It is my pleasure, as incoming CEO of Implats, to report on yet another exceptional year for the business, with record returns to shareholders.

Delivering shareholder value
Implats’ mission is the delivery of real returns to shareholders. This was accomplished this year by:

• A substantial increase in the share price; and
• Remarkable returns in cash, accentuated by a special dividend of R30 per share at mid-year.

The building blocks for growth are now firmly in place, enabling Implats to realise its aspirations to become a 2 million ounce platinum producer by 2006. Previously constrained by the limitations dictated by its single producing orebody, the Impala lease area, Implats now boasts not only the additional reserves over which it exercises management and control, but also those delivering life-of-mine concentrates, purchased from those operations in which Implats holds an equity stake and over which it exercises significant influence.

Implats has now secured its future by delivering the reserves necessary for growth and creating the flexibility required by the market.

All concentrates not originating from Impala’s lease area are accounted for through an entity known as Impala Refining Services (IRS). The IRS business utilises surplus smelting and refining capacity to process third party concentrates from which IRS retains an agreed proportion of the metal value or receives a toll refining fee. The incremental pgm ounces generated through IRS are produced at vastly reduced capital costs and associated operating risks. The benefit that accrues to Implats from its "bought-in" ounces represents an overall reduction in the unit costs of processing Implats’ in-house concentrate production and, in future, the significant minority shareholdings will contribute to earnings. Furthermore, these additional "bought-in" ounces materially add to the marketing leverage attributed to being the second largest platinum producer.

In addition to the earnings from Impala’s in-house production, and margins retained by the IRS operation, Implats benefits from dividend income declared by associated companies.

Phenomenal growth in earnings and profits
Attributable income and headline earnings for the year ended 30 June 2001 more than doubled to R4.65 billion (US$611 million) or 7 024 cents per share (US923 cps). This was primarily due to an increase in sales revenue of 71% to R11.97 billion (US$1 573 million) as a result of higher dollar metal prices and a further weakening in the rand.

Strong growth was experienced in all areas of Implats’ business. Contribution to attributable income from Impala increased to R3 724 million from R1 905 million in 2000. IRS generated a contribution of R300 million, up 156% from R117 million in 2000. Attributable income from Lonplats increased to R647 million from R220 million in 2000.

Despite an almost five-fold increase in total dividends to 6 800 cents per share, the anticipated level of earnings will ensure that the company remains in a sufficiently healthy cash position to realise its growth ambitions in the years ahead.

Record pgm market
The 2001 financial year was characterised by intense volatility in the prices of pgms, with record high palladium prices exceeding US$1 000 per ounce. This resulted in a 47%

increase in the price index (weighted average of Impala’s basket of products) achieved to US$1 254 per ounce, the highest ever recorded by Implats. While delivering record profits and cash flows to Implats, the high prices have, as expected, begun to take their toll on demand, particularly with regard to palladium.

Platinum demand remained firm despite the run up in prices. The metal used in jewellery exceeded other applications owing to strong growth in China which offset reduced demand in Japan. Platinum benefited from increased use in autocatalysts, particularly in diesel vehicles and growth in computer hard disc and LCD glass applications. Tightening emission control legislation should continue to boost platinum demand thereby ensuring a balanced market in the short to medium term, albeit at prices lower than those achieved during 2001.

The palladium market experienced strong demand particularly from the automotive and electronics sectors exacerbated by erratic supplies from Russian sources and demand quickly exceeded supply. As a result, palladium prices nearly doubled leading up to January 2001 before retreating as more product was released out of Russia towards the middle of 2001. The high prices have accelerated palladium substitution in dental and electronics applications as well as the conversion back to platinum/rhodium autocatalyst systems. Accordingly, Implat’s business plan assumes further weakening of palladium demand and prices.

The long term oversupply forecast for palladium will be particularly problematic for the Russian and North American producers who collectively produce around three ounces of palladium for every ounce of platinum produced. Conversely, the South African producers only generate around half an ounce of palladium per ounce of platinum produced – a distinct competitive advantage in the near future.

Group safety a priority
The group safety record produced a mixed result for the year. The number of fatalities increased unacceptably to 13 from the level of seven fatalities experienced in both 1999 and 2000. Our sincere condolences are extended to the families and friends of the deceased. The lost time injury rate per million man hours, however, improved by 32% to 8.5 from the rate of 12.6 reported in 2000. Fresh initiatives will clearly be required to lift Impala’s safety performance to match at least best international underground mining practice.

Operational review
Total platinum production, which includes metals sourced from concentrate purchased from third parties, increased by 8% to 1.29 million ounces.

Platinum production from the Impala lease area decreased by 1.7% to 1 million ounces of platinum. Tons mined from the Impala lease area increased by 3.3% on the previous year while tons milled increased by 1.2%. However, late delivery of the new UG2 concentrator circuit by the contractor and subsequent problems experienced during commissioning had a negative impact on Impala’s performance for the year. As a result, the ore stockpile grew by around 210 000 tons to 630 000 at year end.

