1

Mining in Africa:A great opportunity for investment

P. Lazarus Zim

Chief Executive

Anglo American Corporation of South Africa Limited

8 February 2005

2

• A stable democracy under a sound constitution.

• 3 peaceful & free & fair elections.

• One nation, one flag, one anthem.

• Free press & independent judiciary.

• An established culture of dialogue and debate to resolve issues.

• Political transformation has laid the foundation for economic transformation

• Transformation that has already occurred is often overlooked…

South Africa’s political transformation…

3

Higher & less volatile GDP growth

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

84 86 88 90 92 94 96 98 00 02 04 06

% c

han

ge

1984-93 = 1% pa 1994-2003 = 2.9% pa

Forecast(Reuters Consensus)

2004-07 = 3.8% pa

… accompanied by an already remarkable economic transformation

4

... as well as improved capital flows

-5

-4

-3

-2

-1

0

1

2

3

4

5

84 86 88 90 92 94 96 98 00 02 04Jan-Sep

% o

f G

DP

1984-93 = -1.2% pa 1994-2003 = 2.2% pa

Reflected in rising private fixed investment ...

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

84 86 88 90 92 94 96 98 00 02 04Q3

% o

f G

DP

Private fixed investment

… accompanied by an already remarkable economic transformation

5

Improving fiscal balances

20.0

21.0

22.0

23.0

24.0

25.0

26.0

27.0

28.0

29.0

30.0

0.02.04.06.08.0

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

Expenditure

Revenue

Deficit

-8

-7

-6

-5

-4

-3

-2

-1

0

84 86 88 90 92 94 96 98 00 02 04 06

% o

f G

DP

Disciplined fiscal performance

30

35

40

45

50

55

% o

f G

DP

Med

ium

-ter

mE

con

om

ic

Fra

mew

or k

Budget deficit

Government debt

… accompanied by an already remarkable economic transformation

6

...provides scope for lower interest rates

0

5

10

15

20

25

30

84 86 88 90 92 94 96 98 00 02 04

%

Prime overdraft rate

CPI/CPIX (from 1998)

and significantly lower inflation

0

2

4

6

8

10

12

14

16

18

20

84 86 88 90 92 94 96 98 00 02 04 (Nov)

06

%

1984-93 = 14.3% 1994-03 = 7.8%

Target

CPI (CPIX from 1998)

Forecast(Reuters Consensus)

… accompanied by an already remarkable economic transformation

7

International liquidity position

-30

-25

-20

-15

-10

-5

0

5

10

15

93 95 97 99 01 03

US

$ b

n

Moody's Fitch

1994 Baa3 BB BB

1995 Baa3 BB+ BB

2000 Baa3 BBB- BB+ BBB-

2001 Baa2 BBB- BBB-

2002 Baa2 BBB- BBB-

2003 Baa2 BBB BBB

2004 Baa2 BBB BBB

2005 Baa1 BBB BBB

S&P

Recognised by improvedSovereign credit ratings

… accompanied by an already remarkable economic transformation

8

Although recent Rand strength largely offset higher commodity prices…

Platinum price - Rand & US Dollars

400

500

600

700

800

900

00 01 02 03 04 05

US

D/o

z

3000

4000

5000

6000

7000

Ra

nd

/oz

Rand/oz

USD/oz

Gold price - Rand & US Dollars

250

300

350

400

450

99 00 01 02 03 04 05

US

D/o

z

1500

2000

2500

3000

3500

Ra

nd

/oz

Rand/oz

USD/oz

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…growth in mining investment has outstripped that of other sectors

South Africa: Gross Fixed Capital Formation(constant 2000 prices)

100

120

140

160

180

200

220

94 95 96 97 98 99 00 01 02 03 04

Q1

94 =

100

Mining & quarrying

Total excl mining

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  Rm Rm Rm Rm Rm Rm Rm

  Dec Dec Dec Dec Dec Jun    1999 2000 2001 2002 2003 2004 TOTAL

CAPEX 4,529 6,425 10,703 13,390 14,030 6,020 55,097

Replacement 4,529 3,047 2,849 4,631 6,463 2,704 24,223 Expansionary - 3,378 7,854 8,759 7,567 3,316 30,874

Acq of subs 6,934 1,624 5,218 9,874 9,034 4,462 37,146 Acq of ass 800 357 205 3,988 542 9 5,901 Acq of JVs - 2,548 16 - - - 2,564

Total 12,263 10,954 16,142 27,252 23,606 10,491 100,708

Total Anglo American investment in SA

NB: Money of the day - figures would be higher if adjusted to today’s money

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Selected major authorised projects with capex estimates. Unapproved projects unshaded. 100% of subsidiaries and AA plc’s share of JV’s and associates. Full production dates.

