RICK MENELL Chairman

This year marks two important anniversaries: 1 June 2003 was the 70th birthday of the Anglovaal Group, and 7 December 2003 marks the fifth anniversary of the current structure of Anglovaal'successor, Anglovaal Mining Limited (Avmin), following the unbundling of Anglovaal Industries, the consolidation of our mining interests and the staged removal of our outdated control structure.

Avmin over the last five years

The last five years have been extremely active for your Company. We have moved aggressively to restructure the Group, modernise our operations, and hone the portfolio of investments to achieve a greater focus while at the same time providing superior returns to shareholders. Our operating assets now comprise low cost, high margin modern mines and beneficiation plants.

Strategic actions have included:

• The Avmin Group has bought five mining assets for approximately R1,7 billion in the ferrous, precious and base metals sectors;
   
• Ten assets have been sold by the Avmin Group for R6,5 billion, divesting from diamonds, coal, industrial minerals, higher-cost mature gold operations, Iscor and our troubled investment in Chambishi Metals plc (Chambishi);
   
• A special distribution to shareholders of R2,9 billion was made in 2000 following the sale of our diamond interests; and
   
• The Avmin Group has completed nine major projects for a total capital cost of R5,9 billion in our chosen focus sectors of ferrous, precious and base metals.

All these transactions have been profitable and the new projects successful, with the exception of our Zambian cobalt/copper venture at Chambishi.

Through our strategies of divesting low-margin or troubled businesses, and capitalising new modern mechanised operations with low costs, Avmin has built a platform for future growth that is as competitive as any other South African mining company.

When measured by share price, cash dividends and capital distributions, Avmin has delivered superior returns to shareholders since its formation on 7 December 1998: all-in returns to shareholders over the nearly five years have averaged 40 per cent per annum measured in rand terms, and 31 per cent per annum in US dollar terms. Over the three years, since the distribution of R27 per share in July 2000, rand returns have averaged 20 per cent per annum and US dollar returns 17 per cent per annum. These returns have been achieved in a fast-changing and unpredictable environment, despite highly volatile rand/US dollar exchange rates and commodity prices, dramatic changes to the South African regulatory environment and a major setback at Chambishi.

Financial year 2003

Much of the work to achieve our long-term objectives took place over the last financial year, and is described in detail in Jan Steenkamp' chief executive officer' report. A number of major capital projects reached full production during the year, including Target gold mine, Chambishi' cobalt smelter and the Machadodorp ferro-chrome smelter. We achieved the major objective of eliminating US$170 million of debt, which necessitated the sale of Chambishi and 13 per cent of our shareholding in our subsidiary, Avgold. The Group reduced its consolidated net debt-to-equity from 42 to 11 per cent by year-end, and Avmin itself became
debt-free shortly after the end of the financial year.

The sale of Chambishi resulted in an exceptional loss of R649 million. The sales agreement provides for us to earn up to an additional US$25 million through royalties over the next six years, depending on cobalt prices, production volumes and the resolution of tax issues with the Zambian government by the new owners. Avmin has no material remaining liabilities or obligations relating to Chambishi. This project has been a major disappointment, but we can now move forward unencumbered by the cost and extra risks that it represented.

The sale of Chambishi by Avmin and the higher-cost ETC gold assets by Avgold significantly reduced the overall risk profile of the Group. An additional benefit of Avgold'sale of ETC for R255 million was that it enabled Avgold to reduce its debt significantly, eliminating US dollar borrowings, refinance the remaining debt and thereby achieve freedom to manage a restructuring and continuous reduction of its remaining gold hedge book.

The rand strengthened unexpectedly by 36 per cent during the financial year. An immediate benefit to the Company was that the repayment of the US$170 million debt related to Chambishi, during May to August 2003, cost R400 million less than it would have a year previously.

However, our earnings from ongoing South African operations suffered from the strong rand.

Our South African operations, Assmang, Avgold and Nkomati nickel, all achieved outstanding operating results for the year, with record production volumes and low unit costs. Despite the stronger rand, Group headline earnings were similar to the previous year at R197 million (R204 million). Group headline earnings increased 18 per cent to R241 million before the effect of unrealised non-hedge derivative losses.

These results include the significantly reduced losses at Chambishi of R95 million (loss - R221 million), as well as the reduced earnings from ferrous metals at R152 million (R270 million) due principally to a stronger rand.

A substantial improvement in net cash flow from operating activities of 113 per cent to R630 million (R296 million) reflects the maturity of our newly-capitalised, competitive low-cost operations. The cash generated was applied towards debt reduction and the completion of capital projects throughout the Group.

Dividends

In light of the Company' loss after tax, the board does not consider it appropriate to declare a dividend for the year ended 30 June 2003. However, we recognise the importance to shareholders of the payment of regular dividends and plan to recommence dividend payments as soon as we can do so withouth incurring debt specifically to fund such payments.

Sustainable development

The Group has evolved in its management of sustainable development. A separate report accompanies this annual report covering safety, health, HIV/AIDS, and environmental and community development issues. We continue to improve our ability to achieve superior "triple bottom line" returns, in the financial, environmental and community development fields.

Despite our strenuous efforts and successes, I regret to report that six members of our team lost their lives in separate accidents during the year at our Nchwaning manganese mine, Beeshoek iron ore mine and ETC gold mine. On behalf of the board and all at Avmin, I extend our condolences to the families. It is a top priority of the Group to avoid any fatalities, and there is no reason why we cannot achieve this. Apart from these tragic losses, safety performance improved significantly from levels a year ago.

