Xstrata Coal South Africa and ARM Coal Site Visit
6 November 2006
Coal
Introduction
Steve Mashalane(Chief Executive Officer - ARMCoal)
Coal
3
Index
• Overview Xstrata Coal
• Xstrata Coal South Africa (XCSA)
• Goedgevonden Joint Venture
• Coal Market Review
• ATCOM site visit
Coal
Xstrata Coal
Leon Binedell(Chief Financial Officer – XCSA)
5
Xstrata Coal Profile
• The second largest of Xstrata plc’s commodity businesses post the Falconbridge transaction (19% of enlarged Xstrata Plc EBIT)
• One of the world’s largest producers of export thermal coal and a significant exporter of coking coal
• Interests in over 30 operating coal mines located in South Africa, Columbia and Australia, employing around 10,000 people
47
41
35
26
23
0 20 40 60
Enlarged Xstrata
BHP Billiton
Anglo American
PT Bumi Resources
Drummond Co.
Mt
58
16
12
11
10
0 20 40 60 80
BHP/Mitsubishi
Fording
AngloEnlargedXstrata
Rio Tinto
Mt
Top 5 Coking Coal producersTop 5 Thermal Export producers
1
1-Includes 1/3 share of Cerrejon coal for 2005
6
Our Vision
We have an absolute commitment to leadership in the areas of health, safety, environment and the community
We are a fatality free business which operates beyond compliance in our HSEC obligations
Our participation and presence in the communities in which we operate is valued by both those who live there and the wider community
7
Structure 2006 Xstrata Coal employs 10,000 people worldwide
Xstrata Coal South Africa
(XCSA)Sam Coetzer
Xstrata Coal Americas(XCAm)
Jeff Gerard
Xstrata Coal Queensland
(XCQ)Ian Cribb
Xstrata Coal New South Wales
(XCN)Mick Buffier
20.9 Mt- coking 8.7 Mt- thermal 12.2 Mt
18.6 Mt36.1 Mt- coking 5.2 Mt- thermal 30.9 Mt
2005 Total Managed Production:75.6 Mt(XCSA – Attributable production)
Peter Coates, Chief ExecutivePeter Freyberg, Director of Operations
Xstrata Coal8 Mt
8
World’s major export thermal coal companyHeadquartered in AustraliaOperating in Qld, NSW, South Africa, Colombia
Source: AME
Com
pan
y Equity
Shar
e (M
tpa)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Xstrata BHP Billiton Pt Bumi Resources Anglo American Drummond Rio Tinto
9
Organic Growth Optionality
2009+2007
Roseby Project (Cu)Oaky Creek (Coal)Cook (Coal)Wollombi (Coal)Ravensworth West (Coal)Lion Project (Ferrochrome)Bulga, Ulan and Liddell (Coal)Mount Isa (Cu)
2009
Koniambo (Ni)Altonorte Phase 5 (Cu)Nickel Rim (Ni)
Ulan West (Coal)Togara North (Coal)
2008
Collahuasi (Moly)Raglan (Ni)AA
Collahuasi (Moly)Raglan (Ni)AA
2006
Oaky Creek (Coal) Wollombi (Coal)Ravensworth West (Coal)Southstock 5 seam open cut (Coal)Ulan and Liddell (Coal)
Wandoan (Coal)Glendell (Coal)Goedgevonden (Coal)Rolleston expansion (Coal)
Bulga UG – Blakefield (Coal)Cerrejon expansion (Coal)Southstock 5 seam underground (Coal)Donkin (Coal)
Xstrata Coal South Africa
Coal
11
Xstrata Coal South AfricaCoal
12
13
Overview – XCSA (Including GGV JV)
• Third largest exporter in South Africa (13.5Mt in 2005)
• Operations
• 10 managed mines integrated into 3 complexes
• 2 mines managed by Bhpbilliton (16% JV)
• Goedgevonden complex JV with ARMCoal
• Substantial increase in productivity since moving to more mechanised mining methods
• 65% of production from underground operations*
• 73% of production exported #
• Xstrata owns 20.9% of RBCT
• Total domestic sales in 2005 of 6.9 Mt #
*Note: Managed = 100% of all Xstrata managed operations including GGV but excluding DTJV
# Consolidated Xstrata and ARMCoal combined interest in exports
Coal
14
0
5
10
15
20
25
30
Bhpbilliton (Ingwe) Anglo Coal Xstrata
Mill
ion
tonn
