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Broad-based Black Economic Empowerment Transaction

Broad-based Black Economic Empowerment Transaction. Presentation to Investors, Analysts and Media 28 August 2008. Introducing the Team. Ntombi Langa-Royds - MC, Non-Executive Director John Gomersall - PPC, CEO Community Service Groups Phutumile Dumisa - Shalamuka for Penreach

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Broad-based Black Economic Empowerment Transaction

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  1. Broad-based Black EconomicEmpowerment Transaction Presentation to Investors, Analysts and Media 28 August 2008

  2. Introducing the Team • NtombiLanga-Royds - MC, Non-Executive Director • John Gomersall - PPC, CEO Community Service Groups • PhutumileDumisa - Shalamuka for Penreach • Mike du Toit - Disability Empowerment Concerns, CEO Strategic Black Partners • SalukaziDakile-Hlongwane - Nozala, Executive Chairman • Peter Malungani - PEU, Executive Chairman • MandlaGantsho - iLima Portland Consortium, CEO • Jerry Vilakazi - Capital Edge Cement Consortium, Chairman

  3. John Gomersall PPC – Chief Executive Officer

  4. Highlights • R2.7bn broad-based black ownership initiative • 15.00% shareholding in the increased issued share capital of PPC acquired by black people • Major portion allocated to broad-based empowerment groupings through the inclusion of PPC employees and their families, communities, construction and related industry associations, education and community service groups • This initiative will directly benefit approximately 3.5m people in South Africa, of which 99.90% are black individuals • Total risk equity capital of approximately R65.4m contributed by empowerment parties • An issue of new shares of 8.50% of PPC’s increased share capital and a Scheme of Arrangement in terms of Section 311 for 6.65% of PPC’s increased share capital • PPC will raise approximately R1.5bn long-term debt to replace existing short-term interest-bearing debt raised to fund its capital expansion projects and working capital requirements

  5. PPC’s approach to Transformation Equitable Economic Opportunities Black Equity Participation Ownership and Management The Opportunity Barrier Develop Black Entrepreneurs Preferential Procurement Enterprise Development The Business Barrier Skills Development Opportunities for black leaders and employees The Skills Barrier Employment Equity/Job Creation CSI Empower and uplift disadvantaged communities The Poverty Barrier

  6. BBBEE Transaction overview • The transaction is structured to embrace the true spirit of broad-based black economic empowerment (BBBEE) • Developed in accordance with Mining Charter and the DTI’s Codes of Good Practice • A holistic part of our transformation strategy which is part of PPC’s DNA • A significant stride towards meeting our BBBEE objectives and conversion of mineral rights • This empowerment transaction achieves: • Meaningful and sustainable wealth creation and black empowerment • Minimal dilution and cost to shareholders while strengthening our BEE credentials • Long-term mutual value creation for all stakeholders

  7. Transaction Structure OverviewBroad-based stakeholders Broad-based Entities 8.15% Strategic Black Partners 7.00% (Including some Broad-based elements) Total transaction 15.15% - R2.7bn

  8. Transaction Structure OverviewBroad-based stakeholders • Majority of 8.15% to Broad-based Entities • 5.2% External stakeholders • 2.95% Internal stakeholders • 7% to Strategic Black Partners • 4 partners in total some including Broad-based elements such as youth and women

  9. R1.46bn allocated to Broad-based stakeholders • Truly broad-based • External Trusts and Community Service Groups (CSGs) • Largest allocation to Construction Industry Association Trust • Community Trust and CSGs (Shalamuka & DEC) • Internal Trusts • Including staff, management and their families • Small allocation to a trust for 3 Independent Non-Executive Directors

  10. R1.46bn allocated to Broad-based stakeholders External Components (5.20%) Internal Components (2.95%) PPC Black Managers Trust 1.83% PPC Construction Industry Association Trust 2.00% PPC Current and Future Team Trust 0.57% PPC Team Benefit Trust 0.50% Community Service Groups 1.50% Independent Black Non- Executive Directors 0.05% PPC Community Trust 0.70% PPC Education Trust 1.00%

