ADMINISTRATION
Secretary and registered offi ce
MS Viljoen
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
Pretoria
0183
PO Box 9229, Pretoria
0001
South Africa
Telephone +27 12 307 5000
Company registration number: 2000/011076/06
JSE share code: EXX
ISIN code: ZAE000084992
Auditors
Deloitte & Touche
Private Bag X6
Gallo Manor
2052
Commercial bankers
Absa Bank Limited
SHAREHOLDERS’ DIARY
FINANCIAL YEAR-END
ANNUAL GENERAL MEETING
REPORTS AND ACCOUNTS
Announcement of annual results
Annual Report
Interim report for the half-year ending 30 June
DISTRIBUTION
Final dividend declaration
Payment
Interim dividend declaration
Payment
Corporate law advisers
CLS Consulting Services (Pty) Limited
United States ADR Depositary
The Bank of New York
101 Barclay Street
New York NY 10286
United States of America
Sponsor
Deutsche Securities (SA) (Pty) Limited
3 Exchange Square
87 Maude Street
Sandton
2196
Registrars
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown
2107
31 December
April/May
Published
February
March
August
February
March
August
September
The front section of this document is printed on Magno Matt paper. This paper only uses wood from sustainable forests, is manufactured from TCF (totally
chlorine free) pulp and is acid free. The back section of this document is printed on Cartridge 120gsm. A minimum of 30% fi bre used in making this paper
comes from well-managed forests independently certifi ed according to the rules of the Forest Stewardship Council.
Carbon offset
The carbon footprint arising from the paper production, printing and distribution of this annual report will be assessed and offset by installing one solar geyser
at a charitable organisation by December 2009. We will disclose this information in our next report.
BASTION GRAPHICS
POWERING POSSIBILITY
EXXARO CORPORATE CENTRE
Pretoria, South Africa
P: +27 12 307 5000
F: +27 12 307 4760
Roger Dyason Road, Pretoria West 0183, South Africa
PO Box 9229, Pretoria 0001, South Africa
www.exxaro.com
E
X
X
A
R
O
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
8
POWERING POSSIBILITY
WHAT DRIVES EXXARO
VISION
Through our innovation and
growth, we will be a powerful
source of endless possibilities.
MISSION
We create unrivalled value
for all stakeholders of our
diversifi ed resources business
through our processes, thinking
and passion.
VALUES
EMPOWERED TO
GROW AND
CONTRIBUTE
TEAMWORK
COMMITTED TO
EXCELLENCE
HONEST
RESPONSIBILITY
Developing and deploying
our knowledge and
ingenuity to achieve
our vision. We focus on
people, create freedom to
innovate and collaborate,
respect individuality, have
fun and rise to challenges.
We succeed together
through a climate of
respect and equality.
We take ownership,
provide visible
leadership and
encourage collaboration,
commitment and
creativity for the benefi t
of all.
We speak the truth and
accept accountability for
our actions.
ANNUAL REPORT 2008
COVER PICTURE: Safety: Plant operator Eric Mashaba is
part of the team at North Block Complex mine which was
Profi tability: The performance turnaround
named best-performing coal mine in South Africa by the
of KZN Sands was assisted by mineral sands
South African Colliery Managers’ Association in recognition of
technology expertise acquired with the
26 years of fatality-free shifts (page 13).
Namakwa Sands transaction.
THE EXXARO GROUP
With assets of R23 billion, Exxaro is one of the
top 40 companies on the JSE Limited (JSE) by
market capitalisation, and a constituent of the
JSE’s Socially Responsible Investment index.
Exxaro is a diverse mineral resources group –
with a portfolio spanning coal, mineral sands,
base metals and iron ore – and operates in
South Africa, Australia and Namibia. Refl ecting
the benefi ts of this diverse portfolio, Exxaro has
an unfolding pipeline of growth projects that is
arguably among the best in its peer group.
The group’s strong positioning in each of
its chosen commodity markets, locally or
internationally, record of innovation and focus
on sustainable development underpin its
promise to change the face of mining.
ABOUT THIS REPORT
Guided by consultation with stakeholders,
Exxaro produces an integrated annual
report detailing our economic, social and
environmental performance. Following
feedback on earlier reports, we have
repositioned all content relating to sustainable
development in a dedicated section. So, while
sustainable development is inextricably woven
through our operations and our reporting,
interested readers will fi nd all the information
required in the governance and sustainability
section.
In addition, case studies that illustrate our
approach are available on our website and
indicated in this report by
for ease of
reference.
To facilitate discussion with stakeholders on
Exxaro’s corporate reporting, particularly
this annual report, a blog will be run during
April 2009.
You are invited to participate on
www.exxaro.com
www.exxaro.com
ADMINISTRATION
Secretary and registered office
MS Viljoen
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
Pretoria
0183
PO Box 9229, Pretoria
0001
South Africa
Telephone +27 12 307 5000
Company registration number: 2000/011076/06
JSE share code: EXX
ISIN code: ZAE000084992
Auditors
Deloitte & Touche
Private Bag X6
Gallo Manor
2052
Commercial bankers
Absa Bank Limited
SHAREHOLDERS’ DIARy
FINANCIAL YEAR-END
ANNUAL GENERAL MEETING
REPORTS AND ACCOUNTS
Announcement of annual results
Annual Report
Interim report for the half-year ending 30 June
DISTRIBUTION
Final dividend declaration
Payment
Interim dividend declaration
Payment
Corporate law advisers
CLS Consulting Services (Pty) Limited
United States ADR Depositary
The Bank of New York
101 Barclay Street
New York NY 10286
United States of America
Sponsor
Deutsche Securities (SA) (Pty) Limited
3 Exchange Square
87 Maude Street
Sandton
2196
Registrars
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown
2107
31 December
April/May
Published
February
March
August
February
March
August
September
The front section of this document is printed on Magno Matt paper. This paper only uses wood from sustainable forests, is manufactured from TCF (totally
chlorine free) pulp and is acid free. The back section of this document is printed on Cartridge 120gsm. A minimum of 30% fibre used in making this paper
comes from well-managed forests independently certified according to the rules of the Forest Stewardship Council.
Carbon offset
The carbon footprint arising from the paper production, printing and distribution of this annual report will be assessed and offset by installing one solar geyser
at a charitable organisation by December 2009. We will disclose this information in our next report.
BASTION GRAPHICS
POWERING POSSIBILITY
EXXARO CORPORATE CENTRE
Pretoria, South Africa
P: +27 12 307 5000
F: +27 12 307 4760
Roger Dyason Road, Pretoria West 0183, South Africa
PO Box 9229, Pretoria 0001, South Africa
www.exxaro.com
E
X
X
A
R
O
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
8
POWERING POSSIBILITY
WHAT DRIVES EXXARO
VISION
Through our innovation and
growth, we will be a powerful
source of endless possibilities.
MISSION
We create unrivalled value
for all stakeholders of our
diversified resources business
through our processes, thinking
and passion.
VALUES
EMPOWERED TO
gROW AND
CONTRIBUTE
TEAMWORK
COMMITTED TO
EXCELLENCE
HONEST
RESPONSIBILITy
Developing and deploying
our knowledge and
ingenuity to achieve
our vision. We focus on
people, create freedom to
innovate and collaborate,
respect individuality, have
fun and rise to challenges.
We succeed together
through a climate of
respect and equality.
We take ownership,
provide visible
leadership and
encourage collaboration,
commitment and
creativity for the benefit
of all.
We speak the truth and
accept accountability for
our actions.
ANNUAL REPORT 2008
COVER PICTURE: Safety: Plant operator Eric Mashaba is
part of the team at North Block Complex mine which was
Profitability: The performance turnaround
named best-performing coal mine in South Africa by the
of KZN Sands was assisted by mineral sands
South African Colliery Managers’ Association in recognition of
technology expertise acquired with the
26 years of fatality-free shifts (page 13).
Namakwa Sands transaction.
THE EXXARO gROUP
With assets of R23 billion, Exxaro is one of the
top 40 companies on the JSE Limited (JSE) by
market capitalisation, and a constituent of the
JSE’s Socially Responsible Investment index.
Exxaro is a diverse mineral resources group –
with a portfolio spanning coal, mineral sands,
base metals and iron ore – and operates in
South Africa, Australia and Namibia. Reflecting
the benefits of this diverse portfolio, Exxaro has
an unfolding pipeline of growth projects that is
arguably among the best in its peer group.
The group’s strong positioning in each of
its chosen commodity markets, locally or
internationally, record of innovation and focus
on sustainable development underpin its
promise to change the face of mining.
ABOUT THIS REPORT
Guided by consultation with stakeholders,
Exxaro produces an integrated annual
report detailing our economic, social and
environmental performance. Following
feedback on earlier reports, we have
repositioned all content relating to sustainable
development in a dedicated section. So, while
sustainable development is inextricably woven
through our operations and our reporting,
interested readers will find all the information
required in the governance and sustainability
section.
In addition, case studies that illustrate our
approach are available on our website and
indicated in this report by
for ease of
reference.
To facilitate discussion with stakeholders on
Exxaro’s corporate reporting, particularly
this annual report, a blog will be run during
April 2009.
You are invited to participate on
www.exxaro.com
www.exxaro.com
POWERING POSSIBILITY
ADMINISTRATION
Secretary and registered office
MS Viljoen
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
Pretoria
0183
PO Box 9229, Pretoria
0001
South Africa
Telephone +27 12 307 5000
Company registration number: 2000/011076/06
JSE share code: EXX
ISIN code: ZAE000084992
Auditors
Deloitte & Touche
Private Bag X6
Gallo Manor
2052
Commercial bankers
Absa Bank Limited
SHAREHOLDERS’ DIARy
FINANCIAL YEAR-END
ANNUAL GENERAL MEETING
REPORTS AND ACCOUNTS
Announcement of annual results
Annual Report
Interim report for the half-year ending 30 June
DISTRIBUTION
Final dividend declaration
Payment
Interim dividend declaration
Payment
Corporate law advisers
CLS Consulting Services (Pty) Limited
United States ADR Depositary
The Bank of New York
101 Barclay Street
New York NY 10286
United States of America
Sponsor
Deutsche Securities (SA) (Pty) Limited
3 Exchange Square
87 Maude Street
Sandton
2196
Registrars
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown
2107
31 December
April/May
Published
February
March
August
February
March
August
September
The front section of this document is printed on Magno Matt paper. This paper only uses wood from sustainable forests, is manufactured from TCF (totally
chlorine free) pulp and is acid free. The back section of this document is printed on Cartridge 120gsm. A minimum of 30% fibre used in making this paper
comes from well-managed forests independently certified according to the rules of the Forest Stewardship Council.
Carbon offset
The carbon footprint arising from the paper production, printing and distribution of this annual report will be assessed and offset by installing one solar geyser
at a charitable organisation by December 2009. We will disclose this information in our next report.
BASTION GRAPHICS
POWERING POSSIBILITY
EXXARO CORPORATE CENTRE
Pretoria, South Africa
P: +27 12 307 5000
F: +27 12 307 4760
Roger Dyason Road, Pretoria West 0183, South Africa
PO Box 9229, Pretoria 0001, South Africa
www.exxaro.com
E
X
X
A
R
O
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
8
POWERING POSSIBILITY
WHAT DRIVES EXXARO
VISION
Through our innovation and
growth, we will be a powerful
source of endless possibilities.
MISSION
We create unrivalled value
for all stakeholders of our
diversified resources business
through our processes, thinking
and passion.
VALUES
EMPOWERED TO
gROW AND
CONTRIBUTE
TEAMWORK
COMMITTED TO
EXCELLENCE
HONEST
RESPONSIBILITy
Developing and deploying
our knowledge and
ingenuity to achieve
our vision. We focus on
people, create freedom to
innovate and collaborate,
respect individuality, have
fun and rise to challenges.
We succeed together
through a climate of
respect and equality.
We take ownership,
provide visible
leadership and
encourage collaboration,
commitment and
creativity for the benefit
of all.
We speak the truth and
accept accountability for
our actions.
ANNUAL REPORT 2008
COVER PICTURE: Safety: Plant operator Eric Mashaba is
part of the team at North Block Complex mine which was
Profitability: The performance turnaround
named best-performing coal mine in South Africa by the
of KZN Sands was assisted by mineral sands
South African Colliery Managers’ Association in recognition of
technology expertise acquired with the
26 years of fatality-free shifts (page 13).
Namakwa Sands transaction.
THE EXXARO gROUP
With assets of R23 billion, Exxaro is one of the
top 40 companies on the JSE Limited (JSE) by
market capitalisation, and a constituent of the
JSE’s Socially Responsible Investment index.
Exxaro is a diverse mineral resources group –
with a portfolio spanning coal, mineral sands,
base metals and iron ore – and operates in
South Africa, Australia and Namibia. Reflecting
the benefits of this diverse portfolio, Exxaro has
an unfolding pipeline of growth projects that is
arguably among the best in its peer group.
The group’s strong positioning in each of
its chosen commodity markets, locally or
internationally, record of innovation and focus
on sustainable development underpin its
promise to change the face of mining.
ABOUT THIS REPORT
Guided by consultation with stakeholders,
Exxaro produces an integrated annual
report detailing our economic, social and
environmental performance. Following
feedback on earlier reports, we have
repositioned all content relating to sustainable
development in a dedicated section. So, while
sustainable development is inextricably woven
through our operations and our reporting,
interested readers will find all the information
required in the governance and sustainability
section.
In addition, case studies that illustrate our
approach are available on our website and
indicated in this report by
for ease of
reference.
To facilitate discussion with stakeholders on
Exxaro’s corporate reporting, particularly
this annual report, a blog will be run during
April 2009.
You are invited to participate on
www.exxaro.com
www.exxaro.com
POWERING POSSIBILITY
CONTENTS
gROUP AT A gLANCE
gROUP IN BRIEF
Inside flap What drives Exxaro
Inside flap Group at a glance
1 Highlights and lowlights
1 Group structure
2 Business objectives
3 Comparable key ratios
3 Creating value for all stakeholders
4 Geographical locations
6 Comparable group review at a glance
8 Summary of business operations
10 Focus areas
12 Chief executive officer’s review
18 Macro-economic and commodity review
22 Financial review
32 Business operations review
43 Growth
46 Review of mineral resources and
reserves
56 Executive committee
58 Directorate
gOVERNANCE &
SUSTAINABILITy
62 Corporate governance
69 Shareholder information
70 Shareholders’ analysis
72 Risk management
74 Sustainable development
81 SHE performance
92 Economic performance
95 Social performance
104 Society
107 Legislative compliance/mining charter
scorecard
110 Independent assurance statement
to the directors and management of
Exxaro Resources Limited
113 GRI indicator index
SUPPLEMENTARy FINANCIAL
INFORMATION
115 Group cash value added financial
statements
116 Supplementary financial information
118 Selected group financial data translated
into US dollars
120 Definitions
FINANCIAL STATEMENTS
122 Annual financial statements
ADMINISTRATION
230 Notice of annual general meeting
233 Biographies of directors up for
re-election
235 Form of proxy
IBC Administration and
shareholders’ diary
BUSINESSES
Eight managed coal mines produce 44,8Mtpa of power
station, steam and coking coal. All power station coal
produced is supplied to the national power utility,
Eskom. Grootegeluk is one of the most efficient mining
operations in the world, and operates the world’s largest
coal beneficiation complex. There is a strong pipeline of
greenfield and expansion projects under way that will
culminate in Exxaro becoming one of the largest coal
Coal
producers in South Africa.
2008 COMPARABLE
CONTRIBUTION TO GROUP
REVENUE
60% R9 040 million
OPERATIONS
REGIONAL
LOCATION
OWNERSHIP
PRODUCTS
Grootegeluk mine
Limpopo
Division of Exxaro Coal (Pty) Limited
Leeuwpan mine
Mpumalanga
Division of Exxaro Coal (Pty) Limited
Tshikondeni mine
Limpopo
Division of Exxaro Coal (Pty) Limited
Power station coal (Eskom)
Semi-soft coking coal
Steam coal
Power station coal (Eskom)
Steam coal
Coking coal (ArcelorMittal)
Mafube coal1
Inyanda mine
Mpumalanga
Mpumalanga
Division of Exxaro Coal (Pty) Limited
Steam coal
Division of Exxaro Coal (Pty) Limited
Steam coal
Exxaro reductants
Limpopo
Division of Exxaro Coal (Pty) Limited
Steam coal
Arnot mine
Matla mine
Mpumalanga
Mpumalanga
New Clydesdale mine
Mpumalanga
North Block Complex
Mpumalanga
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Power station coal (Eskom)
Power station coal (Eskom)
Power station coal (Eskom)
Steam coal
Power station coal (Eskom)
Steam coal
Exxaro’s South African mineral sands operations are
28% R4 142 million
Mineral Sands – RSA
KwaZulu-Natal
Mineral
sands
housed in KZN Sands and the Western Cape operations
of Namakwa Sands. In Australia, our interests are housed
in Australia Sands whose principal asset is 50% of the
Tiwest joint venture with Tronox Inc. With the acquisition
of Namakwa Sands effective 1 October 2008, Exxaro is
now one of the world’s largest suppliers of titanium dioxide
feedstock and zircon. Collectively, Exxaro’s mineral sands
operations produced 272kt of slag, 193kt of zircon, 113kt of
synthetic rutile and 43kt of pigment in 2008.
Namakwa Sands
Northern Cape
Australia Sands2
Australia
Subsidiaries of Exxaro Resources Limited
and a division of Exxaro TSA Sands (Pty)
Limited
Ilmenite
Zircon
Rutile
Pig iron
Chloride slag
Sulphate slag
Division of Exxaro TSA Sands (Pty) Limited Zircon
Rutile
Pig iron
Chloride slag
Sulphate slag
Zircon
Rutile
Synthetic rutile
Leucoxene
Subsidiary of Exxaro Resources Limited
The Rosh Pinah zinc/lead mine in southern Namibia and
12% R1 829 million*
Zincor refinery
Base metals
in the world. Exxaro has an interest in the Chifeng zinc
the Zincor electrolytic refinery in Gauteng comprise one
of the few integrated zinc mining and refinery operations
Rosh Pinah mine
Gauteng
Namibia
Division of Exxaro Base Metals (Pty) Limited
Subsidiary of Exxaro Base Metals (Namibia)
(Pty) Limited (50,04%)
Chifeng refinery3
China
Associate (22,00%)
Black Mountain Mining (Pty)
Limited
Northern Cape
Associate (26,00%)
* Excludes industrial minerals
Glen Douglas mine
Gauteng
Subsidiary of Exxaro Resources Limited
FerroAlloys
Gauteng
Subsidiary of Exxaro Resources Limited
Atomised ferrosilicon
Sishen mine4
Northern Cape
Thabazimbi mine4
Limpopo
Division of Sishen Iron Ore
Company (Pty) Limited
Division of Sishen Iron Ore
Company (Pty) Limited
Lump ore
Fine ore
Lump ore
Fine ore
Zinc metal
Sulphuric acid
Zinc concentrate
Lead concentrate
Zinc metal
Sulphuric acid
Zinc concentrate
Lead concentrate
Metallurgical dolomite
Aggregate
Lime
and
Industrial
minerals
INVESTMENTS
Iron ore
refinery in China. During the year, Rosh Pinah and Zincor
produced 109kt of zinc concentrate and 87kt of zinc metal
respectively. A dedicated plant in Pretoria manufactures
high-quality, gas-atomised ferrosilicon, while the Glen
Douglas dolomite quarry provides a range of products for
the steel, construction and agricultural sectors.
Exxaro holds 20% of Sishen Iron Ore Company (Pty)
Limited. The company operates the Sishen and Thabazimbi
mines, producing some 34Mtpa of lumpy and fine iron
ore, two-thirds of which is exported. Sishen is one of the
largest single open-pit mines in the world, known for its
high grade and consistent product quality.
1 Sales tonnes disclosed reflect Exxaro Coal’s 50% of the Mafube expansion project.
2 Sales tonnes disclosed reflect Exxaro Australia Sands’ 50% interest in the Tiwest joint venture.
3 Sales tonnes disclosed represent the effective interest in the physical information of the Chifeng (Hongye) refinery.
4 Sales tonnes disclosed represent the effective interest in the physical information of Sishen Iron Ore Company (Pty) Limited.
NFD – Not for disclosure
SALES FOR 12 MONTHS
TO DECEMBER 2008
000
TONNES
%
EXPORTS
14 374
2 172
1 482
1 216
1 605
352
639
788
57
4 865
13 189
184
864
2 427
560
40
36
14
64
101
17
135
27
82
145
26
35
14
62
17
98
115
86
22
28
11
NFD
NFD
419
756
66
6
3 715
2 387
228
280
15
19
24
100
81
89
70
95
100
100
100
70
100
100
85
100
100
100
100
100
100
100
100
76
91
CONTENTS
gROUP AT A gLANCE
gROUP IN BRIEF
Inside flap What drives Exxaro
Inside flap Group at a glance
1 Highlights and lowlights
1 Group structure
2 Business objectives
3 Comparable key ratios
3 Creating value for all stakeholders
4 Geographical locations
6 Comparable group review at a glance
8 Summary of business operations
10 Focus areas
12 Chief executive officer’s review
18 Macro-economic and commodity review
22 Financial review
32 Business operations review
43 Growth
46 Review of mineral resources and
reserves
56 Executive committee
58 Directorate
gOVERNANCE &
SUSTAINABILITy
62 Corporate governance
69 Shareholder information
70 Shareholders’ analysis
72 Risk management
74 Sustainable development
81 SHE performance
92 Economic performance
95 Social performance
104 Society
107 Legislative compliance/mining charter
scorecard
110 Independent assurance statement
to the directors and management of
Exxaro Resources Limited
113 GRI indicator index
SUPPLEMENTARy FINANCIAL
INFORMATION
115 Group cash value added financial
statements
116 Supplementary financial information
118 Selected group financial data translated
into US dollars
120 Definitions
FINANCIAL STATEMENTS
122 Annual financial statements
ADMINISTRATION
230 Notice of annual general meeting
233 Biographies of directors up for
re-election
235 Form of proxy
IBC Administration and
shareholders’ diary
BUSINESSES
Eight managed coal mines produce 44,8Mtpa of power
station, steam and coking coal. All power station coal
produced is supplied to the national power utility,
Eskom. Grootegeluk is one of the most efficient mining
operations in the world, and operates the world’s largest
coal beneficiation complex. There is a strong pipeline of
greenfield and expansion projects under way that will
culminate in Exxaro becoming one of the largest coal
Coal
producers in South Africa.
2008 COMPARABLE
CONTRIBUTION TO GROUP
REVENUE
60% R9 040 million
OPERATIONS
REGIONAL
LOCATION
OWNERSHIP
PRODUCTS
Grootegeluk mine
Limpopo
Division of Exxaro Coal (Pty) Limited
Leeuwpan mine
Mpumalanga
Division of Exxaro Coal (Pty) Limited
Tshikondeni mine
Limpopo
Division of Exxaro Coal (Pty) Limited
Power station coal (Eskom)
Semi-soft coking coal
Steam coal
Power station coal (Eskom)
Steam coal
Coking coal (ArcelorMittal)
Mafube coal1
Inyanda mine
Mpumalanga
Mpumalanga
Division of Exxaro Coal (Pty) Limited
Steam coal
Division of Exxaro Coal (Pty) Limited
Steam coal
Exxaro reductants
Limpopo
Division of Exxaro Coal (Pty) Limited
Steam coal
Arnot mine
Matla mine
Mpumalanga
Mpumalanga
New Clydesdale mine
Mpumalanga
North Block Complex
Mpumalanga
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Power station coal (Eskom)
Power station coal (Eskom)
Power station coal (Eskom)
Steam coal
Power station coal (Eskom)
Steam coal
Exxaro’s South African mineral sands operations are
28% R4 142 million
Mineral Sands – RSA
KwaZulu-Natal
Mineral
sands
housed in KZN Sands and the Western Cape operations
of Namakwa Sands. In Australia, our interests are housed
in Australia Sands whose principal asset is 50% of the
Tiwest joint venture with Tronox Inc. With the acquisition
of Namakwa Sands effective 1 October 2008, Exxaro is
now one of the world’s largest suppliers of titanium dioxide
feedstock and zircon. Collectively, Exxaro’s mineral sands
operations produced 272kt of slag, 193kt of zircon, 113kt of
synthetic rutile and 43kt of pigment in 2008.
Namakwa Sands
Northern Cape
Australia Sands2
Australia
Subsidiaries of Exxaro Resources Limited
and a division of Exxaro TSA Sands (Pty)
Limited
Ilmenite
Zircon
Rutile
Pig iron
Chloride slag
Sulphate slag
Division of Exxaro TSA Sands (Pty) Limited Zircon
Rutile
Pig iron
Chloride slag
Sulphate slag
Zircon
Rutile
Synthetic rutile
Leucoxene
Subsidiary of Exxaro Resources Limited
The Rosh Pinah zinc/lead mine in southern Namibia and
12% R1 829 million*
Zincor refinery
Base metals
in the world. Exxaro has an interest in the Chifeng zinc
the Zincor electrolytic refinery in Gauteng comprise one
of the few integrated zinc mining and refinery operations
Rosh Pinah mine
Gauteng
Namibia
Division of Exxaro Base Metals (Pty) Limited
Subsidiary of Exxaro Base Metals (Namibia)
(Pty) Limited (50,04%)
Chifeng refinery3
China
Associate (22,00%)
Black Mountain Mining (Pty)
Limited
Northern Cape
Associate (26,00%)
* Excludes industrial minerals
Glen Douglas mine
Gauteng
Subsidiary of Exxaro Resources Limited
FerroAlloys
Gauteng
Subsidiary of Exxaro Resources Limited
Atomised ferrosilicon
Sishen mine4
Northern Cape
Thabazimbi mine4
Limpopo
Division of Sishen Iron Ore
Company (Pty) Limited
Division of Sishen Iron Ore
Company (Pty) Limited
Lump ore
Fine ore
Lump ore
Fine ore
Zinc metal
Sulphuric acid
Zinc concentrate
Lead concentrate
Zinc metal
Sulphuric acid
Zinc concentrate
Lead concentrate
Metallurgical dolomite
Aggregate
Lime
and
Industrial
minerals
INVESTMENTS
Iron ore
refinery in China. During the year, Rosh Pinah and Zincor
produced 109kt of zinc concentrate and 87kt of zinc metal
respectively. A dedicated plant in Pretoria manufactures
high-quality, gas-atomised ferrosilicon, while the Glen
Douglas dolomite quarry provides a range of products for
the steel, construction and agricultural sectors.
Exxaro holds 20% of Sishen Iron Ore Company (Pty)
Limited. The company operates the Sishen and Thabazimbi
mines, producing some 34Mtpa of lumpy and fine iron
ore, two-thirds of which is exported. Sishen is one of the
largest single open-pit mines in the world, known for its
high grade and consistent product quality.
1 Sales tonnes disclosed reflect Exxaro Coal’s 50% of the Mafube expansion project.
2 Sales tonnes disclosed reflect Exxaro Australia Sands’ 50% interest in the Tiwest joint venture.
3 Sales tonnes disclosed represent the effective interest in the physical information of the Chifeng (Hongye) refinery.
4 Sales tonnes disclosed represent the effective interest in the physical information of Sishen Iron Ore Company (Pty) Limited.
NFD – Not for disclosure
SALES FOR 12 MONTHS
TO DECEMBER 2008
000
TONNES
%
EXPORTS
14 374
2 172
1 482
1 216
1 605
352
639
788
57
4 865
13 189
184
864
2 427
560
40
36
14
64
101
17
135
27
82
145
26
35
14
62
17
98
115
86
22
28
11
NFD
NFD
419
756
66
6
3 715
2 387
228
280
15
19
24
100
81
89
70
95
100
100
100
70
100
100
85
100
100
100
100
100
100
100
100
76
91
HIGHLIGHTS
Record results from coal
Significant profi t contribution from mineral sands
Acquisition of Namakwa Sands places Exxaro among global leaders in
integrated mineral sands market
Good progress on conversion of mining rights
Mining charter targets exceeded for race and gender, 30% increase in
learnerships
Reinforced safety policy and corporate standards implemented
LOWLIGHTS
Disappointing safety performance
Operating loss from base metals and Australia Sands
GROUP STRUCTURE
15%
Industrial
Development
Corporation
55%
9,5%
Eyesizwe
Eyabantu
9,5%
Tiso
11%
Basadi Ba
Kopane
Anglo American
plc*
BEE
Holdco
52,54%
Exxaro MPOWER#
2,99%
Minorities
(free fl oat)
9,78%
100%
100%
100%
As at 31 December 2008
* Held through Anglo South Africa Capital (Pty) Ltd.
These are special purpose vehicles for shareholders in our black-owned holding company.
# Employee share ownership programme.
d
e
m
r
o
f
r
e
p
e
w
w
o
H
34,69%
20%
SISHEN
IRON ORE
COMPANY
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
1
BUSINESS OBJECTIVES
Exxaro’s business objectives are measurable indicators of performance. At every level, and in different ways, our teams are
accountable for these objectives.
Exxaro
Kumba
Target
Target
Actual
2009
2008
2008
Actual
2007
Actual
Actual
Actual
2006
2005
2004
FINANCIAL TARGETS1
• Return on equity (ROE) (%)
• Return on capital employed (ROCE) (%)
• EBITDA interest cover (times)
>4
NON-FINANCIAL TARGETS
25
28
>4
30
36
14
15
24
9
33
59
20
12
17
7
8
28
12
40
5,7
16
• Safety
– fatalities
– lost-time injury frequency rate
(per 200 000 hours)
• Safety, health and environmental
certifi cation (OHSAS 18001 and
ISO 14000) (number of business units)
• Employment equity
– management (%)
– women (%)
• HIV/Aids voluntary testing and
0
0
5
5
6
4
2
0,21
0,21
0,39
0,36
0,42
0,52
0,51*
15
40
12
95
15
40
12
at least
9
36
12
10
35
11
10
32
13
9
42
13
64
counselling (%)
(longer
50% at
• Human resources development
(% spend of payroll)
• Mining learnerships
• Procurement from HDSA companies (%)
• HDSA ownership (%)
2008
2014
term)
each site
(group)
30
41
54
6,0
40
56
56
5,2
678
39
56
56
6,5
408
35
56
56
45
56
56
5,1
341
37
6,3
503
24
56
56
1 Financial targets are set with reference to a peer group of companies while actual ratios are based on statutory fi nancial results that have not been
restated for comparable purposes. Comparable key ratios are shown on page 3. No fi nancial ratios are reported for 2006 as the empowerment
transaction that led to the creation of Exxaro in November 2006 resulted in the ratios not been meaningful. Certain fi nancial targets for 2009 will only
be fi nalised in the fi rst quarter of 2009 due to the signifi cant impact of the global economic meltdown in the second half of 2008.
2
I E x x a r o A n n u a l R e p o r t 2 0 0 8
COMPARABLE KEY RATIOS
RATIOS
Profi tability and asset management
Return on net assets (%)
Return on equity attributable to owners of the parent
– Attributable earnings (%)
– Headline earnings (%)
Return on invested capital (%)
Return on capital employed (%)
Operating margin (%)
Solvency and liquidity
Net fi nancing cost cover (times) – EBIT
Net fi nancing cost cover (times) – EBITDA
Current ratio (times)
Net debt to equity (%)
Net debt to earnings before interest, tax, depreciation and amortisation (times)
Number of years to repay interest-bearing debt
12 months ended
31 December
2008
2007
39
30
32
28
34
19
6
9
2
18
0,6
1
24
14
14
16
20
14
4
6
3
31
1,2
2
Key ratios for 2007 and 2008 have been restated for comparable purposes to include Namakwa Sands as well as the equity-
accounted 26% interest in Black Mountain Mining (Pty) Limited as if effective from 1 January 2007.
WE CREATE VALUE FOR ALL STAKEHOLDERS
(cid:58)(cid:88)(cid:106)(cid:95)(cid:23)(cid:91)(cid:96)(cid:106)(cid:89)(cid:108)(cid:105)(cid:106)(cid:92)(cid:91)(cid:23)(cid:88)(cid:100)(cid:102)(cid:101)(cid:94)(cid:23)
(cid:106)(cid:107)(cid:88)(cid:98)(cid:92)(cid:95)(cid:102)(cid:99)(cid:91)(cid:92)(cid:105)(cid:106)(cid:23)(cid:41)(cid:39)(cid:39)(cid:47)
(cid:58)(cid:88)(cid:106)(cid:95)(cid:23)(cid:91)(cid:96)(cid:106)(cid:89)(cid:108)(cid:105)(cid:106)(cid:92)(cid:91)(cid:23)(cid:88)(cid:100)(cid:102)(cid:101)(cid:94)(cid:23)
(cid:106)(cid:107)(cid:88)(cid:98)(cid:92)(cid:95)(cid:102)(cid:99)(cid:91)(cid:92)(cid:105)(cid:106)(cid:23)(cid:41)(cid:39)(cid:39)(cid:46)
(cid:41)(cid:40)(cid:28)
(cid:46)(cid:28)
(cid:40)(cid:39)(cid:28)
(cid:46)(cid:28)
(cid:46)(cid:28)
(cid:40)(cid:43)(cid:28)
(cid:45)(cid:41)(cid:28)
(cid:46)(cid:41)(cid:28)
■(cid:23)(cid:23)(cid:73)(cid:92)(cid:100)(cid:108)(cid:101)(cid:92)(cid:105)(cid:88)(cid:107)(cid:92)(cid:23)(cid:92)(cid:100)(cid:103)(cid:99)(cid:102)(cid:112)(cid:92)(cid:92)(cid:106)(cid:23)(cid:93)(cid:102)(cid:105)(cid:23)(cid:106)(cid:92)(cid:105)(cid:109)(cid:96)(cid:90)(cid:92)(cid:106)(cid:23)
■(cid:23)(cid:23)(cid:71)(cid:88)(cid:112)(cid:23)(cid:91)(cid:96)(cid:105)(cid:92)(cid:90)(cid:107)(cid:23)(cid:107)(cid:88)(cid:111)(cid:92)(cid:106)(cid:23)(cid:107)(cid:102)(cid:23)(cid:107)(cid:95)(cid:92)(cid:23)(cid:106)(cid:107)(cid:88)(cid:107)(cid:92)
■(cid:23)(cid:23)(cid:71)(cid:105)(cid:102)(cid:109)(cid:96)(cid:91)(cid:92)(cid:23)(cid:99)(cid:92)(cid:101)(cid:91)(cid:92)(cid:105)(cid:106)(cid:23)(cid:110)(cid:96)(cid:107)(cid:95)(cid:23)(cid:88)(cid:23)(cid:105)(cid:92)(cid:107)(cid:108)(cid:105)(cid:101)(cid:23)(cid:102)(cid:101)(cid:23)(cid:89)(cid:102)(cid:105)(cid:105)(cid:102)(cid:110)(cid:96)(cid:101)(cid:94)(cid:106)(cid:23)
■(cid:23)(cid:23)(cid:71)(cid:105)(cid:102)(cid:109)(cid:96)(cid:91)(cid:92)(cid:23)(cid:106)(cid:95)(cid:88)(cid:105)(cid:92)(cid:95)(cid:102)(cid:99)(cid:91)(cid:92)(cid:105)(cid:106)(cid:23)(cid:110)(cid:96)(cid:107)(cid:95)(cid:23)(cid:90)(cid:88)(cid:106)(cid:95)(cid:23)(cid:91)(cid:96)(cid:109)(cid:96)(cid:91)(cid:92)(cid:101)(cid:91)(cid:106)
(cid:198) We have a multi-stakeholder
(cid:198) Commitment to communities
approach to business
where we operate
(cid:198) Track record of value release
(cid:198) Supporting national initiatives
for shareholders
(cid:198) Proud to be an employer of
choice
(cid:198) Exemplary corporate
governance is a hallmark of
our business philosophy
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
3
GEOGRAPHICAL LOCATIONS
Amsterdam
Zug
CHINA
19
Beijing
AUSTRALIA
12
Perth
18
NAMIBIA
20
16
South Africa
■ Operations
● Growth projects
▲ Representative offi ces
4
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Coal
1
Grootegeluk (GG)
1a
GG expansion for Medupi power
station
Leeuwpan
Arnot
Matla
North Block Complex (NBC)
New Clydesdale
Tshikondeni
Belfast
Mmamabula Central (Botswana gas
project)
Eerstelingsfontein
Inyanda
Moranbah South
Mafube*
RBCT Phase V*
2
3
4
5
6
7
8
9
10
11
12
13
14
Mineral sands
15
16
17
18
KZN Sands
Toliara Sands
Namakwa Sands
Australia Sands
Base metals and industrial minerals
19
20
21
22
23
24
25
Chifeng Zinc Refi nery*
Rosh Pinah
Zincor
Glen Douglas
FerroAlloys
Black Mountain*
Sishen Iron Ore Company*
23
21
22
GAUTENG
MPUMALANGA
Middelburg
13
8
Witbank
11
6
5
10
3
4
2
9
1
1a
7
25
14
15
25
24
17
Detailed maps on page 55
* Joint ventures and investments not operationally controlled.
t
n
i
r
p
t
o
o
f
o
r
a
x
x
E
e
h
T
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
5
COMPARABLE GROUP REVIEW AT A GLANCE
The supplementary information on pages 6 and 7 has been compiled using the following assumptions:
– Namakwa Sands was consolidated from 1 January 2007.
– the 26% equity interest in Black Mountain Mining (Pty) Limited was equity accounted from 1 January 2007, despite the actual
consolidation and equity accounting from 1 October and 1 November 2008 respectively.
12 months ended
31 December
2008
Unaudited
Rm
2007
Unaudited
Rm
15 209
2 811
(457)
1 603
(546)
24
228
3 663
1 068
375
8,10
2 131
(973)
2 765
3 923
11 449
1 640
(453)
685
(500)
(20)
22
1 374
403
160
7,26
1 507
(4 123)
(453)
(3 069)
COMPARABLE INCOME STATEMENTS
Revenue
Net operating profi t
Net fi nancing costs
Investment and equity income
Income tax expense
Minority interest
Add back items for headline earnings
Headline earnings
Headline earnings per share (cents)
Dividends per share (cents)
Average realised exchange rate (R/US$)
COMPARABLE STATEMENTS OF CASH FLOWS
Cash fl ows from operating activities
Cash fl ows from investing activities
Cash fl ows from fi nancing activities
Net increase/(decrease) in cash and cash equivalents
6
I E x x a r o A n n u a l R e p o r t 2 0 0 8
GROUP STATEMENTS OF FINANCIAL POSITION
Assets
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates and joint ventures
Deferred tax
Financial assets
Current assets
Cash and cash equivalents
Inventories, trade and other receivables
Non-current assets classifi ed as held for sale
Total assets
Equity and liabilities
Capital and reserves
Equity attributable to owners of the parent
Minority interest
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Financial liabilities
Deferred tax
Current liabilities
Interest-bearing borrowings
Other
Non-current liabilities classifi ed as held for sale
Total equity and liabilities
Net debt
ANALYSIS PER SHARE
Number of shares in issue (million)
Weighted average number of shares in issue (million)
Earnings per ordinary share
– Attributable earnings (cents)
– Headline earnings (cents)
Dividend declared per ordinary share (cents)
Dividend cover (times)
Net asset value per ordinary share (cents)
Attributable cash fl ow per ordinary share (cents)
At 31 December
2008
Unaudited
Rm
2007
Unaudited
Rm
11 309
10 343
34
79
1 849
1 083
1 577
1 769
5 407
78
30
76
712
732
1 046
850
4 101
2
23 185
17 892
12 996
128
13 124
3 650
1 746
31
1 257
500
2 827
50
23 185
2 381
355
343
1 002
1 068
375
2,67
3 661
681
9 728
19
9 747
3 798
1 414
1 065
74
1 794
17 892
3 022
353
341
396
403
160
2,48
2 756
440
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
7
SUMMARY OF BUSINESS OPERATIONS
000 tonnes produced
2008
2007
2006
2005
12 months ended 31 December
2 560
2 233
327
36 700
14 581
1 188
13 230
4 865
115
2 721
5 574
1 387
1 801
984
561
841
2 962
2 499
463
34 246
14 510
956
2 496
2 133
363
34 599
14 268
921
2 273
1 859
414
34 164
14 060
513
13 030
13 613
12 470
3 702
156
1 892
4 111
1 485
1 421
814
391
3 985
331
1 481
4 665
1 585
1 504
1 107
469
4 976
361
1 784
5 523
1 551
1 442
996
1 534
44 834
41 319
41 760
41 960
229
367
319
356
34
19
50
16
95
18
315
130
27
103
6
135
24
34
17
90
20
150
26
300
115
24
91
11
126
27
50
25
75
10
134
36
272
128
28
83
8
112
23
47
23
89
8
134
30
316
129
29
99
130
25
COAL
Coking coal
Grootegeluk
Tshikondeni
Power station coal (Eskom)
Grootegeluk
Leeuwpan
Matla1
Arnot1
New Clydesdale1
North Block Complex1
Steam coal
Grootegeluk
Leeuwpan
New Clydesdale1
North Block Complex1
Inyanda
Total coal production
KZN SANDS
Ilmenite
Zircon
Rutile
Pig iron
Scrap pig iron
Chloride slag
Sulphate slag
NAMAKWA SANDS2
Ilmenite
Zircon
Rutile
Pig iron
Scrap pig iron
Chloride slag
Sulphate slag
8
I E x x a r o A n n u a l R e p o r t 2 0 0 8
000 tonnes produced
AUSTRALIA SANDS3
Ilmenite
Zircon
Rutile
Synthetic rutile
Leucoxene
Pigment
BASE METALS
Rosh Pinah (zinc concentrate)
Black Mountain (zinc concentrate)4
Zincor (zinc metal)
Zincor (sulphuric acid)
Chifeng (zinc metal)5
Rosh Pinah (lead concentrate)
Black Mountain (lead concentrate)4
INDUSTRIAL MINERALS
Glen Douglas
Metallurgical dolomite
Aggregate
Lime
FerroAlloys
12 months ended 31 December
2008
2007
2006
2005
174
29
13
113
16
43
94
15
87
129
23
20
17
422
788
63
216
36
17
100
16
54
95
15
101
147
23
22
15
543
749
54
227
36
18
98
14
54
104
18
90
142
16
21
18
661
672
59
220
35
16
111
12
53
126
17
102
168
15
25
16
689
666
26
Atomised ferrosilicon
6
6
6
6
IRON ORE
Sishen6
Thabazimbi6
Total iron ore production
6 808
532
7 340
5 946
535
6 481
5 738
28 458
484
2 529
6 222
30 987
1 Physical information includes Eyesizwe Coal mines for 12 months in 2005 even though only acquired effective 1 November 2006.
2 Physical information includes Namakwa Sands for 12 months from 2005 even though only acquired effective 1 October 2008.
3 Physical information refl ects Exxaro Australia Sands' 50% interest in the Tiwest joint venture with Tronox Incorporated, Western Australia.
4 Physical information refl ects Exxaro's 26% interest in Black Mountain Mining (Pty) Limited from 2005 even though only acquired effective
1 November 2008.
5 Physical information represents the effective interest in Chifeng (Hongye) refi nery.
6 Physical information from 2006 refl ects Exxaro's 20% interest in SIOC.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
9
FOCUS AREAS
FOCUS AREAS
Each year, Exxaro conducts a comprehensive
groupwide analysis of risks. These are grouped,
and ranked by both impact and probability, as well
as the effectiveness of the control measure, to
form the group’s risk management framework for
the next period. These high-level risks and control
measures are reviewed at board level. In our
industry, some risks are perennially high on the
table (page 72) and require ongoing management.
Others change in line with prevailing economic,
social and environmental circumstances.
In the long term, apart from the scale of human tragedy,
poor safety records could undermine the business as a
whole, increase our cost of funding and affect our share
price.
In addressing this challenge, we have aggressively reinforced
a multi-pronged approach (page 81) spanning, among others,
enhanced safety awareness and preventative programmes,
a strong focus on hazard identifi cation and Visible Felt
Leadership. Our ultimate goal for safety is an injury-free
workplace. To reach this target, we aim to improve our lost-
time injury frequency rate by 30% each year.
For the immediate future, Exxaro’s key challenges are
safety, profi tability and operational issues. The context and
In August 2008, chief executives of Chamber of Mines
mitigating strategies for each of these issues are detailed
member companies met to deliberate on sustainable ways in
in this section.
which a culture of health and safety could be strengthened
and how working environments could effectively be made
Safety
The safety of employees heads the operational and strategic
safer and healthier. Endorsing the target of zero harm
and the milestones that have been agreed with tripartite
agenda of Exxaro as it does for other
partners to achieve this objective, the chief executives also
corporate members of the Chamber
acknowledged the principle that safety is a core value that
of Mines.
In 2008, more than
must always take precedence over production (page 74).
140 people lost their lives in surface
Exxaro fully subscribes to this principle.
and underground accidents on
South African mines. Although the
2008 January-September fatality
Profi tability
Maintaining a strong balance sheet with a cash-preservation
rate was 15% lower than for the
focus, together with
judicious consideration of both
same period
last year,
industry
sustaining capital and growth aspirations, further supported
leaders unanimously agree it is not acceptable. Apart from
by continuous business improvement at all operations, is of
the grief and distress suffered by the families of miners who
paramount importance in the current global recessionary
are injured or killed, there is profound understanding and
environment.
acceptance of the ethical business threat to industries with
unsatisfactory health and safety records.
Operational
The key risks faced by our operations are energy (primarily
Exxaro employs over 10 000 people, many of whom work
security of supply) and, following the global economic
in the world’s most challenging environments. Our 2008
meltdown which started in the second half of 2008, low
safety performance was disappointing (page 82). The
commodity prices and contracting markets.
key risks in our diverse mining operations are lifting and
material handling, energy and machine isolation, vehicle
safety, ground control, working at heights and a number
Energy
The national electricity crisis in early 2008 had an immediate
of site-specifi c issues. For our group, the short-term
detrimental impact on the business of mining and continues
impact of an unacceptable safety record could result in
to present consequences that require remedial attention
intervention by:
• Government revoking mining licences
• Strike action by labour unions
• Other stakeholders – leading to diffi culty in attracting and
retaining the required skills, lack of community support,
lobbies/protests or boycotts and declining
investor
interest.
and accurate assessment.
In January 2008, compelled to avert an almost certain
countrywide
blackout,
Eskom
declared a force majeure and cut
the supply of power to the mining
industry by 50%. With electricity
being imperative to the safety and
survival of employees in underground
working environments (over 50%
10
I E x x a r o A n n u a l R e p o r t 2 0 0 8
of electricity used in deep-level mines is for cooling,
Low commodity prices and
ventilation and pumping), most of South Africa’s mines had
contracting markets
no alternative but to suspend operational activities.
Calendar 2008 was very much a year
of two halves, with record prices in
The shutdown lasted for seven days, with a cost to the
the fi rst half matched by equally
economy in lost mineral sales and lost production of
dramatic collapses in the second and
R12 billion. The value of mining equities quoted on the
bleak prospects for 2009 for many
JSE declined by a staggering R85 billion. This was a direct
commodities:
consequence of investment community concern about the
industry’s viability under the threat of power curtailment.
Equally, the more than 25% drop in mining gross domestic
product (GDP) effectively halved the country’s economic
growth rate from 5% in the fourth quarter of 2007 to
• Hard coking coal’s 200% price increase in 2008 is
expected by commodity analysts to be followed by a
50% drop in price in 2009. The patterns were similar
for semi-soft coking coal and low-volatile PCI benchmark
coal, and more pronounced for the spot price of steam
slightly more than 2% in the fi rst quarter of 2008.
coal.
