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1 The Manganese and Chrome Macquarie Connections China Day in South Africa 2012 Cape Town 3 February 2012 Alastair D. Stalker Managing Director Ore & Metal Company Limited Director-Assmang Ltd Past Chairman International Manganese Institute Markets The S. Africa/China Connection

2 Disclaimer Disclaimer: This presentation has been prepared by the speaker in his personal capacity and does not reflect the views of Assore Ltd, Assmang Ltd, The International Manganese Institute or The International Chrome Development Association. It shall not be reproduced in whole or in part without permission. The information contained herein has been obtained from sources which and from persons whom I believe to be reliable, but is not guaranteed for accuracy, completeness or otherwise. The author will not be liable in any manner whatsoever for any representation or other statement herein contained.

3 Crude Steel Production Met Forecasts World crude steel output, million metric tonnes, and growth rate, % (RHS) '000 0mt % Rest of the world China YoY World % YoY World excl. China Data: MacQuarie Commodities Research

4 World Crude Steel Production Forecasts are still optimistic Mill metr ric ton CRU Macquarie

5 However Monthly Crude Steel Production Has Been Reducing Millio on World ex China China

6 And Most of the Predicted Growth is in China Mill metric tons Africa / Middle East Latin America North America Japan Western Europe China

7 Regional Crude Steel Forecasts - Some of These Look Very Optimistic Mill metric tons Africa / Middle East Latin America North America Japan Western Europe

8 Manganese Ore

9 Manganese Ore Demand Tracks Crude Steel Production Mill mt Cru ude Steel 1,400 1,200 1, Crude steel CAGR : 3.4 %pa Mn ore CAGR : 3.7%pa Mill mt Ore Crude steel Mn ore Source: Worldsteel. IMnI

10 But Manganese Ore Prices have been Declining for 20 months USD / mt Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May- Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May- Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11

11 Lets Look at the Manganese Ore price History Steel Produ uction (Mmt) Crude Steel Japanese/Chinese Price $/mtu This caused the Problem Mn Ore Pr rice ($/mtu) Source: WSA, Tex Report

12 And Also at Mn Ore Seaborne Trade USA France Russia mill t mill t mill t Ann Norway South India Ukraine Japan China Mill Tons

13 Chinese Mn Ore Imports Significant Growth of Others 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% YTD 2011 Others Ghana Gabon Brazil Australia South Africa

14 China trade partners 2010 Significant Tonnages from Non Traditional Origins Rank Partner Country YEAR Australia South Africa Gabon Brazil Myanmar Malaysia Indonesia India Ghana Kazakhstan Namibia Bulgaria Vietnam Morocco Mexico Zambia Thailand Cote d Ivoire Others Total Namibia 1% Kazakhstan 1% Malaysia 6% Myanmar 6% Gabon 11% Ghana 1% India Indonesia 2% 2% Brazil 11% Morocco 1% Bulgaria 1% Vietnam 1% Zambia 1% Mexico 1% Others 1% Australia 27% Origin of China imports in 2010: Imports from over 20 countries: various grades and qualities of Mn ore The big 4 majors >75% of total imports: mostly high grade ores (8.8 mln mt) Therefore, other imports > 2.7 mln mt (varying quality) South Africa 27% Source: GTIS

15 But Major Players also to Blame 4,500,000 4,000,000 3,500,000 Jan - Nov 2010 Jan - Nov ,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 - Others Brazil Gabon South Africa Ghana Australia

16 Chinese Mn Ore Stocks Finally Reducing 4,000,000 3,500,000 Mn Ore Imports 3,000,000 Port Inventories 2,500,000 2,000,000 1,500,000 1,000, ,000 - Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11

17 Changing landscape of the Mn Ore Market The Effects of Capacity Expansions and New Projects: Mln mt High-grade (>43% Mn) Mid-grade (>30% and <44% Mn) Low-grade (<31% Mn) The Changing Mn Ore Supply 1. Moved from a handful of major suppliers to many players 2. More price volatility: annual to quarterly to monthly contracts 3. More mid-grade and low-grade ores on market ('e) Possible Game Changers: Assumptions 2014: 3newprojectsinRSAwillbesuccessfulinbringingplannedoutputtomarket Chinatolose3mlnmtof18%Mnoreoutputthroughdepletionandsubstitution Major producers will produce according to their announced capacity expansions Exclusion of projects which have no definitive start date or annual capacity projections 1. RSA logistics do not accommodate additional ore 2. Too much new ore if demand forecasts do not materialize 3. Can the world absorb so much S.A carbonate ore Source: CRU, Metal Bulletin, Metal Expert and IMnI