  11. Transaction Structure and Overview • Detailed structure – slide 39 - in Annexures at back of booklet • Reflects effective % shareholdings • Source of shares • 6.65% into various Trusts via Section 311 Scheme of Arrangement • 8.5% via the issue of new shares

  12. Transaction Structure and Overview • Share price applicable R31.32 (30 day VWAP at 21 August 2008) • Funding • Construction Association and PPC Education, Community, Team Benefit and the Black Managers Trusts - financed through a preference share funding structure • General staff and the black non-executive directors will receive a non-refundable contribution from PPC to purchase shares • New PPC shares to be issued to CSG - funded by a credit sale structure - (CSGs contribute nominal R5.4m in equity) • New PPC shares to be issued to SBP consortium - funded by a credit sale structure (SBP’s contribute R60m in equity) • Vesting and Lock-in • Shareholdings have various vesting conditions and sale restriction periods • Dividends • General Staff and black non-executive directors will receive dividends immediately • Trickle dividend to external trusts, PPC Team Benefit Trust and CSG’s

  13. Transaction Structure and Overview • Dividends / Earnings dilutionary effect • Initial dilution only 5.9% – (new shares issued - 8.5% of increased shares in issue reduced by 2.6% shares bought back held by PPC Treasury) • It is PPC’s intention to buy back shares when appropriate to limit dilution • Balance Sheet • PPC will receive approx. R1.5 bn through the CSG PPC and SBP PPC interest bearing loans • PPC intends using these long-term interest bearing loans to replace existing short-term interest bearing borrowings raised to fund capital expansion projects and working capital requirements • IFRS2 share-based payment charge • R557.4m equates to 3.24% of market capitalisation of R17.2bn at close of business on 21 August 2008

  14. PhutumileDumisa

  15. The Shalamuka Foundation0.75% - R134m • The Shalamuka Foundation is a trust founded in 2006 to act solely as the funding vehicle for the highly regarded Penreach Whole School Development Programme (“Penreach”) • Penreach has enjoyed 14 successful years of operation, reaching and imparting skills to over 900 schools and 2200 teachers annually, 4,000+ teachers / 3 million learners reached to date. 90% of the teachers are women and 95% are black rural South Africans. Beneficiaries are identifiable by their registration with the programme • Shalamuka is focused on securing long-term sustainability and funding for Penreach • The 350,000+ annual learners are mainly in Mpumalanga (rural/ disadvantaged township schools) and Limpopo (Bushbuckridge and Mkhuhlu areas) also in Swaziland • Trustees 85% black South Africans and 71% are black women. All trustees are volunteers and do not benefit financially, including; Yvonne Chaka Chaka Mhinga; Leah Gcabashe; Phineas Mojapelo; Paul Harris; Elizabeth Maepa and Ethyl Nyembe • Shalamuka has EmpowerDex certification and is compliant with 2007 DTI BEE codes. It enhances CSI/BEE scorecard of investee companies

  16. Shalamuka –The Penreach Programme • Founded in 1994 with 40 teachers from 10 schools, Penreach is a non-profit skills development programme supporting qualified and unqualified teachers by providing skills training workshops, support visits to schools by experienced fieldworkers, and tutorial lessons in mathematics and science. • The results are seen in improved teacher status and confidence, productivity and discipline, focused results in maths, science and literacy • The Penreach mission statement is: “To improve the quality and accessibility of education for teachers and learners in disadvantaged schools” • Penreach’s upliftment of local communities via improvement in education has been recognised by numerous awards and is supported by the Department of Education • Penreach principles are currently being applied by, Grace College (KZN), Mitchell House Preparatory School (Polokwane), Thandulwazi Teacher Training Programme (Maths and Science), St. Stithians College (Johannesburg) • The PPC transaction will enable Shalamuka to roll out their programme in a number of other regions and provinces, and schools outreach programmes, based on the Penreach model

  17. Mike du Toit

  18. Disability Empowerment Concerns Trust0.75% - R134m • DEC – The Disability Empowerment Concerns Trust was established in 1996 by seven major South African NGO’s representing 2 million South Africans with disabilities, of whom at least 85% are black people. • DEC investment returns contribute to funding the human rights and development work of: • SA Federation for Mental Health • Deaf Federation of South Africa • Disabled People South Africa • National Council for Persons with Physical Disabilities in SA • South African National Council for the Blind • Epilepsy South Africa • Thabo Mbeki Development Trust for Disabled People • DEC was established to engage in business ventures as a Broad-based Black Economic Empowerment shareholder.

