14. MINING ASSETS VALUATION

14.5	Analysis of Operating Costs Details on how the operating costs used in the FMs were derived is provided for the operating Material Properties in this section.
	14.5.1	Iron Ore – Sishen Mine
		The operating costs used in the FMs in Table 14.5 to Table 14.8 are based on the 2006 operating cost budget developed by Sishen Iron Ore during 2005. For each of the principal activities a number of cost elements are separated in terms of a fixed cost element and variable cost element. These fixed and variable cost elements are used to generate the forecast costs used in the FMs according to the tonnage hauled profile. The tonnage hauled profile includes ore and waste mining and stockpile re-handling. SRK has reviewed these costs and the calculations and incorporated a similar methodology in the FMs presented as part of this CPR. Due to the 2006 basis of the cost estimation and current elevated levels of certain consumables, notably diesel prices, these costs are considered to be conservatively estimated. SRK has made adjustments to the operating expenditures to reflect the following aspects: Adjusted the mining costs to account for the likely increase in costs associated with an increasing pit depth over the LoM Plan. The pit is scheduled to increase from some 80m below surface currently to some 430m according to the results of the mine design. SRK understand that Sishen is investigating improvements that would lead to lower costs than that assumed by SRK in the FMs. The projects and improvements currently considered include back-filling of exhausted open-pit areas, an increase in fleet size, and other mining methodologies for ore and waste transport; Excluded certain general and administrative items of a once off or project nature in the cost forecasts; Included a provision for closure cost based on the difference between the estimated final closure cost and the balance of the environmental Trust Fund; Included a provision for the likely terminal benefits to employees at the end of the LoM; and Included a small adjustment to reflect an increase in various tailings management actions recommended by SRK in this CPR.
	14.5.2	Iron Ore – Sishen South Project The operating costs used in the FMs in Table 14.9 and Table 14.10 are based on the operating costs developed by Kumba as presented in the June 2005 Feasibility Study document. The costs have generally been derived according to a zero-based estimation and have taken cognisance of the production profile and the likely physical changes in the operating parameters over the full period of the LoM Plan. SRK has reviewed these costs and the calculations and incorporated a similar methodology in the FMs presented as part of this CPR. SRK has not made any modification to the direct costs used in the FMs but has, however, made adjustments to the operating expenditures to reflect the following indirect costs: Included a provision for closure cost based on the difference between the estimated final closure cost and the balance of the environmental Trust Fund; and Included a provision for the likely terminal benefits to employees at the end of the LoM.
	14.5.3	Iron Ore – Thabazimbi Mine The operating costs used in the FM in Table 14.11 is based on the 2006 operating cost budget developed by Kumba during 2005. For each of the principal activities a number of cost elements are separated in terms of a fixed cost element and variable cost element. These fixed and variable cost elements are used to generate the forecasted costs used in the FMs according to the tonnage profile. SRK has reviewed these costs and the calculations and incorporated a similar methodology in the FMs presented as part of this CPR. SRK has however made certain adjustments to the operating expenditures to reflect the following aspects: Increased the operating costs for certain tailings management aspects by ZAR8.3 million over the LoM Plan; Included a provision for closure cost based on the difference between the estimated final closure cost and the balance of the environmental Trust Fund. SRK has increased environmental costs associated for closure by some ZAR22 million to that of the Kumba environmental costs; and Included a provision for the likely terminal benefits to employees at the end of the LoM.
	14.5.4	Coal The operating costs used in the FMs in Tables 14.12 to 14.29 for the coal assets are based on the historical and projected financial and operating numbers provided by Kumba and Eyesizwe. For each of the principal activities a number of cost elements are separated in terms of a fixed cost element and variable cost element (Fixed Costs and Variable Production Costs in the FMs). These fixed and variable cost elements are used to generate the forecast costs used in the FMs according to the tonnage hauled profile. The tonnage hauled profile includes ore and waste mining and stockpile re-handling. SRK has reviewed these costs and the calculations and incorporated a similar methodology in the FMs presented as part of this CPR. Due to the 2006 basis of the cost estimation and current elevated levels of certain consumables, notably diesel prices, these costs are considered to be conservatively estimated.
	14.5.5	Heavy Minerals, Base Metals and Industrial Minerals The operating costs used in the FMs in Tables 14.30 to 14.33 for the heavy mineral assets, Tables 14.34 to 14.38 for the base metal assets and Tables 14.39 to 14.42 for the industrial mineral assets are based on the historical and projected financial and operating numbers provided by Kumba. For each of the principal activities a number of cost elements are separated in terms of a fixed cost element and variable cost element (Fixed Costs and Variable Production Costs (Operating Costs) in the FMs). These fixed and variable cost elements are used to generate the forecast costs used in the FMs according to the production profile.