1 Palabora Mining Company Limited (“PMC”) The effect of suspending section 45 on PMC’s BEE transaction 21 June 2011

Key points PMC’s BEE transaction enables meaningful economic benefits to HDSA’s, including 20% equity participation by communities and employees The transaction structure is in place for sound commercial reasons, is not an avoidance scheme and is fully taxable –no tax loss to SA The suspension of section 45 will result in a tax charge which is not financially feasible for the transaction.

3 1.Introduction - The business PMC is a South African company located in the Limpopo Province and listed on the JSE The company extracts and beneficiates copper, vermiculite and magnetite –It is South Africa’s major producer of refined copper PMC employs around 2,500 people, of which 79% are HDSAs PMC has a market capitalisation of c.$6.1 billion (as at 20 June 2011) and its FY2010 Revenue was R7 billion realising a profit after tax of R595 million.

4 1.Introduction (contd) HDSA equity participation is a requirement of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry (Mining Charter). It is a business imperative for PMC to secure conversion of its mining rights under the Minerals and Petroleum Resources Development Act, PMC therefore entered into an empowerment transaction in June 2010, which is to be implemented in the near future on fulfillment of certain conditions. This followed an intensive consultation process which commenced in 2008 with multiple stakeholders, including communities, trade unions and other BEE partners.

5 BEE equity participation structure Loan PMC BEE Consortium Palabora Copper (new company) 74% 10% 6% 10% BEE Employee Trust BEE Community Trust Sale of business and shares in foreign subsidiaries

6 Transaction steps Empowerment partners obtain their 26% shares in Palabora Copper for a negligible price. PMC transfers its business and assets to Palabora Copper. Consideration is left outstanding as a inter-company loan. The loan will be repaid out of cash flow. Based on current consensus pricing, the loan will be repaid in approximately 2 years.

7 No loss of tax to the country Interestincome taxed at 28% PMC BEE Consortium Palabora Copper 74% 10% 6% 10% BEE Employee Trust BEE Community Trust 28% tax relief on interest expense

8 Benefits of the structure As Palabora Copper will be fully geared, it can issue shares to the Empowerment Partners at a negligible cost –Enables Empowerment Partners to become shareholders without having to raise funds; –Creates a stable structure that creates real value for the Empowerment Partners. The Empowerment Partners get full voting rights from day 1. The Empowerment Partners will have the same class of shares as PMC in Palabora Copper. Structure not dependant on strong growth in the listed share price of PMC or interest rates.

9 Benefits of the structure (contd) A third party would have required the Empowerment Partners to raise R6.1 billion of debt. A structure at the level of PMC was considered inappropriate as it would have a finite term and is also dependant upon the future share price of PMC. The commercial attributes of the structure favour the Empowerment Partners and enable meaningful economic benefits to the partners.

10 Specific attributes of the structure Price for business is transparent as it is based on PMC’s current share price. Full voting rights from day 1. Minimum dividend of c. 28 million (increasing each year) from day 1. Board representation for Empowerment Partners.

11 Community Trust Community participation Makhushane Community Mashishimale Community Maseke Community Selwane Community Majeje Community Palabora Copper All surrounding communities are participating in the transaction. Dividends received from Palabora Copper used for sustainable and meaningful community upliftment. 10%

12 Employee Trust Employee participation PC 10% All employees except CEO and expatriates. Dividends received from Palabora Copper flow equally to all employees. All employees to benefit directly as beneficiaries, not linked to union affiliation or participation. All employees

13 Engagement Process Active engagement with the Communities and the Consortium from Q Engagement with the main unions (NUM and Solidarity) from February The Communities nominated their own lawyer to represent all three Empowerment Partners. Financial adviser was appointed in 2008 by the Communities. From 2009 the transaction agreements have been prepared, and negotiated. The transaction agreements were signed by all of the parties on 10 June 2010.

14 Suspension of section 45 The outstanding conditions should be fulfilled shortly and the transactions are about to be implemented. The suspension will result in the business transfer being fully subject to tax. Tax will therefore be payable on R6 billion in terms of a transaction that will have no loss to the SA’s tax revenues and is aimed at broad-based empowerment. This tax charge is not financially feasible for the company or its Empowerment Partners. Our shareholders are gravely concerned with the proposed suspension –PMC’s share price has dropped 20% last week on the news of the potential impact of the proposals on PMC.

Suspension of section 45 (contd) PMC has incurred significant costs and time in putting the structure in place. The proposal will set PMC back significantly and could put its mining rights in jeopardy. 15