed the JSE All Share Index (ALSI).

Chart 10 : Relative performance of gold and equities (2002 to date)

(80%)

3%

103%

57%

194%

121 %

63%

104%

243%

1 91%

391%

(200%) (100%) 0% 100% 200 % 3 00% 4 00% 500%

DRD

GBG

PAN

HAR

GFI

ANG

ALSI

JSE Pt In dex

JSE Au In dex

Platinum (R/kg)

Plat inum ($/oz)

Gold (R/kg)

Gold ($/oz)


Looking at the performance of gold equities since the September 2008 collapse of Lehman, the JSE Gold Index has lagged the price of gold in US$ terms, but outperformed the price in rand terms. In the South African context the rand gold price is obviously far more relevant.

The gold sector has outperformed the ALSI by some margin in the same time period. Notably, Gold Fields, which has consistently been the best performer in the sector from a longer-term perspective, outperformed gold in both rand and US$ terms over this period.

Chart 11 : Relative performance of gold and equities (September 2008 to date)

(4.2%)

57.6%

57.4%

27.6 %

83.3%

71.2%

1 9.8%

(2.1%)

62.2%

23.0%

39.1%

53.7%

75.1%

(20.0%) 0.0% 20 .0% 40.0% 60.0% 80 .0% 100.0%

DRD

GBG

PAN

HAR

GFI

ANG

ALSI

JSE Pt In dex

JSE Au In dex

Platinum (R/kg)

Plat inum ($/oz)

Gold (R/kg)

Gold ($/oz)


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From a shorter-term perspective (ie, the last three months), the JSE Gold Index has also outperformed the price of gold in rand terms, but lagged the price in US$ terms. Again, Gold Fields stands out as the top performer among the majors, outperforming the price gain of gold. Similarly, following underperformance relative to the majors to date, juniors strongly outperformed the price of gold.

Chart 12 : Relative performance of gold and equities (last three months)

10%

24 %

2 9%

5%

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4%

13%

15 %

7%

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HAR

GFI

ANG

ALSI

JSE Pt In dex

JSE Au In dex

Platinum (R/kg)

Plat inum ($/oz)

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Even shorter-term performance confirms this trend, with the JSE Gold Index strongly outperforming both gold (in rand terms) and the ALSI, and Gold Fields outperforming its peers.

Chart 13 : Relative performance of gold and equities (last four weeks)

1%

(0 %)

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7%

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In our view, gold and gold equities are preferred investment vehicles in times of economic crisis and uncertainty, hence their low correlation to general equity indices which underperform in these times (refer to Chart 1).

Gold shares are a long-term investment Not now, not ever. The previous section (“Gold shares always underperform”) already gave an indication that this is hardly the best investment strategy. During the bull cycle, the JSE Gold Index has underperformed gold by 328% in US$ terms and by 128% in rand terms. Only in the shorter term, when selecting exposure based on relative performance and relative valuations, will gold shares generate competitive returns. We can think of no catalysts that will change this on a sustainable basis.

To demonstrate we look at two consecutive 90-day periods. After AngloGold Ashanti and Gold Fields posted strong performances over the first period (see Chart 14), one could expect some slow down, if not a correction, in the following period, which is the case illustrated in Chart 15.

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Also, laggards in the first period, like Pan African Resources and Great Basin Gold, could be expected to outperform in the following period, which is also the case.

In both instances, individual shares outperform gold. While this method is not fool proof, our analysis shows that relative performance is critical in selecting exposure to the sector.

Chart 14 : Relative performance of gold and equities (90 days)

Chart 15 : Relative performance of gold and equities (90 days)

(29.3%)

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Plat inum ($/oz)

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Gold ($/oz)

(8.2%)

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ANG

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The strong rand is accelerating the industry’s decline Not so! Through the bull cycle (since 2002) gold has certainly been one of the weaker performers in rand terms, but it’s easy to forget the rand blow-out towards end-2001, which resulted in a near record closing price of around R106,000/kg.

However, longer-term price performance shows a different picture. Since the beginning of 2000, gold has actually been the second-strongest performer in rand terms.

Chart 16 : Gold price performance since 2002 Chart 17 : Gold price performance since 2000

416.5%

302.5 %

374.5 %

417.1 %

271 .3%

222.4%

166.4%

195.8%

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TRY/oz

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GBP/oz

EUR/oz

USD/oz

1220.3%

283.2%

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Even now, as the industry and unions choose to bemoan rand strength, the price of gold in rand terms is at around R315,000/kg – not far from the record R321,357/kg achieved in February 2009.

Margins at key producers have certainly been under pressure, but have and are recovering to what we consider very healthy levels. in our view, previous margin pressure had little to do with the rand and was primarily due to poor efficiencies, limited mining flexibility and high capital expenditure to fix omissions (ie, ore reserve development) of the past.

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Chart 18 : Cash costs margins Chart 19 : Replacement cost margins

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ANG GFI HAR

Source: Company reports, Nedbank Capital Source: Company reports, Nedbank Capital

Often, the rand weakens when the price of gold in US$ terms weakens, thereby offsetting the impact on the price rand-denominated gold price on revenue. Unfortunately, this is seldom reflected in ratings, as the market tends to follow the US$-denominated gold price.

Chart 20 : Gold price performance (4 weeks) Chart 21 : Gold price performance (7 days)

8.0%

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EUR/oz

USD/oz

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South African mines are the highest cost producers To a large extent we believe this is true, especially if one just focuses on total cash costs. But again it depends on which mines, and, more importantly, which company one looks at. The following chart compares total cash costs of the South African region of local gold miners with some of their North American peers.

According to the VM Group, average costs for a total of 232 mines globally was US$558/oz as of 2Q10. AngloGold Ashanti was close to this average, with total cash costs of US$560/oz, while individual operations like Mponeng (US$408/oz) and Kopanang (US$542/oz) achieved costs below this average.

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Chart 22 : Total cash cost comparison (2Q 2010)

925

822

778

650

560

492

457

363

0

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200

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400

500

600

700

800

900

1,000

DRD HAR GFI PAN ANG NEM ABX GG

Tota

l cas

h co

sts

(US

$/oz

)

Total cash costs Global average

Source: Company data, VM Group, Nedbank Capital

In our view, replacement costs are far more relevant to profitability and cash flows, ie, total cash costs plus capital expenditures. On this basis, AngloGold Ashanti and Pan African Resources compare much better due to lower capital requirements.

Chart 23 : Comparison of replacement costs (2Q 2010)

1,12

9

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5

995

975

871

781

754

746

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GFI HAR DRD NEM GG ANG ABX PAN

Rep

lace

men

t cos

ts (U

S$/o

z)

GFI HAR DRD NEM GG ANG ABX PAN

Source: Company data, Nedbank Capital

Gold shares trade at a premium to their NPV This is hardly surprising as gold miners are usually valued under the assumption that costs will escalate and the price of gold will decline from current spot levels. This is especially true now, when gold is continually reaching new highs and testing uncharted territory. Naturally few – us included – trust that the bull cycle will be sustained ad infinitum, expecting prices to decline at some point. To top it all off, valuation is based on a finite asset/reserve ratio and assumes a finite life.

Valuing gold stocks at spot rates over their life and keeping costs and, consequently, margins flat presents a different picture. The table below compares the price-to-NPV multiple the share prices imply based on Nedbank’s gold price and exchange rate assumptions against the multiple at spot rates (US$1,384/oz, US$/ZAR7.09). As the table below illustrates, all stocks under our coverage trade at substantial discounts to their NPVs. Given that any gold price forecast is a guess at best, we consider this the most effective way of getting a sense of what the market is discounting.

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Table 2 : Price-to-NPV multiples using Nedbank assumptions and spot rates

ANG GFI HAR PAN GBG DRDLast price (cps) 32837 11566 7895 107 2000 345Nedbank assumptions 1.94 1.70 2.47 1.08 2.30 2.30Spot rates 0.79 0.67 0.72 0.65 0.67 0.26


1212


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Investment stance

While gold keeps testing new highs, equities remain range bound and give little indication of reaching new highs. We see no near- to medium-term catalysts to change this. For now we pin our hopes to juniors that can still create value through growth from a lower base.

Juniors continue to outperform Quality juniors like Pan African Resources and Great Basin Gold have performed strongly over the last 12 months. This at a time when established majors were largely range bound and juniors started to deliver on their projects. We also believe it is far easier to generate growth and value from a smaller base. Small-scale projects like Phoenix (PAN) require little capital, and low lead times can make a significant difference to the value of juniors. Projects that materially affect the value and rating of a major require long lead times and are capital intensive; capital that is often funded through value-eroding debt or equity placements.

Chart 24 : Performance of gold shares (last 12 months) Chart 25 : Performance of gold share (last 3 months)

32.3%

10.3%

(2.3%)

16 .7%

(11.8%)

2 .6%

10.3%

17.4%

(4.4%)

73.9%

21.6%

(3 .1%)

7.1%

(0.6%)

(40.0 %) (20 .0%) 0.0% 20.0% 40.0% 60. 0% 8 0.0%

RIO

BIL

AGL

IMP

AMS

GG

NEM

ABX

DRD

GBG

PAN

HAR

GFI

ANG

16.5%

16.5%

12.0%

11 .7%

2.1 %

5.0%

(2 .5%)

13.9%

13.1%

29.0%

20.2%

5.7%

11. 2%

6.5%

(10.0 %) 0.0% 10.0% 20.0% 30.0% 4 0.0%

RIO

BIL

AGL

IMP

AMS

GG

NEM

ABX

DRD

GBG

PAN

HAR

GFI

ANG


Valuation methodology

We include five valuation metrics in our new methodology:

Price-to-NPV;

Price-to-book;

EV/EBITDA;

Price-to-cash earnings; and

EV per reserve ounce.

Our 12-month target price is calculated as an equally weighted (20%) average of these five metrics. In our view, an equal weighting eliminates the risk of under- or overvaluing a stock based on one multiple with a higher weighting. Also, we find that the target price determined with this methodology is generally within 5% of the price determined solely with our established price-to-NPV methodology.

As a reality check, each valuation metric implied by the target price is then compared with historical trading ranges.

The respective exit multiples we use to determine our target prices are normally based on a 12-month average. However, adjustments are made depending on where the company is in its life cycle, and historical multiples are not representative of outlook. Great Basin Gold, which is developing two start-up projects, is an example of this. Also, if certain counters appear under- or overvalued on one measure, we reserve the right to apply an exit multiple in line with that of its peer group.

Equally weighted valuation metrics reduce the risk of under- or overvaluing a stock based on one single multiple

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Price-to-NPV

This is the most controversial of all valuation methodologies, but still our firm favourite. As our model is built by quarter, we can calculate the NPV at any given period in the past or in the future. By dividing the NPV into the respective share price of the day or the average for the quarter, we can determine historical trading ranges. Plotting historical price-to-NPV multiples against the share price over time offers a good indication of when the share is cheap and likely to re-rate, or expensive and likely to de-rate.

This provides a sense of current market sentiment and whether the share is relatively cheap or expensive based on previous multiples and vs its peers.

Given the gold market consistent buoyancy, we believe it is still appropriate to apply peak-cycle multiples of 2.5x for gold majors and 2.0x for juniors.

Price-to-NPV multiples are bound to vary greatly among analysts depending upon their assumptions for production volumes, yields, productivity, costs, capex, gold price and exchange rates. Hence, to be meaningful, consistency in individual application is crucial. Barring a brief period between September 2008 and February 2009, when we reduced our exit multiple to 2.0x due to highly volatile market conditions, we have consistently used an exit multiple of 2.5x.

Our NPV calculation is based on a nominal US$ operating free cash flow and a discount rate of 5%.

Price-to-book

Tangible book value = total assets - intangible assets - liabilities

This is the value of the share if the company were to liquidate all its assets.

Again, our model allows us to determine historical price-to-book values and, therefore, to assess whether the share is under - or overvalued against its prior performance and against its peers. Reputable blue-chip companies often trade on higher price-to-book multiples than their more volatile or smaller peers, but offer lower returns (ROE, ROA), and can incur the highest losses since the book value is the lowest value at which a share can theoretically trade. AngloGold Ashanti is an example of this.

EV/EBITDA

EV = market capitalisation + debt + minorities - cash

We consider this a sound alternative to PE ratios, which we find too distorted, erratic and unpredictable in the gold sector. The enterprise value represents the theoretical takeover value of a company. This is a useful reference point in the junior-to-mid-tier sector, where M&As are rife.

As with all our other valuation metrics, historical trading ranges offer an indication of whether the share is cheap or expensive and whether the multiple implied by our target price is realistic.

Price to cash earnings

Cash earnings = EBIT + amortisation/depreciation - taxes

In our view, cash earnings are the cleanest and most predictable earnings as they eliminate any distortion of through non-cash items or exceptionals. Historical trading ranges offer an indication of absolute and relative value.

Enterprise value (EV) per reserve ounce

This metric, much like market capitalisation per reserve ounce, is an indication of the market’s perception of the quality of the ore reserve and the company itself. Quality in this sense refers to geographical and operational risk, grade and volume. Usually, companies with a higher exposure to open-pit mining and little exposure to Africa and deep-level South African mining in particular are likely to trade at higher values.

All exit multiples are checked against their historical ranges

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Reality check The following table compares the valuation multiples implied by our target prices with each company’s historical range. The long-term average is calculated over a 10- to 12-year period.

Table 3 : Valuation metrics

Long-term average

36-month average

12-month average

3-month average

Current Exit multiple Implied by target price

Price/NPV ANG x 1.26 1.46 1.69 1.82 1.97 1.68 2.11 GFI x 1.07 1.16 1.00 1.37 1.74 1.33 1.68 HAR x 4.00 2.74 2.43 2.38 2.50 2.42 2.66 GBG x 15.08 3.29 1.74 1.59 2.41 2.00 1.87 PAN x 0.57 0.57 0.59 0.80 1.24 1.00 1.57 DRD x 6.74 5.86 2.01 1.77 2.32 2.50 2.59Price/BV ANG x 4.9 4.9 4.7 4.3 4.7 4.7 3.8 GFI x 2.6 1.5 1.3 1.8 1.9 1.7 1.6 HAR x 1.6 1.4 1.2 1.2 1.2 1.2 1.3 GBG x 1.9 1.9 1.9 2.3 3.5 1.8 2.7 PAN x 1.2 1.2 1.1 1.1 1.8 1.7 1.5 DRD x 3.8 1.3 0.7 0.6 0.8 0.8 0.8EV/EBITDA ANG x 10.6 9.3 7.7 7.0 24.5 7.7 5.7 GFI x 9.7 5.5 4.0 5.1 21.2 6.0 4.9 HAR x 26.7 15.4 16.0 13.9 37.9 10.0 7.9 GBG x 72.9 72.9 63.4 37.2 72.8 10.0 7.6 PAN x 2.1 2.1 1.7 1.6 20.1 3.6 1.8 DRD x 4.5 1.7 6.4 5.3 2.4Price/cash earnings ANG x 13.0 4.9 6.5 5.9 6.4 6.4 7.7 GFI x 12.4 5.8 4.2 5.6 4.1 6.5 5.7 HAR x 5.4 15.3 16.3 14.6 15.4 10.0 9.2 GBG x 57.6 44.6 8.5 5.3 7.9 8.0 6.7 PAN x 2.4 2.4 1.4 1.7 2.6 3.9 3.4 DRD x 2.1 2.0 0.7 0.8 1.0 1.0 1.3EV per reserve ounce ANG US$/oz 164 204 250 266 285 249 315 GFI US$/oz 100 122 119 169 186 144 178 HAR US$/oz 113 123 120 123 130 121 148 GBG US$/oz 68 81 60 62 93 59 91 PAN US$/oz 164 151 83 110 173 152 224 DRD US$/oz 26 25 19 21 101 23 31


In summary, the vast majority of the valuation multiples implied by our target prices are in line with historical trading ranges. We have made adjustments to our exit multiples for Harmony’s EV/EBITDA and price-to-cash earnings, as we expect EBITDA and cash earnings to pick up notably in the coming year.

