Investor Presentation - AECIAEL Context In middle of 5-year strategic journey Traditionally, high capped fuse market share in South Africa Early diversification into Africa and more

Investor PresentationInvestor Presentation15 May 200815 May 2008

AEL Presentation

• AEL in Context

• Global Explosives Market

• AEL’s Businesses, Services and Products

• Key Strategic Projects

• Summary

AEL Context

In middle of 5-year strategic journeyTraditionally, high capped fuse market share in South AfricaEarly diversification into Africa and more recently into international marketsHave continually been reinvesting in plants and peopleCapped fuse to shocktube market shift underwaySales growth continues despite volume issues in gold and platinum industriesInput cost escalations.Strategy and current investment programme remains relevantThe new R556m ISAP plant (Factory of the Future) remains compelling

Key Business Drivers

Safety and complianceLocal market volume challenges in gold, platinum and coalAfrican footprint expansion and central African growthInternational entries – South East Asia and South AmericaShocktube conversion programme, capacity ramp up and investment gainsMarginsSkills and resourcing

Global Explosives

S.E. S.E. AsiaAsia77%%

North AmericaNorth America2525%%

Latin AmericaLatin America1212%%

Western EuropeWestern Europe5%5%

AfricaAfrica77%%

RussiaRussia55%%

AustraliaAustralia1313%%

ChinaChina1616%%

Other 11Other 11%%(Eastern Europe, Other FSU,N.E. Asia, India)(Eastern Europe, Other FSU,N.E. Asia, India)





RussiaRussia55%%


ChinaChina1616%%

Other 11Other 11%%(Eastern Europe, Other FSU,N.E. Asia, India)

3%3% 2%2% 5%5%

12%12%

8%8%

8%8%

4%4%5%5%

5%5%

Global ExplosivesGrowth Estimates ($7b $9.3b)

(Annual volume growth shown + 15% weighted ave. price adjustment)

AfricaAfrica77%%

(Eastern Europe, Other FSU,N.E. Asia, India)

AEL’s Businesses

Narrow Reef

Narrow Reef





RussiaRussia55%%


ChinaChina1616%%

South African

AfricaAfrica

South AmericaSouth America

South East AsiaSouth East Asia

Surface & Massive

Surface & Massive

NR

S&M

Africa

Int

AfricaAfrica77%%

Other 11Other 11%%African

International

1% 2% 2% 2% 2% 2% 1% 2%4% 5% 6%

8%

16%

26%

BM

E

SASO

L

ENAE

X

AEL

MA

XAM

AUS

TIN

DYN

O

ORI

CA

Global Competitors

Commodities boomFrom regional player to global player?Sourcing and logisticsCustomer global buyingCost of new capacity

Services and Products

Products & HardwareExplosivesExplosives

Ammonium Nitrate Products.Bulk Emulsions.

Remote Bulk Emulsion Plants.MMU’s - Mobile Manuf. Units

Packaged ExplosivesUnderground Bulk Explosives

Underground Bulk Loaders

Initiating SystemsInitiating Systems

Shocktube SystemsCapped Fuse SystemsElectric SystemsElectronic SystemsGeneral Accessories

Full Services Blasting“Customised Blasting”

Rock on Ground ContractsPrime-Load-Tie & ShootDown the Hole ServiceBlast DesignBlast ConsultingLogistical ServicesProduct Sales

Blasting Expertise and Customer Focus

Main Mining Sectors

GoldPlatinumCoalDiamondsBase Metals

Applications

SurfaceOpen PitQuarrying

Massive Underground

Uphole Blasting Board & Pillar

Narrow Reef

DevelopmentStoping

Other

Shaft SinkingTunnellingDemolition

QuarryingConstruction

2007 Revenue by Market and Application

R' millions R' millions

Market 2 699 PRODUCT 2 699

Narrow Reef 903 Explosives 1 449Gold 343 Ammonium Nitrate 261Platinum 560 Bulk Services 799

Packaged Explosives 389Suface & massive 798Coal 252 Initiating Systems 850Quarry & construction 298 Non-Electronics 715Opencast 248 Electronics 135

