“The South African mining

sector – challenges and

opportunities”

Roger Baxter

Chief Operating Officer

Presentation to African Iron Ore

Conference, 4 June 2014

Presentation outline

How does South Africa score?

Conclusion

Global and local drivers

Key drivers of mining competitiveness

Why Mining is Crucial to South Africa

Unpacking the constraints for mining

The prospects of Commodities at a global level are

mostly driven by economic growth

Since 2008, the global commodities markets have been hit

by the multiple effects of:

• The “W” shaped recession-slow recovery in the EuroZone

• The slowdown in economic growth in China.

• The “V” shaped recession- slow recovery in the US economy.

• The reduction in quantitative easing by the Federal Reserve.

But prospects are stabilising:

• Despite ongoing structural issues the Eurozone is expected to post a modest

positive growth rate in 2014.

• China’s economy has stabilised and is expected to grow at >7% in 2014.

• The US economy is recovering, with consumer confidence rising.

• The impact of tapering on commodity markets should ease.

PWC Annual Mining Report Titles

• 2005 “Enter the Dragon”

• 2007 “Riding the wave”

• 2008 “as good as it gets”

• 2009 “When the going gets tough”

• 2010 “Back to the Boom”

• 2011 “The game has changed”

• 2012 “The Growing Disconnect”

• 2013 “A Confidence Crisis”

The World economy is gradually recovering

Source: IMF WEO October 2013

-5

-3

-1

1

3

5

7

9

11

13

15

Economic growth rate, selected countries and regions

China

South Africa

United States

European Union

Sub-Saharan Africa

Risks at the Global level remain…….

Source: IMF WEO October 2013

0

50

100

150

200

250

300

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

% o

f G

DP

Gross public debt to GDP ratios, selected countries

Germany

Japan

South Africa

United Kingdom

United States

Despite the volatility in the short-term, the long-term fundamentals are positive for growth in commodity

demand

• Long term drivers of demand remain intact:

» Trends in urbanization and industrialization appear to be entrenched for the next few decades in China, India and other EMs.

» By 2050 another 3 billion people at the global level will urbanize. Most of this urbanization will take place in emerging market economies (UN population division).

» The infrastructure expenditure to accommodate global urbanization is significant.

» The quantity of minerals required to support this urbanization will remain large.

World urban population growth

(Billion people)

Rising urbanisation, 3 billion people to urbanise by 2050 (most of the growth in Africa)

Source: UN, McKinsey

0.4

0.5

0.5

0.8

0.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

2010 Urban Pop. China India Other Asia Africa RoW 2050 Urban Pop.

The world is set to urbanise close to another 3 billion people by the middle of the century

Perceptions about Mining by RSA’s people in general

•Little link made between role of minerals and the functioning of a modern society.

•Little credit given to the mining industry for playing a key role in South Africa’s economic development over past 130 years, which has transformed South Africa into the most industrialised country in Africa

Metals and minerals in a Smart Phone

• Copper (16 grams) ¹

• Silver (0.35 grams) ¹

• Gold (0.034 grams) ¹

• Palladium (0.015 grams) ¹

• Platinum (0.00034 grams) ¹

• Ceramic magnetic switches containing rare earths ²

• Indium²

• Titanium dioxide ²

• Indium tin oxide ²

• ¹ source – USGS http://pubs.usgs.gov/fs/2006/3097/ • ² source – NRC critical minerals report

Metals and Minerals in a car

• 960kg iron &steel

• 109kg Aluminum

• 22.7kg Carbon

• 19 kg Copper, 34kg for a

hybrid

• 19kg Silicon

• 11 kg Lead

• 10kg Zinc

• 7.7kg manganese

• 6.8kg Chromium

• 4.1kg Nickel

• 0.3 kg Platinum

•+Antimony, barium, beryllium, cobalt, gallium, gold,

magnesium, molybdenum, neodymium, indium, palladium,

•Sulphur, rhodium, silver, strontium, tin, titanium, tungsten,

vanadium, zirconium.