The implied price-to-book, EV/EBITDA and price-to-cash-earnings multiples are mostly below historical ranges, confirming, in our view, that our target prices are not too aggressive.

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AngloGold Ashanti

Downgrade to Hold

The rerating we were hoping for following the termination of the company'shedge book has not materialised. GFI continues to outperform ANG, havinggained 8% vs the latter's 4% since 20 September. For now, we believe the share isnear its peak and we downgrade to Hold (from Buy).

Key forecasts

FY08A FY09A FY10F FY11F FY12F

Revenue (Rm) 30,121 30,745 39,164 46,543 45,397 EBITDA (Rm) 9,198 15,593 14,729% 20,084 17,914 Reported net profit (Rm) -16,746 -2,571 1,196& 8,580% 7,688%Normalised net profit (Rm) 4,908 9,385 7,054% 8,580% 7,688%Normalised EPS (R) 14.80 26.20 19.00% 22.30% 20.00%Dividend per share (R) 39.90 133.2 134.5% 439.6% 393.2%Dividend yield (%) 11.80 39.50 39.90 130.4 116.7 Normalised PE (x) 22.80 12.90 17.70 15.10 16.90 EV/EBITDA (x) 15.40 8.63 9.24 6.37 6.67 EV/invested capital (x) 3.86 4.69 3.81 3.71 3.71 ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00

Use of %& indicates that the line item has changed by at least 5%. Accounting standard: IFRS Source: Company data, Nedbank Capital forecasts

year to Dec, fully diluted

Tropicana gold mine adds value In our view, the development of the Tropicana gold mine in Australia will make a material difference to the value of the company’s highest-cost region. Once the mine is in production, which we expect around late 2013, we expect the region to generate strong cash flows following more than three years of losses.

Net growth is limited Tropicana will be AngloGold Ashanti’s first greenfield development in a long time. However, the project’s net impact on incremental growth is likely to be negated by further declines in South Africa’s output and ongoing problems optimising key assets like Obuasi. The project has yet to establish a consistent trend, and another new team has been appointed to facilitate a turnaround.

Vamping is not the solution Management has highlighted its renewed focus on vamping, a process of gold reclamation from old areas that can apparently be sustained over a long period. This is a basic step in the mining process, and we are puzzled that it has been neglected to such an extent that it can now boost output over a protracted period. We are equally puzzled that face advance has declined materially over the last three years and that concerted efforts to reverse this are only now are being made.

Downgrade from Buy to Hold We downgrade AngloGold Ashanti to Hold (from Buy) and lower our 12-month target price to R360 (R388) to reflect revisions to our gold price, exchange rate, production and cost assumptions. The risk profile of our forecasts is high.

6 December 2010

Analyst


Price performance

(1M) (3M) (12M)Price (R) 323.2 312.9 338.0Absolute (%) 5.0 8.5 0.4Rel market (%) 3.1 -3.4 -12.6Rel sector (%) 0.4 -8.6 -5.8

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ANGJ J Jo'burg All-Share Index

Market capitalisation R128.45bn (€14.18bn) Average (12M) daily turnover R339.00m (€34.63m) Sector: JSE Mining RIC: ANGJ J, ANG SJ Priced R336.99 at close 2 Dec 2010. Source: Bloomberg

Hold (from Buy) Target price R360.00 (from R388.00) Price R336.99 Short term (0-60 days) n/a Market view Underweight

Change of recommendation

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AngloGold Ashanti | Financial Statements | 6 December 2010

2

Assumptions The following table summarises our key assumptions. We include the Tropicana mine in our forecast, but believe that the company’s production target of one million additional ounces within five years remains out of reach, as we see current production levels in South Africa becoming increasingly difficult to maintain. We expect non-core operations like Great Noligwa and Savuka to cease production within the next three years.

Table 1 : Summary of our assumptions

2007 A 2008 A 2009 A 2010 F 2011 F 2012 F 2013 F 2014 FSpot gold price US$/oz 604 696 872 972 1,221 1,350 1,250 1,150 R/kg 131,580 157,191 229,761 261,086 288,143 324,924 320,016 305,025Received gold price US$/oz 531 629 485 751 1,178 1,350 1,250 1,150 R/kg 115,970 133,763 194,829 249,840 278,514 324,981 319,920 305,025Exchange rate US$/R 6.76 7.04 8.25 8.40 7.35 7.49 7.96 8.25Gold production Moz 5,634,0005,477,0004,982,0004,599,0004,510,4554,604,5634,562,1644,403,765Total cash costs US$/oz 294 357 444 514 614 641 649 653 R/kg 64,113 77,804 111,681 127,887 144,936 154,406 166,033 173,166Replacement costs (NCE) US$/oz 465 583 716 769 907 959 927 887 R/kg 101,294 131,595 189,347 206,071 214,300 230,880 237,218 235,190Cash cost margins % 44.2% 41.8% 43.0% 48.7% 47.8% 52.5% 48.1% 43.2%Replacement costs margins% 16.7% 9.1% 10.4% 24.4% 30.9% 36.7% 33.0% 29.4%


Sensitivities The starting point for our analysis is spot rates, which we have rounded off to US$1,350/oz and USD/ZAR7.00 for the purposes of these calculations. Spot rates are entered into our models in nominal terms over the life of the operations with 0% cost escalation. We then change the gold price and the exchange rate in increments of US$50/oz and US$/ZAR0.50 and calculate the impact on our target price, cash earnings and NPV estimates. The result of this calculation may be interpreted as what the market is currently discounting.

Our sensitivity analysis indicates that our R360 target price is broadly in line with valuations at current spot rates.

Table 2 : Sensitivities to our target price

US$/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550US$/ZAR 5.00 212 217 223 229 234 240 246 251 257 5.50 237 243 249 255 262 268 274 280 286 6.00 262 269 276 282 289 296 303 309 316 6.50 287 294 302 309 317 324 331 339 346 7.00 312 320 328 336 344 352 360 368 375 7.50 337 346 355 363 372 380 389 397 405 8.00 362 372 381 390 399 408 417 426 435 8.50 388 398 407 417 427 436 446 455 464 9.00 413 423 434 444 454 464 474 484 494

Source: Nedbank Capital

Based on spot rates, we estimate that AngloGold Ashanti is trading at a 15% discount to its NPV.

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AngloGold Ashanti | Financial Statements | 6 December 2010

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Table 3 : Sensitivities to NPV

US$/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550US$/ZAR 5.00 95 122 147 173 197 221 245 268 292 5.50 138 165 192 219 245 271 296 322 347 6.00 177 207 235 264 292 320 348 376 403 6.50 216 247 278 309 339 369 399 429 459 7.00 255 288 321 353 385 418 450 483 515 7.50 292 328 363 397 432 467 502 536 571 8.00 330 367 405 442 479 516 553 590 627 8.50 368 407 447 486 525 565 604 644 683 9.00 405 447 489 530 572 614 655 697 739


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AngloGold Ashanti | Key Financial Data | 6 December 2010

Income statement

Rm FY08A FY09A FY10F FY11F FY12FRevenue 30121 30745 39164 46543 45397Cost of sales -18689 -18587 -20436 -22855 -24229Operating costs -2234 3435 -3999 -3604 -3253EBITDA 9198 15593 14729 20084 17914DDA & Impairment (ex gw) -4785 -4633 -5147 -5184 -5481EBITA 4413 10960 9582 14900 12434Goodwill (amort/impaired) n/a n/a n/a n/a n/aEBIT 4413 10960 9582 14900 12434Net interest -400.8 -703.7 -918.0 -1609 -534.2Associates (pre-tax) n/a n/a n/a n/a n/aOther pre-tax items -21852 -11429 -5531 0.00 0.00Reported PTP -17840 -1173 3133 13291 11899Taxation 1218 -1171 -1438 -2658 -2372Minority interests -322.0 227.0 -498.4 -2053 -1840Other post-tax items 198.0 -454.0 0.00 0.00 0.00Reported net profit -16746 -2571 1196 8580 7688Tot normalised items -21654 -11956 -5858 0.00 0.00Normalised EBITDA 9198 15593 14729 20084 17914Normalised PTP 4012 10783 8991 13291 11899Normalised net profit 4908 9385 7054 8580 7688

Source: Company data, Nedbank Capital forecasts year to Dec

Balance sheet

Rm FY08A FY09A FY10F FY11F FY12FCash & market secs (1) 5438 8176 9568 9706 10132Other current assets 21039 10105 9450 10267 10166Tangible fixed assets 41081 43263 40606 37181 33270Intang assets (incl gw) 1403 1316 1296 1296 1296Oth non-curr assets 7241 9910 9620 9620 9620Total assets 76202 72770 70540 68071 64483Short term debt (2) 10046 9493 1864 1864 1864Trade & oth current liab 22861 24344 12122 10588 8603Long term debt (3) 8224 4862 15363 7363 -637.0Oth non-current liab 11325 11547 13140 13316 13540Total liabilities 52456 50246 42489 33131 23370Total equity (incl min) 23746 22524 28051 34939 41113Total liab & sh equity 76202 72770 70540 68071 64484Net debt 12832 6179 7659 -479.1 -8905

Source: Company data, Nedbank Capital forecasts year ended Dec

Cash flow statement

Rm FY08A FY09A FY10F FY11F FY12FEBITDA 9198 15593 14729 20084 17914Change in working capital -1407 -950.0 -1817 -377.1 247.5Net interest (pd) / rec -304.0 -501.0 -515.0 -1609 -534.2Taxes paid -1242 -1230 -1517 -2658 -2380Other oper cash items -8815 -9632 -10322 1739 1540Cash flow from ops (1) -2570 3280 557.1 17179 16788Capex (2) -9866 -8655 -6414 -7349 -6848Disposals/(acquisitions) 1337 1337 1337 1337 1337Other investing cash flow n/a n/a n/a n/a n/aCash flow from invest (3) -8529 -7319 -5077 -6012 -5511Incr / (decr) in equity 13170 2301 5512 0.00 0.00Incr / (decr) in debt 1983 749.9 2860 -8000 -8000Ordinary dividend paid -406.0 -474.5 -1128 -1692 -1514Preferred dividends (4) n/a n/a n/a n/a n/aOther financing cash flow n/a n/a n/a n/a n/aCash flow from fin (5) 14747 2576 7244 -9692 -9514Forex & disc ops (6) 17.0 -672.6 -165.0 0.00 0.00Inc/(decr) cash (1+3+5+6) 3666 -2135 2559 1475 1762Equity FCF (1+2+4) -12436 -5375 -5857 9830 9939


1919

AngloGold Ashanti | Performance and Valuation | 6 December 2010

Standard ratios AngloGold Gold Fields Harmony Gold

Performance FY08A FY09A FY10F FY11F FY12F FY10F FY11F FY12F FY11F FY12F FY13FSales growth (%) 32.3 2.07 27.4 18.8 -2.46 6.41 9.97 -0.50 19.8 20.9 6.65EBITDA growth (%) 48.6 69.5 -5.54 36.4 -10.8 4.90 23.2 -8.32 93.9 52.9 5.03EBIT growth (%) 116.9 148.4 -12.6 55.5 -16.6 -2.60 37.7 -12.8 729.4 106.5 3.65Normalised EPS growth (%) 2161 77.4 -27.4 17.2 -10.4 -9.77 70.6 -11.6 n/a 156.1 6.28EBITDA margin (%) 30.5 50.7 37.6 43.2 39.5 39.2 44.0 40.5 21.7 27.5 27.1EBIT margin (%) 14.7 35.6 24.5 32.0 27.4 23.8 29.7 26.1 8.59 14.7 14.3Net profit margin (%) 16.3 30.5 18.0 18.4 16.9 10.1 15.7 14.0 4.14 8.76 8.73Return on avg assets (%) 7.71 13.6 11.5 17.0 15.0 7.01 12.2 10.3 1.83 4.01 3.99Return on avg equity (%) 24.3 40.6 27.9 27.2 20.2 7.56 12.3 10.1 1.89 4.69 4.77ROIC (%) 12.2 21.6 24.0 30.0 26.0 11.3 15.8 13.7 2.82 5.67 5.82ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Dec year to Dec year to Jun

Valuation EV/sales (x) 4.69 4.38 3.48 2.75 2.63 2.66 2.33 2.25 2.58 2.07 1.84EV/EBITDA (x) 15.4 8.63 9.24 6.37 6.67 6.77 5.30 5.56 11.9 7.53 6.81EV/EBITDA @ tgt price (x) 16.3 9.20 9.84 6.81 7.16 6.77 5.30 5.56 13.9 8.86 8.08EV/EBIT (x) 32.0 12.3 14.2 8.59 9.61 11.2 7.83 8.64 30.0 14.1 12.9EV/invested capital (x) 3.86 4.69 3.81 3.71 3.71 1.79 1.71 1.65 1.14 1.10 1.06Price/book value (x) 5.02 5.42 4.62 3.71 3.16 1.86 1.73 1.62 1.15 1.10 1.05Equity FCF yield (%) -11.1 -4.45 -4.69 7.58 7.66 4.37 6.49 6.09 -0.52 3.40 5.35Normalised PE (x) 22.8 12.9 17.7 15.1 16.9 25.0 14.6 16.5 61.4 24.0 22.6Norm PE @ tgt price (x) 24.4 13.7 18.9 16.2 18.0 25.0 14.6 16.5 72.1 28.2 26.5Dividend yield (%) 11.8 39.5 39.9 130.4 116.7 156.7 264.2 228.4 28.7 41.7 44.3 year to Dec year to Dec year to Jun

Per share data FY08A FY09A FY10F FY11F FY12F Solvency FY08A FY09A FY10F FY11F FY12FTot adj dil sh, ave (m) 332.3 358.1 370.9 384.9 384.9 Net debt to equity (%) 54.0 27.4 27.3 -1.37 -21.7Reported EPS (ZAR) -50.4 -7.18 3.22 22.3 20.0 Net debt to tot ass (%) 16.8 8.49 10.9 -0.70 -13.8Normalised EPS (ZAR) 14.8 26.2 19.0 22.3 20.0 Net debt to EBITDA 1.40 0.40 0.52 -0.02 -0.50Dividend per share (ZAR) 39.9 133.2 134.5 439.6 393.2 Current ratio (x) 0.80 0.54 1.36 1.60 1.94Equity FCF per share (ZAR) -37.4 -15.0 -15.8 25.5 25.8 Operating CF int cov (x) -3.37 10.0 5.03 13.3 36.9Book value per sh (ZAR) 67.2 62.2 72.9 90.8 106.8 Dividend cover (x) 35.1 19.7 13.9 5.07 5.08 year to Dec year to Dec

Priced as follows: ANGJ J - R336.99; GFIF.J - R120.99; HARJ.J – R80.00 Source: Company data, Nedbank Capital forecasts


Our 12 –month target price is based on an equally weighted average of five valuation metrics: price to NPV, price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Both up- and downside risks to our valuation include variations to our currency, gold price, production and cost assumptions. Source: Nedbank Capital

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AngloGold Ashanti | Strategic and Competitive Overview | 6 December 2010

Strategic analysis Average SWOT company score: 3 Production split FY11

Company description Hold Price relative to country

AngloGold Ashanti is a global gold producer with 21 operations in Africa, Australia and North and South America and a substantial, worldwide exploration program. The company's primary listing is in Johannesburg, withsecondary listings in New York, Ghana, London and Australia. We expect 2010 gold production to reach 4.5-4.7m ounces at total cash costs of around US$600/oz. Following the termination of the hedge book, we expect arerating as a result of higher gearing to gold. The company can now focus on bringing its portfolio of greenfieldexploration projects into production to achieve its annual target of 6m ounces. Headwinds facing AngloGoldAshanti include the need for further restructuring in South Africa, as operations like Great Noligwa and Savuka arenearing the end of their natural life.

