South African Taxation Matters

Mining companies in South Africa are taxed at the standard corporate tax rate of 28%. In
addition, a secondary tax on companies is payable at the rate of 10% on the excess of dividends
paid to shareholders over dividends received from other South African companies. No other tax
or withholding tax is payable in respect of dividends paid to shareholders.

Corporate tax is paid on all income, plus 66% of capital gains, less deductible operating
expenditure and a capital expenditure allowance. Deductible expenditure includes rehabilitation
expenditure actually incurred and annual contributions to an approved rehabilitation trust.
Prospecting and capital development expenditure is treated as follows:

all prospecting and capital development expenditure is carried forward to the year of
commencement of production;
thereafter the accumulated prospecting expenditure and all future prospecting expenditure
is allowed as a deduction either in full or in annual installments as determined by the
South African Revenue Services;
in the year of commencement of production and thereafter the accumulated and future
annual capital expenditure on shaft-sinking, mine equipment and mine development is
deductible in full up to the amount of taxable income from mining before allowing for
this capital expenditure allowance. Any excess of capital expenditure over such taxable
income is carried forward for deduction from future taxable income from mining;
capital expenditure in respect of employees' housing, hospitals, schools, shops,
recreational buildings and facilities and railway lines is deductible in 10 equal annual
instalments. Capital expenditure in respect of motor vehicles intended for the private use
of employees is deductible in five equal annual instalments. Each annual instalment is
included in the above capital expenditure which is subject to the annual limit of taxable
income from mining;
no deduction is allowed in respect of the cost of land and mineral rights; and
proceeds on the disposal of any asset previously included in the capital expenditure
allowance are first deducted from any excess capital expenditure not already deducted
and thereafter are included in full in taxable income. Such proceeds do not give rise to
capital gains.