Laboratory worker at Goedgevonden Coal Mine

82 Laboratory worker at Goedgevonden Coal Mine

Integrated Annual Report 2013 Operational review ARM Coal 83 ARM Coal F2013 F2012 % change ARM Coal attributable sales volumes (000t) Headline earnings Rm 148 52 185 EBITDA margin % 45 42 EBITDA Rm 414 323 28 5 000 4 000 4 300 4 200 4 100 4 600 4 500 3 000 Attributable capital expenditure R41 million 2 000 Key projects invested in during the year Tweefontein Optimisation Project 1 000 0 F2009 F2010 F2011 F2012 F2013 ARM Coal contribution to headline earnings increased to R148 million from R52 million in F2012 as Goedgevonden Mine exceeded steady state production. Where we operate Paardekop Power Stations Goedgevonden Tweefontein Division Impunzi Division (ATCOM/ATCOM East) Undeveloped Resources

84 ARM Coal Thando Mkatshana Chief Executive: ARM Coal Divisional structure Xstrata Holdings SA 100% Glencore Operations South Africa*** 49% 51% * 51% 20% Goedgevonden (GGV) Participating Coal Business (PCB)** 49% 70% 10% * ARM Coal holds the following: Access to Glencore Operations South Africa s (previously Xstrata South Africa) interest and entitlement in the Richards Bay Coal Terminal (RBCT); and An export entitlement of 3.2 mtpa in the Phase V expansion at the RBCT. ** Participating Coal Business (PCB) refers to Xstrata South Africa s coal operations excluding GGV. *** Glencore Operations South Africa (Pty) Ltd was previously Xstrata South Africa (Pty) Ltd.

Integrated Annual Report 2013 Operational review ARM Coal 85 Scorecard F2013 objectives F2013 performance F2014 objectives Goedgevonden Coal Mine Complete a prefeasibility study to expand Goedgevonden Mine output. Pre-feasibility study underway, completion envisaged by December 2013. Progress feasibility study. Participating Coal Business (PCB) Continue construction of the Tweefontein Optimisation Project (TOP). Commission Addcar 5 seam mining. Take advantage of improved performance by Transnet and increase thermal coal exports. 71% of the capital expenditure was committed as at 30 June 2013. The Addcar 5 seam mining was commissioned in Q3 F2013. Export performance targets achieved. Continue with construction and implementation of TOP in accordance with the project schedule. Review Addcar performance and commence with conceptual study for additional Addcar units. Improve Eskom coal sales. Overview Operational overview attributable to ARM F2013 F2012 F13/12 % change Operational target 2014 PCB sales million tonnes 2.4 2.8 (14) Export thermal coal sales million tonnes 2.0 1.9 5 Eskom thermal coal sales million tonnes 0.3 0.7 (57) Local thermal coal sales million tonnes 0.1 0.2 (50) Goedgevonden sales million tonnes 2.1 1.8 17 Export thermal coal sales million tonnes 0.9 0.8 13 Eskom thermal coal sales million tonnes 1.2 1.0 20 ARM total sales million tonnes 4.5 4.6 (2) Export thermal coal sales million tonnes 2.9 2.7 7 Eskom thermal coal sales million tonnes 1.5 1.7 (12) Local thermal coal sales million tonnes 0.1 0.2 (50) ARM operating profit margin % 35 32 Financial overview attributable to ARM F2013 F2012 F13/12 % change Cash operating profit R million 822 686 20 Goedgevonden R million 417 317 32 PCB R million 405 369 10 Headline earnings attributable to ARM R million 148 52 185 Goedgevonden R million 162 78 108 PCB R million (14) (26) 46