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Price relative to country

Competitive position Average competitive score: 4- Broker recommendations

Africa36%

Americas19%

Australia7%

South Africa38%

Source: Company data

Market data

Headquarters 76 Jeppe Street, Newtown, 2001, South Africa Website www.anglogoldashanti.com Shares in issue 381.2m Freefloat 100% Majority shareholders Paulson & Co (11%), Allan Gray Unit Trust (10%), Blackrock (5%)

Supplier power 3-The dominant positions of suppliers of steel and reagents continue to have an above-inflationary impact on operating costs.

Barriers to entry 5+ High capital requirements, long lead times in developing projects and increasing difficulty in finding economicallyviable resources present extremely high barriers to entry.

Customer power 3- Declining production levels as reserves are depleted and mines become deeper and more mature make the South Africa's gold mining industry a less dominant force in the supply chain.

Substitute products 3- Platinum jewellery and alternative consumer products (eg i-Pods) have replaced the demand for gold jewellery,exacerbating the impact of high prices and price volatility on demand.

Rivalry 5- Competition is fierce in a global race to replace depleted reserves. The player with the lowest operating costs andhighest cash flows has the strongest position.

Scoring range 1-5 (high score is good) Plus = getting better Minus = getting worse

Country view: South Africa Country rel to M East & Africa

The South African economy is underpinned by its mineral wealth, but the rand's volatility tends to make investorssceptical, so most emerging market fund managers are underweight South Africa. Due to the strong commoditysector, flows into the bond and equity markets are improving. South Africa should also benefit from the Chinagrowth theme, but we believe more stability in the rand is necessary before an upgrade to Neutral would be warranted.

The country view is set in consultation with the relevant company analyst but is the ultimate responsibility of the Strategy Team.

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Strengths 4ANG has the lowest cost base among its South African peers. The group also has a strong exploration portfolio,with several projects that could be brought to account within the next four to six years.

Weaknesses 2 The company's production profile is likely to decrease faster than that of its peer, and greenfield exploration projects need to be brought into production.

Opportunities 4 Opportunities to unlock value may arise from further consolidation in the industry or through the regionalunbundling of assets.

Threats 3 The main threats to the company's profitability and sustainability are continued rand strength and a weaker US$gold price.

Scoring range is 1-5 (high score is good)

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Produced by: Nedbank Capital+

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Important disclosures can be found in the Disclosures Appendix. +Distributed outside Sub-Saharan Africa by The Royal Bank of Scotland N.V. and its affiliates under a strategic alliance with Nedbank Capital.

DRDGold

Lacking excitement

Over the last three months, DRDGold has experienced renewed investor interest,gaining a solid 15% and outperforming all majors and the JSE gold index. This isin line with a general resurgence of interest in juniors during this period. Nonetheless, we find little to get excited about with this counter.

Key forecasts


Revenue (Rm) 1,911 1,991 2,494 2,135 2,038 EBITDA (Rm) 82.10 218.8 262.1& 330.1& 328.1%Reported net profit (Rm) 92.30 180.0 -3.40& -5.90& -6.35&Normalised net profit (Rm) 159.1 14.30 4.80& -5.90& -6.35&Normalised EPS (R) 0.42 0.04 0.01& -0.02& -0.02&Dividend per share (R) 0.00 0.00 0.00 0.00 0.00 Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 Normalised PE (x) 8.11 91.10 274.1 n/m n/m EV/EBITDA (x) 12.50 5.43 4.13 2.83 2.17 EV/invested capital (x) 0.79 0.78 0.78 0.76 0.71 ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00


year to Jun, fully diluted

Blyvoor strategy needs to be rethought Despite making a concerted effort to re-establish working places in the higher grade areas, we very much doubt that this mine will operate at volumes and grades sufficient to return it to profitability. Unfortunately, the partial exit from Blyvoor by selling it to Aurora failed, but there are other alternatives, in our view. Unless this situation is resolved, this mine will continue to drag DRDGold’s profitability and rating.

Costs expected to increase further We believe the company’s operating costs will continue to increase, partially due to its exposure to the Blyvoor underground mine. But with limited capital expenditure, replacement cost margins of 10–15% are, in our view, achievable, if current rand gold prices are sustained.

Ergo progressing Over the last two quarters, the head grade has declined while the yield has increased, indicating that the recovery factor is improving. Volumes are also likely to increase further.

Hold maintained We maintain our Hold recommendation as well as our 12-month target price of R4.00 per share. Revisions to our gold price and exchange rate estimates were offset by changes to our production and cost assumptions. The risk to our forecast is high.

6 December 2010

Analyst


Price performance

(1M) (3M) (12M)Price (R) 3.34 3.00 4.26Absolute (%) 2.4 14.0 -19.7Rel market (%) 0.6 1.9 -29.3Rel sector (%) -0.8 -3.2 -23.4

2

4

6

8

10

12Dec 07 Dec 08 Dec 09

DRDJ.J Jo'burg All-Share Index

Market capitalisation R1.32bn (€144.26m) Average (12M) daily turnover R2.42m (€0.25m) Sector: JSE Mining RIC: DRDJ.J, DRD SJ Priced R3.42 at close 2 Dec 2010. Source: Bloomberg

Hold Target price R4.00 Price R3.42 Short term (0-60 days) n/a Market view Underweight

22

DRDGold | Financial Statements | 6 December 2010

2

Assumptions Our key assumptions are summarised in table 1. Despite high operating costs, we believe the company will achieve sound replacement cost margins, assuming current rand gold price levels are sustained.

Table 1 : Summary of key assumptions

2007A 2008A 2009A 2010A 2011F 2012F 2013F 2014FReceived gold price US$/oz 635 812 874 1,086 1,296 1,302 1,199 1,062 R/kg 146,551 189,237 251,176 267,799 308,710 321,189 316,144 283,488Exchange rate US$/R 7.19 7.28 9.02 7.57 7.29 7.68 8.20 8.31Gold Production Moz 477,156 321,432 247,689 235,729 255,351 213,721 207,241 208,473Total cash costs US$/oz 570 675 735 954 1,151 1,042 950 921 R/kg 132,662 158,586 212,228 227,638 269,815 257,107 250,460 245,967Replacement costs (NCE) US$/oz 743 786 873 1,061 1,256 1,114 986 942 R/kg 150,548 178,512 258,802 253,445 294,378 274,768 259,968 251,784Cash cost margins % 9.5% 16.2% 15.2% 13.1% 14.1% 20.0% 20.8% 13.2%Replacement costs margins % (2.7%) 5.7% (3.4%) 3.2% 6.2% 14.5% 17.8% 11.2%


Sensitivities The starting point for our analysis is spot rates which we have rounded off to US$1,350/oz and USD/ZAR7.00 in these calculations. These are entered into our models in nominal terms over the life with 0% cost escalation. We then changed the gold price and the exchange rate in increments of US$50/oz and USD/ZAR0.50 and calculated the impact on our target price, cash earnings and to NPV. The result of this calculation may be interpreted as what the market is currently discounting.

The sensitivity analysis of our target price indicates limited upside to current ratings.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 1.84 1.78 5.50 2.06 1.92 2.04 2.19 2.35 6.00 2.08 2.12 2.29 2.48 2.67 2.87 3.06 6.50 2.22 2.28 2.49 2.71 2.95 3.17 3.40 3.62 3.83 7.00 2.61 2.88 3.15 3.42 3.68 3.93 4.18 4.43 4.67 7.50 3.27 3.57 3.88 4.17 4.46 4.75 5.03 5.30 5.57 8.00 3.98 4.32 4.66 4.98 5.30 5.62 5.93 6.24 6.54 8.50 4.75 5.12 5.49 5.85 6.20 6.55 6.90 7.24 7.58 9.00 5.56 5.97 6.37 6.77 7.16 7.54 7.93 8.30 8.68


The substantial upside to our NPV valuation confirms the huge gearing DRDGold has to a higher gold price or a weaker rand.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 1.38 2.84 4.21 5.50 0.85 2.46 4.00 5.45 6.68 8.03 6.00 1.13 2.84 4.45 6.01 7.49 8.78 10.07 11.35 6.50 2.70 4.45 6.12 7.72 9.11 10.50 11.88 13.27 14.65 7.00 5.78 7.49 9.00 10.50 11.99 13.48 14.96 16.44 17.92 7.50 8.47 10.07 11.67 13.27 14.86 16.44 18.03 19.61 21.19 8.00 10.92 12.63 14.33 16.02 17.71 19.40 21.08 22.77 24.45 8.50 13.37 15.17 16.98 18.77 20.56 22.35 24.14 25.93 27.73 9.00 15.81 17.71 19.61 21.50 23.40 25.30 27.20 29.10 30.99


2323

DRDGold | Key Financial Data | 6 December 2010

Income statement

Rm FY09A FY10A FY11F FY12F FY13FRevenue 1911 1991 2494 2135 2038Cost of sales -1682 -1651 -2151 -1737 -1642Operating costs -146.2 -120.7 -80.8 -68.2 -67.7EBITDA 82.1 218.8 262.1 330.1 328.1DDA & Impairment (ex gw) -46.2 -190.8 -109.8 -94.0 -90.5EBITA 35.9 28.0 152.3 236.1 237.7Goodwill (amort/impaired) n/a n/a n/a n/a n/aEBIT 35.9 28.0 152.3 236.1 237.7Net interest 105.9 11.7 -5.00 -9.35 -1.63Associates (pre-tax) n/a n/a n/a n/a n/aOther pre-tax items -59.5 171.9 -8.20 0.00 0.00Reported PTP 82.3 211.6 139.1 226.8 236.0Taxation 28.4 -8.30 -45.1 -63.5 -60.2Minority interests 18.4 -23.3 -97.4 -169.2 -182.1Other post-tax items -36.8 0.00 0.00 0.00 0.00Reported net profit 92.3 180.0 -3.40 -5.90 -6.35Tot normalised items -66.8 165.7 -8.20 0.00 0.00Normalised EBITDA 82.1 218.8 262.1 330.1 328.1Normalised PTP 149.1 45.9 147.3 226.8 236.0Normalised net profit 159.1 14.3 4.80 -5.90 -6.35

Source: Company data, Nedbank Capital forecasts year to Jun

Balance sheet

Rm FY09A FY10A FY11F FY12F FY13FCash & market secs (1) 353.6 188.2 372.9 491.3 674.9Other current assets 196.9 221.2 342.6 268.6 260.9Tangible fixed assets 1738 970.7 1119 1193 n/aIntang assets (incl gw) 0.00 0.00 0.00 0.00 0.00Oth non-curr assets 337.8 1207 1124 1074 2237Total assets 2626 2588 2959 3026 3173Short term debt (2) 2.10 0.00 0.00 0.00 0.00Trade & oth current liab 323.9 276.5 558.4 574.9 671.4Long term debt (3) 65.1 59.0 139.8 109.8 69.8Oth non-current liab 650.7 602.1 641.9 728.3 825.2Total liabilities 1042 937.6 1340 1413 1566Total equity (incl min) 1584 1650 1619 1614 1607Total liab & sh equity 2626 2588 2959 3027 3173Net debt -286.4 -129.2 -233.1 -381.5 -605.1

Source: Company data, Nedbank Capital forecasts year ended Jun

Cash flow statement

Rm FY09A FY10A FY11F FY12F FY13FEBITDA 82.1 218.8 262.1 330.1 328.1Change in working capital 44.0 -26.5 9.43 -30.2 -12.6Net interest (pd) / rec -10.5 -12.1 -6.70 -9.35 -1.63Taxes paid -46.9 -12.6 -39.8 -63.5 -66.1Other oper cash items 139.7 -114.0 60.9 38.7 37.1Cash flow from ops (1) 208.4 53.6 286.0 265.8 284.9Capex (2) -593.3 -226.4 -192.8 -117.4 -61.3Disposals/(acquisitions) 0.00 0.00 0.00 0.00 0.00Other investing cash flow n/a n/a n/a n/a n/aCash flow from invest (3) -593.3 -226.4 -192.8 -117.4 -61.3Incr / (decr) in equity 0.00 0.00 0.00 0.00 0.00Incr / (decr) in debt -85.8 7.80 91.5 -30.0 -40.0Ordinary dividend paid 0.00 0.00 0.00 0.00 0.00Preferred dividends (4) n/a n/a n/a n/a n/aOther financing cash flow n/a n/a n/a n/a n/aCash flow from fin (5) -85.8 7.80 91.5 -30.0 -40.0Forex & disc ops (6) -21.8 -0.40 0.00 0.00 0.00Inc/(decr) cash (1+3+5+6) -492.5 -165.4 184.7 118.4 183.6Equity FCF (1+2+4) -384.9 -172.8 93.2 148.4 223.6


2424

DRDGold | Performance and Valuation | 6 December 2010

Standard ratios DRDGold Great Basin Gold Pan African Resources

Performance FY09A FY10A FY11F FY12F FY13F FY10F FY11F FY12F FY11F FY12F FY13FSales growth (%) 3.62 4.18 25.3 -14.4 -4.56 198.9 223.1 21.0 20.5 14.2 7.15EBITDA growth (%) -65.1 166.5 19.8 25.9 -0.61 -79.3 n/a 16.4 32.4 7.77 2.20EBIT growth (%) -78.4 -22.0 443.8 55.0 0.65 -64.7 n/a 10.5 42.8 6.36 0.68Normalised EPS growth (%) -65.1 -91.1 -66.8 8.75 7.67 -60.8 n/a 13.9 55.6 7.34 2.05EBITDA margin (%) 4.30 11.0 10.5 15.5 16.1 -10.6 38.3 36.8 40.2 38.0 36.2EBIT margin (%) 1.88 1.41 6.11 11.1 11.7 -19.3 30.2 27.6 38.0 35.4 33.2Net profit margin (%) 8.33 0.72 0.19 -0.28 -0.31 -19.2 24.3 22.9 28.8 27.0 25.8Return on avg assets (%) 4.14 1.12 3.82 5.68 5.71 -3.22 11.4 11.1 23.0 19.0 15.7Return on avg equity (%) 11.0 0.88 0.29 -0.37 -0.39 -5.27 18.7 17.7 28.9 23.9 19.7ROIC (%) 4.14 1.55 7.21 12.3 13.9 -3.60 12.0 11.4 38.7 36.6 34.6ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Jun year to Dec year to Jun