The smelter upgrade comprising two new converters, the enhanced acid plant and new 38MW furnace was successfully completed. However, the furnace refractories developed cracks soon after commissioning and, although this did not affect smelter output in 2001, it may necessitate premature replacement of the refractory bricks. A claim for damages has been lodged with the supplier of the refractories.

The inherent difficulties attendant on commissioning any major project were compounded in the case of two significant projects during the year.

• The challenges of recommissioning old equipment at Crocodile River mine were exacerbated by an orebody more heterogenous than sampling had led us to believe.

• In the case of the UG2 plant expansion, delivery by the contractor was a month late and although the designed 30% increase in capacity has been achieved, recoveries remain disappointingly below those expected. This is primarily as a result of equipment unreliability in the milling circuit which has prevented the plant from achieving steady-state production. The solution will most likely involve some circuit re-design.

Cash operating costs per platinum ounce refined increased by 16% which is not in line with Impala’s objective of delivering real decreases in the cost of metal produced. This was mainly as a result of mining costs incurred for ore which was not processed and lower recoveries in the new UG2 circuits. An above inflation wage increase of 9% also had an adverse impact on costs as well as the additional cost to the company of some 3% as a result of complying with the Basic Conditions of Employment Act, Skills Development Levy and higher regional services levies.To get Impala’s cash operating costs back on track to a level below inflation, the business improvement process (Fixco) was revitalised and several promising initiatives have been identified which should yield sustainable benefits. A number of noteworthy initiatives have already resulted in productivity increasing from 40m2 to 41m2 per employee, with a record level of 43m2 recorded in the month of June 2001.

Growth from mining and exploration
Implats has previously stated its objective of growing production by 10% per annum. Undoubtedly 2001 will be seen as the year that delivery on this objective gained momentum. During this year alone the company added almost 37 million attributable resource ounces of in situ platinum into its portfolio.

Implats’ growth strategy comprises three paths, namely:

• Mining pro jects and exploration;
• Strategic investments; and
• Processing concentrates to leverage processing and refining assets.
  
  
• The Winnaarshoek project, one of Implats’ major new ventures, is a combination of the Platexco acquisition and mineral rights swaps with Anglo American Platinum Limited. Production is expected to commence as early as 2002 with full production of 175 0000 ounces of platinum per annum by 2004. The agreement with Mmakau Mining (Pty) Limited and community-based empowerment participants in the Northern Province, is illustrative of Implats’ ability to bring new projects on stream within the context of South Africa’s proposed Minerals Development legislation.
  
  
• Barplats Mines Limited’s Crocodile River mine was brought into production during December 2000. The planned mining rate of 75 000 tons per month was achieved in March 2001, although problems experienced with the re-commissioning of the concentrator resulted in lower than expected pgm concentrate production. Recovery of precious metals during the first four months of operation has been below expectations, but has improved as operations extend into less weathered ores. A number of mining and metallurgical improvements are in hand in order to ensure that the planned production of 50 000 ounces of platinum per annum is achieved.
  
  
• In its exploration strategy Implats continues to pursue projects and joint ventures both in South Africa and internationally, focussing on primary pgm projects which have the potential to generate quality deposits. To achieve this, Implats supports junior exploration companies, providing funding, expertise and access to smelting and refining infrastructure. In February 2001, Implats entered into an alliance with international group Falconbridge to explore jointly for pgm mineralisation on five continents. This alliance has already identified a number of prospects, with exploration beginning at Cana Brava in Brazil in mid-2001. Exploration continued at the Kennedy’s Vale project in South Africa and the Birch Lake and River Valley projects in North America.
  

  Growth from strategic investments
  

• Delivery from Implats’ 27% stake in Lonplats in terms of both production and contribution to earnings was well in excess of expectations. Lonplats is proceeding with expansions to become a one million ounce producer and, although capital expenditure will remain high, Implats will continue to benefit from this company’s profitability.

• Relationships with Aquarius (Implats 10.1%) remain strong. Kroondal was delisted from the JSE Securities Exchange in early August. Good performance was once again achieved at Kroondal, with platinum production capacity now increased to an annual rate of 130 000 ounces. The Marikana project, scheduled to begin production in late 2002, has the potential to yield 75 000 ounces of platinum per annum.
  
  
• Implats acquired an effective 40% stake in the Ngezi-Hartley assets of the Zimplats group. The first phase of production from the Ngezi open-cast mine is planned for January 2002, with full production of 180 000 tons per month from March yielding 40 000 ounces of platinum during 2002. The operation has the potential to grow even further in the future.

