Presentation to the Select Committee on Labour and Public Enterprise August 2011.

Presentation to the Presentation to the Select Committee on Select Committee on

Labour and Public Labour and Public Enterprise Enterprise

August 2011August 2011

Progress on the Implementation of Alexkor’s Corporate Plan

• Introduction• Overall Strategy/Key Elements• Progress on Key Elements• Corporate Plan Targets• Results• Commencement of Alexkor RMC JV• Commence large scale exploration• Alexkor Corporate

Introduction

• Implement the Deed of Settlement• Secure and expand the Alexkor Operations• Maintain sustainability of Alexkor• Enlarge the production base• Increase the number of contractors• Secure new sources of production• Investigate the beneificiation of the product• Implement the Alexkor RMC JV• Commence large scale exploration

Overall Strategy/Key Elements of the Corporate Plan

• To give effect to the Deed of Settlement (DoS)agreement between Alexkor, the government of South Africa and the Community of the Rictersveld. Inter alia this will include:

- The formation of the PSJV - Operating the current activities on a profitable

basis- Reducing costs while exploring strategies that will

ensure long term viability• Commence with exploration in the onshore and offshore

mining and prospecting areas (the intention of the exploration is to provide a sound footing and basis to increase mining from the land operations and to stabilize mining from the marine areas for the foreseeable future

• Progress on Key Elements

Overall Strategy/Key Elements of the Corporate Plan (cont.)

• Commence with exploration in the onshore and offshore mining and prospecting areas (the intention of the exploration is to provide a sound footing and basis to increase mining from the land operations and to stabilize mining from the marine areas for the foreseeable future);

• To secure and expand the Alexkor operations into new diamond mining opportunities in and outside the borders of South Africa to ensure Alexkor becomes profitable and sustainable. Inter alia this will include:

- Improving performance and achieving real cost savings whilst seeking an optimal business model

- The objectives are to build a sustainable diamon mining company with a diversified portfolio of diamond mining ventures

Overall Strategy/Key Elements of the Corporate Plan (cont.)

• Alexkor must comply with all applicable legislation (especially in terms of the Mining Charter and PMFA)

Progress on Richtersveld Deed of SettlementThe Settlement reached entails the following:Restoration of the land claimed. Portions of land to be transferred to the RVC by Alexkor & the State [Alexkor, the State & Northern Cape Government ordered to give effect to];Transfer of Alexkor’s land mining rights to the RVC [Alexkor ordered to give effect to]. In the interim, a Pooling & Sharing Joint Venture (PSJV) to be formed between Alexkor & the RVC. The State to capitalise Alexkor for it to contribute R200 m to this PSJV in order to constitute a viable mining venture;Transfer of Alexkor’s agricultural & mariculture assets to the RVC in order to empower the RVC & to create a basis for future development & wealth creation [Alexkor ordered to give effect to];R190 m as extraordinary reparation to be paid to the RVC’s Investment Holding Company in 3 equal instalments over 3 years [The State (DLA) ordered to give effect to];

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Progress on the Dos

R50 m lump sum development grant to the RVC’s Investment Holding Company to be used for the recapitalisation of the agricultural & maricultural enterprises [State (DLA) ordered to give effect to];R45 m to the RVC’s Property Holding Company as compensation to secure Alexkor’s right of occupation of the transferred residential properties for a period of ten years [Alexkor ordered to give effect to on transfer of erven to RVC]; Establishment of a formal township in terms of the Northern Cape Planning & Development Act, 1998 at Alexander Bay [The State & Alexkor ordered to give effect to];Environmental rehabilitation & revision of the mine’s Environmental Management Programme [Alexkor ordered to give effect to financial obligation for all outstanding environmental rehabilitation, with the State providing a guarantee for the financial obligation]; andCosts in connection with the implementation of the Settlement.

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Court Order

The Deed of Settlement & the Unanimous Resolution declared to be binding between the Richtersveld Community, Alexkor, the Government of the Republic of South Africa & the Government of the Northern Cape Province

The Order of Court states in clause 6: “By consent the State shall procure that Alexkor shall perform its obligations in terms of the Deed of Settlement & the Unanimous Resolution & that Alexkor shall be in a financial position to do so.”

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Status of Richtersveld Land Claim Settlement 1/1

Obligations Status

Restoration of the land claimed. Portions of land will be transferred to the RVC by Alexkor and the State [Alexkor, the State & Northern Cape Government ordered to give effect to]

All land has been transferred, except for the township erven

Transfer of Alexkor’s land mining rights to the RVC [Alexkor ordered to give effect to]. In the interim, a Pooling & Sharing Joint Venture (PSJV) will be formed between Alexkor and the RVC. The State will capitalise Alexkor for it to contribute R200 million to this PSJV in order to constitute a viable mining venture

The Notarial Deed of Cession of the Alexkor land mining right (from Alexkor to RMC) was registered by the Mineral & Petroleum Titles Registration Office on 6 April 2011

Transfer of Alexkor’s agricultural and mariculture assets to the RVC in order to empower the RVC and to create a basis for future development and wealth creation [Alexkor ordered to give effect to]

Alexkor’s agricultural and maricultural assets were transferred to the Richtersveld Community’s agricultural holding company in January 2008.