Valuation EV/sales (x) 0.54 0.60 0.43 0.44 0.35 11.4 3.58 2.78 1.21 0.84 0.54EV/EBITDA (x) 12.5 5.43 4.13 2.83 2.17 n/m 9.37 7.55 3.02 2.22 1.48EV/EBITDA @ tgt price (x) 15.3 6.45 4.98 3.51 2.85 n/m 10.1 8.17 4.26 3.37 2.61EV/EBIT (x) 28.7 42.4 7.11 3.96 2.99 n/m 11.9 10.1 3.20 2.38 1.61EV/invested capital (x) 0.79 0.78 0.78 0.76 0.71 1.95 1.71 1.56 1.53 1.14 0.77Price/book value (x) 0.82 0.80 0.81 0.82 0.82 2.86 2.37 1.99 1.37 1.08 0.89Equity FCF yield (%) -29.8 -13.3 7.08 11.3 17.0 -19.1 -1.49 6.59 10.7 16.3 19.7Normalised PE (x) 8.11 91.1 274.1 n/m n/m n/m 13.9 12.2 5.41 5.04 4.94Norm PE @ tgt price (x) 9.48 106.6 320.6 n/m n/m n/m 15.2 13.4 7.15 6.66 6.53Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Jun year to Dec year to Jun

Per share data FY09A FY10A FY11F FY12F FY13F Solvency FY09A FY10A FY11F FY12F FY13FTot adj dil sh, ave (m) 377.2 381.2 384.9 384.9 384.9 Net debt to equity (%) -18.1 -7.83 -14.4 -23.6 -37.7Reported EPS (ZAR) 0.24 0.47 -0.01 -0.02 -0.02 Net debt to tot ass (%) -10.9 -4.99 -7.88 -12.6 -19.1Normalised EPS (ZAR) 0.42 0.04 0.01 -0.02 -0.02 Net debt to EBITDA -3.49 -0.59 -0.89 -1.16 -1.84Dividend per share (ZAR) 0.00 0.00 0.00 0.00 0.00 Current ratio (x) 1.69 1.48 1.28 1.32 1.39Equity FCF per share (ZAR) -1.02 -0.45 0.24 0.39 0.58 Operating CF int cov (x) 25.3 6.47 49.6 36.2 216.5Book value per sh (ZAR) 4.19 4.29 4.21 4.19 4.17 Dividend cover (x) 0.00 0.00 0.00 0.00 0.00 year to Jun year to Jun

Priced as follows: DRDJ.J - R3.42; GBGJ.J - R20.09; PANJ.J - R1.09 Source: Company data, Nedbank Capital forecasts


Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Both up- and downside risks to our valuation include variations to our currency, gold price, production and cost assumptions. Source: Nedbank Capital

2525

DRDGold | Strategic and Competitive Overview | 6 December 2010

Strategic analysis Average SWOT company score: 3 Production split, FY11F


DRDGold is a junior gold producer with a primary listing on the JSE (Johannesburg) and a secondary listing onNasdaq (New York). The company's main business is the retreatment of surface tailings and it also operates theBlyvooruitzicht deep level mine. After the sale of 60% of Blyvoor to Aurora failed, the company is focussed onincreasing production volumes from this operation. DRDGold is also developing a 50km pipeline to deposit tailingsfrom the Crown operations at the Ergo tailings facilities.

50

100

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300

Dec07

Mar08

Jul08

Oct08

Feb09

Jun09

Sep09

Jan10

Apr10

Aug10

Nov10



Surface sources

64%

Underground

36%

Source: Nedbank Capital forecasts

Market data

Headquarters 1st floor, Quadrum 1, Quadrum Office Park, 50 Constantia Boulevard, Constantia Kloof Ext., Roodepoort, South Africa Website www.drdgold.com Shares in issue 384.9m Freefloat 100% Majority shareholders Soges Fiducem (8%), Investec (8%), Clearstream Banking (2%)

Supplier power 3-Dominant positions of suppliers of steel and reagents continue to have an above inflationary impact on operating costs.


Customer power 3- Declining production levels as reserves are depleted and mines become deeper and more mature make the SouthAfrican gold mining industry a less dominant force in the supply chain.

Substitute products 3- Platinum jewellery and alternative consumer products (eg, i-Pods) have replaced the demand for gold jewellery,exacerbating the impact of high prices and price volatility on demand.

Rivalry 5- Competition is fierce in a global race to replace depleted reserves where the player with the lowest operating costs and highest cash flows has the strongest position.



The South African economy is underpinned by its mineral wealth, but the rand's volatility tends to make investorssceptical, so most emerging market fund managers are underweight South Africa. Due to the strong commoditysector, flows into the bond and equity markets are improving. South Africa should also benefit from the China growth theme, but we believe more stability in the rand is necessary before an upgrade to Neutral would bewarranted.


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120

130

140

150

Dec07

Mar08

Jul08

Oct08

Feb09

Jun09

Sep09

Jan10

Apr10

Aug10

Nov10

MarketIndex

0

1

2

3

Sell Hold Buy

Source: Bloomberg

Strengths 4The retreatment of surface tailings carries none of the operational risk usually associated with South African deeplevel mining.

Weaknesses 1 The low grades of DRDGold's tailings make operating margins very sensitive to the rand gold price.

Opportunities 3 Opportunities to unlock value may arise from expansion offshore to reduce currency risk.

Threats 3 The main threats to the company's profitability and sustainability are continued rand strength and a weaker dollar gold price.


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Gold Fields

Taking profits

While some may fail to get excited about this company, it is the best performingSouth African gold share. Even after AngloGold Ashanti terminated its hedgebook it was outperformed by Gold Fields. Nonetheless, lately the stock has failedto maintain levels above the R120 mark and we find it opportune to take profits.

Key forecasts


Revenue (Rm) 25,360 31,772 33,808 37,178 36,993 EBITDA (Rm) 9,004 12,647 13,267 16,344 14,984%Reported net profit (Rm) 2,613 3,429 3,162& 5,838 5,163%Normalised net profit (Rm) 2,640 3,786 3,422& 5,838 5,163%Normalised EPS (R) 4.04 5.37 4.85& 8.27 7.31%Dividend per share (R) 186.8 130.0 189.5% 319.7% 276.4%Dividend yield (%) 154.4 107.4 156.7 264.2 228.4 Normalised PE (x) 29.90 22.50 25.00 14.60 16.50 EV/EBITDA (x) 10.50 7.28 6.77 5.30 5.56 EV/invested capital (x) 1.80 1.79 1.79 1.71 1.65 ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00



Scope for restructuring The reorganisation of Gold Field’s core South African assets – Driefontein and Kloof – may have been done under the mantle of better cost control, but it does open the door for more drastic restructuring. Some of the new individual clusters may prove to be unprofitable and, so, be closed down or even sold. This would put Gold Fields under even greater pressure to bring one of its exploration projects to account to compensate for the loss in production.

Development of South Deep at opportune time While the remaining estimated R8bn of capital expenditure for the development of this project will consume much of the group’s cash flow over the next three years, the elevated gold price certainly helps in funding this investment in Gold Fields’ sustainable future. However, we find some of the group’s cost and production projections too optimistic and take a more cautious stance in our valuations.

Fundamentals remain solid By reducing its South African labour force, largely through natural attrition, the company has made sound progress in reducing its operating costs. We still see scope for further reductions, but we believe management has made an important first step. Also the lack of mining flexibility, an industry wide problem, in our view, is being addressed and further improvements in managing the mining mix (grade) are likely.

Downgrading to Sell We downgrade Gold Fields from Hold to Sell and reduce our target price to R121 (R130) due to revisions to our gold price, exchange rate, production and cost assumptions.

6 December 2010

Analyst


Price performance

(1M) (3M) (12M)Price (R) 107.9 104.1 114.7Absolute (%) 13.0 17.3 6.3Rel market (%) 11.0 4.4 -7.4Rel sector (%) 8.1 -1.2 -0.2

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120

140Dec 07 Dec 08 Dec 09

GFIF.J Jo'burg All-Share Index

Market capitalisation R85.41bn (€9.43bn) Average (12M) daily turnover R236.21m (€24.04m) Sector: JSE Mining RIC: GFIF.J, GFI SJ Priced R120.99 at close 2 Dec 2010. Source: Bloomberg

Sell (from Hold) Target price R121.00 (from R130.00) Price R120.99 Short term (0-60 days) n/a Market view Underweight


27

Gold Fields | Financial Statements | 6 December 2010

2

Assumptions Our key assumptions are summarised below. Gold Fields urgently needs to develop one of its exploration projects to account to compensate for further declining production at its mainstay South African operations – Driefontein, Kloof and Beatrix. Replacement cost margins look solid, but remain well below those of AngloGold Ashanti due to high capital expenditure for South Deep.

Table 1 : Summary of our assumptions

2007A 2008A 2009A 2010A 2011F 2012F 2013F 2014FReceived gold price US$/oz 612 708 872 996 1,310 1,350 1,250 1,150 R/kg 133,352 160,381 228,414 267,541 309,884 325,038 319,962 305,025Exchange rate US$/R 6.76 7.04 8.25 8.40 7.37 7.49 7.96 8.25Gold Production Moz 4,066,1313,983,1743,329,1763,582,5943,505,0723,677,4403,717,1473,746,409Total cash costs US$/oz 367 435 536 596 758 713 706 708 R/kg 80,305 98,492 141,911 159,749 179,572 171,694 180,800 187,685Replacement costs (NCE) US$/oz 488 636 850 848 1,097 1,014 968 928 R/kg 107,198 144,026 224,168 227,857 259,683 244,072 247,730 246,225Cash cost margins % 39.8% 38.6% 37.7% 40.4% 42.1% 47.2% 43.5% 38.5%Replacement costs margins % 21.1% 11.9% 3.2% 17.0% 18.3% 27.9% 25.3% 21.7%


Sensitivities The starting point for our analysis is spot rates, which, in these calculations, we have rounded off to US$1,350/oz and USD/ZAR7.00. These are entered into our models in nominal terms over the life with 0% cost escalation. We then change the gold price and the exchange rate in increments of US$50/oz and USD/ZAR0.50 and calculate the impact on our target price, cash earnings and to NPV. The result of this calculation may be interpreted as what the market is currently discounting.

At spot rates Gold Fields appears to be fairly priced


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 91 65 66 68 71 73 76 79 82 5.50 70 72 75 78 81 84 87 90 94 6.00 78 81 84 88 91 95 98 102 105 6.50 86 90 94 98 102 105 109 113 117 7.00 96 100 104 108 112 116 121 125 129 7.50 105 109 114 118 123 127 132 136 141 8.00 114 119 124 128 133 138 143 148 153 8.50 123 128 134 139 144 149 154 159 165 9.00 133 138 144 149 154 160 165 171 176


At spot gold and rand rates Gold Fields is trading at a 26% discount to its NPV.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 6 22 35 47 60 72 84 96 107 5.50 32 45 59 72 86 98 111 123 136 6.00 53 68 82 96 110 124 137 150 163 6.50 74 89 105 119 134 148 162 177 191 7.00 95 111 126 142 157 173 188 204 219 7.50 114 131 147 164 181 197 214 230 247 8.00 133 151 169 186 204 222 239 257 275 8.50 152 171 190 209 227 246 265 284 303 9.00 171 191 211 231 251 271 291 310 330


2828

Gold Fields | Key Financial Data | 6 December 2010

Income statement

Rm FY08A FY09A FY10F FY11F FY12FRevenue 25360 31772 33808 37178 36993Cost of sales -15713 -18322 -19613 -19731 -20988Operating costs -642.8 -803.1 -927.4 -1104 -1020EBITDA 9004 12647 13267 16344 14984DDA & Impairment (ex gw) -3646 -4400 -5234 -5286 -5339EBITA 5358 8247 8033 11058 9645Goodwill (amort/impaired) n/a n/a n/a n/a n/aEBIT 5358 8247 8033 11058 9645Net interest -410.5 -406.5 -417.9 -931.9 -690.4Associates (pre-tax) n/a n/a n/a n/a n/aOther pre-tax items -59.2 -799.0 -702.6 0.00 0.00Reported PTP 4888 7042 6913 10126 8954Taxation -1983 -3070 -2779 -2430 -2149Minority interests -292.0 -542.8 -971.8 -1858 -1643Other post-tax items 0.00 0.00 0.00 0.00 0.00Reported net profit 2613 3429 3162 5838 5163Tot normalised items -27.0 -356.7 -260.1 0.00 0.00Normalised EBITDA 9004 12647 13267 16344 14984Normalised PTP 4915 7399 7173 10126 8954Normalised net profit 2640 3786 3422 5838 5163


Balance sheet

Rm FY08A FY09A FY10F FY11F FY12FCash & market secs (1) 1054 1828 4641 6729 8777Other current assets 6141 5774 4557 7992 11379Tangible fixed assets 49601 51648 52011 48942 45605Intang assets (incl gw) 4459 4459 4459 4459 4459Oth non-curr assets 5148 2568 1914 1914 1914Total assets 66402 66276 67583 70036 72134Short term debt (2) 391.9 3674 4750 4750 4750Trade & oth current liab 4683 4129 1026 1116 1153Long term debt (3) 10016 4823 4340 3140 1940Oth non-current liab 8029 8926 11673 11655 11703Total liabilities 23120 21551 21788 20660 19546Total equity (incl min) 43282 44725 45795 49376 52588Total liab & sh equity 66402 66276 67583 70036 72134Net debt 9354 6669 4448 1160 -2088


Cash flow statement

Rm FY08A FY09A FY10F FY11F FY12FEBITDA 9004 12647 13267 16344 14984Change in working capital 210.5 -1793 1184 32.5 34.9Net interest (pd) / rec 0.00 0.00 -270.2 -931.9 -690.4Taxes paid -1478 -1596 -2078 -2430 -2149Other oper cash items -374.7 -661.0 -332.1 -294.4 -262.8Cash flow from ops (1) 7362 8597 11771 12720 11917Capex (2) -8757 -7170 -8038 -7175 -6718Disposals/(acquisitions) 3.50 3.50 3.50 3.50 3.50Other investing cash flow n/a n/a n/a n/a n/aCash flow from invest (3) -8753 -7166 -8034 -7171 -6714Incr / (decr) in equity 831.7 122.6 34.7 0.00 0.00Incr / (decr) in debt 2316 -289.4 766.0 -1200 -1200Ordinary dividend paid -1210 -760.3 -1866 -2257 -1951Preferred dividends (4) n/a n/a n/a n/a n/aOther financing cash flow n/a n/a n/a n/a n/aCash flow from fin (5) 1938 -927.1 -1066 -3457 -3151Forex & disc ops (6) 266.1 -77.5 -204.6 0.00 0.00Inc/(decr) cash (1+3+5+6) 812.7 426.1 2467 2092 2051Equity FCF (1+2+4) -1395 1427 3734 5545 5199


