Project DELTA

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Agreement between Iscor and IDC

• Structure of Kumba unbundling
• Integration of Saldanha
• Rights issue in Iscor post unbundling

26 September 2001
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Agenda

• Introduction
• Ownership of iron ore
• Integration of Saldanha
• Final IDC Holdings
• Iscor rights issue
• Rationale for the rights issue
• Debt allocation
• Other issues
• Timetable and conditions precedent
• Conclusion

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Introduction

• Iscors 1 March 2001 unbundling proposal a
  further step in 5 yr programme of releasing value
  for all shareholders
• IDC required as part of unbundling
• ownership of iron ore for Iscor
• full recapitalisation of Saldanha
• integration of Saldanha into Iscor
• Agreement now reached between Iscor and IDC

Agreement meets requirements of all stakeholders
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Ownership of iron ore

• Iscor retains ownership of 6.25 Mtpa of Sishen
  iron ore from 1 July 2001 (current production
  27 Mtpa)
• Total iron ore requirements then received at cost
  plus 3
• Additional R400 mill p.a. EBITDA for Iscor
• Creates a more robust steel operation
• Reduced debt allocation ensures no destruction of
  value in Kumba
• Kumba free to
• - further expand Sishen (27 Mtpa to 33 Mtpa) and
  
• - develop Welgevonden (10 Mtpa)
• Iscor retains right to participate in Kumbas
  local iron ore expansions only i.r.o. any further
  domestic requirements

• - Iscor remains vertically integrated steel
  producer
• Kumba value remains intact with significant
  expansion potential

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Integration of Saldanha

• Saldanha debt R5.8 bn at hedged values (30 June
  2001) to be fully refinanced by Iscor and IDC
• Iscor to acquire IDC 50 stake in fully
  refinanced Saldanha
• IDC to contribute 50 of Saldanha operating
  funding requirements to June 2002 - R250m cash to
  Iscor post unbundling
• IDC receives 10 million Kumba shares and 20
  million post-unbundled Iscor shares as
  consideration
• If Saldanha funding requirements gt R500m can
  request 50 of excess from IDC in consideration
  for post unbundled Iscor shares at market price

Iscor positioned for integration of SA steel
industry
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Final IDC holdings

• Current IDC holding 31.5 million shares 11.5
• Holding post Saldanha integration and unbundling
• Kumba 14.7
• SteelCo 17.6 (pre rights issue)

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Iscor rights issue

• Vertically integrated Iscor requires
  recapitalisation to limit debt
• IDC will underwrite R1.67 billion Iscor rights
  issue post-unbundling
• Timing after interim results announcement in
  February 2002
• Price at 25 discount to market

IDC to underwrite Iscor recapitalisation
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Rationale for the rights issue

• Unbundling would not be possible without iron ore
  ownership for Iscor
• Leaving debt of R4.3bn in Kumba with reduced
  R400m EBITDA destroys value in hard currency
  Kumba, with no financial flexibility to develop
  projects
• Debt thus left in softer currency Iscor
• R3.6bn debt in Iscor not acceptable to lending
  banks
• Hence Iscor debt has to be refinanced
• Options available to Iscor are
• No unbundling - maximum value release foregone
• Kumba overgeared - destroying certain value in
  the hard currency
• Steelco overgeared - not acceptable to lending
  banks

Preferred option is rights issue in Steelco
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Debt allocation
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Other issues

• Iscor Board supports IDCs wish to vote dispose
  of Iscor and Kumba
• shares without restriction
• Proposals to shareholders to be voted as one
  indivisible transaction
• Strategic equity partner desirable, but not
  conditional

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Timetable and conditions precedent

• Documentation posted to Iscor shareholders 23 Oct
• Iscor shareholders meeting 15 Nov
• Unbundling date 19 Nov
• Approvals required
• Iscor shareholders
• Lending banks (i.r.o. debt allocation)
• Competition Commission (only i.r.o. Saldanha
  integration)
• JSE/SRP

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Conclusion

• PROPOSAL MEETS ALL STAKEHOLDER REQUIREMENTS
• ISCOR
• becomes focused integrated steel producer
• recapitalised to limit debt
• positioned for rationalisation of SA steel
  industry
• favourable procurement creates more robust
  operation
• KUMBA
• becomes focused metals/minerals producer
• value remains intact
• positioned for strong growth
• significantly stronger balance sheet compared to
  March proposal

Major value release for shareholders