Contract Mining and Plant Rental

Investor Day 2012

Erich Clarke – divisional CEO

Open cast mining contractor

Coal, platinum, nickel and other base metals

Load and haul, ore recovery and rehabilitation

Drilling

Blasting

Surface blasting

Provides full range of packaged explosives, blasting accessories and pyrotechnic/electronic initiation systems to suit requirements

Plant Hire

Best earthmoving plant at competitive prices

Commitment to service excellence

Maintained and serviced by qualified field service mechanics with a world class workshop and rebuild facility

Divisional overview – what we do

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Largest division of Eqstra – 45% of revenues and 50% of revenue producing (leasing) assets, but currently only 24% of PBT

Primary business units - MCC Contracts and MCC Plant Hire

One of two large domestic open cast mining contractors in southern Africa

Largest plant hire fleet in southern Africa and largest grader fleet

in Africa

Targeted job range R400 million – R1 billion in capex

5 010 employees (+5.5%)

Divisional overview – the numbers…

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Safety Achievements

MCC achieved 1000 fatality free shifts in June 2012

Tharisa was nationally recognised by the DMR (Department of Mineral

Resources) and received an award : “Highest Safety Standards” within a

mining operation – this against mining giants like BHP, Exxaro and Xstrata,

among others

MCC Khutala received an award for “Best Safety Standards” throughout all

BECSA operations

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No direct impact from national / mining sector strikes

DMO / Khutala contracts renewed / extended for three years

Previously loss making Platmin contract breaking-even

Conclusion of contract negotiations with Nkomati Nickel should stop bleed

Management changes well received both internally and externally

Improved availability has released capacity (negative impact on utilisation)

Further intervention initiatives gaining traction

Key points on current operations

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Last reported financial results

Rm 2012 2011* % ch

Revenue-generating assets 4 517 3 912 15.5%

Inventories 97 61 59.0%

Other assets 945 791 19.5%

Operating assets 5 559 4 764 16.7%

Revenue 3 707 3 225 14.9%

EBITDA 1 137 966 17.7%

Operating profit 322 322

Asset reversal (impairment) 37 (50)

Foreign exchange gains (losses) 270

Net finance costs (277) (221) 25.3%

Profit before taxation 109 51 113.7%

PBT margin 2.9% 1.6%

EBITDA to net finance costs 4.1x 4.4x

* Income statement reclassified for segment reallocations

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Commodity diversification

Commodity and regional diversification

has improved in recent years from past

high exposure to PGM’s

Identified opportunities in iron ore and

copper

Capacity available for one sizeable

contract

Revenue by commodity

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25%

35%

63%

84%

49%

37%

19%

26%

28%

18%

16%

0% 25% 50% 75% 100%

PGM's

Energy (coal & uranium)

Other and plant rental

Jun ‘09

Jun ‘10

Jun ‘11

Jun ‘12

Mining contracts

Client

Mineral/ Service

Location

Monthly volumes

End date

Platmin - Pilanesberg Platinum

Mine Platinum Northam, North West 1 250 000m3 03/2014

ARM/Norilsk JV - Nkomati Nickel Nickel Machadodorp,

Mpumalanga 1 200 000m3 09/2014

Tharisa Minerals Chrome Marikana, North West 600 000m3 06/2017

Rio Tinto - Benga Mine Coal Tete, Mozambique 1 900 000m3 12/2015

DMO Project Coal Witbank, Mpumalanga 1 200 000m3 11/2015

Khutala Colliery Coal Ogies, Mpumalanga 1 000 000m3 10/2014

Total Coal – Dorstfontein East

Coal Kriel, Mpumalanga 1 600 000m3 01/2016

Coal of Africa - Vele Colliery

Coal Musina, Limpopo 250 000m3 12/2016

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Contract demand outlook

Commodity Global climate Project exposure Impact on Eqstra

Platinum Turmoil, industrial action Platmin • Open cast mining at lower

end of production cost curve

• No industrial action in past six

months

• Potential for increased

demand

Coal: Thermal Demand outlook and prices

have weakened

Dorstfontein

DMO

Khutala

• Increased demand from

Eskom

• Contracts extended /

renewed for supply to Eskom

Coal: Metallurgical Demand outlook and prices

have weakened

Benga

Vele

•Steady demand from Tata

(35% Benga shareholder) for

own smelter

• Scaled down demand and kit

redeployed

Nickel / Chrome Lower steel demand has

weakened prices

Nkomati

Tharisa

• Contract losses due to

contract management

• Contract terms renegotiated

• Client has commissioned new

plant

• Increased tonnage expected

in 2013

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Resignations:

JC Pretorius: MD, MCC Contracts

Trevor Adams: Projects Director

Restructured into four operational areas:

Hard Rock

Soft Rock

Africa (Mozambique)

Plant Hire

Recent management changes

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Senior management reorganised and

structured

Established a Business Development Team:

Marketing

Tendering/Pricing

Contract Management

A focused plan has been implemented to address all identified contract issues

Legal reviews of contracts

Matrix developed to ensure contract compliance

Continuous contract performance evaluation

Current tenders and new contracts to benefit from new improved contract

management measures

Contract management

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Contract accounted for significant losses in recent years