HIV/AIDS

Avmin'sustainable Development Report provides details of our extensive strategies for managing the impact of the HIV/AIDS pandemic. Group wide testing has been completed for a second time, with results showing HIV prevalence among our permanent work force of eight per cent, but a much higher level of 19 per cent for the external contractors working for the Group. I believe our strategies for dealing with the financial and social impacts of HIV/AIDS are among the most progressive and effective in the South African private sector.

Legislative changes

During the year, the Minerals and Petroleum Resources Development Act (MPRDA) was enacted, and the Mining Charter between mining stakeholders was negotiated and signed. Despite some remaining ambiguities, we wholeheartedly support these instruments which provide a much higher degree of certainty as well as several major challenges for the industry as a whole. Your Company is actively engaged in all the relevant areas to meet the requirements of the MPRDA and the Mining Charter in order to achieve new order mining and prospecting licences for all our operations. The challenges of Black Economic Empowerment (BEE) are being addressed at both the mining asset level and at the corporate level, with some progress being made through the sale of ETC and a memorandum of understanding was signed with a BEE group led by TISO Capital (Proprietary) Limited on our Two Rivers platinum project. The new requirements present both opportunities as well as potential costs, and are central to our future growth strategies. We continue to explore innovative solutions for achieving and exceeding the challenging, but necessary, requirements set by the new legislation.

The final pieces of legislation governing the new mining regime are the "Money Bill" outlining the new royalty regime, and the "Beneficiation Bill" dealing with government policy on encouraging beneficiation of natural resource products. Both are in their formative stages. There have been some concerning indications that these instruments will inhibit new investment and reduce the industry' competitiveness, but as with the Mining Charter, an active and constructive dialogue is underway that should enable a compromise to be reached that will be acceptable to all stakeholders in the South African mining industry.

New growth projects

Avmin has continued to develop attractive new mining and metals investment opportunities while bringing our major projects to full operation; the Nkomati nickel expansion, Two Rivers platinum project, iron ore rationalisation and expansion, Target North gold prospect, Avmin Alloys (AvAlloys) superalloy initiative and a new gold discovery at Otjikoto in Namibia provide a range of potential opportunities in favourable sectors. The Nkomati nickel expansion and Two Rivers platinum project feasibility studies were completed during the year with encouraging results. Both await financing and go-ahead decisions in the near future.

Future growth strategy

With rapid change underway and likely to continue for some time in the South African mining industry, combined with our quality operating assets and major in-house growth projects, I believe we have every opportunity to achieve returns for shareholders over the next five years that are as attractive as those we have delivered since 1998.

Two key objectives must still be achieved in order to give Avmin the best opportunities to grow, deliver value to shareholders and create new, quality jobs and national wealth:

• We must build a stronger financial base to support new mining investments; despite reducing our group gearing to low levels, we are too small to support fully the risk investment required for our larger in-house projects such as the Nkomati expansion and Two Rivers platinum project;
   
• We must become a fully empowered Company so that we can utilise our resources to became a partner-of-choice for new mining ventures. We must achieve a dominant shareholding in our Company by historically disadvantaged South Africans, who can make a leadership contribution to the Group.

The purchase of 34,5 per cent of the ordinary shares in Avmin by Harmony Gold Mining Company Limited (Harmony), itself 15 per cent owned by African Rainbow Minerals Investments and Exploration (Proprietary) Limited, offers special opportunities to achieve both these key objectives.

All strategic options are under thorough and urgent evaluation and our objective is to announce a plan by early 2004 that will demonstrate an exciting and profitable future for our Company.

The year ahead

The strategic objectives that I have outlined as well as the extreme volatility of the rand makes if difficult to predict headline earnings for next year with any confidence. Throughout the Group we plan to increase production volumes over the current year, while maintaining the current low operating costs but this may not fully offset the impact of the current strong rand on Group earnings. Management teams at all the operations are implementing a range of strategies to counter the effect of a stronger rand on cashflows, including a focus on essential capital expenditure items only and further cost reduction initiatives. We are also reviewing all the key economic assumptions that underpin new project feasibility studies: projecting a stronger rand may lead to the deferral of go-ahead decisions on certain projects.

Team changes

Following the completion of the sale of shareholdings in the Company, those directors nominated by Anglo American Corporation of South Africa Limited and Arctic Resources Limited resigned. These were: Barry Davison, his alternate Bill Nairn, Dave Barber, Philip Baum, Roy Oron, Nir Livnat, Brian Frank and Brian Menell. They all made a very significant contribution to the Group and served diligently. I thank them all for their input and commitment.

Harmony nominated three directors to the board: Patrice Motsepe, Bernard Swanepoel and Pine Pienaar. All are welcome and have already made important contributions.

David Murray retired as chief executive officer on 30 June 2003, but remains a non-executive director. He made a major contribution, particularly in improving the Group' management structure, and guided us through some very challenging times. Jan Steenkamp, previously chief operating officer, has joined the board as chief executive officer, accompanied by Doug Campbell as chief financial officer.

During the year we completed a radical, but necessary, restructuring of our head office with some 120 of our close colleagues leaving us, including several who have invested their entire careers with Avmin. The sale of ETC and Chambishi also resulted in a large number of departures. I am grateful to all involved for their contribution and the highly professional way in which they all handled these difficult transitions.

Finally, I would like to thank all my colleagues on the board, in the executive and throughout the Group, as well as our many business partners, for working so hard and so well to steer Avmin onto an exciting course for the future.

RICK MENELL
Chairman

3 October 2003
Johannesburg