Financial Review.

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Simon Scott, Chief Financial Officer.

Overview

The 2012 interim period has been characterised by declining profitability driven mainly by reduced revenues. Automotive and industrial demand for PGMs has remained subdued which has had an adverse impact on the pricing environment. The volume of PGMs sold has also declined from the 2011 interim period. This is due to anticipated production increases not materialising as a result of production losses due to heightened Section 54 stoppages as well as management induced safety stoppages and community unrest disruptions.

On the cost side, wage and electricity tariff increases continued at above inflation rates putting further strain on profitability. However, the resultant increase in costs was mitigated by favourable exchange movements and positive metal stock movements. Unit costs remain under pressure as cost escalations have not been offset by the expected increase in production as mentioned above. The C1 unit cost per ounce produced for the 2012 interim period was 10.9% higher than the comparative 2011 period.

We continue to invest in capital expenditure as we build our production base. Not only will this allow us to meet our objective of moving down the industry cost curve, but it will also enable us to increase production from our Marikana infrastructure at a time when we believe that the market will require the additional production. While this has had the consequence of increasing our net debt to $356 million at 31 March 2012, our gearing at 11% remains relatively low. We continue to demonstrate balance sheet capacity afforded us by existing debt facilities and other funding measures we are able to execute in the short term. One such funding measure was the prepaid sale of gold undertaken in March which yielded $107 million in cash flow.

We will constantly monitor and balance the need to invest for future production and the requirement to maintain a strong balance sheet, with the overriding objective to provide an optimal return for our shareholders.

Income Statement

The $134 million movement between the underlying operating profit of $14 million for the six months ended 31 March 2012 and that of $148 million for the six months ended 31 March 2011 is analysed below.

  $m
Period to 31 March 2011 reported operating profit 144
Period to 31 March 2011 special items 4
Period to 31 March 2011 underlying operating profit 148
PGM price (119)
PGM volume (92)
PGM mix 37
Base metals (13)
Revenue changes (187)
Cost changes (including foreign exchange impact of $60m) 53
Period to 31 March 2012 underlying operating profit 14
Period to 31 March 2012 special items
Period to 31 March 2012 reported operating profit 14
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