18 SA Manganese Ore Logistics Cost Effective Port Elizabeth 5.5 million tpa Commitment to vacate by Allocation process for 2013 to 2016 should take place shortly Saldanha +/ - 13 Million tpa Transnet is no longer considering Mn ore in the next Sishen Saldanha expansion Durban Rail and Truck Trucking expensive but BMA 3 Million tpa terminal efficient and cost effective plus containers Richards Bay Truck 1 Million tpa? Trucking more expensive than Durban. Competition with chrome ore/ magnetite in the port. Expensive Coega Million tpa Requires upgraded heavy haul rail track plus new terminal. Feasibility study underway. Transnet s preferred option

19 Incremental Ore Logistics in SA are Very Expensive 38 % Mn Ore through Richards Bay Port US$ / mt Trucking plus Port Loading Costs 90 Current Freight to China 30 +/- $120/mt $3.15/dmtu Mining, marketing, finance costs, etc still have to be added Current Price +/- $4.00/dmtu CIF; Only leaves +/- R260/mt to cover these costs

20 No Shortage of Mn ore Expansions and New Mines South Africa; Assmang : 3 Mill tpa to 4 Mill tpa BHP-Billiton Wessels: 1Mill tpa to 1.5 Milltpa BHP-Billiton Mamatwan: Increase of 1 Milltpa UMK: Increase from 2 to 2.7 Milltpa by mid 2012 Kgalagadi: 2.4 Mill tpa of sinter from mid 2012 Tshipi e Ntle: 2.4 Mill tpa by mid/end 2012 Several other projects at or close to bankable feasibility stage

21 No Shortage of Mn ore Expansions and New Mines Rest of the World; BHP-Billiton Australia- Gemco: 4.2Mill tpa to 4.8 Milltpa by 2013 Comilog Eramet- Gabon: Increase from Mill tpa in 2012 Citic Dameng Gabon: Increase from 0.3 to 1.15 Milltpa by mid 2012 Minera Autlan Mexico Tajo Naopa: 0.3 Mill tpa in 2012 Zambia: Multitude of small projects 0.5 Mill tpa?

22 Manganese Alloys

23 Manganese Alloy Prices Continue to Decline HCFeMn MCFEMn SiMn USD / mt Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May- Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May- Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11

24 But World Real Consumption of Manganese Alloys at Record Levels me etric tons Ref FeMn HCFeMn SiMn

25 Manganese Alloy Predicted Consumption thousand me etric ton SiMn HCFeMn Refined FeMn

26 But Where Will That Additional Demand Be China ; China is virtually self sufficient in Mn alloys with limited imports, has underutilised smelting capacity and is the major Mn ore import market India ; India is virtually self sufficient in Mn alloys with only limited imports of high spec alloys. Becoming an important Mn ore market and a major alloy exporter Developing World; largely being supplied at present from domestic and/or other developing nations.

27 Key Factor :Chinese Manganese Alloy Exports have Virtually Disappeared me etric tons SiMn HCFeMn Ref FeMn

28 Key Factor: South Korean Exports are Taking their Place HCFeMn SiMn Refined FeMn

29 Key Factor :As Are India SiMn Alloy Exports HCFeMn SiMn

30 Mn Alloys Are in Oversupply Q1 11 Q2 11 Q3 11 SiMn HCFeMn Refined FeMn

31 Manganese Conclusions Mn ore and alloys are currently in oversupply Mn ore demand is very dependent on Chinese steel recovery Major Mn ore players need to show some production restraint Too much Mn ore capacity was incentivised by the high prices More Mn ore capacity coming on stream Probability that Mn ore will be in oversupply for several years Mn alloys demand in developed world likely to remain depressed for a number of years Mn alloy production costs generally increasing but particularly in S.A. Production of Mn alloys will continue to move eastwards (India, Malaysia, S. Korea)

