De Beers Overview Anglo American Analyst Presentation 13 April 2010
Agenda 1. Industry Overview & De Beers Introduction Gareth Penny (CEO) 2. 2009 Operating & Financial Review Stuart Brown (CFO) 3. 2010 & Beyond Gareth Penny (CEO) 4. Venetia Overview Martin Preece (GM –Venetia Mine) Q&A 2
Diamonds are a luxury product 1. Diamonds are a luxury product with unique attributes which are very distinct from the commodities 2. Whilst also a natural resource, diamonds are the main feature of an end consumer product, as distinct from more fungible commodities 3. From a consumer perspective, diamonds have both emotional and physical attributes which influence purchase behaviour 4. Diamond jewellery competes with other discretionary services and products for the share of consumers wallet 5. Because of their aspirational and discretionary nature, diamonds are more vulnerable to reputation threats than other raw materials 3
…in comparison with precious metals Demand sources for Diamonds, Gold and Platinum - 2008 1% 100% 29% 80% 43% 12% 60% 6% 99% 40% 30% 58% 20% 23% 0% Diam onds G old Platinum Jew ellery Industrial Investm ent Autocatalyst Source: De Beers Group analysis; World Gold Council Gold Demand Trends, February 2009; Angloplat 2008 Annual Report, page 20. 4
Marketing and distribution is key to driving value Price per carat in 2007 (polished stones) $8,000 Price Diam onds change ’97-’07 6,000 + 26% 4,000 -23% Rubies Emeralds 2,000 -38% Sapphires -39% 0 0 10 20 30 40 50 Volume in 2007 (rough carats) I ncreasing Rarity No te : Data is fo r the USA – wo rld’ s larg e st g e msto ne marke t; Pric e s are fo r 1-c arat sto ne s So urc e : U S Ge o lo gic al Surve y; T he Guide (Pric e s); DT C (vo lume ) 5
Diamond value chain 2008 Diamond Pipeline De Beers as market leader De Beers as participant Share of Share of world world production distribution Retail $70.3bn $14.8bn $19.6bn $14.2bn n.a. CONSUMER De Beers DTC PWP 1 $19.1bn 41% 42% Rough Rough Polished Exploration Jewellery Jewellery ALROSA Production Distribution Manufacturing Manufacturing Retail & Dealing & Dealing Other Other 59% 58% Description • Finding new • Carats recovered • Rough Distributor – • Cutting and • Crafting • Selling deposits of through mining selling rough diamonds polishing rough jewellery diamond diamondiferous purchased from primary diamonds ready which jewellery to kimberlites that source for inclusion into incorporates end can be mined jewellery polished consumers • Rough Dealer – trades economically diamonds diamonds purchased from rough distributors or other rough dealers Note 1: PWP is the price of a polished diamond at Cutting Centre before any additional mark-ups. It denotes the diamond content of a piece of diamond jewellery sold at retail. Source: DB Group Strategy estimates. 6 24 Overview of the diamond industry
Diamond pipeline profitability Estimated pipeline profitability 20% Size of bubble = Indication of absolute net profit � Rough production and distribution Economic Profit Margin 10% and diamond jewellery retail produce the largest profit pools in the pipeline 0% � However, in retail: 0 – Profit margins are variable (reflecting different business -10% models and risks) – Profit pool is shared by a highly fragmented base (est. 250,000+ retailers globally) -20% Rough Rough Polished DJ DJ Production and Dealing Manufacturing Manufacturing & Retailing Distribution & Dealing Distribution N. of Companies 100s 50s 1,000s 10,000s >250,000 Degree of segment fragmentation Range of EP Margin Source DB estimates 2007 7
World Production Growth 180 Canada (Diavik) 160 Canada (Ekati) 140 120 Botswana Carats (m) 100 (Jwaneng S. Africa ) Botswana (Venetia) (Orapa) 80 Russia 60 Tanzania Sierra 40 Leone Australia (Argyle) 20 0 1914 1918 1922 1926 1930 1934 1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 No new material production is expected to come online in the near future 8
World Diamond Production Botswana is the largest producer of rough diamonds globally Gem diamond production by country (volume) Gem diamond production by country (value) All others All others Angola 2% 4% Angola 6% Russia 10% Russia 21% 24% South Africa 8% Canada 9% South Africa DRC 11% 4% Australia 9% DRC Canada 21% 19% Botswana 28% Botswana Australia 21% 3% Total 150mcts Total US$14.8bn Sources: Kimberley Process 2008 Statistics; De Beers Group Strategy 9
