Key factors affecting future operating results

Export iron ore demand and price

Analyst forecasts indicate that global steel consumption should grow in excess of 5% per annum over the next three years, which would lead to increasing iron ore demand. Chinese demand for iron ore is expected to grow by at least 5% during 2010. With Chinese domestic iron ore production falling this has placed increased pressure on seaborne iron ore imports and spot prices. A further recovery outside of China is expected during 2010, which should increase the pressure on seaborne iron ore supply. Overall, the global seaborne iron ore market remains structurally tight. The growing demand for seaborne iron ore is also manifested in the sharp rise in steel scrap and spot iron ore prices, with the latter approaching a 100% premium to 2009 contract prices. Current market consensus indicates an increase in iron ore export prices for the 2010/2011 iron ore year.

Iron ore sales volumes

The ramp-up of the jig plant continues during 2010 with total production from Sishen Mine expected to increased by ~5% for the year. The beginnings of a recovery in Kumba’s traditional markets have been seen and return in demand from the South African market (domestic demand) is expected. As such the increase in export volumes in 2010 may only be marginal as domestic demand will offset the increases in production volumes. Domestic sales remain dependent on the level of demand from ArcelorMittal. Exports to China should normalise at around 60% of our geographical sales mix.

Exchange rate

Kumba’s revenue generated from the export of iron ore and shipping services is affected by the Rand/US Dollar exchange rate.

Relative to the US Dollar, the South African Rand has strengthened ~20% over the past year. Kumba’s operating profit remains highly sensitive to the Rand/US Dollar exchange rate.

Operating expenses

Kumba is committed to a further increase in production volumes during 2010, with the continued ramp-up of the Jig plant. Waste mining at Sishen Mine is anticipated to increase as the pit gets deeper and wider. The first mining royalty is payable by Kumba’s mining operations from the second quarter of 2010.

Management focus will be on asset optimisation initiatives, cost management and additional production and sales volumes to lessen the adverse effects of the cost pressures from an increase in waste mining.

RAND/US DOLLAR EXCHANGE RATE