Message from Mike Leech, Managing Director
30 April 2011

Paving the way to our future

Making use of growth opportunities, Rössing has put a number of initiatives in place to chart a well-planned growth path to enhance our strength.

It is hard to believe that it is only seven years ago that we announced that the mine would have to close its operations due to the low uranium price and dismal outlook. Since then, the global nuclear outlook has changed, and we have been rebuilding our business through an extensive development programme, re-equipping it to meet today's supply targets and also tomorrow's. Making use of growth opportunities, Rössing has put a number of initiatives in place to chart a well-planned growth path to enhance our strength.

During the year under review, noteworthy progress was achieved, with a major resource upgrade announced. This resource upgrade means that we have 164 per cent more uranium that can be mined, compared to previous estimates. Our current Life of Mine plan sees the mine continuing operations until 2023. With these revised resources we are now working to further extend the mine's life – indeed good news for us and Namibia.

It is, however, not an easy task to rebuild a business. We are a low-grade mine with relatively high costs, facing a constant struggle against rising costs and the need to build today for tomorrow. Most of our competitors have resources with much higher grades than us, with resulting lower costs. In order to stay in the game we have to do more with less.

We have recognised that the new environment changes our challenge; we need to control costs — nothing new here — but we must grow at the same time. We are busy putting measures in place that pave the way for our future.

Profitability impacted by investment in our future

During 2010, our profitability was severely impacted by the amount of money that we had to spend on stripping away the waste in the open pit to have access to additional resources by 2013, together with the significant impact of the strong rand on our earnings. The net effect was a loss of N$43 million after tax in 2010, down from N$289 million profit recorded in 2009. This pattern is expected to continue in 2011 and 2012, although the Rand:Dollar exchange rate could reduce the impact, if it were to weaken.

Our financial figures are provided in this year's report for the first time ever. This is in line with worldwide trends toward transparency and good corporate governance. The key point to keep in mind when looking at these figures and the next three years of operation, is that our ore-to-waste ratio has moved up from a long-term average of around 1 up to 5.28 and our uranium grade from a high of 0.040 per cent down to 0.028 per cent. These new key drivers will remain in these ranges until we re-access the southern side of the pit and the main ore body in 2014.

"Investing in our future" has been our theme for some years now. This is a very considerable act of faith on the part of our shareholders who are experiencing pain now (no profits and therefore no dividends), yet making very sizable capital investments. We are conscious of this commitment to our shareholders and have confidence that we will deliver the improved performances and returns planned.

This report clearly demonstrates the strong investments that were made in almost all areas of the business in 2010. In 2011, the following are already in place:

• Waste stripping on the southern wall represents more than N$1 billion of expenditure per annum.
• The exploration of the Z20 anomaly in our mining licence area has been taken into a second phase of exploration with three drills being deployed.
• The Heap Leach trial pads produced 40 tonnes of uranium oxide in 2010. This year, the trial pads are being operated as a production unit to supplement the Tank Leach process and further develop our understanding of how different ore types need to be processed.
• Mining in SK4, the satellite mining area, began last year and will be completed by the end of the year, with ore stockpiled and blended into plant feed this year and next.

• We continue to invest heavily in training of future employees and current staff. This year we have:
  • more than 100 students at the Namibian Institute
    of Mining and Technology;
  • 41 students at universities;
  • more than 100 employees on correspondence and
    other development courses; and
  • we are supporting 109 children of employees at
    tertiary institutions.
• We spent N$247 million on capital projects in 2010, and plan to spend N$550 million on capital in 2011.

Safety and business improvement

Last year the mine introduced a business improvement programme. This multi-year programme is our journey to operational excellence and sustainable world class performance through focused changes in efficiency, production capacity and the cost base of the business into the future.

Rössing applies world class standards and practices in our daily health, safety and environmental operations. Our safety performance in 2010 was poorer than in previous years, largely due of a lack leadership focus and accountability. To address this, we implemented a safety acceleration programme in the last quarter of 2010 to place the mine's employees and contractors on a sound foundation to achieve Zero Harm. I firmly believe that we can really reach a state where we work without harm and injury. We have laid out a programme and actions to achieve a change in mindset, which is the starting point. With this foundation and continued vigilance on the part of each of our employees, I have every confidence we will see outstanding safety performance in the years ahead, which will be the supporting base for excellence in operations.

Continued drive for nuclear energy

The tragedy which struck Japan on 11 March this year shocked the world. The impact on Fukushima has prompted much debate, and will surely continue to do so. A careful review of the events at Fukushima is needed in order to determine the impacts of the accident and to identify improvements in design and emergency response.

I do not believe that we will see any significant reduction in the global deployment of nuclear energy in the medium to long term. In my view, the global demand for energy will continue to grow strongly as the world needs energy diversification, as well as to reduce greenhouse gas emissions from energy use. The most likely change to come is that the findings of the Fukushima review will be used to inform and improve the construction and operation of current and future nuclear plants.

As a significant and growing long-term supplier of uranium to the world's nuclear power industry, we are committed to working for Namibia.