Review of mineral resources and ore reserves

General statement on mineral resource and ore reserve estimation and reporting

The following summaries of the mineral resources and ore reserves attributed to Kumba’s current mining operations and growth projects are reported as those remaining at 31 December 2007. The figures reported reflect 100% of the mineral resources and ore reserves irrespective of Kumba’s attributable ownership. These details are included in the relevant tables.

Kumba has decided to gradually divert from reporting mineral resources ‘inclusive’ of ore reserves and to adopt an internationally-accepted norm of reporting mineral resources ‘exclusive’ of ore reserves for all operations and projects. To achieve this, the 2007 statement contains both inclusive and exclusive mineral resource statements; the former included to transparently declare mineral resource movements from 2006 to 2007.

Mineral resources are reported according to the latest available geological models, which are typically updated within three to six months prior to the end of the year of reporting. Ore reserves for mining operations have been estimated within two months of this statement, while for projects, updates are performed as required by business feasibility investigations or when primary business case assumptions change.

Mineral resource grades (average above cut-off) are reported in situ using operation-specific cut-off grades. Ore reserve grades reported represent the average grade of the ‘plant feed’ or ‘run-of-mine’ material and take into account all applicable modifying factors. The average grade and tonnage estimates of ‘saleable product’ are also reported to show that beneficiation losses have been taken into account in the figures reported.

Kumba uses the concept of an ‘optimistic pit shell’ to differentiate between mineral resources (reported) and mineral inventory (not reported). Optimistic pit shells were established for all operations and projects by doubling the long-term revenue factors used to estimate the current pit shells from which practical pit layouts containing the ore reserves were derived. Thus, Kumba’s 2007 mineral resources are not an inventory of all mineral occurrences drilled or sampled regardless of cut-off grade, likely dimensions, location or continuity. Instead they are a realistic record of those, which may be economically extractable in future under assumed and justifiable technical and economic conditions.

The mineral resource and ore reserve statements have been compiled to comply with international reporting standards and conventions as well as the regulations set by the JSE. They conform to the Kumba mineral resource and ore reserve reporting policy (endorsed by the Kumba board of directors in 2007), which recognises the SAMREC Code of 2007 as our minimum reporting standard. Note, ore reserves in the context of this report have the same meaning as mineral reserves, as defined by the SAMREC Code.

In accordance with the SAMREC Code, Kumba derives the ore reserve estimates reported for each operation or project by applying mining, metallurgical, economic, marketing, legal,environmental, social and governmental ‘modifying factors’ to their reported mineral resources. Initially, grades and tonnages estimated from the geological block models are discounted by the application of modifying factors such as dilution and mining recovery efficiency to develop a so-called mining model, which forms the base from which ore reserves are estimated through life-of-mine scheduling. Kumba’s operations and projects consider the expected long-term revenue versus the time-inflated operation and production costs associated with mining and beneficiation as well as environmental and social costs, in determining whether a mineral resource could be economically extractable and converted to an ore reserve or not.

Competent persons have estimated the mineral resources and ore reserves reported here. All competent persons have been duly appointed and made aware of their responsibility to unbiased mineral resource and/or ore reserve estimation on an operational or project level according to the Kumba mineral resource and ore reserve reporting policy. All competent persons have sufficient relevant experience in the style of mineralisation, type of deposit and mining method as well as in the activity for which they have taken responsibility to qualify as a competent person as defined by the SAMREC Code of 2007. The mineral resource and ore reserve estimates have been signed off by the relevant competent persons, who consent to the inclusion of the information in this report in the form and context in which it appears. A list of the competent persons responsible for Kumba’s mineral resources and ore reserves is available from the company secretary on written request.

Kumba’s operations and projects are continually internally reviewed and externally audited on a three- to four-year rotational basis to ensure that internationally acceptable estimating processes are followed. As part of the 2007 external independent review process, Golder Associates was appointed to estimate Thabazimbi’s 2007 mineral resources and ore reserves as independent competent persons.

The estimates reported here have been reviewed and are endorsed by V Lickfold, the person within Kumba designated to take corporate responsibility for mineral resources and ore reserves. The chief executive officer of Kumba Iron Ore, EJ Myburgh, also endorses the estimates presented in this report.

V Lickfold (Pr Sci Nat 400099/94)
Head: Geosciences

EJ Myburgh
Chief executive officer, Kumba Iron Ore