PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE

RESULTS FOR THE YEAR

ENDED 2010

CONTENTSCONTENTS

1. ALEXKOR MINING CONCESSIONS

2. OPEARTIONS

3. OPERATIONAL OVERVIEW

4. DIAMOND SALES

5. DEED OF SETTLEMENT

6. HEALTH AND SAFETY

7. EXTENDED OPEARTIONS

8. DETAIL ON THE AFS FOR 2010

9. REHABILITATION

10.POLICIES AND PROCEDURES

11.IN THE YEAR AHEAD

ALEXKOR MINING CONCESSIONS

OPERATIONS

• Contracted companies recover diamondiferous gravel along the coastal strip from the mouth of the Orange River to south of Port Nolloth, for a distance of 140km

• This gravel is delivered to an Alexkor operated plant for processing and the recovery of diamonds

• The diamonds are subsequently sold on tender at the Johannesburg Diamond Exchange. The proceeds of the sale are shared between the contractor and Alexkor

OPERATIONAL OVERVEIW OPERATIONAL OVERVEIW

• Notwithstanding the effects of the global economic downturn, unlike other operators, Alexkor kept its operations going and did not downsize or effect any retrenchments

• This is critical to an area almost solely dependent on diamond mining

DIAMOND SALES DIAMOND SALES

• Alexkor’s gross revenue from diamond sales amounted to R163.8 million, compared with the R127.5 million for 2009 – an increase of R36.3 million. This was mainly due to increased diamond production and a higher volume of carats produced

THE DEED OF SETTLEMENT THE DEED OF SETTLEMENT

• The Deed of Settlement (DoS) signed between Alexkor, the State and the Richtersveld Community in 2007 envisaged the establishment of a Pooling and Sharing Joint Venture (PSJV) with the Richtersveld Community in which the land mining rights would be ceded to the community and Alexkor would hold the marine mining rights

• The DoS required the conversion of the old order land and marine mining rights. In preparation of the applications for conversion of the mining rights, consultations with interested and affected parties were carried out

• On 28 January 2010 the application for the conversion of the old order land mining rights, which are to be ceded to the Richtersveld Community, was granted and the converted right was subsequently executed on 19 May 2010

• The conversion of the marine mining rights was likewise granted, and executed on 2 July 2010. The cession of the land mining rights is in the process of being finalized. All has been done for the cession on Alexkor’s behalf

HEALTH AND SAFETY

• Alexkor’s emphasis on safety has been a major focus over the past year

• Alexkor underwent an independent health, safety and environmental audit in February 2010

• An audit score of 86% was achieved, compared with a score of 47% achieved in the previous audit

• This shows a decisive improvement in safety considerations • Although there was improvement on reportable incidents and lost-

time injuries compared with the previous year, minor injuries remained a concern

• Alexkor has reviewed its Health, Safety and Environmental Management Plan, primarily to address this concern

• Alexkor achieved 1,000 fatality-free production shifts on 25 November 2009. This remarkable achievement was celebrated jointly by employees and contractors on 14 December 2010

EXTENDED OPERATIONS EXTENDED OPERATIONS •Mining operations at Alexkor’s land operations continued at curtailed levels to preserve the asset being transferred to the Richtersveld Community while still generating revenues to sustain operations and maintain these operations in working condition

• In order to bolster carat production in December 2009, it was decided after consultations with the Richtersveld Community that Alexkor would invite interested parties to express interest in contracting in the deep-sea, middle-sea, shallow-water, beach and on the curtailed areas of land mining

• The submitted tenders were subjected to rigorous review in accordance with Alexkor’s tender process.

• As part of the adjudication process, strict criteria relating to BEE credentials, local content and technical know-how were applied to select candidates for short-listing

• Among the extended operations is the contract of a women’s group at an area called Witvoorkop

•This is inline with Alexkor’s undertakings to increase the participation of women in mining

• Another step in this direction is the involvement and training of one of Alexkor’s female diamond sorters in the marketing of its diamonds on the bourse

AFS - GENERALAFS - GENERAL

• The following figures were audited by PwC and signed off by them on 30 July 2010.

• An unqualified opinion was issued by PwC for the financial year of 2010.

• The annual financial statements were submitted to National Treasury and the Department of Public Enterprises before 31 July 2010, as required by the Public Finance Management Act (PFMA).

AFS – FINANCIAL POSITIONAFS – FINANCIAL POSITION

Non-current and current assets

• Cash held in the Rehabilitation Trust increased with 18% to a total of R32.8m. The cash is held to address the historical environmental liability.

• Inventory included diamonds to the value of R7.4m and was the main reason for the material increase.

• Trade and other receivables decreased by R5.3m with irrecoverable debts and impairments being the main contributing factors.

• Cash increased by R141m. This was due to government grants received to the value of R129m (R100m for the PSJV and R29m for the Township Establishment), with the difference being the interest received on these accounts

AFS – FINANCIAL POSITION (continued)AFS – FINANCIAL POSITION (continued)

Non-current assets classified as held for sale• These are the assets that will be transferred over to the community

upon completion of the Township Establishment in accordance with the Deed of Settlement

• The value of the assets decreased by R14.33m because Farm Beauvallon was transferred to the community during the year

• It is expected that these assets will be transferred during the 2012 financial year. Alexkor will receive compensation for these items as stipulated in the Deed of Settlement.

