1. Presentation to the Select Committee on Economic and Foreign Affairs Mzolisi Diliza, Chief Executive, Chamber of Mines of South Africa 7 February 2007 Chamber of Mines of South Africa

2. 2 Outline of presentation 1. 1.The importance of mining to the economy 2. 2.Background to the Chamber of Mines 3. 3.The importance of tripartite co-operation 4. 4.Some challenges facing the industry.

3. 3 1. Importance of mining to the economy Gross Domestic Product (GDP): Directly: 6.2% of GDP Including indirect contribution: 16% Exports: R105-billion in export earnings 30% of total merchandise exports Including beneficiated mineral products: over 50% of exports 60 different minerals are mined – exported to over 100 international destinations

4. 4 Important provider of jobs Mining employees: 450 000 Wage bill = R36-billion

5. 5 Important provider of jobs Mining employees: 450 000 Dependants: 5 million

6. 6 Important provider of jobs Associated industries: 150 000 Mining employees: 450 000 Dependants: 5 million

7. 7 Importance of mining (continued) Energy: 93% of electricity generation via coal power plants About 30% of liquid fuels via Sasol’s use of coal Investment: 12% of fixed investment (direct and indirect) At R1-trillion, 33% of the market value of the JSE Empowerment deals of R30 billion in 2006 Complementary role in deep rural areas:   Remittances   Clinics, schools, community centres   Development projects   Financial infrastructure   TEBA Development, TEBA Bank

8. 8 2. The Chamber of Mines Vision: To achieve a policy, legislative and governance framework, which is widely supported and which will allow the mining industry to convert as great a part of the country’s abundant mineral resources into wealth for the benefit of South Africa. A private sector body, fully funded by private companies Founded in 1889

9. 9 Some principles supported by the Chamber Emphasis on addressing historical legacies Need for transformation to ensure a more inclusive and participative economy: Mining Charter developed on tripartite basis Unions are important stakeholders Importance of participating in economic tripartism Importance of dealing responsibly with an important national resource.

10. 10 Chamber transformation 2006 Black persons in management and professional (COM) 40% Women: total management and professional (COM) 47% Women: total employment (COM) 52% Women: total employment (12 major mining companies) 7%

11. 11 Chamber representation Chamber members account for 90% of the country’s mineral production and 89% of employment Chamber approach is fully mandate driven through numerous technical policy committees representing members Research backing for Chamber views an important priority.

12. 12 How the Chamber operates − President:Lazarus Zim − Vice-presidents: Ralph Havenstein Bernard Swanepoel − COM CE: Mzolisi Diliza − Other CEOs Executive Council Final mandate on major issues

13. How the Chamber operates Executive Council Policy committees Company experts Environment, labour relations, skills development, health, safety, etc. 13 Gold and coal principals

14. 14 The advocacy role of the Chamber Government, Parliament, Parastatals Member of Business Unity South Africa (BUSA) International role Chamber not a service organisation (exception of collective bargaining for gold and coal).

15. 15 Future of Gold Mining HIV/AIDS Committee Tripartism in the Mining Industry Minerals & Mining Development Board Mine Health and Safety Council 3. Tripartite co-operation Sector Partnership Committee, Social Plan, etc Mining Summits (past and future) Sustainable Development issues

16. 16 4. Some challenges facing the industry Health & Safety Issues Chamber of Mines Skills devl. Issues Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues Compliance with the Minerals Act Compliance with Mining Charter Beneficiation Transformation Issues

17. 17 Drop in mining investment Input cost pressures – Energy – Transport – Water Royalties. Some challenges facing the industry Health & Safety Issues Chamber of Mines Skills devl. Issues Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues Transformation Issues

18. 18 Health & Safety Issues Chamber of Mines Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues Transformation Issues Some challenges facing the industry Skills devl. Issues Financial Provision for mine closure Climate change, biodiversity Water resource management

19. 19 Health & Safety : Milestones Integration of Health & Safety Laws Integration of Compensation Systems HIV/AIDS Some challenges facing the industry Health & Safety Issues Chamber of Mines Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues Transformation Issues Skills devl. Issues

20. 20 Some challenges facing the industry Transformation Issues Health & Safety Issues Chamber of Mines Skills dev Issues Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues Bargaining council for mining industry Provident Fund Accommodation Women in mining

21. 21 Transformation Issues Health & Safety Issues Chamber of Mines Skills dev Issues Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues Skills shortages Learnerships and apprentices Adult literacy MQA Some challenges facing the industry

22. 22 Framework for responsible mining Gold theft REACH Some challenges facing the industry Transformation Issues Health & Safety Issues Chamber of Mines Skills dev Issues Economic Issues Environmental Issues Labour relations Issues Sustainable Development (SD) Issues

23. 23 Major national issue Major national issue Huge impact on mining industry Huge impact on mining industry Substantial in-roads and interventions Substantial in-roads and interventions Provision of antiretrovirals Provision of antiretrovirals 40% – 45% of people in the industry needing treatment are receiving it 40% – 45% of people in the industry needing treatment are receiving it 94% of HIV positive employees return to work 94% of HIV positive employees return to work HIV/AIDS

24. 24 Employee safety: our major concern Employee safety: our major concern We deeply regret fatalities and injuries We deeply regret fatalities and injuries 2005 – best ever improvement in safety (16%) 2005 – best ever improvement in safety (16%) 2006 - below 20% improvement objective 2006 - below 20% improvement objective High level task team appointed High level task team appointed One fatality is one fatality too many One fatality is one fatality too many Safety