Even a Wind Turbine uses a significant amount of metals and minerals

• 335 tons of steel

(chrome included)

• 4.7 tons of copper

• 13 tons of fiberglass

• 3 tons of aluminum

• 1,200 tons of

reinforced concrete

Some of the world’s famous buildings would not have been possible without Mining

Even the cosmetics and makeup are made from minerals

• Talc

• Mica

• Kaolin

• Calcite

• Titanium dioxide

• Zinc oxide

Perceptions and realities about RSA mining

PERCEPTION REALITY

Is a “Dirt Digger”

Is uncaring about the lives of workers and

does not pay well

Does not care about the environment,

communities –Poverty at the doorstep of

prosperous mines

Profits and benefits exported to a small

bunch of Capitalists

Resistant to Transformation

Does not matter to SA- Ingi Saldago-

Business Report-”Eskom was right to

switch off the Mines”

Perceptions and realities about RSA mining

PERCEPTION REALITY

Is a “Dirt Digger”

Another R300 billion and 200 000 jobs

created in downstream industries

Is uncaring about the lives of workers and

does not pay well

67% reduction in fatality rate, average

wages per employee up 12% p.a.

Does not care about the environment,

communities –Poverty at the doorstep of

prosperous mines

Spent R2 billion on communities, R4

billion on skills and R20 billion in

corporate taxes in 2012.

Profits and benefits exported to a small

bunch of Capitalists

Shareholders balanced 50% local, 50%

offshore, R12 billion in dividends

Resistant to Transformation >R150 billion in BEE deals concluded,

good progress on all pillars of Charter

Does not matter to SA- Ingi Saldago-

Business Report-”Eskom was right to

switch off the Mines”

18% of GDP, 50% of exports, 1.3 million

jobs, 94% of electricity, 17.2% of

corporate tax

The ANC Mangaung Elective Conference

• ANC rejects wholesale nationalisation as a policy option.

• ANC has adopted the National Development Plan as a key

strategic area.

• Over the next five years, the ANC will take decisive and resolute

action to overcome the triple challenges of poverty, inequality and

unemployment, which are at the heart of South Africa’s socio-

economic challenges.

• The most effective weapon in the campaign against poverty is the

creation of decent work, and creating work requires faster

and more inclusive economic growth.

• Using South Africa’s natural resources in a manner that benefits

the nation as a whole.

The ANC Mangaung Elective Conference mining

specific resolutions

• State intervention with a focus on beneficiation for

industrialisation.

• Equitably sharing the rents.

• Strategic minerals will be investigated and declared.

• Strengthening of the state mining company.

• Mining should create safe and decent work, and mineral

extraction should not compromise local communities or the

environment.

• There is a need to develop and enhance mineral knowledge

linkages.

The Chamber of Mines supports the ANC Policy

Resolutions

• A greater degree of policy certainty is emerging.

• In a number of areas the “how” is critically important.

– Encouraging further beneficiation is an important issue and

further work regarding the “how” is taking place.

– Energy security can be guaranteed through private sector

investment and cooperation between government and the

private sector.

Presentation outline

How does South Africa score?

Conclusion

Global and local drivers

Key drivers of mining competitiveness

Why Mining is Crucial to South Africa

Unpacking the constraints for mining

•Progress has been made to get the economy back on to a higher

growth path (3.2% 1994 to 2012).

•However, SA’s unemployment rate is too high (>20%), its levels of

income inequality are very high (Gini coefficient 0.59).

•Government has now placed the creation of meaningful

employment as a central pillar of economic policy.

•All parties recognise that higher levels of sustainable, balanced

and labour absorbing economic growth is key to reducing

unemployment (NDP, NGP, IPAP5).

South Africa requires faster, more balanced and

inclusive economic growth

South Africa

While South Africa’s growth rate has risen to 3.2% p.a.