2929

Gold Fields | Performance and Valuation | 6 December 2010

Standard ratios Gold Fields AngloGold Ashanti Harmony Gold

Performance FY08A FY09A FY10F FY11F FY12F FY10F FY11F FY12F FY11F FY12F FY13FSales growth (%) 22.8 25.3 6.41 9.97 -0.50 27.4 18.8 -2.46 19.8 20.9 6.65EBITDA growth (%) 25.7 40.5 4.90 23.2 -8.32 -5.54 36.4 -10.8 93.9 52.9 5.03EBIT growth (%) 32.5 53.9 -2.60 37.7 -12.8 -12.6 55.5 -16.6 729.4 106.5 3.65Normalised EPS growth (%) 47.3 32.9 -9.77 70.6 -11.6 -27.4 17.2 -10.4 n/a 156.1 6.28EBITDA margin (%) 35.5 39.8 39.2 44.0 40.5 37.6 43.2 39.5 21.7 27.5 27.1EBIT margin (%) 21.1 26.0 23.8 29.7 26.1 24.5 32.0 27.4 8.59 14.7 14.3Net profit margin (%) 10.4 11.9 10.1 15.7 14.0 18.0 18.4 16.9 4.14 8.76 8.73Return on avg assets (%) 5.37 6.97 7.01 12.2 10.3 11.5 17.0 15.0 1.83 4.01 3.99Return on avg equity (%) 6.51 8.60 7.56 12.3 10.1 27.9 27.2 20.2 1.89 4.69 4.77ROIC (%) 8.98 11.3 11.3 15.8 13.7 24.0 30.0 26.0 2.82 5.67 5.82ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Dec year to Dec year to Jun

Valuation EV/sales (x) 3.74 2.90 2.66 2.33 2.25 3.48 2.75 2.63 2.58 2.07 1.84EV/EBITDA (x) 10.5 7.28 6.77 5.30 5.56 9.24 6.37 6.67 11.9 7.53 6.81EV/EBITDA @ tgt price (x) 10.5 7.28 6.77 5.30 5.56 9.84 6.81 7.16 13.9 8.86 8.08EV/EBIT (x) 17.7 11.2 11.2 7.83 8.64 14.2 8.59 9.61 30.0 14.1 12.9EV/invested capital (x) 1.80 1.79 1.79 1.71 1.65 3.81 3.71 3.71 1.14 1.10 1.06Price/book value (x) 1.83 1.91 1.86 1.73 1.62 4.62 3.71 3.16 1.15 1.10 1.05Equity FCF yield (%) -1.77 1.67 4.37 6.49 6.09 -4.69 7.58 7.66 -0.52 3.40 5.35Normalised PE (x) 29.9 22.5 25.0 14.6 16.5 17.7 15.1 16.9 61.4 24.0 22.6Norm PE @ tgt price (x) 29.9 22.5 25.0 14.6 16.5 18.9 16.2 18.0 72.1 28.2 26.5Dividend yield (%) 154.4 107.4 156.7 264.2 228.4 39.9 130.4 116.7 28.7 41.7 44.3 year to Dec year to Dec year to Jun

Per share data FY08A FY09A FY10F FY11F FY12F Solvency FY08A FY09A FY10F FY11F FY12FTot adj dil sh, ave (m) 653.0 704.6 705.8 705.9 705.9 Net debt to equity (%) 21.6 14.9 9.71 2.35 -3.97Reported EPS (ZAR) 4.00 4.87 4.48 8.27 7.31 Net debt to tot ass (%) 14.1 10.1 6.58 1.66 -2.89Normalised EPS (ZAR) 4.04 5.37 4.85 8.27 7.31 Net debt to EBITDA 1.04 0.53 0.34 0.07 -0.14Dividend per share (ZAR) 186.8 130.0 189.5 319.7 276.4 Current ratio (x) 1.42 0.97 1.59 2.51 3.41Equity FCF per share (ZAR) -2.14 2.03 5.29 7.86 7.36 Operating CF int cov (x) 0.00 0.00 52.3 17.3 21.4Book value per sh (ZAR) 66.3 63.4 64.9 69.9 74.5 Dividend cover (x) 3.27 3.40 2.84 2.59 2.65 year to Dec year to Dec

Priced as follows: GFIF.J - R120.99; ANGJ J – R336.99; HARJ.J – R80.00 Source: Company data, Nedbank Capital forecasts


Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Upside and downside risks to our valuation include variations to our currency, gold price, production and cost assumptions. Source: Nedbank Capital

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Gold Fields | Strategic and Competitive Overview | 6 December 2010


Company description Sell Price relative to country

Gold Fields is one of the world's largest unhedged producers of gold with production levels of 3.4-3.8 million ounces per annum from nine operations in South Africa, Ghana, Australia and Peru. The company isheadquartered in Johannesburg, South Africa, and primarily trades on the JSE with a secondary listing in NewYork. The group's flagship project is the South Deep mine with an expected life of around 40 years and targeted annual production levels of 700-800 thousand ounces. Given the high amount of capital expenditure needed tobring this project to account, this operation has been somewhat contentious with investors.

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Market data

Headquarters 150 Helen Rd, Sandown, Sandton, 2196, South Africa Website www.goldfields.co.za Shares in issue 705.9m Freefloat 100% Majority shareholders Tradewinds Global (6%), First Eagle Investment (6%), Mvelphanda Resources (5%)

Supplier power 3-Dominant positions of suppliers of steel and reagents continue to have an above inflationary impact on operatingcosts.


Customer power 3- Declining production levels as reserves are depleted and mines become deeper and more mature make the South African gold mining industry a less dominant force in the supply chain.

Substitute products 3- Platinum jewellery and alternative consumer products (eg, i-Pods) have replaced the demand for gold jewelleryexacerbating the impact of high prices and price volatility on demand.

Rivalry 5- Competition is fierce in a global race to replace depleted reserves where the player with the lowest operating costsand highest cash flows has the strongest position.





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Source: Bloomberg

Strengths 4Thanks to Gold Field's long-life South Deep project in South Africa the group has the longest 'life of mine' in theindustry giving it a solid cash generating platform.

Weaknesses 2 Gold Field's deep-level South African operations are prone to seismic related safety stoppages making production results extremely unpredicatable.

Opportunities 3 Opportunities to unlock value may arise from further consolidation in the industry or through the regionalunbundling of assets.

Threats 3 The main threats to the company's profitability and sustainability are continued rand strength and a weaker dollargold price.


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Great Basin Gold

Time to take a breather

Great Basin Gold's share price has had a great year gaining 88% over the last 12months, 38% in the last three months and 7% in the last week. Aside from theusual risks associated with any start-up project we see no major reason for concern. Nonetheless we believe it is opportune to lock in some profits.

Key forecasts


Revenue (Rm) 198.8 252.7 755.4 2,441 2,952 EBITDA (Rm) -754 -388 -80.2 934.1 1,087 Reported net profit (Rm) -645 -432 -66.6 593.9 676.3 Normalised net profit (Rm) -638 -342 -145 593.9 676.3 Normalised EPS (R) -3.05 -1.03 -0.40 1.45 1.65 Dividend per share (R) 0.00 0.00 0.00 0.00 0.00 Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 Normalised PE (x) n/m n/m n/m 13.90 12.20 EV/EBITDA (x) n/m n/m n/m 9.37 7.55 EV/invested capital (x) 3.29 2.53 1.95 1.71 1.56 ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00

Accounting standard: IFRS Source: Company data, Nedbank Capital forecasts


Project delivery is progressing, but behind schedule The building blocks for becoming a fully-fledged producer are falling into place, even if they are a little late. At Burnstone the commissioning of the plant has been delayed by exogenous factors (Eskom), but the power supply is now sufficient for the planned production build-up. Pleasingly, all third-party milling campaigns at Hollister have come to an end and all ore will be processed at the Esmeralda plant, hopefully making production results more stable and predictable.

High forecasting risk until operations run at full capacity As with any start-up project, the risk to any production forecast is high. Particularly at Burnstone, where the success of long-hole stoping is, in our view, critical in achieving yield, volume and cost targets. Here, shale in the footwall will make controlling the stoping width and hence minimising dilution challenging. Also, the milling arrangements at Hollister seem to us anything but optimal.

Funding risk remains With a cash balance of US$23m, plus US$90m from the exercising of 57.4m warrants and capital commitments of US$120m-150m over the next two years to complete its projects, we believe there is still some funding risk. Headroom on existing debt facilities is limited, but management expects to be cash flow positive in 4Q10.

Downgrading to Sell We downgrade Great Basin Gold to Sell (Hold) but maintain our 12-month target price of R22 per share. Revisions to our gold price and exchange rate forecast were offset by changes to our production and cost assumptions. The risk to our forecast is high.

6 December 2010

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Price performance

(1M) (3M) (12M)Price (R) 19.50 15.10 12.60Absolute (%) 2.8 32.7 59.0Rel market (%) 0.9 18.2 38.5Rel sector (%) -1.7 11.9 49.2

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Market capitalisation R7.10bn (€783.19m) Average (12M) daily turnover R2.05m (€0.21m) Sector: JSE Mining RIC: GBGJ.J, GBG SJ Priced R20.00 at close 2 Dec 2010. Source: Bloomberg

Sell (from Hold) Target price R22.00 Price R20.00 Short term (0-60 days) n/a Market view Underweight


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Great Basin Gold | Financial Statements | 6 December 2010

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Assumptions The table below summarises the key assumptions in our valuation of Great Basin Gold. The next 12 months will be make or break for Great Basin Gold as they will have to deliver on their production targets.

Table 1 : Summary of our key assumptions

2008E 2009E 2010F 2011F 2012F 2013F 2014FReceived gold price US$/oz 808 873 1,090 1,097 1,029 868 889 R/kg 216,333 243,171 271,390 298,917 286,858 251,655 268,264Exchange rate US$/R 8.25 8.40 7.63 8.48 8.68 9.02 9.38Gold Production Moz 36,600 83,392 111,631 262,536 330,906 363,941 363,576Total cash costs US$/oz 494 94 725 571 554 564 580 R/kg 129,167 25,498 179,402 155,557 154,457 163,594 174,891Replacement costs (NCE) US$/oz 4,002 1,946 2,973 1,242 940 877 890 R/kg 1,011,437 498,926 726,588 338,346 262,133 254,485 268,593Cash cost margins % 40.3% 86.1% 26.5% 48.0% 46.2% 35.0% 34.8%Replacement costs margins % (238.3%) (109.9%) (173.3%) 1.8% 23.6% 13.9% 14.9%

Source: Company data, Nedbank Capital estimates and forecasts

Sensitivities The starting point for our analysis is spot rates which in these calculations we have rounded off to US$1,350/oz and USD/ZAR7.00. These are entered into our models in nominal terms over the life with 0% cost escalation. We then change the gold price and the exchange rate in increments of US$50/oz and USD/ZAR0.50 and calculate the impact on our target price, cash earnings and to NPV. The result of this calculation may be interpreted as what the market is currently discounting.

Applying spot rates to our valuation methodology implies 30% upside to current ratings.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 3 7 9 12 14 15 17 19 21 5.50 8 11 13 15 17 19 21 23 25 6.00 13 15 17 19 21 23 25 27 30 6.50 17 18 20 23 25 27 29 32 34 7.00 20 21 24 26 29 31 34 36 39 7.50 23 25 27 30 32 35 38 40 43 8.00 26 28 31 33 36 39 42 45 48 8.50 29 31 34 37 40 43 46 49 52 9.00 32 34 38 41 44 47 50 53 57

Source: Nedbank Capital estimates

Great Basin Gold is trading at a 33% discount to its NPV if calculated at spot rates.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 (2) 0 3 6 9 12 15 17 20 5.50 2 4 8 11 14 17 20 24 27 6.00 6 9 12 16 19 23 26 30 33 6.50 10 13 17 21 24 28 32 36 40 7.00 14 17 21 26 30 34 38 42 46 7.50 18 22 26 31 35 39 44 48 52 8.00 23 26 31 35 40 45 50 54 59 8.50 27 30 35 40 45 50 55 60 65 9.00 31 35 40 45 51 56 61 66 72

Source: Nedbank Capital estimates

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Great Basin Gold | Key Financial Data | 6 December 2010

Income statement

Rm FY08A FY09A FY10F FY11F FY12FRevenue 198.8 252.7 755.4 2441 2952Cost of sales -147.6 -153.4 -561.8 -1273 -1593Operating costs -805.5 -487.5 -273.8 -234.1 -272.5EBITDA -754.3 -388.2 -80.2 934.1 1087DDA & Impairment (ex gw) -52.2 -24.3 -65.5 -197.3 -273.0EBITA -806.4 -412.5 -145.7 736.8 814.1Goodwill (amort/impaired) n/a n/a n/a n/a n/aEBIT -806.4 -412.5 -145.7 736.8 814.1Net interest 9.03 20.2 -2.29 -61.9 -45.6Associates (pre-tax) n/a n/a n/a n/a n/aOther pre-tax items -104.2 -0.36 -37.4 0.00 0.00Reported PTP -901.6 -392.7 -185.4 674.9 768.5Taxation 256.1 36.1 -8.19 -81.0 -92.2Minority interests 0.00 0.00 0.00 0.00 0.00Other post-tax items 0.00 -75.6 127.0 0.00 0.00Reported net profit -645.5 -432.2 -66.6 593.9 676.3Tot normalised items -7.19 -89.3 78.5 0.00 0.00Normalised EBITDA -754.3 -388.2 -80.2 934.1 1087Normalised PTP -894.4 -378.9 -136.9 674.9 768.5Normalised net profit -638.3 -342.9 -145.1 593.9 676.3


Balance sheet

Rm FY08A FY09A FY10F FY11F FY12FCash & market secs (1) 260.9 628.2 105.7 583.1 826.8Other current assets 149.0 279.7 148.6 603.4 849.8Tangible fixed assets n/a n/a n/a n/a n/aIntang assets (incl gw) 0.00 0.00 0.00 0.00 0.00Oth non-curr assets 2430 2942 4795 4991 4917Total assets 2840 3850 5049 6177 6593Short term debt (2) 7.13 307.3 62.3 62.3 62.3Trade & oth current liab 206.3 205.1 340.1 265.3 301.3Long term debt (3) 482.7 610.6 1572 2172 1872Oth non-current liab 143.8 102.9 189.8 198.7 202.9Total liabilities 839.9 1226 2164 2698 2439Total equity (incl min) 2000 2624 2885 3479 4155Total liab & sh equity 2840 3850 5049 6177 6593Net debt 228.9 289.7 1529 1651 1108


