Results presentation – 31 December 2006 Poised for growth
HIGHLIGHTS – YEAR ON YEAR • Revenue up 32% • Operating profit up 36% • Headline earnings increase 33% • Production volumes up 1% • Export volumes down 3% • Maiden dividend of 80cps 2
OPERATIONAL OVERVIEW 3
SAFETY (LOST TIME INJURY FREQUENCY RATE) Sishen mine 1 1 0,87 0,85 0.9 0,9 0.8 0,8 Highlights 0.7 0,7 0.6 0,6 0,51 0,48 • 5,3 million injury free man- 0.5 0,5 0.4 0,4 0,29 0,22 hours at Sishen mine 0.3 0,3 0.2 0,2 0.1 0,1 • 4 000 fatality free production 0 0 2001 2002 2003 2004 2005 2006 shifts at Thabazimbi mine Thabazimbi mine 1 1 0,92 0.9 0,9 0.8 0,8 0.7 0,7 0.6 0,6 0.5 0,5 0,36 Low points 0.4 0,4 0,31 0,3 0,29 0.3 0,19 0,3 0.2 0,2 • One fatality at Sishen mine 0.1 0,1 0 0 2001 2002 2003 2004 2005 2006 4
OPERATIONAL PERFORMANCE – SISHEN • Sustained production 2006 2005 2004 achieved Waste mined 59,3 58,6 54,7 (Mtpa) • Stripping ratio and waste mined in line Stripping ratio (1) 1,9 1,8 1,7 with mine plans Total production 28,7 28,5 27,5 (Mtpa) • Pressure on Total production production costs 79,59 62,43 56,01 cost (Rand / ton) (1) Measured as total waste: total ore 5
OPERATIONAL PERFORMANCE – THABAZIMBI • Production 2006 2005 2004 impacted by logistical constraints Waste mined 18,6 25,0 34,5 (Mtpa) • Waste mined and Stripping ratio (1) 6,4 7,5 11,2 stripping ratio in line Total production with life of mine plan 2,4 2,5 2,5 (Mtpa) Total production 188,02 198,55 174,08 cost (Rand / ton) (1) Measured as total waste: total ore 6
OPERATIONAL PERFORMANCE – LOGISTICS AND SALES • Exports impacted by Mtpa 2006 2005 2004 shiploader breakdown in September 2006 Saldanha railed 24,3 24,0 22,0 • Shiploader 2 back Export shipments 21,5 22,1 20,7 in operation by August 2007 Sales total 29,8 31,3 30,3 • Domestic sales Sales export 21,5 22,1 20,9 impacted by logistics Sales domestic 8,3 9,2 9,4 constraints and lower Mittal demand in 2006 7
FINANCIAL OVERVIEW 8
FINANCIAL PERFORMANCE Overview of results Unaudited Audited Unaudited Audited % Change 10-month 2-month 12- month prelisting Act 2006 Act 2006 aggregated statement 2006 12-months Rand million 2005 Revenue 6 483 2 171 8 654 6 573 32% Operating profit 4 669 684 5 353 3 931 36% Net finance costs (28) (36) (64) (120) (87%) Profit before tax 4 641 648 5 289 3 811 39% Taxation (745) (269) (1 014) (1 084) 6% Basic earnings 3 900 376 4 276 2 727 57% Headline earnings 1 863 262 2 125 1 596 33% HE - attributable to 466 114 580 400 45% minorities Equity holders 2 329 376 2 705 1 996 36% Tax rate 16% 42% 19% 28% 9
FINANCIAL PERFORMANCE Minority interest Audited Unaudited 2-month 12- month Rand million Act 2006 aggregated 2006 Profit for the year 379 4 275 Add back : 153 153 IFRS3 charge 41 41 CGT on above profits Attributable profit 573 4 469 Attributable to minorities – 20% 114 894 Headline earnings adjustment Add back: - (314) 20% of profit on disposal (R1 571) Minority interest 114 580 10
FINANCIAL PERFORMANCE Discussion on once-off charges arising from empowerment transaction Unaudited Audited Unaudited 10-month 2-month 12-month Act 2006 Act 2006 aggregated Rand million 2006 IFRS 2 charge (i) – 153 153 Profit on sale of KIBV (ii) (1 571) – (1 571) Transaction costs (iii) 11 19 30 (i) Kumba sale of 3% interest in SIOC to SIOC Community Development Trust (ii) Sale of offshore non-iron ore assets to Exxaro (iii) Transaction costs in relation to the Kumba BEE transaction 11
FINANCIAL PERFORMANCE Operating profit variance – unaudited 7 000 242 328 202 1775 6 000 584 255 95 5 000 R million 4 000 3 000 2 000 1 000 3 931 5 353 0 2005 Act Price Exchange Volume Inflation Cash cost Non-cash Other 2006 Act cost Other costs include the reversal of the sale of Hope Downs of R1 163 million, the profit on disposal of non-iron ore offshore assets to Exxaro of R1 571 million and the IFRS 2 charge of R153 million 12
FINANCIAL PERFORMANCE Cash cost detailed analysis – unaudited 700 53 40 584 600 37 259 500 R million 400 64 300 22 174 200 100 15 0 Distribution Volume Labour Petroleum Contract Maintenance Corporate Cost Cash costs charges costs mining cost costs savings total 13
FINANCIAL PERFORMANCE Profit margins – unaudited Group EBIT as percentage of gross turnover 46% 50% 42% 40% 30% 21% 19% 20% 10% 0% 2003 2004 2005 2006 14