25. 25 Skills development On average 4.5% of payroll spent on skills development On average 4.5% of payroll spent on skills development Industry contributes about R15m per annum to Minerals Education Trust Fund for tertiary mining education Industry contributes about R15m per annum to Minerals Education Trust Fund for tertiary mining education Bursaries in mining: Bursaries in mining: Companies: 700 (R40m) Companies: 700 (R40m) MQA: 837 (R50m) MQA: 837 (R50m)

26. 26 SA did not take full advantage of commodities boom SA did not take full advantage of commodities boom Global exploration expenditure increased by 43% but only 27% in South Africa between 2003 and 2005 Global exploration expenditure increased by 43% but only 27% in South Africa between 2003 and 2005 Commodities boom and lost investment opportunities Australia  Pre-tax profits increased by 95%  Capital investment surged by more than 34% South Africa  Profits increased by 12% only  Real fixed investment declined by 16.5% (and 18.6% in 2004) An Australian comparison (2005)

27. 27 Some possible reasons Strong Rand (especially in 2003 and 2004) an important reason Transport: Logistical constraints in rail and ports compounded the problem Industry & Transnet agreed initiatives to overcome logistical inhibitors; Transnet spending R37-billion to upgrade infrastructure in the Waterberg area

28. 28 What are the issues? Issuing of new or converted mining rights Issuing of new or converted mining rights Interpretational differences of Mining Charter, empowerment requirements and Social and Labour Plans Interpretational differences of Mining Charter, empowerment requirements and Social and Labour Plans Capitalisation of Environmental Trust Funds Capitalisation of Environmental Trust Funds Delays in processing water licences Delays in processing water licences Chamber capital investment survey

29. 29 Programme of action to address problems Increasing efficiencies is top priority for DME Industry is addressing shortcomings with applications, e.g. incomplete applications, lack of transparency on some BEE deals Joint investigation into investment constraints and solutions Continuing discussions.

30. 30 Positive developments in recent months: Positive developments in recent months: 2495 new prospecting licences granted (94% finalised within time frame, i.e. either granted or refused) 2495 new prospecting licences granted (94% finalised within time frame, i.e. either granted or refused) 341 mining rights granted (65% finalised) 341 mining rights granted (65% finalised) 1025 permit applications granted (84% finalised) 1025 permit applications granted (84% finalised) Transparency on progress with applications Transparency on progress with applications 8.3% increase in investment between Q3 2005 and Q3 2006 8.3% increase in investment between Q3 2005 and Q3 2006 Good news

31. 31 Significant improvements in second draft of Royalties Bill are welcomed However, proposed two-tier system of royalty rates is a concern: Lower rate for refined product But has serious cost consequences for bulk commodity producers, esp. iron ore and coal. Royalty concerns

32. 32 Industry concerns about prescription of claims Industry concerns about prescription of claims Window ends on 30 April 2007 Window ends on 30 April 2007 Compensation claims could become unenforceable Compensation claims could become unenforceable Difficulty in assessing value of rights Difficulty in assessing value of rights Urgent solution required Urgent solution required On-going discussions with the DME to find solutions On-going discussions with the DME to find solutions The resolution of Legal Proceedings Against Certain Organs of State Act (ILPA) set a good precedent The resolution of Legal Proceedings Against Certain Organs of State Act (ILPA) set a good precedent Urgency of passing legislation before 30 April 2007! Urgency of passing legislation before 30 April 2007! MPRDA and prescription

33. 33 An invitation Chamber and mining industry would like more interaction with Parliamentary structures Visits to mines to obtain hands-on information should take place regularly Chamber is willing to carry a portion of the cost of such visits

34. 34 Financial corporations Anglo American Corporation of South Africa Ltd Gold mining African Rainbow Minerals (Gold) Ltd AngloGold Ashanti Ltd Armgold/Harmony JV Ltd Gold Fields Ltd Beatrix Mining Company Ltd Driefontein Consolidated (Pty) Ltd Kloof Gold Mining Company Ltd Harmony Gold Mining Co. Ltd JCI Gold Ltd Placer Dome Western Areas JV Coal mining Anglo Operations Ltd, Anglo Coal Division Eyesizwe Coal (Pty) Ltd Ingwe Coal Corporation Ltd Douglas Colliery Ltd Khutala Mining Services (Pty) Ltd Optimum Colliery Ltd Kangra Group (Pty) Ltd Kumba Resources Ltd Kuyasa Mining (Pty) Ltd Sasol Mining Tweewaters Fuel (Pty) Ltd Xstrata Coal Diamond mining De Beers Consolidated Mines Ltd Namakwa Diamond Company South African Diamond Producers Organisation Trans Hex Group Ltd Platinum mining Anglo American Platinum Corporation Ltd Impala Platinum Ltd Lonmin Platinum Ltd Ridge Mining Small, medium & emerging operations ASA Metals (Pty) Ltd Aggregate & Sand Producers Association of South Africa Clay Brick Association G & W Base and Industrial Minerals (Pty) Ltd Imerys South Africa (Pty) Ltd Mvelephanda Resources Randgold & Exploration Ltd Vametco Mineral Corporation (Pty) Ltd Other members AngloGold Ashanti Health Services (Pty) Ltd BHP Billiton (SA) Ltd Cementation (Africa Contracts) (Pty) Ltd Corobrik (Pty) Ltd RUC Holdings Ltd Shaft Sinkers (Pty) Ltd Suspended operations City Deep Ltd Consolidated Main Reef Mines & Estates Ltd Crown Mines Ltd Members of the Chamber of Mines