R190 million as extraordinary reparation to be paid to the RVC’s Investment Holding Company in three equal instalments over three years [The State (DLA) ordered to give effect to]

Paid

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Status of Richtersveld Land Claim Settlement 2/2Obligations Status

R50 million lump sum development grant to the RVC’s Investment Holding Company to be used for the recapitalisation of the agricultural and maricultural enterprises [State (DLA) ordered to give effect to]

Paid in 2007

R45 million to the RVC’s Property Holding Company as compensation to secure Alexkor’s right of occupation of the transferred residential properties for a period of ten years [Alexkor ordered to give effect to on transfer of erven to RVC]

Alexkor to give effect on transfer of erven.

Establishment of a formal township in terms of the Northern Cape Planning and Development Act, 1998 at Alexander Bay [The State & Alexkor ordered to give effect to]

Township upgrade commenced. Upgrade expected to be completed in July 2011.

Environmental rehabilitation and revision of the mine’s Environmental Management Programme [Alexkor ordered to give effect to financial obligation with the State providing a guarantee for the financial obligation]

Revised EMP submitted to DME in November 2008. Rehabilitation commenced

Outstanding Richtersveld Land Claim Committments

Establishment of a formal township in terms of the Northern Cape Planning and Development Act, 1998 at Alexander Bay [The State & Alexkor ordered to give effect to];

Environmental rehabilitation and revision of the mine’s Environmental Management Programme [Alexkor ordered to give effect to financial obligation with the State providing a guarantee for the financial obligation];

R45 million to the RVC’s Property Holding Company as compensation to secure Alexkor’s right of occupation of the transferred residential properties for a period of ten years [Alexkor ordered to give effect to on transfer of erven to RVC];

Transfer of Alexkor’s land mining rights to the RVC and forming the Pooling & Sharing Joint Venture[Alexkor ordered to give effect to].

Pooling & Sharing Joint Venture

Clause 8.3 of the Deed of Settlement (DoS) provides for formation of a Pooling & Sharing Joint Venture (PSJV) between Alexkor & Richtersveld Mining Company (RMC) as follows:

– Alexkor & RMC to remain holders of their respective marine & land mining rights;– Alexkor & RMC to put their respective mining rights under the full control of a

Joint Board of the PSJV for purposes of mining both marine & land diamond resources;

– Alexkor to further put its land & marine mining assets under the control of the Joint Board & certain of its personnel under the control of the Executive Committee which shall be appointed by the Joint Board;

– Alexkor to initially hold a 51% stake & RMC a 49% interest in the PSJV; and– Alexkor shall make an initial finance & capital contribution of R200 m to the PSJV

which will be expended on both the land & sea operations according to a mining development programme approved by the Joint Board.

Pooling & Sharing Joint Venture

ALEXKOR(land & sea mining rights)

Land mining rights transferred to RMC

Alexkor retains sea mining rights, mining

assets

PSJVAlexkor 51%RMC 49%

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Conditions Precedent for the Formation of the PSJV

• In terms of clause 3.1 of the Unanimous Resolution, the commencement of the PSJV was subject to the fulfilment of a number of suspensive conditions namely:

i. that RMC & Alexkor must obtain the required approvals to implement the pooling transaction from the Competition Authorities under Competition Act, 1998, all on an unconditional basis or under circumstances where any conditions attached to any of such approvals, that such conditions are reasonably accepted to Alexkor & the RMC [The Competition Commission subsequently advised that the transaction was not notifiable];

ii. that the Land Claims Court grants an order confirming or noting the Deed of Settlement &, to the extent necessary, the terms, provisions & conditions of the PSJV [The Land Claims Court made the DoS an order of court on 9 October 2007];

iii. that the existing Environmental Management Plan of Alexkor be amended as contemplated in clause 9 of the Deed of Settlement [Alexkor’s revised EMP was submitted to the Department of Mineral Resources (DMR) in November 2008]; and

iv. that the land mining rights are transferred to RMC with the permission of the Minister of Minerals & Energy, as contemplated in clause 8.2 of the Deed of Settlement [the Notarial Deed of Cession of the Alexkor land mining right (from Alexkor to RMC) was registered by the Mineral & Petroleum Titles Registration Office on 6 April 2011].