Anglo American’s investment programme

Anglo Platinum AngloGold AshantiDiamonds Coal Base Metals Industrial Minerals Paper & Packaging Ferrous Metals

2005 2006 2007 20082004

FINSCH$130m

RPM PH 1$210m

MPONENG$191m

TAU TONA$52m

PMR Expan.$99m

ISIBONELO $65m

BLACK MTN$110m

RICHARDS BAY$235m

MEREBANK$150m

RPM PH 2$444m

BRPM$317m

CERREJÓN$17m

TWICKENHAM$343m

KROONDAL$138m

UNKI$84m

GROOTEGELUK$55m

MOAB KHOTSONG

$690m

CUIABÁ$121m

INYANDA$30m

Kleinkopje$56m

SIGUIRI$52m

W.L. TAILINGS$186m

RUZOMBEROK$233m

TICOR 2$54m

COPEBRAS$22m

CHAGRES$21m

EL SOLDADO$80m

GRASSTREE$106m

DAWSON $306m

CODEMIN 2$67m

Buxton$173m

Dartbrook$55m

Collahuasi$288m

Approved $6bn global project portfolio…

ACP Project$250m

Skorpion$454m

TICOR 1$137m

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Anglo Platinum AngloGold AshantiDiamonds Coal Base Metals Industrial Minerals Paper & Packaging Ferrous Metals

Selected major authorised projects with capex estimates. Unapproved projects unshaded. 100% of subsidiaries and AA plc’s share of JV’s and associates. Full production dates.

2005 2006 2007 20082004

FINSCH$130m

RPM PH 1$210m

MPONENG$191m

TAU TONA$52m

PMR Expan.$99m

ISIBONELO $65m

BLACK MTN$110m

RICHARDS BAY$235m

MEREBANK$150m

RPM PH 2$444m

BRPM$317m

CERREJÓN$17m

TWICKENHAM$343m

KROONDAL$138m

UNKI$84m

GROOTEGELUK$55m

MOAB KHOTSONG

$690m

CUIABÁ$121m

INYANDA$30m

Kleinkopje$56m

SIGUIRI$52m

W.L. TAILINGS$186m

RUZOMBEROK$233m

TICOR 2$54m

COPEBRAS$22m

CHAGRES$21mTICOR 1

$137m

EL SOLDADO$80m

GRASSTREE$106m

DAWSON $306m

CODEMIN 2$67m

Buxton$173m

Dartbrook$55m

Collahuasi$288m

Approved $6bn global project portfolio……of which $4bn is in Southern Africa

ACP Project$250m

Skorpion$454m

Anglo American’s investment programme

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• South Africa post-1994 is a much better place for doing business.

• Because of South Africa’s size, this has positive implications for the Continent.

• SA business – often lead by the mining sector - is seeking to expand across the Continent.

• This is occurring against the backdrop of a highly favourable global environment for mining producers.

• As well as a renewed global focus on Africa.

South Africa: A good story

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* Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe.

Source: World Bank, World Development Indicators, 2004.

Gross National Income Population

2002 figures USD bn

% of

Sub-Saharan Africa

Per capita (millions)

South Africa $113 36% $2 520 45

Rest of Southern Africa* $ 44 14% $ 401 108

Southern Africa $157 50% $1 023 153

Sub-Saharan Africa $311 100% $ 450 689

SA’s improved performance impacts positively on the Region & increasingly the Continent

Due to its size South Africa impacts on the Continent

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GDP growth - 1990-2002

0

1

2

3

4

5

6

7

8

Zim

ba

bw

e

Za

mb

ia

S-S

ah

ara

n A

fric

a

An

go

la

S A

fric

a*

Ma

law

i

Sw

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d

Ta

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nia

Le

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Na

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Bo

tsw

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a

Ma

uri

tiu

s

Mo

zam

biq

ue

% p

er

an

nu

m

Per capita incomes now growing in most countries in Southern Africa & increasingly the rest of the Continent

Source: World Bank, World Development Indicators, 2004.

SA’s improved performance impacts positively on the Region & increasingly the Continent

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Significant improvement on pre-1994 performance

South Africa's boom/bust cycle of the '80s

-3

-2

-1

0

1

2

3

4

5

6

7

8

80 81 82 83 84 85 86 87 88 89 90 91 92 93

% c

ha

ng

e

1.4% pa

Source: SA Reserve Bank & World Bank, World Development Indicators, 2004.