Cash flow statement

Rm FY08A FY09A FY10F FY11F FY12FEBITDA -754.3 -388.2 -80.2 934.1 1087Change in working capital 95.6 -108.6 42.5 1.88 14.8Net interest (pd) / rec 15.1 -2.74 -11.9 -61.9 -45.6Taxes paid -262.6 -41.5 -8.36 -81.0 -92.2Other oper cash items 316.1 98.0 87.5 210.7 245.1Cash flow from ops (1) -590.1 -442.9 29.5 1004 1209Capex (2) -339.2 -855.1 -1411 -1126 -665.4Disposals/(acquisitions) 3.87 3.87 3.87 3.87 3.87Other investing cash flow n/a n/a n/a n/a n/aCash flow from invest (3) -335.4 -851.2 -1407 -1123 -661.5Incr / (decr) in equity 47.1 1142 223.0 0.00 0.00Incr / (decr) in debt 532.3 608.9 642.0 600.0 -300.0Ordinary dividend paid 29.1 -1.47 0.00 0.00 0.00Preferred dividends (4) n/a n/a n/a n/a n/aOther financing cash flow n/a n/a n/a n/a n/aCash flow from fin (5) 608.5 1749 865.1 600.0 -300.0Forex & disc ops (6) 0.00 13.8 7.22 0.00 0.00Inc/(decr) cash (1+3+5+6) -317.0 468.7 -505.1 481.3 247.6Equity FCF (1+2+4) -929.3 -1298 -1381 -122.6 543.7


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Great Basin Gold | Performance and Valuation | 6 December 2010

Standard ratios Great Basin Gold DRDGold Pan African Resources

Performance FY08A FY09A FY10F FY11F FY12F FY11F FY12F FY13F FY11F FY12F FY13FSales growth (%) 1017 27.1 198.9 223.1 21.0 25.3 -14.4 -4.56 20.5 14.2 7.15EBITDA growth (%) 101.5 -48.5 -79.3 n/a 16.4 19.8 25.9 -0.61 32.4 7.77 2.20EBIT growth (%) 115.5 -48.8 -64.7 n/a 10.5 443.8 55.0 0.65 42.8 6.36 0.68Normalised EPS growth (%) 42.0 -66.3 -60.8 n/a 13.9 -66.8 8.75 7.67 55.6 7.34 2.05EBITDA margin (%) -379.5 -153.6 -10.6 38.3 36.8 10.5 15.5 16.1 40.2 38.0 36.2EBIT margin (%) -405.7 -163.2 -19.3 30.2 27.6 6.11 11.1 11.7 38.0 35.4 33.2Net profit margin (%) -321.1 -135.7 -19.2 24.3 22.9 0.19 -0.28 -0.31 28.8 27.0 25.8Return on avg assets (%) -25.3 -10.7 -3.22 11.4 11.1 3.82 5.68 5.71 23.0 19.0 15.7Return on avg equity (%) -32.2 -14.8 -5.27 18.7 17.7 0.29 -0.37 -0.39 28.9 23.9 19.7ROIC (%) -40.6 -13.3 -3.60 12.0 11.4 7.21 12.3 13.9 38.7 36.6 34.6ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Dec year to Jun year to Jun

Valuation EV/sales (x) 36.9 29.2 11.4 3.58 2.78 0.43 0.44 0.35 1.21 0.84 0.54EV/EBITDA (x) n/m n/m n/m 9.37 7.55 4.13 2.83 2.17 3.02 2.22 1.48EV/EBITDA @ tgt price (x) n/m n/m n/m 10.1 8.17 4.98 3.51 2.85 4.26 3.37 2.61EV/EBIT (x) n/m n/m n/m 11.9 10.1 7.11 3.96 2.99 3.20 2.38 1.61EV/invested capital (x) 3.29 2.53 1.95 1.71 1.56 0.78 0.76 0.71 1.53 1.14 0.77Price/book value (x) 2.16 2.56 2.86 2.37 1.99 0.81 0.82 0.82 1.37 1.08 0.89Equity FCF yield (%) -22.1 -19.4 -19.1 -1.49 6.59 7.08 11.3 17.0 10.7 16.3 19.7Normalised PE (x) n/m n/m n/m 13.9 12.2 274.1 n/m n/m 5.41 5.04 4.94Norm PE @ tgt price (x) n/m n/m n/m 15.2 13.4 320.6 n/m n/m 7.15 6.66 6.53Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Dec year to Jun year to Jun

Per share data FY08A FY09A FY10F FY11F FY12F Solvency FY08A FY09A FY10F FY11F FY12FTot adj dil sh, ave (m) 209.5 333.4 360.0 410.7 410.7 Net debt to equity (%) 11.4 11.0 53.0 47.5 26.7Reported EPS (ZAR) -3.08 -1.30 -0.18 1.45 1.65 Net debt to tot ass (%) 8.06 7.52 30.3 26.7 16.8Normalised EPS (ZAR) -3.05 -1.03 -0.40 1.45 1.65 Net debt to EBITDA -0.30 -0.75 -19.1 1.77 1.02Dividend per share (ZAR) 0.00 0.00 0.00 0.00 0.00 Current ratio (x) 1.92 1.77 0.63 3.62 4.61Equity FCF per share (ZAR) -4.44 -3.89 -3.84 -0.30 1.32 Operating CF int cov (x) 22.7 -145.6 4.17 18.5 29.5Book value per sh (ZAR) 9.30 7.86 7.02 8.47 10.1 Dividend cover (x) 0.00 0.00 0.00 0.00 0.00 year to Dec year to Dec

Priced as follows: GBGJ.J - R20.09; DRDJ.J - R3.42; PANJ.J - R1.09 Source: Company data, Nedbank Capital forecasts



3535

Great Basin Gold | Strategic and Competitive Overview | 6 December 2010


Company description Sell Price relative to country

Great Basin Gold is a junior mining company developing two projects in South Africa (Burnstone) and in the USA(Hollister). Hollister is currently in the trial mining phase and at Burnstone infrastructure development and plantconstruction are almost complete. Both projects should reach full production capacity of a combined 400,000ounces within 2-3 years. The company is primarily listed in Toronto and has secondary listings in New York and inJohannesburg.

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Burnstone63%

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Market data

Headquarters 1108-1030 West Georgia St, Vanvouver BC, Canada, V6E 2Y3 Website www.grtbasin.com Shares in issue 353.2m Freefloat 100% Majority shareholders Van Eck Ass (6%), Tranter Gold (6%), Mackenzie Financial Corporation (5%)

Supplier power 3-Dominant positions of suppliers of steel and reagents continue to have an above inflationary impact on operatingcosts.



Substitute products 3- Platinum jewellery and alternative consumer products (eg i-Pods) have replaced demand for gold jewellery, exacerbating the impact of high prices and price volatility on demand.

Rivalry 5- Competition is fierce in a global race to replace depleted reserves, where the player with the lowest operatingcosts and highest cash flows has the strongest position.





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Strengths 5GBG's key strength is it's high-grade Hollister operation. Grades of more than 30g/t should result in low operatingcosts of around US$450-500/oz. Also, the development of both projects is now fully funded.

Weaknesses 2 Beneficiation at Hollister is suboptimal as the ore has to be trucked around 300 miles to the Esmeralda plant.Dismantling and re-erected the plant at the mine is unviable due to lengthy permitting.

Opportunities 3 Opportunities to unlock value may arise from further consolidation in the industry.

Threats 3 The main threats to the company's profitability and sustainability are continued rand strength and a weaker dollargold price.


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Harmony Gold

Maintaining a neutral stance

Harmony continues to underperform its peers due to concerns about randstrength and limited upside potential from growth projects. Still, we remainneutral on this company as we believe the timely development of growth projects in Papua New Guinea could drive a substantial increase in value.

Key forecasts


Revenue (Rm) 11,496 11,284 13,517 16,349 17,436 EBITDA (Rm) 3,491 1,516 2,940& 4,495& 4,721 Reported net profit (Rm) 2,928 -193 867.0& 1,432& 1,521 Normalised net profit (Rm) 2,253 -166 559.0& 1,432& 1,521 Normalised EPS (R) 5.39 -0.39 1.30& 3.34& 3.55 Dividend per share (R) 50.00 62.10 22.90% 33.40% 35.50%Dividend yield (%) 62.50 77.60 28.70 41.70 44.30 Normalised PE (x) 14.80 n/m 61.40 24.00 22.60 EV/EBITDA (x) 9.37 22.90 11.90 7.53 6.81 EV/invested capital (x) 1.17 1.17 1.14 1.10 1.06 ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00



Scope for further restructuring Harmony has made great strides in transforming itself into a sustainable business. However, while its South African growth projects are starting to deliver, their net impact on profitability is still restricted by high cost operations, particularly at Joel, Unisel and Evander. We expect management to acknowledge its lack of alternatives and close these operations down in the not too distant future.

PNG success is key to Harmony’s credibility While we are intrigued by the results of initial exploration at Wafi/Golpu, we think the company needs to prove that it can operate successfully in this region before it begins to develop another project in the area. In our view, efficiencies and throughput at the Hidden Valley mill also need to be improved dramatically to reduce operating costs and make the mine profitable.

Operational and resource risks remain high We are not able to rate Harmony higher due to the risks we have identified related to two of the group’s growth projects: Doornkop and Kusasalethu. At Doornkop, Kimberly reef grades are extremely low and need to be supplemented with higher-grade South reef to be viable. The mine is also under-sampled, and a new sampling regime is being implemented. Meanwhile, productivity remains a challenge at Kusasalethu, as the long distance between the shaft and working areas limits face time.

Maintain Hold and marginally lower TP to R94 We maintain our Hold recommendation on Harmony and marginally lower our 12-month target price to R94 (previously R95). Revisions to our gold price and exchange rate assumptions were largely offset by changes to our production and cost estimates. The risk profile of our forecasts is high.

6 December 2010

Analyst


Price performance

(1M) (3M) (12M)Price (R) 79.00 76.16 85.16Absolute (%) 4.4 8.3 -3.1Rel market (%) 2.6 -3.5 -15.7Rel sector (%) -0.1 -8.7 -9.1

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Market capitalisation R34.31bn (€3.79bn) Average (12M) daily turnover R120.14m (€12.29m) Sector: JSE Mining RIC: HARJ.J, HAR SJ Priced R80.00 at close 2 Dec 2010. Source: Bloomberg

Hold Target price R94.00 (from R95.00) Price R80.00 Short term (0-60 days) n/a Market view Underweight

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Harmony Gold | Financial Statements | 6 December 2010

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Assumptions The table below summarises our key forecasts. We believe that the group’s production target of 2m ounces per annum will remain out of reach. While risks to our cost forecasts are on the upside, we believe that increasing output from some of the group’s lower-cost growth projects will partially offset inflationary pressure at the other mines.

Table 1 : Summary of our key expectations

2007A 2008A 2009A 2010A 2011F 2012F 2013F 2014FReceived gold price US$/oz 639 746 869 1,080 1,315 1,299 1,200 1,061 R/kg 147,580 175,029 250,836 263,113 308,289 320,765 316,311 283,323Exchange rate US$/R 7.19 7.28 9.02 7.57 7.29 7.68 8.20 8.31Gold production Moz 2,334,0991,684,0181,460,8301,406,7601,396,905 1,638,6371,772,2761,766,598Total cash costs US$/oz 487 540 589 784 925 848 790 753 R/kg 112,407 125,846 168,457 191,104 216,837 209,595 208,319 201,235Replacement costs (NCE) US$/oz 674 757 830 1,158 1,246 1,075 960 886 R/kg 155,637 176,687 237,605 289,781 292,080 265,517 253,026 236,758Cash cost margins % 23.8% 28.1% 33.3% 25.9% 30.3% 34.7% 34.1% 29.0%Replacement costs margins % (0.8%) 3.9% 11.5% (6.6%) 11.0% 22.0% 24.7% 20.5%


Sensitivities The starting point for our analysis is spot rates, which we have rounded off to US$1,350/oz and USD/ZAR7.00 for the purposes of these calculations. Spot rates are entered into our models in nominal terms over the life of the operations with 0% cost escalation. We then change the gold price and the exchange rate in increments of US$50/oz and US$/ZAR0.50 and calculate the impact on our target price, cash earnings and NPV estimates. The result of this calculation may be interpreted as what the market is currently discounting.

Applying our valuation methodology using spot rates indicates only limited upside potential from the current share price.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 12 13 14 34 42 48 50 52 55 5.50 16 38 47 52 55 57 60 63 66 6.00 49 56 58 61 65 68 71 75 78 6.50 61 64 68 71 75 79 82 86 90 7.00 70 74 78 81 85 89 93 97 101 7.50 79 83 87 92 96 100 105 109 113 8.00 88 93 97 102 107 111 116 120 125 8.50 98 102 107 112 117 122 127 132 137 9.00 107 112 117 123 128 133 138 143 149


Based on spot rates, we estimate that Harmony is trading at a 23% discount to its NPV.


US$/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550US$/ZAR 5.00 11 22 31 40 48 56 5.50 14 25 35 44 53 62 70 79 6.00 25 36 46 55 64 74 83 92 101 6.50 44 54 64 74 84 94 103 113 123 7.00 61 72 82 93 103 114 124 134 144 7.50 77 88 100 111 122 133 144 155 166 8.00 93 106 117 129 141 152 164 176 187 8.50 110 122 134 147 159 172 184 197 209 9.00 125 139 152 165 178 191 204 217 230


3838

Harmony Gold | Key Financial Data | 6 December 2010

Income statement

Rm FY09A FY10A FY11F FY12F FY13FRevenue 11496 11284 13517 16349 17436Cost of sales -8210 -9114 -9863 -11073 -11894Operating costs 205.0 -654.0 -714.9 -780.7 -821.3EBITDA 3491 1516 2940 4495 4721DDA & Impairment (ex gw) -1467 -1376 -1779 -2097 -2235EBITA 2024 140.0 1161 2398 2486Goodwill (amort/impaired) n/a n/a n/a n/a n/aEBIT 2024 140.0 1161 2398 2486Net interest 238.0 -8.00 -188.3 -196.0 -145.3Associates (pre-tax) n/a n/a n/a n/a n/aOther pre-tax items -81.0 40.0 303.0 0.00 0.00Reported PTP 2181 172.0 1276 2202 2341Taxation -32.0 -333.0 -405.9 -770.8 -819.2Minority interests 0.00 0.00 0.00 0.00 0.00Other post-tax items 779.0 -32.0 -3.00 0.00 0.00Reported net profit 2928 -193.0 867.0 1432 1521Tot normalised items 675.0 -27.0 308.0 0.00 0.00Normalised EBITDA 3491 1516 2940 4495 4721Normalised PTP 2285 167.0 964.9 2202 2341Normalised net profit 2253 -166.0 559.0 1432 1521