Given that Eskom’s low reserve margins are expected
to remain a serious risk for the next several years until
additional capacity comes on stream, the Chamber of Mines
and its individual members have been closely involved
in
initiatives focused on electricity conservation and
effi ciency. The chamber is also developing a protocol for
handling electricity supply emergencies based on sectoral
contributions to the national economy, which will be
presented to government for approval.
Exxaro was one of the early signatories of the Energy
Effi ciency Accord, in its previous form as Kumba Resources.
Since then, the Eskom request for a 10% electricity saving
requires a more urgent response. In April 2008 Exxaro’s
energy effi ciency team met to outline
the company’s strategy to address
the crisis and to develop savings
projects for implementation in the
short, medium and long term. These
energy-saving ideas are currently in
various stages of implementation,
and include the conversion to low-
energy
lighting; conversion
to
solar appliances for hot-water applications; right-sizing of
electrical motors; use of high-effi ciency pumps, fans and
motors; improved power-factor correction; and demand-
side management projects.
Alternative energy sources are being investigated at various
sites where both solar and wind power could be generated.
These projects are currently entering pre-feasibility phase.
Capturing process energy in off-gas streams is also being
investigated at various sites, creating the possibility of
offsetting the company’s carbon footprint.
• The spot price for iron ore in China moved from US$170
to between US$60 and US$75/t in six months. Market
expectations for 2009 are 30 – 40% lower for Australian
benchmark spot prices.
• The 2009 market forecast for the London Metal Exchange
cash zinc price is considerably lower than the prior year,
albeit up from December’s 2008 lows.
• The rising trend for titanium dioxide prices in 2008 could
be reversed by lower demand in 2009, while feedstock
prices are expected to move sideways.
• Zircon prices are also forecast to move sideways in 2009
as the global economic slowdown is expected to result in
a more balanced supply and demand situation.
However, countering this gloomy outlook to some extent,
mining costs are expected to come down in 2009, helped by
declining energy costs. The worldwide slowdown in activity
levels should lessen the shortage of contractors, equipment
and mining professionals, and freight rates are the best they
have been for many years.
A weaker rand and the Australian dollar at levels more
in line with its historical average exchange rate to the
US dollar will positively refl ect in the realised proceeds of
US dollar-denominated sales revenue, offset to some extent
by its adverse impact on foreign currency-linked capital and
operational costs.
While extremely challenging, Exxaro’s operations are focused
on managing these conditions through relentlessly pursuing
operational effi ciency, cost management and increased
– but safe – productivity. In addition and as a group, our
diversifi cation strategy and product and geographic market
spread afford some protection against prevailing market
conditions.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
11
CHIEF EXECUTIVE OFFICER’S REVIEW
Our performance
refl ects the benefi ts
of diversifi cation in
the most volatile
global market in living
memory.
Sipho Nkosi
Chief executive offi cer
HIGHLIGHTS
• 36% increase in revenue to R13,8 billion
• Headline earnings of 1 058 cents per share
• Signifi cant maiden contribution from successfully integrated Namakwa Sands
• Final dividend of 200 cents per share; total dividend of 375 cents per share
12
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Exxaro’s performance in its second full year of operating
as a listed, empowered mineral resources group refl ects
• Through strategic focus and innovative thinking, Rosh
Pinah has extended its life of mine until 2018, a far cry
the benefi ts of diversifi cation in a volatile global market,
from four years ago when the mine had a life of less than
with record fi nancial results from our coal business and
fi ve years and faced closure.
a signifi cant profi t contribution from our mineral sands
operations. We recorded several major milestones during
• A groupwide business improvement programme has
already identifi ed savings of R190 million as part of our
the period, particularly in our coal business. These included
process of continuous improvement.
a 40-year coal-supply agreement for Eskom’s Medupi power
station, the full ramp-up of Mafube mine, and our new
• Exxaro has sponsored a research chair at the Unisa
Centre for Corporate Citizenship to develop a core body
Inyanda mine exceeding capacity to reach 1,8Mtpa. We also
of knowledge on climate change in South Africa.
completed the Namakwa Sands acquisition to strengthen
our mineral sands portfolio and made good progress on
• We opened a new international offi ce in Switzerland to
service the European steam coal market. Market demand,
conversion and new mining rights applications.
Business environment
The global economic slowdown accelerated markedly in
the second half of the year, impacting on the South African
strong prices and Exxaro’s focus on value-in-use marketing
are expected to underpin an increase in international coal
exports to at least 10Mtpa over the next eight years.
• An Exxaro employee made history in July 2008 when he
became one of 21 000 torch bearers – and the only South
economy as well. Local gross domestic product growth of
African – to carry the Olympic fl ame on its four-month
3,2% was well below the 5,1% achieved in the prior year and
journey around the world to the host city of Beijing.
the outlook for 2009 is for further contraction to around
1,9%. The macro-economic review on page 18 details global
The review period however presented some considerable
economic performance during the year and the outlook
for 2009.
challenges:
• Regrettably, fi ve employees lost their lives, despite
ongoing and company-wide initiatives to enhance safety
In some commodity markets it was decidedly a year of two
awareness. Disappointingly, we also fell far short of our
halves, characterised by volatile supply and demand levels.
target for lost-time injuries (page 82).
Oil and bulk commodities reached record levels in the fi rst
half, but prices collapsed in the second half. Base metals and
• Our base metals division recorded an operating loss for
the year, through a combination of production disruptions,
industrial minerals followed suit. The cycle of rising iron ore
lower revenue, increased operating costs and higher
and coal prices is expected to reverse in 2009, while zinc
provisions for environmental rehabilitation.
prices have come down substantially from high 2007 levels.
• Limited power supply and a total plant blackout following
a transformer failure at Zincor caused major delays
However, some perhaps unexpected benefi ts emerged from
and plant instability in the second half of the year. Rosh
this gloomy picture: fi rstly the upward spiral in mining costs
Pinah was similarly affected by equipment failures, plant
and project capital costs was arrested and, secondly, the
availability and the impact of an unstable power supply.
worldwide shortage of skills and equipment was alleviated
by the plethora of announced cutbacks and project deferrals.
We expect this trend will continue for much of 2009.
Powering possibility
Individual performances during the year have further
entrenched the hallmark of this group to power possibility:
• Exxaro’s North Block Complex was named best-performing
coal mine in South Africa by the South African Colliery
Managers’ Association in recognition of 26 years of
Safety
The group again recorded a poor safety performance, with
fi ve fatalities in the review period, while the average lost-
time injury frequency rate (LTIFR) per 200 000 man-hours
worked was 0,39 which is well above the target for 2008 of
0,21 (page 82). We deeply regret the loss of our colleagues
and extend our sincere condolences to their families, friends
and colleagues.
fatality-free shifts.
We are determined to meet our target of zero harm in all
• Following the successful rebuild of the no 4 roaster in
2007, Zincor simultaneously rebuilt roasters no 1 and 2 at
our operations and have begun implementing revised safety
policy and corporate management standards across the
a cost of some R28 million during the year as part of the
group – detailed on page 82
drive to ensure plant effi ciency, availability and increased
output.
The South African mining industry as a whole is trying to be
• We concluded the empowerment transaction in which
Namibian shareholders acquired a further 43% of Rosh
more consistent in how it applies safety standards, and one
of the behaviours it encourages is zero tolerance for safety
Pinah lead-zinc mine. As part of this landmark transaction,
violations. Among other things, this means that safety
the mine’s employees now hold 3% of the share capital
behaviour needs to be as much part of performance reviews
and will share in its growth and prosperity.
and recognition as it is an individual responsibility.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
13
CHIEF EXECUTIVE OFFICER’S REVIEW continued
In November 2007, the former president of South Africa,
resulting in record operating results from Namakwa Sands.
Thabo Mbeki, announced the implementation of health
Higher production from all operations should benefi t this
and safety audits. All Exxaro mining operations have now
business in 2009.
been audited, and results indicate the extent to which our
operations comply with health and safety requirements.
In base metals, the record high price environment in 2006
We were particularly pleased with results from our
and 2007 has been followed by signifi cantly lower local and
coal operations which, at 73%, exceeded the average
international demand and resultant unfavourable pricing.
Department of Minerals and Energy scores of 70% for coal
The oversupply of concentrate has only partially been offset
and 66% for all mines. The outcomes from these audits and
by higher treatment charges. The business is expected
our own investigations will form the framework to refi ne
to remain under pressure in 2009 given depressed zinc
and improve our practices.
markets and poor zinc metal prices.
Externally facilitated, our fi rst CEO’s Safety Summit was
convened in March 2009. A second summit is planned for
Operational performance
Despite challenges during the year, most notably the extent
October 2009 at which progress against targets will be
of the global economic meltdown and unavailability of plant
mapped and agreement reached on further improvements.
capacity in the mineral sands and base metals businesses,
At Exxaro, safety is our foremost priority. Our North Block
there were a number of notable achievements:
• Record annual production and sale of power station coal
Complex is a prime example of what can be achieved through
to Eskom.
diligent application of safety standards. We plan to drive our
safety initiatives and programmes aggressively throughout
• Increased production of coal from Inyanda (above design
capacity) and North Block Complex, combined with new
the organisation.
reserves and capacity at the latter mine.
Operational overview
Exxaro’s coal business units recorded good operating
• Record synthetic rutile production at Australia Sands
following the successful kiln shut in 2007.
• Annual records for zircon, titanium slag and pig iron
performances complemented by additional production from
production at the newly acquired Namakwa Sands.
Inyanda and North Block Complex. Total production volumes
neared the 45Mt mark.
• Effi ciency improvements at Namakwa Sands translating
into a record chlorinatable slag ratio of 84,5% and iron
recovery rate of 91,3%.
Coal markets continued to benefi t from strong local and
• Zincor completed its roaster rebuild programme in the
international demand which translated into favourable coal
acid plant to position itself for improved effi ciencies.
pricing despite signifi cant softening in international prices
as the global economic meltdown in the second half of 2008
took effect. Expansion of Grootegeluk mine to supply power
New operations
Commissioning and ramp-up to full capacity of the Mafube
station coal to Eskom’s Medupi power station is underway
expansion project has been completed. The mine will produce
following the conclusion of a long-term supply agreement
3Mtpa of export steam coal and 2Mtpa of power station coal.
on the back of unabated local demand. Discussions continue
Exxaro’s 50% joint venture participation with Anglo Coal,
with Transnet on rail capacity to use Exxaro’s export
although still awaiting fulfi lment of all conditions precedent,
entitlement of 6,3Mtpa by end 2009.
added 733kt to overall export volumes allowing the group to
benefi t from higher average export prices during the year.
The mineral sands business was complemented by the
The Inyanda mine was also successfully commissioned and
acquisition of Namakwa Sands from Anglo Operations
ramped up to design capacity of 1,5Mpta.
Limited with effect from 1 October 2008. Feedstock
supply levels continued to affect markets while the global
economic crisis is expected to compound the negative
Energy
In South Africa, coal has attracted much media attention
impact on pigment demand. Exxaro’s 2008 fi nancial
during the year, with coal-fi red power stations contributing
results were again negatively infl uenced by the strength
some 92% of South Africa’s energy-generating capability.
of the Australian currency against the US dollar, despite
While energy is an immediate focus area for Exxaro, as
the weakening of the former in the last quarter of 2008.
detailed on page 87, several issues are worth noting here,
Zircon enjoyed good global demand and pricing in 2008,
given their importance to our long-term growth.
14
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Although Eskom is planning to shift to a 30% nuclear
Namakwa Sands’ products are sold mainly on international
mix within the next 15 years, coal will continue to play a
markets, and for an entity that operates in one of South
signifi cant role in power generation. Given that South Africa
Africa’s most beautiful but challenging environments on
needs to double its generating capacity by 2025 to support
South Africa’s west coast, it boasts signifi cant market share.
current growth rates while keeping costs down means a
In 2007, Namakwa Sands produced 10% of the world’s zircon,
continued reliance on coal, which is still the cheapest source
8% of its titanium dioxide slag, and 5% each of its rutile and
of power generation.
high-purity pig iron. Namakwa Sands has a well-established
customer base across the world, and its incorporation into
Currently the fourth-largest coal producer in the country,
Exxaro will more than double the group’s production of
Exxaro is one of the largest suppliers to Eskom, accounting
zircon, and effectively double its pig iron capacity.
for more than 30% of total power station demand. With
the Waterberg expansions, Exxaro could become one of the
With Namakwa Sands in our stable, Exxaro is now the third-
largest coal producers in South Africa.
largest integrated titanium dioxide feedstock group in the
world. The benefi ts are considerable – ranging from a single
The coal supply agreement for Eskom’s new base-load
marketing team for the mineral sands business, to shared
power station, Medupi, was signed in September 2008,
infrastructure, furnace technology and mineral separation
underscoring the valued and
long-standing business
technology.
relationship Exxaro has built with the power utility. In
terms of the agreement, Grootegeluk will supply an
This makes Exxaro unique in that various mineral sands
average of 14,6Mtpa of power station-grade coal for the
technologies representing the entire value chain, from mine
next 40 years through a R9-billion brownfi elds expansion
to pigment, are housed in one group.
of the mine. The mine will increase production through
a seven-day continuous operations programme to supply
The strategy behind our continued presence in the mineral
additional coal to the adjacent Matimba power station.
sands market is now unfolding. We have always believed we
Two new benefi ciation plants will be constructed at the
need to offer our stakeholders a balanced portfolio and, from
mine to process new production for Medupi. Grootegeluk
the outset, we have chosen to protect the group’s interests
has the largest washing and benefi ciation complex in the
by spreading the risk to deliver value to our stakeholders,
world. Production from the new section of Grootegeluk is
including our employees, over the longer term. This
planned for the end of 2011, with ramp-up to full production
underpins our strategy of a moderately diversifi ed portfolio
by 2014.
with the building blocks of our sands business remaining
sound as it is a dollar-denominated market where prices
These investments by Exxaro and Eskom will have a
are contracted annually and often for three- to fi ve-year
signifi cant benefi t for the local, provincial and ultimately
terms. Together with our leading position as a long-term
national economy. Direct jobs created during construction
power station coal supplier to Eskom, this should provide
will peak at about 9 500 (8 000 from Eskom’s investment,
considerable protection against market fl uctuations and
and 1 500 from Exxaro’s) and thousands of indirect jobs will
times of economic uncertainty. With demand for titanium
be created. Some 550 permanent jobs will be created at
dioxide feedstocks growing internationally, accompanied
Grootegeluk mine alone.
by supply constraints, we remain optimistic about this
As a key role player in the mining industry, it is our
responsibility to become more energy effi cient, to promote
the use of clean technologies, and to fast-track coal mining
Integration
In just two years, Exxaro has proved its ability to integrate
projects. In turn, it is government’s responsibility to ensure
acquisitions and mould these into a cohesive group. The
approval of mining rights and to provide a context in which
process of integrating Namakwa Sands is currently well
strategy.
private investors can – and are encouraged to – invest in
under way.
independent power producers.
Mineral sands acquisition
Effective 1 October 2008, we began the formal process of
An integral element in creating value in the current
economic environment has been to develop a focused group
by integrating our people, attitudes, processes and systems
integrating Namakwa Sands into Exxaro.
to function as a single entity. During the year, this meant
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
15
CHIEF EXECUTIVE OFFICER’S REVIEW continued
consolidating the strategies and best practices of all the
Calendar 2009 also marks the end of the fi rst cycle of the
different teams in our group. With the integration of people
mining charter and its attendant scorecard. The process of
under way early in the year, and succession planning bedded
reviewing the charter against progress and developments
down, the focus shifted to processes and systems.
in the past fi ve years begins in April and is expected to
take some time to fi nalise. Exxaro has made good progress
A project to optimise enterprise resource planning was
against scorecard targets (page 107), but our ultimate aim
initiated in the fi rst quarter. This included migrating
is closely aligned to the intention and spirit of the charter
various business units on to Exxaro’s enterprise-wide
– equitable participation in the country’s natural resources,
resource planning system. By mid-2009, this will ensure
with fair and representative workplaces.
more effective groupwide governance, decision-making,
recording of business activities, risk management and
During the year, Exxaro’s applications to convert the mining
greater ability to identify opportunities for continuous
rights associated with former Kumba Resources operations
improvement.
Strategy
Our strategy is to consolidate in the short term, optimise
growth plans over the medium term and innovate in the
were granted. The process for executing these conversions
should be completed in the current year. Applications to
convert former Eyesizwe Coal mining rights were submitted
in June 2008.
longer term. In light of global challenges, I believe it is
more pertinent to review our immediate strategy (the year
Sustainable development
This year, I have separated my review for the convenience
ahead) in this report. In our current consolidation phase our
of stakeholders. Our comprehensive sustainability report
short-term goals are to focus on operational excellence, to
begins on page 74 with a message that outlines our strategy,
optimise cash fl ow and implement the new organisational
progress and targets. This is supported by illustrative case
structure. Given the credit crisis and worldwide economic
studies available in a dedicated section in our electronic
meltdown in the second half of 2008, the group is reviewing
annual report, on www.exxaro.com/case_studies
its capital expenditure programmes, including sustaining
capital, as well as the project pipeline. We will focus on
successfully implementing committed expansions while
Transformation
The genesis of today’s Exxaro Resources has been a case
reprioritising other identifi ed growth opportunities. These
study in transformation. On unbundling from Iscor in 2001,
projects are detailed on page 43.
the groundwork was done under the Kumba Resources
banner to create a group that offered equal opportunity to all
A continuous business improvement programme is under
stakeholders. This ethos permeated the 2006 transactions
way to preserve the group’s cash fl ow and ensure availability
to create Exxaro, South Africa’s fl agship empowerment
of sustaining capital.
Exxaro is well positioned to weather this economic storm:
• We are a major (and proven) supplier to Eskom
• We have a growing role as a steam coal exporter
increased
• Production has been sustainably
in our
group in the mining industry. Among Exxaro’s shareholders
are over 9 000 of our own employees and communities that
enable us to trade.
At a time when many black economic empowerment
groups are struggling with onerous debt burdens,
mineral sands operations and the marketing strategy
Exxaro’s black shareholders are seeing the fruits of
consolidated
their investment. To date, shareholders in BEE Holdco
• An asset management and plant effi ciency programme
is under way in our zinc business. We are exploring
(page 109), which owns some 53% of Exxaro, have
received dividends totalling R994 million. Our own
alternative markets and reviewing strategic options.
people, through the MPOWER trust, have benefi ted from
Legislation
In recent years, the legislative environment for South Africa’s
We have achieved the targets set by the mining charter for
mining industry has changed signifi cantly. We welcome the
transformation (page 96 and 107), but we will not be satisfi ed
deferment of the draft royalty bill – this is a valuable respite
until transformation is truly widespread and our workforce
in the current economic climate.
a fully representative demographic slice of South Africa.
over R28 million in dividends.
16
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Directorate and governance
Best-practice governance remains the standard at Exxaro,
Prospects
After two years, Exxaro is proving its mettle in the
facilitated by the skills and experience of a dedicated board
commodities market – having grown admirably through
of directors.
good times and bad.
In August 2008, Mike Kilbride retired after more than
The group is expected to continue benefi ting from strong
30 years in the mining industry, predominantly with our
demand for local power station coal. However, coking coal
group and most recently as chief operating offi cer. Mike
sales could be lower at reduced prices. Steam coal sales
played an invaluable role in shaping today’s Exxaro and
volumes should increase but at lower international prices.
we wish him well in this new phase of his life. There is
now a direct reporting line between the heads of Exxaro’s
commodity businesses and the chief executive offi cer.
Subsequent to the year end, Dirk van Staden retired
as fi nancial director of Exxaro after 12 years with the
group and its predecessors, during which he played an
instrumental role in almost every corporate transaction.
His career spanned 34 years in the corporate environment
and we thank him for an exceptional contribution and
extend our very best wishes for a healthy and rewarding
retirement. Dirk is succeeded by Wim de Klerk, a chartered
accountant by profession, miner by experience, and long
part of the Exxaro team who will head the competent
Exxaro fi nance team.
Increased production volumes at all mineral sands
operations, a full 12 months’ contribution from Namakwa
Sands together with the local and Australian currencies
remaining at their present weaker levels, should improve
prospects for this business in 2009 if market demand and
prices remain at current stable levels.
The base metals business is expected to remain under
pressure in 2009 as a result of continued depressed market
conditions and zinc prices.
The equity accounted contribution from Sishen Iron Ore
Company will be affected by market demand and the level
of iron ore price adjustments effective from 1 April 2009.
During the year, Ms Nonkululeko Nyembezi-Heita and
Ms Pinkie Ncetezo resigned from the board. We thank these
directors for their contributions while in offi ce.
Accordingly,
the group will concentrate on capital
prioritisation and working capital management together
with continuous business improvement initiatives and cost
control to offset lower demand and price challenges.
Ms Simangele Mngomezulu and Mr Jeffrey van Rooyen were
appointed as non-executive directors in August 2008. Both
directors add to the expertise and diversity of the Exxaro
board.
We thank Dr Len Konar for continuing to serve as Exxaro’s
acting chairman during the period. While the process
of appointing an independent chairman has been more
protracted than we envisaged, progress is being made.
Appreciation
It has been a year of highlights and challenges, at times
formidable challenges. The spirit and dedication our people
brought to dealing with the challenges was inspiring, as
was their delight in celebrating the milestones. Exxaro is
fortunate to have exceptional people at every level and
I thank each of you for the valuable role you play in our
success.
We also continue to enjoy a mutually benefi cial relationship
with our empowerment partners and we will concentrate on
entrenching this partnership as we grow.
Consolidated results for 2009 will largely be driven by the
extent to which global recessionary conditions impact on
demand and prices for the group’s commodities as well as
the trading levels of the local and Australian currencies.
However, the uncertain market outlook remains a key factor
to the group’s results for 2009.
Sipho Nkosi
Chief executive offi cer
17 March 2009
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
17
MACRO-ECONOMIC AND COMMODITY REVIEW
World gross domestic product (GDP) growth continued to
fourth, taking annual growth to 9,0% compared to 13,0% in
slow during 2008, reaching 2,3% after declining to 4,0%
2007. This was mainly the result of sharply decreasing
in 2007 from 4,1% the previous year. The slowdown was
international trade. In line with developed countries, China
particularly pronounced in the second half of the year, with
also instituted major monetary easing and infrastructure
growth of only 2,2% and 0,3% recorded in the third and
investment measures to arrest the decline in economic
fourth quarters respectively. The major factor in this decline
activity. GDP growth in 2009 is expected to decline further
was the sub-prime meltdown and associated credit crunch
to an average of 5,9%.
which originated in the USA, but then spread to the rest of
the world. This was followed by a loss of confi dence from
The key risks to the global economy are believed to be
businesses and consumers which, in turn, resulted in tight
an unduly timid response to the crisis from governments
credit, declining demand, reduced spending and investment,
globally as well as further deterioration in confi dence from
job losses, declining property prices and collapsing stock
businesses and consumers alike. On the positive side, the
markets all over the world.
precipitous fall in energy prices would boost economic
The impact on the world’s advanced economies was severe,
recovery.
with negative economic growth recorded in all regions
The South African economy was not immune to the
in the fourth quarter. Respective government efforts to
economic problems that affected the rest of the world,
curtail adverse economic developments through signifi cant
with GDP growth declining in 2008 to 3,1% from 5,1% in
monetary easing and massive fi scal stimulus measures were
2007. On a year-on-year basis, growth decreased from
not successful in the short term and an economic recession
3,8% in the fi rst quarter to an estimated 1,6% in the fourth.
in the developed world in 2009 is a foregone conclusion.
Consumer price infl ation rose signifi cantly above the
This recession is described globally as probably the worst
Reserve Bank’s target range of 3 – 6%, with the average
since the Great Depression of the 1930s.
for the year at 11,5%, almost double the upper range of the
target. However, due to the deteriorating economic outlook
Previous arguments about a decoupling between the
globally and locally, the bank’s tight monetary stance was
economies of developed and emerging nations proved
reversed towards the end of the year. Falling oil prices will
erroneous. The travails of the developed world spilled over
assist in easing infl ation in 2009, but strong increases in
to the rest of the world following the collapse in commodity
electricity prices will counteract this. Infl ation is expected to
prices, leading to the drying up of capital fl ows to and capital
drop to within the Reserve Bank target range in the second
fl ight from developing economies, and sharp falls in world
half of 2009. A fl ight from risk by investors resulted in a
trade. Emerging-market GDP growth rates fell from 7,3% in
weakening of the rand exchange rate against the US dollar
the fi rst quarter of 2008 to 3,1% in the fourth quarter.
and this trend is expected to continue in 2009. This will have
Economic growth in China remained the main driver of
manufacturing industries, even though the mining industry
commodity demand in 2008, but expansion in that country
is now operating in an environment of weak and volatile
slowed from 10,6% in the fi rst quarter to 6,8% in the
commodity prices.
a positive impact on the export earnings of the mining and
Comparative GDP growth rates
)
e
g
n
a
h
c
%
(
h
t
w
o
r
g
P
D
G
16
14
12
10
8
6
4
2
0
– 2
– 4
1990
1991
1992
1993
1994 1995
1996
1997
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
— — China — South Africa — World — United States
Source: Global Insight
18
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Due to declining economic activity, infrastructure bottlenecks
a high of US$177,45/tonne in August and then collapsing
– electricity supplies and transport and harbour capacities,
to US$78,50/tonne at the end of the year. The outlook for
as well as the shortage of skilled and experienced human
2009 is cloudy, with the prospect of lower demand due to
resources – will probably ease temporarily, although the
the global economic recession further dampened by the
situation remains tight. Coal rail capacity to Richards Bay
possibility of greater Chinese exports due to lower offtake in
remains a serious constraint.
that country. The impact of restricted logistical capacity will
thus also not be as pronounced as in 2008. All in all, prices
Real GDP growth of only 1,0% is expected in 2009, but further
could stabilise around the US$65/tonne level, but further
negative developments internationally will continue having an
weakness in the oil price could have a negative impact on
adverse impact on economic expansion in South Africa.
this view.
Commodity review
In 2008, continuing robust materials-intensive economic
Tight market conditions in the fi rst half of 2008 resulted
in Australian benchmark iron ore prices for the Asian
growth in China and other emerging economies in the fi rst
basin increasing by 96,5%. The impact of world economic
half pushed oil and other bulk commodity prices to record
conditions is, however, best illustrated by the spot iron ore
levels. This was the fi fth consecutive year of increasing
price in China. This collapsed from over US$170/tonne at the
prices for these commodities, and supply bottlenecks
end of July to less than US$60/tonne towards the end of
supported these price levels. Base metal prices, on the other
October. Prices subsequently recovered to US$75/tonne by
hand, peaked in 2007 and declined in the fi rst part of 2008
December. The second half of 2008 was also characterised
due to easing market fundamentals. The situation changed
by consumers defaulting on offtake agreements and
dramatically in the second half of the year, following the
announcements of production cutbacks and postponed
economic crises in developed economies. This resulted in
expansion projects by iron ore producers. Consensus
a collapse in prices for oil and bulk commodities trading
forecasts of Australian benchmark prices for 2009 indicate
on a spot basis, with base metal prices following suit. The
a 30% decline.
impact on contract prices will also be keenly felt once these
come up for renegotiation.
The 2008 average London Metals Exchange (LME) cash zinc
price was US$1 875/tonne, some 42% lower than the average
Projections of global steel production indicate that crude
for 2007. The decrease was driven by worsening market
output decreased by 14Mt ( 1,2%) to 1 330Mt in 2008. Again, it
fundamentals, refl ected in a refi ned zinc surplus of about
was a tale of two halves, with output increasing in the fi rst fi ve
190kt developing during the year, compared to the surplus
months of the year and then declining. Production increased
of 245kt in 2007. The zinc price declined steadily in the
by some 13Mt, or 2,7%, in China, with output starting to fall in
fi rst nine months of the year from about US$2 400/tonne
July, resulting in a collapse in spot steel prices in that country,
to US$1 700/tonne. In October the price started dropping
similar to the experience in the rest of the world. China was
precipitously to US$1 063/tonne, followed by a period of
responsible for some 36% of world raw steel production in
extreme price volatility in a band between US$1 250/tonne
2008, somewhat higher than in 2007.
and $1 040/tonne, ending the year at US$1 120/tonne. Low
prices since October were driven by expectations of declining
Due to continuing favourable demand conditions in the
demand due to the global economic crisis, increasing zinc
fi rst half of 2008, strengthened by unresolved supply
stocks and divestment from commodity investment funds. In
bottlenecks, an increase of over 200% in the benchmark
2008 LME zinc stocks increased from 88kt to 253kt, primarily
hard coking coal price was negotiated for 2008. However,
due to expanding zinc production in the fi rst part of the year
decreasing steel production and the collapse in steel prices in
and stagnant demand in the second part. Low zinc prices
the second half have put pressure on coking coal producers,
and the dismal demand outlook led to western-world smelter
with several having production cutbacks announced by
capacity cutbacks of more than 500kt being announced by
the end of 2008. The outlook for contract prices in 2009
the end of the year.
seems bleak and expectations are that the benchmark price
could fall by more than 50%. Contract semi-soft coking and
This trend was also evident in the concentrate market,
low-volatile PCI benchmark coal prices increased by more
where western-world closures and cutbacks amounting
than 250% in 2008, but the outlook for 2009 is similar to
to a production loss of almost 800kt in 2009 were
that of hard coking coal, with respective settlements again
announced by the end of 2008. Treatment charges
expected to be more than 50% lower.
favoured the refi ning industry in 2008 due to oversupply
The average Richards Bay spot steam coal price for 2008,
charges were around US$300/tonne at a zinc basis price
at US$120,88/tonne, was 92% higher than the average for
of US$2 000/tonne. Spot treatment charges declined in
2007. The price pattern displayed by other commodities was
2008 to under realised contract treatment charges due to
also evident for steam coal, with the RBCT price reaching
a decreasing concentrate surplus. A concentrate defi cit is
in
the
concentrate market. Contract
treatment
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
19
MACRO-ECONOMIC AND COMMODITY REVIEW continued
expected in 2009, resulting in signifi cantly lower treatment
While the dollar generally continued to weaken against the
charges being realised. Due to the concentrate and refi ned
currencies of commodity-exporting countries in the fi rst half
zinc production cutbacks, the surplus in the zinc market
of 2008, the sub-prime crisis in the US and subsequent events
in 2009 is expected to be much lower than originally
precipitated a fl ight from risk, leading to capital outfl ows
envisaged. This could result in zinc prices actually increasing
from most commodity-producing countries and signifi cant
somewhat from end-2008 levels to a forecast average of
weakening of the relevant currencies against the US dollar
about US$1 250/tonne.
from August. This should bring some relief to commodity
producers struggling with declining prices in terms of their
A small supply defi cit was recorded in the titanium dioxide
local currency receipts from commodity exports.
pigment industry in 2008, resulting in a rising price trend for
most of the year. However, the increasing production trend
The signifi cant increases in mining costs and mining
of the fi rst half was reversed once the ramifi cations of the
project capital costs since 2005 continued into 2008, but
economic crisis, in terms of pigment demand, became clear.
the economic crisis arrested this trend and the outlook
This resulted in slightly negative output growth for the year.
is for mining costs to decline in 2009, with falling energy
The extremely adverse impact of the worldwide economic
prices being a major factor. Capacity shortages in terms of
slump on some major demand sectors for pigment products,
contractors, machinery, equipment and mining professionals
namely the auto industry and housing sector, bodes poorly
worldwide also abated and signifi cant retrenchments in the
for pigment demand in 2009.
mining industry in the last quarter of 2008 are expected to
Titanium dioxide feedstock prices generally
improved
persist into 2009.
moderately in 2008. In particular, the market for chloride
Global bulk freight rates refl ected commodity prices in 2008.
feedstock was tight, primarily due to supply disruptions such
The Baltic Dry Index rose by more than 100% from January
as the KZN Sands furnace shutdown, gas and electricity supply
to June, but started tumbling as demand for ships dried up,
disruptions, the sinking of the Sierra Rutile dredge, closure of
ending the year some 90% lower than its high in June. It was
several smaller mining operations and slow production ramp-
estimated in late November that about 20% of the world’s
up from new producers. During the year, no new feedstock
‘Cape-size’ fl eet was at anchor because of low demand. The
projects were approved. In view of the muted demand outlook
bulk freight market is expected to remain depressed in 2009,
for the pigment industry in 2009, the feedstock industry will
but with freight rates improving from the extremely low levels
also probably face a period of market surplus, with prices
at the end of 2008.
expected to generally move sideways.
Planned global exploration expenditure in 2008 indicated a
Zircon prices declined in the fi rst fi ve months of 2008,
sixth consecutive annual increase, or some 26% over 2007.
primarily against expectations of an oversupplied market.
However, the crash in global commodity markets resulted in
However, the market turned out to be tight, leading to concerns
signifi cant cutbacks in the last quarter of the year. This will
about supply availability. This led to some precautionary buying
cause the average increase for the year to be lower than
and increasing prices in the second half. The global economic
planned. Exploration expenditure in 2009 will be signifi cantly
slowdown is, however, expected to lead to the tightness in the
lower than in 2008. In time, this will lead to capacity shortages
market reducing and prices moving sideways.
when demand shows a sustained upturn.
Nominal historical benchmark iron ore prices
)
u
t
m
d
/
c
S
U
(
e
c
i
r
P
250
200
150
100
50
0
1990
1991
1992
1993
1994 1995
1996
1997
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
— Australia-Japan lump iron ore price — — Australia-Japan fi ne iron ore price
Source: AME
20
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Nominal historical coal prices
)
t
/
$
S
U
(
e
c
i
r
P
350
300
250
200
150
100
50
0
1990
1991
1992
1993
1994 1995
1996
1997
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
— — Hard-coking coal benchmark price — — Semi-soft coking coal benchmark price — RBCT spot steam coal price
Source: AME; SA Coal Report
Nominal historical zinc and lead prices
)
t
/
$
S
U
(
e
c
i
r
p
d
a
e
l
d
n
a
c
n
Z
i
3 500
3 000
2 500
2 000
1 500
1 000
500
0
450
400
350
300
250
200
150
100
50
)
e
t
a
r
t
n
e
c
n
o
c
/
$
S
U
(
e
g
r
a
h
c
t
n
e
m
t
a
e
r
t
c
n
i
z
d
e
s
i
l
a
e
0 R
1990 1991
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
2007
2008
— — LME spot lead price — Zinc treatment charge — LME spot zinc price
Source: AME; Brook Hunt
Nominal historical titanium dioxide pigment, feedstock and zircon prices
)
t
/
$
S
U
(
s
e
c
i
r
p
n
o
c
r
i
z
d
n
a
k
c
o
t
s
d
e
e
f
2
O
T
i
900
800
700
600
500
400
300
200
100
0
2 500
2 250
2 000
1 750
1 500
1 250
1 000
750
500
250
0
)
t
/
$
S
U
(
e
c
i
r
p
t
n
e
m
g
P
i
1990 1991
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
2007
2008
— — Zircon price — Rutile price — Chloride slag price — US pigment price
Source: TZMI
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
21
FINANCIAL REVIEW
The group experienced
strong demand at
higher commodity
prices despite the
signifi cant decrease in
LME zinc prices.
Dirk van Staden
Financial director
Introduction
Calendar 2008 marked the completion of the remaining
Overview of comparable group operating
results
signifi cant
components of
the November 2006
Table 1
empowerment transaction that resulted in the creation
of Exxaro. The acquisition of Namakwa Sands and a 26%
interest in Black Mountain (Mining) (Pty) Limited (Black
Mountain) became effective on 1 October and 1 November
2008
respectively. Accordingly, unless otherwise
indicated, comments are for comparable purposes based
on an analysis of the group’s unaudited comparable
supplementary fi nancial results (pages
116 to
117)
and physical
information compiled (inside fl ap and
page 8) for the 12 months ended 31 December 2008
and 2007 respectively as
if both Namakwa Sands
and the interest in Black Mountain were acquired on
1 January 2007.
The unaudited comparable supplementary fi nancial results
consolidate Namakwa Sands while equity accounting for the
26% interest in Black Mountain.
22
I E x x a r o A n n u a l R e p o r t 2 0 0 8
R million
Revenue
Operating expenses
Net operating profi t
Net operating profi t margin
(%)
Unaudited
12 months ended
31 December
2008
15 209
12 398
2 811
2007
11 449
9 809
1 640
19
14
The coal business reported record revenue and net operating
profi t as strong demand resulted in increased sales at higher
prices despite a signifi cant softening in international prices
in the last quarter of the reporting period following the
global economic meltdown. The sands business reported a
higher consolidated net operating profi t compared to 2007
as a profi t contribution from KZN Sands and a substantially
An average exchange rate of R8,10 to the US dollar
higher profi t from Namakwa Sands more than offset a loss
was realised on exports compared with R7,26 for the
in the Australian operation. Signifi cantly lower average zinc
corresponding 12-month period in 2007. The continued
prices and an increased environmental provision resulted in
strength of the Australian dollar to the US dollar at
the base metals business reporting an operating loss.
US$0,84 continued to impact negatively on the fi nancial
results of the mineral sands operations in Australia, despite
Revenue increased by 33% to R15,2 billion with net operating
the weakening of the Australian dollar in the last quarter
profi t R1,2 billion higher at R2,8 billion.
of 2008.
Segmental results
Comparable segmental results are shown in tables 2 and 3.
Table 2
R million
Revenue
Coal
Tied operations1
Commercial operations
Mineral sands
KZN Sands
Australia Sands
Namakwa Sands2
Base metals
Rosh Pinah
Zincor
Inter-segmental
Other
Total
Table 3
Net operating profi t (Rm)/margin (%)
Coal
Tied operations1
Commercial operations
Mineral sands
KZN Sands
Australia Sands
Namakwa Sands2
Base metals
Rosh Pinah
Zincor
Other
Other
Total net operating profi t
Non-cash costs
Earnings before interest, tax, depreciation
and amortisation (EBITDA)
Unaudited
12 months ended
31 December
2008
2007
9 040
2 492
6 548
4 142
974
1 311
1 857
1 829
436
1 733
(340)
198
15 209
5 087
1 768
3 319
3 464
984
1 188
1 292
2 732
941
2 558
(767)
166
11 449
Unaudited
12 months ended
31 December
%
29
3
39
11
3
27
19
26
2007
885
88
797
99
(157)
60
196
688
457
298
(67)
(32)
1 640
919
2 559
2008
2 654
83
2 571
448
31
(82)
499
(172)
(14)
(95)
(63)
(119)
2 811
1 093
3 904
%
17
5
24
3
5
15
25
49
12
14
22
1 Tied operations refer to mining operations that supply their entire production to either Eskom or ArcelorMittal SA Limited in terms of
contractual arrangements.
2 Takes into account Namakwa Sands from 1 January 2007, for comparable purposes.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
23
FINANCIAL REVIEW continued
Coal
Revenue increased by 78% to more than R9 billion due
maintenance-related issues, an emergency shut at a critical
raw material supplier, the rebuild of all four chlorinators
to signifi cantly higher average international coal prices
and gas supply interruptions in the fi rst quarter of 2008,
linked to global oil and energy increases, and stronger
coupled with the continued strong Australian dollar. The
demand. Domestic prices followed this upward trend with
weaker Australian dollar, at an average rate of 0,77 US cents
international prices, however, declining in the last quarter
for the six months ended 31 December 2008, together with
of 2008 following the global economic crisis.
improved mineral production, led to a net operating profi t
of R57 million in the second half of 2008 against a loss of
The commodity business reported an annual record net
R139 million in the fi rst half.
operating profi t of R2,7 billion, an increase of 200% despite
infl ationary pressures, primarily in diesel and labour costs,
exploration costs for Moranbah South in Australia and higher
Namakwa Sands
Exxaro acquired Namakwa Sands on 1 October 2008 for an
expenditure on projects in the Waterberg and Mpumalanga
adjusted consideration of R2 783 million made up as follows:
province.
Despite higher revenue, net operating profi t from tied
operations decreased slightly as
lower environmental
provisions resulting from the confi rmed longer life of
certain mines was passed on to Eskom in terms of the
supply agreements.
Mineral sands
KZN Sands
The KZN mineral sands operation reported revenue
R10 million lower than the R984 million reported in the
corresponding period in 2007 in line with lower production
volumes as a result of the Furnace 2 water ingress incident
in February 2008. However, net operating profi t increased
by R188 million to R31 million, due to improved prices, a
weaker local currency and cost savings. Net operating profi t
includes a R52 million fi xed asset de-recognition in respect
of the damaged Furnace 2.
Australia Sands
Revenue increased by 10% to R1,3 billion based on increased
sales of synthetic rutile and zircon at higher prices. Net
operating profi t, however, declined by R142 million from the
corresponding period in 2007 to a reported loss of R82 million
in 2008. This was due to lower pigment production, plant
• Cash consideration
• Price adjustments
– Working capital
– MSP Project 1 000
– Tax recoupment – paid in Jan 09
Rm
2 015
199
448
121
2 783
The capitalised price adjustments will result in either a
subsequent cash infl ow or additional future deduction from
taxable income in KZN Sands.
Record production and sales at stronger zircon and average
pig iron prices, combined with a weaker local currency,
resulted in record revenue and net operating profi t for the
period of R1,9 billion and R499 million respectively.
Base metals
Revenue decreased by 33% to R1 829 million while net
operating profi t reduced from a profi t of R688 million
in 2007 to a loss of R172 million in 2008 as a result of a
42% decrease in the average zinc price for the year to
US$1 874 per tonne, coupled with above-infl ation increases
in electricity, diesel and
labour, higher maintenance
expenses and an R87 million increase in the environmental
rehabilitation provision at the Zincor refi nery.
The following graph reconciles comparable net operating profi t for 2007 to that of R2 811 million for 2008:
m
R
6 000
5 000
5 000
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
1 640
1 183
(557)
(772)
1 038
324
(45)
2 811
December
2007
Price
Volume
Exchange
rate
Cost
Infl ation
Other
December
2008
24
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Industrial minerals
The group is currently evaluating the proposed divestment
Comparable attributable earnings
Table 4
of its interest in the Glen Douglas dolomite mine and has
accordingly disclosed its interest as a non-current asset and
liability held for sale.
Pro-forma EBITDA
The pro-forma comparable EBITDA contributions of the
various businesses, on the assumption that Exxaro’s equity
accounted investments of 26% in Black Mountain, 20% in
Sishen Iron Ore Company (Pty) Limited (SIOC) and the 22%
effective in Chifeng, are included in comparable EBITDA, are
shown in the respective pie charts.
EBITDA contributions
12 months 2008*
R million
Net operating profit
Income from investments
Net financing cost
Equity accounted income
Taxation
Minority interest
Comparable attributable
earnings
Weighted average number of
shares
Comparable attributable
earnings (cents per share)
Unaudited
12 months ended
31 December
2008
2 811
2
(457)
1 601
(546)
24
3 435
2007
1 640
2
(453)
683
(500)
(20)
1 352
343
341
1 002
396
15%
40%
45%
Comparable net financing costs
An analysis of the composition of the comparable net
financing cost is:
■ Coal R3 084 million
■ Iron ore R2 726 million
■ Mineral sands R998 million
EBITDA contributions
12 months 2007
14%
19%
34%
33%
■ Coal R1 290 million
■ Iron ore R1 243 million
■ Base metals R711 million
■ Mineral sands R528 million
* Base metals EBITDA contribution was negative in 2008.
Earnings
Attributable earnings for the period are R3 435 million or
1 002 cents per share, representing a 154% increase on
comparable 2007 attributable earnings of R1 352 million or
396 cents per share.
R million
Interest expense and loan costs
Finance lease
Interest income
Interest adjustment on non-
current provisions
Total
Unaudited
12 months ended
31 December
2008
499
63
(153)
409
48
457
2007
391
59
(96)
354
99
453
The higher comparable interest expense is due to the
assumption that the acquisition prices of Namakwa
Sands and the interest in Black Mountain were paid on
1 January 2007.
The interest adjustment on non-current provisions refers
to unwinding of the discount rate for environmental
rehabilitation provisions accounted for at net present value.
The reduction in 2008 is due to the confirmed longer life of
certain mines that are tied operations to Eskom.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
25
FINANCIAL REVIEW continued
Comparable income from equity-accounted investments
Table 5
Unaudited
12 months ended
31 December
R million
SIOC
Chifeng Zinc
Black Mountain
Total
2008
1 856
(4)
(251)
1 601
2007
746
(18)
(45)
683
Comparable headline earnings
Headline earnings, which exclude the
impact of the
impairment of the carrying value of assets in the earnings
of Black Mountain, are R3 663 million or 1 068 cents per
share; 167% higher than the R1 374 million or 403 cents per
share of the previous reporting period.
Table 6
Unaudited
12 months ended
31 December
2008
2007
3 435
1 352
20
169
59
(20)
3 663
18
(10)
17
(3)
1 374
1 068
403
The results of SIOC are fully reported by Kumba Iron Ore
Limited in its publication of fi nancial results to 31 December
2008.
Production at Chifeng refi nery was 101kt for the year
R million
Comparable attributable
earnings
– Net impairment of property,
plant and equipment (PPE)
compared to design capacity of 110ktpa. An equity accounted
– Share of associates’
loss of R4 million was incurred compared to a loss of
R18 million for the corresponding period in 2007.
Following Exxaro’s decision in the fi rst half of 2008 not to
participate in the planned expansion of the Chifeng refi nery
by a further 100ktpa, the project has been indefi nitely
postponed in light of the substantial decline in demand for
zinc metal.
Exxaro acquired a 26% interest in Black Mountain with
effect from 1 November 2008 for R221 million, made up as
follows:
• Cash consideration
• Working capital adjustment
• Gamsberg exploration expenditure
Rm
180
37
4
221
impairments and adjustments
– Gains or losses on disposal of
PPE and subsidiaries
– Taxation effect of adjustments
Comparable headline earnings
Comparable headline earnings
per share
Dividends
Exxaro’s intention remains to progress to distributing 50%
of attributable earnings to shareholders by means of interim
and fi nal dividend declarations. Dividend declarations in the
medium term, however, may be lower to adequately provide
for funding growth projects, comply with contractually
agreed loan covenants, and maintain healthy key fi nancial
metrics.
