Recent developments in the southern African zinc industry

Paul FouchéOperations ManagerZincor 6th Southern African Metals Conference 2011

Phalaborwa, South Africa18-20 July 2011

Our current business at a glance

Coalthe second largest coal producer in South Africa

Mineral sandsone of the world's top three producers of zircon and chlorinatable TiO2 slag

Base metalsthe only zinc producer in South Africa

Iron ore20% holding in Sishen Iron Ore Company

Our commodities

• We are one of the largest South African diversified resources companies with coal, mineral sands, base metals and ferroalloy assets

• We are one of the top 40 companies on the JSE

• We employ about 11 000 people• We have access to valuable strategic

assets and quality resources • We are a 50%+ BEE owned business• We have an extensive growth pipeline• Revenue: R17,2 billion*• Net operating profit: R2,6 billion*

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Who are we?

* Annual results for 12 months ended 31 December 2010

Strategy focus

• Safety always, all the way• Exxaro will remain a diversified

resources group • Coal

– Remain a major reliable supplier to Eskom

– Consider mega-mine opportunities to grow the coal business

– Increase export allocation and de-bottleneck logistical chain

– Develop downstream value-adding products such as char and market coke

– Increase volumes to metals markets

• Mineral sands– Board decision to continue with

development of Fairbreeze mine– Ramp-up of pigment expansion

• Base metals– Progress divestment initiatives

• Iron ore– Expand footprint

• Energy– Energy security– Clean and renewable alternatives

Consolidation in zinc world wide and regionally

Source: Brook Hunt, June 2011

Xstrata AGHindustan Zinc

China Minmetals CorpTeck

GlencoreVotorantim

Vedanta ResourcesBoliden

Minera VolcanSumitomo Corp

0 200 400 600 800 1000 1200

1068853

643628

430367361

310279268

kt zinc in concentrate

Nyrstar

Hindustan Zinc

Votorantim

Huludao Zinc Co

Teck

0 200 400 600 800 1000 1200

11331040

840640

547472

380302296

282

kt zinc in metal product

• Global zinc industry (13Mtpa zinc market)• Zinc mining and refining industry highly

fragmented• Top 10 mining companies produce only 40%

of total market output (vs more than 70% for iron ore from four companies)

• Top 10 refining companies produce 44% of total market output

• Nyrstar has signaled strategic intent to consolidate refining industry

• Regional• Black Mountain and Skorpion acquired by

Vedanta/ Hindustan Zinc• Sable Zinc acquired by Glencore

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Possible Mine Life Extensions

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Base Case Production Capability

Requirement for Zinc Mine Produc-tion

kt Zn

Markets and productsZinc concentrate supply-demand

Zn Concentrate Supply and Demand

• Current concentrate production capability able to meet demand, but:–2010 fairly balanced, from 2011 forecasted

tight concentrate market,–Exacerbated by major mine closures from

2011 – 2015: Century by 2014 (500ktpa concentrate), Brunswick and Lisheen by 2013

–Late/none start-ups could accelerate deficit• Future supply capability scenarios:

–18 new mines between 2010 - 2025 adding 0,9Mtpa Zn at peak output

– Expansions or production creep at 40 mines will add 1,5Mtpa

– By 2025 some 4,8mtpa will be closed due to depletion

– 19 mines which produced 2,6Mtpa in 2010 will produce only 1,6Mtpa by 2025 (1Mtpa output loss by attrition)

• Strong zinc price increases expected by 2014-15

Source: Brook Hunt

Source: Brook Hunt

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World Base Case Smelter Produc-tion

Requirement for Slab Production

kt Zn

Markets and productsZinc metal supply-demand

Zn Metal Supply and Demand

• Current installed refining capacity sufficient to meet forecasted demand through to 2017

• Refined zinc metal in oversupply, to persist till 2013 (concentrate shortage from 2014 onward)

• Sufficient capacity beyond 2017 to be supplied by: –Five new refineries with combined

capacity of 0,7Mtpa between 2010 - 2025

–Expansions and production creep at 68 refineries add 2,4Mtpa (1,4Mtpa Chinese)

–Chinese directive to build new refineries of at least 150ktpa capacity

–No significant closures forecasted

Source: Brook Hunt

Source: Brook Hunt

Mine type: Underground mine with historic open pitsProduction: 680ktpa run-of-mine ore, ~100ktpa zinc and ~20ktpa lead concentrateDepth: Currently down to 400m below surface, with mineralisation up to 800m deepGeometry: Discrete, sub-vertical ore bodies, varying from 0,4 – 2 Mt in sizeMining method: Underground, open stopeOre Minerals: Sphalerite (ZnS), galena (PbS), ~chalcopyrite (CuFeS2)

Rosh PinahMine overview

WF3EF

Low Grade

WF1& 2B-Mine NF

EF-AM2-BAEpotential

S1S-S1Npotential

conveyor planned

Lateral ext. to WF3potential

SW NE

C5

Rosh Pinah explorationGeological potential: on-mine targets

Rosh Pinah explorationGeological potential: regional exploration targets

Refinery type: Roast-leach-electrowinning of zinc sulphide concentrateProduction: ~100ktpa zinc and 160ktpa sulphuric acidZinc products: Range includes SHG, Zn2, Zn4, Zincal, pre-alloy in ingot and jumbo shapesMarket: Only South African zinc refinery, supply predominantly for local galvanisingRaw materials: Concentrate supplied by Rosh Pinah, Black Mountain and imported

ZincorOverview

ZincorNew residue disposal facility

Medium term:• Gamsberg deposit will be developed by Vedanta (400ktpa)• Skorpion will be closed if no further oxides can be found or sourced or alternatively

converted to treat sulphides• Pering Mine may be re-developed• Chinese companies will become more prominent, also as operators• Increased zinc consumption in southern Africa from a broader product range

Long term:• Gergarub Mine to be developed with zinc sulphide concentrate product• Gamsberg East could be developed to expand Gamsberg capacity• Kipushi may be developed if a recognized zinc operator can align with owners• Smaller and lower grade deposits in South Africa, Namibia, Botswana, Zambia, DRC and

Congo may be developed with concentrate supply to larger operators and traders

Regional futureVedanta, the new zinc leader in Africa