Independent expert’s opinion regarding the Black Mountain acquisition

1.   

INTRODUCTION

1.1   

We refer to the Black Economic Empowerment (“BEE”) transaction that involved Anglo American plc (“Anglo American”), Kumba Resources Limited (which was renamed Exxaro Resources Limited) (“Exxaro”), Eyesizwe Coal (Proprietary) Limited, certain BEE consortia and the Industrial Development Corporation of South Africa Limited (the “Transaction”).

1.2

We understand that simultaneous with, but separate and independent to, the Transaction, Anglo Operations Limited, an indirect wholly-owned subsidiary of Anglo American (“Anglo Operations”), granted Exxaro call options, exercisable up to 90 days after the completion date of the Transaction (the “Option”), giving Exxaro the rights to acquire 26% of the issued ordinary share capital of Black Mountain Mining (Proprietary) Limited (“Black Mountain”) for an aggregate cash price of R180 million (subject to the adjustments referred to in paragraph 2.3 below ) (“the Option Assets”). Black Mountain has also concluded a longer term offtake agreement in respect of zinc concentrate for Exxaro’s zinc metal refinery in Springs, Gauteng Province.

1.3

We understand that Exxaro exercised the Option on January 19, 2007. The exercise of the Option is subject to receiving shareholder approval at the general meeting to be held on 6 March 2007. 

1.4

Anglo American is a material indirect shareholder of Exxaro. Therefore, the exercise of the Option is a “related party” transaction in terms of the Listings Requirements of JSE Limited (the “Listings Requirements”).

1.5

Accordingly you, the board of directors of Exxaro (the “Board”), have, pursuant to section 10.4(f) of the Listings Requirements, asked us, Citigroup Global Markets Limited (“Citigroup”, “we”, “our” or “us”), whether, in our opinion, were the Option to be exercised as of the date hereof, the terms upon which the Option would be exercised, from a financial point of view, are fair and reasonable to holders (other than Anglo American and its subsidiaries and affiliates) of Exxaro’s issued ordinary shares, par value R0.01 (“Shareholders”).

2. 

METHODOLOGY AND ASSUMPTIONS

2.1

In arriving at our opinion, we have reviewed (1) the Circular to Shareholders of Kumba Resources Limited dated October 9, 2006, (2) a draft dated 9 February 2007 of the Circular to Shareholders of Exxaro Resources Limited to be issued on 19 February 2007, and (3) the Black Mountain Option Agreement dated October 9, 2006 as amended by an addendum dated 5 February 2007 (the “Option Documents”) and have reviewed the Microsoft Excel Transaction Model prepared by Rand Merchant Bank (dated 11 September, 2006) (the “Transaction Model”), and held discussions with certain senior officers, directors and other representatives and advisers of Exxaro and Anglo American concerning the business operations and prospects of the Option Assets. We examined and reviewed certain publicly available business and financial information relating to the Option Assets as well as certain financial forecasts and other information and data relating to the Option Assets which were provided to or discussed with us by the management of Exxaro and Anglo American and that we deem to be relevant. We reviewed the financial terms of the Option as set forth in the Option Documents in relation to, among other things, the historical and projected earnings, other operating data and the financial condition of the Option Assets. We considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Options Assets and analysed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of the Option Assets. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. The methodology used in arriving at our opinion is consistent with the methodology ordinarily used in respect of transactions of a similar nature.

2.2 

Furthermore, we have taken the following qualitative factors into account, both of which necessarily involve a subjective assessment: 

2.2.1 

the financial terms of the Transaction and the financial terms of the Option, in comparison with the financial terms of certain other transactions that we deemed to be relevant; and 

2.2.2 

the assessment of the Board as to the benefits it expects from exercising the Option. 