Taking these factors into account, as well as the uncertain
commodity market outlook, the board declared a fi nal
Exxaro’s share of R251 million of the R965 million loss
dividend of R2,00. This, together with the interim dividend
reported by Black Mountain has been taken to account in
of R1,75, results in a total dividend of R3,75 for the year.
the illustrative fi gures. This includes R161 million for the
Total dividends declared for the 2008 fi nancial year of
impairment by Black Mountain of the carrying value of its
R1 330 million equate to a dividend covered 2,6 times by
assets.
attributable earnings and are paid or payable to shareholders
as follows:
Taxation
The corporate rate of 28% is reduced to an effective rate of
13% primarily due to:
• Share of associates and
joint ventures differences mainly Exxaro’s equity
accounted share of SIOC’s post-tax earnings
• Prior-year adjustment
• Reclassifi cation of previously
disallowed expenses, and exempt income
• Disallowable expenditure
(11,9%)
(1,7%)
(2,1%)
0,7%
26
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Gross dividend declared
BEE Holdco
Public
Anglo
Exxaro empowerment scheme (MPOWER)
Total
Rm
1 330
699
460
131
40
Final
Rm
710
373
246
70
21
Interim
Rm
620
326
214
61
19
Since the creation of Exxaro in November 2006, the following dividends have been declared:
Period ended
30 June 2007
31 December 2007
30 June 2008
31 December 2008
Dividend
(cps)
R million
R million
incl STC1
Date
declared
Date paid/
payable
60
100
175
200
535
211
353
620
710
211
353
620
710
15 August 2007
10 September 2007
20 February 2008
17 March 2008
13 August 2008
22 September 2008
23 February 2009
30 March 2009
1 894
1 894
1 No STC is payable due to the use of STC credits from dividend receipts from SIOC.
Cash fl ow (Actual as reported)
Table 7
R million
Net cash retained from operations
Net fi nancing cost, taxation and dividends
Cash used in investing activities
• New capacity
• Sustaining and environmental capital
Acquisition of investments and operations
Dividends received
Proceeds on sale of non-core assets and investments
Other
Cash (outfl ow)/infl ow
Share issue
Increase in net debt on acquisition of a subsidiary
Other movements in net debt
(Increase)/decrease in net debt
12 months ended
31 December
2008
3 574
(1 664)
(470)
(1 147)
(3 157)
1 044
29
(55)
(1 846)
31
(83)
(1 898)
2007
2 308
(801)
(727)
(569)
(257)
379
50
5
388
114
(25)
(39)
438
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
27
FINANCIAL REVIEW continued
Cash retained from operations was R3 574 million. This was
mainly applied to taxation payments of R487 million, dividend
Debt structure and fi nancial covenants
Compliance with the group’s fi nancial loan covenants with
payments of R984 million in March and September 2008
its external fi nanciers is as follows:
respectively, fi nance charges of R193 million and capital
expenditure of R1 617 million of which R470 million was
invested in expansion capacity and R1 147 million in
sustaining and environmental capex.
Expansion capacity consisted mainly of the Sintel char
plant, Inyanda coal mine and the pigment plant expansion
in Western Australia.
After the payments before year-end of R2 662 million and
R221 million respectively for the acquisition of Namakwa
Sands and a 26% interest in Black Mountain, the group had
a net cash outfl ow of R 1 846 million.
Net debt of R483 million at 31 December 2007 accordingly
increased to R2 381 million at a net debt to equity ratio of
18% on 31 December 2008.
Debt structure
The group’s debt structure at 31 December 2008 was:
Debt structure
R million
Long-term
– Corporate
– Australia Sands
Cash and cash equivalents
Net debt
Short-term standby facilities
Net debt to equity (%)
EBITDA interest cover (times)
HDSCR1
CHDSCR2
Ratio Covenants
18
14
5,28
4,91
<125
>4
>1,3
>1,5
1 Historical debt service cover ratio (HDSCR) being cash earnings, less
unfunded capital expenditure and taxation, plus dividends received
(collectively referred to as free cash fl ow), divided by mandatory
capital and interest payments on fi nancing facilities.
2 Cumulative HDSCR being cash and cash equivalents at the beginning
of the period, plus free cash fl ow, less dividends paid, divided by
mandatory capital and interest payments on fi nancing facilities.
Dividend payments may not result in this being less than 1,5.
During the year the group complied with all its contractually
agreed loan covenants, except for the stand-alone funding
package arranged for Rosh Pinah Zinc Corporation (Rosh
Pinah) of R200 million to facilitate the disposal of a 43%
interest to Namibian stakeholder groupings. Loan covenants
were breached mainly as a result of the collapse in zinc prices
in the second half of 2008 as well as above-infl ation cost
increases at the mine. Funding banks have, however, agreed
to waive the breaches based on a contracted undertaking
to settle the loans by 31 March 2009. At year-end Exxaro
has provided shareholder loan funding of R67 million to
Rosh Pinah.
Drawn
4 150
3 588
562
(1 769)
2 381
Available
1 761
1 200
561
Repayment
profi le
500
328
419
794
2009
2010
2011
2012
2 109
After 2012
4 150
1 100
The fi nal dividend for payment in March 2009 will amount to a further cash outfl ow of R710 million, offset by a dividend
infl ow from SIOC of R1 123 million.
28
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Organisational structure
The divestment of a 43% interest in Rosh Pinah to Namibian shareholder groupings, effectively reducing Exxaro’s
shareholding to 50,04%, became effective on 1 July 2008. Exxaro continues to manage the mine in terms of a management
agreement.
At 31 December 2008 a total of 18kt representing 60% of Rosh Pinah’s projected lead sales were hedged forward until 2011
at an average price per tonne of R16 089 and 78kt representing 60% of Rosh Pinah’s projected zinc sales at an average
price of R19 619.
Details of the hedging in place are as follows:
Zinc
Lead
Year
2008
2009
2010
2011
2008
2009
2010
2011
Tonnes
hedged
13 500
26 400
26 400
26 700
93 000
2 750
6 675
5 175
5 500
20 100
Average
Average
USD
price
2 256
2 521
2 216
2 061
2 187
1 814
1 591
1 713
1 967
1 756
ZAR
price
17 854
18 939
19 944
19 976
19 365
14 625
13 509
15 692
19 066
15 744
Capital expenditure
Table 8 compares capital expenditure for the 12-month
in 2009 includes replacement of primary mining equipment
at the coal operations and the replacement programme for
periods ended 31 December 2008 and 2007 together with
the fl otation circuit at Rosh Pinah.
an estimate for the 2009 fi nancial year.
Following the credit crisis and global economic meltdown
Investment on the expansion of Grootegeluk mine at a capital
in the second half of 2008, Exxaro is reviewing its capital
cost of R9 billion over the next few years to supply Eskom’s
expenditure programme, including sustaining capital, as
adjacent Medupi power station, and the AU$100 million
well as its project pipeline. The group will focus on the
Tiwest Kwinana pigment expansion project for an additional
successful implementation of committed expansions while
40ktpa production, will dominate cash outfl ows on capital
reprioritising other identifi ed growth opportunities.
expenditure in 2009. Sustaining and environmental capital
Table 8
Capital expenditure
R million
Sustaining and environmental
Expansion
• Coal
• Mineral sands
• Base metals
• Other
Total
Financial
year 2009
Estimate
805
1 312
811
75
24
12 months ended
31 December
2008
1 147
337
104
26
3
2007
569
678
16
21
12
3 027
1 617
1 296
Major cash fl ow commitments for investments not included
in capital expenditure:
– Mafube coal joint venture (50%)
713
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
29
fInancIal revIew continued
Changes to International Financial Reporting
Standards (IFRS)
The financial statements have been prepared
in
accordance with IFRS, with accounting policies consistent
with those applied for the corresponding period ended
31 December 2007.
An actuarial valuation of the employer
liability was
performed in 2007 and a provision was raised in the amount
of R36,3 million, of which R33,7 million was simultaneously
raised as a receivable, being recoverable from Eskom as
part of tied coal supply arrangements. The latest actuarial
valuation of this liability at 31 December 2008 is R42 million
with R42 million as a receivable from Eskom.
Exxaro did, however, early-adopt the following standards in
2008:
• IAS 1 Presentation of financial statements: including
a statement of comprehensive income to separately
disclose ‘other comprehensive income’ being items of
income and expenses that are non-owner related and not
recognised in profit or loss, and which were previously
recognised directly in equity.
• IFRS 8 Operating segments: Disclosure of the components
or segments that management uses to make decisions on
operational issues. The implementation led to differences
in the basis of segmentation compared to previous
periods. As a result, new operating segments have been
identified.
IAS 1 and IFRS 8 are disclosure standards and have no other
impact on the recognition or measurement of items and
accordingly their adoption has no effect on profit or equity
for the year.
A further post-retirement benefit liability was acquired at
an actuarial valuation of R25 million on the acquisition of
the assets and liabilities of Namakwa Sands.
Exxaro is a participating employer in a number of defined
contribution funds that provide retirement, death and
disability benefits to employees. Exxaro no
longer
participates in any defined benefit funds.
Share price performance
A year-on-year comparison to 31 December 2008 shows the
volume-weighted average share price was R103,72 against
R75,49 for the previous year. Daily trade in shares averaged
1 158 198 in 2008 compared to 849 137 in the previous
period, an increase of 30% illustrating strongly improved
liquidity. During the year the share price peaked at R159,50 in
June 2008 (against a high of R107,00 in the previous
financial period) and bottomed at R53,50 in October 2008
versus a low of R51,75 in January 2007.
Post-retirement benefit liability
Accredited medical aid funds are structured to exclude any
For the period Exxaro performed in line with the FTSE/JSE
Resources Index but underperformed the FTSE/JSE All
employer liability for post-retirement medical benefits in
Share Index by 5%.
respect of either existing or past employees.
The merger with Eyesizwe and creation of Exxaro in
acknowledgements
As this is my final financial review of the group, I thank
November 2006 resulted in the need to raise a provision
Sipho Nkosi, our chief executive officer, and the board of
for post-employment healthcare benefits that had been
directors for their guidance and support during my term as
provided to a group of continuation and in-service members
financial director. My best wishes accompany them in the
on the Witbank Coal Medical Aid Scheme and BHP Billiton
future governance and strategic direction of the group.
SA Medical Scheme. This benefit, which is no longer offered,
applied to selective employees previously employed
I also express my sincere appreciation to the very competent
by Eyesizwe or Ingwe Coal and comprises a subsidy of
Exxaro finance teams for their commitment, dedication and
contributions.
valuable contributions.
ManagEMEnt tEaM
Rian Strydom (42)
General manager: financial accounting
Riaan Koppeschaar (38)
General manager: corporate finance and treasury
Sakkie Prinsloo (55)
Group manager: taxation
30
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Relative performance for the period 1 January 2008 to 31 December 2008
0
0
1
o
t
d
e
s
a
b
e
R
160
140
120
100
80
60
40
(27%)
(31%)
(31%)
01/02/2008
02/23/2008
04/15/2008
06/06/2008
07/28/2008
07/28/2008
09/18/2008
11/09/2008
12/31/2008
— — Exxaro Resources Limited — FTSE/JSE All Share Index — FTSE/JSE Resources Index
Source: I-Net Bridge
Share price and volume traded for the period 1 January 2008 to 31 December 2008
)
0
0
0
(
d
e
d
a
r
t
e
m
u
o
V
l
5 000
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
180
160
140
120
100
80
60
40
20
0
)
R
A
Z
(
e
c
i
r
p
e
r
a
h
S
8
0
/
2
/
1
8
0
/
6
1
/
1
8
0
/
0
3
/
1
8
0
/
3
1
/
2
8
0
/
7
2
/
2
8
0
/
2
1
/
3
8
0
/
6
2
/
3
8
0
/
9
/
4
8
0
/
3
2
/
4
8
0
/
7
/
5
8
0
/
1
2
/
5
8
0
/
4
/
6
8
0
/
8
1
/
6
8
0
/
2
/
7
8
0
/
6
1
/
7
8
0
/
0
3
/
7
8
0
/
3
1
/
8
8
0
/
7
2
/
8
8
0
/
0
1
/
9
8
0
/
4
2
/
9
8
0
/
8
0
/
0
1
8
0
/
2
2
/
0
1
8
0
/
5
/
1
1
8
0
/
9
1
/
1
1
8
0
/
3
/
2
1
8
0
/
7
1
/
2
1
8
0
/
1
3
/
2
1
— — Volume traded — Share price
Source: I-Net Bridge
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
31
BUSINESS OPERATIONS REVIEW
Coal
OVERVIEW
Calendar 2008 was an exceptional period for
Exxaro Coal, with Inyanda and Mafube coming on
line and contributing to group results.
2009 Capital expenditure estimate
19%
●● Sustaining and
environmental
●● Expansion
* A R713 million commitment in
2009 is also expected for the
50% Mafube coal joint venture
participation.
81%
HIGHLIGHTS
• Record annual revenue of R9 billion and net operating profi t of R2,7 billion
• Total production volumes reach 45Mt
• Higher production from Inyanda and North Block Complex
• Construction of Grootegeluk expansion on track to supply Medupi power
station.
Above: Haul trucks at shift change, Grootegeluk mine, Limpopo.
32
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The positive turnaround at North Block Complex (NBC) in
with the objective of developing solutions for sustainable
2007 underpinned further growth at this mine in the review
improvements on the coal line.
period with additional capacity now available due to mining
new reserves.
Despite rail logistical challenges and in line with the strategic
intent to increase Exxaro Coal’s presence in the steam coal
The decision to discontinue underground activities at
export market, production from the new mines Mafube and
New Clydesdale mine for safety reasons in the prior year
Inyanda together with Exxaro’s increased export entitlement
created the opportunity to accelerate the development
at the Richards Bay Coal Terminal (RBCT), boosted export
of the Inyanda export coal mine through New Clydesdale
volumes by 80% from 1,8mt to 3,3mt in 2008. Phase V
benefi ciating Inyanda’s run-of-mine production, enabling it
of RBCT will be commissioned in 2009, although future
to capture valuable export income for the group.
allocations of rail and port capacity have not yet been
fi nalised. With the introduction of additional rolling stock
After a catastrophic failure in 2007 as previously reported,
by Transnet Freight Rail in the fi rst quarter of 2009, rail
Leeuwpan mine’s stacker reclaimer was repaired and
performance is expected to improve.
recommissioned in early 2009. Front-end loaders were
deployed from September 2007 to minimise the impact
With international coal prices being linked to global oil
on the business and performed above expectations under
and energy price increases, they rose to record levels in
diffi cult circumstances.
the fi rst half of 2008 with domestic prices following this
trend. International prices, however, softened considerably
Exxaro’s joint venture participation in the Mafube expansion
in the second half of the reporting period following the
project with Anglo Coal has been delayed as certain
global economic crisis. Exxaro Coal was able to optimally
conditions precedent are still outstanding. Despite this,
capture value from both international and domestic price
the Mafube mine ramped up during the year and Exxaro’s
movements.
50% share of export product added 733kt to overall export
volumes, allowing the group to benefi t from prevailing
Exxaro Coal supplied the fi rst 3,3Mt of the total 10Mt
higher export prices.
undertaking to Eskom as part of Eskom’s request for
40Mt additional power station coal from the coal industry.
South African coal exports have declined 13% from 72Mt in
Additional tonnage was supplied from NBC and Grootegeluk
2005 to approximately 63Mt in 2008, primarily due to rail
mines with the balance of 5,8Mt in 2009 and 0,9Mt in 2010
logistics. Discussions with Transnet Freight Rail continue
coming from the Grootegeluk, NBC and Leeuwpan mines.
Physical information and operating results
Overall production volumes were 9% higher than in 2007. Production and sales volumes are refl ected below:
2008
2007
Variance
Y-O-Y %
Production (000 tonnes)
Power station coal
– Tied operations1
– Commercial operations
Coking coal
– Tied operations1
– Commercial operations
Other commercial operations
Total
Sales (000 tonnes)
Eskom
– Tied operations1
– Commercial mines
Other domestic
– Tied operations1
– Commercial mines
Export commercial mines2
Total
36 700
18 095
18 605
2 560
327
2 233
5 574
44 834
36 255
18 054
18 201
5 481
352
5 129
3 276
45 012
34 246
16 732
17 514
2 962
463
2 499
4 111
41 319
34 226
16 699
17 527
5 237
449
4 788
1 821
41 284
2 454
1 363
1 091
(402)
(136)
(266)
1 463
3 515
2 029
1 355
674
244
(97)
341
1 455
3 728
7
8
6
(14)
(29)
(11)
36
9
6
8
4
5
(22)
7
80
9
1 Tied operations refer to mines that supply their entire production to either Eskom or ArcelorMittal SA Limited in terms of
contractual agreements.
2 Includes steam coal exports from Exxaro’s 50% share of the Mafube expansion project.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
33
BUSINESS OPERATIONS REVIEW continued
Operating results
Total
Revenue
Net operating profi t
Capital expenditure on new capacity
Rm
9 040
2 654
337
Other domestic sales were affected by lower production at
Tshikondeni and a 13% decrease in sales to ArcelorMittal
SA Limited in line with reduced demand in the steel and
ferroalloy industry in the last quarter of 2008. The coal
business was able to offset some of these lower sales
volumes through additional sales from Leeuwpan and North
Power station coal production at the Eskom-tied mines was
Block Complex to the domestic market.
signifi cantly higher due to a good turnaround at Arnot after
successfully implementing improvement initiatives. Exxaro’s
commercial mines, most notably North Block Complex,
Prospects
In 2009, the focus will remain on optimising current assets
increased production to supply higher demand from Eskom.
as well as ensuring the successful commissioning and ramp-
North Block Complex started mining new reserves and
up of the Sintel char plant at Grootegeluk and development
increased overall capacity.
of the Diepspruit reserve at New Clydesdale.
Coking coal production, however, decreased by 402kt in
The coal business is expected to continue experiencing
2008 due to challenging geological and mining conditions at
strong demand for local power station coal. However, coking
Tshikondeni mine. In addition, Grootegeluk mine used its no
coal sales are anticipated to be lower at reduced prices
6 plant-tipping capacity to channel run-of-mine tonnages to
in line with lower demand from the steel and ferroalloy
produce additional power station coal from the no 2 washing
industry. Steam coal sales volumes, in turn, should increase
plant, contributing to the reduction in coking coal production.
but at lower international prices.
Steam coal production was signifi cantly higher than
All applications for new-order mining rights for the coal
the previous year mainly due to Inyanda ramping up in
business have been granted, except for the Weltevreden
2008, good production levels at Leeuwpan resulting from
deposit adjacent to Leeuwpan mine which
is under
additional overburden removal in 2007 and increased
consideration by the Department of Minerals and Energy.
production at North Block Complex.
Sales of power station coal to Eskom increased by 2Mt to
2008 by successfully commissioning projects scheduled
36,3Mt as a result of improved production performance at
for the new fi nancial year. Effective cost-management and
tied operations and demand from the electricity utility to
improvement initiatives will be pursued to ensure profi tability
increase stock levels at various power stations.
even during a prolonged recessionary environment.
Exxaro Coal aims to improve on the solid performance in
34
I E x x a r o A n n u a l R e p o r t 2 0 0 8
STRATEGIC OBJECTIVES
We will create exceptional value by being an innovative
MANAGEMENT TEAM
Mxolisi Mgojo (48)
coal and reductants company, with a global footprint,
Executive general manager
and by utilising and developing excellence in people and
superior processes. We aim to achieve our 2015 target of
75Mt of coal and 750kt of reductants by focusing on:
• Operational excellence
• Responsible custodianship of safety, health, environment
and quality issues
• Continued optimisation of market position
• Value growth of the business
Leon Groenewald (42)
Manager: fi nance
Mongezi Veti (43)
Area general manager: Arnot, New Clydesdale and
Tshikondeni
Johan Wepener (51)
• Organisational excellence including high-performance
Area general manager: Leeuwpan, Inyanda, North Block
culture, sustainability and transformation.
Complex and Mafube
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
35
BUSINESS OPERATIONS REVIEW continued
Mineral
sands
OVERVIEW
On 1 October 2008, Namakwa Sands became part
of Exxaro, making the group one of the largest
suppliers of titanium dioxide feedstock and zircon
in the world and allowing it to be uniquely positioned
in the global minerals sands industry.
2009 Capital expenditure estimate
●● Sustaining and
environmental
●● Expansion
22%
78%
HIGHLIGHTS
• Consolidated profi t recorded
• Signifi cant maiden profi t contribution from Namakwa Sands
• Several production records at all operations
Above: Smelter operations at KZN Sands, KwaZulu-Natal.
36
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The mineral sands technology expertise acquired with the
Despite growing titanium dioxide pigment demand from
Namakwa Sands transaction has assisted in the profi table
developing countries, declining GDP increases in developed
turnaround of the KZN operation. The three operations
economies, compounded by the global economic crisis,
(Australia Sands, KZN Sands and Namakwa Sands) now
resulted in lower demand and only marginal price increases
boast a complementary set of products and technologies,
in 2008. Demand for feedstocks, zircon and low manganese
with a group consolidated marketing strategy other than for
pig iron (LMPI) remained strong in 2008 as evidenced by
pigment, which is marketed by Tronox, Exxaro’s partner in
higher prices. Prices in 2009 for feedstocks, LMPI and zircon
the Tiwest joint venture.
will remain challenging and are expected to move sideways.
Physical information and operations review
Production and sales volumes for 2008 and 2007 are disclosed below:
2008
2007
Variance
Y-O-Y %
KZN Sands
Production (000 tonnes)
– Ilmenite
– Zircon
– Rutile
– Pig iron
– Scrap pig iron
– Chloride slag
– Sulphate slag
Sales
– Ilmenite
– Zircon
– Rutile
– Pig iron
– Scrap pig iron
– Chloride slag
– Sulphate slag
Namakwa Sands1
Production (000 tonnes)
– Ilmenite
– Zircon
– Rutile
– Pig iron
– Scrap pig iron
– Chloride slag
– Sulphate slag
Sales
– Zircon
– Rutile
– Pig iron
– Scrap pig iron
– Chloride slag
– Sulphate slag
229
34
19
50
16
95
18
40
36
14
64
7
101
17
315
130
27
103
6
135
24
135
27
82
1
145
26
367
34
17
90
20
150
26
50
27
18
91
8
163
29
300
115
24
91
11
126
27
115
26
86
1
124
30
(138)
–
2
(40)
(4)
(55)
(8)
(10)
9
(4)
(27)
(1)
(62)
(12)
15
15
3
12
(5)
9
(3)
20
1
(4)
–
21
(4)
(38)
–
12
(44)
(20)
(37)
(31)
(20)
33
(22)
(30)
(13)
(38)
(41)
5
13
13
13
(45)
7
(11)
17
4
(5)
–
17
(13)
1 Namakwa Sands has been included from 1 January 2007 for comparable purposes
2Australia Sands’ 50% interest in its Tiwest joint venture is disclosed
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
37
BUSINESS OPERATIONS REVIEW continued
Australia Sands2
Production (000 tonnes)
– Ilmenite
– Zircon
– Rutile
– Synthetic rutile
– Leucoxene
– Pigment
Sales
– Zircon
– Rutile
– Synthetic rutile
– Leucoxene
2008
2007
Variance
Y-O-Y %
174
29
13
113
16
43
35
14
62
17
216
36
17
100
16
54
29
16
57
17
(42)
(7)
(4)
13
–
(12)
6
(2)
5
–
(19)
(19)
(24)
13
–
(20)
21
(13)
9
–
1 Namakwa Sands has been included from 1 January 2007 for comparable purposes
2 Exxaro Sands Australia’s 50% interest in its Tiwest joint venture is disclosed
Operating results
Total
Comparable revenue
Comparable net operating profi t
Capital expenditure on new capacity
KZN Sands
Australia Sands
Rm
4 142
448
104
Record synthetic rutile production was achieved in 2008
resulting from stable operating conditions following the kiln
shut in 2007. Although mineral production was lower as a
result of dredging operations moving through lower ore
grade areas, successful business improvement initiatives to
increase yield and recoveries partially offset the negative
KZN Sands reported lower production as a result of the
variances. The 2009 mine plan indicates a higher grade than
Furnace 2 water ingress incident at the end of February 2008,
2008 which should positively impact on mineral production
with only Furnace 1 being operational for the remainder of
in the new year.
the year. Continuous improvement initiatives are impacting
positively on production, with the Furnace 2 start up in early
Pigment production was substantially lower than the
December 2008 ramping up according to plan.
comparative period in 2007 as a result of maintenance-
related issues, an emergency shut at one of the critical raw
Titanium slag produced at 113kt was 63kt lower than the
material suppliers, the rebuild of all four chlorinators and
comparable period in 2007. Furnace 1 performed well by
interruptions in gas supply in the fi rst quarter of 2008.
producing more than 95kt of slag, equivalent to 87% of
Several initiatives have been implemented to improve the
cold feed capacity. Low manganese pig iron production was
performance of the pigment plant and, in December 2008,
in line with the decreased slag throughput while ilmenite
pigment production improved to pre-2008 levels. A stronger
production was aligned with lower smelter feed requirements
pigment production performance is expected in 2009.
at 138kt lower than the corresponding period in 2007.
38
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Namakwa Sands
Exxaro acquired effective ownership of Namakwa Sands
STRATEGIC OBJECTIVES
• Maintain position among leading global suppliers of
on 1 October 2008 for an adjusted consideration of
titanium dioxide feedstock and zircon
R2 783 million. The breakdown of the acquisition price is
• Downstream value addition
detailed in the fi nancial review.
• Increase share in world chloride pigment production
MANAGEMENT TEAM
Wim de Klerk (45)
Executive general manager
Mellis Walker (42)
Manager: fi nance
Annual records were achieved for zircon, titanium slag
and pig iron production. The record zircon production
was attributable to higher grades and improved plant
effi ciencies. Record smelter production resulted from
Furnace 2 operating on full power of 35MW following the
de-bottlenecking of process diffi culties which increased slag
and iron tapped despite power cutbacks in the fi rst quarter
of 2008.
Effi ciency improvements at the smelter operations include
annual records reported for the chlorinatable (CP) slag
ratio at 84,5% compared to a previous best of 82,5%, and
iron recovery at 91,3% compared to the previous record of
90,3%.
Prospects
At Namakwa Sands the optimisation of mine planning and
scheduling in 2009 is receiving priority to ensure optimal
matching of current technology and driving integrated
business improvement initiatives. The containment of unit
costs at all operations will be embarked on, with identifi ed
savings initiatives aimed at realising profi table contributions
from all three business operations.
Increased production volumes from all mineral sands
operations and a full 12 months’ contribution from Namakwa
Sands, together with the local and Australian currencies
remaining at their present weaker levels, should benefi t this
business in 2009 if market demand and prices remain at
current stable levels.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
39
BUSINESS OPERATIONS REVIEW continued
Base
metals
OVERVIEW
A year characterised by signifi cantly lower zinc
metal demand and prices.
2009 Capital expenditure estimate
●● Sustaining and
environmental
●● Expansion
44%
56%
HIGHLIGHTS
• Rebuild of roasters in Zincor’s acid plant completed
• Crushing circuit at Rosh Pinah mine refurbished
• Major plant maintenance programmes to be completed in 2009
Above: Preparing for underground blasting at Rosh Pinah mine, Namibia.
40
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Exxaro’s base metals business encompasses the operations
in November 2006 and has as strategic intent the possible
of Rosh Pinah zinc and lead mine in southern Namibia
supply of concentrate from the adjacent Gamsberg project
(now 50,04% held), the Zincor zinc refi nery in Gauteng, a
to the Zincor refi nery.
22% effective interest in the Chifeng zinc refi nery in Inner
Mongolia, China and, with effect from 1 November 2008, a
The record-high price environment in 2006 and 2007 has
26% interest in Black Mountain Mining (Pty) Limited.
been followed by signifi cantly lower zinc metal prices due to
lower local and international demand. The average zinc price
The interest in Black Mountain was acquired for an
for the year of US$1 874 per tonne was 42% lower than the
adjusted consideration of R221 million as fully disclosed
equivalent average of US$3 231 in 2007. Higher treatment
in the fi nancial review. The acquisition formed part of the
charges only marginally offset the impact of lower prices.
empowerment transaction that led to the creation of Exxaro
Physical information and operating results
Production and sales volumes for 2008 and 2007 are refl ected below:
Production (000 tonnes)
Zinc concentrate – Rosh Pinah
– Black Mountain1
Zinc metal
– Zincor
– Chifeng2
Lead concentrate – Rosh Pinah
– Black Mountain1
Zinc metal sales
– Domestic
– Export
Lead concentrate – Rosh Pinah
Export
2008
2007
Variance
Y-O-Y %
94
15
87
23
20
17
93
33
22
95
15
101
23
22
15
93
29
19
(1)
–
(14)
–
(2)
2
–
4
3
(1)
–
(14)
–
(9)
13
–
14
16
1 Exxaro’s 26% interest in Black Mountain has been disclosed from 1 January 2007 for comparable purposes.
2 Exxaro’s effective interest in the Chifeng refi nery is disclosed.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
41
BUSINESS OPERATIONS REVIEW continued
Operating results
Total
Revenue
Net operating loss
Capital expenditure on new capacity
Rm
1 829
(172)
26
STRATEGIC OBJECTIVES
• Securing a long-term, viable, quality feedstock supply
for Zincor
• Operational improvement at current businesses
Production of zinc metal at Zincor refi nery of 87kt was 14%
MANAGEMENT TEAM
Wim de Klerk (45)
lower than 2007. This was due to limited power supply and
Executive general manager
a total plant blackout following a transformer failure that
caused major delays and instability throughout the plant in
Mellis Walker (42)
the second half of 2008, as well as the extended shut and
Manager: fi nance
rebuild of two roasters in the acid plant.
Zinc metal sales, however, remained in line with 2007
despite a drastic reduction in the second half when the
global economic crisis caused a sharp decline in the local
market.
Production of zinc concentrate at Rosh Pinah mine of 94kt
is in line with 2007 although lower metal content grades
were recorded. This was caused by plant stoppages and
instability from equipment failures at the crushing and
fl otation circuits of the plant and failures due to an unstable
electricity supply. A capital replacement programme of the
fl otation circuit is planned for the second half of 2009 while
the crushing circuit was fully refurbished in the second half
of the review period.
Zinc concentrate railed from Rosh Pinah was 11% lower as
problems with the availability of railway wagons led to lower
imports of cement into Namibia and subsequent backhaul
of concentrate. Lead sales were higher than 2007 due to
rescheduled shipments.
Prospects
Completion of
the major capital replacement and
refurbishment programmes, with plant stability, is a focus
area for 2009.
The base metals business is expected to remain under
pressure
in 2009 given continued depressed market
conditions and zinc prices.
Working capital management together with cost control and
business improvement initiatives will be required to offset
interim lower demand and price challenges.
42
I E x x a r o A n n u a l R e p o r t 2 0 0 8
GROWTH
Following the credit crisis and global economic meltdown
Market coke
in the second half of 2008, Exxaro is reviewing its capital
A feasibility study on producing high-quality market coke
expenditure programmes,
including sustaining capital,
from semi-soft coking coal produced at Grootegeluk mine
as well as its project pipeline. The group will focus on
is under review.
successfully implementing committed expansions while
reprioritising other identifi ed growth opportunities.
Mafube coal mine
Coal
Grootegeluk Medupi expansion
Commissioning of the Mafube expansion project, at a capital
cost of R1,9 billion, in which the group is a 50:50 joint
venture partner with Anglo Coal, has been completed and
Exxaro board approval for the coal supply agreement and
ramp-up to full capacity was reached by end-2008. At full
implementation of the project to expand Grootegeluk mine,
production, the mine will produce 3Mtpa of export steam
at a capital cost of R9 billion, was obtained in August 2008.
coal and 2Mtpa of power station coal.
In September 2008 an agreement was concluded with
Eskom for the supply of 14,6Mtpa of power station coal
Inyanda coal mine
for 40 years from Grootegeluk mine to Eskom’s adjacent
Commissioning of
the benefi ciation plant at
the
Medupi power station, currently under construction. The
R290-million Inyanda mine was successfully completed in
fi rst coal is to be supplied in the last quarter of 2011 with full
the second quarter of 2008. Full production of 1,5Mtpa,
production from 2014.
Waterberg mine
mostly for the export market, was exceeded by the end of
the year.
A pre-feasibility study and geological exploration work on a
The Blackhill railway siding has been successfully
potential greenfi elds mine adjacent to Grootegeluk mine is
commissioned and is being operated at design capacity. This
being progressed. This potential mine has the capability of
is currently the only train-loading facility in Exxaro where
supplying the market with power station and metallurgical
Jumbo railway wagons can be loaded to full capacity.
coal.
Sintel char project
Eerstelingsfontein reserve
All mining authorisations and regulatory approvals for
The commissioning of the Sintel char plant at Grootegeluk
mining the Eerstelingsfontein reserves near Belfast to
mine to produce reductants for the ferroalloy industry is
supply 1Mtpa of product to the local market have been
behind schedule. This is due to delays experienced with
obtained. Full production is expected by the second quarter
construction contractors. Ramp-up of the facility began in
of 2009.
August 2008 but was delayed to February 2009 when the
refractory lining of the four retorts failed during the heating
process. All retorts should be commissioned by end-June
2009, with full production of 160ktpa estimated by the end
of the year.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
43
GROWTH continued
Botswana Gas project
Moranbah South resource
Exxaro has concluded an agreement with Sekaname
Exploration of the hard coking coal resource on the adjacent
(Pty) Limited to begin a coal-bed methane exploration
properties of Moranbah South and Grosvenor South in
programme in Botswana. The focus of the study will be
Queensland, Australia, in joint venture with Anglo Coal
to prove economic gas fl ow rates from coal-bed methane
Australia, is progressing according to schedule. Exploration
seams. The purpose of the joint venture, in which Exxaro
is focused on geological work to delineate long-wall
has a 75% interest, is to explore the feasibility of creating a
mining resources. The potential for bord-and-pillar mining
gas-based energy business.
operations will also be explored. Moranbah South has the
potential to produce large volumes of premium-quality hard
coking coal.
Diepspruit reserve
Mineral sands
Fairbreeze mine
The feasibility study for the construction of the Fairbreeze
mine, south of the existing Hillendale mine, is being updated
Development of the Diepspruit reserve at New Clydesdale
with start of construction targeted for the second half of
(NCC) is planned to produce its fi rst coal by the second
2009. Production is planned for the fi rst half of 2011 after
quarter of 2009. At full production, the R136-million project
mining Braeburn and Braeburn extension in the next three
will produce 1,3Mtpa run-of-mine coal for benefi ciation at
years.
NCC for supply to the export steam coal market.
Co-generation project
Port Durnford mine
The feasibility study for Port Durnford mine, south-west of
Hillendale mine, will be completed in 2010. This mine could
Exxaro formed a joint venture with Promethium Carbon to
supply the KZN furnaces for more than 20 years, if proven
develop co- and on-site generation projects of up to 200MW
viable.
each. The bankable feasibility phase for some of these
projects is nearing completion and discussions are under
Centane deposit
way with host parties on offtake agreements and contractual
A drilling campaign to confi rm the Shell-Rhoex results for
arrangements. It is anticipated that three projects will be
the Centane deposit in Eastern Cape took place in August
initiated in 2009.
2008. Samples analysis will be completed in 2009.
44
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Toliara Sands
The Toliara Sands project’s feasibility study for the Ranobé
Base and other metals
Turkey iron ore and base metal opportunity
deposit in south-western Madagascar is still under way.
Exploration activities in Turkey are still in their early
Further process work is being done on ilmenite product from
stages with further participation being critically reviewed
the Ranobé deposit. An aerial radiometric and magnetic
in the current depressed economic environment. The area
survey was completed for the northern Monombo-Marombe
includes zinc, lead copper and iron ore prospects. A total of
area. Results from this survey will determine whether to
R110 million was expensed for the year on acquisition and
continue with further drilling.
exploration costs.
Kwinana pigment expansion
More than 11 000 metres of mainly iron ore-focused
Implementation of the Tiwest Kwinana pigment expansion
exploration drilling was completed between April and
project for an additional 40ktpa production is on track, with
October 2008. Exploration activities have been suspended
commissioning targeted for the fi rst quarter of 2010. Exxaro
for the winter and will resume again in the second quarter
is funding 100% of the A$100-million expansion project.
of 2009.
Dongara
Technical evaluation on a bulk ore sample is also in progress
The Dongara feasibility study, which forms part of the
at the Exxaro research and development test facilities.
Tiwest joint venture, is under way and will be completed
Results are expected towards the end of 2009.
by 2009. Given the increased life expectancy of the Tiwest
current dry mine operation at Cooljarloo, production at
Chifeng refi nery
Dongara is not planned to start before 2011. This deposit
The feasibility study to expand Chifeng refi nery by a
has the potential to provide feedstock to the Tiwest mineral
further 100ktpa was completed in the fi rst half of 2008.
separation plant for six years. Alternatives for Dongara
After reviewing the prospect, Exxaro concluded that the
are being investigated. Exploration at Cooljarloo West has
planned expansion does not meet its investment criteria,
started and will continue in 2009.
and decided not to participate. The expansion plans have
since been indefi nitely delayed as a result of the substantial
decline in demand for zinc metal.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
45
REVIEW OF MINERAL RESOURCES AND RESERVES
The mineral resources and ore reserves underpinning
persons is available from the company secretary on written
Exxaro’s current operations and growth projects are
request.
summarised in the tables on pages 48 to 55. Mineral
resources are reported inclusive of ore reserves and
The processes and calculations associated with the estimate
at 100%, irrespective of the percentage attributable to
have been audited by internal competent persons and, on a
Exxaro, except in the case of Gamsberg and Black Mountain
three- to four-year cycle basis, by external consultants. In
because fi gures received from Anglo Base Metals represent
the case of Namakwa Sands, which was acquired by Exxaro in
resources exclusive of reserves. Signifi cant changes in the
2008, the fi gures listed in the tables represent the tonnages
resource or reserve fi gures have been explained by relevant
quoted in the Anglo American 2007 fi nancial statements,
footnotes attached to each table. Mineral resources and
depleted by tonnages mined during the reporting period.
ore reserves were estimated by competent persons on
an operational basis and in accordance with the Samrec
The person within Exxaro designated to take corporate
Code (2007) for South African properties and the Jorc
responsibility for mineral resources and ore reserve, HJ van
Code (2004) for Australian properties. Ore reserves in the
der Berg, the undersigned, has reviewed and endorsed the
context of this report have the same meaning as “mineral
reported estimates.
reserves”, as defi ned by the Samrec Code of 2007. All the
competent persons have suffi cient relevant experience in
the style of mineralisation, type of deposit, mining method
and activity for which they have taken responsibility, to
qualify as a “competent person” as defi ned in these codes.
These competent persons have signed off their respective
estimates in the original mineral resources and ore reserve
HJ Van Der Berg
statements for the various operations and consent to the
MSc (Geology), BSc (Hons)
inclusion of the information in this report in the form and
Pr Sci Nat (400099/01)
context in which it appears. A list of Exxaro’s competent
Manager Mineral Assets
46
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Comment
Exxaro’s tenure over its mineral assets as listed in the
Anglo Coal Australia, has confi rmed that it is a valuable
tables was audited and is confi rmed with the following
coking coal resource. The pace of exploration will be
consideration. The appeal against the refusal of a prospecting
increased in 2009 to facilitate the start of a feasibility study
right over several farms included in the Leeuwpan and
on certain areas by 2010. The other international resources
Strehla mineral resource fi gures is still pending. This issue
growth opportunity – namely iron ore in Turkey – was pursued
is being addressed at senior level and positive progress has
through an intense exploration programme during the eight-
been made. The new mining right application over certain
month long exploration cycle (April to November) and the
Leeuwpan properties is still under consideration by the
potential for a small, but profi table, operation established.
Department of Minerals and Energy (DME).
The 2009 programme will focus on taking the potential
mineral resource to pre-feasibility/feasibility level and an
Exxaro applied for the conversion of all ex-Kumba old-
investment decision. Base metal potential in Turkey will also
order mining licences to new-order mining rights in 2005.
be evaluated in 2009 to determine whether it fi ts Exxaro’s
Additional information requested by the DME has been
growth strategy. At Rosh Pinah zinc mine, boreholes based
provided. Applications for the conversion of all ex-Eyesizwe
on the conceptual extension of the ore model intersected
mines were submitted in 2008, well ahead of the fi nal date
good mineralisation and drilling to delineate the mineralised
for submission on 30 April 2009. Exxaro received written
area will continue in 2009.
confi rmation from the DME in December 2008 that the
ex-Kumba mining licences have been converted. The DME
The objective to manage and grow Exxaro’s mineral assets
needs to schedule the execution of these rights.
was strongly pursued during the review period and will
continue in 2009, with distinct focus on prioritised targets.
Exxaro’s coal resources in the Waterberg coalfi eld, both in
The approach will be to enhance understanding of the
the form of the existing mining area and prospecting rights,
mineral resources through the innovative integration and
are regarded as one of the cornerstones of the company’s
interpretation of available information and by tracking value
future, and their management and optimisation will remain
creation. The foremost objective will be to support Exxaro’s
a focus area in 2009. Prospecting rights in the Mpumalanga
quest to continually improve on safe working conditions.
coalfi eld are being prioritised to determine the optimum fi t
Equally important are the mineral resources needed to
in the company’s growth strategy.
sustain Exxaro’s competitiveness through the challenges
Internationally, additional exploration done on the Moranbah
mineral assets available on which to base its growth strategy
South project in Queensland, Australia, in co-operation with
when the cycle turns positive again.
ahead, but ultimately it is critical to ensure Exxaro has the
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
47
REVIEW OF MINERAL RESOURCES AND RESERVES continued
Table 1: Exxaro’s Mineral Resource estimates for 2007 and 2008
Mineral resource estimates reported here are inclusive of ore reserve estimates reported in table 2; resources have been
estimated in accordance with the Samrec and Jorc codes with respect to South African and Australian operations/projects
2008
2007
% attribu-
table to
Exxaro
Resource
category
Tonnes
(million)
Grade
Tonnes
(million)
respectively.
Commodity
Operation
Coal
Mpumalanga
Arnot mine (1)
(captive market)
Matla mine (2)
(captive market)
Inyanda mine (3)
100
100
100
Leeuwpan mine (4)
100
Mafube mine
50,0
NBC mine (5)
(North Block Complex)
Belfast project (6)
(prospecting)
NCC mine (7)
(New Clydesdale)
Strehla project
(prospecting)
Coal
Limpopo
Grootegeluk
mine (8)
100
100
100
100
100
Grootegeluk West project (9)
(prospecting)
100
Waterberg South project
(prospecting)
100
48
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
176,8
8,5
6,5
191,8
256,5
483,0
71,3
810,8
15,5
–
–
15,5
186,6
2,8
–
189,4
122,5
–
54,3
176,8
32,4
20,2
–
52,6
107,7
3,7
7,1
118,5
16,8
40,3
–
57,1
–
22,5
–
22,5
4 117
1 347
96
5 559
17
5 357
590
5 963
–
–
699
699
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
–
Raw coal
Raw coal
Raw coal
–
Raw coal
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
Raw coal
–
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
–
Raw coal
Raw coal
Grade
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
Raw coal
Raw coal
–
–
Raw coal
Raw coal
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
Raw coal
–
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
–
Raw coal
Raw coal
%
change
(27,0)
95,3
(14,6)
11,7
(2,8)
–
242,9
124,6
39,0
0,0
2,7
12,7
171,7
74,0
17,1
262,8
302,3
112,8
–
415,1
18,1
–
–
18,1
163,1
6,5
–
169,6
58,2
41,9
81,8
182,0
7,1
8,3
–
15,4
23,9
24,0
4,8
52,7
13,7
27,4
–
41,1
–
22,5
–
22,5
774
3 534
1 107
5 415
–
–
5 290
5 290
Not reported
–
Raw coal
0,0
Commodity
Operation
Coal Limpopo
(continued)
Waterberg North project
(prospecting)
Tshikondeni mine
(captive market)
Coal
Australia
Moranbah South project (10)
(prospecting)
Commodity
Operation
Mineral sands
KwaZulu-Natal
Hillendale Mine + Braeburn
+ Braeburn Extension (11)
Fairbreeze A+B+C+C Ext
(mining right)
Fairbreeze D (mining right,
additional resource not
included in Fairbreeze
LOM)
Block P
(mining right)
Block P Extension project
(prospecting)
Port Durnford project (12)
(prospecting)
Mineral sands
Eastern Cape
Eastern Cape
project (prospecting)
(Nombanjana, Ngcizele,
Sandy Point old and
recent)
2008
2007
% attribu-
table to
Exxaro
Resource
category
Tonnes
(million)
Grade
Tonnes
(million)
Grade
%
change
100
100
50
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
–
–
2 176
2 176
24,4
10,1
–
34,5
165,6
767,8
406,1
1 339,5
–
–
Raw coal
Raw coal
Raw coal
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
Not reported
Raw coal
Raw coal
Raw coal
–
Raw coal
Raw coal
Raw coal
Raw coal
Raw coal
–
25,3
10,1
–
35,4
53,4
494,3
762,3
1 310,0
2008
2007
0,0
(2,7)
2,3
% attribu-
table to
Exxaro
Resource
category
Tonnes
(million)
Grade
% Ilmenite
Tonnes
(million)
Grade
% Ilmenite
%
change
100
100
100
100
100
51
100
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
53,4
–
–
53,4
202
27
–
229
–
9,2
–
9,2
–
40,6
–
40,6
–
–
42
42
142,5
340,1
466,0
948,6
232,9
–
–
232,9
3,35
–
–
3,35
3,7
2,5
–
3,6
–
2,5
–
2,5
–
3,1
–
3,1
–
–
2,7
2,7
3,0
2,8
2,5
2,7
4,5
–
–
4,5
62,6
–
–
62,6
202
27
–
229
–
9,2
–
9,2
–
40,6
–
40,6
–
–
42
42
–
1 004,6
117,3
1 121,9
232,9
–
–
232,9
3,53
–
–
3,53
3,7
2,5
–
3,6
–
2,5
–
2,5
–
3,1
–
3,1
–
–
2,7
2,7
–
2,8
2,9
2,9
4,5
–
–
4,5
(14,6)
0,0
0,0
0,0
0,0
(15,4)
0,0
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
49
REVIEW OF MINERAL RESOURCES AND RESERVES continued
Commodity
Operation
Mineral sands
Limpopo
Gravelotte sand and
pebbles
(mining right)
Gravelotte rock
(mining right)
Letsitele sand project
(prospecting)
Letsitele rock project
(prospecting)
Mineral sands
Western Cape
Namakwa Sands
mine (13)
Mineral sands
Madagascar
Ranobé
– Upper sand unit
(prospecting)
Mineral sands
Australia
Tiwest– Cooljarloo
mine (14)
– Jurien project
(mining right)
– Dongara project (15)
(prospecting)
Commodity
Operation
Base metals
Namibia
Rosh Pinah mine
(zinc and lead)
2008
2007
% attribu-
table to
Exxaro
Resource
category
Tonnes
(million)
Grade
% Ilmenite
Tonnes
(million)
Grade
% Ilmenite
%
change
100
100
100
100
100
100
50
50
50
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
75,1
–
31,3
106,4
–
–
112,3
112,3
12,5
–
–
12,5
–
53,6
–
53,6
181,3
393,2
262,9
837,4
208,8
320,4
181,3
710,5
62,5
281,8
10,0
354,3
–
25,6
–
25,6
91,4
–
–
91,4
9,1
–
4,0
7,6
–
–
20,7
20,7
10,5
–
–
10,5
–
25,9
–
25,9
3,9
3,6
2,4
3,3
4,8
4,0
3,5
4,1
% THM
3,4
2,4
2,4
2,6
–
6,0
–
6,0
4,5
–
–
4,5
75,1
–
31,3
106,4
–
–
112,3
112,3
12,5
–
–
12,5
–
53,6
–
53,6
208,8
320,4
181,3
710,5
117
297
25
439
–
25,6
–
25,6
1,3
75,4
–
76,7
9,1
–
4,0
7,6
–
–
20,7
20,7
10,5
–
–
10,5
–
25,9
–
25,9
Not reported
4,8
4,0
3,5
4,1
% THM
2,7
2,4
1,8
2,4
–
6,0
–
6,0
6,9
6,6
–
6,6
0,0
0,0
0,0
0,0
0,0
(19,3)
0,0
19,2
2008
2007
% attribu-
table to
Exxaro
50,04
Resource
category
Tonnes
(million)
Grade
Tonnes
(million)
Grade
%
change
Measured
Indicated
Inferred
TOTAL
% Zn
8,7
6,6
4,8
7,2
% Pb
2,2
1,8
0,8
1,8
4,7
5,8
1,7
12,2
5,0
6,4
1,7
13,1
% Zn
8,6
6,4
4,9
7,1
% Pb
1,9
1,8
0,9
(1,8)
(7,1)
50
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Commodity
Operation
Base metals
Northern Cape
Black Mountain Mining (16)
– Deeps mine (zinc, lead,
copper and silver)
– Broken Hill mine
(zinc, lead, copper and
silver)
– Swartberg mine
(zinc, lead, copper and
silver)
Gamsberg mine (16)
(zinc)
Commodity
Operation
Industrial minerals
Gauteng
Glen Douglas mine
(metallurgical dolomite)
Glen Douglas mine
(aggregate dolomite)
% attribu-
table to
Exxaro
Resource
category
Tonnes
(million)
2008
Grade
Zn%
Pb%
Cu%
Ag g/t
26
26
26
26
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
1,1
2,5
2,4
6,0
0,5
0,1
–
0,6
–
17,3
24,5
41,8
–
–
54,2
54,2
4,4
3,7
4,4
4,1
2,2
2,4
–
2,3
–
0,6
0,7
0,7
–
–
4,1
4,1
4,0
4,5
1,4
3,2
1,9
1,1
–
1,8
–
2,9
2,8
2,8
–
–
–
–
0,6
0,6
1,1
0,8
0,7
0,2
–
0,6
–
0,7
0,6
0,7
–
–
–
–
Not
reported
in 2007
Not
reported
in 2007
Not
reported
in 2007
Not
reported
in 2007
53,0
59,0
14,0
40,0
33,0
36,0
–
34,0
–
35,0
41,0
39,0
–
–
–
–
2008
2007
% attribu-
table to
Exxaro
Resource
category
Tonnes
(million)
100
100
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
179,2
–
125,2
304,4
36,1
–
193,7
TOTAL
229,8
Grade
% SiO2
<2,5
–
<2,5
<2,5
Raw
material
–
Raw
material
Raw
material
Tonnes
(million)
180,3
–
125,2
305,5
37,7
–
193,7
231,4
Grade
% SiO2
<2,5
–
<2,5
<2,5
Raw
material
–
Raw
material
Raw
material
%
change
(0,4)
(0,7)
The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
Rounding-off of fi gures may cause computational discrepancies.
