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buy back 1,707 million shares (US$6400 million / US$3.75). It is unlikely PIC –a key player in our
Mendelow Analysis (Appendix 2), will sell despite the threats as AMANGO appears to be so
strategic in the country’s mining sector –electoral political considerations is likely to torpedo such a

move! However, the threat could weaken market sentiment and damage our value even further; so
we need to tread carefully. Global investors hold 60% -if they sell, PIC’s % voting control will
increase to 33% (463/ 772/0.25 – 1,707); these global investors may become jittery it may be the
first step to a populist policy of nationalisation and may dump their remaining AMANGO holdings to

protect their investment, so, they may choose not to participate in the share re-purchase programme
in the first place!

In both options, investment (lease) income of US$ 618 million per year will be forfeited and the sale

process itself may attract union attention who may seek to represent employees affected. At face
value, it may help show our commitment to BEE when the deal is announced, yet in reality, its
design does not constitute a real black ownership of the mines as envisaged by the new regulations

but rather ownership in a new property company. It may have ethical undertones but not conclusive
hence not discussed further in the section on ethics!

4.3.5 Recommendation
Do not deleverage the balance sheet nor undertake a share repurchase by unbundling the

residential property portfolio from the group. In fact, do not unbundle the property portfolio at all!

Justification: The unbundling exercise brings us close to delivering on our KPI in relation to balance

sheet deleverage (Net Debt of US$ 10,5 billion against a KPI target of US$ 10 billion) and
operational leverage (operating cost saving of USD$ 4,7 billion against a target of US$ 5,8 billion),
but we are counting on closing down unprofitable mines and on disposals to reduce employee

numbers from 160,000 to 60,000. At least 33% of all employees (53,300/160,000 –see Appendix
2.5.2 of the case study) are based in South Africa and mainly working in the platinum, iron ore and
manganese as well as the coal segments which we have strongly recommended against disposal
per BCG and Ashridge –so we will continue to need these houses. If we did sell, we risk leaving

53,000 of our employees and their families who have long stayed in these houses, deeming the right
to buy and own someday as a benefit to now negotiate with an outside property company for the
right to continue with the lease, most probably without the right to own it. Rest assured unions will

get involved! Furthermore, selling these apartments fails to address the 10% royalty tax risk and
does not actually meet the substantive intent of the mining regulations as the deal structure gives
black ownership to a property rather than mining company. As some of these issues affect the
mining industry as a whole, it is best to approach it in strategic collaboration with other mining
companies through the industry chamber of mines.

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