es p
er a
nnum
*
South Africa’s 3rd Largest Exporter of Thermal Coal
*Xstrata marketed sales
Note: Figures based on 2005 RBCT throughput
Coal
15
2005 Production Statistics
Note: Figures reflect XCSA proportionate share of DTJV(16%), ATC/ATCOM (50%) and GGV (100%)
*
0
1
2
3
4
5
6
DTJVTav
istoc
k
South
Witban
kBos
chman
sTse
lentis
Witcons
ATCOMPho
enix
Spitzk
opATC
Goedg
evon
denWater
pan
Mines
Tonn
es (M
t)
ROMSaleable
Coal
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The operating strategy
2006H2 H1 H2 H1 H2 H1 H2
Tweefontein•Waterpan•Boschmans•Witcons
Southstock•South Witbank•Tavistock•5 Seam
iMpunzi•ATC•ATCOM•Phoenix
Mpumalanga•Tselentis•Spitzkop•Verkeerdepan
Goedgevonden•Goedgevonden
2007 2008 2009
Convert from 3 plants and FEL operations to Underground and Opencast Operations with a Central Plant and Central Rapid Loading Terminal
Approval Design and Construction Commission
Finalise issues pertaining to defunct JV
Optimise LOM plan re 5/4/2 Seam and O/C and U/GOptimise Processing Plant requirementsCentral Rapid Loading Terminal
Tselentis re-plan and commission new Spitzkop Shaft
Develop Verkeerdepan Rationalise sidings and coal transport systems
Coal
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Total recordable injury frequency rate
Rehabilitated mining area
• We strive for zero harm at our operations• 14 months fatality free• South Witbank - after a record of more
than 9000 Fatality Free Shifts sustained a fatality on 10 October 2006
• Mpumalanga Opencast – 7200 Fatality Free Shifts
• Goedgevonden – 2000 Fatality Free Shifts
• Waterpan – 3000 Fatality Free Shifts• We are committed to progressive
rehabilitation and the highest standards of environmental management
• Comprehensive HIV and AIDs testing, counselling and treatment provided; extended to community
• Extensive community support and social development projects for communities associated with operations
Health, Safety, Environment and Community
0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006
Coal
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Social & Community Development
Xstrata is involved in the implementation of integrated development plans for communities where mining takes place
Company officials serve in various local community structures (government as well as civil) including Local Economic Development forums in Witbank and Ermelo.
With regard to labour sending areas, Xstrata shares in the TEBA social development initiatives.
Discussion on the price of mielies!
Coal
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HIV/AIDS Programme
VCT Campaign
Clinic services
CD4 < 200ART
-ve
+ve
XCSA Employees
Education &Training
ODT* Monitoring Nutrition
CD4 > 200
* Opportunistic Diseases Treatment
CD4 < 200
•Award winner for Testing and Counselling from the Global Business Coalition. PEPFAR awarded XCSA $600 000 which will be used in cofunding our PPP initiatives with Government.
•In excess of 80% of Xstrata employees know their HIV status.
•Employees and their families have access to clinics and ART.
•XCSA established a HIV/AIDS clinic in Breyten In 2005 for employees and the community.
•Currently setting up a PPP with Local and Provincial Government with the purpose of capacitating Primary Health Care clinics with the objective of registering them as ART roll out sites.
Middelburg Care Centre – accommodates 120 children
Coal
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Productivity Enhancements
50%
16%
0%
29%
5%10%
54%3%
14%
19%
U/G CDBU/G CMU/G Contr.O/C OwnO/C Contr.