Figures are reported at 100% irrespective of percentage attributable to Exxaro.
All changes more than 10% (signifi cant) are explained.
1 The review of geological information during the reporting period and subsequent creation of a new geological model has resulted in the decrease.
2 The increase is primarily the result of the creation of a new geological model incorporating 84 new drill holes drilled since 2004 and the inclusion of
additional resources in areas previously excluded from the statement.
3 The change is the result of mining depletion.
4 The signifi cant increase was the result of the re-classifi cation of underground to opencast resources (~27,3Mt) due to a revised business plan.
5 Revised business plan including opencast mining of seams 3, 4 (previously not reported) and 2 (previously reported as underground) at Glisa resulted in
a signifi cant increase in the resource.
6 Increase is mainly the result of re-classifi cation of previously underground resources to opencastable resources (revised business case) and inclusion of
additional resources previously excluded from the statement.
7 The signifi cant change is mainly the result of adding coal resources by drilling areas previously not included.
8 Changes within various categories are the result of updating the geological model in 2008 (48 additional holes) and re-classifi cation of measured
resources.
9 A prospecting right adjacent to Grootegeluk mine. Changes in various categories are due to additional drilling, creation of a new geological model and
re-classifi cation of resources.
10 The 2007 and 2008 fi gures as estimated by Anglo Coal Australia covering the joint-venture area.
11 The decrease is the result of mining depletion.
12 Extensive drilling (~30 000m), the update of the geological model (cut-off changed from 3% THM to 3% ilmenite) and subsequent exclusion of areas
previously reported on, resulted in the changes within categories and overall decrease.
13 Operation was acquired in October 2008. Figures were calculated by depleting the Anglo American audited 2007 statement.
14 Mine plan changes to access higher grades (by excluding areas of lower grade and stripping additional low-grade ore as overburden) has resulted in a
~41Mt loss.
15 Extensive drilling (~64 000m), creation of a new geological model, and re-optimisation of the resource areas resulted in the signifi cant change.
16 Shareholding in project obtained in 2008. Figures received from Anglo Base Metals. Resources are additional to reserves.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
51
REVIEW OF MINERAL RESOURCES AND RESERVES continued
Table 2: Exxaro’s ore reserves estimates for 2007 and 2008
Ore reserve estimates reported here are included in the mineral resource estimates of table 1. They have been estimated
in accordance with the SAMREC and JORC codes with respect to South African and Australian operations/projects
respectively.
Commodity
Operation
%
attribu-
table to
Exxaro
Coal
Mpumalanga
Arnot mine (17)
(captive market)
100
Matla mine (18)
(captive market)
Inyanda mine (19)
100
Leeuwpan mine
100
Mafube mine (20)
50
100
NBC mine (21)
(North Block
Complex)
Belfast project (22)
100
NCC mine (23)
(New Clydesdale)
Coal
Limpopo
Grootegeluk (24)
mine
Tshikondeni mine
(captive market)
100
100
100
2008
2007
Reserve
category
ROM
(Mt) Grade
Saleable
product (Mt)
ROM
(Mt) Grade
Saleable
product (Mt)
%
change
Coking
coal
Thermal
coal
Metallur–
gical
coal
N/A
N/A
N/A
N/A
N/A
N/A
N/A
85,7
N/A
1,2
N/A
86,9
N/A
137,3
N/A
258,5
N/A
395,8
A-grade export steam coal
8,7
8,7
48,4
34,3
N/A
N/A
82,7
Export Thermal
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
105,3
14,9
120,2
22,0
24,7
46,7
N/A
N/A
N/A
56,8
–
56,8
N/A
N/A
N/A
11,4
20,9
32,3
24,2
19,6
43,8
29,9
–
29,9
8,6
–
8,6
124,0 1 094, 1
221,0
28,1
1 315,1
152,1
N/A
2,6
N/A
–
N/A
2,6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
97,3
–
97,3
203,3
67,3
270,6
16,3
–
16,3
95,2
42,4
137,6
44,3
–
44,3
4,9
–
4,9
22,0
21,1
43,1
10,5
0,6
11,1
739
2 041
2 780
4,3
–
4,3
Coking
coal
Thermal
coal
Metallur–
gical
coal
N/A
N/A
N/A
N/A
N/A
N/A
94,3
–
94,3
201,3
66,6
267,9
N/A
N/A
N/A
N/A
N/A
N/A
A-grade export steam coal
10,2
–
10,2
N/A
N/A
N/A
76,9
Export Thermal
12,08
23,92
–
–
12,08
23,92
4,8
N/A
–
N/A
N/A
14,6
10,3
24,9
N/A
N/A
N/A
37,9
111,9
149,8
2,4
–
2,4
4,8
7,4
9,0
16,4
7,7
0,4
8,1
348
954
1 302
N/A
N/A
N/A
53,0
23,9
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
35,7
59,9
95,6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10,3)
38,4
(14,8)
5,6
142,5
799
(120,3)
12,5
19,0
3,5
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
Proved
Probable
TOTAL
86,1
1,2
87,3
110,3
264,2
374,5
13,9
–
13,9
88,0
57,4
145,4
40,6
66,8
107,4
24,2
19,6
43,8
91,9
3,0
94,9
12,5
–
12,5
2756
552
3 308
4,41
–
4,41
52
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Commodity
Operation
%
attribu-
table to
Exxaro
2008
2007
Reserve
category
ROM
(Mt) Grade
Total heavy mineral (THM)
composition
ROM
(Mt) Grade
Total heavy mineral (THM)
composition
%
change
%
THM
%
Ilmenite
%
Rutile
%
Zircon
%
Leuco-
xene
%
THM
%
Ilmenite
%
Rutile
%
Zircon
%
Leuco-
xene
Hillendale
mine (25)
(including
Braeburn
and Braeburn
Extension)
Fairbreeze
A+B+C+ C
ext (26)
Gravelotte sand
(mining right)
100
Proved
Probable
25,8
2,7
7,5
5,0
55,0
63,0
3,7
8,0
6,5
4,0
1,9
2,0
19,1
2,7
8,2
5,0
53,0
63,0
4,0
4,0
6,0
8,0
2,0
2,0
TOTAL
28,5
7,3
55,8
4,1
6,3
1,9
21,8
7,8
54,0
4,0
6,0
2,0
30,5
100
100
Proved
Probable
TOTAL
137,4
44,1
181,5
6,1
7,2
6,4
59,9
61,3
60,3
3,1
3,4
3,3
8,3
8,1
8,1
1,4
1,8
1,7
137,4
44,1
181,5
6,1
7,2
6,4
Proved
Probable
TOTAL
52,4
–
52,4
13,0
–
13,0
85,0
–
85
N/A
–
N/A
N/A
–
N/A
N/A
–
N/A
52,4
–
52,4
13,0
–
13,0
60
61
60
85
–
85
3,1
3,4
3,3
N/A
–
N/A
8
8
8
N/A
–
N/A
1,4
1,8
1,7
N/A
–
N/A
0,0
0,0
Not reported
Mineral
sands
KwaZulu-
Natal
Mineral
sands
Limpopo
Mineral
sands
Western
Cape
Mineral
sands
Australia
Namakwa
Sands mine (27)
100
Proved
Probable
TOTAL
64,7
217,9
282,6
12,2
10,0
10,5
Tiwest
– Cooljarloo
mine (28)
– Jurien
(mining right)
– Dongara
project (29)
(prospecting)
50
50
50
Proved
Probable
58,0
56,0
TOTAL
Proved
Probable
TOTAL
Proved
114,0
–
15,7
15,7
29,5
Probable
TOTAL
–
29,5
3,3
2,7
3,0
–
7,9
7,9
7,3
–
7,3
38,7
37,8
38,0
60,6
60,4
60,5
–
54,0
54,0
48,6
–
48,6
1,8
2,1
2,0
4,3
4,6
4,4
–
6,8
6,8
7,0
–
7,0
9,8
9,8
9,8
9,3
8,4
8,9
–
10,0
10,0
10
–
10
3,9
4,1
4,1
3,2
3,1
3,1
–
2,3
2,3
2,0
–
2,0
41
95
136
–
15,7
15,7
–
20,2
20,2
2,7
2,9
2,8
–
7,9
7,9
–
10,2
10,2
59
61
61
–
54,0
54,0
–
50
50
4,7
4,4
4,5
–
6,8
6,8
–
6,7
6,7
10
9
10
–
10
10
–
8
8
2,8
3,1
3,0
–
2,3
2,3
–
1,3
1,3
(16,1)
0,0
46,0
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
53
REVIEW OF MINERAL RESOURCES AND RESERVES continued
Commodity
Operation
%
attribu-
table to
Exxaro
Base metals
(zinc and
lead)
Namibia
Rosh Pinah
mine (30)
50,04
Commodity
Operation
%
attribu-
table to
Exxaro
2008
2007
Reserve
category
ROM
(Mt) Grade
Saleable
product (Mt)
ROM
(Mt) Grade
Saleable
product (Mt)
%
change
zinc
metal
(x 1 000t)
lead
metal
(x 1 000t)
% Zn
% Pb
zinc
metal
(x 1 000t)
lead
metal
(x 1 000t)
% Zn
% Pb
Proved
Probable
TOTAL
3,3
2,7
6,0
10,1
7,4
8,9
2,4
1,8
2,2
327
203
530
80
49
129
3,3
5,0
8,3
9,4
6,2
7,5
2,0
1,9
1,9
310
312
622
64
96
160
(27,9)
2008
Reserve
category
ROM
(Mt)
Grade
Saleable
product (Mt)
% Zn % Pb
Cu % Ag g/t
zinc
metal
(x 1 000t)
lead
metal
(x 1 000t)
copper
metal
(x 1 000t)
silver
metal
(x 1 000t)
Base metals
(zinc, lead,
copper and
silver)
Northern Cape
Black Mountain
Mining (31)
– Deeps mine
Gamsberg mine
26
26
Proved
Probable
TOTAL
Proved
Probable
TOTAL
2,9
5,9
8,8
34,2
110,3
144,4
3,7
2,9
3,2
7,5
5,5
6,0
3,2
2,9
3,0
–
–
–
2008
0,4
0,4
0,4
–
–
–
40
42
41
–
–
–
109,4
170,1
279,5
2,6
6,1
8,7
93,2
168,2
261,4
–
–
–
116,8
244,5
361,3
–
–
–
13,4
21,9
35,3
–
–
–
2007
Not reported
in 2007
Not reported
in 2007
Commodity
Operation
%
attribu-
table to
Exxaro
Reserve
category
ROM
(Mt)
Industrial
minerals
Gauteng
Glen Douglas
Dolomite mine
100
Proved
Probable
TOTAL
Glen Douglas
Dolomite mine
100
Proved
Probable
TOTAL
42,8
-
42,8
10,5
-
10,5
Grade
% SiO2
<2,5
-
<2,5
Raw
dolomite
–
Raw
dolomite
Saleable
product (Mt)
Metallurgical
dolomite (Mt)
40,2
–
40,2
Aggregate
(Mt)
9,8
–
9,8
ROM
(Mt)
43,4
–
43,4
11,3
–
11,3
Grade
% SiO2
<2,5
–
<2,5
Raw
dolomite
–
Raw
dolomite
Saleable
product (Mt)
Metallurgical
dolomite (Mt)
40,8
–
40,8
Aggregate
(Mt)
10,6
–
10,6
%
change
(1,4)
(6,8)
Note
Tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
Rounding-off of fi gures may cause computational discrepancies.
Figures are reported at 100% irrespective of percentage attributable to Exxaro.
All changes more than 10% (signifi cant) are explained.
17 The change is the result of mining depletion, a decrease in the resource base and a new mine plan. Revised cut-off parameters (mine height and
maximum acceptable mining slope angle) have been implemented.
18 Change is the result of the signifi cant increase in the resource base.
19 Change is the result of mining depletion.
20 The transfer of ~67Mt of additional resources (outside LOM plan in 2007) to LOM plan has resulted in the signifi cant increase in the reserve.
Figures estimated by Anglo Coal.
21 Change is the result of signifi cant increase in the resource base.
22 Project is included pending the approval of the mining right. The change is the result of increase in the resource base.
23 The change reported is the result of an increase in the resource base.
24 The change is the result of the signifi cant increase in the indicated and measured resource categories.
25 The new mining right for Braeburn Extension (~12,8Mt) was granted and executed during the reporting period and it is therefore included for the fi rst time
as a reserve. The mining right for Braeburn, although granted, has not been executed and is therefore only reported as a probable reserve.
26 Fairbreeze C is included pending the approval of a mining right.
27 The fi gures were calculated by depleting the Anglo audited 2007 statement.
28 The netto decrease is the result of mining depletion and the decrease in the resource base.
29 The change is the result of increase in the resource base and re-optimisation of mine plan.
30 Infi ll drilling has contributed to a ~1,6Mt gain but economic considerations exclude mining of lowgrade ore (~3,7Mt) previously included. The
changes however have resulted in a higher Zn and Pb headgrade.
31 Shareholding in projects obtained in 2008. Figures received from Anglo Base Metals.
54
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Map depicting Exxaro’s mineral sands mines, projects and smelter in KwaZulu-Natal.
Map depicting Exxaro’s coal mines and projects in relation to the coalfi elds in Limpopo, Mpumalanga and Gauteng.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
55
EXECUTIVE COMMITTEE
Sipho Nkosi (54)
Chief executive offi cer
Mxolisi Mgojo (48)
Executive general manager, commodity operations: coal
BCom (Hons)(Econ), MBA (Univ Mass, USA), Diploma in Marketing
BSc (Hons), MBA, AMP (Whanton)
Management
Sipho began his career as a market analyst with Ford Motor Company
coal logistics. Until June 2008, Mxolisi was responsible for the
South Africa in 1980. In 1986 he moved to Anglo American Coal
base metals and industrial minerals commodity business when he
Previously at Eyesizwe Coal, he was responsible for marketing and
Corporation as a marketing coordinator. In 1992 he joined Southern
assumed his current position.
Life Association as senior manager, strategic planning. In 1993 he was
appointed marketing manager, new business development at Trans-
Retha Piater (54)
Natal Coal Corporation, which later became Ingwe Coal Corporation.
Executive general manager: human resources
In 1997 he joined Asea Brown Boveri (South Africa) Limited as vice
BCom (Hons), MBA, Advanced Management Programme (Insead)
president marketing. He joined ABB Power Generation in 1998 as
managing director. As founder of Eyesizwe Holdings, he served as
Retha has 22 years of human resources experience across the
chief executive offi cer. On 1 September 2007 he was appointed chief
various business units and commodities, specifi cally in the area of
executive offi cer of Exxaro.
remuneration.
Dirk van Staden (59)
Financial director
Dr Nombasa Tsengwa (44)
Executive general manager – safety and sustainable development
BIuris, LLB, Advanced Management Programme (Insead)
Senior secondary teacher’s diploma, BSc (Hons), MSc, PhD
(Biotechnology)(Univ of Maryland, USA), Advanced Management
Dirk joined Iscor in 1997 as general manager, corporate treasury. Prior
Programme (Insead)
to that, he was employed by the IDC as general manager responsible
for international and project fi nance, treasury operations and legal
Prior to her appointment in 2003, Nombasa was the deputy director-
services. In June 2001 he was appointed executive director, fi nance
general for the Department of Environmental Affairs and Tourism,
of the former Kumba Resources Limited.
and served as a corporate manager at the Council for Scientifi c and
Trevor Arran (41)
Executive general manager: corporate affairs and strategy
Ernst Venter (52)
BSc (Hons)(Econ Geo), AMP (UP/GIBS), BEP, Diploma Project
Executive general manager: growth
Industrial Research (CSIR).
Management
BEng (Hons), MBA, Advanced Management Programme (Insead)
Trevor has a wide mining background, supplemented by fi nancial
Ernst has headed a number of portfolios including base metals,
experience gained in equity markets, investment banking and new
Zincor, consulting services, mining technology, coal benefi ciation,
business.
Wim de Klerk (45)
Executive general manager, commodity operations: sands and base
metals
BCom (Hons), CA(SA), TEP, EMP (Harvard)
process development and plant metallurgy. Prior to assuming
his current position, he was responsible for the coal commodity
business.
Marie Viljoen (62)
Company secretary
After joining Iscor in 1996, Wim served on the executive management
Marie has 22 years’ experience
in the fi eld. She assumes
team of Iscor, responsible for strategy and continuous improvement.
responsibility for the group’s corporate governance and business
From 2001, he was responsible for Exxaro’s mineral sands commodity
administration to ensure alignment with statutory and
legal
business and assumed additional responsibility for the base metals
compliance requirements.
businesses in 2008.
Dr Humphrey Mathe (58)
• Mike Kilbride retired as chief operating offi cer on 31 August 2008,
and Dirk van Staden as fi nancial director subsequent to the end of
Executive general manager: corporate services
the fi nancial year, on 28 February 2009.
MSc (Expl Geol), PhD (Univ Natal), Advanced Management
Programme (Insead)
Responsibilities include engineering, projects and research and
development. Previously at Eyesizwe Coal, he served as head of the
technical and new business development division.
56
I E x x a r o A n n u a l R e p o r t 2 0 0 8
POWERING POSSIBILITY
Sipho Nkosi
Dirk van Staden
Trevor Arran
Wim de Klerk
Dr Humphrey Mathe
Mxolisi Mgojo
Retha Piater
Dr Nombasa Tsengwa
Ernst Venter
Marie Viljoen
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
57
DIRECTORATE
1
Sipho Abednego Nkosi (54)
Chief executive offi cer
10 Nkululeko Leonard Sowazi (45)
Non-executive director
BCom (Hons)(Econ), MBA (Univ Mass, USA), Diploma in
BA, MA (Urban and reg plan) (UCLA)
Marketing Management
2
Dirk Johannes van Staden (59)
Financial director
BIuris, LLB, Advanced Management Programme (Insead)
3
Philip Michael Baum (54)
Non-executive director
BCom, LLB, H DIP Tax Law
4
Jurie Johannes Geldenhuys (66)
Independent non-executive director
11 Jeffrey van Rooyen (59)
Independent non-executive director
BCom, BCompt (Hons), CA(SA)
12 Dalikhaya Zihlangu (42)
Non-executive director
BSc (Min Eng), MDP, MBA (Wits)
• Nonkululeko Nyembezi-Heita resigned as non-executive director
with effect from 29 February 2008.
• Pinkie Kedibone Veronica Ncetezo resigned as non-executive
director with effect from 30 April 2008.
BSc (Eng)(Elec), BSc (Eng)(Min), MBA (Stanford), Pr Eng
• Michael James Kilbride retired as chief operating offi cer and
executive director on 31 August 2008.
• Dirk van Staden retired as fi nancial director subsequent to the end
of the fi nancial year, on 28 February 2009.
5
Ufi kile Khumalo (43)
Non-executive director
BSc (Eng), MSc Eng, MAP, SEDP (Harvard)
6
Deenadayalen Konar (55)
Independent non-executive director
BCom, CA(SA), MAS, DCom
7 Simangele Esther Ann-Maria Mngomezulu (54)
Non-executive director
Diploma public relations, Diploma community development,
Certifi cate Executive Preparation Programme
8 Vincent Zwelibanzi Mntambo (51)
Non-executive director
BJuris, LLB, LLM
9
Richard Peter Mohring (61)
Independent non-executive director
BSc (Eng)(Mining), MDP, PMD (Harvard); Pr Eng
58
I E x x a r o A n n u a l R e p o r t 2 0 0 8
POWERING POSSIBILITY
Sipho Abednego Nkosi
Dirk Johannes van Staden
Philip Michael Baum
Jurie Johannes Geldenhuys
Ufi kile Khumalo
Deenadayalen Konar
Simangele Mngomezulu
Vincent Zwelibanzi Mntambo
Richard Peter Mohring
Nkululeko Leonard Sowazi
Jeffrey van Rooyen
Dalikhaya Zihlangu
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
59
60
I E x x a r o A n n u a l R e p o r t 2 0 0 8
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
61
Social development: Grootegeluk mine is
rolling out a housing project as part of its
social and labour plan commitment where fi ve
ground-breaking new houses are being built in
Lephalale in partnership with the town’s local
government. Here Onicca Mfi sa, one of the
24 local people trained in building skills, puts
fi nishing touches to one of the houses.
POWERING POSSIBILITY
GOVERNANCE &
SUSTAINABILITY
About this section:
62 CORPORATE GOVERNANCE
62
Board and
board sub-committees
70 SHAREHOLDERS’ ANALYSIS
72 RISK MANAGEMENT
74 SUSTAINABLE
DEVELOPMENT
74
Message from CEO
76 Approach
81 Safety
82 Health
84 Environment
92 Economic
95 Society
107
MINING CHARTER
110 INDEPENDENT ASSURANCE
STATEMENT
113 GRI INDEX
Highlights of the year
Key governance highlights and developments
included:
• Review of board charter and board committees’
terms of reference
• Compilation and implementation of groupwide
delegation of authority policy and framework
• Compilation of groupwide confl ict of interests
policy
• Compilation of groupwide compliance policy
Key sustainability highlights included:
• HIV/Aids policy revised
• Improved environmental reporting
• Stakeholder engagement further improved
• Mining charter targets largely exceeded
CORPORATE GOVERNANCE
Exxaro is a company of the 21st century and therefore
To ensure excellent corporate governance practices are
understands that diversity, empowerment and development
entrenched in the group, all our operations are obliged to
at every level can only be achieved through effective,
subscribe to the spirit and principles of King II. While the
transparent and accountable leadership.
Exxaro board takes overall responsibility for compliance with
King II, directors of subsidiaries are required to continually
Exxaro’s
leadership recognises that good corporate
monitor compliance with these principles within their legal
governance practices are essential in maintaining high
entities.
standards of integrity, professionalism and ethical behaviour.
Exxaro’s directors are fully committed to embedding the
principles of transparency and accountability in our various
business operations, ensuring we create value for all
stakeholders.
In making good governance a hallmark of our group, the
directors are guided by established tenets in creating long-
term value for all:
• Adherence
to sound principles of direction and
management
• Implementation of best practices
in
corporate
management
• Understanding conceptual issues in corporate governance,
international
including a review of national and
developments to gain a better appreciation of corporate
governance systems and mechanisms
• Clarification of issues pertaining to the board of directors
and management
• Recognition of shareholder/stakeholder rights and
responsibilities.
Best-practice corporate governance structures ensure a
dynamic cycle of improvement where every individual is
guided by a common set of values as we expand our quality
portfolio of assets. At Exxaro, our values guide the way
this organisation is managed and controlled. These values
appear on the first flap.
In compliance with the mining charter, Exxaro is one of the
largest black-owned and managed resources companies
listed on
the JSE, comfortably exceeding charter
requirements with a 53% black economic empowerment
(BEE) shareholding.
Ethics
In
line with Exxaro’s value of honest responsibility,
compliance with the group’s code of ethics is monitored
by the group risk manager and company secretary, and
ethical behaviour is encouraged throughout the group by
communicating regularly with employees, using a number
of different communication channels.
During the year, all business units were assessed for
risks related to corruption and fraud. Training in anti-
corruption policies and procedures is integrated into
the group induction programme for new employees and
during annual competence update training for existing
staff.
Formal disciplinary measures are in place to deal with any
identified incidents of corruption and fraud. In addition
to Exxaro’s other compliance and enforcement activities,
a reporting hotline (whistle-blowing) is in place through
which all stakeholders can report suspected corruption,
conflicts of interest, contraventions of group values or
other reportable irregularities, with guaranteed anonymity.
Details of the reporting mechanisms: Hotline: 0800 20 35 79
Hotmail: Exxaro@tip-offs.com.
Alleged irregularities reported on the hotline are fully
investigated. Some resulted in criminal prosecution.
Exxaro regularly participates in industry initiatives focused
on developing equitable public policies for the mining sector.
However, the group does not directly or indirectly support
political parties or, individual politicians through financial or
in-kind contributions.
Compliance with King II
The Exxaro board, committees and management believe
compliance is key in maintaining the group’s values. The
group supports the provisions and principles of corporate
Board of directors
Functions
The board is the focal point of Exxaro’s corporate
governance as defined by the King II report and the Listings
governance system, with ultimate accountability and
Requirements of the JSE, and complied in all material
responsibility for the company’s performance and affairs.
respects with the Code of Corporate Practices and Conduct
The board charter details the purpose and composition
in King II and the requirements of the JSE during the review
of
the board, responsibilities of board members,
period.
requirements for board meetings and remuneration of
62
I E x x a r o A n n u a l R e p o r t 2 0 0 8
directors. The charter was reviewed during the year to
assess compliance with the current regulatory framework
Appointments and succession planning
Within its powers, the entire board selects and appoints
and international best practices.
directors, including the CEO and executive directors, on the
recommendations of the transformation, human resources,
During the review period, the Exxaro board completed a
remuneration and nomination committee (TREMCO).
self-assessment of its performance. We intend to establish
formal board evaluation procedures in future.
All appointments are based on a formal and transparent
The primary responsibility of the board is to determine
appropriate for Exxaro, its industry and its transformation
process. Candidates are selected against criteria deemed
the company’s purpose and values and provide strategic
objectives.
direction. It is also responsible for identifying key risk
areas and performance indicators, monitoring performance
The chairman is appointed for a term not exceeding one
against agreed objectives, advising on fi nancial matters
year and is nominated from the ranks of independent non-
and reviewing the performance of executive management
against defi ned objectives and industry standards.
executive directors.
Composition
The board is an appropriate mix of skills, experience,
retire and may be nominated for re-election every three
years. No director may hold offi ce for more than three
demographic diversity and personalities to ensure effective
consecutive periods. The retirement age for non-executive
leadership and sound governance.
directors is 70 years, effective at the annual general meeting
To ensure effi cient staggering of director rotation, directors
As a truly South African company we support and actively
drive transformation in everything we do, and we are proud
that the majority of our board members are historically
disadvantaged South Africans.
The board currently comprises 12 directors:
• Four independent non-executive directors
• Two executive directors
• Six non-executive directors.
after the date on which they turned 70.
Accountability
Exxaro’s directors bring appropriate judgement to bear on
the issues at hand. Non-executive directors understand
Exxaro’s mission, strategy and business and add varied
expertise to the group.
We believe open communication with our directors is a
priority in ensuring their accountability. Therefore all
material information is disseminated to them between
In categorising the capacity of each director as executive,
board meetings.
non-executive or independent, Exxaro is guided by the
guidelines of King II.
Independence
There is a clear distinction in Exxaro between the roles of
The company secretary is responsible for the duties set
out in section 268G of the Companies Act. In terms of
Exxaro policy, directors have free access to the company
secretary and to
independent professional advisers,
chairman and chief executive offi cer (CEO) to ensure no
whether in legal, technical or accounting areas, at the
one has unfettered powers of decision-making. Identifying
company’s expense.
suitable candidates for the role of independent chairman
has taken longer than anticipated. During the year our
acting chairman, Dr Len Konar, ensured continuity in
Remuneration
TREMCO considers and submits recommendations to the
the board’s activities. Appointed in 2001, Dr Konar is an
board on fees to be paid to each non-executive director.
independent non-executive director, responsible for the
Any changes to fees are recommended by the board and
effective functioning of the board in his acting capacity.
submitted to shareholders at the annual general meeting
The CEO is in charge of the company as a whole and
directly responsible to the board. Among other things, he is
In line with generally accepted governance practices,
responsible for ensuring the company achieves its strategic
independent non-executive directors do not have service
and fi nancial objectives, and for monitoring its day-to-day
contracts, are not members of the group’s pension scheme
operational requirements.
and are not given incentive awards.
for approval prior to implementation and payment.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
63
CORPORATE GOVERNANCE continued
Non-executive directors’ remuneration is summarised below:
Non-executive remuneration
Name
PM Baum
JJ Geldenhuys
U Khumalo
Dr D Konar
SEA Mngomezulu
VZ Mntambo
RP Mohring
PKV Ncetezo**
NMC Nyembezi-Heita*
NL Sowazi
J van Rooyen
D Zihlangu
Attendance
Board meetings
PM Baum
JJ Geldenhuys
U Khumalo
MJ Kilbride
Dr D Konar (acting chairman)
SEA Mngomezulu
VZ Mntambo
RP Mohring
PKV Ncetezo
SA Nkosi
NMC Nyembezi-Heita
NL Sowazi
J van Rooyen
DJ van Staden
D Zihlangu
√ Attended • Apologies * Resigned on 29 February 2008
** Resigned on 30 April 2008 *** Retired on 31 August 2008
Fees for
services
R
181 570
267 083
146 427
540 686
55 642
206 990
307 146
68 997
38 125
193 284
64 545
206 990
Benefi ts and
allowances
R
23 427
21 357
7 314
8 735
Total
R
181 570
290 510
146 427
540 686
55 642
206 990
328 503
76 311
38 125
193 284
64 545
215 725
Appointed
to board
17 Feb 04
1 June 01
28 Nov 06
1 June 01
1 June 01
13 Aug 08
28 Nov 06
28 Nov 06
28 Nov 06
18 Oct 01
28 Nov 06
28 Nov 06
13 Aug 08
1 June 01
28 Nov 06
19
Feb
23
May
30
Jul
12
Aug
28
Nov
•
√
√
√
√
–
√
√
√
√
√
√
–
√
√
√
√
•
•
√
–
•
√
**
√
*
•
–
√
√
•
√
√
√
√
–
•
√
**
√
*
√
–
√
√
•
√
√
√
√
–
√
√
**
√
*
√
–
√
√
√
√
√
***
√
√
√
√
**
√
*
√
√
√
√
64
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Board committees
The board has appointed three committees to assist in
Role, purpose and principal functions
The committee reviews the principles, policies and practices
effectively discharging its responsibilities. All committees
adopted in preparing the fi nancial statements of the
fulfi l their responsibilities within clearly defi ned written
company and its subsidiaries. It also ensures that interim
terms of reference, which deal explicitly with their purpose
and annual fi nancial statements and any other formal
and function, reporting procedures and written scope of
announcements on the company’s fi nancial performance
authority.
comply with the Companies Act, the JSE Listings
Requirements and
International Financial Reporting
These terms of reference were reviewed during the year and
Standards.
changes made where necessary to refl ect our continuous
drive to comply with regulatory changes and international
The committee reviews the work of the group’s external and
best practices.
internal auditors to ensure the adequacy and effectiveness
of Exxaro’s fi nancial, operating, compliance and risk
To ascertain
committees are subject to regular evaluation by the board.
their performance and effectiveness,
management controls.
To ensure that board committees effectively discharge
the committee, details which services may or may not be
Exxaro’s policy on non-audit services, reviewed annually by
their responsibilities, the chairman of the board provides
quarterly feedback to the board on their performance and
achievement of their mandate.
Audit, risk and compliance committee
Composition and meeting procedures
The committee consists of four members and the majority
(including the chairman) are
independent directors.
provided by Exxaro’s external auditors and covers:
• Basic accounting assistance
• Payroll services
• Tax services
• Human resources services
• Information technology services
• Appraisal or valuation services
• Legislative and administrative decision-making and
Executive directors, the senior audit partner and head of the
corporate governance
outsourced internal audit function also attend meetings and
• Internal audit and risk management.
have unrestricted access to the chairman and committee
members. Non-executive directors may also attend by
This policy was complied with in the year under review.
invitation. When required, suitably qualifi ed people may be
co-opted to render specialist services.
The committee meets at least four times a year.
Attendance
Director
Dr D Konar (chairman)
RP Mohring
NL Sowazi
J van Rooyen
√ Attended • Apologies
Appointed to
committee
11 Feb 02
30 May 07
30 May 07
13 Aug 08
18
Feb
√
√
•
—
23
May
√
√
•
—
12
Aug
√
√
√
—
28
Nov
√
√
√
√
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
65
CORPORATE GOVERNANCE continued
Safety, health and environment committee (SHE)
Composition and meeting procedures
The role of the committee is to:
• Oversee
independent assurance of
sustainability
The committee consists of fi ve members with an independent
performance
chairman. The CEO and executive general manager: safety
• Oversee the development of policies and guidelines for its
and sustainable development attend meetings as standing
specifi c fi elds
invitees.
Executive general managers of commodity businesses,
human resources and technology management attend
• Review the policies and performance of the group on the
progressive implementation of safety and sustainability
policies
• Encourage
independently managed
subsidiaries,
meetings by invitation. Suitably qualifi ed people may be
associates and signifi cant investments to develop their
co-opted onto the committee when necessary to render
own policies, consistent with those of the group
specialist services.
• Receive reports on substantive safety and sustainability
risks and liabilities
The committee meets at least three times a year.
• Monitor key
indicators on accidents and
incidents
Role, purpose and principal functions
and, where appropriate, ensure this
information
is
communicated to other companies managed by or
The purpose of the committee is to develop the framework,
associated with the company
policies and guidelines for health, environmental and safety
• Consider
for adoption substantive national and
management and sustainable development group-wide.
international regulatory and technical developments
• Facilitate participation, co-operation and consultation
on related matters with government, national and
international organisations, supranational authorities,
other companies and other relevant associations.
Appointed
to committee
17
April
29
July
11 April 02
11 April 02
1 June 08
18 April 07
√
√
–
√
√
√
√
√
31
Oct
√
***
√
√
Attendance
Director
JJ Geldenhuys (chairman)
MJ Kilbride
RP Mohring
D Zihlangu
√ Attended
*** Retired on 31 August 2008
TREMCO
Composition and meeting procedures
The committee consists of four members, chaired by an independent director. The CEO, fi nancial director (FD), executive
general manager: human resources, and compensation and benefi ts advisers may be invited to attend any meeting.
Suitably qualifi ed people may be co-opted onto the committee to render the specialist services required to assist the committee in
its deliberations on any particular matter.
The committee meets at least four times a year.
66
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Role, purpose and principal functions
The purpose of the committee is to:
• Make recommendations on the composition of the board
and board committees and ensure that the board consists
of individuals equipped to fulfi l the role of director of the
company
• Guide, monitor, review and evaluate the company’s
progress on transformation, specifi cally employment
equity,
community
involvement and preferential
procurement
Attendance
Director
NMC Nyembezi-Heita (chairman)
RP Mohring (chairman)
PM Baum
JJ Geldenhuys
VZ Mntambo
PKV Ncetezo
√ Attended
• Apologies
** Resigned on 30 April 2008
* Resigned on 29 February 2008
• Ensure the company’s remuneration strategies, packages
and schemes are related to achieving business objectives
and delivering shareholder value
• Ensure compliance with statutory and best-practice
relations
labour and
requirements on
industrial
management, and that appropriate human resources
strategies, policies and practices are in place.
Appointed to
committee
19
Feb
15
May
30
Jul
29
Oct
9 May 07
1 Mar 08
16 Mar 04
1 Jun 08
9 May 07
9 May 07
√
—
•
—
√
√
*
√
√
—
√
**
*
√
•
√
√
**
*
√
√
√
√
**
Executive committee
The executive committee (Exco) is chaired by the CEO and
consists of 10 members. It meets formally every six weeks
and informally weekly.
Management committees
The strategic co-ordination forum
The forum met every six weeks until the retirement of the
chief operating offi cer on 31 August 2008. This forum will
be replaced by the portfolio review committee, chaired by
Exco is mandated, empowered and held accountable for
the CEO.
implementing the strategies, business plans and policies
determined by the Exxaro board. It is also responsible
for managing and monitoring the business affairs of the
The mandate of this forum is to:
• Ensure alignment of strategy execution and new
company in line with board-approved plans and budgets,
developments
prioritising the allocation of capital and other resources and
establishing best management and operating practices.
• Determine strategic priorities and co-ordinate, support
and monitor strategic initiatives throughout the group
• Allocate resources and accountabilities for investigations
Exxaro follows a structured process to ensure it invests in
or studies.
projects aligned with group strategy and which yield the
required returns. In this process two forums are engaged: an
initial assessment is completed by the strategic co-ordination
Investment review committee
The committee meets monthly and its primary responsibility
forum and a comprehensive review is then undertaken by the
is to undertake comprehensive investment reviews and
investment review committee. The offshore review committee
assess the technical feasibility and fi nancial viability of
assists the board in fi nancially co-ordinating Exxaro’s portfolio
proposed capital projects or investments prior to these
of offshore investments and interests.
requests being presented to the executive committee and
Exxaro board for approval.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
67
CORPORATE GOVERNANCE continued
In fulfi lling these objectives, the committee ensures that:
• Each project meets the strategic, technical and investment
Disclosure policy
The board has adopted a formal policy of continual
requirements defi ned by the board
disclosure of interests to ensure full and timely disclosure
• Critical decisions, project parameters and potential
risks are adequately addressed and researched prior to
by directors.
recommending the commitment of funds
• Each project enhances the portfolio value of Exxaro.
Offshore review committee
The committee meets quarterly, or more frequently, if
required. Its primary responsibilities include:
• Financial control and governance of Exxaro’s offshore
investments and multi-disciplinary interests
• Effi cient fi nancial structuring
• Providing for offshore investment funding and expenditure
• Ensuring fi nancial reporting, auditing and tax-related
issues are properly managed
• Ensuring the company’s overseas offi ces are effectively
staffed, managed and used.
Intellectual property committee
Exxaro acknowledges the importance of intellectual property
and its proper management. This committee ensures possible
innovations are exploited and, if appropriate, patented and
properly maintained. Copyright, trademark and possible
infringement issues are also addressed. The committee
also comprises the company secretary, representatives of
the fi nance and technology departments, and Exxaro’s legal
representatives.
Sustainability
Sustainability is a cornerstone of the Exxaro group and our
Confl icts of interest
Exxaro has drawn up a comprehensive confl icts of interest
policy that applies to all directors, management and
employees in regulating conditions which could or do
constitute a confl ict.
The primary objectives of this policy are to:
• Provide guidance on the behaviour expected in accordance
with the company’s values
• Promote
transparency and avoid business-related
confl icts of interest
• Ensure fairness in dealing with the interests of all
employees, other affected individuals, and the company
• Document the process for disclosure, approval and review
of activities that may amount to actual, potential or
perceived confl ict of interests
• Provide a mechanism for the objective review of personal
outside interests.
External communications
Briefi ng analysts, investors and fund managers is an
important element of maintaining
investor relations.
However, we will only provide “price-sensitive” information
after disclosing that information to the market.
Broader stakeholder communication plans have been
approach is embedded in the fi rst of our corporate values:
implemented. The group believes in clear, transparent,
“empowered to grow and contribute”. Our aim is to encourage
concise and timely dissemination of relevant information
entrepreneurship as far as possible to transform this value
to all stakeholders. This is achieved through a multitude
into reality for as many stakeholders as possible (page 74).
of channels and media, including written, electronic and
Black economic empowerment codes of good
practice
While we understand that companies need to verify the BEE
verbal presentations. Specifi cally, there are a number of
mechanisms for stakeholders to interact with the board and
its sub-committees. These include annual general meetings,
representative forums, internal communications across a
status of suppliers in terms of the Codes of Good Practice,
range of platforms and more.
Exxaro confi nes its reporting to the requirements set out in
the Mineral and Petroleum Resources Development Act and
its associated mining charter scorecard.
Our approach to transformation and empowerment,
however, fi ts well with the requirements of the BBBEE codes
and scorecard. In structuring the new group, we ensured
that the:
• Majority of voting rights are exercised by HDSAs
• Majority of profi ts accrue to black people
• Majority of the board comprises black people.
68
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Marketing communication
In line with its corporate values, Exxaro communicates
regularly and openly with all stakeholders. At all times,
our communications adhere to the laws, standards and
voluntary codes of accepted marketing communication in
the areas where we operate. During the year, no incidents of
non-compliance were recorded.
SHAREHOLDER INFORMATION
Market listings and other information
The principal market for Exxaro is the JSE. As a constituent
of the All Share Top 40 index (ALSI 40 index), Exxaro shares
trade through the STRATE system.
access to this personalised enquiry facility, are provided on
the Computershare website: www.computershare.com
Publication of fi nancial statements
Shareholders wishing to view the annual report or interim
Closing JSE share prices are published in most national and
report in electronic rather than paper form can access it on
regional South African newspapers and are available during
the Exxaro website: www.exxaro.com
the day on the Exxaro and other websites. Share prices are
also available on I-Net Bridge, Reuters and Bloomberg.
Shareholder information
Major shareholders
Exxaro has an over-the-counter sponsored American
As of 31 December 2008, the one entity known to Exxaro
depositary receipt (ADR) facility with the Bank of
as owning more than 10% of its shares is Main Street 333
New York (BoNY) under a deposit agreement. For
(Pty) Limited with 186 550 873 shares representing 52,54%
additional
information, please
refer
to
the BoNY
of the number of shares in issue. This entity is commonly
website: www.adrbny.com
referred to as BEE Holdco (refer to page 109).
ADR holders
ADR holders may instruct BoNY on how shares represented
by their ADRs should be voted. Registered holders of
ADRs will have annual and interim reports mailed to them
at their recorded address. Brokers or fi nancial institutions
that hold ADRs for shareholder clients are responsible for
forwarding shareholder information to their clients and
will be provided with copies of annual and interim reports
for this purpose.
Dividend determination
Dividends are determined in South African rand (ZAR) and
are declared payable in the same currency by the group.
ADR shareholders are paid in US dollars by the group’s ADR
bank, BoNY. BoNY effects the conversion of ZAR-determined
dividends in US dollars on behalf of its US ADR shareholders.
Contact Computershare or BoNY for further details.
Shareholder communication
General shareholder enquiries
Computershare is the registrar for Exxaro. All general
enquiries and correspondence concerning shareholders
(other than shares held in ADR form) should be directed to
the registrar. Computershare’s contact details are on the
inside back cover. Shareholders must notify Computershare
promptly in writing of any change of address.
All enquiries concerning shares held in ADR form should be
directed to BoNY.
Shareholders can obtain details about their own shareholding
on the internet. Full details, including how to gain secure
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
69
SHAREHOLDERS’ ANALYSIS
at 31 December 2008
Issued share capital: 355 036 600
Shareholder spread
1 – 1 000 shares
1 001 – 10 000 shares
10 001 – 100 000 shares
100 001 – 1 000 000 shares
1 000 001 shares and over
Category
Black economic empowerment
Corporate holdings
Unit trusts/mutual funds
Pension funds
Custodians
Investment trusts
Insurance companies
Exxaro Employee Empowerment
Private investors
Charity
Other funds/holdings
American depositary receipts
Number of
shareholders
% of
shareholders
Number of
shares
% of issued
capital
16 618
2 670
551
120
27
83,15
13,36
2,75
0,60
4 787 182
7 892 799
17 031 860
35 587 755
0,14
289 737 004
1,35
2,22
4,80
10,02
81,61
19 986
100,00
355 036 600
100,00
Number of
shareholders
% of
shareholders
Total
shareholding
% of issued
capital
1
390
2 582
451
40
41
71
1
0,01
186 550 873
1,95
39 105 250
12,92
34 595 502
2,26
0,20
0,20
0,35
0,01
26 270 183
23 772 833
12 122 987
11 452 301
10 618 974
15 976
79,94
8 491 230
80
351
1
0,40
1,75
0,01
968 148
852 092
236 227
52,54
11,01
9,74
7,40
6,70
3,42
3,23
2,99
2,39
0,27
0,24
0,07
19 986
100,00
355 036 600
100,00
(cid:57)(cid:92)(cid:101)(cid:92)(cid:93)(cid:96)(cid:90)(cid:96)(cid:88)(cid:99)(cid:23)(cid:106)(cid:95)(cid:88)(cid:105)(cid:92)(cid:95)(cid:102)(cid:99)(cid:91)(cid:96)(cid:101)(cid:94)(cid:23)
(cid:42)(cid:28)(cid:23)(cid:102)(cid:105)(cid:23)(cid:100)(cid:102)(cid:105)(cid:92)
(cid:42)(cid:35)(cid:39)(cid:39)(cid:28)
(cid:42)(cid:35)(cid:47)(cid:41)(cid:28)
(cid:48)(cid:35)(cid:46)(cid:47)(cid:28)
(cid:62)(cid:92)(cid:102)(cid:94)(cid:105)(cid:88)(cid:103)(cid:95)(cid:96)(cid:90)(cid:88)(cid:99)(cid:23)(cid:106)(cid:103)(cid:99)(cid:96)(cid:107)(cid:23)(cid:102)(cid:93)(cid:23)
(cid:89)(cid:92)(cid:101)(cid:92)(cid:93)(cid:96)(cid:90)(cid:96)(cid:88)(cid:99)(cid:23)(cid:106)(cid:95)(cid:88)(cid:105)(cid:92)(cid:95)(cid:102)(cid:99)(cid:91)(cid:92)(cid:105)(cid:106)
(cid:40)(cid:35)(cid:44)(cid:42)(cid:28)
(cid:39)(cid:35)(cid:48)(cid:40)(cid:28)
(cid:39)(cid:35)(cid:44)(cid:45)(cid:28)
(cid:45)(cid:35)(cid:41)(cid:40)(cid:28)
(cid:44)(cid:41)(cid:35)(cid:44)(cid:43)(cid:28)
(cid:48)(cid:39)(cid:35)(cid:46)(cid:48)(cid:28)
■(cid:23)(cid:23)(cid:68)(cid:88)(cid:96)(cid:101)(cid:23)(cid:74)(cid:107)(cid:105)(cid:92)(cid:92)(cid:107)(cid:23)(cid:42)(cid:42)(cid:42)(cid:23)(cid:31)(cid:71)(cid:107)(cid:112)(cid:32)(cid:23)(cid:67)(cid:96)(cid:100)(cid:96)(cid:107)(cid:92)(cid:91)(cid:23)
■(cid:23)(cid:23)(cid:56)(cid:101)(cid:94)(cid:99)(cid:102)(cid:23)(cid:56)(cid:100)(cid:92)(cid:105)(cid:96)(cid:90)(cid:88)(cid:101)(cid:23)(cid:58)(cid:102)(cid:105)(cid:103)(cid:102)(cid:105)(cid:88)(cid:107)(cid:96)(cid:102)(cid:101)
■(cid:23)(cid:23)(cid:71)(cid:108)(cid:89)(cid:99)(cid:96)(cid:90)(cid:23)(cid:64)(cid:101)(cid:109)(cid:92)(cid:106)(cid:107)(cid:100)(cid:92)(cid:101)(cid:107)(cid:23)(cid:58)(cid:102)(cid:105)(cid:103)(cid:102)(cid:105)(cid:88)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)
■(cid:23)(cid:23)(cid:60)(cid:111)(cid:111)(cid:88)(cid:105)(cid:102)(cid:23)(cid:60)(cid:100)(cid:103)(cid:99)(cid:102)(cid:112)(cid:92)(cid:92)(cid:23)(cid:60)(cid:100)(cid:103)(cid:102)(cid:110)(cid:92)(cid:105)(cid:100)(cid:92)(cid:101)(cid:107)
■(cid:23)(cid:23)(cid:74)(cid:102)(cid:108)(cid:107)(cid:95)(cid:23)(cid:56)(cid:93)(cid:105)(cid:96)(cid:90)(cid:88)(cid:23)
■(cid:23)(cid:23)(cid:76)(cid:101)(cid:96)(cid:107)(cid:92)(cid:91)(cid:23)(cid:74)(cid:107)(cid:88)(cid:107)(cid:92)(cid:106)(cid:23)(cid:102)(cid:93)(cid:23)(cid:56)(cid:100)(cid:92)(cid:105)(cid:96)(cid:90)(cid:88)(cid:23)(cid:88)(cid:101)(cid:91)(cid:23)(cid:58)(cid:88)(cid:101)(cid:88)(cid:91)(cid:88)
■(cid:23)(cid:23)(cid:76)(cid:101)(cid:96)(cid:107)(cid:92)(cid:91)(cid:23)(cid:66)(cid:96)(cid:101)(cid:94)(cid:91)(cid:102)(cid:100)(cid:23)
■(cid:23)(cid:23)(cid:73)(cid:92)(cid:106)(cid:107)(cid:23)(cid:102)(cid:93)(cid:23)(cid:60)(cid:108)(cid:105)(cid:102)(cid:103)(cid:92)
■(cid:23)(cid:23)(cid:73)(cid:92)(cid:106)(cid:107)(cid:23)(cid:102)(cid:93)(cid:23)(cid:107)(cid:95)(cid:92)(cid:23)(cid:110)(cid:102)(cid:105)(cid:99)(cid:91)
70
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Public/non-public shareholders
Public shareholders
Non-public shareholders
Directors and associates
Main Street 333 (Pty) Ltd*
Anglo American Corporation
Exxaro Employee Empowerment
Assore Ltd
Kumba Management Share Trust
* Directors’ holdings of 18 546 091 excluded.