Pooling & Sharing Joint Venture

ALL THE SUSPENSIVE CONDITIONS FOR POOLING & SHARING JOINT VENTURE TO COME INTO EFFECT HAVE BEEN FULFILLED

ALEXKOR HAS SUBMITTED APPLICATION FOR THE APPROVAL OF THE POOLING & SHARING JOINT VENTURE IN TERMS OF SECTION 54(2) OF THE PFMA

GIVEN THAT THE PSJV HAS NOW COME INTO EFFECT, ALEXKOR’S OPERATIONS IN ALEXANDER BAY WILL FALL UNDER THE CONTROL OF THE JOINT BOARD OF THE PSJV

JV Operations

DoS Requirements

• All houses and buildings to be transferred to CPA• Town should be upgraded to municipal standard and to

be transferred to the Richtersveld Municipality administration

• The JV should be governed by a Board consisting of 3 members appointed by Alexkor and 3 members appointed by RMC

• Management appointed by the Board consisting of a General Manager and Executive Committee

DoS Requirements

• Submission of a Environmental Management Plan to DMR

• Conversion of Mining/ Prospecting Rights to New Order• Ceding of Land Mining Rights to RMC• Surface Rights to be transferred to CPA

DoS Requirements

• Government to provide funding towards further exploration by the JV = R200m

• Town Establishment = R120m

Commencement of JV

• 7 April 2011

Progress of JV

• Town Establishment is in progress, anticipated to be completed by May 2012, within budget

- Phase 1 of the project (Civil Engineering Services) is 93% complete versus the target of 100%. This project phase was supposed to be completed by 1st July 2011 but due to hard rock intersected, subcontractor withdrawal from the project and declining road conditions, the deadline was not met. The revised completed time for this phase is the end of September 2011 (due to more road damages encountered since the finalization of the tender)

Phase 2 of the project (The Electrical Engineering Services) is 27.6% completed versus 40% due to delayed delivery of equipment. The consultants are working on this.

Phase 3(treatment works) is estimated to be completed on 31 March 2012.

• Conversion of Mining Rights granted by DMR June 2011

• Ceding of Land Mining Rights happed on 6 April 2011• Commencement of JV 7 April 2011• JV Board

• R Muzariri (Acting Chairperson) (Alexkor)• Dr. R Paul (Alexkor)• S Ngoma (Alexkor)• W Diergaardt (RMC)• M Solomon (RMC)• C Matthews (RMC)

Progress of JV

• Conversion of Mining Rights granted by DMR June 2011

• Ceding of Land Mining Rights happed on 6 April 2011• Commencement of JV 7 April 2011• JV Board

• R Muzariri (Acting Chairperson) (Alexkor)• Dr. R Paul (Alexkor)• S Ngoma (Alexkor)• W Diergaardt (RMC)• M Solomon (RMC)• C Matthews (RMC)

Progress of JV

• In terms of DoS the Board needs to appoint an Exco

Progress of JV

• Continue with production from contractor operations• 50 Shallow water contractors• 3 Beach mining contractors• 3 Land mining contractors• 1 Deep Sea contractor

• Continue to establish and maintain solid production• Utilize all of concessions• Keep cost under control• Alexkor employees to be seconded to JV• Employee good local skills• Investigate the beneficiation of product

Progress of JV

• Commence exploration on Land concessions• Exploration conducted in phased manner• R200m allocated towards exploration• Spending in prudent and cautious manner• Target areas that has got a known resource• Goal is to establish land mine operations for at least 10

years

Targets

• Implement DoS• Commence Alexkor RMC JV• Expand the production to 36 225 (31 000 – 2011)• Expand operations

• 50 Shallow water contractors• 3 Beach mining contractors• 3 Land mining contractors• 1 Deep Sea contractor

• Separate Alexkor Corporate and JV

Targets

• Conversion of rights and ceding of rights• Formation of Board and appointment of Exco• Commence large scale exploration on Land• Upgrade of town• Government to provide funding towards further exploration by

the JV = R200m• Town Establishment = R120m

Results

• 7 April 2011• Ceding of rights 6 April 2011• First Joint Board meeting 28 April 2011

Production Results

Production Results

Production Results

Production Results

Summary

• JV has commenced on 7 April 2011• Board has been established• Exco position to be filled• Production is maintained and improved• Exploration to be commenced• Town Establishment completed by 2012

Alexkor Corporate (background)

• Alexkor to be separated into JV and Alexkor Corporate• Alexkor Corporate office in Johannesburg• Opportunity to look for new business ventures• Find and secure diamond mining opportunities in

Southern Africa• Continue with rehabilitation of historical affected areas• Is responsible for the Post-retirement medical aid

liability• Generate cash flow from new ventures asap

New Business

• Since the establishment on the JV on 7th April 2011 the Johannesburg office has begun to look for new diamond ventures

• A number of 24 opportunities have been considered thus far• 4 have been short-listed• MTEF applications have been submitted• Other funding methods are being looked at, which include the IDC

and DBSA

In Future…

Success of the new business is key for the future sustainability of Alexkor, which will enable it to service its

liabilities, produce diamonds and jobs

Thank You