Africa & International 865 Services & Other 400

Industrial & Other 133

Ammonia

Business Unit Revenue Spread

Narrow Reef

Suface & massive

Africa & International

0

500

1 000

1 500

2 000

2 500

3 000

2004 2005 2006 2007

Narrow Reef Suface & massive Africa & International Industrial & Other

Ran

d M

illio

ns

The Narrow Reef Business

Gold and platinum volumes below expectations

Market conditions more bullish for the latter part of 2008

Shocktube conversion programme in full swing

Continued focus on supporting customer expansion projects

The Surface and Massive Business

Coal – high demand in both exports and local markets

Platinum – still the only viable material for catalytic converters

Iron ore – large demand driven by Asian markets

Aggregates – continued high local demand in civil construction

The African Business

AFRICA DRIVERS

•5 key hubsGhanaZambiaTanzaniaBotswanaZimbabwe

•Footprint Expansion

•Harnessing Growth

AFRICA DRIVERS

•5 key hubsGhanaZambiaTanzaniaBotswanaZimbabwe

•Footprint Expansion

•Harnessing Growth





AfricaAfrica77%%

RussiaRussia55%%


ChinaChina1414%%

Other 11Other 11% %

South America

South East Asia

The International Business

Safety Performance over last 20 years

MonitoringSafetyClosely




AEL 2007 results

Revenue R2 699m (+8.4%); TP R163m (-37.5%)

Margin 6.0% (10.6%)

Volumes in SA surface business grew strongly

Volumes in rest of Africa: pleasing growth, even better potential in ’08

Weaker 2H’07 compared to ’06 in narrow reef

Market share loss and mining volume decline in narrow reef had major negative effect

Fixed costs well controlled, but additional expenses for running old and new plants impacted negatively

Mining Solutions 2006 - 2007

100

150

200

250

300

R 261m:Trading Profit

2006

(R 80m):Narrow Reef

Volume

R 85m:Surface

& Africa Volume

and price

(R 50m):Fixed Cost

Inflation

(R 33m):OperationRamp-up

(R 47m):Depreciation /

Retrenchment /Other

R 28m:DetNet

R 163m:Trading Profit

2007

Margin: AEL Operating Costs: AEL DetNet

Revenue and Trading Profit History

739 767 8591078 1142 1225 1255

1474

19032076 2136

23172492

2700189142

176

235

287

161

74

120 115

150

179

111

274

241

0

1,000

2,000

3,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

R m

illio

n

0

100

200

300

400

Sales Trading Profit

ISAP Project - Context

Identified that the market was ready for a significant swing to shocktube

Faced the need for an unprecedented large volume - high speed – high quality shocktube plant, at a step change reduction in unit cost

And significantly safer to operate

Some of the existing plants and technologies were unviable - we wanted a competitive edge for the future

Such a plant did not exist and the technology challenges were significant

ISAP Project

Targeted a capacity of 100m shocktube assemblies per year

Total capital spend of R556m

All capacity commissioned by 4Q’09

Ramp up in 2010

Three Project Stages:Bernice R 77m Detonator capacity installed for 40m detonatorsCharlize R104m Additional 50ml detonators

and the first final assembly unitsDenise R375m Ramp up of all the stages of the plant to 100m

Will open up new business opportunities beyond our local markets

ISAP technologies usable in future AEL shocktube and IS plants locally and abroad

Makes a step change reduction in costs possible

ISAP Update: Capacities

Tube Drawing

Powder Drying

ElementFilling

Detonator Mnfr

Shocktube extrusion

Automated assembly

80 M

40 M

200 M

40 M

20 M

100 M

0 0

Det

onat

or C

apac

ity

Shoc

ktub

e U

nit C

apac

ity

Bernice Charlize Denise

ISAP Project – Ramp Up

Expected shocktube ramp up

0102030405060708090

100

2006 2007 2008 2009 2010

Key parts of project Charlize commissioned

Preparation for field trialing in August and ramp up underway

Expenditure on final phase, project Denise (R375m) including new powder drying system brought forward

Achieved 85% increase in shocktube production in 2007

Targeting similar increase for 2008

Benefits

Expected financial return of projects remains attractive Margin improvement: R 80m paOperating cost savings: R120m pa

Slower ramp up of first phase has not delayed expected completion date

First off-shore shocktube assembly operation being established in SE Asia,commissioning in Q3’08

Reduced market share and mining volumes in narrow reef make transition more difficult, but have not changed fundamentals of the journey

Summary - AEL Overview

Short-term challenges continue

Medium-term outlook for markets is positive

Africa and International expansion a priority

Major modernisation programme will set up AEL’s operations for years to come

AEL will emerge from structural changes in strategically stronger position

Africa and International GrowthAfrica and International Growth15 May 200815 May 2008

International Strategy - ImmediateAfrica-International

Africa outside South AfricaAfrica outside South Africa

International outside AfricaInternational outside Africa

Strategic OptionsAfrica-International

Full Blasting Service…..

