Eastern Cape Coalfield Development:

an opportunity for local industry22nd September

2010

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created or organised under the laws thereof.2

Presentation Overview

Page 3

1. Background & Overview

2. An Alternative, Energy Efficient, Steam Solution

3. Conclusions & Contacts

Company structure

Elitheni Coal (Pty) Ltd

Strategic Natural Resources PLC Local BEE

74% shareholding 26% shareholding

Community Beneficial Interest

3%

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Major Shareholders

•Coal of Africa plc – 19.6%•SCCP (RSA Elitheni founder) – 15%•ERIG – 9%•Apollo Nominees Limited – 7.2%•Credit Suisse Group AG – 7.2%•Pershing Nominees Limited – 4.9%•Caldwell Management AG – 3.1%•Jeremy Peter Metcalfe (Director) – 3%•Richard Henry Ringrose Latham (Chairman) – 3%•Advaita Energy Ventures – 3%•JO Hambro – 2.8%

-approx. Mine Location

Where is the ‘Elitheni’ operation?

Indwe

5Sphere of commercial advantage

Our prospecting and mining footprint dominates the Eastern Cape Coalfield with over 1800km2 of rights area.

Ph 5

34

4

1&2

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Current Mining Rights Area: Technical Summary

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150 million tonne resource

45.6Mt measured, 45.5Mt indicated and 59.2 inferred

Seam averages 1.46m thick for measured resource.

Typical Coal Specifications

SpecEast RAW

East Washed

West RAW

WestWashed

GCV 18Mj 24Mj 21Mj 25Mj

Ash 44% 28% 32% 20-25%

Vols 8% 8% 12% 12%

Sulph 0.3% 0.4% 0.3% 0.4%

InherenH20

1.5 - 2% 1.5 - 2% 1.5 - 2% 1.5 - 2%

Phos in Coal

0.004% 0.004% 0.004% 0.004%

Presentation Overview

1. Background & Overview

2. An Alternative, Energy Efficient, Steam Solution

3. Conclusions & Contacts

Page 8

A Collaborative Opportunity

There are over 1000 boilers according to government reports, that exist in the Eastern &

Western Cape, being a combination of coal, oil, diesel, paraffin and electrode boilers.

Oil, diesel and paraffin remain the most expensive fuel source for boilers and where electrode

boilers on the basis of cheaper electricity have historically been comparatively competitive, the

cost of running an electrode boiler has increased dramatically over the past two years based on

Eskom tariffs, and is set to increase further given NERSA agreed to tariff increases.

The coal used in coal fired boilers travels from Witbank / Mpumalanga coalfields and lands at an

expensive price given the travel distance as well as the fact that coal miners are seeking export

parity pricing from mines in Witbank. This adds to the volatility of the coal price.

The Eastern & Western Cape has an abundance of coal on its doorstep (in some cases over

1000km closer than coal from Witbank) yet this coal, being anthracitic in nature, does not burn

easily in conventional chain grate boilers.

Elitheni realised the dilemma of customers being forced to use expensive fuels sources without

an alternative and have spent the past 18 months developing an alternative.

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A boiler solution for the Eastern Cape Coal

In 2009, Elitheni purchased combustion equipment used in the UK in order to trial the technology, measured

success was achieved in combustion efficiencies but the mechanics of de-ashing presented a problem.

As a result, Elitheni’s holding company (SNR) set up ACE (Allied Coal Engineering) as a collaboration between coal

handling experts, boiler makers and combustion engineers. The experience in the boiler and combustion industry

spans more than 25 years, with boilers being designed and built for Sasol, SAB and Spoornet.

The team took on the challenge of developing smaller units for Eastern Cape coal combustion and to research the

most optimal solution for larger industrial steam units.

A collaboration with various vendors and steam supply experts resulted and the ACE CCU was born for smaller

industrial clients, with Fluidised Bed Combustion modelled for larger industrial steam users.

Through collaboration with the Steam Team and Synergy Steam, Elitheni is able to cost effectively deliver Fluidised

Bed Combustion solutions to any client of >4T of steam / hr.

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Collaborative Partnerships

Commercial Opportunity

Given that Elitheni control the fuel source, it is able to offer both a flexible and competitive solution to clients.

Subject to the location of the client in the Eastern & Western Cape as well as the current fuel source being used, Elitheni

can offer clients a saving of between 10-20% on the cost of the fuel to produce their steam, this typically comprises

between 80-95% of the cost of the steam production.

This saving would include the cost of Elitheni financing a new boiler technology.

Elitheni can offer flexible commercial arrangements for the client:

A fully inclusive option including supply of coal, labour and the boiler, charging the client per tonne of steam supplied;

A partially inclusive option, supplying the client with the coal and the boiler;

A fuel only option where the client finances the boiler and Elitheni supplies the coal only.