  19. Disability Empowerment Concerns Trust • DEC is governed by a Board of Trustees made up of 14 independent trustees - 9 are black people (64%); 4 are black women (28%). • 5 of 8 directors of the DEC Investment Holding Company are black people, 4 are black women, and all are people with disabilities. • Mandate to develop a sizeable diversified portfolio of investments which will over time yield a sustainable income stream without the need for sale. • DEC therefore has a long-term time horizon in evaluating investments • DEC seeks that an investment is self funding, but if necessary supplements funding requirements from its own sources. • DEC’s unique value proposition has led to our inclusion in the BEE transactions of many major South African companies

  20. Strategic Black Partners7% in total – R1.25bn Peu, 1.90% Nozala 1.80% Capital Edge Consortium 1.50% iLima Portland Consortium 1.80% Also including broad-based elements

  21. SalukaziDakile-Hlongwane

  22. Nozala1.8% – R322m • Broad-based women's empowerment group. Established 1996 with 100% black management, 86% Black Shareholding; 34% Broad-based shareholding; 70% Black women owned and indirectly benefitting over 500,000 black women • Mission involves economic advancement of women through constructive business partnerships. Develops and supports rural women entrepreneurs through Nozala Trust • Long-term investor focused on the resources sector, industrial and consumer services. • PPC completed its first BEE transaction with Nozala, (50% stake in Afripack) which was 100% vendor financed by PPC as an enterprise development project in 2004 • In addition to broader business associations and relationships in SA, the rest of Africa and globally, Nozala is also able to contribute following: • Sourcing contracts for PPC • Support management in recruitment efforts for suitably qualified black executives • Support effective implementation of PPC’s enterprise development programme • Assist in identifying meaningful and sustainable community projects

  23. Peter Malungani

  24. Peu1.9% – R340m • Peu is a black owned and black managed company, established in 1996 with a management shareholding of 72%, the balance (28%) is held by two trusts • Intsika Investment Trust and Intsika Enablement Trust which facilitate BBBEE • Peter Malungani is the founder and Executive Chairman of Peu. The management team comprises of 7 individuals, with a combination of skills in finance and investment banking • Prior to the formation of Peu, Peter was owner of a construction business which has built a long-standing relationship with PPC since 1993 when in partnership we built the first corporate owned shopping centre in Soweto in 1993 • Peu holds strategic long term investments predominantly in infrastructure and various sectors • Peu’s sector portfolio includes amongst others • DipCivils and Stabilid • Peu previously held 50% of Taylor Woodrow SA, which built the Hector Peterson Memorial complex in Soweto and together with Grinaker, built the Monte Casino complex • Peu will add value by assisting PPC with advice on external trusts and enterprise development

  25. MandlaGantsho

  26. The iLima Portland Consortium 1.8% – R322m • Established to participate in the PPC transaction and expose shareholders to a prime infrastructure development and construction materials investment • Key shareholders are: • Controlling shareholders of iLima Group (Pty) Ltd, i.e. • Dr MandlaGantsho, a development finance practitioner, currently working for the African Development Bank (formerly CEO of the DBSA) • Dr Lupepe the Group Chief Executive of iLima Group an entrepreneur and founder • SimisaniKupe the CEO of ILima Mining and Strategic Investments • iLima Group employees • Other non-iLima Group Black individuals, youth and women • iLima Group is a long-term investor focused on infrastructure development, minerals exploration and energy generation and distribution • Other significant iLima Group investments are in Group Five Limited, Bombela Concession and ImbumbaAganang Concession (Department of Foreign Affairs Headquarters) • iLima Portland Consortium and PPC will both derive synergies from their strategic alignment along a more integrated infrastructure-related demand and materials-related supply chain linkages