2000 2005
Managed* ROM Production 21.9Mt Managed* ROM Production 28.2Mt
* Managed = 100% of ATC/ATCOM and GGV excludes DTJV
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Productivity Enhancements
• Reduction of 1200 employees over four years while managed production increased
by 26%
• In 2000: CMs produced only 16% of coal, now CMs produce 58% of managed
production *
• In 2001 added new mine with zero increase in total employee numbers
• CM output increased from 0.55mtpa to >1.0mtpa
• Systematically re-engineering of operations
• Vigorous mine planning standards implemented through XC
* Managed = 100% of ATC/ATCOM, GGV and excludes DTJV
Coal
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Reserves: Proved and Probable (Mt)(XCSA Managed Operations)
Goedgevonden ,357
South Witbank, 92 Witcons , 43
Tselentis , 26
ATCOM , 63ATC , 15
Waterpan , 80
Spitzkop , 16
Phoenix , 15
Tavistock , 65
Boschmans , 55
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Growth in Exports – 2006 TO 2011
RBCT Phase 1-4
RBCT Quattro
RBCT Phase 5
71.076.0 76.0
91.0 91.0 91.0
17.616.816.014.414.013.6
2006 F 2007 B 2008 B 2009 B 2010 B 2011 B
XCSA Net Entitlement (Mtpa)
• 2001 to 2004: RBCT expansion stalled resulting in significant threat to long-term throughput as a result of lack of access for BEEs to export market
• 2004 / 5 Xstrata led rethink of expansion strategy
• 2006 announcement of 91Mtpa expansion
• 2006 Ingwe announce inability to utilise their port entitlement
• Opportunity for Xstrata and ARM Coal to grow export business beyond above curve
Coal
Market Review
Murray Houston (General Manager Marketing – Atlantic Markets)
Coal
25
World Energy Consumption by Fuel and Region
Oil shocks decouple Energy and GDP: EJ/GDP improving 1.2%/y since 1980, and 0.85% to 2025
Oil, gas gaining market share, at expense of coal and nuclear
Carbon intensity (MtC/EJ) declined 30% over the last 100 years, but forecast to increase +1% in next 25
Coal grows, but slower than other fossil fuels
Global energy use 70 GJ/capita, rising to 88 GJ/capita
China accounts for 21% of future energy growth, US 21%, India 6%
IEA: $16 Trillion needed to fund energy supply
Nuclear: 5%
0
100
200
300
400
500
600
700
1900 1925 1950 1975 2000 2025
Source: RMI analysis, IEA 2004, EIA IEO 2004, BP Statistical Review 2003, IFP, WCI 2005Age of Oil
BeginsAge of Oil
BeginsAge of Gas
BeginsAge of Gas
Begins
World Energy Consumption by Primary Fuel1900-2025
Coal: 23%(-3.2%)
Oil: 41%(+3.5%)
Gas: 26%(+2%)
Renewables: 3%
EJ
0
100
200
300
400
500
600
700
1965 1975 1985 1995 2005 2015 2025
World Energy Consumption by Region1965-2025
OECD: 27%(Non-US)
US: 23%
China: 15%
India: 5%
Rest of World: 31%
EJ
Coal
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Who owns fossil energy reserves and how long might they last?
North America
16 11
258
Central and South America
25 11 22
USSR and Successor Countries
2186
225
Africa25 21
55
Western and Southern Europe
7 8
97
Asia and Oceania
6 17
94
1 1
84
Central and Eastern Europe
1 133
Middle East179
110
2
China
6 3
115
The Location of the World’s Main Fossil Fuel Reserves (Gtce)
India
Source: BP2003, wci 2005Oil Natural Gas Coal
Reserve/Production Ratios
Yea
rs
200
60 40
0100200300
Coal Oil
Oil and GasReserves
Concentrated
Non-traditional reserves are large but recovery is questionable• Oil related: ~440 Gtce (2x Oil)• Methane clathrates ~1,000-
8,000 Gtce (4-30x Gas)
Non-traditional reserves are large but recovery is questionable• Oil related: ~440 Gtce (2x Oil)• Methane clathrates ~1,000-
8,000 Gtce (4-30x Gas)
Coal
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In 2003….