1994-2013, it is just too slow to meaningfully tackle

unemployment & poverty

35

24

18

15

12

10 9

8 7

-

5

10

15

20

25

30

35

40

2 3 4 5 6 7 8 9 10

Years

to

do

ub

le r

eal

GD

P

% annual growth rate

Number of years to doubling real GDP at different growth rates

Too much of the economy’s recent growth has been

driven by credit fuelled non-tradable demand side, &

tradable export sectors have languished…..

Source: StatsSA

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

R'm

illio

ns

South Africa: Contribution to GDP in real terms, non-tradable vs tradable sectors of economy (real terms)

Non-tradable sectors

(financial services, wholesale

and retail trade, etc)

Tradable sectors (mining,

manufacturing, agric)

-8

-4

1

5

9

13

17

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

% o

f G

DP

.

% g

row

th .

Real annual GDP growth for tradable sectors versus non-tradable sectors, and the current account deficit as % of GDP

Tradable

Non-tradable

Current account % ofGDP

Resulting in large external imbalances, that must be

funded by capital flows…..

Source: StatsSA

To ensure more balanced and higher levels of growth

& job creation the country needs its tradable export

sectors to grow at a much faster pace

This is where mining fits in:

•Mining has a very large employment, foreign exchange earning and

GDP multipliers.

•The National Development Plan (NDP) recognises the important

role that mining can play.

Mining - The Essential Core Of SA Economy

• Creates 1.35 million jobs (520 000 direct & 830 000 indirect).

• Accounts for about 19% of GDP (9% direct, 10% indirect & induced).

• Critical earner of foreign exchange >50%.

• Accounts for 20% of private investment (12% of total investment).

• Attracts significant foreign savings (R1.4 trillion/ 29% of value of JSE).

• 2012, R20 billion & R5.6 billion in royalties.

• R437 billion in expenditures, +/- R389 billion spent locally.

• R93.6 billion spent in wages and salaries

• 50% of volume of Transnet’s rail and ports

• 94% of electricity generation via coal power plants

• 15% of electricity demand

• About 37% of country’s of liquid fuels via coal

• R4 billion spent on skills development

• R2 billion spent on community investment

Downstream beneficiation is far bigger than people think!

• About 99% of RSA's cement is made locally from locally mined products

• 80% of RSA's steel is made locally from locally mined iron ore, chrome, manganese, coking coal

• 30% of RSA’s liquid fuels are produced from locally mined coal

• 94% of RSA's electricity is produced from locally mined coal

• Most of our domestic chemicals, fertilisers, waxes, polymers, plastics, etc., are fabricated using locally mined minerals & coal

• 13% of the world's platinum catalytic converters are made in RSA, and so on

Overall another R300 billion in sales value and >200 000 jobs are

created in the downstream beneficiation industries. Extra value is

being created where the commercial opportunities exist

Mining has significant potential

• If growth constraints can be removed mining can:

– Grow at 3% to 5% p.a., resulting in a much more balanced

country growth rate (double size of mining by 2028).

– If mining had grown at same pace as rest of economy between

1994 and 2012, it would have increased the country’s growth

rate to 4% from 3.2%, a significant difference.

– At a 5% growth rate, the mining industry can double in size in

15 years, significantly increase exports and reduce the

savings-investment constraint.

– Add another 50 000 to 100 000 direct jobs.

Potential of the bulk commodities… Mineral/com

modity

Opportunities Key Enablers Risks

1.Coal • Need 100MT extra coal <10 years (>

R80bn- R100bn in investment)

• Export market (India/China)

• Domestic market – Eskom/synfuels

• SA has significant coal reserves

• Mature Witbank fields

• Relatively undeveloped Waterberg

coalfield

• Investment (capital)

• Profitable coal projects

• Synergy of domestic sales &

exports

• Stable, predictable & competitive

investment environment for

mining. (Smart tape)

• Cost effective, efficient , reliable

& available logistics

• Demand (global/local)

• Uncertainty on policy

• Uncertainty on domestic

pricing /export restrictions

• Infrastructure.

