Annual General Meeting: 27 October 2011

Chairman’s report

 Dear Shareholders

 Having successfully recapitalised the business, through the rights offer in December 2009 and the sale of the Group’s stake in the Koornfontein mine, in March 2010, the 2011 financial year was a watershed one with the Company having to consolidate and deliver improved operating results, especially at Megacube. As the global economy began to emerge from recession and demonstrated slow, but steady growth, the demand for mining services started to experience a rebound. While the full impact of the global economic crisis, from a South African perspective, was alleviated to some degree, by its hosting of the 2010 World Cup soccer event, a delay in the start of the recovery was also experienced. The overall operational performance for the year while on par with expectations, was significantly higher than the previous year, with some once-off costs impacting the financial results.

 Macroeconomic environment

 The demand for coal, the commodity to which Sentula has the greatest exposure, continued to grow in the domestic and export markets.

 During the third quarter of 2010, Dollar-denominated export thermal coal prices rose sharply by some 40%, on the back of adverse weather conditions, which affected both supply and demand. While the export coal market has continued to be robust, the Rand price of coal was adversely impacted by the strong exchange rate. This negatively impacted South African producers’ ability to capitalise on the increased pricing. The exchange rate also impacted adversely on Geosearch’s 10 foreign African operations. The demand for domestic coal continued to grow, driven by Eskom requirements. The global demand for coal is expected to continue, increasingly driven by India with its power-generation programme on the western seaboard of the subcontinent, and also by Chinese consumption.

 Despite the buoyant international coal environment, we are starting to see the profitability of some South African coal producers coming under pressure because of the strong Rand and rising costs. This has led to the cancellation of some mining contracts and a contraction in the number of contracts being put out to tender.

 Group performance

 The results for 2011 were mixed with revenue increasing to R2 402 million from R2 179 million, in the prior year. Operating profit increased to R185 million from R129 million mainly due to a positive contribution from Megacube. Basic earnings, while considerably reduced, were impacted by an impairment of assets and a write-off of financial costs related to the restructuring of the Company’s debt. In addition, last year’s earnings included the one-off sale of Koornfontein.

 Headline earnings per share, which is more representative of normal business conditions, rose from 0,6 cents per share to 16,06 cents per share. This was largely driven by a pleasing 43% increase in operating profit.

 The anticipated turnaround at Megacube materialised during the second half of the financial year. Loss-making contracts were terminated during the first quarter, and replaced with profitable sites across a broader client base.

 This unfortunately necessitated a large number of retrenchments and parking of idle equipment, as a result of a consolidation in the number of operating sites and improved equipment utilisation. This process was only completed in June 2010 and therefore the benefits of the turnaround strategy only materialised from the second quarter of the 2011 financial year.

 The downturn in economic conditions affected most of the services provided by Sentula and disproportionately Geosearch’s exploration business as customers cut back on discretionary spending. This initially occurred in its international business, however, as global exploration recovered, Geosearch began to experience cutbacks in domestic exploration expenditure. This resulted in a shift in drilling operations from predominantly South African to mostly foreign sites. While this shift in the operating footprint of the subsidiary stretched resources during the period under review, it now provides an opportunity to capitalise on this investment.

 Given the current visibility of uncertain market conditions, the Board of Directors decided not to declare a dividend in respect of the year ended 31 March 2011.

 Strategy

 Sentula’s commitment to be the diversified mining services company of choice across the African continent is unwavering. Through the resources, expertise and experience base of the collective Group, our overall goal is to unlock value for shareholders associated with our portfolio of coal investments.

 The Board’s primary objective for the year under review was, on the back of reduced debt levels, to support the turnaround strategy of Megacube. During the second half of the financial year, Megacube returned to operational profitability. The challenge that we now face is to restore the margins in this business to the levels being experienced by its peer group.

 We will continue to contain costs and strategically position the Group for organic growth in the mining services business in conjunction with the development of its portfolio of proprietary coal assets.

 With effect from 1 July 2010, Rain Zihlangu, Cor van Zyl and Kholeka Mzondeki were appointed as independent non-executive directors bringing complementary financial, mining and leadership skills to the Company. On 2 June 2011, Andy Kawa resigned from the Board, and I would like to take this opportunity to thank her for her valuable contribution over the last three years and wish her well.