• The successful acquisition of a 35% stake in Mimosa Platinum, a low cost producer on the Great Dyke, is another strategic investment in this region. Mimosa is proceeding with its expansion plans to increase platinum production by 50 000 ounces to 68 000 ounces by 2003.
  
  
• Through its effective stakes in Zimplats and Mimosa, Implats, together with its partners, has access to about 85% of the primary pgm resource of the Great Dyke, which is the largest undeveloped pgm resource in the world, second only in importance to South Africa’s Bushveld Complex.
  
  
• The Two Rivers joint venture with Anglovaal Mining Limited should lead to the establishment of a 100 000 platinum ounces per annum mine in 2004. This follows the successful bid by the Implats/Avmin joint venture for the Dwars Rivier reserves. Avmin will operate the project, with technical and other input from Implats, while Implats – through subsidiary IRS – will benefit from a life-of-mine concentrate offtake agreement signed with Two Rivers.

Leveraging processing and refining assets
The above projects, along with the third party concentrate purchases and toll-refining business, will see IRS continuing to deliver robust growth both in contributions to income and in increasing the total ounces of pgms produced in the years ahead.

Created in July 1998 as a dedicated vehicle to house the tolling and metal purchase contracts built up by the group, the concept behind IRS has become a major strategic thrust and has delivered another year of phenomenal growth. Production amounted to some 587 000 ounces of pgms and 9 534 tons of base metals, of which, 267 000 ounces pgm was purchased from third parties and 320 000 ounces was toll refined.

Growth has been generated as a result of both existing business and new projects. Production in terms of existing agreements, such as with Kroondal Platinum Mines Limited and A1 Specialised Services and Supplies Inc (autocatalyst recycling), has continued during the year.

Implats’ strategic partnership approach will have the additional benefit of new sources of concentrate. During 2002/2003, the group will benefit from the first scheduled production from Ngezi Mine (Zimplats) and the Marikana Mine (Aquarius), with which it has entered into life-of-mine concentrate purchase contracts. The Winnaarshoek project will come into production during 2002 and the Two Rivers project, should come into production in 2004. Further out on the time horizon are Aquarius’ Everest South project and Barplats’ Kennedy's Vale project.

Challenges and opportunities
A number of challenges and opportunities lie ahead for Implats.

• Safety is an area of primary concern. Following several internal and external audits, a programme of behavioural motivation for both management and employees is being undertaken. New safety initiatives will be introduced in order to achieve a step-change reduction in the number of accidents.
  
  
• Although Lonplats is expected to continue to deliver excellent returns to Implats during the year ahead, we recognise that the full value of this investment is poorly reflected in the Implats share price. Attention to this unfinished business continues.
  
  
• The future of the Gencor shareholding is being constructively addressed by the Implats Board, in association with the Board of Gencor, to ensure a satisfactory outcome for the shareholders of both companies.
  
  
• Implats is proactively managing the impact of HIV/AIDS. A recent anonymous blood testing study conducted at Impala's 8 Shaft, confirmed an HIV prevalence of 16% which is significantly below the levels of 25 to 30% currently reported in the industry. An anonymous attitude survey also produced encouraging findings indicating high levels of understanding and education amongst employees regarding HIV/AIDS. During the year Implats commissioned an independent actuarial report to determine the potential financial impact of HIV/AIDS. The report indicates that costs for medical treatment, absenteeism, training and costs to maintain productivity, could amount to R86 million per year at a peak in 2011. However, if current education and intervention programmes are successful in only halving the rate of new infections amongst employees, there would be a dramatic reduction in HIV/AIDS costs to R46 million at the expected peak of the epidemic in 2011. This is a credible scenario if prevalence levels amongst Impala employees have indeed peaked as our research suggests. Implats spent more than R4 million during the year on various education and intervention programmes and will continue to drive these through our collaborative union/management HIV/AIDS Committee.
  
  
• Achieving a rating in the market relative to our competitors which fairly reflects the underlying value and potential of the company, is being addressed. Much work has been done in improving disclosure to the investing community and in selling the Implats story to international investors. There have been some indications of interest from emerging market and generalist funds and reaching these potential investors in particularly Europe and North America is a key goal.

The year ahead
Prospects for the year ahead remain good, with continued delivery in terms of operational performance and the coming on stream of the various growth projects. The upbeat markets of the past 12 to 24 months could not be expected to continue indefinitely. Based on current market prices, Implats is therefore anticipating earnings lower than for the current year but increased from the levels of 2000 which in itself was a record year. Global economies seem to be responding sluggishly to stimuli and a prolonged slowdown may impact on pgm demand to a greater extent than anticipated in our business plan – with further negative impact on prices. In anticipation of this, Implats has emphasised process enhancements, as well as cost reduction and productivity initiatives during the year and is well-placed to capitalise on these going forward.

Keith Rumble
Chief Executive Officer