• Cost inflation.

• Poor execution

• Lack of cooperation

between key stakeholders

1.1 Coal potential: Grow production to >350 MT by 2020 (2012: 258 MT), exports to >100MT (2012: 78 MT), Local sales 250

MT, (2012: 185 MT), and grow employment to >100 000 (2012: 80 000)

2.Iron Ore • Global demand (China)

• RSA produces niche product

• Same as above, but logistics is

key

• Same as 1 above.

2.1 Iron ore potential: grow production to >100 MT by 2020 (2012: 67 MT) increase exports to 90MT (2012: 59 MT) and grow

employment to 30 000 people (2012: 18 000)

3.Manganese • Global demand and supply

• Same as above but logistics is

key

• Same as 1 above.

3.1 Manganese potential: grow production to > 21 MT by 2020 (2012: 8.8 MT) and grow employment to 10000 people (2012:

5800)

These 3 bulks could add 37 000 jobs and R72 billion extra in sales

RSA iron ore production is up 137% 1990 to 2013…

Source: StatsSA/CoM

0

50

100

150

200

250

300

19

90

=1

00

SA: physical volume of production for selected minerals, 1990 to 2013, base indexed to 1990

diamonds

gold

PGMs

Coal

Iron ore

Chrome

Manganese

Presentation outline

How does South Africa score?

Conclusion

Global and local drivers

Key drivers of mining competitiveness

Why Mining is Crucial to South Africa

Unpacking the constraints for mining

Competitiveness in mining is driven by multiple factors, and

leads to measurable performance and sustainability outcomes

Competitiveness drivers Performance outcomes

Value add

Production volumes

Investment

• Labour cost

• Other costs

Produc-tion

Costs

Sustainability outcomes

▪ Occupational health and safety

▪ Environmental impact

Trans- formation

Safety, health, & environ-ment

▪ Transformation level

▪ Societal contributions

SOURCE: McKinsey & Company

Market context

Regulatory environment

Inherent potential Product demand Enabling factors

Factor market efficiency

Industry structure

Natural resource endowment

Human capital/ skills

Geographical factors

Accessibility of markets

Domestic demand

International demand

Regulatory and legal requirements

Institutional capacity

Infrastructure

Ease of doing business ▪ Social licence ▪ Security of tenure ▪ Rule of law ▪ Macroeconomic

stability

Mining Asset Lifecycle

Explore Evaluate Develop Mine Closure

Cash flow over life cycle +

-

Price cycle

Given long life cycle, mining requires predictable, stable

and competitive policy and regulatory environment

Presentation outline

How does South Africa score?

Conclusion

Global and local drivers

Key drivers of mining competitiveness

Why Mining is Crucial to South Africa

Unpacking the constraints for mining

At a general level South Africa ranked 53rd /148 most

competitive economy in WEF 2013-2014 report

•RSA is the second highest ranked BRICs economy (behind China).

•RSA does well on:

• Auditing standards/efficacy of boards/protecting minority shareholders (rank 1)

• Soundness of banks (rank 3) and security exchange regulation (rank 1)

• intellectual property protection (rank 18th),

• Protection of investors (10th)

• Protecting property rights (rank 20th) and

• the effectiveness of resolving legal disputes (13th).

•RSA has high accountability in private institutions (rank 2), that

support the institutional framework.