Benefi cial shareholders holding 3% or more
Main Street 333 (Pty) Limited
Anglo American Corporation
Public Investment Corporation
Exxaro Employee Empowerment
Geographic split of benefi cial shareholders
South Africa
United States of America and Canada
United Kingdom
Rest of Europe
Rest of the world
Directors
Nkosi, SA
Mntambo, VZ
Zihlangu, D
Sowazi, NL
Van Staden, DJ
Konar, D
Total
Number of
shareholders
% of
shareholders
Total
shareholding
% of issued
capital
19 975
99,95
122 239 574
12
0,06
232 797 026
6
1
1
1
1
1
0,03
18 546 824
0,01
168 004 782
0,01
0,01
0,01
0,01
34 730 282
10 618 974
600 000
296 164
34,43
65,57
5,22
47,32
9,78
2,99
0,17
0,08
19 986
100,00
355 036 600
100,00
Total
shareholding
% of issued
capital
186 550 873
52,54
34 730 282
13 554 640
10 618 974
9,78
3,82
3,00
Total
shareholding
% of issued
capital
322 349 860
90,79
22 024 931
5 436 199
3 232 186
1 993 424
6,21
1,53
0,91
0,56
355 036 600
100,00
Number of
shares
8 016 068
5 529 881
2 818 552
2 181 590
565
168
18 546 824
% of shares
2,26
1,56
0,79
0,61
0,00
0,00
5,22
* Please note that indirect benefi cial holdings of Nkosi, Mntambo, Zihlangu and Sowazi were held under Main Street 333 (Pty) Limited.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
71
RISK MANAGEMENT
Risk philosophy
Exxaro maintains an
integrated enterprise-wide risk
operational risks and appropriate mitigating strategies.
Business unit managers play an important role in identifying
management
(ERM) programme to guide
individual
business units in their risk management endeavours to
either prevent or reduce the adverse impacts of operational
losses, earnings surprises and reputational damage.
Risk appetite
The audit, risk and compliance committee of the board
Risk identifi cation process
The risk management process is continuous, with well-
defi ned steps. Risks from all sources are identifi ed and once
they pass a set materiality threshold, a formal process begins
in which causal factors and consequences are identifi ed and
the correlation with other risks and mitigating controls is
approves Exxaro’s risk appetite within the board-approved
reviewed.
risk philosophy and methodology. Exxaro’s risk-bearing
capacity is a function of its ability to withstand unexpected
The top business risks, appropriately categorised and
losses and the impact of such losses on the group’s ability to
based on impact and likelihood of occurrence, together
continue as a going concern.
Risk culture
Risk owners are responsible for continuously monitoring
both the existing and ever-changing risk profi le of the
environment in which they operate.
with mitigating control measures, are disclosed below
in descending order. These top business risks have been
approved by the executive committee, the audit, risk and
compliance committee of the board, and the board itself.
High-level business risks
Risk
• Strategic
Lengthy process of executing new
mining rights and possible restrictive
conditions attached to converting rights
Impact Probability Control measures
High
High
Ensure compliance with mining charter requirement.
Continuous engagement with the Department of Minerals
and Energy (DME).
• Strategic
High
High
Finalise sands feedstock reserve prioritisation.
Confi rmation of long-term viable quality
feedstock resource for KZN Sands
smelter.
• Strategic
High
High
Long-term viable quality zinc concentrate
supply to zinc refi nery in Springs.
• Strategic
High
High
Funding of value-added growth within
balance sheet and equity-raising
constraints.
Continued exploration activity at Rosh Pinah zinc mine
and identifi cation of viable zinc concentrate supply
sources.
Ranking value-adding opportunities in a strategy aligned
growth process and within an acceptable capital
structure underpinned by cash fl ow generation and
preservation.
• Strategic
High
Medium Continuous business improvement. Optimised use of
Longer term decline in commodity prices
affecting dividend payouts thereby
negatively impacting on stable BEE
shareholder structure.
• Operational
High
High
Anticipated signifi cant price increases
for electricity combined with power
supply uncertainty, and the impact of
interruptions on safety, production and
profi tability.
• Operational
High
High
KZN Sands – not achieving cold feed
furnace production capacity at both
furnaces.
operating assets. Maintain a healthy balance sheet
through judicious consideration of growth aspirations and
global market conditions.
Participation in industry forums that engage with
Eskom and the National Energy Regulator of South
Africa (NERSA). Investigation into co-generation.
Implementation of power saving initiatives and
examination of alternatives with regard to the
conservation and use of electricity throughout operations.
Commitment to assist Eskom with additional coal supply
required to achieve stability in the power grid.
Continuous improvement combined with projects and
complementary technologies to maintain achievement of
nameplate capacity, including ongoing investigation into
alternative hearth technology.
72
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Impact
High
Risk
• Profitability
Volatility in currencies combined with
impact of forecast macro-economic
parameters and commodity prices
on operating margins, returns on
investments, project cost escalation in
respect of growth aspirations and loan
covenant compliance.
• Profitability
High
High
Impact on buoyant construction and
engineering market on the cost of capital
projects.
• Profitability
High
High
Infrastructure constraints inhibiting
coal exports and ability to transfer zinc
feedstock to zinc refinery.
• Human resources
High
High
Attraction and retention of key skills
impacting on current production and
future growth.
• Safety
High
High
Unacceptable safety record resulting
in government, labour union and other
stakeholder intervention.
• Safety
HIV/Aids pandemic.
High
High
• Environmental
High
High
Risks posed by continuously changing
and onerous environmental legislation.
• Reputational
Medium
High
Impact to imminent changes to the
mining charter and potential application
of BBBEE legislation.
Probability
Control measures
High
Judicious hedging policy. Continuous
business improvement initiatives with
rigorous tracking. Optimised use of
operating assets to leverage benefits of
higher throughput. Investigate downstream
integration opportunities and diversification
of markets and product sector.
Maintaining a database on escalation of
major commodity items based on industry
trends and own experience to ensure
comprehensive provision for escalation
on project costing and timing of long-lead
items.
Engagement to obtain expansion of the
Coallink rail capacity in order to fully utilise
Exxaro’s Richards Bay Coal Terminal
allocation of 6,3Mtpa by the end of 2009.
Implementation of effective retention
strategy for key disciplines. Remain an
employer of choice due to:
– regularly benchmarked market-related
remuneration
– comprehensive training and
development
– growth opportunities.
Focus on innovative recruitment initiatives
and succession planning. Continuous
rotation and exposure of own talent in
multidisciplinary project teams.
Enhancement of safety awareness and
preventative programmes through a strong
focus on hazard identification and visible
felt leadership.
Improve voluntary counselling and testing
enrolment by creating a conducive
environment for disclosure and treatment
participation.
Continuous monitoring of work performed
in line with rehabilitation strategy. Ongoing
rehabilitation is managed out of operational
budgets while Exxaro Environmental
Rehabilitation Fund provides for the final
closure costs. Continuous engagement
with authorities.
Proactive planning to ensure compliance
in terms of ownership, preferential
procurement and employment equity.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
73
SUSTAINABLE DEVELOPMENT
Sustainable development is a cornerstone of the Exxaro group, embedded
in our strategy and the fi rst of our corporate values which states
“empowered to grow and contribute”. To be truly effective, however, we
believe empowerment must be a two-way process between Exxaro and our
stakeholders.
Message from the chief executive offi cer
During the year, as part of reviewing the structure and
strategy of Exxaro, we streamlined certain divisions,
resulting in a safety and sustainable development (S&SD)
division that incorporates all the elements of triple bottom-
line reporting: social, environmental and economic. The
head of S&SD, a well-qualifi ed and experienced senior
executive, reports directly to me and to the board through
a focused board sub-committee (page 66). By creating
an integrated department, targets can be closely aligned
with the group’s short- and long-term strategies, national
priorities and expressed stakeholder needs.
In essence, our mission is to create unrivalled value for all
stakeholders through our processes, thinking and passion.
Breaking this down into measurable targets in the longer
term means:
• Sustainable returns to our shareholders – including our
own people
• An injury-free work environment – one where every
employee has the freedom to grow and develop
• A healthy workforce – with an appropriate balance
between individual responsibility and healthy working
conditions
• Responsible use of our natural resources.
Reaching our long-term goals requires short-term action,
focused on:
• Maximising effi ciencies in the current economic climate
• Reducing the number of injuries (page 81)
• Managing our use of natural resources (pages 84,
87 and 91).
The analysis on page 10 contextualises the focus areas for
our group at present.
Managing a mining group in the 21st century, particularly
the safety, health, environmental (SHE) and social aspects,
requires an unprecedented level of statutory and non-
statutory compliance. More importantly, we believe it requires
a genuine desire to preserve at every level – in the skills of
people, in the resources of our planet and in the prosperity of
our communities. This requires a holistic view of the strategic
issues that infl uence SHE. For Exxaro, these include:
• Legislation in different territories
• Corporate strategy:
• Continually becoming more proactive
• Finding the correct balance between generic policies,
eg Exxaro’s I care rules, and the operational needs of
each business unit
74
I E x x a r o A n n u a l R e p o r t 2 0 0 8
• Commodity choices – the group risk environment
do on fi nancial aspects of our business. We believe today’s
where our current dominance in coal presents a high-
stakeholders deserve no less.
risk profi le
• Effi ciency and cost management
In November 2008, the second annual report from South
• International SHE issues (Namibia, Australia, China, etc)
Africa’s Carbon Disclosure Project – part of a global
• Business unit strategy/needs and risk minimisation
initiative that tracks companies’ greenhouse gas emissions,
• Stakeholder perceptions.
targets and responses to climate change – was released.
The local survey covers the top 100 companies on the JSE.
SHE services are statutory by nature; whatever is new or
Interestingly, in the carbon-intensive sector, Exxaro was
being discontinued depends on legislative changes or
ranked fi fth against far more established companies in the
changes in risk profi le. These, in turn, inform work volumes.
metals and mining sector.
Managing these volumes while meeting stakeholder needs
is an ongoing challenge, and not specifi c to our group or
In our quest to be a truly responsible business in all respects,
industry.
Performance
Exxaro became a signatory of the United Nations Global
Compact in 2007 – the world’s largest voluntary corporate
citizenship initiative that outlines 10 universally accepted
Exxaro’s performance on the key elements of sustainable
principles on human rights, labour, the environment and
development – economic, social and environmental – during
anti-corruption. This is another tangible illustration of the
the year was mixed. On the positive side, we established a
group’s commitment to sustainable development. Exxaro is
carbon footprint for the group and clarifi ed our strategy on
already voluntarily working towards complying with various
energy, revised our HIV/Aids strategy and initiated a major
local and international sustainability protocols, including
drive on water management. We also exceeded 2009 mining
the Global Reporting Initiative (GRI) and the JSE’s Socially
charter targets for employment equity at management
Responsible Investment (SRI) index.
level and for women in mining, and increased the number of
registered mining learnerships by more than 60%.
Today Exxaro is one of over 6 200 global compact signatories
in 120 countries, and one of more than 1 000 organisations
Areas where we missed our targets include our disappointing
in nearly 60 countries using GRI guidelines.
safety performance, which is being vigorously addressed
(page 81). Exxaro operations without international health
Responsible business practices are a long-term value
and safety (OHSAS 18001) and environmental standards
proposition for Exxaro: it makes business sense for us to
(ISO 14001) in place are well advanced in their preparations
invest in creating a sound environment in which to operate,
and should achieve certifi cation in 2009.
based on universal values, accountability and transparency.
It’s also the right thing to do and we do it with passion.
We were pleasantly surprised to be judged the best
newcomer – extractive industries in the 2007 Association
of Chartered Certifi ed Accountants (ACCA) sustainability
reporting awards. Surprised, because as a new group
formed from two established companies, we knew that
much work was needed to standardise systems and ensure
Sipho Nkosi
meaningful reporting. We said as much in our 2007 report.
Chief executive offi cer
However, receiving this prestigious award has reinforced
our resolve to report on sustainability issues as well as we
17 March 2009
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
75
APPROACH TO SUSTAINABLE DEVELOPMENT
We believe sustainable development is integral as part of our value
proposition to stakeholders.
In July 2008, the safety and sustainable development division was created to ensure that Exxaro has a sustainable
development platform with a clear programme. While the targets and objectives of this division are still being developed,
cognisance will be given to priorities raised in the 2002 World Summit on Sustainable Development, and we are carefully
examining the issues raised at that summit that give rise to sustainable development programmes in organisations,
including:
• Role of mining in communities
• Role of ethics in business
• Environmental care
• Due diligence
• Social responsibility
• Operating within the legal framework
• Participating in the legal process.
We have already distilled these into three major areas, graphically shown below:
Sustainable development focus areas
• Safety & health of people
• Workplace issues
•
Natural resource
management & rehabilitation
•
Energy effi ciency & cleaner
production
•
•
•
•
•
Community development
Enterprise development
External impacts
Skills development
Stakeholder engagement
SYNERGIES
•
•
•
•
•
•
•
Ethics
Legal issues
Risk management
Governance issues
Shareholder rights
Reporting
Stakeholder trust
The existing safety, health and environment (SHE) and
Nations Global Compact, and the International Council
sustainable development structures across the group are
on Mining and Minerals. In line with our commitment,
being reviewed in line with Exxaro’s strategy. Underpinned
sustainability is a key performance indicator in the economic,
by a comprehensive analysis of the business case for
social and environmental aspects of our business.
sustainable development and the triple bottom-line drivers
in each area, our approach is determined by formal charters
The business case for sustainable development is graphically
that defi ne our goals and commitment to stakeholders.
shown overleaf, with the outer ring representing areas
These charters are, in turn, guided by South African
that add value for Exxaro and the inner ring value for our
legislation, recommendations on corporate governance
stakeholders – the ultimate aim, however, is creating value
and international benchmarks such as the Global Reporting
for all.
Initiative (GRI) and its sectoral supplements, the United
76
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The business case for sustainable development (SD)
Maintain
international
management and
reporting standards
Elevated sustainable
development brand
Employer
of choice
Self-
sustaining
communities
Gaining and
maintaining licence
to operate and grow
Optimisation
and effi ciency of
resources
Investor of
choice
Approved
material
SD thrusts
Value
creation
Improved
standards of
living
Enhanced
resource
conservation
Mining
charter
Enhanced
work/life
balance
High SD
performance culture
Maintain
stakeholder trust
Identify and reduce
SD risk
■■ Company value
■■ Stakeholder value
Improved attraction
and retention of
workforce
We believe sustainable development is integral as part of our
In fi nding the balance between economic interests and social
value proposition to stakeholders. Our shareholders need to
and environmental concerns of our stakeholders, Exxaro
understand the coherent process that underpins the way we
implements specifi c
interventions and developmental
do business: from the strategy that drives our growth, to
projects guided by the social needs of the community, and
our keen understanding of the risks that may impede that
by the national priorities of society at large, including:
strategy and the commitment of our management teams to
• Education, training and skills development
achieving profi tability and sustainability. Therefore, we are
• Healthcare promotion, particularly HIV/Aids programmes
giving equal emphasis to strategic growth and sustainable
• Job creation, SMME (small, medium and micro enterprises)
development, acknowledging that Exxaro’s success in South
and other business opportunity development
Africa rests on their interdependence. To ensure continual
• Conservation of environment,
including awareness
improvement, our strategy is regularly reviewed.
programmes
• Infrastructure development.
To remain abreast of the changing needs of our stakeholders
and the impact of our operations and initiatives, Exxaro
As a mining group, our challenge is to demonstrate that the
businesses have completed socio-economic assessments of
way we approach our business contributes to sustainable
most of their operations. Through this process and continual
development. This means balancing the opportunities
community engagement forums, Exxaro has been able to
for growth and development that responsible citizenship
establish a relationship of trust within communities where
presents and ensuring that the social, environmental
it operates.
and economic impacts of mining – positive and negative
– are managed in an open and accountable way. This will
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
77
APPROACH TO SUSTAINABLE DEVELOPMENT continued
require leadership in promoting sustainability as a business
The methodologics for determining specifi c indicators are
philosophy.
described in the text, eg injuries (page 82), carbon footprint
(page 87) and air quality management (page 86).
Accordingly, our operations have social and labour plans
and environmental management plans, most of which
Stakeholder engagement
have been approved by authorities. These plans guide the
Stakeholder engagement is fundamental to create value
implementation of a balanced approach between Exxaro’s
for all our employees, interested and affected parties as
interests and the social and environmental concerns of the
well as with authorities. Effective and strategically aligned
community.
stakeholder engagement within Exxaro will lead to more
equitable and sustainable socio-economic development and
By stipulating leadership in sustainable development as
will enable better management of risk and reputation.
one of the elements of our strategic framework, we have
committed ourselves to setting and achieving targets that will
To strengthen stakeholder engagement, Exxaro has adopted
ensure the legacy we leave is positive for today’s children and
AccountAbility AA1000SES Standards, which include the
tomorrow’s leaders.
following processes:
Through triple bottom-line reporting, charting our progress
• To engage with stakeholders in developing a proactive
towards these targets is a measurable performance indicator
approach
for every level of management, and the responsibility of
• To determine material issues
• To develop a database with stakeholders
every person in our group.
Scope of report
• To respond on all issues
• To ensure completeness.
Exxaro’s 2008 annual report includes the group’s sustainable
In 2008, Exxaro developed a software system for socio-
development performance,
integrating our economic,
economic development which focuses mainly on stakeholder
social and environmental results for the year for a group-
engagement. In addition to the processes of AA1000SES,
wide understanding. It also sets out the challenges and
the system also focuses on project management, donations
opportunities that lie ahead.
(cash contributions), donations-in-kind
(non-monetary),
volunteerism and reporting against the requirements of
Although the group is only two years old in its present
the mining charter and codes of good practice. The system
form, the process of merging the former Kumba Resources
was installed in fi ve of our operations by July 2008, and by
and Eyesizwe operations is almost complete and the
mid-2009 will be fully implemented and operational at all
consolidation of the Namakwa Sands operations began in
business units.
October 2008. This makes data comparability challenging
in some areas. Throughout these processes, however, the
Communication between Exxaro and each stakeholder group
group’s earlier adoption of triple bottom-line reporting has
is facilitated in a number of ways:
remained a cornerstone of our commitment to sustainable
• Employees are invited to provide views and comments
development and of our determination to entrench global
on internal communication within the group through
best practices in all operations. Exxaro therefore reports
bi-monthly newsletters, an intranet, regular employee
against the 2006 guidelines of the Global Reporting
surveys and feedback from various forums.
Initiative (G3), and the content of the 2008 report has been
• Customer perceptions are regularly surveyed through
prepared in line with GRI intermediate application level B+.
external service providers
78
I E x x a r o A n n u a l R e p o r t 2 0 0 8
• Supplier
interaction
is continual through external
South Africa, Exxaro competed against 30 companies
perception surveys, forums and other initiatives
and was specifi cally commended for its high standard of
• Trade unions – regular consultation with all recognised
reporting and exceptional coverage of human resources-
unions by the group’s employee relations management
related issues, governance and fi nancial disclosure
unit
• Government – consultation is at national, provincial,
district and local level
• Regulators – senior Exxaro members meet with offi cials
from different and relevant government departments
• Industry bodies – Exxaro’s chief executive offi cer has just
begun his second term as president of the Chamber of
Mines, and the group actively participates in chamber
issues
• Investors – there
is regular
interaction between
management and the investor community, from fi nancial
results presentations to roadshows, open days, site visits
and individual meetings. Full use is made of technology to
give investors complete access to group operations and
management
• Media – regular
interaction takes place between
management and media representatives
• Exxaro’s internal newsletter, xxplore, took the trophy in
the annual South African Publication Forum competition
• A
supply-chain management
initiative
between
Grootegeluk mine and Hitachi to improve the availability
of Hitachi trucks at the mine won a major pan-African
accolade in 2008. Judged the “best cross-functional
teamwork project” at the
Institute of Purchasing
South Africa (IPSA) awards, it has boosted production
at Grootegeluk with considerable cost savings. This
rewarding partnership has also facilitated breakthrough
design changes for these trucks which will benefi t users
across South Africa.
Report scope and boundary
Sustainability performance
in this report spans the
12 months from 1 January to 31 December 2008. For the
review period, Exxaro reports against the revised GRI
guidelines, referred to as G3 to differentiate them from
• Communities – in addition to stakeholder engagement
GRI’s 2002 guidelines.
plans, operational management members serve on
municipal forums for integrated development planning
and local economic development, and actively participate
in capacity-building initiatives
Although Namakwa Sands only offi cially became part of the
group in October 2008, data from this operation is included.
This report excludes the following operations where we do
• Interest groups – Exxaro is building strong relationships
not have management control:
with relevant non-government bodies and interest groups
• Australia Sands – principal asset is its 50% ownership in
such as the Centre for Corporate Citizenship, African
the Tiwest joint venture with Tronox Incorporated.
Institute for Corporate Citizenship, National Business
• Chifeng Refi nery – as a fi rst step for potential investment
Initiative and others.
in China, Exxaro has an equity joint venture with an
existing refi nery facility. Exxaro owns 38% of Phase 2 and
Across the group,
issues raised by stakeholders are
25% of Phase 3 in this venture, resulting in an effective
appropriately channelled. These issues are considered
22% economic interest in the expanded operation.
and included in the risk evaluation process, as set out on
• Mafube
page 72. Responses are supplied as soon as practical and
disseminated across the organisation.
Awards
In determining material issues to include in this report,
Exxaro has used the methodology recommended by G3
which spans external and internal factors:
• Exxaro’s fi rst sustainability report (integrated into the
• External:
2007 annual report) was judged best newcomer – large
• Key sustainability issues raised by stakeholders
enterprises at the annual Association of Chartered
Certifi ed Accountants (ACCA) awards. Hosted by ACCA
• Sectoral issues and challenges reported by peers and
industry bodies such as the Chamber of Mines
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
79
APPROACH TO SUSTAINABLE DEVELOPMENT continued
• Relevant legislation and voluntary agreements (local
Exxaro is classifi ed as having an overall high environmental
and international) of strategic signifi cance to the group
impact because it is involved in mining and metals. Ranked
and its stakeholders
among the 21 best performers on the SRI, Exxaro exceeds
• High-profi le
sustainability
issues,
impacts
or
the minimum JSE requirement for environmental policy
opportunities, from climate change to HIV/Aids.
by including all key issues and specifi cally the following
• Internal:
elements:
• Exxaro’s values, policies, strategies, processes and
• responsibility at board level with supporting resources
targets
• the SHE committee is responsible for monitoring and
• The interests and expectations of stakeholders for
performance, using consulting forums to
inform
whom our corporate progress is paramount, including
executive management
employees, shareholders and suppliers
• commitment to use objectives and targets
• Key risks defi ned by corporate risk methodologies
• commitment to monitoring and auditing
• Critical factors for Exxaro’s success, including the
• commitment to public reporting
synergy between our operations and the universal
• globally applicable corporate operating standards
aims of sustainable development.
• commitment to stakeholder involvement
The outcome of this process identifi ed numerous material
issues detailed in the risk management section on page 72.
Solid progress is being made in areas that do not yet fully
We have focused on the top three – safety, profi tability and
comply with JSE SRI requirements, specifi cally providing
operational – in this report (page 10).
objectives and targets for all key areas, and reporting on
• commitment to address product or service impact.
strategic moves towards sustainability:
Ongoing feedback from a range of stakeholders helps us
• Exxaro provides compliance objectives on biodiversity,
to contextualise certain issues better for more informed
rehabilitation, water, air quality and greenhouse gas.
understanding by readers. Feedback is a critical element of
However, targets are only for energy emissions at present.
our reporting process and should be directed to:
Targets are being determined for other key impact areas.
Hilton Atkinson – manager: corporate communication
in Exxaro’s revised SHE policy and the group executive
• Strategic moves towards sustainability are now covered
Email: Hilton.atkinson@exxaro.com
Telephone: +27 12 307 4843
Fax: +27 12 307 4760
Mobile: +27 83 609 1452
www.exxaro.com
SRI compliance
committee commitment statement.
Assurance – broad-based verifi cation
Exxaro has internal systems to record and monitor the
quality (accuracy, fullness and consistency) of management
information and any data gaps in the group.
Exxaro again qualifi ed for inclusion in the JSE’s revised
In line with our commitment to the triple bottom line, an
Socially Responsible Investment (SRI) index in November
integral part of reporting to stakeholders is assurance on
2008. This index identifi es best practice in corporate social
the quality of disclosure. Previous integrated annual reports
responsibility and corporate governance in a benchmark
have been externally assured, albeit on a limited range of
index.
elements. In this report, we have extended our approach
to assurance by commissioning a more in-depth external
assurance report by Ernst & Young (page 110).
80
I E x x a r o A n n u a l R e p o r t 2 0 0 8
SAFETY, HEALTH AND ENVIRONMENT PERFORMANCE
We aspire to be a good international citizen through our endeavours to
contribute to sustainable development challenges facing the world
Commitment to safety, health, environment
and sustainable development
Safety, health and environment (SHE) is an integral part of
our business and a critical pillar of our success in achieving
fatalities by 20% per annum for the following 10 years.
When members met at a summit in 2005, they realised not
much progress had been made.
sustainable development. As part of our programme of
Accordingly, the chamber has adopted a Mining Occupational
continual improvement towards our vision of zero harm,
Safety and Health best-practice system, with the deadline
we publicly report on our safety, health and environment
of 2013 for achieving these industry-wide goals. Four task
performance.
teams will address particular issues, namely noise, dust, falls
of ground, capacity building and leadership. One example
We aspire to be a good international citizen through our
of the work being done by a task team is investigation
endeavours to contribute to sustainable development
into a fogging system that could reduce dust in mining
challenges facing the world, hence our keen interest and
operations.
participation in SHE issues beyond the call of law and, most
importantly, on international treaties to which South Africa
At Exxaro, we are working towards a 30% per annum overall
is a signatory.
safety improvement. We are earning from processes used
abroad, and focusing on adopting the new system identifi ed
We will sustain our SHE programmes through smart
by the chamber.
partnerships with all our stakeholders and periodically
review our policy and management standards to ensure
Keeping our people safe
they are appropriate and relevant to the organisation.
Our target is zero injuries and, therefore, zero fatalities.
Our aim is to achieve this through stringent application of
A formal SHE policy informs most of our SHE-related work
management protocols, programmes and systems. Formal
beyond our mine gates or work that the government may
management-worker health and safety committees are in
perceive as contributing to the well-being of South Africans.
place at all operations, and meet regularly to ensure we
reach those targets.
Our SHE governance model has a focused compliance
approach, meeting legislative requirements as a minimum.
Immediate management action is supporting our drive
Proper risk management systems and processes are then
towards zero harm, with highlights already recorded at
modelled around key risks for implementation at operational
these business units including:
level. A risk-based approach also informs the way resources
• Staffi ng high-risk areas with additional
safety
are allocated and used within the group to ensure precision,
practitioners
progress and dedicated responsibilities towards
legal
• Retraining safety representatives
compliance.
• Coaching and reinforcing the practice of using mini-HIRAs
(hazard identifi cation and risk assessments) before every
During the reporting period, no signifi cant fi nes, sanctions
task
for non-compliance with environmental laws and regulations
• Implementation of a structured visible felt leadership
were imposed on any Exxaro operations.
Safety
At industry level
(VFL) programme (a formal and monitored process in
which leaders spend time with employees at work to
focus on safety, reinforce positive behaviour and correct
negative actions).
Safety is one of the biggest issues facing the South African
and international mining industries, and local experts have
Although key risks differ by operation, the group’s major
set new goals and deadlines for getting the country’s safety
challenges are vehicle incidents, energy and machinery
statistics in line with global standards.
isolation, and risk awareness and discipline at all levels.
Skills shortages effectively exacerbate these challenges and
In 2003, the mining sector set a series of sector targets on
ensuring the group has suffi cient trained people remains a
safety and health, with the goal of reducing injuries and
priority.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
81
SAFETY, HEALTH AND ENVIRONMENT PERFORMANCE continued
A number of initiatives were launched in 2007 to address
including fi re, fl ood, bomb threats, etc. Emergency situations
these risks, supported by corporate audits and incident
that have occurred have been well handled, demonstrating
investigations in the review period. Results to date have
the comprehensiveness of both policy and training.
been satisfactory:
• The roll out of revised I Care fatal risk controls is ensuring
Exxaro set a target of zero fatalities and lost-time injury
special emphasis on the risks responsible for fatalities at
frequency rate (LTIFR) per 200 000 man-hours worked
Exxaro and the preventive measures in place to manage
of 0,21 for 2008, a 30% reduction on the LTIFR target for
these risks better
2007. While there has been a steady reduction in the LTIFR
• Revised HIRA standards have been rolled out to all
from 0,52 in 2005 to 0,36 in 2007, actual performance
operations and are ensuring a higher level of risk
was 0,39 in 2008. In risk-specifi c terms, the leading cause
identifi cation and mitigation
of injuries was lifting and materials handling, followed
• Vehicle safety – revised standards have set a minimum
by energy and machine isolation, vehicle safety, ground
compliance level for vehicles to operate on company
control and working at heights. We are disappointed that
property or be used for company business
we again missed our target in a year when the focus was
• Visible felt leadership – improved communication and
on completing the integration of the former Eyesizwe and
understanding of key safety risks between management
Kumba Resources’ systems, standards and procedures. The
and employees to improve risk awareness and proactively
safety of our people is fundamental to our business, and
address and mitigate safety risks on the fl oor before
we will not rest until we achieve our safety goals through
accidents occur.
collective responsibility, commitment and ongoing focus.
An initiative focused on incident notifi cation, investigation
The fatality frequency rate per million man-hours worked
and communication is in the fi nal stages of development. This
in 2008 was 0,13. Our target remains zero, as any death
will include proper application of lessons learned.
is unacceptable. Despite excellent safety performances at
several mines, we regrettably lost fi ve colleagues during the
All lost-time injuries are investigated by the relevant business
year, four of whom were employed by contractors at Exxaro
unit manager. All fatalities are investigated by a committee
operations. There were two fatalities at Matla – one in March
with the appropriate skills, headed by an independent
and one in November, and one each at Hlobane in February,
chairman. Each business unit tracks its adherence to
Grootegeluk in September and Leeuwpan in October
standards and legislation through a programme of self-
(non-reportable incident that happened outside working
assessments and corporate audits.
hours). Each case was thoroughly investigated, and lessons
learned incorporated into our safety programmes to create
Exxaro’s initiatives to improve safety performance extend to
an injury-free work environment.
contractors at all operations as part of a formal programme:
• Contractors are managed as part of Exxaro’s workforce
The improved safety performance in the fi nal quarter of the
• Corporate contractor management standards are in place
year could indicate that initiatives implemented throughout
and adherence is enforced by each operation’s contractor
the year are beginning to have an impact on behaviour.
manager
• Monthly inspections to ensure compliance
• Induction and medicals are required by all contractors
before starting work
Health and hygiene
Exxaro is committed to reducing employee exposure to
health risks in the workplace. We have also committed
• Contractors participate in monthly SHE meetings at
resources in responding to the major challenge of HIV/Aids.
operations.
Key risks
A policy is in place that details Exxaro’s approach to
As a mining group, our major health and hygiene risks are
identifying, preparing for and responding to emergency
noise, dust and thermal stress. Other risks include gases
situations
affecting
employees
and
surrounding
and illumination. These vary by commodity and by type of
communities. This spans all known types of emergency
operation.
82
I E x x a r o A n n u a l R e p o r t 2 0 0 8
In a systematic process that includes a hygiene surveillance
see www.exxaro.com/case_studies
programme, business units identify, rank and quantify their
ARNOT TAKES ACTION
risks. Workplace exposures are linked to individuals, and this
informs the medical surveillance programme.
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To improve our management of identifi ed workplace risks
in the enlarged group more effectively, standards for
hazardous chemicals and tuberculosis will be implemented
in 2009.
A group-wide awareness campaign that focused on the key
risks (noise, dust and thermal stress) was introduced at all
business units, emphasising the importance of employees
caring for their own health today, to live a quality life in
future – even after retirement. Creating awareness of the
importance of individuals taking responsibility for their
own health and that of their colleagues in the workplace
is central to employees understanding the need to comply
with procedures aimed at reducing adverse health
effects.
see www.exxaro.com/case_studies
ZINCOR WORKPLACE WELLNESS
Meeting mining sector targets
One of the targets set by the mining sector on noise and
silicosis was to ensure that employees entering the industry
after December 2008 would not develop noise-induced
hearing loss or silicosis.
Following the baseline audit we conducted in 2007 to assess
Exxaro’s readiness to meet sector targets, our business
units began to implement appropriate corrective actions to
enable them to meet these goals.
Occupational diseases
In 2008, Exxaro had 22 occupational disease cases accepted
for compensation. These included fi ve cases of noise-induced
hearing loss (NIHL), two cases of pneumoconiosis, and
15 cases of occupational tuberculosis (TB). The increase in
occupational TB cases from two in 2007 to 15 in the review
period can be explained by the fact that in 53% of the cases,
there were co-existing medical conditions which may have
contributed to increased susceptibility to occupational TB.
We will continue to focus on
implementing hearing
conservation and dust control programmes to reduce
employee exposure to aggravating risks in the workplace.
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HIV/Aids
HIV/Aids remains a challenging disease in South Africa, with
one out of every six people living with HIV/Aids in the world
found in South Africa.
Exxaro HIV prevalence is currently estimated at 14%. At
the end of 2008, 64% of our employees had participated
in voluntary counselling and testing. However, at some sites
less than half the employees have tested. Our target for
2009 is to get at least 50% of all employees at each site
to test for HIV.
The group’s HIV/Aids programme was reviewed and the strategy
revised to address identifi ed implementation gaps.
The major strategic objectives of Exxaro’s HIV/Aids
programme are to:
• Reduce risk of infection. This includes providing a
workplace programme focused on prevention, early
detection, treatment and support
• Reduce the cost of intervention by quantifying and
reducing direct, indirect and systemic costs
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
83
SAFETY, HEALTH AND ENVIRONMENT PERFORMANCE continued
• Minimise
impact on fi nancial returns by reducing
becomes a sustainable business. Given that the principles
absenteeism, retaining skills and increasing productivity
of the precautionary approach recommended by GRI are
• Improve
the health of employees and business
embedded in these pieces of legislation, Exxaro adopts
sustainability (by improving employee wellness and
the precautionary approach
in evaluating business
prolonging lives).
opportunities.
The range of services available to employees includes:
To enhance implementation of these legal requirements and
• Telephonic support through a call centre
the sustainable use of natural resources, draft standards for
• Lifestyle and nutrition counselling
managing air quality, water, biodiversity, rehabilitation and
• Anti-retroviral readiness and adherence counselling
incidents have been completed.
• Anti-retroviral treatment
• Monitoring of side effects and adverse drug reactions
In pursuit of sustainable development, Exxaro is responding
• Post exposure prophylaxis.
to the global threat of climate change, beginning with
successfully determining the group’s carbon footprint.
One of our challenges has been ensuring adherence to
This process will allow us to identify opportunities in our
treatment and this will be an area of focus in 2009. Training will
operations to reduce greenhouse gases (page 87).
be provided to encourage employees to be more supportive to
HIV positive employees and peer educators will be equipped
A dedicated in-house environmental management specialist
with skills to help colleagues adhere to treatment.
unit is making good progress in addressing environmental
Progress on achieving Exxaro’s strategic objectives will be
tracked over time by introducing targets on training, testing
Key risks and management activities
enrolments and adherence to treatment.
Key environmental risks from Exxaro’s mining and mineral
risks and impacts to enhance Exxaro’s legal compliance.
see www.exxaro.com/case_studies
COMBATING HIV THROUGH EDUCATION
Environmental management
Conserving natural resources and reducing the burden of
pollutants to the natural environment remains our core
focus in this fi eld. We strive to achieve this by:
• Complying with all applicable environmental legislation –
as a minimum standard
• Developing innovative policies and programmes for
addressing environmental impacts.
All our South African operations have environmental
management programmes required under the Mineral
and Petroleum Resources Development Act (MPRDA) and
the National Environmental Management Act (NEMA),
which is one of the key indicators in ensuring that Exxaro
processing activities include:
• Water and waste management
• Air quality and climate change
• Biodiversity and land management
• Rehabilitation and environmental liability management.
Water and waste management
To manage Exxaro’s waste water risks, the following
management actions were taken during the review period:
• Integrated water and waste management plans were
developed for Matla and the char plant. All other Exxaro
operations have plans in place, except Arnot, Glen Douglas
and Glisa which are planned for 2009.
• Water balances were revised and updated for Zincor, the
char plant and KZN Sands’ Hillendale mine. In progress
are Glen Douglas, Matla, Arnot and KZN Sands’ central
processing complex.
84
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Water effi ciency projects at Exxaro
Business unit
Description
Grootegeluk
• In-pit storage of stormwater runoff for plant use with a pH neutralisation plant to avoid corrosion
• Dewatering of Basalt aquifer as process water, the Basalt aquifer is fed mainly by seepage from unlined
pollution control dams, stockpile areas and slimes facility
• Water recovery from slimes disposal facility
Matla
• Excess water from underground is being considered for distribution to Eskom as process water subject
to water quality
Leeuwpan
Inyanda
• Water recovery from slimes disposal facility
• Stormwater runoff that accumulates in pit and plant area recycled via process water dams
• Water reclamation through the press fi lter at plant reclaims water from the slimes
• Water reclamation from slimes facility
• Stormwater runoff from plant area captured and returned to plant for re-use
• Pit water from groundwater fl ow and runoff pumped back to dirty water facilities for re-use
• Sewage biologically treated with an option for re-use
Tshikondeni
• Co-disposal facility with water reclamation back to plant for re-use
• Stormwater runoff collected in lined pollution control dams at shaft areas for re-use in process water
system
New Clydesdale
• Slimes disposal underground with percolated water recovery for re-use in plant area with zero abstraction
from Olifants River for coal-washing purposes
• Stormwater runoff at plant area recycled back as process water.
• Pit stormwater runoff used for dust suppression at Vaalkranz North
North Block
Complex
Zincor
• Excess water from Blesbok pit and stormwater runoff collected in pollution control dams for dust
suppression.
• Rainwater collection from roofs to augment process water requirements
• Borehole abstraction used to draw back seepage water from aquifer to curb spread of pollution plume
and augment process water supply to plant
Glen Douglas
• Stormwater runoff into open-cast areas used as process water in plant area
KZN Sands
• Hillendale has reduced water consumption from Umgeni Water during rainfall season due to reclamation
of stormwater runoff to plant
• Seepage and runoff at central processing centre collected and used as process water for various
purposes
Namakwa Sands
• At mineral separation plant and smelter, process water recycled from disposal facilities back to plant
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
85
Safety, health and envIronment performance continued
Considering South Africa’s status as a water-scarce country, in November Exxaro and other major coal producers signed a
joint initiative to collaborate on water management issues in the highveld region of Mpumalanga province in an attempt to
find innovative long-term solutions. Other signatories are Anglo Coal SA, BHP Billiton Energy Coal SA, Xstrata and Eskom.
In the year ahead, water management will be a significant area of focus for Exxaro, focusing on various aspects from
security of supply to water efficiency, waste water management and pollution control.
Water withdrawal by source
Source
Arnot
Eskom
Glisa
Inyanda
Leeuwpan
Matla
New
Clydesdale
North
Block
Complex Tshikondeni
Boreholes
Eskom Olifants River
(Mpumalanga)
Municipal Unwa Dam,
boreholes
Olifants River,
(Mpumalanga)
boreholes
Mokolo
Dam,
boreholes,
pit water
Glen
Douglas
Rosh
Pinah
Zincor
KZN
Sands
Namakwa
Sands
Municipal NAMWater Municipal,
boreholes,
rainwater
harvest
Municipal Olifants River,
(Western
Cape),
seawater
see www.exxaro.com/case_studies
Zincor WatEr rEsourcE consErvation and rEclamation
air quality management
Using the Exxaro air quality management framework,
Exxaro’s air quality management activities are aimed at
75% of business operations completed detailed emissions
ensuring compliance with the requirements of the South
inventory and dispersion models during the year, and 93%
African National Environmental Management Air Quality
of our operations monitor ambient concentration of dust
Act, limiting impacts on the receiving environment and key
fallout from mining activities. Monitoring activities at KZN
receptors by adopting a continuous improvement approach
Sands and Grootegeluk have been expanded to include
through innovative environmental management.
PM10 (smaller particle matter suspended in air) using active
analysers with remote data loggers and offsite data quality
Given the nature of our diverse businesses, certain activities
control and checks.
present greater challenges for adequate air quality
management such as emissions generated from:
• Blasting
• Spontaneous combustion of discard dumps
• Mineral ore-processing and handling activities
• Wind erosion of exposed mining and operational areas
• Entrainment of dust from unpaved operational roads
• Tail-pipe gaseous emissions of on-site vehicles.
As a group, Exxaro does not produce ozone-depleting
substances. In addition, the group does not report on NOX
and SOX emissions as this is only relevant at two operations,
Zincor refinery and KZN Sands. Monitoring systems are
being established at these operations.
see www.exxaro.com/case_studies
roastEr rEbuild at Zincor hElps addrEss
fugitivE gasEous Emissions
climate change, energy and greenhouse gases
Energy management
Exxaro has adopted a consolidated approach with all related
issues integrated under the energy management steering
committee. This previously functioned as the clean energy
forum but has been realigned to increase the prioritisation
and management focus given to this important issue.
86
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The scope of the steering committee includes operational
Mitigation and clean-energy opportunities
energy management issues as well as the implementation
The Exxaro Chair in Business and Climate Change is based at
of projects to enable Exxaro to thrive in a low-carbon
Unisa’s College of Economic and Management Sciences. The
economy. The forum is led by an executive general manager,
R3-million three-year sponsorship will help in developing a
and comprises senior management from corporate services
core body of knowledge on climate change in South Africa
and business units. Topics addressed include:
to assist local businesses to adapt to, and reduce the effects
• Regulatory environment
of, climate change. This reinforces Exxaro’s commitment
• Energy consumption data reporting
to achieving clean energy standards and remaining
• Energy security
• Energy effi ciency
competitive while dealing effectively with climate change,
potential energy shortages, related environmental concerns
• Mitigation and clean-energy opportunities
and rising costs of energy.
• Integration with sustainability management.
The forum’s objectives
include establishing a cross-
renewable energy projects with the potential of generating
functional management structure to address all energy-
250 – 400MW, in either wind or solar generation. The group
related
issues, and ensuring the development of a
is also progressing with a feasibility study on co-generation
comprehensive energy-consumption and carbon footprint
to produce some 200MW of electricity from waste energy
Exxaro has
initiated a pre-feasibility study on two
reporting framework.
Energy effi ciency
such as furnace off-gas and waste heat at its own and at other
organisations’ operations. The objective is to minimise energy
waste, thus increasing energy effi ciency dramatically. The
Exxaro remains committed to the energy effi ciency accord
carbon footprint of electricity from these sources is virtually
signed in 2005 and, by participating in the energy effi ciency
zero and would reduce Exxaro’s carbon footprint.
technical committee (facilitated by the National Business
Initiative), is playing a leading role in industry collaboration
Carbon disclosure project
with the DME and other government agencies.
As noted in the chief executive’s sustainable development
Exxaro uses just under 1% of all the electricity generated by
response to climate change issues in the group’s fi rst
message, Exxaro was recognised for its comprehensive
Eskom. In 2006, Exxaro produced 379 443 tonnes of carbon
dioxide equivalent (CO2e) through the consumption of petrol
and diesel and more than 1,5 million tonnes of CO2e from
purchasing electricity from the Eskom grid. Establishing
these quantities – and investigating ways to reduce them
– was the fi rst step towards reaching Exxaro’s 2015 goal of
improving energy effi ciency by 15%. In 2007, the group’s
electricity bill was R256 million – 3% of total operating
expenses. This cost per tonne may increase signifi cantly
over the next four years purely as a result of tariff increases,
which will be partially mitigated by the extensive energy
effi ciency initiatives being undertaken.
participation in the carbon disclosure project. This process
assesses four issues surrounding climate change namely:
• Climate change risks and opportunities – identify strategic
risks and opportunities and their implications
• Greenhouse gas (GHG) emissions accounting – determine
actual absolute GHG emissions
• Performance – against targets and plans to reduce GHG
emissions
• Governance – determine responsibility and management
approach to climate change.
see www.exxaro.com/case_studies
CO-GENERATION ON THE WEST COAST
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
87
SAFETY, HEALTH AND ENVIRONMENT PERFORMANCE continued
Case study – Guyuni’s people see the light
Houses in the Guyuni community in Limpopo, near Exxaro’s Tshikondeni mine,
had never enjoyed the simple luxury of electricity until Exxaro partnered with the
Alternative Energy Development Corporation (AEDC) to bring zinc air fuel cells to
the village. Exxaro is serious about improving the quality of life of the communities
around its mines.
