We are One THE NEGATIVE IMPACT OF ESKOM s MYPD3 PROPOSAL 31 JANUARY 2013 PETER TURNER, EXECUTIVE VICE PRESIDENT NERSA GAUTENG PUBLIC HEARINGS
DISCLAIMER Certain statements included in this presentation, as well as oral statements that may be made by Sibanye Gold, or by officers, directors or employees acting on their behalf related to the subject matter hereof, constitute or are based on forward-looking statements. Forward-looking statements are preceded by, followed by or include the words may, will, should, expect, envisage, intend, plan, project, estimate, anticipate, believe, hope, ca n, is designed to or similar phrases. These forward looking statements involve a number of known and unknown risks, uncertainties and other factors, many of which are difficult to predict and generally beyond the control of Sibanye Gold, that could cause Sibanye Gold s actual results and outcomes to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, among others, Sibanye Gold s operations, Sibanye Gold s ability to implement its strategy and any changes thereto, Sibanye Gold s future financial position and plans, strategies, objectives, capital expenditures, projected costs and anticipated cost savings and financing plans, as well as projected level of gold price and other risks. Sibanye Gold undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect any change in Sibanye Gold s expectations with regard thereto.
OUR ASSETS A PROUDLY SOUTH AFRICAN GOLD COMPANY STRUCTURED TO MAXIMISE VALUE FROM DEEP LEVEL NARROW VEIN MATURE OPERATIONS
UNBUNDLING Shareholders Gold Fields Limited International South Deep Project GFIMSA Tarkwa (Ghana) Damang (Ghana) St Ives (Australia) Agnew (Australia) Cerro Corona (Peru) Growth Projects A NEW SOUTH AFRICAN CHAMPION IS BORN Kloof and Driefontein Complex (KDC) Beatrix
Ounces (koz) CREDENTIALS Largest gold producer in South Africa Gold reserves C2012 electricity usage 437 MW (1.8% of ESKOM s anticipated sales for year ended 2013) 13.5 million ounces in reserve 74.2 million ounces in resource potential C2012 power cost R 2.096 billion Proudly South African business SOUTH AFRICAN GOLD PRODUCTION RANKING 800 600 400 200 0 Sibanye Gold AngloGold Harmony DRD Pan African Resources * Source, company reports H1 C2012 Gold production SIBANYE GOLD IS A COMMITTED SOUTH AFRICAN PLAYER
UNBUNDLING OPERATING STRATEGY OUTCOME PREMISED ON REASONABLE INFLATION OF INPUT COSTS Superior Dividends Reduce costs and paylimits SIBANYE GOLD Increase flexibility and volume Creation of value for shareholders Approximately 35, 227 employees in service Indirect jobs through suppliers Cornerstone of economy in host communities and labour sending areas Direct taxes of R733 million paid in 2012 Strong cash flows Increase output and margins Foreign exchange earned of USD 2 billion (2% of RSA exports) Optimise ALL capital including balance sheet Maintain ability to fund social spend Create capital to access untapped mineral resources UNLOCK VALUE OF RSA S MINERAL RESOURCES FOR ALL OUR STAKEHOLDERS
Koz $/oz Koz $/oz OPERATIONAL CHALLENGES KDC BEATRIX 2 500 2 000 1 500 1 000 500-2 000 1 500 1 000 500-600 500 400 300 200 100-2 000 1 500 1 000 500 - Production (Koz) Gold Price ($/oz) NCE ($/oz) Production (Koz) Gold Price ($/oz) NCE ($/oz) * Year to date: As at 30 September 2012, annualised * NCE includes operating cost plus additions to property, plant and equipment Electricity tariffs Doubling every 4-5 years Wage demands Productivity MAJOR HEADWINDS Service suppliers under similar cost pressures PRODUCTION COSTS TRACK GOLD PRICE Margin largely dependent on buoyant gold price