•RSA has a mixed scorecard in other areas:

• Its labour market efficiency is below average (rank 116)

• Health and primary education score poorly (rank 135)

At a general level South Africa ranked 53rd /148 most

competitive economy in WEF 2013-2014 report

0

1

2

3

4

5

6

Institutions

Infrastructure

Macroeconomicenvironment

Health and primaryeducation

Higher educationand training

Goods marketefficiency

Labour marketefficiency

Financial marketdevelopment

Technologicalreadiness

Market size

Businesssophistication

Innovation

WEF global competitiveness scores, South Africa vs other Efficiency Driven Economies, 2013-2014

South Africa Efficiency driven economies

South Africa is the top ranked African mining country on WEF

Competitiveness Score & Strength of investor protection

10

41

84

69

69

41

69

84

107

57

123

41

123

123

142

53

74

77

90

93

114

118

125

131

132

135

137

140

141

147

0 50 100

South Africa

Botswana

Morocco

Namibia

Zambia

Ghana

Egypt

Tanzania

Zimbabwe

Madagascar

Mali

Mozambique

Burkina Faso

Mauritania

Guinea

Global competitiveness rank and strength of investor protection 2012/13 (WEF)

Strenght of investorprotection rank (out of 148countries)

WEF GCI rank (148countries)

South Africa is mid-table ranked (8th) in the Fraser Institute

Survey of Policy potential for Africa

17

25

30

36

54

55

59

64

69

70

74

76

79

85

91

93

0 10 20 30 40 50 60 70 80 90 100

Botswana

Morocco

Namibia

Mauritania

Ghana

Burkina Faso

Zambia

South Africa

Egypt

Niger

Tanzania

Guinea

Mali

Madagascar

Zimbabwe

DRC

Fraser Institute Survey 2012/13, ranking of mining countries by policy potential score (rank out of 96 countries)

-100 -50 0 50 100

BotswanaSouth Africa

NamibiaGhana

MoroccoZambia

MauritaniaTanzania

Burkina FasoEgypt

MadagascarNiger

MaliZimbabwe

GuineaDRC

Frazer Institute Survey 2012/13 Quality of the geological database, factors encouraging investment in exploration versus deterrents to

investment for African mining countries

Encouragementscore

Deterrent Score

Quality of the geological database, selected countries –

factors contributing to investment and detracting from

investment

-100 -50 0 50 100

MoroccoNamibia

BotswanaSouth Africa

EgyptGhana

ZambiaTanzania

Burkina FasoZimbabwe

MadagascarMali

MauritaniaNiger

GuineaDRC

Frazer Institute Survey 2012/13 Quality infrastructure, factors encouraging investment in mining versus deterrents to investment

for African mining countries

Encouragementscore

Deterrent Score

Quality of infrastructure, selected countries – factors

contributing to investment and detracting from

investment

-100 -50 0 50 100

BotswanaMorocco

Burkina FasoGhana

NamibiaMauritania

ZambiaMali

NigerMadagascar

TanzaniaSouth Africa

DRCEgypt

GuineaZimbabwe

Frazer Institute Survey 2012/13 Tax system, factors encouraging investment in mining versus deterrents to investment for African

mining countries

Encouragementscore

Deterrent Score

Tax systems, selected countries – factors contributing

to investment and detracting from investment

0 10 20 30 40 50 60 70

Uzbekistan

Ivory Coast

Mongolia

Ghana

Guinea

Greenland

Arizona-USA

Mexico

Poland

Tanzania

Peru

Indonesia

Kazakstan

Philippines

South Africa

Bolivia

Papua New Guinea

China

Argentina

Zimbabwe

Chile

Western Australia

Sweden

% effective tax rate

Copper mine model-comparative effective tax rates

South Africa

Yet on standardised tax model, South Africa is

reasonable competitive on a taxation point of view

Source: Prof Jim Otto

South Africa is ranked 24th in terms of the IFC’s Doing

Business 2014, Ease of Paying taxes

RSA Australia Canada Brazil Botswana USA OECD

Rank Ease of paying

taxes

24 44 8 159 47 64

Payments (no. p.a.) 7 11 8 9 34 11 12

Time (hours p.a.) 200 105 131 2,600 152 175 175

Profit tax (%) 21.9 26.2 6.6 24.9 21.7 27.9 16.1

Labour tax (%) 4.1 20.2 12.9 39.6 0.0 9.9 23.1

Other Taxes (%) 4.2 0.6 4.9 3.8 3.6 8.4 2.0

Total Tax take (%) 30.1 47.0 24.3 68.3 25.4 46.3 41.3

Presentation outline

How does South Africa score?