Contract renegotiated effective 1 January 2012 to exclude reefing and drilling

Labour climate has remained challenging, but no significant disruptions to

operations in recent months

Platmin – at break-even

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Significant contract loss posted in FY2012

Took over blasting from July 2012 after poor fragmentation delivered by previous

blasting contractor

Poor fragmentation resulted in elevated wear and tear on equipment and

consequent high maintenance costs and poor productivity

Contract has remained a challenge in recent months

Revised pricing negotiated and run rate should improve

Nkomati Nickel

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Benga (Mozambique) update

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Contract continues its satisfactory performance

Mine is now at full production of around 1.9 million tonnes per month

Future logistics constraints to export high volumes of coal remain a concern

Tyre management is proving to be a

challenge due to shortages

Tata Steel’s 35% ownership of concession

ensures sustainability of demand

Plant hire activities gathering momentum

Industrial relations is a key operational and strategic risk

Marikana has changed the labour relations landscape

Labour unrest in the Rustenburg region mainly affected underground mining

operations

Initiatives implemented have improved labour relations and interaction with unions

MCC has “weathered” the unrest storm

No illegal or legal strikes

Cost increases due to negotiations and industry concessions

Labour relations climate

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Excess equipment on balance sheet

Fleet optimisation and availability improvement exercise has identified excess

equipment:

R80m held for sale

R50m spare drilling capacity

R115m incorrect sizing

Optimisation of approximately R150m required

Contract renewals will correct this

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Capital expenditure outlook

Expansion capex decreased from R931m in FY2011 to R477m in FY2012

Benga project capex R645m in FY2011 and R450m in FY2012

Limited expansion capex forecast in FY2013

Replacement capex in FY2013 expected to be below R500m

Excess equipment extracted from optimisation exercise will be used as

replacement

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Availability

Equipment availability is measured according to how many hours a specific item of equipment actually was mechanically available to work per shift i.e. the % of time mechanically able to work per shift

Poor levels of availability often lead to poor utilisation as equipment work in teams

Poor availability addressed:

Increased maintenance spend

Increased focus on preventative maintenance

Clarification of reporting lines – technical managers assigned for specific products

Monthly engineering meetings – focus on availability, costs etc.

Increased artisan headcount

Increased Midrand workshop capacity

Introduced Service Level Agreements with major suppliers

Introduced monthly site, production and plant, meetings contributing to improved

conditions to increase availability (Site Severity Audits)

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Fleet utilisation

Utilisation is measured according to how many hours a specific item of equipment

actually “worked” as a % of the available hours it could have worked i.e. was

mechanically able to work

Utilisation rates have increased in the past two reporting periods

Factors impacting utilisation:

Contract negotiations

Inclement weather

Equipment replacement cycle lag

Project transitions

Bad scheduling practices

Bad mining practices e.g. excessive tramming

Operator availability

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Addressing under utilisation

Daily continuous focus on monitoring cubic metres moved per hour of all “major movers”

Comparisons to benchmarks

Improve training through innovative technology

Utilisation targets to include moving average analysis to ensure a focus on continuous

improvement

Production incentives

Reduce expansion capital expenditure

Tender for additional projects with existing equipment

Supervisor training and exposure

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Plant Hire overview

10-15% of divisional revenues

Current markets:

Infrastructure development

Government and parastatals

Construction and Mining

Branches in Windhoek, Namibia and in Tete, Mozambique performing stronger

than branches in RSA

Domestic construction market remains depressed, little signs of life

Africa opportunities continue to hold promise

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Training and development

There is normally a shortage of suitably skilled workers in communities surrounding mine sites

Technical training:

MCC operates its own formal technical training academy in Benoni, Gauteng

The academy is fully accredited by industry training bodies

Offers the following trades:

Earthmoving

Boilermaker

Auto Electrical

Operator training:

Advanced simulator technologies increases operator skills in a short period of time

The Centre is fully accredited by: Construction SETA (NQF Level 3); Services SETA (NQF Level

4), MQA (Evaluations and assessments) and the Independent Examinations Board (ABET Level 4)

The Centre includes moderators and assessors

International Award: The Centre received the international award from

Immersive Technologies for “Best Results in Operator Simulator Training” – this

Centre competed against 23 countries with results assessed for a total of 240 000 operators

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ERP Project Implementation

SAP ERP system selected

Go live date: 4 March 2013

Advantages:

Enhanced functionality

Production monitoring

Equipment life cycle monitoring

Detailed cost analysis

Management Reporting &

variance analysis

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Commodity outlook

MCC does not take direct commodity risk, however, increases are being

linked to commodity price recovery

Targeting other commodity opportunities to diversify commodity and country

risk i.e. copper, iron ore and Africa

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Priorities

Business model requires at least a 14% operating margin to achieve 20%

targeted ROE

Operating margin negatively impacted by:

low plant utilisation

high planned preventative maintenance expenses

new contract start-up costs

staff costs

Cost control:

Labour costs have increased due to SAFCEC determination

Correction of normal working hour

Union demands i.e. Medical aid, bonuses, etc

Efficiency improvements

Utilisation drive

Improved maintenance / availability drive

SAP implementation – project on track

Order book – increased scope on existing contracts

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QUESTIONS?

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