• World primary energy consumption increased by 2.9%
• For the second year running, coal was the fastest growing fuel, increasing by 6.9%, driven by China, Russia, Japan and North America
Coal as a Component of World Energy
More generally……
• Coal fuels almost 40% of the world’s power generation
• Coal as a raw material underpins some 70% of the world’s steel industry
EJ
0
100
200
300
400
500
600
700
1900 1925 1950 1975 2000 2025
Coal - 23%
Oil - 41%
Gas - 26%
Nuclear- 5%Renew - 3%
Global Coal Production - 5.0 Billion tons
Hard Coal Production - 4.1 Billion tons
Low Rank Coal - 0.9 Billion tons
Domestic Hard Coal - 3.5 Billion tons
Seaborne Hard Coal - 0.6 Billion tons
Thermal Seaborne - 0.4 Billion tons
Metallurgical Seaborne - 0.2 Billion tons
World Energy Consumption by Primary Fuel1900-2025
Virtually all serious commentators now recognise that coal will have a critical role to play for at least the next 30 years and very likely (reserves) for much longer
Coal
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4.4
14.11.8
2.7
9.1
14.4
Developing Nations
Transition Economies*
OECD
20302002
Total (‘000s TW.hr): 15.4 31.2
1.5%
1.4%
3.8%
CAGR
Global Power GenerationElectricity Generation by Region (TWh x 103)
2.4%
• The world and in particular, the developing world (Asia, Latin America, Africa) is going to demand more energy – much of it will come from (cost-effective) coal
* Transition economies are those of Eastern Europe, Russia and the FSUSource: IEA World Energy Outlook 2004
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Global Power GenerationWorld Electricity Demand
• Power generation from coal is set to double in the next 25-30 years, with export coal set to grow faster than this to feed fast-growing Asia
Source: IEA World Energy Outlook 2004
Coal
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Overview of Global Coal Market
Production: 4.000 Mt (est.)Production: 4.000 Mt (est.)
DomesticDomestic3,3,340340 MtMt
TradedTraded660660 MtMt
ThermalThermal2,2,940940 MtMt
SeaborneSeaborne615615 MtMt
CokingCoking400 Mt400 Mt
Land TradeLand Trade4455 MtMt
ThermalThermal443 Mt443 Mt
CokingCoking171722 MtMt
Thermal 85% Coking: 15%
Source: IEA, McCloskey& various 2004
Coal
31
XCSA -Geographical Distribution of Exports - 2005
25.2%
1.5%
5.9%
13.3%19.0%
6.0%
0.2%
6.7%
3.4%
2.4%
3.6%
0.3%
3.4%
0.6%
8.1% 0.3%
U.K.
Croatia
France
Israel
Spain
Germany
Netherlands
Belgium/Denmark
Europe via ARA
Italy
Portugal
Mauritius
Turkey/Morocco
South America
India/Pakistan
UAE / West Africa
* Including 100% of GGV and XCSA share of DTJV
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South African & XCSA Sales Profile - 2005
South African Coal Sales XCSA Coal Sales
17% (41Mt)43% (105Mt)
29% (69Mt)11% (26Mt)
ExportPetrochemicalPower (incl. Eskom)Industrial & Metcoal
66% (13.5Mt)
11% (2.2Mt)
23% (4.6Mt)
ExportPower (incl. Eskom)Industrial
Note: XCSA coal sales reflect XCSA share of DTJV (16%), ATC/ ATCOM (50%) and GGV (100%)
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33
3-Year Spot Price History & Forward Curves
• RB prices and NEWC prices have come off the peaks of mid-2004, in US$ terms.• Both RB and NEWC prices are in contango on the forward curve.