All households have been equipped with zinc-air fuel cells, and community members now
enjoy the benefi ts of proper lighting and power for radios, cellphone chargers and small
appliances drawing less than 35W. They are also saving money – the operating cost of
the cells is less than the cost of candles and paraffi n.
In addition to cheaper, better-quality light, community members now have the opportunity
to use the energy to create their own employment. The cells can be used to power
haircutters, sewing machines, soldering irons and for charging cordless power tools. They
can even power a computer with internet access. A service shop has been established
to service fuel cells and other electrical items, and to supply new fuel cell anodes. The shop will also receive a much-needed
photocopier as a value-added service to the community and its learners.
These cells are kind to the environment – once their energy is exhausted, the zinc anodes are fully recycled, so no pollution
or toxic chemicals are created in the recharging process. A vegetable garden was set up in the community where waste
water is used and zinc oxide serves as a fertiliser.
Easy, affordable energy
The zinc-air fuel cell can power lights, radios, small TVs, cellphone chargers and other small
appliances that draw less than 35W.
• The cells are designed to deliver uninterrupted power for up to 240 hours before
the anode needs changing
• The fuel set comes in a neat carry case with a plug outlet
• If more energy is required, the cells can be linked in parallel – so two cells can power
a fridge that requires 60W
• AEDC also supplies a range of appliances compatible with the cells, including a deep
freeze, colour TV and DVD player combo, an anti-malaria vapourising unit, and a PC
and fl at-screen LCD monitor combination.
88
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Biodiversity management
Conservation is becoming increasingly important as climate change impacts on habitats and the richness of global biodiversity.
Exxaro-owned and managed land has signifi cant biodiversity given the wide geographical distribution of the group’s operations.
A summary of the biomes, vegetation types and associated business units is available at www.exxaro.com
PROGRESSIVE MANAGEMENT OF BIODIVERSITY
Desktop studies
Biodiversity baseline
Mapping of
(including Precis list)
assessment
vegetation units
Biodiversity
action plans
Completed for all
Exxaro operations
Operations completed:
Operations completed:
• Tshikondeni
• Tshikondeni
• Fairbreeze Ext C
• Fairbreeze Ext C
• Glen Douglas
• Glen Douglas
• Zincor
• Zincor
• New Clydesdale
• New Clydesdale
• Grootegeluk
Balance of operations
Balance of operations
scheduled for 2009.
scheduled for 2009.
Scheduled for 2009:
all operations
see www.exxaro.com/case_studies
A ZEBRA NAMED INYANDA
(cid:60)(cid:111)(cid:111)(cid:88)(cid:105)(cid:102)(cid:23)(cid:41)(cid:39)(cid:39)(cid:47)(cid:23)(cid:105)(cid:92)(cid:95)(cid:88)(cid:89)(cid:96)(cid:99)(cid:96)(cid:107)(cid:88)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)
(cid:103)(cid:92)(cid:105)(cid:93)(cid:102)(cid:105)(cid:100)(cid:88)(cid:101)(cid:90)(cid:92)(cid:23)(cid:106)(cid:107)(cid:88)(cid:107)(cid:108)(cid:106)
Exxaro’s mine rehabilitation policy and management
standard is based on a legal and risk approach – a system
of chronological steps to optimise ongoing rehabilitation at
operational business units and prepare for effi cient mine
closure. It also emphasises the fact that rehabilitation starts
at the feasibility stage of a mining operation.
This will now inform physical processes and fi nancial
provisions, including rehabilitation performance indicators.
Most business units are already reporting on these indicators
each quarter. By closely monitoring this data, rehabilitation
backlogs can be identifi ed before undue fi nancial liabilities
occur. The goal of the environmental rehabilitation
department is to report against set ongoing rehabilitation
budgets per business unit, in terms of volumes and fi nance.
Exxaro contributed R54,9 million
in 2008 and had
R342 million in its trust fund at 31 December 2008 for
mine closure activities. Annually updating rehabilitation
provisions also guides potential rehabilitation optimisation
alternatives that will decrease the closure liabilities of mines
in the long term.
(cid:63)(cid:92)(cid:90)(cid:107)(cid:88)(cid:105)(cid:92)(cid:106)
(cid:43)(cid:39)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:42)(cid:44)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:42)(cid:39)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:41)(cid:44)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:41)(cid:39)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:40)(cid:44)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:40)(cid:39)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:44)(cid:23)(cid:39)(cid:39)(cid:39)
(cid:39)
(cid:42)(cid:45)(cid:23)(cid:41)(cid:48)(cid:44)
(cid:91)
(cid:92)
(cid:89)
(cid:105)
(cid:108)
(cid:107)
(cid:106)
(cid:96)
(cid:91)
(cid:88)
(cid:92)
(cid:105)
(cid:56)
(cid:23)
(cid:41)(cid:45)(cid:23)(cid:40)(cid:39)(cid:44)
(cid:112)
(cid:107)
(cid:96)
(cid:99)
(cid:96)
(cid:89)
(cid:88)
(cid:96)
(cid:99)
(cid:23)
(cid:101)
(cid:102)
(cid:96)
(cid:107)
(cid:88)
(cid:107)
(cid:96)
(cid:99)
(cid:96)
(cid:89)
(cid:88)
(cid:95)
(cid:92)
(cid:73)
(cid:40)(cid:39)(cid:23)(cid:40)(cid:48)(cid:39)
(cid:91)
(cid:92)
(cid:107)
(cid:88)
(cid:107)
(cid:96)
(cid:99)
(cid:96)
(cid:89)
(cid:88)
(cid:95)
(cid:92)
(cid:105)
(cid:23)
(cid:88)
(cid:92)
(cid:105)
(cid:56)
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
89
SAFETY, HEALTH AND ENVIRONMENT PERFORMANCE continued
Land management
are included in the table on the following page together with
Land management is aimed at reducing or preventing
a schedule of environmental incidents.
various business-related risks, such as:
• Safety – previously mined areas, ie inactive sites that are
scheduled for later rehabilitation and pose a safety risk in
Corporate integrated safety, health and
environment audits
the interim
Internal integrated safety, health and environment audits
• Environment – risk assessments of all inactive sites
conducted by the head of the safety and sustainable
• Illegal occupation or invasion of land – settling disputes.
development division, and executive general managers, have
ISO/OHSAS certifi cation
now been rolled out across group operations. With three mines
audited to date, areas identifi ed for improvement include:
Nine of Exxaro’s 15 operations have both the international
• Adherence to standards and procedures
health and safety certifi cation
(OHSAS
18001) and
• Severe
skills
shortages
in
safety management
environmental certifi cation (ISO 14001). While we did not
(establishment of professionals-in-training programme
meet our target of having all operations internationally
for safety practitioners and implementation of skills
certifi ed in 2008, preparations are well advanced and
retention programme)
certifi cation of the outstanding business units is expected
• Application of site-specifi c procedures and tracking
in the current year. To date, one operation has completed
operational adherence to standards and legislation through
the conversion to OHSAS 18001:2007.
a programme of self-assessments and corporate audits.
Environmental performance – 2008
Exxaro is also actively participating in representative
To measure continuous
improvement, all business
industry forums to ensure the group develops and applies
operations have guidelines for reporting on relevant diesel,
best practices at all operations.
gas, electricity and water use performance indexes. These
Case study – Innovation and nature work hand in hand
In our prior report, we outlined the environmental challenges faced with expanding
Matla while preserving one of the larger wetland systems in Mpumalanga’s highveld,
the sensitive and highly important Blesbokspruit/Rietspruit ecosystem.
In an example of innovation and nature working hand in hand, the team at Matla are
going below the wetland using undermining, a technique typically used when a mine
extends under a building, roadway or town. The team has adapted this approach into
an innovative engineering design that allows them to extend Matla’s underground
shortwall mining operation with minimal impact on the Blesbokspruit/Rietspruit
wetland that lies above the surface.
The Matla wetland management project is one of Exxaro’s key biodiversity
conservation projects. It is unique in that the water fl ow and function of the wetland
is protected through a shortwall mining design that allows for even subsidence of the
area. The entire wetland area will drop by 1,8m, thus avoiding the formation of ponds
and ensuring the continued natural fl ow of water. The fl ow of water into the wetland is controlled in a way that protects the
ecosystem and allows mining to continue without the risk of fl ooding.
The Blesbokspruit/Rietspruit wetland is one of the larger and more sensitive wetland systems in the area. Mining these coal
reserves could have destroyed 120 hectares of identifi ed non-channelled riparian wetland and another 132 hectares of the
seasonally inundated non-channelled fl oodplain at the bottom of the valley. This innovative solution has ensured that the
normal wetland function and biodiversity will remain intact.
90
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Commodity business: 1 January – 31 December 2008
Electricity (Gj)
Diesel (Gj)
Sasol Gas (Gj)
Petrol used (Gj)
Total energy use (Gj) *
Commodity business
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
Exxaro Coal
1 692 223
1 816 119
2 258 568
1 380 903
Exxaro Base Metals
1 795 828
1 852 900
143 596
145 703
0
18
0
0
Mineral Sands
2 051 525
1 983 715
173 422
72 944
319 020
320 593
18 223
13 421
3 969 015
3 210 442
414
1 087
584
1 939 855
1 999 187
0
2 545 053
2 377 251
* Total energy fi gures comprise electricity, diesel, petrol and Sasol gas.
Commodity business
Exxaro Coal
Exxaro Base Metals
Mineral Sands
Commodity business
Exxaro Coal
Exxaro Base Metals
Mineral Sands
Commodity business
Exxaro Coal
Exxaro Base Metals
Mineral Sands
Water (m3)
Product (Kt)
Energy per tonne
2008
2007
2008
2007
11 623 896
7 746 713
44 834 000
40 534 259
3 206 356
3 844 548
1 603 000
1 664 507
14 771 649
10 307 560
1 201 000
684 273
2008
0,09
1,21
2,12
Electricity per tonne
Diesel per tonne
Water per tonne
2008
0,04
1,12
1,71
2007
0,04
1,11
2,90
2008
0,05
0,09
0,14
2007
0,03
0,09
0,11
2008
0,26
2,00
12,30
2007
0,08
1,20
3,47
2007
0,19
2,31
15,06
CO2 from electricity
purchased (tonnes)**
CO2 from diesel
(tonnes)***
2008
517
519
593
2007
483
493
528
2008
2007
167 238
102 325
10 633
12 841
10 797
5 405
** Electricity purchased x 1,04
*** Diesel purchased x 2,69 ÷ 1 000
Reported CO2 emissions refl ect burning fossil fuels and electricity consumption. CO2 emissions from processes (spontaneous
combustion, fl aring, etc) are not currently reported as methodologies are still being developed and reviewed for the relevant
operations. Please note that CO2 emission fi gures in the 2007 report were overstated by a factor of 1 000 due to the use of
kilowatt hours as opposed to megawatt hours in the conversion calculation. These are therefore restated in this report.
Commodity business
Exxaro Coal
Exxaro Base Metals
Mineral Sands
Total
Level 1: minor impact and/or non-compliance
Level 2: intermediate impact and/or non-compliance
Level 3: major impact and/or non-compliance
Environmental incidents
Level 1
Level 2
Level 3
458
137
201
796
5
2
10
17
0
0
0
0
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
91
ECONOMIC PERFORMANCE
Generally residents from local communities are employed at business units, except
in areas where specifi c skills are not available. About 70% of employees at
the various business units are recruited from local communities.
Economic value generated and distributed
Component
Comment
2008
Direct economic value generated
• Revenues
Economic value distributed
• Operating costs
• Employee wages and benefi ts
• Payments to providers of capital
Net sales plus revenues from fi nancial
investments and sales of assets
R13 843 million (page 140)
Payments to suppliers, non-strategic
investments, royalties, and facilitation
payments
Total monetary outfl ows for employees
(current payments, not future
commitments)
All fi nancial payments made to the
providers of the organisation’s capital.
R11 376 million (page 140, 158)
R2 644 million (see note 3 to AFS* on
page 158)
Interest expense and loan costs of
R283 million (note 4 to AFS* on
page 161)
Note 7 and 25.3 to AFS* on page162
and 179
R19,8 million page 104
• Payments to government (by country)
Gross taxes
• Community investments
Voluntary contributions and investment
of funds in the broader community
(includes donations)
Economic value retained (calculated
as economic value generated less
economic value distributed)
* AFS = annual fi nancial statements
Investments, equity release, etc
Value-added statement on page 115
Retirement and medical plans
Medical aid membership is voluntary under agreements
All permanent employees must belong to a defi ned-
for employees in the bargaining units at Exxaro Resources,
contribution retirement fund. By defi nition these are fully
Exxaro Coal and Glen Douglas Dolomite. At all other group
funded with no employer funding liability, and all recognised
employers and for the management and specialist category
funds are registered with the Pension Funds Board. These
of employees, medical aid is compulsory.
are adequately funded as per the latest actuarial valuations
on 31 December 2007 available from the funds.
At 31 December 2008, Exxaro had 8 038 employees
(79,3% of the workforce) who belonged to medical aids
The rand value of all employer contributions to retirement
with stipulated employer subsidies, representing R51 million
funds for the year was R166 million (2007: R144 million).
(2007: R61 million).
The challenge faced by corporate South Africa remains
Accredited medical aid funds have been structured to exclude
unresolved in terms of pending legislative amendments
any employer liability for post-retirement medical benefi ts in
that aim to make membership of a national basic retirement
respect of either existing or past employees. However, there
fund and medical aid compulsory. Draft legislation is only
is post-retirement medical liability for certain employees of
expected in mid-2009, after which the group will prepare an
Matla Coal as well as Namakwa Sands. The employer liability
appropriate action plan.
at 31 December 2008 has been actuarially valued and is
appropriately disclosed in the fi nancial statements and in
the fi nancial review on page 22.
92
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Market presence
see www.exxaro.com/case_studies
Approximately 74% of all employees’ remuneration is based
INVESTING IN RESEARCH
on collective agreements with trade unions determining
minimum wages for each grade. Other employees’
remuneration
is based on performance and market
competitiveness.
Less than 1% of the workforce is governed by sectoral
determinations issued by the Department of Labour for
farm and forestry workers. Those employed by the company
are substantially better off than the minimum requirements
stipulated by the Basic Conditions of Employment Act. In all
cases, minimum conditions of employment in Exxaro exceed
the requirements of the Act.
(cid:59)(cid:96)(cid:106)(cid:107)(cid:105)(cid:96)(cid:89)(cid:108)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)(cid:102)(cid:93)(cid:23)
(cid:92)(cid:100)(cid:103)(cid:99)(cid:102)(cid:112)(cid:92)(cid:92)(cid:106)(cid:23)(cid:103)(cid:92)(cid:105)(cid:23)(cid:105)(cid:92)(cid:94)(cid:96)(cid:102)(cid:101)
(cid:44)(cid:35)(cid:41)(cid:28)
(cid:40)(cid:44)(cid:35)(cid:44)(cid:28)
Preferential procurement practices
Exxaro continues to follow the narrow-based standard for
mining houses in reporting expenditure with historically
disadvantaged South Africans (HDSAs). Hopefully, this
statutory anomaly can be addressed in the mining charter
review scheduled for 2009 to deal with confl icting legislation
specifi c to the mining industry (codes of good practice from
Department of Trade and Industry (dti) versus stipulations
of Department of Minerals and Energy). The availability and
capacity of rating agencies verifi ed by the South African
National Accreditation system remains a challenge in
transforming the supplier industry.
Exxaro has policies, guidelines and systems in place
to promote procurement from HDSA companies in the
stipulated categories of capital goods, consumables and
(cid:45)(cid:35)(cid:46)(cid:28)
services. As a group, we have long given preference
(cid:42)(cid:45)(cid:35)(cid:43)(cid:28)
(cid:41)(cid:46)(cid:35)(cid:42)(cid:28)
(cid:47)(cid:35)(cid:47)(cid:28)
■(cid:23)(cid:23)(cid:62)(cid:88)(cid:108)(cid:107)(cid:92)(cid:101)(cid:94)(cid:23) ■(cid:23)(cid:23)(cid:66)(cid:81)(cid:69)
■(cid:23)(cid:23)(cid:67)(cid:96)(cid:100)(cid:103)(cid:102)(cid:103)(cid:102)(cid:23) ■(cid:23)(cid:23)(cid:68)(cid:103)(cid:108)(cid:100)(cid:88)(cid:99)(cid:88)(cid:101)(cid:94)(cid:88)
■(cid:23)(cid:23)(cid:69)(cid:88)(cid:100)(cid:96)(cid:89)(cid:96)(cid:88)(cid:23) ■(cid:23)(cid:23)(cid:78)(cid:92)(cid:106)(cid:107)(cid:92)(cid:105)(cid:101)(cid:23)(cid:58)(cid:88)(cid:103)(cid:92)
Generally residents from local communities are employed at
business units, except in areas where specifi c skills are not
available. About 70% of employees at the various business
units are recruited from local communities.
to companies that demonstrate HDSA
involvement,
development and support in ownership, management and
skills development.
Over the years, we have tracked our performance on
procurement from HDSA companies, which indicates good
progression from 2004 at 16%, 2005 (24%), 2006 (37%)
and 2007 (35%). The target for 2007 was specifi cally set at
35% to provide for the introduction of the dti’s codes of good
practice. The performance for 2008 was a commendable
39% against a target of 40%, infl uenced largely by the
transition to the dti codes. In rand terms, this represented
R2,36 billion spent with HDSA-owned, -empowered and
-infl uenced companies. The target for 2009 is set at 45%.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
93
ECONOMIC PERFORMANCE continued
Close monitoring, tracking and stakeholder engagement
form partnerships with local HDSAs in areas of group
continues to ensure strong partnerships with suppliers.
operations. We also encourage transformation in areas
Exxaro’s major suppliers are encouraged to transform, and
such as employment equity, skills development, enterprise
secure accreditation in line with the codes of good practice,
development and employee share ownership plans.
but with an indication of their narrow-based status.
In line with Exxaro’s future expenditure, companies that
as required by the mining charter – remains an industry-
are likely to have increased and longer-term business
wide challenge. The targets shown graphically are annual
relationships with the group are viewed as strategic partners
percentages, and reporting is in line with the current mining
for transformation. These suppliers are encouraged to
charter.
Accurately tracking spending on suppliers by category –
(cid:71)(cid:105)(cid:102)(cid:90)(cid:108)(cid:105)(cid:92)(cid:100)(cid:92)(cid:101)(cid:107)(cid:23)(cid:93)(cid:105)(cid:102)(cid:100)(cid:23)(cid:63)(cid:59)(cid:74)(cid:56)
(cid:71)(cid:105)(cid:92)(cid:93)(cid:92)(cid:105)(cid:92)(cid:101)(cid:107)(cid:96)(cid:88)(cid:99)(cid:23)(cid:103)(cid:105)(cid:102)(cid:90)(cid:108)(cid:105)(cid:92)(cid:100)(cid:92)(cid:101)(cid:107)(cid:23)(cid:107)(cid:88)(cid:105)(cid:94)(cid:92)(cid:107)(cid:106)
(cid:28)
(cid:44)(cid:39)
(cid:43)(cid:39)
(cid:42)(cid:39)
(cid:41)(cid:39)
(cid:40)(cid:39)
(cid:39)
(cid:43)(cid:44)(cid:28)
(cid:42)(cid:48)(cid:28)
(cid:42)(cid:46)(cid:28)
(cid:42)(cid:44)(cid:28)
(cid:41)(cid:43)(cid:28)
(cid:40)(cid:45)(cid:28)
(cid:39)(cid:43)
(cid:39)(cid:44)
(cid:39)(cid:45)
(cid:39)(cid:46)
(cid:39)(cid:47)
(cid:39)(cid:48)
■(cid:23)(cid:23)(cid:75)(cid:88)(cid:105)(cid:94)(cid:92)(cid:107)
(cid:45)(cid:39)
(cid:44)(cid:39)
(cid:43)(cid:39)
(cid:28)
(cid:42)(cid:39)
(cid:41)(cid:39)
(cid:40)(cid:39)
(cid:39)
(cid:44)(cid:41)(cid:35)(cid:41)(cid:28)
(cid:43)(cid:48)(cid:28)
(cid:43)(cid:44)(cid:28)
(cid:43)(cid:39)(cid:28)
(cid:39)(cid:47)
(cid:39)(cid:48)
(cid:40)(cid:39)
(cid:40)(cid:40)
94
I E x x a r o A n n u a l R e p o r t 2 0 0 8
SOCIAL PERFORMANCE
The skills shortage hits where it hurts most – business’s bottom
line. And while everyone is fi shing from the same skills pond, not everyone is
contributing to it.
Exxaro’s current staff complement is 10 135, including
In the bargaining units, there are 8 096 employees, with
Namakwa Sands. Building on the
leading practices
2 039 employees in the management and specialist
entrenched
in recent years, we focus on exceeding
category. All are full-time employees with only one person in
compliance targets in South Africa through training and
Gauteng being a part-time employee (in a bargaining unit).
development to maximise individual potential – and reduce
the shortage of skills in our industry (page 97) – equality
and safety in the workplace, meeting our employment
equity targets and improving standards of living in our
In Gauteng, 15 employees in the management and specialist
category are expatriates. Two are based in China, one in
Australia, one in The Netherlands, 10 in Namibia and one in
Switzerland. The regional distribution is as follows:
stakeholder communities.
Following the merger between Kumba Resources and
Eyesizwe Coal, the process of aligning and standardising
all human resource processes – from staffi ng, training
and development, performance management,
talent
management,
reward and
recognition,
through
to
e-learning – will culminate in an integrated human resource
systems environment early in 2009. This will give managers
immediate access to a “single view” of all essential employee
information, and improved contractor management.
Region
Gauteng
KwaZulu-Natal
Limpopo
Mpumalanga
Namibia
Western Cape
Manage-
ment and
specialist
category
Bargaining
unit
906
511
2 346
3 191
436
706
671
167
416
495
96
194
Total
1 577
678
2 762
3 686
532
900
Wage agreements that govern remuneration are in place
new projects
is ongoing. Exxaro has an active
The challenge of fi nding suitable skills
to staff
at all group employers, while formal processes determine
the remuneration of non-unionised employees. Six-monthly
market surveys ensure that total remuneration is market
related. At all levels, minimum conditions of employment
exceed the requirements of South Africa’s Basic Conditions
of Employment Act.
During the year, there were no reported incidents of
discrimination in the group.
There are two main categories of employees in Exxaro:
employees in bargaining units and the management and
specialist category.
programme to retain scarce skills that accounts for
2–3% of total payroll (page 97).
Since collective agreements determine specifi c guaranteed
minimum salaries, there is no discrimination between
salaries of men and women. In the management and
specialist category, all employees are on performance
contracts and individual salaries are based on performance
and not gender. The breakdown of male/female employees
per category and region is shown below.
Gender breakdown by category and region: at 31 December 2008
Region
Gauteng
KwaZulu-Natal
Limpopo
Mpumalanga
Namibia
Western Cape
Total
Bargaining unit
Management and
specialist category
Male
735
454
2 137
2 835
406
614
7 181
Female
Male
Female
171
57
209
356
30
92
915
476
134
367
431
69
162
1 639
195
33
49
64
27
32
400
Total
1 577
678
2 762
3 686
532
900
10 135
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
95
SOCIAL PERFORMANCE continued
During the year, a third-party audit by a leading industry expert confi rmed that all relevant Exxaro policies fully complied
with South Africa’s Employment Equity Act 55 of 1998.
Exxaro’s employment equity reports for the period 1 October 2007 to 30 September 2008, as submitted to the Department of
Labour, refl ect the following level of representation per occupational level by designated groups (historically disadvantaged
South Africans or HDSAs – blacks, coloureds, Indians and white females as per mining charter defi nition) and split between
permanent and temporary employees:
Employment equity – 1 October 2007 – 30 September 2008
Level
Male
Female
Top management
Senior management
Professional, specialists
and middle management
Skilled technical,
academically qualifi ed
and junior management
Semi-skilled staff
Unskilled staff
Total permanent
employees
Total temporary
employment service
labour
B
5
0
20
0
186
2
57
0
868
45
3 146
92
1 047
231
I
1
0
7
0
30
1
10
0
35
0
21
0
0
0
C
0
0
4
0
22
0
1
0
W
18
0
156
16
396
45
149
7
154
1 079
0
470
1
2
0
68
140
33
28
8
B
1
0
2
0
I
0
0
1
0
45
20
0
3
0
158
20
179
16
128
11
1
0
0
22
2
9
0
0
0
C
0
0
2
0
3
0
0
0
37
2
85
0
2
0
W
1
0
24
3
99
4
7
0
306
51
86
16
2
0
Foreign
nationals
Male Female
0
0
2
0
0
0
0
0
10
0
89
0
17
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total
26
0
218
19
801
53
227
7
2 669
188
4 225
158
1 226
250
5 329
104
653
1 966
516
52
129
525
118
0 10 067
370
1
3
177
47
563
3
55
2
131
74
599
0
118
0
675
0 10 742
Total staff complement
5 699
105
654
2 143
B – blacks I – Indians C – coloureds W – whites
96
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Literacy and numeracy
There are now accredited ABET training centres at
Exxaro offers sponsored, voluntary adult basic education
Grootegeluk, Tshikondeni, Matla and Arnot mines. The
and training (ABET) programmes at all commodity
group’s annual training reports and workplace skills
businesses, except where employees are fully literate. Exxaro
plans, submitted to and approved by Mining Qualifi cations
carries the full cost of these programmes, totalling some
Authority (MQA), contain sections on the number of ABET
R3,3 million in 2008. Candidates are screened and counselled
candidates completing various levels and planned for the
to ensure they are able to make informed decisions, and an
years ahead.
incentive scheme is in place for each level completed to
encourage more employees to become functionally literate
In compliance with the national skills strategy, KZN Sands,
and numerate. More than 1 000 employees have passed one
Namakwa Sands, Grootegeluk and the corporate centre
or more ABET level since inception of this programme.
already have more than 70% of their employees on NQF
level 1 and higher.
Good progress was made in 2008 towards our target of
offering everybody the opportunity to become functionally
Specifi c ABET successes in 2008 include:
literate and to participate in ABET classes. Almost double
• KZN Sands’ Hillendale Mine had 32 ABET graduates
the number of employees completed various ABET levels
during the year, all of whom have gone to the next step in
compared to the previous year. In 2008, 236 employees
their literacy training. Fifteen contractor employees were
completed various ABET levels successfully – of these,
enrolled in the level 1 programme later in the year.
14 passed ABET level 4, 29 passed level 3, 45 level 2, 98 level
• At Matla, two full-time educators run the ABET
1 and 50 pre-ABET. Equally, the number of non-employees
programmes and at least 90 employees each year attend
completing different ABET levels more than doubled in the
13-week full-time courses. The success of this approach is
review period. Across the group, 68% of employees had
refl ected in Matla’s 100% ABET pass rate in 2008.
an NQF level 1 and above qualifi cation in September 2008
(66% in September 2006).
Training and education
(cid:56)(cid:57)(cid:60)(cid:75)(cid:23)(cid:99)(cid:92)(cid:109)(cid:92)(cid:99)(cid:106)(cid:23)(cid:90)(cid:102)(cid:100)(cid:103)(cid:99)(cid:92)(cid:107)(cid:92)(cid:91)
link, Exxaro is determined not to have any weak links in its
Understanding that a chain is only as strong as its weakest
(cid:41)(cid:42)(cid:45)
(cid:41)(cid:41)(cid:42)
(cid:69)(cid:108)(cid:100)(cid:89)(cid:92)(cid:105)(cid:23)(cid:102)(cid:93)(cid:23)(cid:103)(cid:92)(cid:102)(cid:103)(cid:99)(cid:92)
(cid:41)(cid:44)(cid:39)
(cid:41)(cid:39)(cid:39)
(cid:40)(cid:44)(cid:39)
(cid:40)(cid:41)(cid:47)
(cid:28)
(cid:40)(cid:39)(cid:39)
(cid:48)(cid:42)
skills development process. We believe in empowering all
staff with the knowledge and skills they need to help us
grow the company, but also to develop personally. Since
the group’s formation in 2006, Exxaro employees have
successfully completed almost 25 000 different training
courses, specialist and development programmes. Exxaro’s
policy is to invest an appropriate amount of total payroll
each year on human resource development. In 2008, this
was 5,2% (excluding the 1% skills levy) or an investment of
over R100 million.
(cid:45)(cid:47)
aims to:
Through our human resource development policy, Exxaro
(cid:45)(cid:45)
(cid:44)(cid:39)
(cid:39)
(cid:106)
(cid:92)
(cid:92)
(cid:112)
(cid:102)
(cid:103)
(cid:100)
(cid:60)
(cid:99)
(cid:99)
(cid:106)
(cid:92)
(cid:92)
(cid:112)
(cid:102)
(cid:103)
(cid:100)
(cid:92)
(cid:36)
(cid:101)
(cid:102)
(cid:69)
(cid:106)
(cid:92)
(cid:92)
(cid:112)
(cid:102)
(cid:103)
(cid:100)
(cid:60)
(cid:99)
(cid:99)
(cid:106)
(cid:92)
(cid:92)
(cid:112)
(cid:102)
(cid:103)
(cid:100)
(cid:92)
(cid:36)
(cid:101)
(cid:102)
(cid:69)
■(cid:23)(cid:23)(cid:41)(cid:39)(cid:39)(cid:47)
■(cid:23)(cid:23)(cid:41)(cid:39)(cid:39)(cid:46)(cid:23)
■(cid:23)(cid:23)(cid:69)(cid:72)(cid:61)(cid:23)(cid:99)(cid:92)(cid:109)(cid:92)(cid:99)(cid:23)(cid:40)(cid:49)(cid:23)(cid:45)(cid:45)(cid:28)(cid:23)(cid:96)(cid:101)(cid:23)(cid:41)(cid:39)(cid:39)(cid:45)(cid:35)(cid:23)(cid:45)(cid:47)(cid:28)(cid:23)(cid:96)(cid:101)(cid:23)(cid:41)(cid:39)(cid:39)(cid:47)(cid:23)
(cid:23)
• Develop and sustain core competencies and maximise
human resources to meet its strategic objectives and
improve its operational performance
• Create a learning culture by assisting and facilitating the
process by which employees and their dependants take
responsibility for improving their own educational and
competency levels, to the mutual benefi t of the individual
and the organisation
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
97
SOCIAL PERFORMANCE continued
• Ensure integration and uniformity in all learning and
which, when combined with engineering
learnerships,
development processes through leveraging technologies
brought the total number of people in learnerships/skills
• Support and reinforce the values of the company, through
programmes to 678.
various learning and development initiatives
• Ensure learning and development initiatives are career-
Exxaro’s human resources development professionals
focused and aligned with business objectives
• Establish life-long learning as the major thrust of learning
and development.
In 2008, Exxaro refi ned the focus on skills development.
Where our primary focus was previously on engineering
learnerships, the skills development objective in Exxaro
has broadened to include other learnerships and especially
skills programmes, while steadily increasing the number of
engineering learnerships.
Although the numbers vary as learners qualify and new
are contributing signifi cantly to the national and sectoral
transformation
process
through membership
and
participation in bodies such as Business Unity South Africa,
Chamber of Mines’ education advisory committee, the MQA
sector skills planning committee and standards-generating
bodies of the MQA.
Training to assist employees in managing career endings
is included in the social and labour plan for each mine,
submitted to and monitored by the Department of Minerals
and Energy as part of the process of renewing mining
recruits enter the system, on average Exxaro currently
licences for each mine. Exxaro also included a fi ve-year
has over 600 learners registered in engineering and
engineering learnership plan for 2007 to 2011.
other learnerships/skills programmes. This is a meaningful
improvement on the prior year’s levels of 400.
In monitoring our artisan retention strategy, the ratio
In 2008, on average, 170 engineering learners were
employed in various trades is reported to Exxaro’s executive
registered and trained at the Colliery Training Centre in
committee each month.
of learnerships in the pipeline to the number of artisans
Witbank, while 245 engineering learners were registered
at Grootegeluk’s Grovos Engineering Training Centre. More
than 100 artisans qualifi ed at the Grovos training centre
alone.
To put this contribution into perspective, Exxaro alone
constitutes more than 20% of all engineering learnerships
registered with the MQA. Exxaro’s training in engineering
learnerships will lead to full artisan status in trades such
as electrician, fi tter, plater, diesel mechanic and millwright.
Artisans are considered scarce and critical skills in South
Africa and all these trades appear on the country’s scarce
skills list.
Exxaro keenly understands the impact on current production
and future growth of skills retention and availability. To
retain technical and engineering competence in the group,
a retention strategy has been introduced for technical
categories, among others, together with an aggressive
succession-planning strategy. Exxaro regularly benchmarks
remuneration, provides comprehensive
training and
identifi es growth opportunities at every level. This includes
continual rotation and exposure of our own talent in
multidisciplinary project teams.
All non-bargaining unit employees
receive
formal
The number of other learnerships and skills programmes
performance and career development reviews bi-annually.
has also increased signifi cantly, reaching the highest levels
All management members are assessed throughout the
towards the end of 2008. By then, there were 40 people
year and this becomes the basis for individual succession
registered in mining learnerships, 230 in plant learnerships/
programmes and talent management. These assessments
bursars and 16 in administrative/services learnerships,
are also linked to reward and remuneration.
98
I E x x a r o A n n u a l R e p o r t 2 0 0 8
While employees in the bargaining unit are not part of
industry needs to provide a steady fl ow of qualifi ed talent
Exxaro’s formal performance management system, their
to tackle our growth and expansion projects. In 2008, there
development is driven by individual development plans
were some 233 trainees involved in programmes supporting
derived from an employee’s job profi le, formal career plan
internal advancement. The overarching objective is to
and individual preference. The performance management
ensure that trainees entering the company are empowered,
process is entrenched in the culture of Exxaro.
challenged and appropriately rewarded:
All new management and specialist category employees
Foundation sponsors 30 previously disadvantaged
receive formal training on the performance management
students each year for a 12-month bridging course at
process and system to reinforce the concept that reward is
the University of Pretoria. Candidates must be grade
• Exxaro People Development Initiative: the Exxaro
driven by performance. Performance management is also
included in a web-based induction programme.
12 students from Exxaro mining communities who want
to study for a mining-related degree or diploma. On
completing their studies, candidates may be considered
All training and development is based on a thorough needs
for an Exxaro bursary.
analysis, taking cognisance of business strategy, identifi ed
skills defi ciencies via the performance management
process, succession planning requirements, employee
career pathing, and the relevant employment equity plans.
Personal development emphasises the joint responsibility of
employees to manage their career growth. As such, Exxaro
provides fi nancial assistance to permanent employees with
potential to further their education through part-time studies
of certain recognised, approved courses and programmes.
Employees nominated by the company to attend courses or
programmes are fully sponsored for tuition, examinations,
travel, accommodation costs and study leave.
Specifi c strategies to ensure the accelerated learning and
development of black people, women and people with
disabilities include:
• Fast-tracking employees with leadership and management
potential
• Bursary programme: Exxaro grants around 35 bursaries
each year to school leavers interested in mining-related
disciplines such as engineering, geology and mine
surveying. Graduates are generally offered employment
at Exxaro, depending on the current need in that
fi eld, mostly through the group’s formal three-year
professionals-in-training programme. There are currently
142 bursars studying at South African institutions at a
cost of R9,7 million: more than two-thirds are historically
disadvantaged South Africans and 30% are women.
• Professionals-in-training programme: the three-year
programme bridges the gap between academic theory
and the work environment. Each professional-in-training
has a mentor who supervises exposure to the various
commodities, leadership and management training, and
formal training from professional bodies. In 2008, there
were 91 professionals-in-training throughout Exxaro in a
R32-million programme: 77% are from designated groups
• Accelerated development for occupationally based skills
and 26% of those are women.
• Adult basic education
• Life skills programmes
• Learnerships.
Career development
Communities of practice: Exxaro has communities of
practice for effective development and sharing of knowledge,
best practices and lessons across the group. The focus
is primarily on core competencies required for Exxaro’s
In line with Exxaro’s strategy to ensure that 80% of all new
sustainability. In practice, these communities have lowered
appointments are made internally, we have a well-integrated
the risk of losing key knowledge workers, and brought new
process that is carefully aligned with our strategy and
people up to speed more rapidly.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
99
SOCIAL PERFORMANCE continued
Leadership development: Formal leadership development
Negotiations for improvement of wages and conditions of
initiatives, mentorship programmes and succession-
employment are done in-house and through the Chamber
planning workshops involving senior management and
of Mines.
employees are conducted throughout the year. Building and
retaining a pool of current and future leaders is a priority for
Exxaro has a disciplinary code that is used when necessary.
Exxaro and appropriate initiatives include a comprehensive
The code is based on the principle of fairness as required
succession-planning process and enhancing strategic
by labour law. Supervisors have the skill to implement
leadership competencies.
Employee turnover
Between 1 January and 31 December 2008, Exxaro
recorded an average employee turnover rate of 7%. The
primary reasons for terminations were death, resignations,
dismissals and disabilities. The turnover rate by employee
group is shown below:
the code.
Through collective bargaining, employees receive several
benefi ts beyond minimum legislative requirements below.
Conditions of employment for employees in bargaining
units are centrally negotiated each year.
Employee benefi ts
Turnover rate by employee group
Full-time employees receive a range of benefi ts – many
Terminations
Jan – Dec 2008
exceeding minimum stipulations – including:
• Retirement
fund membership subsidised by
the
Employment equity –
occupational categories
% of total
workforce
Number
Senior offi cials, managers,
legislators
Professionals
Technicians/associated
professionals
Clerks and administrative
workers
Service and sales workers
Craft and related trades
Plant and machine
operators
Labourers and elementary
occupations
Labour relations
0,49
0,61
0,51
0,73
0,03
2,24
1,60
0,78
50
62
52
74
3
227
162
79
employer
• Medical aid membership subsidised by the employer
• Housing allowance/company accommodation
• Guaranteed annual bonuses/13th cheque for bargaining
unit employees
• Travel allowances
• Annual
leave, sick
leave, maternity
leave, family
responsibility leave
• Incentive schemes, share appreciation rights schemes,
standby and call-out allowances, etc as well as payment
for overtime worked.
Retirement and other benefi ts for all permanent employees
are provided by independent defi ned contribution funds.
Almost 80% of Exxaro’s employees are represented
The employer contribution to retirement funds in the group
by affi liated unions, predominantly National Union of
ranges from 10% to 18% of employee pensionable earnings,
Mineworkers (NUM 69,8%), and Solidarity (7,0%). Other
and is expensed as it is occurred. All retirement funds are
recognised unions are Mineworkers Union of Namibia (MUN),
governed by the South African Pension Funds Act (1956),
National Union of Metalworkers in South Africa (NUMSA),
with no members on defi ned-benefi t plans.
and United Association of South Africa (UASA).
100
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The group continues to focus on home ownership. To comply
Where meals are provided, the quality and nutritional value
with the mining charter and our own business needs, a
of these meals are determined by a dietician. Qualifi ed staff
new long-term housing strategy has been developed.
continually monitor the fulfi lment of contractual obligations.
While Exxaro’s housing policy focuses on home ownership,
Employees have accessible mechanisms to engage both
employees receive a housing or living-out allowance to
management and suppliers on food issues.
assist them in obtaining accommodation. Land has been
made available for housing at Grootegeluk where some
Employee wellness
800 units will be built over the next four years.
External service providers manage employee assistance
Housing categories
Home owners (bought company property)
Hostels
Single quarters
Rental and other
Total
programmes for our people and their dependants at all
business units. These have been particularly successful
in ensuring a fast and effi cient response to employees
suffering trauma because of work-related and community-
based events.
see www.exxaro.com/case_studies
PUTTING ROOFS OVER HEADS AND FOOD ON
TABLES
2008
number of
employees
822
389
1 336
7 588
10 135
Building tiny skills
The KZN Sands sustainable development team has come up with an innovative
way to ensure people in their rural communities are given a fair start.
As part of its sustainable development strategy, KZN Sands has built a crèche
in the Somopho area, outside eMpangeni. The crèche is manned by qualifi ed
educators who use a variety of games and building exercises to teach their young
pupils essential coordination skills. Interestingly, coordination has proven to be
the main reason why many applicants from rural communities fail to qualify for
learnerships at KZN Sands: they fail the basic hand/eye coordination test. Through
the new crèche, KZN Sands aims to build a solid educational foundation so that
future generations don’t have to suffer the same fate. Later in the year, and as
part of Arbor Week, trees were planted in the crèche grounds.
The 40 registered learners at the crèche range from a few months to four years.
Older groups are taught the offi cial grade R syllabus. Currently registered as a
non-profi t organisation, the crèche will become a formal pre-school by 2010.
Case study – Equity in action
Empowering women to play a more active role in Exxaro, the mining industry and the country is a strategic priority. But, for
Exxaro, it is about far more than just making our workforce more representative. It is also a way in which we can combat the
current skills shortage.
More than half of South Africa’s population are women and, therefore, so is half the country’s talent. Yet, in the mining
industry, companies are struggling to increase the percentage of women in core mining skills to just one-tenth of their
workforces. We need to develop and channel this talent into areas where it is needed most, with technical skills as our
priority.
Exxaro is investigating a number of ways to boost the role of women in the group, with good results:
• 19% of Exxaro’s senior to middle management level is made up of women
• Almost 13% of the group’s permanent workforce are women.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
101
SOCIAL PERFORMANCE continued
Diversity and equal opportunity
transformation without affecting existing positions in the
When we created Exxaro – the largest black-owned mining
company. Each business unit has a formally assigned senior
company in the country – we stated our intention of being
manager for employment equity, and an employment equity
the best example of how South African companies can
forum that is responsible for ensuring appropriate plans
and should be run. We made a commitment to our people
are developed, executed, monitored and communicated to
to ensure their progress and to build up the skills base we
employees.
need to fulfi l our vision. Employment equity is just one of
the ways in which we are doing this.
Pleasingly, and despite the shortage of skills, Exxaro has
exceeded 2009 mining charter targets ahead of time in both
While employment equity is certainly a legal issue, with
the management and women in core mining categories. This
strict targets imposed by both the mining charter and the
refl ects the constant focus on internal promotion, individual
government’s black economic empowerment codes, for
development and skills retention in our aim to be a preferred
Exxaro it is also a moral imperative.
employer. The group’s performance against the mining
charter’s complete set of targets appears on page 107.
At the heart of our employment equity strategy are detailed
plans developed by each business unit in consultation
Women in mining initiatives
with employees and unions. These are updated and
Women
in mining
initiatives were established and
progress reported quarterly to the board and annually to
implemented to attract women to work in the core business
government.
of the company. A committee representing all the business
units of Exxaro has been established to implement and to
By following these plans, each unit ensures that recruitment
execute these initiatives.
and skills development are conducted responsibly, promoting
Employment equity progress
(cid:63)(cid:59)(cid:74)(cid:56)(cid:23)(cid:105)(cid:92)(cid:103)(cid:105)(cid:92)(cid:106)(cid:92)(cid:101)(cid:107)(cid:88)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)(cid:96)(cid:101)(cid:23)(cid:88)(cid:99)(cid:99)(cid:23)
(cid:100)(cid:88)(cid:101)(cid:88)(cid:94)(cid:92)(cid:100)(cid:92)(cid:101)(cid:107)(cid:23)(cid:90)(cid:88)(cid:107)(cid:92)(cid:94)(cid:102)(cid:105)(cid:96)(cid:92)(cid:106)
(cid:78)(cid:102)(cid:100)(cid:92)(cid:101)(cid:23)(cid:31)(cid:88)(cid:99)(cid:99)(cid:23)(cid:99)(cid:92)(cid:109)(cid:92)(cid:99)(cid:106)(cid:32)
(cid:44)(cid:39)
(cid:43)(cid:39)
(cid:42)(cid:39)
(cid:28)
(cid:41)(cid:39)(cid:28)
(cid:41)(cid:39)
(cid:43)(cid:41)(cid:28)
(cid:42)(cid:45)(cid:28)
(cid:42)(cid:46)(cid:28)
(cid:41)(cid:47)(cid:28) (cid:41)(cid:47)(cid:28)
(cid:40)(cid:39)
(cid:39)
(cid:39)(cid:42)
(cid:39)(cid:43)
(cid:39)(cid:44)
(cid:39)(cid:45)
(cid:39)(cid:46)
(cid:39)(cid:47)
(cid:28)
(cid:40)(cid:44)
(cid:40)(cid:41)
(cid:48)
(cid:45)
(cid:42)
(cid:39)
(cid:40)(cid:42)(cid:28)
(cid:40)(cid:41)(cid:28) (cid:40)(cid:41)(cid:28)
(cid:40)(cid:40)(cid:28) (cid:40)(cid:40)(cid:28)
(cid:40)(cid:39)(cid:28)
(cid:39)(cid:42)
(cid:39)(cid:43)
(cid:39)(cid:44)
(cid:39)(cid:45)
(cid:39)(cid:46)
(cid:39)(cid:47)
102
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Human rights
Induction programmes ensure employees are educated
As a responsible corporate citizen, Exxaro complies with
about human rights. Policies on discrimination, harassment
labour legislation in South Africa and with International
and racism are in place, as are structures to protect
Labour Organisation guidelines. Accordingly, the group
employees’ human rights in the workplace. All security
encourages freedom of association and collective bargaining,
personnel are fully trained after appointment on human
ensures that child labour is not tolerated and that forced or
rights aspects relevant to each operation. Refresher courses
compulsory labour is not practised.
also cover human rights issues.
see www.exxaro.com/case_studies
DEVELOPING BUSINESS AND PERSONAL
POTENTIAL
Case study – Preserving west coast vegetation
The newly acquired Namakwa Sands is a mineral sands mining operation at
Brand se Baai, approximately 385km north of Cape Town along the west coast
of South Africa. The area falls within the semi-arid portion of the Cape Floristic
Region (CFR) and is acknowledged as the most biologically rich semi-arid region
in the world, known for its unique habitats and diversity of species.
Due to mining activities, the land is left totally bare and exposed to extreme
conditions:
• High wind speeds (up to 6m/sec)
• Increased soil temperature
• Reduced moisture content of the soil
• Increased salinity in the growth medium (tailings from processing plants used
as backfi ll material).
The re-establishment of the same species under new exposed conditions
is therefore extremely challenging. The process is divided into separate actions to develop and maintain a sustainable
rehabilitation programme to ensure that the area’s biodiversity is restored to its fullest potential after mining:
• Data capturing: Namakwa Sands adopted a GIS database in which all historical and current rehabilitation practices are
captured for future reference. This data, together with monitoring results, can be used to identify best rehabilitation
practices and opportunities for continual improvement
• Monitoring: An external botanical specialist annually surveys controlled and rehabilitated areas. Monitoring results is a
way of determining the success of specifi c rehabilitation efforts against current closure objectives
• Topsoil recovery: The removal and fi nal placement of topsoil is closely monitored and surveyed monthly
• Wind erosion protection: Shade nets are used as windbreaks to minimise the movement of sand and protect newly
established vegetation. Windbreaks are maintained for fi ve to six years until the established vegetation can replace their
function. Almost 3 000km of windbreaks have been erected to cover 2 100ha
• Harvesting: Indigenous seeds are harvested per specie from approved areas during the summer months
• Sowing: Indigenous seeds are sowed in areas where rehabilitation earthworks have been completed and stabilised with
windbreaks. A total of 862kg of indigenous seeds were sowed over 500ha in 2008
• Transplantation: Young indigenous plant species are transplanted from areas to be mined to the area where rehabilitation
earthworks have been completed and the areas stabilised with windbreaks
• Propagation: A nursery was established at the beginning of 2007 to propagate indigenous plant species from seeds
and cuttings in a protected environment to improve the individual species survival rate. The nursery also provides the
opportunity to propagate indigenous plants that cannot be transplanted.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
103
SOCIETY
Improving quality of life is fundamental to the projects we support and
the partnerships we initiate
Social development
From 2008, Exxaro’s socio-economic development strategy
It is group policy to actively recruit labour from local
communities wherever possible. Training
initiatives
and policy will incrementally move away from ad hoc
concentrate on developing the skills of community members
philanthropic donations to funding or
implementing
to fulfi l the group’s requirements.
longer-term, strategic programmes for measurable and
lasting change within disadvantaged communities close to
In 2008, no signifi cant fi nes or sanctions for non-compliance
our operations. In each of the following focus areas, the
with labour laws or regulations were imposed.
objective is job creation and improving the quality of life
within communities near our operations:
• Skills development and capacity building
• Formal education
• Enterprise development
• Health and welfare
• Environmental stewardship.
