Palabora Mining Company Limited

1 Palabora Mining Company LimitedIntegrated annual report 2012 Palabora Mining Company Limited is a large copper mine, smelter and refinery complex in the Limpopo Province of South Africa, and is a member of the worldwideRio Tinto Group. Cautionary statement about forward-looking statements This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Palabora of forward-looking statements in this integrated annual report include those regarding estimated ore reserves, anticipated production data, costs, outputs and productive life of assets or similar factors. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this document that are beyond the Group s control.

2 For example, future ore reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulations, and political light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward-looking statements which speak only as to the date of this document. Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

3 The Group cannot guarantee that its forward-looking statements will not differ materially from actual at a glance4 Group highlights6 Board of directors12 Executive management2 Company OVERVIEW16 Report from the Chairman20 Managing Director s report22 Chief financial officer s report15 LEADERSHIP STATEMENTS58 Environment69 Local economic development projects77 Enterprise development projects79 Employees81 Health and well-being82 Employees, contractors and visitors safety83 Transformation86 Stakeholder engagement57 SUSTAINABILITY STATEMENTSCONTENTS45 OPERATIONAL PERFORMANCE46 Safety48 Copper50 Growth51 Sales, marketing and logistics52 Ore reserves and mineral resources overview24 CORPORATE GOVERNANCE STATEMENTS26 Introduction26 Palabora board of directors31 Board Audit and Risk Committee34 Remuneration and Nomination Committee36 Social, Ethics and Technical Committee39 Palabora Risk ManagementIFC FLaPPalabora Mining Company Limited is a large copper mine, smelter and refinery complex in the Limpopo Province of South Africa, and is a member of the worldwideRio Tinto Group.

4 Design of the reportThe layout and design of this report, is inspired by our main product we have mined in the Ba-Phalaborwa area for decades and that s copper, which has sustained our business for years and contributed to socio-economic development of the area. Scope of the report This integrated report covers the financial year 1 January 2012 to 31 December 2012 and is released within three months of the end of the financial principles Palabora Mining Company Limited ( Palabora ) is a Company incorporated in the Republic of South Africa in accordance with the provisions of the Companies Act and complies with the principles of King III, unless otherwise stated, the Companies Act and the JSE Limited Listings Requirements and other legislative requirements.

5 Palabora subscribes to high ethical standards and principles of corporate governance. In addition, the Company also adheres to International Financial Reporting Standards (IFRS) in compiling its annual financial assurancePalabora s Board of directors acknowledges its responsibility to ensure the integrity of the integrated annual report. The Board has accordingly applied its mind to the integrated annual report and, in its opinion, the report presents fairly the integrated performance of the Company and its financial statements 2012 The annual financial statements for the year ended 31 December 2012 were approved by the Board of directors on 14 March 2013. PricewaterhouseCoopers Inc.

6 , independent auditors, have audited the annual financial statements as disclosed in their unqualified audit report on page are pleased to present to stakeholders our integrated annual report for the year ended 31 December 2012. Our integrated annual report is consistent with the recommendations in the King Code on Corporate Governance Principles for South Africa (King III). This report covers our financial and operational performance for the year under review, as well as other non-financial indicators and information which will give our stakeholders a more comprehensive picture of our business in one list of abbreviations has been supplied on the inside back cover for ease of reference. This report is also available at THIS8991 Statement by the Company Secretary91 Statement by the Board Audit and Risk Committee92 Statement of responsibility by the Board of directors93 Directors report97 Independent auditor s report98 Income statements99 Statements of comprehensive income100 Statements of financial position101 Statements of changes in equity103 Statements of cash flows104 Notes to the consolidated financial statements144 Summary financial data146 Summary production data150 Analysis of shareholdersANNUAL FINANCIAL STATEMENTS151 Shareholders diary151 Useful information and contacts152 Notice to shareholdersProxy form InsertedIBCA bbreviations151 ADDITIONAL INFORMATIONIFC A leader in the Mining industry

7 Through our performanceVision To safely and profitably extract and convert minerals and metal from the Palabora ore bodyMissionKey facts Incorporated in the Republic of South Africa in 1956, located in the Limpopo Province and listed on the JSE Limited The Company extracts and beneficiates copper, vermiculite and magnetite South Africa s major producer of refined copper Produces refined copper mainly for the South African market The refinery produces continuous cast rod for the domestic market and cathodes for export Palabora has a 230 mt magnetite stockpile which is a joint-product of the copper process Palabora also owns a vermiculite deposit which is mined and processed for sale world-wide12 OVERVIEWCOMPANYO bjectives Create a strong enterprise resourCe for suCCess optimise operations sustainable long lifen High performance culturen Profitable long-term plann Develop future leadersn Attract and retain the best talent at all levelsn Ensure zero harmn Be a production benchmarkn Be

8 A third quartile cost producern Plan and execute the plann Improve continuouslyn Make the right strategic choicesn Drive life of mine extension projects (Lift II, magnetite)n Earn the support of the communityn Preserve the environmentValues integrity Courage aCCountability Caring teamworkn Be who you say you aren Be honestn Choosing to confront fear, risk and uncertaintyn Assume responsibility for actions, decisions and outcomesn Treat others as you would like to be treatedn Working with others towards a common goalWe have identified four strategic objectives as key drivers towards the achievements of our Mining Company Limited Integrated annual report 20123 Palabora Mining Company Limited ( Palabora ) is a major producer of refined copper and operates an underground block cave mine, smelter and refinery complex.

9 Palabora is based in Phalaborwa in the Limpopo Province of South Africa and is a member of the world-wide Rio Tinto Group of companies. ProductsThe primary product of the Group is copper with magnetite being classified as a joint-product due to its significant contribution to revenue and operating profit. By-products include nickel sulphate, anode slimes and sulphuric acid. The Industrial Minerals division produces and markets copper operation comprises an underground mine, a concentrator, a copper smelter with anode casting facilities and an associated acid plant, an electrolytic refinery tank house, a rod casting plant, a magnetite separation plant and by-product recovery consists of two ore streams, one being the magnetite mined as part of the copper-bearing ore and the other a historic stockpile accumulated during the open cast copper period.

10 Magnetite is mostly processed through the magnetite separation plant to increase the grade to approximately 65 per cent Fe content. The vermiculite division comprises an open pit Mining operation and a recovery plant. Foreign subsidiaries in the United States of America, the United Kingdom and Singapore are responsible for the sale and marketing of AT A3372565-1455244-4 CopperBy-productsMagnetiteVermiculitePRO DUCT REVENUE CONTRIBUTION (%)PRODUCT OPERATING PROFIT CONTRIBUTION (%)0501001502002501981198219831984198519 8619871988198919901991199219931994199519 9619971998199920002001200220032004200520 06200720082009201020112012 Material mined (Mt)Copper mined (thousand tonnes)COPPER PRODUCTION PERSPECTIVE4 HIGHLIGHTSgROuP420122011 p er cent changeFinancial (R million)More information on our annual financial statements from page 89 Turnover (pre-hedge)9 7419 0927 Net (loss)/profit after tax(97)1 464(107)EBITDA4132 432(83)Headline (loss)/earnings(82)