* GlobalCOAL Index and API#4 Forward Curve prices are basis 6000kcal/kg NAR
Thermal Coal Prices 2003 to 3Q'06 Actuals4Q'06 to 2008 Forecast
(US$/Tonne)
GlobalCOAL NEWC Index Forward
Curve as at 27/10/06
API#4 Forward Curve as at
27/10/06
15202530354045505560657075
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
4Q'06 2007 2008
US$
/Ton
ne F
OB
GC NEWC Index (US$)
GC RB Index (US$)
Coal
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Lower Freight Rates: the “China Effect”
• Newc/SA Spot freight rate differential into Europe is currently at +-US$6.00/T• 6-month forward curve suggests a relatively flat freight market through 2006
onwards, however may have some volatility due to:o new ship additions and switchingo Ship-scrapping rate (may increase as freights reduce)o Queue reductions and shorter shipping distanceso Bunker prices (linked to oil)
Source: Freight Investor Services; McCloskey Coal Report; Xstrata
Spot Capesize Freight Rates 2003 to 3Q'06 Actuals4Q'06 to 2008 Forecast
(US$/Tonne)
C4 Forward Curve as at 27/10/06
5
10
15
20
25
30
35
40
45
50
Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 4Q'06 2007 2008
US$
/Ton
ne F
OB
Spot : NEWC-Rott
Spot: RBCT-Rott
Coal
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Xstrata Coal’s Export Thermal Coal Business: Spot vs. Contract
• The split of XCA’s and XCSA’s export thermal coal sales reflect the differing nature of the European and Asian markets (Europe traditionally more of a spot market)
• Although XCA’s sales are still mostly on a term contract basis, there has been a (buyer-driven) shift towards shorter-term deals and spot purchases by most major Asian power utilities, particularly over the last 2-3 years
6043
4057
2005Xstrata Coal Australia (%)
2005Xstrata Coal South Africa (%)
Total (%) 100 100
Spot
Annual/Term Contract
Coal
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Atlantic Thermal Coal Market:1998-2005 (Key Markets and Suppliers)
• Demand growth has been steady in the major Atlantic markets• The USA is now a net importer of thermal coal, while Poland’s exports are stagnant and likely
to reduce.• Note that Russia which supplies +-25% to Pacific and +-75% to the Atlantic market increased
exports from 7.25MT in 1998 to 37.9MT in 2005.
CAGR (%)1998-2005
Source: National Statistics/Giag
Demand (M Tonnes)
16
7
21
7
Supply (M Tonnes) CAGR (%)1998-2005
1
10
(27)
Germany
Iberia P.
UK
USA
(2)
South Africa
Poland
Colombia
USA
Italy 12
Russia27
0
5
10
15
20
25
30
35
40
1998 1999 2000 2001 2002 2003 2004 2005 2006(fc)
2007(fc)
05
101520253035404550556065707580
1998 1999 2000 2001 2002 2003 2004 2005 2006(fc)
2007(fc)
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Issues – 2005 Atlantic Market
•Continued growth in European and Mediterranean market (± 4.8%)•Market is undersupplied, swing supply will have to come from the Pacific (+-24Mt)
• Indonesian growth countered by lower Australian expectations and Chinese reductions •Declining domestic production/phase out of subsidies
• U.K., Germany, Spain and Poland•Market drivers
• Physical coal fundamentals: • Supply : Infrastructure (rail & ports), production (weather related, equipment
availability, mining capacity and production costs) • Demand : reducing domestic production, seasonal effects ~ temperature, hydro &
wind, and alternative energy costs/availability• Energy complex fundamentals:
• Robust oil, gas & electricity prices as well as freight and CO2 costs coupled with exchange rates
• Trading utilities, forward power sales and derivatives/spread trading•Freight rates – showing signs of “normalising” albeit with volatility (China effect & port queues)•Growth in Colombian supply more than offset by US & Americas import growth (+-15.6%)
• European destined volumes flat in 2005•South African exports remain constrained (mine capacity, rail & port)
• Rail efficiency improved in second-half 2005 resulting in annual exports of ± 69Mt.