Percentage (%) NEGATIVE EFFECT OF ESKOM MYPD3 APPLICATION ON 2013 25 R 2.23bn R 2.53bn R 2.58bn 22.96 % 20 20.53 % 15 10 6 % 5 0 Inflation Proposed MYPD3 tariff increase for urban users * Figures include a 3% saving in power consumption for 2013 MYPD3 with power factor charges for urban users Adds R 350 million into 2013 cost structure (real terms above inflation) Extension of power factor charge to all periods adds a further 2.5 % to electricity charges in 2013 EFFECTIVE 2013 INCREASE - HIGHER THAN PUBLISHED
Power costs (R bn) IMPACT POWER COSTS 4.5 4 169 % INCREASE 110 % INCREASE MYPD3 CYCLE 3.5 3 2.5 2 1.5 1 0.5 0 C2007 C2008 C2009 C2010 C2011 C2012 C2013 C2014 C2015 C2016 C2017 ESKOM MORE THAN DOUBLES POWER COSTS EVERY 4-5 YEARS
POWER CONSUMPTION (MW) COST ( R bn) 480 479 MW POWER COST VS CONSUMPTION 3 *R 2.6bn 460 2.5 440 *439 MW 2 420 R 1.55bn STRIKE INFLUENCE C2010 C2011 C2012 C2013 POWER CONSUMPTION (MW) Normalised (MW) COST (R bn) 1.5 * C2013 cost and consumption are forecast POWER REDUCTION INITIATIVES HAVE NOT OFFSET TARIFF ESCALATION
POWER REDUCTION PROJECTS - IMPLEMENTED C2007 520 MW C2012 437 MW (16% saving, 83 MW) Main fan guide vane clipping Energy awareness Compressed air control valves Water control valves Pump optimising Main fan guide vane clipping Energy awareness Compressed air control valves Water control valves Pump efficiency monitoring Water quality drives Water heating systems Water quality drives Water heating systems 83 MW POWER REDUCTION ACHIEVED
POWER REDUCTION PROJECTS - FUTURE C2013 C2017 (3% p.a. 56 MW) Methane power generation (2 MW) 3 Chamber Pump System (3.7 MW) Motor generator set (1.3 MW) Variable Speed Drive refrigeration plants (3.02 MW) BEATRIX METHANE PLANT Concentrated solar generation (0.4 MW) Photo-voltaic (1 MW) Integrated Demand Management Air (1 MW) Water (4.38 MW) 3 CHAMBER PUMP SYSTEM SIBANYE GOLD IS COMMITED TO CONTINUED POWER REDUCTION
IMPACT ON COST BASE WORKING COST MAKE-UP MYPD 1 and MYPD 2 MYPD 3 2007 2012 2017 17.5 17.7 9.2 19.8 12.3 16.1 18.1 11.2 23.4 55.6 51.7 47.3 * As a percentage of working cost including ORD Electricity Labour Stores Other ESKOM ELECTRICITY COST SIGNIFICANTLY IMPACTING THE COST BASE
NCE Margin (%) NCE Margin (%) EFFECT OF ESKOM MYPD3 ON EMPLOYMENT AFFECTED WEST WITS OPERATIONS AFFECTED FREE STATE OPERATIONS 6% 5% 4% 3% 2% 1% 0% -1% -2% 2012 2013 2014 2015 2016 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% 2012 2013 2014 2015 2016 Inflation MYPD3 Proposal EMPLOYMENT 15,000 POWER CONSUMPTION 182 MW EMPLOYMENT 3,000 POWER CONSUMPTION 40 MW CONSEQUENTIAL LOSSES OVERHEAD ALLOCATION REDUCTION IN SERVICES INDIRECT EMPLOYMENT (2,000 OF 3,600 IN SERVICE SECTOR) ESKOM POWER INCREASES IMPACTING ON EMPLOYMENT
CONCLUSION Realising full value from RSA gold resources dependant on stable input costs MYPD3 submission could compromise value derived from gold mining owing to increasing input cost pressures Sibanye Gold is committed to growth in South Africa ESKOM MYPD3 not aligned with the national agenda SIBANYE GOLD GROWTH STRATEGY Extend life Operational excellence Asset growth JEOPARDISED GROWTH STRATEGY Will force immediate restructuring Job losses Operating performance SIBANYE WE ARE ONE New investment