  27. Jerry Vilakazi

  28. Capital Edge Cement Consortium1.5% – R268m • Capital Edge Cement Consortium is a Broad-based group formed in August 2006 primarily for the purpose of the Strategic Black Partnership with PPC. • Our vision is to be a strategic partner by playing a leading role in BBBEE through participation in initiatives that have the potential to create employment and skills transfer • Diverse - strong women component, youth and shareholder representation in all provinces • Consortium is led by Jerry Vilakazi, (CEO of BUSA and entrepreneur) with key management in Dr. Rejoice Simelane, ChamaKamukwamba and TiisetsoTsukudu • Shareholders Capital Edge Cement Consortium consist of the following: • Capital Edge Resources (Jerry Vilakazi, ) • Ubuntu-Botho Investment Holdings (Broad-based groups/individuals) • Black Management Forum Investment Co. (Broad-based professionals) • Imbewu Mineral Holdings (TiisetsoTsukudu) • Baswa Investments (Youth Groupings) (MaloseKekana) • Yard Capital (Leslie Maasdorp) • AbafaziiAfrika Group (Fay Mukaddam) • Together with the Black Management Forum (BMF) we are committed to Human Capital development and will further assist PPC in achieving its transformation through access to black skills and talent and proactively identifying new business opportunities in sub-Saharan Africa

  29. John Gomersall PPC – Chief Executive Officer

  30. ExternalTrusts 1.1m CSG’s 2.4m Direct Beneficiary Analysis –Excluding Broad-based elements in Strategic Black Partners Internal Trusts 4 000 3.5 million direct beneficiaries Based on Stats SA dependency multiplier of 3 –Could touch over 12 million people?

  31. Summary and Conclusion • Broad-based BEE and diverse partnership structure • Positively impacts 3.5 million people directly • Major stride advancing BBBEE in PPC. Future advances to come • Transformation in PPC goes beyond just equity ownership • Meets the requirements of the Mining Charter and DTI Codes • Mutual long-term benefits for key stakeholders – shareholders, employees, communities, SBPs, CSGs • Sustainable – lowest possible borrowing cost to participants • IFRS2 charge at 3.24% of market capitalisation in line with recent BEE transactions • Dilution is minimal

  32. Thank you – Any Questions?

  33. broad-based and sustainable Ntombi Langa-Royds PPC – Non Executive Director

  34. Key dates Circular and notice of general meeting posted to shareholders Thursday, 16 October General & Scheme meeting of shareholders Tuesday, 11 November Court hearing to sanction the Scheme Tuesday, 25 November Effective closing date of transaction on or about Monday, 15 December

  35. Closing Proceedings • Media are invited to a round table session at the front of the auditorium at 11:30 this morning • PPC executives are available for further explanations • Break for refreshments/finger lunch in the atrium • Thank you once again for attending

  36. Thank you www.ppc.co.za Tel. 011 386 9000

  37. broad-based and sustainable ANNEXURES

  38. Summary Table SBP’s BEE Credentials

  39. Transaction Structure (based on 30 day VWAP toclose of business on 21 August 2008 of R31.32 per PPC share) External trusts Internal trusts CSGs The PPC Black Managers Trust The Current PPCTeam Trust and The Future PPC Team Trust Shalamuka DEC The PPC Community Trust The PPC Construction Industry Associations Trust The PPC Education Trust The PPC Team Benefit Trust 100% 100% 100% 100% 0.75% 0.75% Broad-based The PPC Community Trust Funding SPV The PPC Construction Industry Associations Trust Funding SPV The PPC Education Trust Funding SPV The PPC Team Benefit Trust Funding SPV The CSG Funding SPV 0.70% 2.00% 1.00% 1.83% 0.57% 1.50% 0.50% SBPs Internal trust Peu Nozala iLima Capital Edge The PPC Black Independent Non-Executive Directors Trust Strategic 1.90% 1.80% 1.80% 1.50% 0.05% The SBP Funding SPV Percentage holdings all reflect effective holding in PPC post increase in shares issued – reduced by shares held by PPC in treasury 7.00% 15.15% Other PPC Shareholders

  40. Overview of Broad-based components

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