To ensure we achieve our strategy, we believe it is important
to create public-private partnerships on all our projects.
These partnerships are mainly informal although, during
the year, Exxaro has had discussions with government on
integrating formal public-private partnerships from 2009.
At each of our operations, social and labour plans were
developed by engaging and consulting with relevant
authorities and communities. These plans focus on
(cid:28)(cid:23)(cid:106)(cid:103)(cid:92)(cid:101)(cid:91)(cid:23)(cid:102)(cid:101)(cid:23)(cid:106)(cid:102)(cid:90)(cid:96)(cid:102)(cid:36)(cid:92)(cid:90)(cid:102)(cid:101)(cid:102)(cid:100)(cid:96)(cid:90)
(cid:93)(cid:102)(cid:90)(cid:108)(cid:106)(cid:23)(cid:88)(cid:105)(cid:92)(cid:88)(cid:106)(cid:23)(cid:89)(cid:112)(cid:23)(cid:60)(cid:111)(cid:111)(cid:88)(cid:105)(cid:102)(cid:23)(cid:58)(cid:95)(cid:88)(cid:96)(cid:105)(cid:100)(cid:88)(cid:101)(cid:203)(cid:106)(cid:23)
(cid:61)(cid:108)(cid:101)(cid:91)(cid:23)(cid:88)(cid:101)(cid:91)(cid:23)(cid:60)(cid:111)(cid:111)(cid:88)(cid:105)(cid:102)(cid:23)(cid:61)(cid:102)(cid:108)(cid:101)(cid:91)(cid:88)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)(cid:41)(cid:39)(cid:39)(cid:47)
(cid:41)(cid:44)(cid:28)
(cid:45)(cid:28)
(cid:43)(cid:45)(cid:28)
(cid:40)(cid:46)(cid:28)
(cid:45)(cid:28)
■(cid:23)(cid:23)(cid:74)(cid:98)(cid:96)(cid:99)(cid:99)(cid:106)(cid:23)(cid:91)(cid:92)(cid:109)(cid:92)(cid:99)(cid:102)(cid:103)(cid:100)(cid:92)(cid:101)(cid:107)(cid:23)(cid:88)(cid:101)(cid:91)(cid:23)(cid:23)(cid:23)
(cid:23)(cid:23)(cid:23)(cid:23)(cid:23)(cid:90)(cid:88)(cid:103)(cid:88)(cid:90)(cid:96)(cid:107)(cid:112)(cid:23)(cid:89)(cid:108)(cid:96)(cid:99)(cid:91)(cid:96)(cid:101)(cid:94)
■(cid:23)(cid:23)(cid:60)(cid:101)(cid:109)(cid:96)(cid:105)(cid:102)(cid:101)(cid:100)(cid:92)(cid:101)(cid:107)(cid:88)(cid:99)(cid:23)(cid:106)(cid:107)(cid:92)(cid:110)(cid:88)(cid:105)(cid:91)(cid:106)(cid:95)(cid:96)(cid:103)
■(cid:23)(cid:23)(cid:61)(cid:102)(cid:105)(cid:100)(cid:88)(cid:99)(cid:23)(cid:92)(cid:91)(cid:108)(cid:90)(cid:88)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)
■(cid:23)(cid:23)(cid:63)(cid:92)(cid:88)(cid:99)(cid:107)(cid:95)(cid:23)(cid:88)(cid:101)(cid:91)(cid:23)(cid:110)(cid:92)(cid:99)(cid:93)(cid:88)(cid:105)(cid:92)
■(cid:23)(cid:23)(cid:60)(cid:101)(cid:107)(cid:92)(cid:105)(cid:103)(cid:105)(cid:96)(cid:106)(cid:92)(cid:23)(cid:91)(cid:92)(cid:109)(cid:92)(cid:99)(cid:102)(cid:103)(cid:100)(cid:92)(cid:101)(cid:107)(cid:23)
communities close to our operations, the source of 70% of
In 2008, Exxaro spent R19,8 million on socio-economic
our workforce on average, to ensure they benefi t from the
development projects, which includes over R5 million in
mine’s presence in multiple ways.
donations.
Case study – Contributing to an industry challenge
Exxaro convened a skills debate in March 2008, with panellists from Business Unity
South Africa, the Chamber of Mines and its own business units. Key points from the
debate included:
• Companies must focus on employment branding as opposed to company branding
• Businesses must look internally – skills theft is a reality and companies that don’t
invest in skills, will steal them
• Companies can achieve much through short-term measures, such as adopting a
school, while macro issues are being addressed at government level
• Mining companies must identify and promote role models who can raise the
industry’s profi le at schools, and promote it as an exciting career opportunity
• Public-private partnerships are essential. The only way to change the current
landscape is for schools, academia, business and government to join forces
• Businesses should second their experts to academic institutions to meet the need for
top-quality training, rather than luring academics through lucrative positions
• Mining companies must attract more women to the industry
• Industry needs a better database of available skills, wasting undue time looking for
talent in the wrong places
• National bodies, SETAs and industry must co-ordinate their efforts to avoid the mismatch between what these
bodies do and what industry actually needs.
We must adopt a country, not company, approach. The war will not be won by companies working individually,
especially when they are all fi ghting for the same skills.
104
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The planned number of jobs to be created over a fi ve-year period in social and labour plan projects that started in 2008 will
exceed 660. In addition to job creation, the projects will benefi t over 4 200 people indirectly.
Selection of projects and donations: 2008 – 2012
Mine
Project/donation
Benefi ciaries
Tshikondeni
Alternative energy project in Guyuni (see page 88)
The Sanari Entrepreneurial Centre was established in
Sanari, near Tshikondeni Mine. Exxaro partnered with
the National Development Agency and Department of
Labour to develop a business and training centre for
Sanari).
Sanari community (
Masunda Citrus Farm (
Masunda).
3 direct jobs, 990 indirect project
benefi ciaries
20 direct jobs, 200 indirect project
benefi ciaries
12 direct jobs, 120 indirect project
benefi ciaries
Tshikondeni
Tshikondeni
Tshikondeni
Exxaro partnered with the Department of Agriculture in
the Makuya farmers’ co-operative (
Makuya).
40 direct jobs, 400 indirect project
benefi ciaries
Corporate commitment
Exxaro established the chair in Business and Climate
Change at Unisa to focus on carbon footprinting and
climate change issues that companies should consider
(
Unisa).
Corporate commitment
Exxaro assists the University of Pretoria’s community
project for the maintenance engineering department.
n/a
n/a
Grootegeluk
Grootegeluk
KZN Sands
KZN Sands
Grootegeluk
Donation to Abbotspoort drop-in-centre near
Grootegeluk Mine to care for the growing number of
orphans in the area.
Each year, a sizeable investment is made in technical
and civil skills development in the Lephalale area with
the help of several local training institutions. Offered skills
include welder/planter, ABET, maintenance operator and
building.
SME development and support centre was constructed
last year and is now fully operational. Exxaro partnered
with the European Union, Absa and uThungulu District
Municipality to offer community members a centre where
they can learn skills like art and decoration, furniture-
making, pottery and jewellery production.
In Ezingeni, a hydroponics garden was started which
produces tomatoes for local retailers. The garden was
recently expanded in partnership with BHP Billiton.
18 direct jobs, 65 orphans
1 710 learners over a fi ve-year period
350 direct jobs, 1 750 indirect project
benefi ciaries
15 direct jobs, 75 indirect project
benefi ciaries
Eco-friendly housing, roadbuilding and enterprise
development project.
24 direct jobs, fi ve home owners,
101 indirect project benefi ciaries
see www.exxaro.com/case_studies
CHANGING THE FACE OF A TOWN
see www.exxaro.com/case_studies
THEIR FUTURE IS A CLICK AWAY
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
105
SOCIETY continued
Mine
Rosh Pinah
Zincor
Arnot
New Clydesdale
Leeuwpan
Project/donation
Due to the large infl ux of people to the area, the need
was identifi ed to expand the existing primary school
which already accommodates 600 learners. New
teachers were employed and a campaign to provide
a better education standard started. The improved
school will make Rosh Pinah town a better place to
raise children and Rosh Pinah Zinc Corporation an ideal
employer.
In Vukuzenzele, an informal settlement near the Zincor
plant in Springs, a refuse project educates residents
about a healthy environment, hygiene and welfare.
Refuse is collected monthly. Given its success to date,
Ekhurhuleni Metropolitan Municipality will take over the
project from mid-2009.
Benefi ciaries
15 teachers, 600 learners
all inhabitants of Vukuzenzele
settlement
A hydroponics garden was started near Arnot mine
which will expand into a commercial farm over fi ve years.
95 direct jobs, 332 indirect project
benefi ciaries
A hydroponics garden was started where local
community members and mine employees can receive
training in agricultural skills.
A laundry and dry-cleaning enterprise was started to
meet demand from mine workers and Delmas residents.
A pick-up and delivery service is included for servicing
clients further away.
65 direct jobs, 227 indirect project
benefi ciaries
7 direct jobs, 25 indirect project
benefi ciaries
Monitoring and evaluation
We are currently implementing monitoring and evaluation software to measure progress and identify challenges. This
system will be aligned with Exxaro’s internal socio-economic development technology platform which will be fully operative
by June 2009.
106
I E x x a r o A n n u a l R e p o r t 2 0 0 8
LEGISLATIVE COMPLIANCE/MINING CHARTER SCORECARD
Mining charter scorecard
In 2009, industry progress against the mining charter will be reviewed, and the accompanying scorecard refi ned where
necessary. In the past fi ve years, Exxaro has made steady progress and exceeds many of the charter’s targets, most notably
those for transformation at management level, women in mining and building the pool of industry skills.
Requirements
Progress
Human resources development
• Pay skills development levy
• Submit workplace skills plans and annual training reports
• Provide and encourage employees to become functionally literate
Interface with MQA?
Yes, through submitting statutory reports and serving on sector skills planning
committee and technical reference groups
Formulated a comprehensive skills
audit?
MQA is researching the required format of a skills audit acceptable to all
stakeholders. Exxaro will implement this format once available
Interface with education authorities,
scholarships to promote mining-
related educational advancement?
• Bridging school, bursary and professionals-in-training programmes in place
• Contributing to fund to enhance faculty remuneration at two universities offering
higher education in the mining fi eld
• Through participation in educational structures of Business Unity SA and
Chamber of Mines, Exxaro contributes to transforming broader education in the
country
Increasing number of learnerships
in the mining industry? If so by how
much?
Exxaro has increased its learnerships and skills programmes signifi cantly – to
678: 392 in engineering learnerships, 230 in plant learnerships, 40 in mining
learnerships and 16 in administration/services learnerships.
Skills training opportunities to prepare
for mine closure?
No mine closures. All mines have sections on post-mining training processes and plans
in their social and labour plans, submitted to the Department of Minerals and Energy
Functional literacy and numeracy in
consultation with labour?
Career paths and opportunities for
HDSA?
Systems for mentoring empowerment
groups as a means of capacity
building?
Employment equity
Published employment equity plan and
achievements?
Targets in junior and senior
management categories?
• Fully company-sponsored, voluntary ABET programmes running at all mines
(some since 1992)
• Currently, 2 920 employees have qualifi cation 3 year
Attributable to tax
Total
Market
related
value
Rm
Foreign
currency
million
Contract
value
Rm
Recog-
nised
fair value
in equity
Rm
3
1
4
18
18
75
56
37
561
730
3
1
4
19
19
57
44
41
552
694
1
1
8
6
4
60
78
(1)
(1)
(18)
(12)
4
(9)
3
(32)
Note: In respect of a US$60 million (2007: US$60 million) loan liability of Exxaro Australia Sands Pty Limited, an economic
hedge exists between US$ revenue and US$ borrowings. Accordingly, future sales proceeds to be applied to the repayment
of US$ borrowings are recorded at the historical exchange rate effective at the date of loan draw down.
With regard to the above-mentioned cash fl ow hedges, the future expected cash fl ows are represented
below:
Expected future cash fl ows
– United States Dollar – FECs
– Euro – FECs
– United States Dollar – Note holders loan
Expected gain/(loss) in profi t or loss
(at maturity)
– United States Dollar – FECs
– Euro – FECs
– United States Dollar – Note holders loan
2009
Rm
141
19
(27)
(1)
2010
Rm
>2010
Rm
Total
Rm
141
19
561
(27)
(1)
(9)
561
(9)
194
I E x x a r o A n n u a l R e p o r t 2 0 0 8
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.2.1
Foreign currency risk management (continued)
Market
related
value
Rm
Foreign
currency
million
Contract
value
Rm
Recog-
nised
fair value
in equity
Rm
9
4
13
62
3
26
1
92
1
1
62
3
27
1
93
1
1
(1)
(1)
GROUP
2007
Imports
United States Dollar – FECs
Less than 3 months
3 months
6 months
1 year
Total
Less than 3 months
Total
Euro – FECs
Exports
United States Dollar –
Note holders loan
> 3 year
Attributable to tax
Total
397
397
60
60
304
304
93
(31)
62
Note: In respect of a US$60 million (2007: US$60 million) loan liability of Exxaro Australia Sands Pty Limited, an
economic hedge exists between US$ revenue and US$ borrowings. Accordingly, future sales proceeds to be applied
to the repayment of US$ borrowings are recorded at the historical exchange rate effective at the date of loan
draw down.
With regard to the above-mentioned cash fl ow hedges, the future expected cash fl ows are represented
below:
2008
Rm
2009
Rm
>2009
Rm
Total
Rm
Expected future cash fl ows
– United States Dollar – FECs
– Euro – FECs
– United States Dollar – Note holders loan
Expected gain/(loss) in profi t or loss
(at maturity)
– United States Dollar – Note holders loan
93
1
93
1
304
304
93
93
Market
related
value
Rm
Foreign
currency
million
Contract
value
Rm
Recog-
nised
fair value
in equity
Rm
COMPANY
2008
Imports
United States Dollar – FECs
3 months
Total
1
1
0,1
0,1
1
1
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
195
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.2.1
Foreign currency risk management (continued)
With regard to the above-mentioned cash fl ow hedges, the future expected cash fl ows are represented
below:
2008
Rm
1
Market
related
value
Rm
2009
Rm
>2010
Rm
Total
Rm
1
Recog-
nised
fair value
in equity
Rm
Foreign
currency
million
Contract
value
Rm
Expected future cash fl ows
– United States Dollar – FECs
COMPANY
2007
Imports
United States Dollar – FECs
Less than 3 months
Total
1
1
0,2
0,2
1
1
With respect to the above-mentioned cash fl ow hedges, the future expected cash fl ows are represented
below:
Expected future cash fl ows
– United States Dollar – FECs
2009
Rm
2010
Rm
2008
Rm
1
Total
Rm
1
Foreign currency sensitivity
The following table includes outstanding foreign currency denominated monetary items and adjusts
their translation at the period end for a 10% increase in foreign currency rates and details the group and
company sensitivity thereto. Foreign currency denominated monetary items such as cash balances,
trade receivables, trade payables and loans have been included in the analysis. A positive number
represents a gain whilst a negative number represents a loss.
For exports (US$), an increase in the exchange rate of the Rand (ZAR) against the dollar (US$) (eg,
FEC taken out on exports at R6,10: US$1, with actual rate coming out at R6,50: US$1) represents a
weakening of the Rand against the US dollar, which results in a loss incurred of R0,40. The opposite
applies for a decrease in the exchange rate.
PROFIT OR (LOSS)
EQUITY
GROUP
United States dollar
Euro
COMPANY
United States dollar
2008
Rm
248
115
2007
Rm
68
2
21
2008
Rm
(4)
2007
Rm
(29)
2
For imports (Euro), an increase in the exchange rate of the Rand (ZAR) against the Euro (eg, FEC taken
out on exports at R10,00: €1, with actual rate coming out at R11,00: €1) represents a weakening
of the Rand against the Euro, which results in a gain incurred of R1,00. The opposite applies for a
decrease in the exchange rate.
A 10% decrease in the Rand against each foreign exchange rate would have an equal but opposite
effect on the above, on the basis that all other variables remain constant.
196
I E x x a r o A n n u a l R e p o r t 2 0 0 8
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.2.2
Commodity risk management
The group entered into commodity derivatives to hedge certain of its export product exposures, in
terms of lead and zinc prices. Cash fl ow price hedges for coal at year-end are insignifi cant due to
limited hedged exports and fi xed price agreements.
As of 31 December 2008 the net fair value of commodity derivatives refl ected a R583 million loss (2007:
R92 million). The potential loss in fair value for such commodity hedging derivatives from a hypothetical
adverse 10% move against Exxaro’s position in commodity prices would be approximately R21 million
(2007: R2 million).
Prices for future purchases and sales of goods and services are generally established on normal
commercial terms through agents or direct with suppliers and customers. Price hedging is undertaken
on a limited scale for future zinc sales at Rosh Pinah Zinc Corporation (Pty) Limited and Exxaro Base
Metals (Pty) Limited to secure operating margins and reduce cash fl ow volatility. Price hedging is also
undertaken for future lead sales at Rosh Pinah.
The potential profi t or loss in accounting for changes in fair value for such commodity hedging
derivatives assuming an adverse 10% move in commodity prices is demonstrated below. This analysis
assumes that all other variables remain constant. The analysis is performed on the same basis for
2007. There is no impact on the profi t or loss for both 2008 and 2007.
Lead
Zinc
EQUITY
2008
Rm
(3)
(18)
2007
Rm
(2)
A 10% positive move against the above commodity prices at 31 December would have had the equal
but opposite effect on the above derivatives to the amounts shown above, on the basis that all other
variables remain constant.
Cash fl ow hedges – commodity risk
The forward hedged position at balance sheet date is shown below:
2008
Recognised transactions
Lead
Price
Currency
Zinc
Price
Currency
Attributable to:
– tax
– minority shareholders
Market
related
value
Rm
Foreign
currency
million
Contract
value
Rm
Tons
Recog-
nised
fair value
in equity
Rm
18 825
161
314
30
30
276
276
81 750
939
1 337
173
130
1 356
1 166
2 751
363
3 074
115
(38)
417
(171)
(134)
(99)
90
With respect to the above-mentioned hedges, the future expected cash fl ows are represented
below:
2009
2010
2011
2012
Total
Expected future cash outfl ows
Lead
Zinc
Expected gain/(loss) in profi t or loss
(at maturity)
Lead
Zinc
138
736
151
847
214
867
49
71
552
2 521
201
190
177
15
583
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
197
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.2.2
Commodity risk management (continued)
2007
Recognised transactions
Lead
Price
Attributable to:
– tax
– minority shareholders
Market
related
value
Rm
Tons
Foreign
currency
million
Contract
value
Rm
Recog-
nised
fair value
in equity
Rm
13 000
213
18
121
13 000
213
18
121
(92)
34
4
(54)
With respect to the above-mentioned hedges, the future expected cash fl ows are represented
below:
Expected future cash outfl ows
Expected gain/(loss) in profi t or loss (at maturity)
2008
2009
2010
66
(37)
34
(30)
21
(25)
Total
121
(92)
29.5.2.3
Interest rate risk management
The group is exposed to interest rate risk as it borrows and deposits funds at both fi xed and fl oating
interest rates on the money market. The risk is managed by maintaining an appropriate mix between
fi xed and fl oating rate borrowings taking into account future interest rate expectations. The risk is also
managed where borrowings were entered into at fl oating interest rates in anticipation of a decrease in
the interest rate cycle. The interest rate repricing profi le is summarised below:
At 31 December 2008:
Term borrowings (under the IFRS 7 scope)
Percentage of total borrowings (%)
1 – 6
months
Rm
7 – 12
months
Rm
Beyond
1 year
Rm
Total
borrowings
Rm
3 336
86
561
14
3 897
100
At 31 December 2007:
Term borrowings (under the IFRS 7 scope)
Percentage of total borrowings (%)
The group makes use of interest rate derivatives to hedge specifi c exposures in the interest rate
repricing profi le of existing borrowings.
1 089
100
681
63
408
37
The value of borrowings hedged by interest rate derivatives, the instruments used and the respective
rates applicable to these contracts are as follows:
Borrow-
ings
hedged
Amount
Floating
interest
payable
%
Floating
interest
receivable
%
Fixed
interest
payable
%
Fixed
interest
receivable
%
Re-
cognised
fair value
gain/(loss)
%
LOCAL
At 31 December 2008
Interest rate derivatives
beyond 1 year:
– Interest rate swaps
At 31 December 2007
675
3m Jibar
11,1
1,5
198
I E x x a r o A n n u a l R e p o r t 2 0 0 8
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.2.3
Interest rate risk management (continued)
The following table refl ects the potential impact on earnings, given a movement in interest rates of
50 basis points:
INCREASE
DECREASE
2008
Rm
(16)
2007
Rm
(3)
2008
Rm
16
2007
Rm
3
Profi t or (loss)
The impact on equity is less than a million.
29.5.3
Liquidity risk management
Liquidity risk is the risk that the group will not be able to meet its fi nancial obligations as they fall
due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always
have suffi cient liquidity to meet its liabilities when due, under normal and stressed conditions, without
incurring unacceptable losses or risking damage to the group’s reputation.
The ultimate responsibility for liquidity risk management rests with the board of directors, which has
built an appropriate liquidity risk management framework for the management of the group’s short,
medium and long-term funding and liquidity management requirements.
The group manages liquidity risk by monitoring forecast cash fl ows in compliance with loan covenants
and ensuring that adequate unutilised borrowing facilities are maintained. The group aims to cover at
least its net debt requirements through long-term borrowing facilities.
Financial guarantee liabilities are initially recognised at their fair value, and the initial fair value is
amortised over the life of the fi nancial guarantee. The guarantee liability is subsequently carried at the
higher of this amortised amount and the present value of any expected payment if a payment under
the guarantee has become probable. Financial guarantees are included within other liabilities.
Borrowing capacity is determined by the directors in terms of the articles of association, from time to
time:
Amount approved
Total borrowings
Unutilised borrowing capacity
2008
Rm
16 245
4 150
12 095
2007
Rm
12 254
1 333
10 921
The group’s capital base, the borrowing powers of the company and the group were set at 125% of
shareholders’ funds for both the 2008 and 2007 fi nancial years.
Standard payment terms for the majority of trade payables is the end of the month following the month
in which the goods are received or services are performed. A number of trade payables do however
have shorter contracted payment periods.
To avoid incurring interest on late payments, fi nancial risk management policies and procedures are
entrenched to ensure the timeous matching of orders placed with goods received notes or services
acceptances and invoices.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
199
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.3
Liquidity risk management (continued)
Maturity profi le of fi nancial instruments
The following table details the group’s contractual maturities of fi nancial liabilities:
MATURITY
Con-
tractual
cash
fl ows
Rm
Carrying
amount
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
More
than
5 years
Rm
342
342
4
4
53
281
25
98
220
363
33
1
228
25
5
6
487
2 668
2
1 769
34
4 697
75
495
2 303
63
440
3 301
49
392
6
185
3
1 032
16
323
2 812
267
75
(44)
398
6
2 768
41
267
4
351
25
5
6
616
488
2 668
2
1 769
34
6 306
100
3 897
2 303
94
440
6 734
100
351
25
5
6
616
488
2 668
2
1 769
34
6 306
100
3 897
2 303
94
440
6 734
100
53
23
GROUP
2008
Financial assets
Exxaro Environmental
Rehabilitation Trust asset
Richards Bay Coal Terminal
(RBCT)
Igoda
Mafube
Ndzalama game reserve
Derivatives
Long-term receivables
Trade and other receivables
Taxation receivable
Cash and cash equivalents
NCACHFS
Percentage profi le (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Derivatives
Current tax payable
Percentage profi le (%)
Derivative fi nancial liabilities
(included in the above)
Foreign exchange forward
contracts used for hedging
– Sell (Rand infl ow)
Other forward exchange
contracts
– Buy (Rand outfl ow)
200
I E x x a r o A n n u a l R e p o r t 2 0 0 8
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.3
Liquidity risk management (continued)
MATURITY
Con-
tractual
cash
fl ows
Rm
Carrying
amount
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
More
than
5 years
Rm
274
274
82
45
147
290
2
25
5
6
429
1 884
47
850
3 812
100
1 089
1 353
96
137
2 675
100
1 884
47
850
2 781
73
69
1 353
96
137
1 655
62
2
290
25
5
428
6
1
89
2
47
1
895
24
96
525
399
96
4
525
19
399
15
290
2
25
5
6
429
1 884
47
850
3 812
100
1 089
1 353
96
137
2 675
100
143
91
GROUP
2007
Financial assets
Exxaro Environmental
Rehabilitation Trust asset
Richards Bay Coal Terminal
(RBCT)
New Africa Mining Fund
Igoda
Mafube
Ndzalama game reserve
Long-term receivables
Trade and other receivables
Derivative fi nancial instruments
Cash and cash equivalents
Percentage profi le (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Derivative fi nancial instruments
Current tax payable
Percentage profi le (%)
Derivative fi nancial liabilities
(Included in the above)
Foreign exchange forward
contracts used for hedging
– Sell (Rand infl ow)
Other forward exchange
contracts
– Buy (Rand outfl ow)
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
201
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.3
Liquidity risk management (continued)
MATURITY
Con-
tractual
cash
fl ows
Rm
Carrying
amount
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
More
than
5 years
Rm
COMPANY
2008
Financial assets
Exxaro Environmental
Rehabilitation Trust asset
Trade and other receivables
Derivative fi nancial instruments
Intercompany loan debits
Cash and cash equivalents
NCACHFS
Percentage profi le (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Derivatives
Current tax payable
Percentage profi le (%)
Derivative fi nancial liabilities
(Included in the above)
Foreign exchange forward
contracts used for hedging
– Buy (Rand outfl ow)
10
32
44
7 895
478
13
8 472
100
2 913
804
44
10
3 771
100
1
10
32
44
7 895
478
13
8 472
100
2 913
804
44
10
3 771
100
32
13
5 028
478
13
5 564
65
205
804
13
10
1 032
27
10
31
2 140
2 181
26
727
727
9
278
2 430
31
309
8
2 430
65
202
I E x x a r o A n n u a l R e p o r t 2 0 0 8
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.3
Liquidity risk management (continued)
MATURITY
Con-
tractual
cash
fl ows
Rm
Carrying
amount
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
More
than
5 years
Rm
COMPANY
2007
Financial assets
Exxaro Environmental
Rehabilitation Trust asset
New Africa Mining fund
Intercompany loan debits
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Percentage profi le (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Percentage profi le (%)
Derivative fi nancial liabilities
(Included in the above)
Forecasted transactions
– Buy
8
2
4 966
67
8
306
5 357
100
505
327
832
100
2
8
2
4 966
67
8
306
5 357
100
505
327
832
100
4 516
67
8
306
4 897
91
55
327
382
46
8
2
369
379
7
369
369
44
81
81
2
81
81
10
29.5.4
Credit risk management
Credit risk relates to potential default by counterparties on cash and cash equivalents, investments,
trade receivables and hedged positions. The group limits its counterparty exposure arising from money
market and derivative instruments by only dealing with well-established fi nancial institutions of high credit
standing. The group exposure and the credit ratings of its counterparties are continually monitored and
the aggregate value of transactions concluded are spread amongst approved counterparties. Credit
exposure is controlled by counterparty limits that are reviewed and approved by the board annually.
Trade receivables consist of a number of customers with whom Exxaro has long-standing relationships.
A high portion of term supply arrangements exists with such clients resulting in limited credit exposure
which exposure, where dictated by customer creditworthiness or country risk assessment, is further
mitigated through a combination of confi rmed letters of credit and credit risk insurance.
Exxaro establishes an allowance for non-recoverability or impairment that represents its estimate of
incurred losses in respect of trade and other receivables and investments. The main components
of this allowance are a specifi c loss component that relates to individually signifi cant exposures, and
a collective loss component established for groups of similar assets in respect of losses that have
historical data of payment statistics for similar fi nancial assets.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
203
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
29.
FINANCIAL INSTRUMENTS (continued)
29.5
RISK MANAGEMENT (continued)
29.5.4
Credit risk management (continued)
At the reporting date, the amount of change in the fair value of fi nancial liabilities designated at fair value
through profi t or loss, attributable to credit risk was as follows:
Cumulative
Current fi nancial year
GROUP
COMPANY
2008
Rm
(2)
(8)
2007
Rm
6
6
2008
Rm
2007
Rm
Exposure to credit risk
The carrying amount of fi nancial assets represents the maximum credit exposure.
The maximum exposure to credit risk at both reporting dates was equal to the carrying value of fi nancial
assets for both group and company.
Details of the trade receivables credit risk exposure
GROUP
COMPANY
2008
%
2007
%
2008
%
2007
%
By industry
Manufacturing (including structural
metal and steel)
Public utilities
Other
By geographical area
South Africa
Asia
Europe
USA
Other
53
23
24
100
48
15
22
14
1
100
70
19
11
100
50
4
20
25
1
100
The group does not have any signifi cant credit risk exposure to any single counterparty or any group
of counterparties having similar characteristics.
Financial guarantees are contracts that require the group to make specifi ed payments to reimburse the
holder for a loss it incurs because a specifi ed debtor fails to make payment when due in accordance
with the terms of a debt instrument.
GROUP
COMPANY
The carrying amount of the fi nancial
assets at reporting date
Neither past due nor impaired
– trade and other receivables
– other fi nancial assets
– intercompany loan debits
– derivative fi nancial instruments
– tax receivable
– NCACHFS
– cash and cash equivalents
Past due or impaired
– trade and other receivables
Total fi nancial assets
2008
Rm
2007
Rm
2008
Rm
2007
Rm
6 257
2 619
1 217
616
2
34
1 769
49
49
6 306
3 560
1 632
1 031
47
850
252
252
8 472
32
10
7 895
44
13
478
5 346
4 580
10
450
306
3
3
3 812
8 472
5 349
The group strives to enter into sales contracts with clients which stipulate the required payment terms. It is
expected of each customer that these payment terms are adhered to. Where trade receivables balances
become past due, the normal recovery procedures are followed to recover the debt, where applicable new
payment terms may be arranged to ensure that the debt is fully recovered. Therefore the credit quality of
the above assets deemed to be neither past due nor impaired is considered to be within industry norms.
There were no fi nancial assets with renegotiated terms during the 2008 or 2007 reporting periods.
204
I E x x a r o A n n u a l R e p o r t 2 0 0 8
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.4
Credit risk management (continued)
GROUP
COMPANY
2008
Rm
2007
Rm
2008
Rm
2007
Rm
Age analysis of fi nancial assets
Past due but not impaired
1 – 30 days overdue
31 – 60 days overdue
61 – 90 days overdue
>90 days overdue
Total carrying amount of fi nancial
instruments past due but not
impaired
Past due and impaired
>90 days overdue
Total carrying amount of fi nancial
instruments past due and impaired
Total carrying amount of fi nancial
instruments past due or impaired
28
15
4
7
190
16
18
27
54
251
(5)
(5)
49
1
1
252
3
3
3
Before the fi nancial instruments can be impaired, they are evaluated for the possibility of any recovery
as well as the length of time at which the debt has been long outstanding.
Loans and receivables designated at fair value through profi t or loss.
The group had no loans and receivables designated as at fair value through profi t or loss during the
period.
Collateral
The group may require collateral in respect of the credit risk on derivative transactions with a third party.
The amount of credit risk is the positive fair value of the contract.
Collateral may be in the form of cash or in the form of a lien over a debtor's assets, entitling the group
to make a claim for current and future liabilities.
The group is also exposed to a situation where a third party may require collateral with regard to the
transaction with that third party.
The carrying value of fi nancial assets that may be repledged or resold by counterparties are as follows:
Non-current other fi nancial assets
Trade and other receivables
Cash and cash equivalents
2008
Rm
360
272
102
734
GROUP
COMPANY
2007
Rm
2008
Rm
2007
Rm
11
11
These transactions are conducted under terms that are usual and customary to standard lending and
borrowing activities.
No fi nancial assets of the group were repledged during the year under review for collateral purposes.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
205
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
29.
FINANCIAL INSTRUMENTS (continued)
RISK MANAGEMENT (continued)
29.5
29.5.4
Credit risk management (continued)
Guarantees
The group did not during the period obtain fi nancial or non-fi nancial assets by taking possession of
collateral it holds as security or calling on guarantees.
There were no guarantees provided by banks to secure fi nancing during the fi nancial years ended
31 December 2008 or 2007.
For all other guarantees, refer to note 33 on contingent liabilities.
29.5.5
Other price risks
The group is exposed to equity price risks arising from equity investments. Equity investments are held
for strategic rather than trading purposes. The group does not actively trade these investments.
30. RELATED PARTY TRANSACTIONS
During the year the company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase
transactions with associates and joint ventures. These transactions occurred under terms that are not more or less
favourable than those arranged with third parties.
ASSOCIATES AND JOINT VENTURES
Details of investments in associates and joint ventures are disclosed in note 14 and annexure 2 whilst income is disclosed
in note 14. There were no fi nance costs or expenses in respect of bad debts or doubtful debts incurred with regard to the
joint ventures or the associates during the fi nancial years ended 31 December 2008 or 2007.
2008
2007
Joint
ventures
Rm
Associates
Rm
Joint
ventures
Rm
Associates
Rm
Items of income and expense incurred during the year
are as follows:
– group sales of goods
– group purchases of goods and services
The outstanding balances at year-end are as follows:
– included in trade and other receivables
– included in trade and other payables
– included in cash and cash equivalents
– included in fi nancial assets
3
5
1
22
217
135
65
34
2
9
1
3
16
337
74
86
8
2
6
During both years under review, there was no provision raised for doubtful debts related to the outstanding balances
above.
SUBSIDIARIES
Details of income from, and investments in, subsidiaries are disclosed in notes 6 and 15 respectively, as well as in
annexure 3.
Corporate service fee from subsidiaries
The following corporate service fees were received by Exxaro Resources Limited for essential services rendered:
Exxaro Coal (Pty) Limited
Exxaro Base Metals (Pty) Limited
Exxaro Sands (Pty) Limited
2008
Rm
145
46
40
231
2007
Rm
94
52
41
187
206
I E x x a r o A n n u a l R e p o r t 2 0 0 8
30. RELATED PARTY TRANSACTIONS (continued)
SPECIAL PURPOSE ENTITIES
The group has an interest in the following special purpose entities which are consolidated unless otherwise indicated:
Entity
Ferrosure (South Africa) Insurance Company Limited1
Exxaro Environmental Rehabilitation Fund
Exxaro Employee Empowerment Participation
Scheme Trust
Exxaro Foundation
Exxaro Chairman's Fund
Exxaro People Development Initiative
Kumba Resources Management Share Trust
Merrill Lynch Insurance PCC Limited3
1 Consolidated until September 2008.
2 Non-profi t organisations.
3 Consolidated until July 2008.
Nature of business
Insurance captive
Trust fund for mine closure
Employee share incentive trust
Local social economic development2
Local social economic development2
Local social economic development – bridging classes2
Management share incentive trust
Offshore insurance captive
DIRECTORS
Details relating to directors’ emoluments and shareholdings (including options) in the company are disclosed in the report
of the directors.
SENIOR EMPLOYEES
Details relating to option and share transactions are disclosed in note 32.
KEY MANAGEMENT PERSONNEL
For Exxaro Resources Limited other than the executive and non-executive directors, no other key management personnel
were identifi ed. Refer to page 127 for details on directors' remuneration.
For the group, for 2008, the executive committee has been identifi ed as being key management personnel.
For the group, for 2007, the directors of the major subsidiaries have been identifi ed as being key management personnel.
The major subsidiaries are considered to be the following:
– Exxaro Coal (Pty) Limited
– Exxaro TSA Sands (Pty) Limited
– Exxaro Sands (Pty) Limited
– Exxaro Australia Sands Pty Limited
– Exxaro Base Metals (Pty) Limited
– Exxaro International BV
Short-term employee benefi ts
Termination benefi ts
Share-based payments – related expense
Total compensation paid to key management personnel
2008
Rm
47
9
7
63
2007
Rm
59
9
4
72
SHAREHOLDERS
The principal shareholders of the company at 31 December 2008 are detailed in the “Analysis of Shareholders” schedule
on page 70 of the annual report.
CONTINGENT LIABILITIES
Details are disclosed in note 33.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
207
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
31. OPERATING SEGMENTS
Information regarding the group's reportable segments is presented below. Amounts reported for the prior year have been
restated to conform to the requirements of IFRS 8.
Analysis of the group's profi t or losses and assets and liabilities by reportable segment:
Segment revenue
Total revenue
Inter-segmental
External
Segment net operating profi t/(loss)
Interest income (external)
Interest expense (external)
Interest (income)/expense on non-current provisions
Depreciation and amortisation of intangible assets
Impairment charge and (reversals)
Income tax expense/(income)
Net surplus on disposal of investment
Other non-cash fl ow items not disclosed above
Cash infl ow/(outfl ow) from operations
Cash generated by/(utilised in) operations
Income/(loss) from equity-accounted investments
Capital expenditure
Segment assets and liabilities
Deferred tax assets
Assets (external excluding deferred tax)
Investments in associates (equity accounted)
Total assets
Liabilities (external)
Deferred tax liabilities
Current tax payable (receivable)
Total liabilities
Additions in non-current assets1
Number of permanent employees
Coal
Tied
operations
Commercial
operations
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2 492
1 768
6 548
3 319
2 492
83
1
(38)
42
1 768
88
1
14
33
45
33
25
6 548
2 571
30
35
54
370
21
705
3 319
797
15
6
29
339
18
229
111
237
199
217
350
394
71
3 033
2 780
47
1 201
1 183
740
876
1 491
1 285
2
9 790
2
6 793
1 491
795
133
22
950
1 285
665
141
11
817
3 535
3 385
9 792
1 486
763
409
2 658
740
2 746
6 795
1 042
762
66
1 870
1 144
2 486
1 Excluding fi nancial instruments, deferred tax, post-employment benefi t assets, intercompany loans, investments in subsidiaries.
208
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Mineral sands
Base metals
Other
Total
KZN
Sands
Namakwa Sands
Australia
Sands
Rosh
Pinah
Zincor
Other
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2008
Rm
2007
Rm
2008
Rm
2007
Rm
974
984
491
1 311
1 188
974
31
5
62
1
170
984
(157)
11
62
2
162
491
155
21
5
32
1 311
(82)
18
66
10
168
1 188
60
37
37
9
134
436
(340)
96
(14)
13
16
(2)
42
941
(767)
174
457
7
1 393
340
1 733
(95)
2
1 791
767
2 558
298
2
3
34
15
42
22
30
29
(100)
21
(180)
57
(4)
176
(75)
87
(113)
88
30
52
57
142
23
210
121
131
218
86
(5)
189
162
(2)
26
85
(2)
489
441
94
41
319
5
333
153
259
61
126
187
132
93
84
133
86
502
3 252
485
2 576
(12)
3 571
211
2 924
41
2 990
1 097
490
3 754
496
3 061
432
3 559
448
496
259
653
432
62
642
448
2 789
1 025
3 135
1 025
109
3 031
743
134
1 134
187
333
877
132
343
1 097
316
284
(4)
596
97
532
490
187
10
4
201
84
571
63
1 002
1 065
505
505
133
671
1 126
1 126
339
12
85
436
86
679
198
166
13 843
10 157
(63)
7
(67)
11
2
(1)
(6)
2
(64)
(73)
(18)
3
39
116
158
4
(31)
(27)
7
16
5
(7)
3
(67)
(84)
(193)
20
67
202
289
1
(44)
(21)
(64)
252
15
198
(119)
56
167
3
32
(1)
(24)
96
6
38
1 856
79
297
(2 941)
1 647
(997)
3 292
12
34
3 338
325
948
166
(32)
12
93
1
17
44
9
(6)
(94)
746
57
13 843 10 157
2 467
1 444
153
96
346
212
48
99
898
763
20
17
510
512
(7)
414
3 792
3 574
1 663
1 617
325
2 549
2 308
728
1 296
201
1 083
732
(1 613) 20 253 13 686
1 849
757
23 185
15 175
8 364
4 138
1 257
1 077
440
137
10 061
5 352
4 782
1 576
10 458
9 031
641
(771)
726
18
2
746
61
909
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
209
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
31. OPERATING SEGMENTS (continued)
The group relies on two of its major customers for its revenue from the tied coal operations, commercial coal operations,
Zincor and the other reportable segments. These two external customers account for at least 10% or more individually of
the group’s revenues (20% and 28% (2007: 22% and 27%)). The total amount of revenue from these two customers was
R2 626 million and R3 800 million respectively (2007: R2 217 million and R2 760 million, respectively).
Information about geographical areas
Sourced from country of domicile
– South Africa
Sourced from foreign countries
– Rest of Africa
– Europe
– Asia
– Australia
– Other
Total segment
External revenue
Carrying amount of
non-current assets1
2008
Rm
2007
Rm
2008
Rm
2007
Rm
8 758
7 156
12 423
7 112
19
2 823
959
33
1 251
13 843
5
996
397
9
1 594
10 157
206
1
74
645
230
22
110
1 626
13 349
9 100
1 Excluding fi nancial instruments, deferred tax, post-employment benefi t assets, intercompany loans, investments in subsidiaries.
No asymetrical (irregular) allocations to reportable segments occurred during the periods under review. There were no
material changes in total assets disclosed from the last annual fi nancial statements.
Total segment revenue, which excludes value added tax, represents the gross value of goods invoiced. Export revenue are
recorded according to the relevant sales terms, when the risks and rewards of ownership are transferred. The group uses
the basis of signifi cant marketing regions to allocate external revenues to the individual countries. Total segment revenue
further includes operating revenues directly and reasonably allocable to the segments. Segment revenue includes sales
made between segments. These sales are made on a commercial basis.
Segment net operating profi t equals segment revenue less segment expenses and includes impairment charges, -reversals
and negative goodwill.
Segment expenses represent direct or reasonably allocable operating expenses on a segment basis.
Segment assets and liabilities include directly and reasonably allocable assets and liabilities. This information is not regularly
provided to the chief decision-maker. There are no differences in the way segment assets and liabilities are measured for
reportable segments or group purposes.
There are no differences in the way segment profi t or loss is measured in comparison to the previous annual period nor
between the reportable segments' profi ts or losses and the group’s profi t or loss.
210
I E x x a r o A n n u a l R e p o r t 2 0 0 8
32.
EMPLOYEE BENEFITS
Retirement funds
Independent funds provide retirement and other benefi ts for all permanent employees, retired employees, and their
dependants. At the end of the fi nancial year, the main defi ned contribution retirement funds to which Exxaro was a
participating employer, were as follows:
• Exxaro Selector Pension Fund and Exxaro Selector Provident Fund;
• Iscor Employees’ Provident Fund;
• Mine Workers Provident Fund;
• Namakwa Sands Employees Provident Fund;
• Sentinel Mining Industry Retirement Fund.
In compliance with the Pension Funds Act, after the unbundling of Kumba Iron Ore Limited, Sishen Iron Ore Company
employees were transferred to the newly created Kumba Iron Ore Selector Pension and Provident Fund during the previous
fi nancial year, after all regulatory approvals had been obtained.
Members pay a contribution of 7%, with the employer’s contribution of 10% to the above funds, being expensed as
incurred.
All funds registered in the Republic of South Africa are governed by the South African Pension Funds Act of 1956 (the
Act).
Defi ned contribution funds
Membership of each fund at 31 December 2008 and 31 December 2007 and employer contributions to each fund were
as follows:
GROUP
Exxaro Selector Funds
Iscor Employees’ Provident Fund
Mine Workers Provident Fund
Namakwa Sands Employees Provident Fund
Sentinel Mining Industry Retirement Fund
Other funds
COMPANY
Exxaro Selector Funds
Iscor Employees’ Provident Fund
Sentinel Mining Industry Retirement Fund
Working
members
2008
Number
Working
members
2007
Number
Employer
contri-
butions
2008
Rm
Employer
contri-
butions
2007
Rm
2 470
3 587
870
1 900
830
478
10 135
668
144
30
842
2 323
3 402
1 914
754
924
9 317
611
146
23
780
62
34
2
15
22
31
166
23
1
2
26
52
28
14
20
30
144
18
1
1
20
Due to the nature of these funds the accrued liabilities by defi nition equates to the total assets under control of these
funds.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
211
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
32.
EMPLOYEE BENEFITS (continued)
Defi ned benefi t funds
Exxaro previously disclosed its interest as a participating employer in the closed defi ned benefi t funds namely the Mittal
Steel South Africa Pension funds and Iscor Retirement Fund. Such interest was disclosed while fi nal confi rmation was
awaited on either the approval by the Registrar of Pension Funds of the scheme for the apportionment of an existing
surplus, or the permission to not submit a surplus apportionment scheme in terms of section 15B of the Act.
The approval by the Registrar for the fund not to submit a surplus apportionment was received in 2007.
Medical funds
The group and company contribute to defi ned benefi t medical aid schemes for the benefi t of permanent employees and
their dependants who choose to belong to one of a number of employer accredited schemes. The contributions charged
against income amounted to R70 million (2007: R61 million). Exxaro has a post-retirement medical obligation to a limited
number of in-service and retired employees belonging to two medical schemes for which an actuarially determined liability
has been raised. The corresponding asset which represents the amount recoverable from Eskom for the captive mines has
been recognised and is included in long-term receivables. Exxaro Coal Mpumalanga’s (previously known as Eyesizwe Coal)
contribution to the post-retirement medical aid obligation for the year ended 31 December 2008 amounted to R1,5 million
(2007:R1 million).
As part of the business combination with Namakwa Sands on 1 October 2008 a post-retirement medical obligation was
acquired. The post-retirement liability is of a defi ned benefi t nature, and consists of an implicit promise to pay a portion
of members’ post-retirement medical aid contributions. This liability is also generated in respect of dependants who are
offered continued membership of the medical aid on the death of the primary member, either pre- or post-retirement. This
benefi t, which is no longer offered, applied to employees employed prior to 2001 by Namakwa Sands. Contributions, if any,
will be offset against the liability. No contributions were made for the two months ended 31 December 2008.
Equity compensation benefi ts
The shareholders of Kumba Resources Limited (Kumba Resources) approved on 2 November 2006 an empowerment
transaction which in essence entailed the unbundling of Kumba’s iron ore business. Kumba Iron Ore Limited (Kumba Iron
Ore) which listed on 20 November 2006, owned 74% of Sishen Iron Ore Company (Pty) Limited (Sishen Iron Ore) from
December 2006. Kumba Resources was renamed Exxaro Resources Limited (Exxaro) on 27 November 2006.
