Safety

Safety at the mine continues to be an area of focus. The Disabling Injury rate (DIIR) (the number of lost time injuries expressed as a rate per 200,000 man hours worked) for the year was 1.66, compared to the rate of 1.31 the previous year. No fatal accidents were recorded.

Major safety awareness and action campaigns were implemented in the second quarter and, at the same time, a safety committee was established. Special audit teams comprising both Aquarius Platinum and contractor personnel have been established to perform safety audits on a regular basis, and to identify problem areas that can then be jointly addressed.

Cementation Mining, the mining contractor, created several new positions to improve supervision on a management and supervisory level. A NOSA (National Occupational Safety Association) audit of Cementation’s operations resulted in the Central section achieving a four-star rating, with the East section achieving five stars. As a result, the mine was able to achieve a number of safety milestones, including 500,000 fatality-free shifts. Another milestone was the 1,000 fatality-free production shifts achievement in a competition run by the Department of Minerals and Energy.

Minopex, the concentrate plant contractor at Kroondal, was awarded two NOSA certificates during the year – one for the best surface plant in the Bushveld region and the second for being one of the top 20 companies in the Bushveld region. Minopex retained its NOSA five-star Integrated (platinum) rating following an audit in February 2004. Minopex has operated for 16 months without a single lost time injury.

Mining

The year proved to be one during which Kroondal demonstrated an excellent recovery on the previous year, as the mine was able to largely overcome the effects of geological disturbances encountered – such as potholes, faults and pegmatite intrusions – which had reduced production and had an impact on costs. Despite the onerous effects of the rand and additional development, Kroondal was able to maintain a substantial cash margin of 45%, compared to the 52% achieved the previous year.

A large part of this success can be attributed to the Beyond 22K cost control efficiency campaign initiated in August 2003. Beyond 22K is aimed at improving the mine’s control over its margins and specifically to achieve a 10% increase in the best-ever historical monthly production – which translates into output in excess of 22,000 PGM ounces (in excess of 21,000 ounces per month was achieved in December and March this year).

The South African Competition’s Commission approved the PSA with Anglo Platinum in September 2003 and this came into effect on 1 November 2003. In line with this agreement, AQP(SA) and Anglo Platinum started sharing revenues, costs and capital expenditure for Kroondal mine. This has the impact, however, of halving the production attributable to AQP(SA), although the production attributable to AQP(SA) is expected to return to the pre-agreement levels when the expansion is completed in 2005.

The mine posted record production of 237,626 PGM ounces, up from 209,061 PGM ounces the year prior, as both production and cost control improved. In line with the PSA agreement, attributable PGM production was 160,190 ounces.

Mining operations produced a total 3.19 million ROM tons, up by 8% from 2.96 million tons; 91% came from underground and 9% from surface. Of this, 3.14 million tons were processed, and a 54,179 ton surface stockpile was created by year-end, as feed material to start the new plant.

ROM cash costs increased by 18% to R153/ton, from R130/ton the previous year. Cash costs per PGM ounce rose by 9.9% to R2,026 per PGM ounce compared to R1,842 per ounce the previous year. This increase largely reflects a change in the capex accounting rules, where development and strike extensions are now expensed. While this change increases cash costs in the short term, it provides favourable long-term benefits as the amortisation charge related to redevelopment and strike extensions is removed.

Without this impact, the cash cost per PGM ounce would have increased by only 1.74%, which is a tribute to the production turnaround at Kroondal.

The mine received a basket price of $599 per PGM ounce, compared to $509 per PGM ounce the previous year. This was primarily due to a 30% increase in the platinum price in dollar terms. Platinum accounts for 60% of Kroondal’s PGM basket.

Progress on the PSA

Following extensive consultation with Interested and Affected Parties, Phase 3 of the EMPR for the PSA was approved in the third quarter. As a result construction activity was able to commence during the year.

Underground development to extend the bord and pillar mining operations will continue into 2006 until steady-state mining is reached at 500,000 PGM tons a year. Construction of the new 250,000-ton per month concentrator plant to process the additional ore commenced in April 2004, with hot commissioning scheduled for May 2005, earlier than originally planned.

Underground development of the new sub-decline systems and the No. 3 decline began in the third quarter and is now well advanced. A total of 467 metres of down-dip development was completed by year-end. All development is onreef and the expansion of mining operations will contribute to increased UG2 ore production throughout 2005.

AQP(SA) is funding its portion of the capital for the PSA from current cash flows, the net proceeds on the disposal of the Waterval Block and an existing debt facility. AQP(SA)’s share of capital commitments to date is R207 million, with capital expenditure paid to date of R46 million.