FINANCIAL PERFORMANCE Cash flow analysis – unaudited 95% compound 4 277 4 500 growth in cash Capital retained in 4 000 expenditure operations range 3 500 3 000 2 594 2 559 2 500 2 192 2 000 1 462 1 500 1 121 1 041 1 000 273 256 500 129 42 38 0 2004 2005 2006 2007 Cash retained in operations SIB capital Expansion capital Cash available after capex 15
FINANCIAL PERFORMANCE Cash flow variance – unaudited 6 000 1 198 4 277 5 000 4 000 1 534 R million 3 000 1 718 44 939 1 571 2 000 1 094 1 000 591 0 2005 2006 Cash Tax Dividends Capital Proceeds Translation Interest- 2006 Opening generated expenditure on bearing Closing balance disposals debt raised balance 16
FINANCIAL PERFORMANCE* Sensitivities on EBIT of a 1% change in Capital -17 Operating costs -22 Export volumes -50 Iron ore prices -76 Rand / US$ -77 -100 -80 -60 -40 -20 0 20 40 60 80 100 R’m * Unaudited 17
FINANCIAL PERFORMANCE • Firm iron ore prices • EBIT margin of 46% , up 10% year on year • Robust cash flows • Cost containment programmes in place • Maiden dividend of 80cps • Dividend cover of 1,05 times 18
PROJECTS 19
GROWTH STRATEGY Ideas Healthy project pipeline Potential MRM Pre- Feasibility Approved feasibility SEP 3 C-Material +20 Mt Technical Implement Optimisation Mining review ZRP SEP 2 1,5 Mt 10 Mt to 20 Mt Short Sishen Sishen SEP Phoenix term South South 13 Mt initiatives 3 Mt 9 Mt 0,5 – 1,0 Mt Expansion Faleme Pellets Plant 6 Mt in excess 1,5 Mt of 12 Mt Sishen Current pipeline includes 11 projects, DMS Customer Expansion ranging from implementation to potential 2 Mt study phase, representing incremental Decision production capacity of some 78 Mtpa Decision (excluding Faleme) to in excess of 90 Mtpa (including Faleme). 20
GROWTH POTENTIAL Kumba is targeting 70 Mtpa by 2015 Growth prospects 90,0 80,0 Faleme 70,0 Pellets 60,0 SEP 2 Phase 1 Phoenix Mtpa 50,0 Sishen South 40,0 Thabazimbi SEP 30,0 20,0 Sishen 10,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 21
SEP – PROGRESS • On track to deliver first production in Q3 2007 • Project to be delivered within the R5 100 million budget • Outstanding safety performance • Strong market support for the product 13 Mtpa brownfields expansion, utilising jigging technology to beneficiate medium grade ores previously considered waste 22
SISHEN SOUTH – UPDATE • On track for investment decisions by mid-2007 – Mine feasibility to be completed by March 2007 – Transnet export channel expansion feasibility progressing well • Capex in order of R3 billion • Ore qualities similar to that of Sishen Greenfields project of up to 9 Mtpa direct shipping ore, 70 km south of Sishen near Postmasburg 23
PROJECT PHOENIX – UPDATE • Mittal informed Kumba in December 2006 that it does not wish to participate in Phoenix • Feasibility study to be completed • Kumba is currently considering alternatives to ensure maximum resource utilisation • The existing commercial arrangements with Mittal are unaffected Project Phoenix considers an extension of 20 years to the LOM through the utilisation of the banded iron ore formation in combination with hematite ore from the old underground operations 24
FALEME – UPDATE • Engagement with the Government of Senegal continues • Exploration drilling commenced again with permission of the Minister of Mines • Presence increased: Country manager and branch office Greenfields project in excess of 12 Mtpa, potential utilising both hematite and magnatite resources, 747km south east of Dakar. Requires infrastructure and export harbour facilities. 25
TRANSFORMATION 26
TRANSFORMATION • Fully compliant on the 26% HDSA ownership criteria for 2014 • HDSA in management at 33% • Women in mining at 13% • BEE procurement 26,8% of discretionary spend • All applications for conversions submitted and accepted by DME 27
MARKET 28
IRON ORE MARKET • The iron ore industry remains fundamentally attractive – Global seaborne iron ore volumes are expected to grow by more than 9% to 730 Mt in 2007 – Steady growth in demand forecast until at least 2020 (25% growth from today’s levels) – Demand (particularly seaborne) growing due to Chinese demand and reduced steel scrap availability – Greenfield incentive pricing is expected until at least 2015 and Brownfield incentive pricing until 2025 – Some iron ore producers and steel producers have reached settlement on a 9,5% benchmark iron ore price increase for 2007 29
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