Conclusion

Global and local drivers

Key drivers of mining competitiveness

Why Mining is Crucial to South Africa

Unpacking the constraints for mining

RSA mining has not met its potential

• RSA mining missed out on the last commodity boom with mining GDP

declining by 1% p.a. between 2001 and 2008, versus 5% growth rate in top

20 mining economies mining sectors.

• Gold mining production shrank 7.6% per annum in the last decade.

• Large shares of the gold & platinum mines are loss-making at current prices.

• The industry has recently been hit by labour market challenges and by the unfortunate Marikana tragedy.

• The industry has faced bouts of policy uncertainty (the nationalisation discussion, the review of mining taxation, the possible introduction of a carbon tax, etc.) and some licensing challenges.

• The industry has faced infrastructure constraints (shortages of electricity, rail and water).

• Rapidly escalating costs have challenged the sector.

Competitiveness drivers

The key threats to

competitiveness of SA

mining are:

▪ Infrastructure (electricity, rail)

▪ Policy uncertainty and some

challenges in regulatory

framework

▪ Social licence to operate1

▪ Human capital/ skills

▪ Institutional capacity

▪ Rapidly rising costs

▪ Falling productivity

Competitiveness drivers of mining

SOURCE: McKinsey & Company

Competitiveness threat

Competitive advantage

Mixed picture

Market context

Regulatory environment

Product demand Enabling factors

Infrastructure

Ease of doing business ▪ Social licence

▪ Security of tenure ▪ Rule of law

▪ Macroeconomic stability

Factor market efficiency

Industry structure

Inherent potential

Natural resource endowment

Human capital/ skills

Geographical factors

Accessibility of markets

Domestic demand

International demand

Regulatory and legal requirements

Institutional capacity

1 Dealt primarily in sustainability and transformation workstreams

The unprotected strikes and Marikana tragedy

exacerbated the situation

• In 2012, the PGM mining sector was hard hit by the unprotected

strikes and the Marikana Tragedy.

• 50 lives were lost and the reputation of the PGM sector and RSA

as a key mining investment destination was tarnished.

• The strike induced decline in production exacerbated the cost

squeeze faced by the industry.

• Approximately R15 billion in revenue was lost and many related

industries were negatively affected by the strikes.

• The strike action in 2014 is further undermine the PGM mining

sector and damaging the country’s reputation.

The Deputy President’s Mining Dialogue Process and

the Minister’s Peace Accord

• All stakeholders signed a “Peace Accord” in February 2013,

focused on calming the situation and restoring law and order in

affected areas.

• In August 2013, the stakeholders developed a “Framework

Agreement for a Sustainable Mining Industry” under the leadership

of the country’s Deputy-President. The focus of the DP’s Mining

dialogue process is to:

– Stabilise the industrial relations environment.

– Promote law and order.

– Get the mining industry back on track from an investment and growth

perspective.

Industrial relations 2013

• 2013 was been vastly different to 2012:

– There has been a significant reduction in unprotected strike activity.

– There has been better enforcement of law and order .

– Mining companies are enforcing internal workplace rules and organised

labour are generally operating within the labour laws, in terms of

negotiations and going on legal strikes.

– Despite high wage demands, single digit wage settlements

accompanied by limited legal strike action has taken place in the gold

and coal sectors.

– Work is being done to improve the financial literacy of workers and to

reduce the impact of employee indebtedness and exposure to micro-

credit.

Industrial relations 2014

• 2014, the Platinum Strike:

– AMCU demands entry level wage of R12,500 on basic wages.

– Mining companies have offered increases of 9%-10% (average

guaranteed pay would rise from R9,230pm in 2013/14 to about

R12,500pm by 2015/16).