86 ARM Coal continued Operational and financial review ARM Coal s operating profit attributable to ARM increased by 20% from R686 million to R822 million in F2013. This improvement was mainly due to increased export sales volumes achieved at both Goedgevonden Mine and PCB. Although a weaker Rand contributed significantly to the improvement in cash operating profit, export US Dollar prices decreased by an average of 13% which reduced the benefit of the weaker Rand. ARM Coal headline earnings attributable to ARM were R148 million for F2013 compared to R52 million in F2012. The increase is mainly due to the increase in cash operating profit offset by an increase in taxation. Operational performance at Goedgevonden Mine continued the positive trend that started in 2H F2012 and this resulted in an increase of 28% in saleable production year-on-year but saleable production at PCB decreased by 4% year-on-year due to further closures of underground operations. Goedgevonden Coal Mine Run-of-Mine (ROM) production increased by 10% year-on-year as the mine has now reached steady state production levels. The Coal Handling and Processing Plant (CHPP) at Goedgevonden Mine has achieved design capacity levels of performance on a consistent basis during the year which resulted in an increase of 28% in saleable production compared to F2012. An improved and more consistent performance by Transnet Freight Rail since Q1 F2013 resulted in increases in export volumes of 11% while a combination of increased rail and road haulage resulted in Eskom sales volumes being up by 22%. Attributable export revenue in F2013 increased by R122 million due to increases in sales volumes (R80 million) and a weaker Rand (R196 million) but decreased by R154 million due to a reduction in export prices. The export US Dollar price at US$83.88 per tonne is 15% lower than F2012 but a different product mix was supplied into the Asian markets in F2013. A decrease in inland sales resulted in a R55 million reduction in revenue. Total attributable on-mine costs decreased by R9 million mainly due to savings achieved by the closure of the South Stock underground operation offset by inflation and a substantial increase in the price of diesel. Attributable ROM production and saleable production were respectively 6% and 2% lower than F2012 mainly due to the closure of the South Stock underground operation which were partially offset by increased production at the Tweefontein and impunzi East mining complexes. The on-mine cost per saleable tonne increased marginally from R321 per tonne in F2012 to R326 per tonne in F2013 as costs were well controlled. This reduction is also evidence of the benefits that will result from ARM Coal s long-term strategy to move to large scale open-cast operations. PCB sales split (100% basis) Inland 2% Eskom 3% Attributable cash operating profit increased by 32% from R316 million to R417 million and headline earnings increased by 108% from R78 million to R162 million. Attributable export revenue in F2013 increased by R77 million due to increases in sales volumes (R71 million) and a weaker Rand (R91 million) but decreased by R85 million as a result of a reduction in export prices. The cost per saleable tonne decreased by 14% from R200 per tonne in F2012 to R171 per tonne in F2013. The increase in headline earnings was mainly due to the increase in cash operating profit offset by an increase of R32 million in income tax. Goedgevonden sales split (100% basis) Export 76% Eskom 24% Participating Coal Business The PCB attributable cash operating profit increased by 10% to R405 million. The attributable headline loss improved by 46% from a R26 million loss to a R14 million loss mainly due to the increase of R36 million in operating profits, offset by small increases in interest, depreciation and taxation. Export 95% Capital expenditure The ATCOM East Project implementation and construction has been completed with 99% of the capital of R2.7 billion being spent. Project close out is underway and is planned to be completed in Q1 F2014. Implementation and construction of the Tweefontein Optimisation Project is progressing well and as at 30 June 2013, 71% of the estimated cost of R8.2 billion had been committed. The project is expected to be completed in F2016. Capital expenditure at PCB for the year amounted to R4.2 million of which 73% was spent at Tweefontein (mainly the Tweefontein Optimisation Project) and 15% at ATCOM East. As the Goedgevonden Mine is now in full production, the capital amount has reduced and mainly related to maintaining current levels of production. Logistics Transnet Freight Rail s performance on the export line to Richards Bay Coal Terminal (RBCT) improved compared to F2012. Although performance was hampered by the annual maintenance shut down during May 2013, current performance indicates that 77mtpa could be achieved for the 2013 calendar year compared to the 68mtpa in the 2012 calendar year. The improved performance trends well towards Transnet s planned expansion to 81mtpa by 2015 and provides an opportunity for ARM Coal to increase export volumes.