The implications of such a commercial opportunity represent significant future savings as illustrated by the following slide.

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A growing opportunity

Given the volatility in the cost of oil, diesel, paraffin and electricity and the difficulty in

obtaining fixed long term contracts on coal, the prices of these fuel sources varies enormously,

often increasing more than 25% in a single year. Historically, increases of 15% have been the

norm.

The graph below shows a typical scenario for a client in the Eastern Cape, currently paying

ZAR1000 per tonne for delivered coal. Taking into account efficiencies of the new boiler

technology as well as current and predicted increases of both the Witbank and the Eastern Cape

Coal, the client would realise significant savings.

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Presentation Overview

Page 13

1. Background & Overview

2. An Alternative, Energy Efficient, Steam Solution

a) The technological ‘know how’

b) FBC a guaranteed solution

3. Conclusions & Contacts

How this is possible

The principles of Fluidised Bed Combustion (FBC), are well established and the technology, now in

existence for the past 50 years has been proven in many places globally.

South Africa with a traditional abundance of higher grade coal, has not needed FBC until today.

The Eastern & Western Cape in particular represent a unique advantage for FBC boilers, given the

abundance of the Eastern Cape coal.

The Eastern Cape coal is a slightly higher ash anthracitic coal, however, it has many advantages:

Very Low Sulphur aids low SOX emissions.

Very low volatiles results in a ‘smokeless’ fuel.

These factors compliment the well documented advantages of FBC, some of these are listed below:

SOX, NOX & particulate emissions, compliant with Air Quality Act and World Health Organisation.

Ash is of a fine form, no clinkers, making it manageable and useful in cement and brick making.

The FBC boilers are very tolerant, they can combust a range of coal quality, unlike other systems

that tend to respond poorly to varying qualities of coal, which results in huge inefficiencies in other

systems.

An example of the designs and an overview of the FBC process follows.

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Presentation Overview

Page 15

1. Background & Overview

2. An Alternative, Energy Efficient, Steam Solution

a) The technological ‘know how’

b) FBC a guaranteed solution

3. Conclusions & Contacts

The Mechanics of FBC

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The process of FBC

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*Coalmax is a division of Thermax, the largest boiler manufacturer globally

The features of FBC (Fluidised Bed Combustion)

The bed retains a very high amount

of heat, acting like a thermal fly

wheel and can release heat

instantly in peak demand

No generation of NOx since the bed

combusts below 900 Deg C

High turbulent inbed facilitates

quick start up and shut down

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Temperature of the bed is uniform, resulting in a complete combustion of fuel

Homogenous mixing of fuel and air results in low excess air requirement for combustion. Improves

efficiency of combustion and reduces power requirement

Combustor bed can be controlled since the bed behaves like a liquid which can be drained at one

point

Features of the ACE CCU, prototype design

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Process of combustion occurs on an ‘airbed’ similar to FBC;

Heat is transferred to both radiant and convective surface

to generate steam;

Ash is disposed of mechanically based on residence time

allowed for in burner.

Although still in development stage, represents viable

alternative for smaller user.

Moving Forward

The general fuel price remains volatile and will continue to have a significant effect on diesel, oil and

paraffin burning. It will also have a significant bearing on the cost of delivered coal.

Eskom pricing will continue to increase given the rising cost of necessary expansion programmes.

Given the development of the Eastern Cape coalfield and the advancements Elitheni and partners have

made in development of a technical steam solution, there is now an alternative fuel and technology

source that can be installed at no capital cost to a client in the E&W Cape, with guaranteed savings.

Elitheni is able to provide proposals on technical steam solutions, capable of being installed in 8-12

months.

The Elitheni solution will result in clean coal technology capable of combustion well within the most

stringent of environmental requirements.

Elitheni is able to offer a turnkey solution, including building of the coal handling system (if not in place),

the ash removal system and even the boiler house all within specified requirements, using mine

contractors who have installed the same set of competitive solutions for the mine.

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Conclusion & Contact InformationFor more information please visit us at:

Our office in South Africa is located at:

130 Cape Rd, Millpark, Port Elizabeth, 6001

Switchboard: +27 41 374 0842

Contact David Nel (CEO); Mazizi Msutu (Director, Stakeholder Mgt & Sustainable Development)

www.elitheni.co.za

Our London office is based in

5th Floor

Prince Consort House

27-29 Albert Embankment

London SE1 7TJ

Tel: +44 (0) 20 7793 5616

Fax: +44 (0) 20 7793 7654

Contact David Nel (CEO); Jeremy Metcalfe (Communications Director)

www.snrplc.co.uk

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