• Full presence in country• Staffing• Plant and equipment• Manufacturing

Full Blasting Service…..

• Full presence in country• Staffing• Plant and equipment• Manufacturing

Component Assembly in Country

• Partnership with existing entity• New investment

Component Assembly in Country

• Partnership with existing entity• New investment

Exports of final products

Presence in AfricaAfrica-International

1st Phase

• Extension of SA relationships

• Culture/environment similar

• 5 key hubs: West Africa;East Africa; Central Africa;Botswana & Zimbabwe

1st Phase

• Extension of SA relationships

• Culture/environment similar

• 5 key hubs: West Africa;East Africa; Central Africa;Botswana & Zimbabwe

R1billionR1billionrevenuerevenue

Solid Platform for Growth

African Growth StrategyAfrica-International

R70millionR70millionCapexCapex

Next Phase• New investments…

North Africa & Egypt

• Expand footprint from hub

• New markets in Angola;Mozambique….

Maximise the growth engineof Central Africa

Next Phase• New investments…

North Africa & Egypt

• Expand footprint from hub

• New markets in Angola;Mozambique….

Maximise the growth engineof Central Africa

Central African Growth EngineAfrica-International

R70 millionCapex

R70 millionCapex

161 staff161 staff

Zambian Mining LandscapeAfrica-International

NFCMOPANIMOPANI

J&W

Luanshya Copper Mines

J&W

Luanshya Copper Mines

DRC Mining LandscapeAfrica-International

Frontier

http://www.bateman.co.za/index.htm

http://www.phelpsdodge.com/

Emulsion Plant - MufuliraAfrica-International

International Focus - Outside AfricaAfrica-International

S.E.AsiaS.E.Asia7%7%

North AmericaNorth America25%25%

Latin AmericaLatin America12%12%


AfricaAfrica7%7%

Russia Russia 5%5%

AustraliaAustralia13%13%

ChinaChina16%16%

Other 11%Other 11%(Eastern Europe,(Eastern Europe,

Other FSU, N.E.Asia,Other FSU, N.E.Asia,India)India)

Growing markets …. that fit our offering

Asia PacificAfrica-International

• Indonesia..Jakarta• Full blasting service • Shocktube assembly plant• Staff complement x 10

• Indonesia..Jakarta• Full blasting service • Shocktube assembly plant• Staff complement x 10

1st Phase

Next Phase• Distribution business…• Vietnam; Thailand;

Cambodia• Sourcing from the region.• Larger scale plant for the

region• India; China; Australia

Shocktube Assembly Plant - SubangAfrica-International

Inauguration of Shocktube Plant - SubangAfrica-International

Latin American StrategyAfrica-International

1st Phase

Export of final products

1st Phase

Export of final products

Next Phase

FBS business…East & West

(possibly an acquisition)

Component assembly -Chile & Peru

Next Phase

FBS business…East & West

(possibly an acquisition)

Component assembly -Chile & Peru

Summary – Africa and InternationalAfrica-International

• African capability already on the ground

• South East Asian capability starting to go in and ramp up

• Exciting challenges in new growth markets

• Will capitalise on ISAP’s new competitive shocktube position

• Well positioned for growth

INITIATING SYSTEMS AUTOMATED (ISAP) PLANT… the Factory of the Future

Structure of the Presentation

• Primary Objectives

• Current to Factory of the Future and Products

• The Shocktube Initiating System

• Process Overview

• Capital Expenditure and Timeline

• Competitive Position

Factory of the Future

• Primary objectives

• Convert the market from capped fuse to shocktube

• Improved quality - reliability and precision beyond current world best performance