2.3 

Except as expressly stated in this paragraph, in preparing our opinion, we have not reviewed the accuracy and completeness of the information, including the independent technical report prepared by SRK dated 19 January 2007 (the “Technical Report”), supplied or otherwise made available to us, discussed with or reviewed by or for us, or publicly available, and we have not independently audited such information or undertaken an independent evaluation or appraisal of any of the assets or liabilities of the Option Assets or been furnished with any such evaluation or appraisal nor have we evaluated the solvency or fair value of the Option Assets under any laws relating to bankruptcy, insolvency or similar matters. In addition, we have not assumed any obligation to conduct any physical inspection of the properties or facilities comprising the Option Assets. The management of Exxaro and Anglo American has provided assurances to us that they are not aware of any relevant information that has been omitted or that remains undisclosed to us.

With respect to financial forecasts and other information and data relating to the Option or the Option Assets (including management’s estimates of purchase price adjustments that are excepted to be made following the exercise of the Option) provided to or otherwise reviewed by or discussed with us, we discussed with and have been advised by the management of Exxaro and Anglo American that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgements of the management of Exxaro and Anglo American as to the future financial performance of the Option Assets (and the likely occurrence and quantum of any such purchase price adjustments). Where practicable, we have compared the financial forecast information furnished to or discussed with us by Exxaro and Anglo American against third party sources and have discussed the assumptions made therein with the management of Exxaro. On the basis of these and other such inquiries as we have considered appropriate, we believe that the financial forecast information has been compiled with due care and consideration.

2.4 

Representatives of Exxaro have advised us, and we further have assumed that the final terms of the draft circular to shareholders will not vary materially from those set forth in the draft reviewed by us. We have further assumed, with your consent, that the remainder of the Option Documents have been exercised in accordance with their terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the exercise of the Option, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Exxaro, the Option Assets or the exercise of the Option. Other than the Technical Report, the Transaction Model, other financial models provided by Exxaro’s and Anglo American’s advisors and other than as set forth in paragraph 2.6 below, we have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Option Assets nor have we made any physical inspection of the properties or assets of the Option Assets. We were not requested to, and we did not, participate in the negotiation or structuring of the Option or the Transaction, nor were we requested to, and we did not, solicit third party indications of interest in the possible acquisition of all or a part of the Option Assets. We express no view as to, and our opinion does not address, the relative merits of exercising the Option as compared with any alternative business strategies that might exist for Exxaro or the effect of any other transaction in which Exxaro might engage.

2.5 

Our opinion is necessarily based upon information available to us, and financial, market and other conditions and circumstances existing as of the date hereof that can be evaluated, and on the information made available to us as of the date of this letter. Our opinion does not address Exxaro’s underlying business decision to exercise the Option, and we express no view on the effect on Exxaro and its Shareholders of the exercise of the Option and the related transactions.

2.6 

In arriving at our conclusion, we have undertaken a valuation of each of the operating assets that are relevant to the Option. We have employed three primary evaluation methodologies for the purposes of valuing the operating assets, being a sum-of-the-parts discounted cash flow valuation (based on the unaudited life-of-mine forecasts provided to us by Exxaro), a public market comparable company valuation (based on valuation statistics of selected peer companies and unaudited forecasted financials for calendar year 2007 and 2008) and a private market precedent transaction valuation (based on valuation statistics of selected precedent transactions and using both audited and unaudited financial statements or projections deemed relevant to evaluating such transactions). We have compared the market trading performance of selected peer companies. We have made certain assumptions, including projected free cash flow and EBITDA estimates for each of the operating assets, weighted average cost of capital estimates, together with the macro-economic assumptions underlying these projections. Such assumptions include commodity prices, exchange rates, inflation rates and interest rates. We have compared such assumptions with those made by the management of Exxaro and Anglo American and those contained in the Technical Report, together with publicly available forecasts and assumptions made by certain investment bank research departments. It should be noted that any valuation is only an approximation, subject to uncertainties and contingencies, all of which are difficult to predict and beyond the control of the firm preparing such valuation and, thus, a valuation is not intended to be, and should not be construed in any respect as, a guarantee of value. The valuations do not represent an opinion as to the price at which the Option Assets, or any interests therein, actually would be acquired or sold. Our opinion stated herein is derived entirely from the valuations described above as of the date hereof, and is qualified entirely by the matters considered and methodology and assumptions underlying such valuations. Except as expressly described above, we did not, and you have not asked us to, undertake any other analyses or consider any other information, and accordingly our opinion is qualified to the extent such other analyses or information may have affected our opinion, or the matters considered and methodology and assumptions used in arriving at our opinion.

