Review of International Operations

St Ives Gold Mine

PRODUCTION: 12,992 kg (417,700 ozs) TOTAL CASH COSTS: R136,122/kg (US$582/oz)

Overview

Location: The St Ives operations extend from 5 to 25 km south-southwest of the town of Kambalda in Western Australia, approximately 630 km east of Perth. Located at approximately latitude 31°12’S and longitude 121°40’E, the nearest major settlement is the town of Kalgoorlie situated 80 km north. Infrastructure: Ore is currently mined from three underground mines, four open-pits and 10 surface stockpile sources, and processed via both mill/CIP and heap leach plants. Geology: Structurally controlled hydrothermal gold deposits situated in the Norseman-Wiluna Greenstone Belt, which is part of the Yilgarn Craton, a 2.6 Ga granite-greenstone terrain in Western Australia. Employees in service: 249 permanent employees, 926 contractors

St Ives Gold Mine

¹As a significant portion of the acquisition price was allocated to tenements of St Ives and Agnew on endowment ounces and also as these two Australian operations are entitled to transfer and then offset losses from one company to another, it is not meaningful to split the income statement below operating profit

Safety, health and environment

St Ives remained fatality free for F2008; but unfortunately recorded six Lost Time Injuries (LTIs) during the year. The Serious Injury Frequency Rate (SIFR) improved from 16.93 in F2007 to 10.79 this year.

The primary focus is to eliminate injuries “aim for zero” through Critical Hazard Controls (CHC) together with the continued implementation of the Zero Incident Process (ZIP), which is an intervention designed to influence safety performance at both the individual and safety culture level.

The mine maintained AS4801:2000 Occupational Health and Safety Management System certification and ISO14001:2004 (Environmental Management System) certification.

Operational performance

Gold production was lower for the year due to the late start of the underground projects and more low grade open pit ore tons being mined in an attempt to compensate. Mining operations focused on sustaining production from base load open pits and the Argo underground operation, while developing the Leviathan pit cutback and underground operations at Belleisle and Cave Rocks as future ore sources.

The majority of open pit ore was mined from the North Revenge, Bahama, Cave Rocks, Pluton and Revenge pits. The Thunderer and Bahama pits were completed, while North Revenge, Cave Rocks, Pluton and Revenge pits will be completed in the first quarter of F2009. A smaller mining fleet mined ‘good-bye cuts’ in all the completed pits and the historical Blue Lode pit. Overburden prestripping at the Grinder and Agamemnon pits commenced and together with the Leviathan pit cutback will reach full production in F2009. As a result stripping ratios and pit volumes remained similar throughout the year.

The sourcing of underground material from Argo was affected by delays in paste filling, but these were successfully resolved.

Development of the Belleisle complex was substantially completed during F2008, with the first stope completed towards the end of the year. Development was delayed due to a number of hyper-saline and high volume water intersections and difficult working conditions. Full production is expected to be reached in the second quarter of F2009.

Cave Rocks started development in September 2007 and an initial stope was mined at the southern extent of the mine at the end of F2008. This project was delayed by six months due to permitting delays and ore body interpretation.

Mining of remnant stopes at Leviathan continued throughout F2008, providing extra feed to the mill while Cave Rocks and Belleisle were developed. The infrastructure was closed in F2008.

The Lefroy mill operation benefited from various value adding projects of which the SAG mill cube control, North Orchin tailings line and Continuous Improvement (CI) process were primary features.

Gold recovery from the heap leach varied during the year as a result of variances in the feed blend, but has increased overall as a result of the agglomeration drum installation. The Leviathan pit cutback ore introduced towards the latter part of the year has impacted negatively on recovery due to its competent nature, pushing up maintenance, reagent and contractor costs. An oxide screen has been commissioned and optimised. Spent heap relocation has been demonstrated as a practical, simplified and cost effective option to create stacking area on existing pads and this strategy will be pursued to replace the Stage 3 pad, which will reach capacity during the third quarter of F2009.

Total gold production was down on the previous year (F2007: 487,000 ounces) to 418,000 ounces. Total cash costs for the year averaged US$582 per ounce (A$649 per ounce), up from US$424 per ounce (A$540 per ounce) in F2007. This was mainly due to increases in input costs, principally labour and fuel, as well as the lower grades and an unfavourable exchange rate movement.

Under the terms of the inherited royalty agreement pertaining to St Ives, the 10 per cent price participation royalty on a gold price above A$600 per ounce continued to apply during the year. The Net Smelter Royalty component was also triggered in mid June with production from St Ives reaching 3.3moz in June 2008. The impact of these royalties for the full year was A$14 million (US$30).

Revenue generated during the year was A$381 million (US$342 million) at an average gold price of US$819 per ounce (A$913 per ounce). Operating cost amounted to A$269 million (US$242 million), realising an operating profit (before amortisation) of A$105 million (US$94 million) for F2008.

Capital expenditure for the year totalled US$108 million (A$120 million) with most of this incurred on mine development for the underground operations at Argo, Belleisle and Cave Rocks. Exploration expenditure of A$27 million is also included in the capital expenditure.

Improved understanding of the underlying geological and mineralisation controls has been developed over the last two years and enabled consolidation of a number of key project areas going forward. The majority of the activity was focused on early stage exploration activities aimed at setting up the site for aggressive resource drill outs in F2009. The strategic thrust of the F2009 exploration programme will include expansion of underground reserves, extensional growth at operating open pit mining areas, and selective targeting in prospective greenfields areas.

Attracting and retaining the right people continues to present challenges, but we continue to embed our people strategy, directing particular attention to accurately identifying and addressing our current and future work force requirements and improving our approach to managing the careers of our people.

Outlook for F2009

• Recertification of the AS4801:2000 Occupational Safety and Health Management and ISO14001:2004 Environmental Management Systems; and certification with the
  International Cyanide Management Code (ICMC).
• Complete development of the Leviathan pit cutback as a future base load.
• Deliver full production from the Belleisle and Cave Rocks underground mines.
• Successful implementation of the Underground Department Improvement Programme (UDIP), delivering improved cash margins through productivity, costs and revenue drivers.
• The heap leach expansion project, through the re-utilisation of the Stage 2 heap leach pad.
• The exploration programme to include expansion of the underground reserves at Argo, Belleisle and Cave Rocks, extensional growth at operating open pit mining areas.