– The companies have lost R20.9 billion in revenue, while workers have lost

R9.3 billion in wages.

– The impact on the Rustenburg area, the associated industries and the

workforce is significant.

– The impact on South Africa’s reputation as a mining investment destination

and choice supplier of PGMs has been tarnished.

– Further restructuring is likely.

South Africa has good policy potential assuming best

practice

• The country’s mineral laws are generally congruent with global

practice (MPRDA, taxation system and Royalty Act), but some areas

require further work (environmental licensing, beneficiation, etc.).

• Recent policy uncertainty regarding the nationalisation debate has

been negative (but is now resolved).

• Some licensing challenges have undermined investment.

• Bouts of policy uncertainty, some licensing challenges and the

Marikana tragedy is reflected in the 2013 Fraser Institute Survey

which ranks South Africa in position 64 out of 96 countries.

• The MPRDA Amendment Act has been passed by Parliament.

• A country taxation review is scheduled for 1h14.

Significant engagement has taken place on the MPRDA

Amendment Bill and progress made on the mining

related aspects of the Bill

1. Section 9, license application system.

2. Section 11, Ministerial approvals for change in controlling interest of

a listed company.

3. Regulating residue stockpiles.

4. Penalties and sanctions.

5. Sharing credits in social and labour plans.

6. Refusing right applications due to concentration.

7. Streamlining environmental licensing.

8. Beneficiation.

9. Other technical issues.

Inflation in input costs has simply been too high

4.4

7.2

9.1

11.2

12

15.3

15.7

18.1

26

0 5 10 15 20 25 30

Mining machinary

Total producer price inflation rate

Cement

Structural steel

Labour costs

Reinforcing steel

Diesel

Pgm mining cash costs per 4e ounce

Electricity prices for mining

Cost inflation affecting the mining sector, average annual increase in costs, 2007 to 2012 (Source: StatsSA, CoM EAU)

Presentation outline

How does South Africa score?

Conclusion

Global and local drivers

Key drivers of mining competitiveness

Why Mining is Crucial to South Africa

Unpacking the constraints for mining

RSA, reinforcing competitive strengths, tackling

competitive weaknesses

• RSA has a number of competitive strengths and advantages that must be built on.

• Significant work is going into challenging areas:

• The DMR Minister’s Peace Accord and the Deputy President’s Mining Dialogue process have helped stabilise the labour relations environment and promoted law and order in key mining areas.

• The ANC has rejected wholesale nationalisation and adopted the NDP as the cornerstone of economic policy (mining is recognised as a key industry).

• The MPRDA Amendment has been passed by Parliament and stakeholders have provided significant input.

• The taxation review process is in a Committee looking at the impact of the tax system on realising inclusive growth

South African Mining Industry of the Future?

Skilled workforce, transformed, productive, decent wages and non-discriminatory, safe & healthy workplaces

Management not only

focus on profits, but provide decent jobs, play positive role in mining communities and sensitive to environment

Government and trade unions: proud of and

fully supportive of the mining industry and acknowledge industry as important for the country

Key exporter

Key earner of foreign

exchange

Key taxpayer

Creator of decent jobs

Developer of skills

Key contributor to

economy

Investors regard industry as a

good investment destination Constructive

Partnerships built on TRUST

Way Forward

• Collaborative partnership that “Puts South Africa First” to achieve the NDP objectives is key.

• We all understand what the growth constraints are, the key is proper implementation plans to resolve the constraints.

• Work is underway to improve the regulatory framework and greater clarity and certainty are emerging.

• All stakeholders have a role to play in moderating cost pressures and improving productivity.

• We need to restore stability to our production cycle and reposition the industry for growth by focusing on competitiveness.

Vibrant, growing, transforming mining sector that helps contribute substantively to growing the

economy, reducing unemployment and making South Africa a better place for all

We have a Vision of a

Conclusion

Mining and minerals matters for the growth, development and transformation of

South Africa