AFS – FINANCIAL POSITION (continued)AFS – FINANCIAL POSITION (continued)

Non-current and current liabilities

• The Post Retirement Medical Aid Liability (“PRMAL”) reduced from R135m to R90m. After consultation with the relevant pensioners and the medical aid schemes the liability was capped to reduce the open ended liability the company was facing on the previous subsidy levels.

• The Environmental Rehabilitation Liability increased from R239m to R256m after it was adjusted on a CPI linked basis. This amount equals the present value of the estimated costs to rehabilitate the existing environmental disturbances at year-end.

• Trade and other payables consist mainly of Government Grants (R309m) and prepaid income (R49m).

AFS - FINANCIAL PERFORMANCE FOR THE YEARAFS - FINANCIAL PERFORMANCE FOR THE YEAR - Gross operating profit - Gross operating profit

• Diamond sales for the year equalled R163.9m (2009: R127.5m). The

increase of 28.5%, was due to the increase in carats production of

33,363 carats, compared to a budgeted production of 25,750 carats.

• Due to the increase in revenue, it also reduced the gross operating

loss to R6.0m (2009: R26.6m)

AFS - FINANCIAL PERFORMANCE FOR THE YEAR AFS - FINANCIAL PERFORMANCE FOR THE YEAR - Net operating profit - Net operating profit

• The net operating profit improved significantly from a loss of R77.5m in 2009, to a profit of R26.9 in 2010.

• The improvement was mainly because of non-cash movements in the Statement of Comprehensive Income relating to the Environmental Rehabilitation Liability of R17.0m (2009: R4.7m) and the Post Retirement Medical Aid Liability (“PRMAL”) of R45.1m (2009: R58.2m negative movement).

• Excluding the above mentioned material adjustments alexkor would have made a net operating loss of R1.1m (2009: R14.6m).

AFS - FINANCIAL PERFORMANCE FOR THE YEARAFS - FINANCIAL PERFORMANCE FOR THE YEAR - Profit for the year (after tax and interest) - Profit for the year (after tax and interest)

• The profit for the year increased significantly to R36.1m (2009: Loss of R65.7). The main reason being the non-cash adjustments mentioned on the previous slide.

• Alexkor managed to accumulate interest on the cash it invested with recognised banking institutions of R8.9m (2009: R13.3m) for its own account. Interest received on the Government Funded Reserves “GFR” was not accounted for as these cash items are restricted to specified projects within Alexkor and not part of Alexkor’s unrestricted cash balance.

• The discontinued operations of Alexkor made a small profit of R0.16m (2009: Loss of R1.4m) for the year. These operations include the guesthouse, town maintenance, fuel station, the airport and the hospital. Only the operations of the guesthouse, town maintenance and fuel station are continuing in the 2011 financial year.

AFS – STATEMENT OF CASH FLOWSAFS – STATEMENT OF CASH FLOWS

• Cash flow from operating activities improved from an inflow of cash of R8.0m (2009: Outflow of R31.1m). This is mainly due to increased production of diamonds which then led to increased sales. Strict cost cutting strategies also helped with this turnaround.

• Cash flow from investing activities showed an outflow of R4.5m (2009: R0.9m) because of capital expenditure incurred. No capital items were sold during the 2010 financial year.

• Alexkor received R129m in GFR during the financial year and this is disclosed as restricted cash. It includes R100m for the PSJV and R29m as part of the Township establishment.

• Alexkor’s own cash reserves decreased during the year with an outflow of R1.1m

for the year, compared to a budgeted outflow of cash for the year of R8.3m. The

variance of 87% was because of the fact that more cash was generated through

diamonds sales and better management of costs.

AFS - CONCLUSIONAFS - CONCLUSION

Positive variances from the 2010 financial year

• Revenue up by 28%

• Gross operating loss decreased by 77%

• Profit for the year up by 155%

• Accumulated loss decreased by 15%

• Operational cash reserves were 87% more than budgeted for

• Capital expenditure increased by 359%

• Cash and cash equivalents increased by 48%

REHABILITATION REHABILITATION

• Within budget constraints, Alexkor focused on the back-filling process at the southeast side of Boegoeberg, as well as on the netting on the southeast side of Boegoeberg

• The back-filling process was completed in February 2010 and approximately 54km of netting was installed during the year under review. The indicated netting was part of the Boegoeberg protection strategy

POLICIES AND PROCEDURES POLICIES AND PROCEDURES

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• This year Alexkor has updated the majority of its policies, which were outdated.

• The performance process has been signed off by the board and the performance contracts with management are being finalized. The process should be up and running by the end of this financial year.

IN THE YEAR AHEAD IN THE YEAR AHEAD

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• In the year ahead, Alexkor’s priorities are to continue offering support within the terms of the DoS, and to return operations to profitability through increased production levels and better cost management

• Simultaneously, in line with a diverse strategic direction, Alexkor will evaluate opportunities to procure new diamond assets to secure new long-term revenue streams and ensure its future growth

THANK YOU