Balance sheet

Rm FY09A FY10A FY11F FY12F FY13FCash & market secs (1) 1950 770.0 1117 2144 3829Other current assets 1980 2297 2431 3612 4495Tangible fixed assets 27912 29485 31206 32349 33037Intang assets (incl gw) 2223 2210 2199 2199 2199Oth non-curr assets 2262 2574 1543 n/m n/mTotal assets 36327 37336 38496 40023 41426Short term debt (2) 252.0 209.0 207.0 207.0 207.0Trade & oth current liab 1494 1542 1170 1329 1329Long term debt (3) 110.0 981.0 1470 1470 1470Oth non-current liab 4946 5395 5740 5820 5854Total liabilities 6802 8127 8587 8826 8860Total equity (incl min) 29525 29209 29909 31197 32566Total liab & sh equity 36327 37336 38496 40023 41426Net debt -1588 420.0 560.5 -467.0 -2152


Cash flow statement

Rm FY09A FY10A FY11F FY12F FY13FEBITDA 3491 1516 2940 4495 4721Change in working capital -1715 -256.4 -75.7 -24.1 10.3Net interest (pd) / rec 177.0 128.0 -159.3 -196.0 -145.3Taxes paid -704.0 -125.0 -415.9 -770.8 -819.2Other oper cash items 1282 320.4 139.7 -269.6 -289.2Cash flow from ops (1) 2531 1583 2428 3234 3478Capex (2) -2644 -3493 -2607 -2069 -1643Disposals/(acquisitions) 1630 1630 1630 1630 1630Other investing cash flow n/a n/a n/a n/a n/aCash flow from invest (3) -1014 -1863 -977.0 -439.5 -13.1Incr / (decr) in equity 1953 18.0 8.00 0.00 0.00Incr / (decr) in debt -3768 845.0 493.0 0.00 0.00Ordinary dividend paid 0.00 -213.0 -256.3 -137.5 -149.1Preferred dividends (4) n/a n/a n/a n/a n/aOther financing cash flow n/a n/a n/a n/a n/aCash flow from fin (5) -1815 650.0 244.7 -137.5 -149.1Forex & disc ops (6) 2.00 3.00 11.0 0.00 0.00Inc/(decr) cash (1+3+5+6) -295.7 373.0 1707 2658 3315Equity FCF (1+2+4) -112.7 -1910 -178.5 1165 1834


3939

Harmony Gold | Performance and Valuation | 6 December 2010

Standard ratios Harmony AngloGold Ashanti Gold Fields

Performance FY09A FY10A FY11F FY12F FY13F FY10F FY11F FY12F FY10F FY11F FY12FSales growth (%) 25.4 -1.84 19.8 20.9 6.65 27.4 18.8 -2.46 6.41 9.97 -0.50EBITDA growth (%) 137.3 -56.6 93.9 52.9 5.03 -5.54 36.4 -10.8 4.90 23.2 -8.32EBIT growth (%) 220.8 -93.1 729.4 106.5 3.65 -12.6 55.5 -16.6 -2.60 37.7 -12.8Normalised EPS growth (%) n/a n/a n/a 156.1 6.28 -27.4 17.2 -10.4 -9.77 70.6 -11.6EBITDA margin (%) 30.4 13.4 21.7 27.5 27.1 37.6 43.2 39.5 39.2 44.0 40.5EBIT margin (%) 17.6 1.24 8.59 14.7 14.3 24.5 32.0 27.4 23.8 29.7 26.1Net profit margin (%) 19.6 -1.47 4.14 8.76 8.73 18.0 18.4 16.9 10.1 15.7 14.0Return on avg assets (%) 5.82 -0.44 1.83 4.01 3.99 11.5 17.0 15.0 7.01 12.2 10.3Return on avg equity (%) 8.30 -0.57 1.89 4.69 4.77 27.9 27.2 20.2 7.56 12.3 10.1ROIC (%) 5.13 0.36 2.82 5.67 5.82 24.0 30.0 26.0 11.3 15.8 13.7ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Jun year to Dec year to Dec

Valuation EV/sales (x) 2.85 3.08 2.58 2.07 1.84 3.48 2.75 2.63 2.66 2.33 2.25EV/EBITDA (x) 9.37 22.9 11.9 7.53 6.81 9.24 6.37 6.67 6.77 5.30 5.56EV/EBITDA @ tgt price (x) 11.1 26.9 13.9 8.86 8.08 9.84 6.81 7.16 6.77 5.30 5.56EV/EBIT (x) 16.2 248.1 30.0 14.1 12.9 14.2 8.59 9.61 11.2 7.83 8.64EV/invested capital (x) 1.17 1.17 1.14 1.10 1.06 3.81 3.71 3.71 1.79 1.71 1.65Price/book value (x) 1.15 1.17 1.15 1.10 1.05 4.62 3.71 3.16 1.86 1.73 1.62Equity FCF yield (%) -0.34 -5.59 -0.52 3.40 5.35 -4.69 7.58 7.66 4.37 6.49 6.09Normalised PE (x) 14.8 n/m 61.4 24.0 22.6 17.7 15.1 16.9 25.0 14.6 16.5Norm PE @ tgt price (x) 17.4 n/m 72.1 28.2 26.5 18.9 16.2 18.0 25.0 14.6 16.5Dividend yield (%) 62.5 77.6 28.7 41.7 44.3 39.9 130.4 116.7 156.7 264.2 228.4 year to Jun year to Dec year to Dec

Per share data FY09A FY10A FY11F FY12F FY13F Solvency FY09A FY10A FY11F FY12F FY13FTot adj dil sh, ave (m) 418.2 426.8 428.9 428.9 428.9 Net debt to equity (%) -5.38 1.44 1.87 -1.50 -6.61Reported EPS (ZAR) 7.00 -0.45 2.02 3.34 3.55 Net debt to tot ass (%) -4.37 1.12 1.46 -1.17 -5.20Normalised EPS (ZAR) 5.39 -0.39 1.30 3.34 3.55 Net debt to EBITDA -0.45 0.28 0.19 -0.10 -0.46Dividend per share (ZAR) 50.0 62.1 22.9 33.4 35.5 Current ratio (x) 2.25 1.75 2.58 3.75 5.42Equity FCF per share (ZAR) -0.27 -4.48 -0.42 2.72 4.28 Operating CF int cov (x) -17.3 -12.3 18.9 21.4 30.6Book value per sh (ZAR) 69.3 68.1 69.7 72.7 75.9 Dividend cover (x) 23.5 -0.62 5.68 10.0 10.0 year to Jun year to Jun

Priced as follows: HARJ.J - R80.00; ANGJ J - R336.99; GFIF.J - R120.99 Source: Company data, Nedbank Capital forecasts


Our 12 –month target price is based on an equally-weighted average of five valuation metrics: price to NPV, price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Both up- and downside risks to our valuation include variations to our currency, gold price, production and cost assumptions. Source: Nedbank Capital

4040

Harmony Gold | Strategic and Competitive Overview | 6 December 2010

Strategic analysis Average SWOT company score: 3 Production split FY11F


Harmony is one of the world's larger gold producers, with current annual production of around 1.5m ounces and atarget to expand this to 2.2m ounces. Growth will come from the company's flagship projects: Hidden Valley(Papua New Guinea) and Elandsrand and Phakisa (South Africa). Over the last five years, the group's goldproduction has declined from around 3.5m ounces per annum as assets were sold to shore up its balance sheetand loss making mines were closed. The group has the highest operating costs among its peers and, with the bulk of production in South Africa, margins are extremely sensitive to the rand. Harmony's primary listing is inJohannesburg, with a secondary listing on the NYSE.

50

100

150

200

250

300

Dec07

Mar08

Jul08

Oct08

Feb09

Jun09

Sep09

Jan10

Apr10

Aug10

Nov10



Papua New Guinea

9%

South Africa91%

Source: Nedbank Capital forecasts

Market data

Headquarters Randfontein Office Park, Cnr Main Reef Rd and Ward Ave, Randforntein, 1759 South Africa Website www.harmony.co.za Shares in issue 428.9m Freefloat 100% Majority shareholders ARM (15%), Allan Gray (13%), Blackrock (10%)










90

100

110

120

130

140

150

Dec07

Mar08

Jul08

Oct08

Feb09

Jun09

Sep09

Jan10

Apr10

Aug10

Nov10

MarketIndex

01234567

Sell Hold Buy

Source: Bloomberg

Strengths 5Harmony's foothold in Papua New Guinea gives it a strong platform to find and develop further projects in thishigh-potential region.

Weaknesses 2 The company's high cost base and high exposure to South Africa make operating margins very sensitive to therand.

Opportunities 2 Opportunities to unlock value may arise from further divestiture of marginal assets.



4141


Equi

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Sout

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g


Pan African Resources

From strength to strength

There is little not to like about this company. It is growing and diversifying, andthereby accreting value and reducing the risk associated with single-product companies. It is improving operating efficiencies at its existing operations and maximising value. It has more near-term growth projects in its pipeline.

Key forecasts


Revenue (Rm) 761.7 818.6 986.6 1,126 1,207 EBITDA (Rm) 329.8 299.7 396.8% 427.7% 437.1%Reported net profit (Rm) 107.9 201.3 280.0% 300.9% 307.1%Normalised net profit (Rm) 127.7 176.8 283.8% 304.6% 310.9%Normalised EPS (R) 0.12 0.13 0.20 0.22 0.22%Dividend per share (R) 0.00 0.00 0.00 0.00 0.00 Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 Normalised PE (x) 9.43 8.42 5.41 5.04 4.94 EV/EBITDA (x) 4.57 4.64 3.02 2.22 1.48 EV/invested capital (x) 2.20 2.00 1.53 1.14 0.77 ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00



Phoenix platinum project finally going ahead Management recently gave an update on the Phoenix platinum project, and the outlined parameters were broadly in line with our assumptions. The project still accounts for 20-25% of our valuation, and we see further upside potential if PAN leverages the stake Shanduka, its BEE partner, has in Lonmin. This may make tailings from Lonmin’s operations accessible to PAN, thereby increasing capacity and extending the life of Phoenix.

Decision on Manica expected soon We expect a final decision on the Manica exploration project in Mozambique early next year. We believe PAN may have found an earn-in partner to co-develop this unloved project (low grade, low volume), which we consider a clean way to finally bring the development to account.

Potential tailing project at Barberton A pre-feasibility study is underway to access gold tailings dams at Barberton, PAN’s core operation. We estimate that this would add 50% to Barberton’s current production capacity of 100,000oz pa while incurring low costs and little operational risk. The Barberton mine is on track to achieve its production target of 100,000oz this year, although security costs are a little higher than expected. However, the latter has very little impact on the mine's profitability.

Still a strong Buy We maintain our Buy recommendation on Pan African Resources and raise our target price to R1.44 (R1.16) following revisions to our gold price, exchange rate, production and cost assumptions. The risk profile of our forecasts is high.

6 December 2010

Analyst


Price performance

(1M) (3M) (12M)Price (R) 1.07 0.84 0.94Absolute (%) 2.8 31.0 17.0Rel market (%) 1.0 16.6 1.9Rel sector (%) -1.7 10.4 9.8

0.2

0.4

0.6

0.8

1.0

1.2

1.4Dec 07 Dec 08 Dec 09

PANJ.J Jo'burg All-Share Index

Market capitalisation R1.54bn (€169.55m) Average (12M) daily turnover R0.91m (€0.09m) Sector: JSE Mining RIC: PANJ.J, PAN SJ Priced R1.09 at close 2 Dec 2010. Source: Bloomberg

Buy Target price R1.44 (from R1.16) Price R1.09 Short term (0-60 days) n/a Market view Underweight

42

Pan African Resources | Financial Statements | 6 December 2010

2

Assumptions The following table summarises our key assumptions. Our production forecast includes PGM ounces from Phoenix on a gold-equivalent basis. Further upside to our forecasts may come from the exploitation of tailings at Barberton.

Table 1 : Summary of our key expectations

2007 A 2008 A 2009 A 2010 A 2011 F 2012 F 2013 F 2014 FReceived gold price US$/oz 415 451 867 1,098 1,321 1,312 1,235 1,103 R/kg 96,067 105,850 251,740 267,876 309,576 324,012 325,473 294,655Exchange rate US$/R 7.19 7.28 9.02 7.57 7.29 7.68 8.20 8.31Gold production Moz 90,022 95,949 98,864 97,483 102,463 112,949 122,679 124,076Total cash costs US$/oz 465 476 469 650 701 722 692 712 R/kg 107,656 111,272 136,178 158,711 164,245 178,488 182,538 190,159Replacement costs (NCE) US$/oz 500 537 535 746 1,003 943 847 842 R/kg 115,777 125,455 155,169 182,090 235,198 232,944 223,350 225,039Cash cost margins % (12.6%) (1.8%) 45.1% 41.1% 46.9% 44.3% 42.3% 32.8%Replacement costs margins % (21.1%) (14.8%) 37.4% 32.4% 30.7% 33.7% 35.5% 25.3%


Sensitivities The starting point for our analysis is spot rates, which we have rounded off to US$1,350/oz and US$/ZAR7.00 for the purposes of these calculations. Spot rates are entered into our models in nominal terms over the life of the operations with 0% cost escalation. We then change the gold price and the exchange rate in increments of US$50/oz and USD/ZAR0.50 and calculate the impact on our target price, cash earnings and NPV estimates. The result of this calculation may be interpreted as what the market is currently discounting.

The target price determined by our valuation methodology using spot rates is in line with our revised target price.


USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550USD/ZAR 5.00 0.39 0.46 0.53 0.59 0.66 0.73 0.80 0.86 0.93 5.50 0.58 0.65 0.73 0.80 0.88 0.95 1.02 1.10 1.17 6.00 0.77 0.85 0.93 1.01 1.09 1.17 1.25 1.33 1.41 6.50 0.95 1.04 1.13 1.21 1.30 1.39 1.48 1.57 1.65 7.00 1.14 1.23 1.33 1.42 1.52 1.61 1.71 1.80 1.89 7.50 1.33 1.43 1.53 1.63 1.73 1.83 1.93 2.03 2.14 8.00 1.51 1.62 1.73 1.84 1.94 2.05 2.16 2.27 2.37 8.50 1.70 1.82 1.93 2.04 2.16 2.27 2.39 2.50 2.62 9.00 1.89 2.01 2.13 2.25 2.38 2.49 2.62 2.74 2.86


Calculating NPV based on spot rates implies that PAN is trading at a 26% discount to its value.