• Cost base below that of the world’s lowest cost producers

• Improve process and operational safety

• Capacity expansion to suit market requirements




• A Typical Shocktube Unit

• The Process



Journey of the Factory of the Future

FUSE IGNITORCORD (2006)

CURRENTSHOCKTUBE

(2006)

FUTURE (3G)SHOCKTUBE (2010)

• Manual assembly• 100m units/year• Low precision• Low accuracy

• Manual assembly• 15m units/year• Better precision• Better accuracy• Lead drawn element

• Continuous high speed• 80-100m units/year• High precision• High accuracy• Rigid element• Significantly reduced

fixed & variable costs

Existing PlantsISAP








Anatomy of Shocktube Unit

SurfaceDetonator(connector)

Downhole Detonator(in the explosive)

Shocktubing(Transmitter)

Two layers of

polymer

Glue

HMX powder

Typical Application of Shocktube

Underground application

4s 4s 4s4s 4s 4s4s 4s 4s

O,2s O,2s O,2s

O,2s O,2s

O,2sO,2s

O,2sO,2s

O,2s O,2s

O,2s

O,2s

O,2s O,2sO,2s

O,2s

Ignite

4s 4s 4s 4s 4s 4s 4s 4s 4s

Typical Application of Shocktube

Surface Mining

• Can stretch a few kilometres

• Large holes with explosives

• Long length shocktube



• Typical Plant in the Future Factory

• A Typical Shocktube Unit

• The Process



Typical Shocktube Units

SurfaceNarrow Reef








Overview of the Process

Tube DrawingTube

DrawingPowder Drying

Powder Drying

ElementFilling

ElementFilling

Detonator Mnfr

Detonator Mnfr

Shocktube Extrusion

Shocktube Extrusion

Automated assembly

Automated assembly

ELEMENTS

TUBESPETNPETN

CUPCUP

ELEMENTELEMENT

L AZIDEL AZIDE

CUPS

Modify andExpand Capacity

Modify andExpand Capacity

Brand newProcess

Brand newProcess

World BestPracticeImproved230 M/C




New knownSirlynExtruder

New knownSirlynExtruder

Step Change

Step Change

Overview of the Process

Raw material sieving3 hours

Traditional Pyrotechnicmixing process

Spray drying processWeighing of materials

0.5 hours

Slurry Mixing

Spray Drying

36 kg/hour – Batch size 250 – 300 kg should take 8 hours.

Weighing of materials0.5 hours

Dry mixing3 Hours

Wet mixing1.5 hours

Granulation0.5 hours

Drying15 hours

Sieving1 hour

Sufficient to supply the total manufacturing demand

24.5 Hours/10 Kg

Manufacturing Process of ISAP

ElementsElements

ShocktubeAssembly

ShocktubeAssembly

PETNPETN

LeadAzide

LeadAzide

DelayElementFilling

DelayElementFilling

PowderPowder

DetonatorAssembly

DetonatorAssembly

ShocktubingExtrusion

ShocktubingExtrusion

Box & StorageBox & Storage

Tubes & CupsTubes & Cups



• Typical Plant in the Future Factory





Capital Expenditure

• Comprises 3 projects

• Bernice R77m (commissioned)

• Charlize R104m (partially commissioned)

• Denise R375m (long lead items ordered)

Factory of the Future

Total R556mTotal R556mFuture Spend

R'000

0

40,000

80,000

120,000

160,000

200,000

2003 2004 2005 2006 2007 2008 2009 2010

Factory of the Future - Timeline

Started Objective Status EndDate

Bernice 2003 Detonators only 40m FullyCommiss.

2007

Charlize 2005 •Add. 40m Dets•Tubing•Auto Assembly

Part.Commiss.

2008

Denise 2007 •Match market•Complete range•Spray D. Powder•Shrink footprint

Long lead time items ordered

Mech. Inst.End 2009Ramp UpBeg. 2010






• Capital Expenditure


Change in Competitive Position

• Lowest cost producer

• Higher quality detonator – Timing/Reliability

• Safer Product and Process – More Robust

• International Markets: Detonators and Assemblies

• Licensable technology – Hardware&Expertise

Documents

Investor Presentation - AECIAEL Context In middle of 5-year strategic journey Traditionally, high capped fuse market share in South Africa Early diversification into Africa and more