Coal
Transformation in Xstrata Coal South Africa
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39
Transformation
Key Legislation:
• Mineral & Petroleum Resources Development Act • Charter and Scorecard for Broad Based Socio-Economic Development in
Mining• Royalties Bill
Xstrata response:
• Formation of Xstrata Transformation Committee– Ownership & JVs – Human Resources & Employment Equity Strategy– Housing and Accommodation– Social & Community Development– BEE procurement
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Background to BEE ownership deal• The Minerals and Petroleum Resources Development Act (MPRDA) provides for the conversion of old
order mining rights into new order mining rights
• One of the requirements defined in the MPRDA to achieve conversion is the transfer of 26% ownership of mining industry assets in 10 years by each mining company
• BEE deal with African Rainbow Minerals Limited (“ARM”) concluded in February 2006
• Effective date 1 July 2006
• 10% option to increase shareholding in XCSA was exercised by ARM on 1 September 2006
• Structured to maximise growth opportunities for both ARM and XCSA through a new jointly owned company ARM Coal.
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41
Structure & Transaction Steps
ARM Coal was incorporated and ARM and Xstrata subscribed for their interests in the newly issued shares of the company.
ARM Coal subscribed for a 20% interest in Xstrata South Africa in the form of participative preference shares, giving ARM Coal the right to participate in Xstrata’s existing South African coal business excluding GGV
ARM Coal acquired a 51% controlling stake in the Goedgevonden (unincorporated) Joint Venture
ARM exercised its option and acquired a further 10% directly into Xstrata’s existing South African coal business excluding GGV.
Xstrata Schweiz
Xstrata South Africa
Xstrata Coal SA
ARM Coal
ARM
Goedgevonden Joint Venture
49%
20%80% (70%)
51%
51%49%
(10%)
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42
Mentoring JVs
Liketh
BEE supplying coal to Eskom from Xstrata operations
• Started off as JV
• Then Liketh managed contractors
• Now Liketh owns equipment and is the principle in the relationship with Eskom
Zingisa
Female led HDSA empowerment company:
• JV with Xstrata to supply coal to Eskom
• Eskom want to expand and extend agreement
• The JV agreement provides for significant development opportunities for this BEE.
Liketh reclaim operation
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Human Resource Development & Employment Equity
Present Organisation
Future Organisation
EE Targets
% by level
No. by skill / profession
Organic Development
Employee evaluation systems
Career path system
Employee Development & Training systems
ABET / Skills training
Management training
Individualised programmes
Inorganic Development
Sponsorship of training & education:
Learnerships (108)
Pre-university (15)
College & University (16)
Recruiting systems
Fast Track System
Evaluation
Six-monthly review
Reporting
Succession Planning System
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HDSAs in Management
0%
10%
20%
30%
40%
50%
2001 2002 2003 2004 2005 200611.9% of XCSA employees and 12 % of management are female.11.9% of XCSA employees and 12 % of management are female.
HDSAs in Management
BandTotal
Positions 2001 2002 2003 2004 2005 2006Directors and General Managers F 13 0 0 1 1 2 2
Colliery Managers & Senior Specialists E 47 0 1 4 5 5 8HODs & Specialists D 132 7 12 21 29 44 59
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45
Literacy training
Xstrata Coal South Africa –Adult Basic Education Centre
•Xstrata provides adult basic education & training (ABET) to both employees and community members from basic literacy to computer skills.
•26% of XCSA employees are illiterate.
•Employees are interviewed individually in order to encourage ABET uptake – 972 employees indicated they would like the opportunity to do ABET. There are currently 54 employees attending full time ABET classes
•XCSA and the Emlalahleni Local Council are jointly developing a community-based learning and trade centre with a capacity of 258 students – this will be available to employees and community members with effect from January 2007.
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Career paths
•Career paths are discussed with all employees during career development interviews – this is a one on one process. •To date more than 80% (3250) employees have been exposed to this process.•Over 400 employees are now in the career development programme.•High-flyers enter the Fast TrackFast Trackprogramme:
• Individual development programmes
• Annual review in front of development panel chaired by COO
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Housing, Accommodation
• Xstrata has eliminated hostels except for Boschmans – and unsustainable “mine villages” –currently 116 residents in hostel.