Table 3 : Sensitivities of our NPV

USD/oz 1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,500 1,550US$/ZAR 5.00 7,114.71 1,007.20 541.96 370.72 281.71 227.17 190.32 163.76 143.70 5.50 442.67 312.84 241.89 197.17 166.41 143.95 126.83 113.36 102.47 6.00 228.44 185.18 155.69 134.30 118.08 105.36 95.11 86.68 79.62 6.50 153.94 131.51 114.78 101.83 91.51 83.08 76.08 70.16 65.10 7.00 116.08 101.96 90.90 82.01 0.74 68.58 63.40 58.94 55.06 7.50 93.14 83.23 75.22 68.62 63.09 58.38 54.32 50.80 47.70 8.00 77.79 70.33 64.17 59.01 54.61 50.83 47.53 44.64 42.08 8.50 66.78 60.89 55.95 51.76 48.15 45.01 42.25 39.81 37.64 9.00 58.51 53.69 49.60 46.09 43.05 40.38 38.03 35.93 34.05


4343

Pan African Resources | Key Financial Data | 6 December 2010

Income statement

Rm FY09A FY10A FY11F FY12F FY13FRevenue 761.7 818.6 986.6 1126 1207Cost of sales -410.7 -495.8 -523.4 -627.0 -696.4Operating costs -21.1 -23.1 -66.3 -71.7 -73.4EBITDA 329.8 299.7 396.8 427.7 437.1DDA & Impairment (ex gw) -34.0 -37.4 -22.4 -29.4 -36.1EBITA 295.8 262.3 374.4 398.3 401.0Goodwill (amort/impaired) n/a n/a n/a n/a n/aEBIT 295.8 262.3 374.4 398.3 401.0Net interest 11.6 7.11 4.29 8.34 14.0Associates (pre-tax) n/a n/a n/a n/a n/aOther pre-tax items -72.4 -4.02 -3.77 -3.77 -3.77Reported PTP 235.0 265.4 375.0 402.8 411.2Taxation -118.4 -91.7 -93.7 -100.7 -102.8Minority interests -61.3 -0.84 -1.18 -1.26 -1.29Other post-tax items 52.6 28.5 0.00 0.00 0.00Reported net profit 107.9 201.3 280.0 300.9 307.1Tot normalised items -19.8 24.5 -3.77 -3.77 -3.77Normalised EBITDA 329.8 299.7 396.8 427.7 437.1Normalised PTP 307.4 269.4 378.7 406.6 415.0Normalised net profit 127.7 176.8 283.8 304.6 310.9


Balance sheet

Rm FY09A FY10A FY11F FY12F FY13FCash & market secs (1) 30.4 146.1 338.4 588.4 890.6Other current assets 32.5 56.4 74.9 84.3 84.5Tangible fixed assets 419.3 385.7 432.2 453.8 n/aIntang assets (incl gw) 152.9 149.9 149.9 149.9 149.9Oth non-curr assets 281.4 316.1 406.7 472.9 965.1Total assets 916.5 1054 1402 1749 2090Short term debt (2) 0.26 0.24 0.24 0.24 0.24Trade & oth current liab 77.2 81.2 100.8 118.6 134.5Long term debt (3) 0.00 0.00 0.00 0.00 0.00Oth non-current liab 123.0 131.0 179.0 207.4 225.3Total liabilities 200.5 212.4 280.0 326.2 360.1Total equity (incl min) 716.0 841.9 1122 1423 1730Total liab & sh equity 916.5 1054 1402 1749 2090Net debt -30.1 -145.9 -338.2 -588.2 -890.3


Cash flow statement

Rm FY09A FY10A FY11F FY12F FY13FEBITDA 329.8 299.7 396.8 427.7 437.1Change in working capital 0.00 -103.3 -13.9 2.83 3.93Net interest (pd) / rec 0.00 -6.50 4.29 8.34 14.0Taxes paid 0.00 0.00 -93.7 -100.7 -102.8Other oper cash items -206.4 23.1 30.4 31.5 32.3Cash flow from ops (1) 123.4 213.0 323.8 369.6 384.5Capex (2) -62.2 -71.1 -159.8 -119.6 -82.3Disposals/(acquisitions) 0.00 0.00 0.00 0.00 0.00Other investing cash flow n/a n/a n/a n/a n/aCash flow from invest (3) -62.2 -71.1 -159.8 -119.6 -82.3Incr / (decr) in equity 11.3 0.50 0.00 0.00 0.00Incr / (decr) in debt 13.8 -11.4 0.00 0.00 0.00Ordinary dividend paid 0.00 0.00 0.00 0.00 0.00Preferred dividends (4) n/a n/a n/a n/a n/aOther financing cash flow n/a n/a n/a n/a n/aCash flow from fin (5) 25.1 -10.9 0.00 0.00 0.00Forex & disc ops (6) -34.6 -3.37 0.00 0.00 0.00Inc/(decr) cash (1+3+5+6) 51.7 127.6 164.0 250.0 302.2Equity FCF (1+2+4) 61.2 141.9 164.0 250.0 302.2


4444

Pan African Resources | Performance and Valuation | 6 December 2010

Standard ratios P.A Resources DRDGold Great Basin Gold

Performance FY09A FY10A FY11F FY12F FY13F FY11F FY12F FY13F FY10F FY11F FY12FSales growth (%) 33.4 7.47 20.5 14.2 7.15 25.3 -14.4 -4.56 198.9 223.1 21.0EBITDA growth (%) 64.9 -9.13 32.4 7.77 2.20 19.8 25.9 -0.61 -79.3 n/a 16.4EBIT growth (%) 72.7 -11.3 42.8 6.36 0.68 443.8 55.0 0.65 -64.7 n/a 10.5Normalised EPS growth (%) -11.1 11.9 55.6 7.34 2.05 -66.8 8.75 7.67 -60.8 n/a 13.9EBITDA margin (%) 43.3 36.6 40.2 38.0 36.2 10.5 15.5 16.1 -10.6 38.3 36.8EBIT margin (%) 38.8 32.0 38.0 35.4 33.2 6.11 11.1 11.7 -19.3 30.2 27.6Net profit margin (%) 16.8 21.6 28.8 27.0 25.8 0.19 -0.28 -0.31 -19.2 24.3 22.9Return on avg assets (%) 18.8 17.5 23.0 19.0 15.7 3.82 5.68 5.71 -3.22 11.4 11.1Return on avg equity (%) 17.0 22.7 28.9 23.9 19.7 0.29 -0.37 -0.39 -5.27 18.7 17.7ROIC (%) 30.3 27.5 38.7 36.6 34.6 7.21 12.3 13.9 -3.60 12.0 11.4ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Jun year to Jun year to Dec

Valuation EV/sales (x) 1.98 1.70 1.21 0.84 0.54 0.44 0.44 0.35 11.4 3.58 2.77EV/EBITDA (x) 4.57 4.64 3.02 2.22 1.48 4.18 2.87 2.20 n/m 9.35 7.53EV/EBITDA @ tgt price (x) 6.06 6.29 4.26 3.37 2.61 4.98 3.51 2.85 n/m 10.1 8.17EV/EBIT (x) 5.09 5.30 3.20 2.38 1.61 7.19 4.01 3.04 n/m 11.8 10.1EV/invested capital (x) 2.20 2.00 1.53 1.14 0.77 0.79 0.77 0.72 1.95 1.70 1.56Price/book value (x) 1.68 1.77 1.37 1.08 0.89 0.82 0.82 0.83 2.85 2.37 1.98Equity FCF yield (%) 5.09 9.53 10.7 16.3 19.7 7.02 11.2 16.8 -19.1 -1.49 6.60Normalised PE (x) 9.43 8.42 5.41 5.04 4.94 276.5 n/m n/m n/m 13.9 12.2Norm PE @ tgt price (x) 12.5 11.1 7.15 6.66 6.53 320.6 n/m n/m n/m 15.2 13.4Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 year to Jun year to Jun year to Dec

Per share data FY09A FY10A FY11F FY12F FY13F Solvency FY09A FY10A FY11F FY12F FY13FTot adj dil sh, ave (m) 1104 1366 1410 1410 1410 Net debt to equity (%) -4.20 -17.3 -30.1 -41.3 -51.5Reported EPS (ZAR) 0.10 0.15 0.20 0.21 0.22 Net debt to tot ass (%) -3.28 -13.8 -24.1 -33.6 -42.6Normalised EPS (ZAR) 0.12 0.13 0.20 0.22 0.22 Net debt to EBITDA -0.09 -0.49 -0.85 -1.38 -2.04Dividend per share (ZAR) 0.00 0.00 0.00 0.00 0.00 Current ratio (x) 0.81 2.49 4.09 5.66 7.24Equity FCF per share (ZAR) 0.06 0.10 0.12 0.18 0.21 Operating CF int cov (x) 0.00 33.8 -96.3 -55.4 -33.8Book value per sh (ZAR) 0.65 0.62 0.80 1.01 1.23 Dividend cover (x) 0.00 0.00 0.00 0.00 0.00 year to Jun year to Jun

Priced as follows: PANJ.J - R1.09; DRDJ.J - R3.42; GBGJ.J - R20.09 Source: Company data, Nedbank Capital forecasts



4545

Pan African Resources | Strategic and Competitive Overview | 6 December 2010

Strategic analysis Average SWOT company score: 4 Production split, FY12

Company description Buy Price relative to country

Pan African Resources in a junior gold producer with ambitions to expand into PGMs. The company operates thehighly profitable Barberton mine in South Africa, which has annual production of around 100,000 ounces at yields of 9-10g/t. Within the next 18 months management expects to complete development of the Phoenix PGM tailingsproject. This is a low-risk project with estimated capital requirements of R100-120m.

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Barberton91%

Phoenix9%


Market data

Headquarters St James's Corporate Services Ltd, 6 St James's Place, London SW1A 1NP, UK Website www.panafricanresources.com Shares in issue 1409.5m Freefloat 100% Majority shareholders Shanduka Gold (26%), Coronation (17%), Investec AM (11%)








The South African economy is underpinned by its mineral wealth, but the rand's volatility tends to make investorssceptical, so most emerging market fund managers are underweight South Africa. Due to the strong commoditysector, flows into the bond and equity markets are improving. South Africa should also benefit from the Chinagrowth theme, but we believe more stability in the rand is necessary before an upgrade to Neutral would bewarranted.


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MarketIndex

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Sell Hold Buy

Source: Bloomberg

Strengths 5High grades at the Barberton mine protect margins when the rand strengthens. PAN is also pursuing severalbrownfield exploration opportunities we believe are likely to extend the life of the mine.

Weaknesses 2 Illegal mining is a substantial problem at Barberton. This appears to have been brought under control in a majorcrackdown in 2H99, but this problem may recur.

Opportunities 5 If the gold bull cycle turns the company will benefit from its exposure to PGMs.



Gold Mining | Disclosures Appendix | 6 December 2010

Recommendation structure Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside of 5% or more. The trading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more from the suggested entry price range, and aTrading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading recommendation time horizon is 0-60 days. Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price and, except as follows, only reflects capital appreciation. A Buy/Sell implies upside/downside of 10% or more and a Hold less than 10%. For research produced by Nedbank Capital, a Buy implies upside inexcess of 20%, A Sell implies an expected return less than 10%, and a Hold implies a return between 10% and 20%. For UK-based Investment Funds research, the recommendation structure is not based on upside/downside to the target price. Rather it is the subjective view of the analyst based on an assessment of the resources and track record of the fund management company. For research produced by Nedbank Capital and for research on Australian listed property trusts (LPT) or real estate investment trusts (REIT), the recommendationis based upon total return, ie, the estimated total return of capital gain, dividends and distributions received for any particular stock over the investment horizon. Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance parameters should be interpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months. Market or sector view: This view is the responsibility of the strategy team and a relative call on the performance of the market/sector relative to the region. Overweight/Underweight impliesupside/downside of 10% or more and Neutral implies less than 10% upside/downside. Target price: The target price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary catalysts were in place to effectthis change in perception within the performance horizon. In this way, therefore, the target price abstracts from the need to take a view on the market or sector. If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value, the target price will differ from 'fair' value.

Distribution of recommendations The tables below show the distribution of recommendations (both long term and trading). The first column displays the distribution of recommendations globally and the second columnshows the distribution for the region. Numbers in brackets show the percentage for each category where there is an investment banking relationship. These numbers includerecommendations produced by third parties with which RBS has joint ventures or strategic alliances.

Valuation and risks to target price AngloGold Ashanti (RIC: ANGJ J, Rec: Hold, CP: R336.99, TP: R360.00): Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple, but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Both up- and down-side risks to our valuation include variations to our currency, gold price, production and cost assumptions. DRDGold (RIC: DRDJ.J, Rec: Hold, CP: R3.42, TP: R4.00): Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price to book,EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Both up- and downside risks to our valuation include variations to our currency, gold price, production andcost assumptions. Gold Fields (RIC: GFIF.J, Rec: Sell, CP: R120.99, TP: R121.00): Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price tobook, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where thecompany is in its life cycle and to bring multiples in line with industry averages. Upside and downside risks to our valuation include variations to our currency, gold price, production and cost assumptions. Great Basin Gold (RIC: GBGJ.J, Rec: Sell, CP: R20.09, TP: R22.00): Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price tobook, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple but reserve the right to make adjustments depending on where thecompany is in its life cycle and to bring multiples in line with industry averages. Besides variations to our currency and gold price assumptions, risks to our valuation include the need toraise further capital. Harmony Gold (RIC: HARJ.J, Rec: Hold, CP: R80.00, TP: R94.00): Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV, price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple, but reserve the right to make adjustments depending on where thecompany is in its life cycle and to bring multiples in line with industry averages. Both up- and downside risks to our valuation include variations to our currency, gold price, production andcost assumptions. Pan African Resources (RIC: PANJ.J, Rec: Buy, CP: R1.09, TP: R1.44): Our 12-month target price is based on an equally weighted average of five valuation metrics: price to NPV,price to book, EV/EBITDA, price to cash earnings and EV per reserve ounce. We apply a 12-month average as an exit multiple, but reserve the right to make adjustments depending on where the company is in its life cycle and to bring multiples in line with industry averages. Both up- and downside risks to our valuation include variations to our currency, gold price, production and cost assumptions.

Long term recommendations (as at 03 Dec 2010)

Global total (IB%) Europe total (IB%)Buy 723 (0) 245 (0)Add 0 (0) 0 (0)Hold 443 (0) 176 (0)Reduce 0 (0) 0 (0)Sell 112 (0) 30 (0)Total (IB%) 1278 (0) 451 (0)

Source: RBS

Trading recommendations (as at 03 Dec 2010)

Global total (IB%) Europe total (IB%)Trading Buy 1 (0) 0 (0)Rec 00 (00) 00 (00) Trading Sell 0 (0) 0 (0)Total (IB%) 1 (0) 0 (0)

Source: RBS


AngloGold Ashanti coverage data

Stock performance, recommendations and coverage (as at 3 Dec 2010)

Christian Siebert started covering this stock on 23 Mar 07. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS

DRDGold coverage data


Christian Siebert started covering this stock on 3 Apr 09. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS

Gold Fields coverage data


Christian Siebert started covering this stock on 4 Apr 08. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS

Trading recommendation history (as at 03 Dec 2010) Date Rec Analyst n/a

Source: RBS


Source: RBS


Source: RBS


Great Basin Gold coverage data


Christian Siebert started covering this stock on 20 Jul 07. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS

Harmony Gold coverage data


Christian Siebert started covering this stock on 14 Sep 07. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS

Pan African Resources coverage data


Christian Siebert started covering this stock on 27 Feb 09. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS


Source: RBS


Source: RBS


Source: RBS


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Conflicts of Interests Certificate Nedbank Limited hereby certifies that in respect of the subject security or issuer to which this report relates it: does not own one percent or more of any class of the issued share capital, nor have any other significant financial or material interest and may have conducted investment banking business in the last 12-months or may do so in the next 6-months.

Share price, ratings and 12-month forward price target (ZAc) Nedbank Capital’s ratings universe

165 165HSHBHSH160

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AngloGold Ashanti 12-month target price

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Buy Hold Sel l

Source: Nedbank Capital Source: Nedbank Capital



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