3. 

EXPLANATION OF FAIR AND REASONABLE

Fairness is based on quantitative issues. We have had regard to the value of the consideration to be exchanged in exercising the Option. Reasonableness is based on qualitative issues. We have had regard to those qualitative factors set out in paragraph 2.2 and have considered the financial implications such qualitative factors could have for Exxaro, including without limitation the potential economic benefits to Exxaro from exercising the Option.

4. 

INDEPENDENCE

4.1

We have acted as an independent financial expert to the Board with respect to this opinion, and with respect to other opinions relating to aspects of the Transaction and other related transactions, and have or will receive a fee for our services in connection with the delivery of these opinions. We did not act as financial adviser to any other parties in connection with the Option or the Transaction and, consequently, we have not had access to documents or information that may have been available to other advisers who have acted in connection with the Option or the Transaction or any other related transactions. We and our affiliates in the past have provided, and currently provide services to Exxaro unrelated to the Option or the Transaction, for which services we and such affiliates have received and expect to receive compensation, including, without limitation, lending relationships with Anglo American and BHP Billiton PLC. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of Exxaro, Anglo American and other parties to the Option or the Transaction for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with Exxaro, Anglo American, other parties to the Option or the Transaction and their respective affiliates, including David Challen who sits as a non-executive director on the board of Anglo American PLC in the capacity of Chairman of the Audit Committee and Member of the Remuneration Committee.

4.2 

Other than as disclosed and providing the Board with this opinion, Citigroup has no advisory or other relevant relationship with, or direct or indirect interest in, Exxaro, Anglo American or any of the other parties involved in the Option or the Transaction. Citigroup has no material interest in the Option or in the success or failure of the exercise of the Option. Accordingly, we believe that we are sufficiently independent to provide this fair and reasonable opinion.

5. 

USE OF THIS OPINION

5.1 

Our advisory services and the opinion expressed herein are provided solely for the information of the Board and the Shareholders (other than Anglo American and its subsidiaries and affiliates) in their respective evaluation of the exercise of the Option, but our opinion is not intended to be and does not constitute a recommendation to any Shareholder as to how such Shareholder should act on any matters relating to the Option, or the Transaction. An individual Shareholder’s decision may be influenced by such Shareholder’s particular circumstances and Shareholders are advised to consult their own independent financial expert if they have any doubts as to the merits or otherwise of the Option or the Transaction. In addition, Shareholders should obtain advice on the taxation, legal and other implications of the Option and the Transaction since these implications have not been assessed by us.

5.2 

We hereby consent to our name being used and ascribed to this opinion and to the inclusion of references to our opinion, in the form and context in which they appear herein, in the proposed announcement and circular to Shareholders. This opinion shall not otherwise, in whole or in part, be disclosed, reproduced, disseminated, quoted, summarised or referred to at any time, in any manner or for any purpose, nor shall any public references to Citigroup Global Markets Limited or any of our affiliates be made by Exxaro or any of its affiliates or the Shareholders, without our prior written consent.

6. 

OPINION

Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, Citigroup is of the opinion that, were the Option to be exercised as of the date hereof, the terms upon which the Option would be exercised, from a financial point of view, are fair and reasonable to the Shareholders (other than Anglo American and its subsidiaries and affiliates).

Our opinion is only expressed as of the date hereof. We understand that the Option has been exercised, subject to shareholder approval at a general meeting to be held on 6 March 2007, and our opinion should not be relied upon as relevant or accurate as at the time the Option was exercised or at any other time since then or following the date hereof. There are a number of external factors that may affect this opinion subsequent to the date hereof, including without limitation changes in market conditions and changes in the value of the Option Assets, and we are under no obligation to update, revise or reaffirm our opinion.

Yours faithfully

Citigroup Global Markets Limited