• XCSA pays industry leading “living out allowances” (minimum R1847 per month) which are based on affording employees the opportunity to live in normalised social circumstances.
• XCSA educate and train all employees during annual induction training on how to access and the merits of living in formal housing as opposed to informal housing.
Witbank Presidential Housing initiative
Coal
48
Access to the land - BEE Farming
•Large scale commercial farm management training for 4 HDSAs
•476 hectares – 226ha maize and 270ha Soya
•This will increase to 1235 hectares in 2007
•“Bumper” season in 2005/2006
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Procurement
• HDSA supplier companies enjoy a preferred supplier status with XCSA and a policy is in place.
• The company has identified its base level of procurement from HDSA companies.
• XCSA increased its HDSA spend from a base of 10% of discretionary expenditure in 2002 to 39% in September 2006.
• The target for 2007 is 50% of discretionary.
Tselentis mine – BEE opencast mining contractor
Coal
ARMCoal has the potential to significantly grow in the South African coal industry
• Currently already holds the following investments• 20 % in Xstrata Coal South Africa• 51% interest in Goedgevonden
• First right of refusal on any new projects generated by ARM or Xstrata in SA
• Various prospecting rights have been converted by XCSA for future development
Coal**
Goedgevonden Joint Venture Project
Coal
Goedgevonden Project
• Approval will be sought from the ARM and Xstrata Boards for capital expenditure of R2.9bn (nominal terms) to construct a new open cut complex at Goedgevonden (GGV)
• GGV will be a long life producer and one of the lowest cost export coal mines in South
Africa
• Part of the strategy of providing a low cost “anchor” to the existing XCSA business and
into ARMCoal
• GGV is set up as a JV with ARM Coal – ARM Coal 51% / Xstrata South Africa 49%
• Potential for significantly increasing scale
Slide 52Slide 52
Coal
Goedgevonden Project
• Potential 12.3 Mtpa ROM Multi-Product mine
– 3.1 Mtpa Export– 3.6 Mtpa Eskom
• 33 year LOM• Feasibility Study completed 2005• Murray & Roberts as Managing
Consultants• Detailed design completed• Tenders received for construction
of CHPP and expression of interest for mine equipment.
+/- 24 Month construction program with mine fully operational in 2009
Slide 53Slide 53
CoalGoedgevonden Project
54
GGV Indicative ramp-up
Slide 54Slide 54
Coal
-
1
1
2
2
3
3
4
4
2006 2007 2008 2009 2010 2011
Export tonsEskom tons
Note- indicative ramp-up subject to approvals, rail capacity and other factors.
Goedgevonden Project
Slide 55Slide 55
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57
GGV on Export Thermal Cost Curve
Slide 57Slide 57
2006 Export Thermal FOB Cash Cost Curve
Energy Adjusted to 6350kcal/kg gar
-
10
20
30
40
50
60
0 50 100 150 200 250 300 350 400 450 500 550
Million Tonnes
US$/t
AustraliaIndonesiaChinaSth africaRussia EastRussia WestNew ZealandNorwayCanadaColombiaVenezuelaVietnamUSAPoland
GGV
Coal
ATCOM Site Visit
Coal
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Coal
60
Dragline
Slide 60Slide 60
HDVHDV
Lub & Fuel bay
LDV
You are here
Rom Tip
Coal
61
Mine Overview and ROM tipCoal
62
ATCOM Plant
Slide 62Slide 62
TK4TK1
Product Discard
M1 M2
Workshops
Coal
63
Engineering Workshops and Refueling Bay
Slide 63Slide 63
HDVHDV
LDV
Lub & Fuel bay
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Rom Tip
Coal
Sectional presentation of coal seams
Spoil
Previously mined areas
Buffer
Overburden (0 – 25m)4l Seam (ave 2m)
Interburden (20 – 25m)
2 Seam (4 - 5m)
Slide 64Slide 64
Coal
Pillars
Dragline Cut Width (50m)
Plan View
Slide 65Slide 65
Coal
66
Coal
“Empowered growth”