Integrated Annual Report 2013 Operational review ARM Coal 87 Performance on the Eskom rail line from Goedgevonden Mine is still not at the planned levels which resulted in large quantities of coal still being transported by road. Sustainability review Our sustainable development reporting is limited to those operations over which we have direct joint management control and therefore excludes the ARM Coal operations. Mining rights status As at 30 June 2013 all conversions from Old Order Mining Rights to New Order Mining Rights for the operations in PCB had beengranted and only one still has to be registered by the mining titles office. All applications for New Order Mining Rights have been granted, executed and registered in the mining titles office. Prospects Implementation of the Tweefontein Optimisation Project is the last leg of the strategy to operate large scale tier 1 predominantly opencast mines. Goedgevonden Mine and Impunzi have already been completed and have delivered much better efficiencies and improved unit costs per saleable tonne produced. The commissioning of the Tweefontein Optimisation Project will therefore result in further improvement and highly competitive overall business performance. ARM Coal export sales (100% basis) (million tonnes) 18 16 14 Market review Export coal market The thermal coal seaborne trade has continued to experience an oversupply of coal which has also been fuelled by the slowdown of coal imports to China as China diversifies to other sources for electricity generation. This oversupply has continued to exert pressure on the prices but the long-term outlook for coal remains positive. World primary energy consumption is projected to grow by 36%, at a rate of 2% up to 2020 and 1.5% thereafter to 2030. This growth will be well suited for low cost producers. Coal consumption grew by 5% in 2012 making it the fastest growing energy source outside of renewables. Coal also accounted for 30% of energy production in 2012, the highest share in the last 40 years. South Africa is in a very good position to supply both the Pacific and Atlantic markets as it has a good product mix that addresses the demand from both markets. India continues to be a major buyer of coal from South Africa and deteriorating coal qualities from Indonesia should support an increase in demand for High Calorific Value (HCV) material from South Africa Domestic coal market Coal-fired base load power stations make up 93% of Eskom s total power generating capacity. Eskom still has to secure large quantities of coal for long-term supply to these plants. The coal mining sector in collaboration with Eskom is looking at further exploitation of the resources. Both Goedgevonden and PCB are well positioned to benefit in the Eskom increase in coal demand. Both Goedgevonden and PCB are well positioned to benefit from the increase in coal demand from Eskom. Thermal coal pricing trends for F2013 (July 2012 to June 2013) (US$/t) 12 10 8 6 4 2 0 F08 F09 F10 F11 F12 F13 F14 F15 F16 92 90 88 86 84 82 80 PCB GGV 78 76 ARM Coal Eskom and local sales (100% basis) (million tonnes) 74 Jul 2012 Jun 2013 14 Source: INet Bridge 12 10 8 6 4 2 0 F08 F09 F10 F11 F12 F13 F14 F15 F16 PCB GGV

88 ARM Coal continued Goedgevonden Coal Mine Management Resources and Reserves (100% basis) ARM s economic interest Governed by a management committee, controlled by ARM Coal, with four ARM representatives and three GlencoreXstrata representatives. 205 mt (saleable reserves) 26.01% Total labour Permanent staff 584 Contractors 407 100% basis F2013 F2012 F13/12 % change Total saleable production million tonnes 8.2 6.4 28 Total sales million tonnes 7.9 6.7 18 Export million tonnes 3.4 3.0 13 Domestic million tonnes 4.5 3.7 22 Average price received Export (FOB) US$/t 91.00 101.90 (11) Eskom (FOR) R/t 187.57 146.06 28 On-mine saleable cost per tonne R/t 171.2 199.80 14 Cash operating profit R million 1 603 1 216 32 Operating profit margin % 45 41 Capex R million 157 506 69 Attributable profit analysis F2013 F2012 % change Cash operating profit attributable to ARM R million 417 316 32 Less: interest paid R million (86) (97) 11 amortisation R million (94) (98) 4 fair value adjustments R million (11) (11) Profit before tax R million 226 110 105 Tax R million (64) (32) (100) Headline earnings attributable to ARM R million 162 78 108

Integrated Annual Report 2013 Operational review ARM Coal 89 Participating Coal Business Management ARM s economic interest Governed by a supervisory committee with five GlencoreXstrata representatives and three ARM representatives. 20.2% 100% basis F2013 F2012 F13/12 % change Total saleable production million tonnes 12.7 13.2 (4) Impunzi million tonnes 5.7 5.5 4 South Stock million tonnes 1.6 3.1 (48) Tweefontein million tonnes 5.4 4.6 17 Total sales million tonnes 11.9 13.3 (11) Export million tonnes 9.8 9.3 5 Eskom million tonnes 1.6 3.3 (52) Domestic million tonnes 0.5 0.7 (29) Average price received Export (FOB) US$/t 83.88 98.75 (15) Eskom (FOR) R/t 157.70 120.31 31 Domestic (FOR) R/t 262.24 262.12 0 On-mine saleable cost per tonne R/t 326.29 321.37 2 Cash operating profit R million 2 005 1 828 10 Operating profit margin % 25 24 Capex R million 4 217 2 230 89 Attributable profit analysis F2013 F2012 % change Cash operating profit attributable to ARM R million 405 369 10 Less: interest paid R million (125) (118) (7) amortisation R million (270) (268) (1) fair value adjustments R million (29) (20) (45) Profit before tax R million (19) (37) (49) Tax R million 5 10 50 Headline loss attributable to ARM R million (14) (27) (48)