Diamond Production De Beers share of global gem diamond production is estimated at c.40% by value Gem diamond production (carats) Gem diamond production (value) Other (fragmented) includes: Other (fragmented) includes: Artisanal & Illicit (8%) Artisanal & Illicit (8%) Juniors (25%) Juniors (19%) Other De Beers Other (highly 33% (highly fragmented) fragmented) De Beers 27% 40% 33% Harry Winston 2% 1 Alrosa BHP 19% 1 Harry Alrosa 2% Winston Rio Tinto 16% BHP Rio Tinto 14% 4% 4% 6% Total 150mcts Total US$14.8bn •The five largest producers contribute over two-thirds of global diamond production •De Beers and Alrosa contribute c.60% of global production by value Source: De Beers estimates 2008 10
Diamond Cutting and Polishing India is the largest cutting centre by value and number of employees Share of Cutting Value by Country USA Beligium Botsw ana 4% Russia 3% 1% 5% South Africa Cutting Centre Cutting Centre Workforce Workforce Average Average 5% Manufacturing Cost Manufacturing Cost I ndia I ndia 850,000 850,000 6-50 6-50 China/ Thailand China/ Thailand 29,000 29,000 15-35 15-35 Israel I srael I srael 2,000 2,000 50 50 11% South Africa South Africa 1,800 1,800 75 75 Belgium Belgium 1,000 1,000 75 75 India 58% Thailand/China etc 13% Source: De Beers 2008 Estimates 11
Cutting Centre Debt Levels 100 6 Total Debt Service Libor 90 5 Cost of Debt per month ($mn) 80 70 4 60 LIBOR % 50 3 40 2 30 20 1 10 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: DTC Estimates 12
13 De Beers Activities
14 Geographical Locations Business locations
Diamond exploration challenge Diamond exploration results from the last 140 years 5,000 5,000 1,500 1,000 850 500 50 3 0 Kim berlites Diam ond- Econom ic > 100B in sam pled iferous contained revenue Source: De Beers Exploration data 15
Focused exploration 2,000km 2 18,000km 2 6,000km 2 9,000km 2 900km 2 Early Stage (recce-discovery) Advanced Stage (deposit) Total De Beers Exploration Spend ($mm) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 70 66 73 68 77 90 109 108 129 94 46 16
De Beers has an unrivalled resource and reserve base The SSV Value^ of The De Beers Family of Companies' Resources*, Business Plan and Reserves** Resource* as at 31/12/09 Business Plan size of bubble = Revenue^ (U$ bn) $185bn $76bn Reserve** $36bn $61bn $34bn $33bn $17bn $29.6bn $18bn $5.4bn $18.1bn $20bn $10bn $0.4bn $3.2bn $6bn $10.8bn $0.9bn $5bn $5.9bn $3.3bn $1.6bn $2.0bn $0.1bn $2.5bn $1.1bn $0.9bn Letlhakane $2.1bn $0bn $5.4bn $0.5bn Finsch SASA Jwaneng Venetia Snap Namdeb Victor Kimberley NM Voor- Damtshaa Orapa Namdeb Gahcho Lake Marine spoed Land Kue FoC ^ using Business Plan Average $/¢ @ June 2008 DTC Price Book for Life of Mine absent time value effects * Resource ¢ x Business Plan average $/¢ ** Reserve ¢ x Business Plan average $/¢ 18
19 Project Pipeline
Agenda 1. Industry Overview & De Beers Introduction 2. 2009 Operating & Financial Review 3. 2010 & Beyond 4. Venetia Overview 20
Financial Summary Financial summary 2004 - 2008 Y/e December - $m 2004 2005 2006 2007 2008 Sales DTC 5,695 6,539 6,150 5,920 5,930 Other 717 732 745 786 768 Total sales 1 6,412 7,271 6,895 6,706 6,698 EBITDA 1,317 1,403 1,232 1,216 1,222 Underlying earnings 652 850 425 483 515 Cash generated by operating activities 985 472 809 844 700 Capital expenditure 416 638 752 1,612 442 Total assets 2 6,258 6,846 7,599 8,381 7,093 Shareholders' interests 3,933 3,701 3,834 3,392 2,628 Gross debt Third party 1,339 2,175 3,037 4,075 3,622 Shareholder preference shares 642 428 214 161 107 Shareholder loans - - - - 248 Cash 393 241 307 179 177 Net debt 1,588 2,362 2,944 4,057 3,800 21
Three factors affecting diamond market in 2009 Drop in consumer demand Drop in consumer demand Constricted liquidity Constricted liquidity Inventory overhang Inventory overhang 22
Maximise demand opportunities: DTC DTC Sales US dollar millions H1 H2 2009 2008 DTC Sales 1,431 1,809 3,240 5,930 • Protecting diamond equity • Selling flexibility • Liaison with diamond banks and trade to bolster confidence • Increased price and volume of sales as year progressed 23
Produce in line with client demand Carats recovered: 2009 vs 2008 2009 2008 Variance DBCM 4 797 11 960 Namdeb 929 2 122 Debswana 17 734 32 276 De Beers 1 146 1 640 Canada Carats 000’s 24,600 48,132 (49%) 25
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