32 Chrome Market 32.

33 World Stainless Steel Production Total million tons Total estimated million tons Source: CRU

34 Source: CRU SS Production

35 World FeCr Production Total 6.4-million tons Total estimated 9-million tons 19% 13% % 16% 2% % 37% 0% 10% South Africa India 14% China Russia & Kazakhstan Others Eastern Europe 11% South Africa India 28% Russia & Kazakhstan Others China Eastern Europe Source: ICDA

36 China FeCrImports Trend for China to produce ferrochrome rather than import Production mt Imp ports mt Produ uction e Kazakhstan South Africa Turkey Russia India Others Production 0 Source: ICDA Statistics & CRU

37 South Africa FeCrcapacity Underutilised Million tons e 2012f 2013f 2014f Production Capacity Source: ICDA Statistics & estimated Forecast

38 South Africa has become the swing ferrochrome producer- falling market share SA Quarterly Production st Q 08 2nd Q08 3rd Q08 4th Q08 1st Q 09 2nd Q09 3rd Q09 4th Q09 1st Q 10 2nd Q10 3rd Q10 4th Q10 1st Q 11 2nd Q11 3rd Q11 '000 mt '000 mt e 2012f Other S.Africa World excl SA Quarterly Production 1st Q 08 2nd Q 08 3rd Q 08 4th Q 08 1st Q 09 2nd Q 09 3rd Q 09 4th Q 09 1st Q 10 2nd Q 10 3rd Q 10 4th Q 10 1st Q 11 2nd Q 11 3rd Q 11 '000 mt Source: ICDA Statistics & CRU forecast

39 Charge Chrome Prices Prices quoted exclude discounts European prices exclude discounts, which have increased USc/lb Cr delivered When prices increase China and India increase production rates, i.eless demand for imported materials from China Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Q3 2010: 130c/lb Cr Del Q4 2010: 130c/lb Cr Del Q1 2011: 125c/lb Cr Del Q2 2011: 135c/lb Cr Del Q3 2011: 120c/lb Cr Del Q4 2011: 120c/lb Cr Del Q1 2012: 115c/lb Cr Del European Contract China Spot Source: CRU Dec 2011

40 Chrome Ore Reserves and Production 2011 World Chromite Reserves 7.6 billion tons (estimate) World Chromite Production 23.14mill tons (forecast) Source: Metal Bulletin Research

41 Chrome Ore Imports into China Mill Tons 2011 estimated 9.7 Mill Tons Source: ICDA and TEX Report

42 China Chrome Ore Stocks at Main Ports Estimated Stocks Imports

43 Cr Ore Pricing (SA 44% Conc) High demand for all ore, but particularly for Lumpy and metallurgical concentrates (min 44%) Current spot prices estimated US$ 200 CIF for metallurgical concentrates (min 44%) Source: CRU Dec 2011

44 S.A Ferrochrome industry under Threat Since 2007, FeCr production costs increased by +/- 11% p.a. Electricity prices have doubled Labour increases between 8-10% p.a. Scarce expensive technical skills Met Coke increased by 15% p.asince 2005 Local transport costs increased-more road transport has to be used because Transnet does not have the capacity Chinese production costs using imported ore very similar to S.A. costs S.A. has become the marginal producer More profitable to sell Cr ore than produce FeCr

45 Future Threats Eskom continues to escalate prices by 15-25% p.a. Cr ore oversupply into export market ( UG 2) S.A. Carbon Tax ( proposed level increases cost of production by +/-7 US c/lb) Chinese smelters adopt more advanced technology (pelletising, pre-reduction, bigger furnaces)

46 Power Comparison between Ferrochrome Producing Countries

47 Forecast of SA exports of Cr Ore to China Source: CRU

48 MckinseyReport on the Chrome Value Chain R42 Bncontribution to GDP in 2010 This is under threat Recommendations; S.A should implement an export tariff of US $ 100/t on chrome ore Set up a S.A chrome marketing arm Agree with Government a justifiable electricity power price path Align S.A CO2 tax implementation with main competition Optimise resource management incl review of mining licence issue and UG2 production.

49 Conclusions Future of S.A Chrome industry very uncertain With increasing platinum production, the increased availability of UG2 suggests continuing Cr ore oversupply Higher cost Cr ore producers may be squeezed out of the market as prices fall S.A FeCrproducers continue to move up the cost curve due mainly to administered price increases and inefficiencies inherent in S. Africa Probability that some FeCrproducers will merge or close in the short term