GNP per capita - 1980-91

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

An

go

la

Za

mb

ia

So

uth

Afr

ica

*

Na

mib

ia

Mo

zam

biq

ue

Ta

nza

nia

Le

so

tho

Zim

ba

bw

e

Ma

law

i

Sw

azi

lan

d

Mo

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biq

ue

*

Bo

tsw

an

a

Ma

uri

tiu

s

% p

er

an

nu

m

* 1985-94

Declining per capita incomes

But some successes

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1993- 18 of SA top 100 listed companies

invested in rest of Africa

SA business as a regional investor

Source: Who Owns Whom, Africa Inc, Nov 2004

2004- 40 of SA top 100 listed companies

invested in rest of Africa- 232 investments in 27 countries

employing 72 000 people

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• Favourable global environment for mining producers.

• Accompanied by renewed global focus on Africa.

• As the major source of many of the globe’s unexploited mineral reserves, Africa in particular stands to benefit from the improved environment for mining.

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China's Share of WorldFirst-use Metals

Consumption(%)

20041994

20100

10

20

30

40Copper

Zinc

Fe Ore

Steel

Aluminium

Nickel

Note: Fe ore is sea-borne.Ni includes Ni content of stainless imports.Source: MSU, WBMS, INSG, Macquarie (Fe Ore, Steel and Al).

Favourable global environment now reinforces improved business climate

Source: Anglo American, MSU & Macquarie

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0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 0460

70

80

90

100

110

120

Stocks, Mt

NickelAl

Zn

Cu

Lead Price Index 1990=100

LME Inventories* and Base Metals Price Index Jan 1997 to Dec 2004

* Cu includes Comex.

Favourable global environment now reinforces improved business climate

Source: Anglo American, MSU

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• 2005 WEF (Davos) – unprecedented focus on Africa.• Strong African presence & participation: Presidents

Mbeki, Obasanjo, Mkapa.• PM Tony Blair has placed Africa high on the agenda of his

G8 & EU presidencies.• Awaiting Report of the Africa Commission.• Growing consensus that Africa should be assisted in the

same structured way as Europe post World War 2.• Important proposals from the United States, Britain and

France of the funding mechanism.• It is vital to synthesise these into one Africa Plan by the

G8 Summit in July.

2005: Africa in the global spotlight

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• Peace & security are vital.– Will make the full exploitation of Africa’s

mineral wealth possible.– We applaud the AU, Ecowas & President

Mbeki’s current peace making efforts.– The current focus of time and resources on

peace making is necessary.– Good for economic development, good for

Africa, good for business.

Africa in the global spotlight: What we need to do

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• Continue to promote investor friendly policies.• Ensure regulatory and policy certainty.• For example: in SA the rules are clear

– New Mining legislation– Mining Charter.

• The key challenge and focal area is that of implementation.

• It is vital to see mineral right conversion early.• Continue the fight against HIV-Aids.

Africa in the global spotlight: What we need to do

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• Promote strong partnerships between government and business.

• Public Private Partnership (PPP) – much more that a buzzword.

• PPP is a necessity – especially in mining.• Mining projects are high risk, capital intensive,

infrastructure and power (energy) hungry.• Need the collective and collaborative effort of

government and business.• Past year: Good experience in relations with DME.• Recent Transnet-Kumba MOU on expansion of export

capacity and tariff structure is a good example of PPP.

Africa in the global spotlight: What we need to do

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Africa’s business challenges are manageable

• Anglo American sees transformation as a strategic imperative.

• This is driven at CEO level through the Transformation Committee with strong operational interface.

• We will continue to focus on:– Employment Equity– Ownership– Procurement– Enterprise development

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Anglo American’s BEE track record – Procurement & Enterprise dev.

TOTAL TOTAL

Rm NOMINAL REAL (since inception) (2003 money)

Procurement 9,532 11,142

Development (SMEI’s) 706 783

Large Transactions 13,193 17,382

Future:

Continued 20% - 30% per annum procurement growth

Major BEE focus in Anglo Platinum, De Beers, Kumba, Mondi, Anglo Coal

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• Africa is at a critical historical crossroads.• The developed world is indicating its

willingness to assist.• Global economic circumstances provide a

supportive backdrop.• Vital that we, as Africa, seize the moment.• Confident that mining will play a leading role

in driving Africa forwards.

Summary & conclusions