As Sishen Iron Ore Company was a wholly owned subsidiary of Kumba Resources before the unbundling of Kumba
Iron Ore Limited, senior employees and directors of Sishen Iron Ore Company were eligible to participate in the Kumba
Resources management share incentive plans.
In order to place, as far as possible, all participants in the Kumba Resources Management Share Option Scheme in the
position they would have been in if they were shareholders of Kumba Resources at the time of the implementation of the
empowerment transaction, the schemes continued in Exxaro and in Kumba Iron Ore, subject to certain amendments that
were made to the Kumba Resources Management Share Option Plan.
Kumba Resources operated the Kumba Management Deferred Purchase Share Scheme and the Kumba Management
Share Option Scheme for senior employees and executive directors of Kumba Resources.
The Kumba Management Deferred Purchase Share Scheme consisted of a combination of an option scheme, a purchase
scheme and a deferred purchase scheme and governed to maturity the share scheme rights and obligations of employees
which were in existence at the time of transfer of the employees from Iscor to Kumba Resources on unbundling of Kumba
Resources effective July 2001. Participants of the Exxaro and Kumba Iron Ore Management Deferred Purchase schemes
who have been granted deferred purchase shares received an Exxaro share and a Kumba Iron Ore share for every deferred
purchase share held under the original purchase agreement.
The Kumba Management Share Option Scheme consists of the granting of options in respect of ordinary Kumba Resources
shares, at market value, to eligible participants.
Shares and/or options held in terms of Kumba Management Deferred Purchase Share Scheme are released in fi ve equal
tranches commencing on the second anniversary of an offer date and expire on the ninth anniversary of an offer date.
Options granted in terms of the Kumba Management Share Option Scheme can be exercised over fi ve years commencing
on the fi rst anniversary of the offer date. If the options are accepted by participants, the vesting periods, unless decided
otherwise by the directors, are as follows:
• 10% after fi rst anniversary of offer date;
• additional 20% after second anniversary of offer date;
• additional 20% after third anniversary of offer date;
• additional 25% after 4th anniversary of offer date;
• additional 25% after 5th anniversary of offer date.
The options not exercised lapse by the seventh anniversary of the offer date.
212
I E x x a r o A n n u a l R e p o r t 2 0 0 8
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Participants of the Exxaro and Kumba Iron Ore Management Share Option schemes exchanged each of their Kumba
Resources options for an Exxaro option and a Kumba Iron Ore option. The strike price of each Kumba Resources option
was apportioned between the Exxaro option and the Kumba Iron Ore options with reference to the volume weighted
average price (VWAP) at which Exxaro and Kumba Iron Ore traded for the fi rst 22 days post the implementation of the
empowerment transaction. The VWAP was calculated as 32,81% for Exxaro and 67,19% for Kumba Iron Ore.
The Exxaro employees’ options in Exxaro schemes are released on the dates that the original options would have vested.
Their options relating to Kumba Iron Ore are released on the earlier of:
• the date that the original options would have vested; or
• 24 months from the date of unbundling.
The Kumba Iron Ore options held by Exxaro employees lapse 42 months after the date of unbundling. The same periods
apply to Kumba Iron Ore employees’ options in Exxaro.
According to the rules of the Long-term Incentive Plan (LTIP) executive directors and senior employees of Exxaro and its
subsidiaries are awarded rights to a number of ordinary Exxaro shares. The vesting of the LTIP awards are conditional upon
the achievement of group performance levels (established by the transformation, human resources, remuneration and
nominations committee of the board) over a performance period of three years.
The extent to which the performance conditions are met governs the number of shares that vest. The performance
conditions set for the initial grant were as follows:
• the total shareholder return (TSR) condition: the Exxaro TSR will be compared to the TSR of a peer group over the
three-year performance period, averaged over a six-month period. The peer group comprises at least 16 members;
• the return on capital employed (ROCE) condition: the ROCE measure is a return on capital employed measure with a
number of adjustments. Targets are set by the committee based on existing ROCE performance in the base year of an
LTIP and planned ROCE performance in the fi nal year of the LTIP performance period.
Kumba Resources, at its election, would have settled the conditional awards by issuing new shares or by instructing
any third party to acquire and deliver the shares to the participants. Kumba Resources, however, elected to collapse the
scheme before the implementation of the empowerment transaction, since it would have been impractical to fi rstly measure
the performance post the unbundling and also to take into account that employees of both Exxaro and Kumba Iron Ore
needed to be compensated for accrued/vested benefi ts up to the date of the unbundling.
The extent to which the conditions were satisfi ed up to the date of the unbundling, determined the number of shares
deemed to vest for each participant.
The cash settlement amount payable to each participant was determined by multiplying the number of shares deemed to
vest in each participant by the 30-day VWAP of Kumba Resources shares as at the last practicable date prior to the posting
of the transaction documentation to Kumba Resources shareholders.
According to the Deferred Bonus Plan (DBP) rules, executive directors and senior employees of Kumba Resources and
its subsidiaries had the opportunity to acquire shares (pledged shares) on the open market with 50% of the after-tax
component of their annual bonus. After the pledged shares have been acquired, the shares are held by an escrow agent
for the absolute benefi t of the participant for a pledge period of three years.
A participant may at its election dispose of and withdraw the pledged shares from escrow at any stage. However, if the pledged
shares are withdrawn from escrow, before the expiry of the pledge period, the participant forfeits the matching award.
The participant will qualify for a matching award at the end of the pledge period on condition that the participant is still
employed and the pledged shares are still in escrow. The matching award entitles a participant to a number of shares equal
in value to the pledged shares. Upon vesting, the pledged shares and the matching award are transferred and released to
the participant and rank pari passu in all respects with the existing issued shares of Exxaro.
The company may settle the matching award by issuing new shares or, alternatively, instruct any third party to acquire
and deliver the shares to the participant. The scheme was also collapsed before the implementation of the empowerment
transaction. Participants received 6 012 matching shares in total.
After the collapse of Kumba Resources LTIP and DBP schemes, Exxaro Resources awarded and will in future award rights
in accordance to the rules of the new schemes.
As a result of restrictions related to the empowerment transaction of Kumba Resources, certain executives and senior managers
who participated in the Kumba Resources Management Share Option Scheme were not able to receive certain grants of
options which would normally have been made in the ordinary course of operations. The human resources and remuneration
committee of Kumba Resources consequently awarded “phantom options” to the affected participants within the following
framework:
• awards of “phantom options” were made, with the grant price, vesting dates, and lapse periods set to be the same as
those of the options awardable;
• on exercise, the participants are paid (in cash) the difference between the market price (volume weighted average price
on the day preceding exercise) and the grant price;
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
213
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
• all other rules and arrangements in respect of the amended Kumba Resources Management Share Option Scheme were
replicated for the Kumba Resources Phantom Share Option Scheme;
• the Kumba Resources Phantom Share Option Scheme was replicated for Kumba Iron Ore;
• Exxaro and Kumba Iron Ore entered into an agreement that facilitates the settlement of obligations towards participants
of the Phantom Option Schemes.
Accounting costs for Exxaro and Kumba Iron Ore Phantom Option Schemes require recognition under IFRS 2 Share-
based Payment using the treatment for cash-settled share-based payments. This treatment is more volatile than that of
the conventional (equity-settled) scheme and the liability will require marking to market at each reporting period. Under the
above scheme 73 690 shares are outstanding at 31 December 2008 (2007: 98 140).
Exxaro made the fi rst annual grant in the Share Appreciation Right Scheme (SARs) to participants in 2007, as well as new
appointments. Under the rules of the scheme, participants obtain the right to receive a number of Exxaro shares to the
value of the difference between the exercise price and the grant (or offer) price.
The performance period’s fi rst review is on 1 March 2010 when the rights will vest if Exxaro's headline earnings per share
(HEPS) increased by a minimum of Consumer Price Index (CPI) plus 6% in the three years. In 2011 and 2012 the minimum
increase in HEPS to achieve is CPI plus 8% and CPI plus 10% respectively. The committee has the discretion to determine
the settlement method, being shares or cash.
Exxaro also created an Employee Empowerment Participation Scheme (MPower) whereby employees in junior levels are
given the opportunity to share in the growth of the company. Employees are awarded share units which entitles them to
dividends of Exxaro in the fi ve-year period ending November 2011. By the end of the fi ve-year period or capital appreciation
period, the units that employee benefi ciaries hold in the Trust, will be sold. The capital distribution is the profi t that is made
on the share units after it is sold and the outstanding loan (used to buy the shares) to Exxaro is settled.
No further awards will be made in terms of the old (Kumba) share incentive plans. The awards already granted and still
outstanding are being phased out. Only SARs, LTIPs, DBPs and MPower schemes remain.
Exxaro will be limited to issuing a maximum of 30 million shares, which amounts to approximately 10% of the number of
issued shares as at the date of the general meeting where approval was given. Notwithstanding the foregoing, Exxaro may
on instruction of the Exxaro board and the transformation, human resources, remuneration and nomination committee, and
as a fallback provision only, pay an Exxaro employee participating in the share incentive plans an equivalent amount in cash
in lieu of any Exxaro shares. The maximum number of Exxaro shares to which any one eligible participant is entitled in total
in respect of all schemes albeit by the way of an allotment and issue of Exxaro shares and/or the grant of options shall not
exceed 1% of the shares then in issue in the share capital of Exxaro.
As at 31 December 2008, the maximum number of shares approved and allocated by shareholders for the purposes of the
schemes, 30 million (2007: 30 million) represent 8,5% (2007: 8,5%) of the issued shares. Of the total of 30 million shares,
21,1 million (2007: 21,1 million) shares are available in the share scheme for future offers to participants, while 8,9 million
(2007: 8,9 million) shares (2,5% of the issued shares) are allocated as options, LTIP, DBP, deferred purchase shares, or
SARS to participants.
Details are as follows:
Number of shares approved by shareholders
Options, LTIP, DBP, deferred purchase instruments and
SARS held by Exxaro employees/participants
Options and deferred purchase instruments held by
Kumba Iron Ore employees/participants
2008
Million
30,0
(6,6)
(1,3)
22,1
2007
Million
30,0
(7,0)
(1,9)
21,1
At 31 December 2008 the company’s loan from the Kumba Resources Management Share Trust amounted to
R51 199 278 (2007: R67 142 835).
The loan is interest free and has no fi xed repayment terms. This amount is refl ected as an intercompany current loan in the
company's accounts and eliminated at group level.
The market value of the shares available for utilisation at the end of the year amounted to R1 358 122 343 (2007:
R2 188 055 019).
214
I E x x a r o A n n u a l R e p o r t 2 0 0 8
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Details of the schemes and plans are:
Outstanding at beginning of year
Issued
Transferred to Kumba Iron Ore1
Transferred from Kumba Iron Ore2
Adjustments
Exercised
Lapsed/cancelled3
Outstanding at end of year
Options4
Exxaro
employees
Kumba Iron Ore
employees
Dec
2008
’000
5 070
(1 464)
(52)
3 554
Dec
2007
’000
6 451
(333)
102
10
(1 044)
(116)
5 070
Dec
2008
’000
1 869
(560)
(37)
1 272
Dec
2007
’000
2 258
333
(102)
9
(569)
(60)
1 869
1 Exercise price range for transferred to Kumba Iron Ore: nil (2007: R8,48 – R42,32).
2 Exercise price range for transferred from Kumba Iron Ore: nil (2007: R8,48 – R33,47).
3 Exercise price range for lapsed/cancelled options: R7,52 – R40,18 (2007: R8,48 – R60,60).
4 No further grants are made under these schemes and plans that are being phased out have been replaced by the new share incentive
plans.
Outstanding at beginning of year
Exercised
Lapsed/cancelled
Outstanding at end of year
Outstanding at beginning of year
Issued
Exercised
Lapsed/cancelled
Outstanding at end of year
Deferred purchase2
Exxaro
employees
Kumba Iron Ore
employees
Dec
2008
’000
5 200
(1 000)
4 200
Dec
2007
’000
6 560
(1 360)
Dec
2008
’000
400
Dec
2007
’000
820
(420)
5 200
400
400
Deferred
bonus plan
Long-term
incentive plan1
Dec
2008
’000
2
16
18
Dec
2007
’000
2
2
Dec
2008
’000
481
462
(3)
(34)
906
Dec
2007
’000
491
(10)
481
1 There is no amount payable by participants on vesting. They will be awarded rights to ordinary shares in the company.
2 No further grants are made under these schemes and plans that are being phased out have been replaced by the new share incentive
plans.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
215
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Outstanding at beginning of year
Issued
Conversion to deferred purchase scheme
Exercised
Lapsed/cancelled
Outstanding at end of year
Details of issues during the period are as follows:
Expiry date
Exercise price (share price range) (R)
Total proceeds if options are exercised at reporting
date/deferred purchase shares at reporting
date paid (R million)
Phantom scheme
SARs
Dec
2008
’000
98
(24)
74
Dec
2007
’000
98
98
Dec
2008
’000
1 422
1 820
(5)
(140)
3 097
Long-term
incentive plan1
Deferred
bonus plan
Dec
2008
Dec
2007
Dec
2008
2009
102,14 –112,35
2009
60,60 – 72,84
2009
89,61 – 111,88
Dec
2007
’000
1 453
(31)
1 422
Dec
2007
2009
86,45
51,8
29,9
2,0
0,2
Expiry date
Exercise price per share (share price range) (R)
Total proceeds if options are exercised at reporting date (R million)
Details of options/deferred purchase shares exercised during the year are as follows:
SARs
Dec
2008
Dec
2007
2014/2015
98,38 – 155,69
200,0
2014
58,33 – 87,22
88,4
Options
Long-term
incentive plan
Dec
2008
Dec
2007
Dec
2008
Dec
2007
Exercise price per share (share price range) (R)
– Exxaro employees in Exxaro (post-unbundling)
– Exxaro employees In Kumba Iron Ore (post-
48,00 – 160,85 51,74 – 110,00
60,6
unbundling)
107,00 – 376,00 109,90 – 300,00
– Kumba Iron Ore employees in Exxaro
(post-unbundling)
Total proceeds (R million)
3,86 – 47,73
424,8
53,15 – 108,03
325,1
0,2
216
I E x x a r o A n n u a l R e p o r t 2 0 0 8
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Exercise price per share (share price range) (R)
Total proceeds (R million)
Deferred
bonus plan
Deferred
purchase
Dec
2008
86,45
Dec
2007
Dec
2008
65,00
0,1
Phantom scheme1
SARs
Exercise price per share (share price range) (R)
Total proceeds (R million)
136,00 – 136,09
1 The phantom option awards are classifi ed as cash-settled since no shares will be issued when exercised.
Dec
2008
Dec
2007
Dec
2008
60,60
0,3
Terms of the options and deferred purchase shares outstanding at 31 December 2008 are as follows:
Dec
2007
65,00
Dec
2007
Expiry date
2009
2010
2011
2012
2013
Total
Options
Long-term incentive plan
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
9,60 – 20,34
7,52 – 19,62
11,09 – 16,62
13,72 – 32,84
33,47 – 47,73
287 60,60 – 102,14
150
112,35
737
1 080
1 300
3 554
89,9
465
441
906
78,2
Total proceeds if options are exercised at reporting
date (R million)
Equity compensation benefi ts held by Exxaro employees in Exxaro
Expiry date
2010
2011
Total
Total proceeds if options are exercised at reporting
date/deferred purchase shares at reporting date paid
(R million)
Expiry date
2012
2014
2015
Total
Total proceeds if options are exercised at reporting
date (R million)
Deferred bonus plan
Deferred purchase
Exercise
price
R
Out-
standing
’000
86,45
86,60 – 111,88
2
16
18
2,0
Exercise
price
R
6,97 – 9,17
18,36
Out-
standing
’000
4
4
SARs
Phantom scheme
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
58,33 – 104,99
112,35
59,80 – 100,10
1 338
1 759
3 097
276,2
74
74
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
217
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Share options held by Exxaro employees in Kumba Iron Ore:
Expiry date
2009
2010
Total
Total proceeds if options are exercised at reporting
date (R million)
Share options held by Kumba Iron Ore employees in Exxaro:
Options
Exercise
price
R
Out-
standing
’000
22,04 – 41,66
14,98 – 97,74
217
2 819
3 036
157,5
Expiry date
2009
2010
2011
2012
Total
Total proceeds if options are exercised at reporting
date/deferred purchase shares at reporting date paid
R million)
Options
Deferred purchase
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
40,62 – 16,11
6,91 – 47,73
12,90 – 13,62
19,62
148
1 118
4
2
1 272
33,1
21,06
400
400
The exercise prices of the options held by Exxaro employees in Exxaro and Kumba Iron Ore respectively at 31 December
2007, have been recalculated with reference to the volume-weighted average price (VWAP) split of 32,81% for Exxaro and
67,19% for Kumba Iron Ore. The last date for exercising these options is 2 May 2010.
Terms of the options and deferred purchase shares outstanding at 31 December 2007 are as follows:
Share options held by Exxaro employees in Exxaro:
Options
Long-term incentive plan
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
8,48 – 20,34
9,48 – 20,34
7,52 – 19,62
11,09 – 14,78
13,72 – 32,84
33,47 – 47,73
697
409 60,60 – 72,84
194
941
1 378
1 451
5 070
112,7
481
481
29,6
Deferred bonus plan
Deferred purchase
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
6,97 – 9,17
18,36 – 23,26
2
2
0,2
4 000
1 200
5 200
0 1
Expiry date
2008
2009
2010
2011
2012
2013
Total
Total proceeds if options are exercised at reporting
date (R million)
Expiry date
2009
2010
Total
Total proceeds if options are exercised at reporting
date/deferred purchase shares at reporting date paid
(R million)
218
I E x x a r o A n n u a l R e p o r t 2 0 0 8
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Expiry date
2012
2014
Total
Total proceeds if options are exercised at reporting
date (R million)
SARs
Phantom scheme
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
58,33 – 87,22
59,80 – 100,10
98
98
1 422
1 422
87,9
Share options held by Exxaro employees in Kumba Iron Ore:
Expiry date
2008
2009
2010
Total
Total proceeds if options are exercised at reporting
date (R million)
Share options held by Kumba Iron Ore employees in Exxaro:
Options
Exercise
price
R
Out-
standing
’000
17,37 – 41,66
19,42 – 41,66
11,11 – 97,74
517
338
3 877
4 732
222,4
Options
Deferred purchase
Exercise
price
R
Out-
standing
’000
Exercise
price
R
Out-
standing
’000
Expiry date
2008
2009
2010
Total
Total proceeds if options are exercised at reporting
date/deferred purchase shares at reporting date paid
(R million)
8,48 – 19,93
3,84 – 16,11
6,91 – 47,73
159
207
1 503
1 869
42,4
Details of options vested but not sold during the year are as follows:
Exxaro employees in Exxaro (post-unbundling)
Number of shares
Exercise price (share price range) (R)
Exxaro employees in Kumba Iron Ore (post-unbundling)
Number of shares
Exercise price (share price range) (R)
Kumba Iron Ore employees in Exxaro (post-unbundling)
Number of shares
Exercise price (share price range) (R)
21,06
400
400
Dec
2008
Dec
2007
4 977 311
3,84 – 47,43
1 559 130
3,86 – 47,73
3 036 340
7,80 – 97,74
1 221 160
15,38 – 97,74
1 271 560
6,91 – 47,73
570 070
3,84 – 47,73
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
219
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
Long-term
Incentive
Plan
’000
Deferred
Bonus
Plan
’000
Deferred
Purchase
’000
Options
’000
Exxaro shares/options only
Number of shares vesting at
beginning of year
– Exxaro employees in Exxaro
– Kumba Iron Ore employees
in Exxaro
Net change during the year
Number of shares vesting at
end of year
– Exxaro employees in Exxaro
– Kumba Iron Ore employees
in Exxaro
6 939
5 070
1 869
(2 113)
4 826
3 554
1 272
Directors’ interests in shares
For details refer to the report of the directors.
481
481
425
906
906
2
2
16
18
18
5
5
5
5
SARs
’000
1 422
1 422
1 675
3 097
3 097
Total
’000
8 849
6 980
1 869
3
8 852
7 580
1 272
Fair value of equity-settled share-based payment transactions with employees
The group applies IFRS 2 to grants of shares, share options or other equity instruments that are granted. In determining
the fair value of services received as consideration for equity instruments, measurement is referenced to the fair value of
the equity instruments granted.
The group applied the transitional provisions of IFRS 2 and applied the principles to grants that were granted after
7 November 2002. Kumba Resources listed on 26 November 2001 and the volatility of its share price since then has been
used to determine the calculations.
The changes to the schemes brought about by the empowerment transaction were treated as a modifi cation. The services
received were measured at the grant date fair value of the original equity instruments granted. Any incremental increase in
the fair value of the equity instruments granted is recognised over the revised vesting period.
The fair value of the options issued under the Management Share Option Scheme was determined immediately before and
after the modifi cation using the Black-Scholes option pricing model.
The weighted average incremental fair value granted per option at the original strike price as a result of the modifi cation
amounted to R12,55 while the incremental fair value for a repriced option amounted to R14,93.
220
I E x x a r o A n n u a l R e p o r t 2 0 0 8
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
The Black-Scholes methodology is used to calculate the fair
value of options granted to employees.
The inputs to the model are as follows:
Share price (R)
Weighted average exercise price range – original strike
price (R)
Weighted average exercise price range – repriced strike
price (R)
Annualised expected volatility (%)
Option life (years) (weighted average)
Dividend yield (%)
Risk-free interest rate (%) (weighted average)
Expected employee attrition (%)
2008
2007
Exxaro
Kumba
Iron Ore
Exxaro
Kumba
Iron Ore
49,00
110,00
49,00
110,00
34,76
71,18
34,76
71,18
13,12
37,90
3,11
4
8,26
9,26
26,86
37,90
3,08
4
8,26
9,26
13,00
37,90
3,11
4
8,26
6,69
26,86
37,90
3,08
4
8,26
6,69
The Black-Scholes methodology is used to calculate the fair value of Share Appreciation Rights (SARs) granted to
employees.
The inputs to the model as at 31 December 2008 are as follows:
Share price (R)
Weighted average exercise price range
Annualised expected volatility (%)
Option life (years) (weighted average)
Dividend yield (%)
Risk-free interest rate (%) (weighted average)
Expected employee attrition (%)
The inputs to the model as at 31 December 2007 were as follows:
Share price (R)
Weighted average exercise price range
Annualised expected volatility (%)
Option life (years) (weighted average)
Dividend yield (%)
Risk-free interest rate (%) (weighted average)
Expected employee attrition (%)
SARs
vesting in
3 years
SARs
vesting in
4 years
SARs
vesting in
5 years
86,25
18,11
40,40
3
9,20
8,89
5
61,24
60,60
36,78
5
2,98
7,70
6,69
86,25
18,11
40,40
4
9,59
8,94
5,5
61,24
60,60
36,78
5,5
3,13
7,64
6,69
86,25
18,11
40,40
5
9,48
8,94
6
61,24
60,60
36,78
6
3,08
7,64
6,69
The Monte Carlo valuation methodology is used to calculate the fair value of long-term incentive plan, deferred bonus plan
and MPower grants to employees.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
221
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
32.
EMPLOYEE BENEFITS (continued)
Equity compensation benefi ts (continued)
The inputs to the LTIP model are as follows:
Date of grant
Share price at grant date (R)
Risk-free rate (%)
Dividend yield (%)
Expected volatility (%)
Time to vesting
Expected employee attrition (%)
The inputs to the DBP model are as follows:
Date of grant
Share price at grant date (R)
Risk-free rate (%)
Dividend yield (%)
Expected volatility (%)
Time to vesting
Expected employee attrition (%)
The inputs to the MPower model are as follows:
Date of grant
Share price at grant date (R)
Risk-free rate (%)
Dividend yield (%)
Expected volatility (%)
Vest date
Vesting probability
The inputs to the Phantom scheme model are as
follows:
Date of grant
Share price at grant date (R)
Risk-free rate (%)
Dividend yield (%)
Expected volatility (%)
2008
01/04/2008
2007
28/2/2007
110,35
8,88
2,81
N/A
three years from date of grant
13,24
61,24
7,70
4,08
36,80
three years from date of grant
5,54
01/04/2008
28/2/2007
111,88
8,88
2,77
N/A
three years from date of grant
9,00
61,24
7,70
4,08
36,80
three years from date of grant
4,45
31/01/2007
71,00
8,20
3,00
37,00
28/11/2011
100
31/1/2007
71,00
8,20
3,00
37,0
28/11/2011
100
22/4/2005 – 1/12/2005
22/4/2005 – 1/12/2005
71,90
8,47 – 8,58
11,32 – 12,96
48,50
56,00 – 100,10
8,54 – 8,70
4,12
34,25
Mainly over fi ve years
in tranches
0
Time to vesting
Expected employee attrition (%)
Over three years in tranches
0
222
I E x x a r o A n n u a l R e p o r t 2 0 0 8
33. CONTINGENT ASSETS AND LIABILITIES
Contingent asset
An outstanding insurance claim for the Furnace 2 incident
at Exxaro TSA Sands (Pty) Limited for which it is probable
that settlement will be received in the second half of 2009.
Surrender fee on prospect rights, exploration rights and
mining rights.
Contingent liabilities1
Contingent liabilities at balance sheet date, not otherwise
provided for in these annual fi nancial statements, arising from:
– guarantees in the normal course of business from
which it is anticipated that no material liabilities will
arise:
– other2
GROUP
COMPANY
2008
Rm
2007
Rm
2008
Rm
2007
Rm
135
57
523
64
165
36
1
3
1
1 The increase in 2008 is mainly attributable to guarantees to the Department of Minerals and Energy in respect of environmental liabilities
on immediate closure of mining operations.
2 Includes the group’s share of contingent liabilities of associates and joint ventures of R57 million (2007: R22 million).
These contingent liabilities have no tax impact.
The timing and occurrence of any possible outfl ows are uncertain.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
223
NOTES TO ANNUAL FINANCIAL STATEMENTS continued
for the year ended 31 December 2008
34. COMMITMENTS
Capital commitments at balance sheet date
Capital expenditure contracted for plant and equipment
Capital expenditure authorised for plant and equipment
but not contracted
The above includes the group’s share of capital
commitments of associates and joint ventures.
Capital expenditure will be fi nanced from
available cash resources, funds generated
from operations and available borrowing capacity.
Capital expenditure contracted relating to captive mines
Tshikondeni, Arnot and Matla, which will be fi nanced by
ArcelorMittal SA Limited and Eskom respectively.
GROUP
COMPANY
2008
Rm
2007
Rm
2008
Rm
2007
Rm
889
450
2 711
1 278
456
157
78
48
33
24
70
72
A trust known as The New Africa Mining Fund was established during 2003 to make portfolio investments in junior mining projects
within the Republic of South Africa and elsewhere on the continent of Africa. Exxaro, as an investor participant to the fund, has
committed to contribute R20 million towards the fund. The Fund Manager can draw down this balance or any portion as and
when required, by serving a 10-day notice to Exxaro. The commitment period commenced on 1 March 2003 and expires on
28 February 2009.
On 19 January 2007 Exxaro announced that, pursuant to the empowerment transaction, it had exercised the option to
acquire the Namakwa Sands mineral sands operation and a 26% interest in a company to be formed to hold the Black
Mountain lead-zinc mine and the Gamsberg zinc project. The transaction was valued at R2 353 million at 31 December
2007. The conversion of mining rights and cession thereof to Exxaro was obtained during 2008 and the transaction was
completed (refer note 27).
Operating lease commitments
The future minimum lease payments under
non-cancellable operating leases are as follows:
– less than one year
– more than one year and less than fi ve years
– more than fi ve years
Total
Operating sublease receivable
Non-cancellable operating lease rentals are receivable
as follows:
– less than one year
Total
GROUP
COMPANY
2008
Rm
2007
Rm
2008
Rm
2007
Rm
9
7
16
46
8
54
34
35
8
77
70
48
8
126
1
1
224
I E x x a r o A n n u a l R e p o r t 2 0 0 8
ANNEXURE 1
NON-CURRENT INTEREST-BEARING BORROWINGS
Final
repayment
date
Rate of
interest per
year (payable
half‑yearly)
Rate of
interest per
year (payable
half‑yearly)
2008
2007
GROUP
COMPANY
Fixed
%
Floating
%
Fixed
%
Floating
%
2008
Rm
2007
Rm
2008
Rm
2007
Rm
LOCAL
Unsecured loans
Secured loans
2009
2009
2011
2012
2013
2013
2013
2013
2013
2013
2013
2013
2016
2011
2011
2012
2013
2025
2026
2031
2032
1,780
14,980
14,140
12,570
13,480
13,480
13,480
13,580
13,480
13,580
13,480
13,580
14,350
6,890
1
12,360
12,460
12,300
12,130
17,490
11,420
13,540
8,330
10,710
22,200
32,930
12,130
17,490
11,420
13,540
8,330
10,710
22,200
32,930
FOREIGN
Unsecured loans (US$)
FOREIGN
Secured loan (AU$)
Total non-current
interest-bearing
borrowings (refer note 21)
2016
6,640
6,640
2010
7,850
7,850
300
150
300
150
415
675
675
125
125
224
224
2 913
450
109
167
5
300
150
415
675
675
125
125
224
224
143
3 337
2
2
1
10
24
13
84
115
251
561
561
1
1
151
300
150
80
681
3
2
1
11
25
13
81
106
242
408
408
2
2
4 150
1 333
2 913
450
2
3
4
5
6
7
8
9
10
11
1 The interest is based on US PPI and settled in rand based on the USD/ZAR exchange rate. The PPI NACS on 31 December 2008 is
1,78% (31 December 2007 6,89%).
Finance leases recognised due to IFRIC 4 Determining whether an Agreement contains a Lease:
2 Finance lease agreement between Exxaro Sands (Pty) Limited and Mhlathuze Water in respect of a plant with a book value of R2 million (2007: R2 million).
3 Finance lease agreement between FerroAlloys (Pty) Limited and African Oxygen Limited (Afrox) in respect of machinery and equipment with a book
value of R0 million (2007: R0 million).
4 Finance lease agreement between Exxaro Sands (Pty) Limited and Eskom in respect of buildings with a book value of R1 million (2007: R1 million).
5 Finance lease agreement between Exxaro TSA Sands (Pty) Limited and Air Products in respect of a plant with a book value of R6 million
(2006: R8 million).
6 Finance lease agreement between Exxaro TSA Sands (Pty) Limited and Mhlathuze Water in respect of a plant with a book value of R21 million
(2007: R23 million).
7 Finance lease agreement between Exxaro TSA Sands (Pty) Limited and Eskom in respect of buildings with a book value of R14 million
(2007: R14 million).
8 Finance lease agreement between Exxaro Sands (Pty) Limited and Kusasa Bulk Terminals (Phase 1) in respect of a plant with a book value
of R45 million (2007: R47 million).
9 Finance lease agreement between Exxaro Sands (Pty) Limited and Kusasa Bulk Terminals (Phase 2) in respect of a plant with a book value of
R49 million (2007: R51 million).
10 US$60 million senior notes issued by Ticor Finance (A.C.T) Pty Limited, an entity controlled by Exxaro Australia Sands Pty Limited, and a
syndicated loan facility of US$60 million, of which US$0 million was drawn on 31 December 2008 (US$17 million 31 December 2007).
11 Finance lease agreement in respect of computer equipment with a book value of R1 million (2007: R2 million).
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
225
ANNEXURE 2
INVESTMENT IN ASSOCIATES, JOINT VENTURES AND OTHER INVESTMENTS
Nature
of
business1
Country
of
incor-
poration2
Number
of shares
held
Percentage
holding
Group carrying
amount
Company carrying
amount
2008
%
2007
%
2008
Rm
2007
Rm
2008
Rm
2007
Rm
ASSOCIATED COMPANIES
Unlisted
Black Mountain Mining (Pty) Limited
Chifeng Kumba Hongye Zinc Corporation
Limited
Chifeng NFC Kumba Hongye Zinc
Corporation Limited
Sishen Iron Ore Company (Pty) Limited
Total associated companies (refer note 14)
JOINT VENTURES
Incorporated
Unlisted
RoshSkor Township (Pty) Limited
South Dunes Coal Terminal Co. (Pty) Limited
Thakweneng Mineral Resources (Pty) Limited
Rosh Pinah Health Care (Pty) Limited
Unincorporated
Moranbah Coal Project
Tiwest
INVESTMENT COMPANIES
Unlisted
Richards Bay Coal Terminal
Other
Total other investments (refer note 16)
TOTAL INVESTMENTS
The investments are valued at reporting date.
Listed shares are valued at market value and
unlisted shares at directors’ value.
Unlisted investments in associates
– directors’ valuation
Unlisted other investments
– directors’ valuation
A
RSA
260
26,00
A & M
CH
58 520 000
38,00
38,00
A & M
A
CH
42 500 000
RSA 240 000 000
25,00
20,00
25,00
20,00
C
A
E
C
A
A
NAM
RSA
RSA
NAM
AUS
AUS
50
1 333
1
31
50,00
33,33
50,00
31,00
50,00
33,33
50,00
50,00
50,00
50,00
50,00
95
21
641
757
32
132
37
1 647
1 848
1
1
351
36
387
2 236
290
38
328
1 085
13 162
9 110
387
328
2
2
1
¹ A – Mining, C – Service, E – Exploration, M – Manufacturing.
² RSA – Republic of South Africa, CH – People’s Republic of China, NAM – Namibia, AUS – Australia
226
I E x x a r o A n n u a l R e p o r t 2 0 0 8
The group’s effective share of balance sheet, income statement and cash fl ow items in respect of associated companies and joint
ventures is as follows:
ASSOCIATED
COMPANIES
JOINT VENTURES
INCOME STATEMENTS
Revenue
Operating expenses
NET OPERATING PROFIT
Net fi nancing (costs)/income
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE YEAR
Profi t for the year attributable to owners of the parent
STATEMENTS OF FINANCIAL POSITION
Non-current assets
Current assets
TOTAL ASSETS
Equity and liabilities
EQUITY ATTRIBUTABLE TO OWNERS OF
THE PARENT
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Deferred tax and other
Current liabilities
Interest-bearing borrowings
Other
TOTAL EQUITY AND LIABILITIES
STATEMENTS OF CASH FLOWS
Net cash fl ows from operating activities
Net cash fl ows from investing activities
Net cash fl ows from fi nancing activities
Foreign currency translations
Net increase/(decrease) in cash and cash equivalents
2008
Rm
4 803
(2 290)
2 513
(64)
2 449
(806)
1 643
1 643
1 967
1 847
3 814
1 614
555
143
412
670
420
3 814
836
(359)
96
4
577
2007
Rm
2 935
(1 749)
1 186
(68)
1 118
(356)
762
762
1 333
898
2 231
757
241
63
315
537
318
2 231
498
(482)
(44)
(15)
(43)
2008
Rm
1 319
(1 392)
(73)
(21)
(94)
(94)
(94)
1 981
1 156
3 137
2007
Rm
1 192
(1 112)
80
6
86
1
87
87
1 643
1 120
2 763
2 533
2 324
128
207
16
15
238
3 137
81
(248)
7
38
(122)
81
152
16
1
189
2 763
258
(204)
(89)
(31)
(66)
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
227
ANNEXURE 3
INVESTMENTS IN SUBSIDIARIES1
Country
of
incor-
poration2
Nature
of
business3
DIRECT INVESTMENTS
AlloyStream (Pty) Limited
AlloyStream Holdings (Pty) Limited
Clipeus Investment Holdings (Pty) Limited
Colonna Properties (Pty) Limited
Cullinan Refractories Limited
Exxaro Base Metals and Industrial Minerals Holdings
(Pty) Limited
Exxaro Base Metals (Pty) Limited
Exxaro Chairman’s Fund
Exxaro Coal (Pty) Limited
Exxaro Employee Empowerment Participation
Scheme Trust
Exxaro Environmental Rehabilitation Fund
Exxaro FerroAlloys (Pty) Limited
Exxaro Foundation
Exxaro Holdings (Pty) Limited4
Exxaro Holdings Sands (Pty) Limited
Exxaro Insurance Company Limited
Exxaro People Development Initiative
Exxaro Properties (Groenkloof) (Pty) Limited
Exxaro Properties (Kloofzicht) (Pty) Limited5
Exxaro Properties (Princess Grant) (Pty) Limited5
Exxaro TSA Sands (Pty) Limited
Exxaro Sands (Pty) Limited
Ferroland Grondtrust (Pty) Limited
Ferrosure (South Africa) Insurance Company Limited6
Glen Douglas Dolomite (Pty) Limited7
Kumba Base Metals Namibia (Pty) Limited
Kumba Resources Management Share Trust
Merrill Lynch Insurance PCC Limited
Mineral Exploration Company of Southern
Africa (Pty) Limited5
Rocsi Holdings (Pty) Limited8
Skyprops 112 (Pty) Limited
Ticor (Bermuda) Holdings Limited9
Ticor (Bermuda) Minerals Limited9
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
BVI & RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
NAM
RSA
ILE
RSA
BVI & RSA
RSA
BER
BER
M
H
H
B
A
H
M
T
A
T
T
M
T
H
H
I
E
B
B
B
M
A
D
I
A
C
T
I
B
H
H
H
H
INDIRECT INVESTMENTS
Coastal Coal (Pty) Limited
Exxaro Australia Pty Limited
Exxaro Australia Sands Pty Limited
Exxaro Base Metals (Namibia) (Pty) Limited
Exxaro Base Metals China Limited
Exxaro Base Metals International BV
Exxaro Coal Botswana Holding (Pty) Limited
Exxaro Coke (Pty) Limited
Exxaro Finance Ireland
RSA
AUS
AUS
NAM
HK
NE
Bot
RSA
IRL
5 000
A
A
11
A 2 038 299 354
100
H
1 354
C
119 209
A
2
P
1
M
893 656 391
C
228
I E x x a r o A n n u a l R e p o r t 2 0 0 8
Issued
capital-
unlisted
ordinary
shares
R
1
1
1
200
1 000
Interest of company
Investment in shares
Indebtedness
2008
R
2007
R
2008
Rm
2007
Rm
1
746 163
1
2 518 966
1 000
1
746 163
1
2 518 966
1 000
10
11
2
1
5 500 000
1
247 712 500
1
247 712 500
413
222
1 000
1 000
760
1 783
1
1
1
1
566 827
40 000
50
459 517 297
1 869 951 859
5 000 000
459 517 297
1
1
1
510
200
2
10 000
1
1
510
6 003 355
2
1
1
1
1
510
6 003 355
2
10
10 000
1
2
200
647 044 943
100
74 836
653 722 945
44 389 208
200
653 722 945
143 502 000
(10)
11
(7)
5
5 693
818
4
2 205
710
4
(67)
(40)
(63)
(1)
1
(2)
(51)
90
20
(51)
(1)
3
69
Interest of company
Investment in shares
Indebtedness
2008
R
2007
R
2008
Rm
2007
Rm
1
(490)
21
(21)
5
Country
of
incor-
poration2
Nature
of
business3
Issued
capital-
unlisted
ordinary
shares
Exxaro Maden Arama ve Madencilik Ltd. Sti.
Exxaro Madencilik Sanayi Ve Ticaret Anonim
Sirketi (76%)
Exxaro Mineral Sands BV
Exxaro Holdings (Australia) Pty Limited
Exxaro International BV
Exxaro International Trading BV
Exxaro International Coal Trading BV
Exxaro Investments (Australia) Pty Limited
Exxaro Sands Holdings BV
Exxaro Coal Mpumalanga (Pty) Limited10
Ferrowest (Pty) Limited (95%)
Inyanda Coal (Pty) Limited
Magnetic Minerals Pty Limited
Omacor Sac
Oreco Leasing Limited
Pigment Holdings Pty Limited
Rocit Investments (Pty) Limited
Rosh Pinah Mine Holdings (Pty) Limited
Rosh Pinah Zinc Corporation (Pty) Limited (50,04%)
Senbar Holdings Pty Limited
Synthetic Rutile Holdings Pty Limited
The Vryheid (Natal) Railway Coal and
Iron Company Limited
Ticor (Overseas) Holdings Pty Limited
Ticor Chemical Company Pty Limited
Ticor Chemicals Ghana Pty Limited5
Ticor Energy Pty Limited
Ticor Finance (A.C.T) Pty Limited
Ticor Resources Pty Limited
Ticor Titanium Australia Pty Limited
Tific Pty Limited
TiO2 Corporation NL
Yalgoo Minerals Pty Limited
TUR
TUR
NE
AUS
NE
NE
NE
AUS
NE
RSA
RSA
RSA
AUS
PERU
MAU
AUS
RSA
NAM
NAM
AUS
AUS
RSA
AUS
AUS
GHANA
AUS
AUS
AUS
AUS
AUS
AUS
AUS
R
32 512
6 436 530
134 973
5
662 037
172 866
172 866
5
169 999
100 000
136 500 000
1 000
31 740 964
10
1
10
1 000
1 000
2 280
10
10
3 675
10
10
10
10
10
8 111 062
10
10
85 101 240
48 216 010
P
P
A
H
H
C
C
H
H
A
B
A
A
C
F
C
H
H
A
C
C
A
H
M
C
F
F
H
H
H
A
A
TOTAL INVESTMENTS IN SUBSIDIARIES (refer note 15)
3 289 564 811
1 513 735 958
7 269
4 788
1 At 100% holding except where otherwise indicated
2 RSA – Republic of South Africa, AUS – Australia, NAM – Namibia, HK – Hong Kong, BVI – British Virgin Islands, ILE – Isle of Man, IRL – Ireland, MAU – Mauritius, NE –
Netherlands, BER – Bermuda, Bot – Botswana, TUR – Turkey
3 A – Mining, B – Property, C – Service, D – Land management, E – Section 21 company, F – Finance, H – Holdings, I – Insurance, M – Manufacturing, P – Exploration, T – Trust
4 Exxaro Holdings (BVI) SA was converted into a South African company as Exxaro Holdings (Pty) Limited
5 Deregistered during 2008
6 Shares sold during 2008
7 Reclassified during 2008 as non-current asset classified as held-for-sale
8 Rocsi Holdings (BVI) Limited was converted into a South African company as Rocsi Holdings (Pty) Limited
9 Liquidated during 2008
10 Previously Eyesizwe Coal (Pty) Limited
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
229
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the eighth annual general meeting
An abbreviated curriculum vitae in respect of each director
of members of Exxaro Resources Limited will be held at the
offering themselves for re-election is set out on page 233 of
Exxaro Corporate Centre, Roger Dyason Road, Pretoria West,
the annual report.
Gauteng, South Africa, at 10:00 on Friday, 8 May 2009.
The following business will be transacted and resolutions
Remuneration of non-executive directors
proposed, with or without modification:
To approve the proposed remuneration for the period
6. ORDINARY RESOLUTION NUMBER 6
1. ORDINARY RESOLUTION NUMBER 1
Approval of financial statements
To receive and adopt the annual financial statements of the
group for the period ended 31 December 2008, including
the directors’ report and the report of the auditors
thereon.
2. ORDINARY RESOLUTION NUMBER 2
Re-appointment of independent auditors
To ratify the re-appointment of Deloitte & Touche as auditors
of the company and Mr BW Smith as the designated
partner for the ensuing year.
3. ORDINARY RESOLUTION NUMBER 3
Auditors’ fees
To authorise the directors to determine the auditors’
remuneration for the period ended 31 December 2008.
4. ORDINARY RESOLUTION NUMBER 4
Re-election of directors
In terms of article 15.2 of the articles of association, the
following directors appointed to the board with effect
from 13 August 2008 will retire and, being eligible, offer
themselves for re-election:
4.1 SEA Mngomezulu
4.2 J van Rooyen
An abbreviated curriculum vitae in respect of each director
offering themselves for re-election is set out on page 233
of the annual report.
5. ORDINARY RESOLUTION NUMBER 5
Re-election of directors
To re-elect the following directors who retire by rotation in
terms of clause 16.1 of the articles of association of the
company, and who are eligible for re-election:
5.1 VZ Mntambo
5.2 NL Sowazi
5.3 D Zihlangu
1 January 2009 to 31 December 2009:
:
Chairman
Director
:
Audit committee chairman :
:
Audit committee member
Board committee chairman :
:
Board committee member
Current
R
Proposed
R
333 853
166 927
106 833
53 417
80 125
40 063
399 600
184 440
170 400
90 000
132 000
63 000
7. ORDINARY RESOLUTION NUMBER 7
Renewal of the authority that the unissued shares be
placed under the control of the directors
“Resolved that subject to the provisions of article 3.2 of the
articles of association of the company, the provisions of
the Companies Act, 61 of 1973, as amended, (the Act), and
the Listings Requirements of JSE Limited (JSE), the directors
are hereby authorised to allot and issue at their discretion
until the next annual general meeting of the company
authorised but unissued shares for such purposes as they
may determine, after setting aside so many shares as may,
subject again to article 3.2 of the articles of association of
the company, be required to be allotted and issued by the
company pursuant to the company’s approved employee
share incentive schemes (the schemes).”
8. ORDINARY RESOLUTION NUMBER 8
General authority to issue shares for cash
“Resolved that subject to article 3.2 of the articles of
association of the company, the Act, and the Listings
Requirements of the JSE, the directors are hereby
authorised, by way of a general authority, to allot and issue
ordinary shares and/or any options/convertible securities
that are convertible into ordinary shares for cash on the
following basis, after setting aside so many shares as may,
subject again to article 3.2 of the articles of association
of the company, be required to be allotted and issued
by the company pursuant to the schemes, to any public
shareholder, as defined by the Listings Requirements of
the JSE, as and when suitable opportunities arise, subject
to the following conditions:
230
I E x x a r o A n n u a l R e p o r t 2 0 0 8
8.1 this authority shall not extend beyond the next
9. SPECIAL RESOLUTION NUMBER 1
annual general meeting or fifteen months from the
Authority to repurchase shares
date of this annual general meeting, whichever date
“Resolved that by way of a general authority, the company
is earlier;
8.2 a press announcement giving full details, including
the impact on net asset value and earnings per share,
be published at the time of any issue representing, on
a cumulative basis within one year, 5% or more of the
number of shares in issue prior to the issue/s;
8.3 the shares be issued to public shareholders as
defined by the JSE and not to related parties;
8.4 any issue in the aggregate in any one year shall not
exceed 15% of the number of shares of the company’s
issued ordinary share capital (including the number to
be issued in the future as a result of the exercise of
options or conversion of convertible securities issued
in the same financial year); and
8.5 in determining the price at which an issue of shares
be made in terms of this authority, the maximum
discount permitted will be 10% of the weighted
average traded price of the shares over the thirty
days prior to the date that the price of the issue is
agreed in writing between the issuer and the party/
or any wholly owned subsidiary of the company may,
subject to the Act, article 36 of the articles of association
of the company or articles of association of a subsidiary
respectively and the Listings Requirements of the JSE,
from time to time purchase shares issued by itself or
shares in its holding company, as and when deemed
appropriate.”
Pursuant to the above, the following additional information,
required in terms of the Listings Requirements of the JSE,
is submitted.
It is recorded that the general repurchase will be subject to
the following limitations:
9.1 that the repurchase is effected through the order
book operated by the JSE trading system and is
done without any prior understanding or arrangement
between the company and the counterparty;
9.2 that this authority shall not extend beyond 15 months
from the date of this resolution or the date of the
next annual general meeting, whichever is the earlier
parties subscribing for the securities. In the event
date;
that shares have not traded in the said thirty day
9.3 that an announcement containing full details of such
period a ruling will be obtained from the committee
repurchases is published as soon as the company
of the JSE.”
In respect of any options and convertible securities
has repurchased shares constituting, on a cumulative
basis, 3% of the number of shares in issue prior to the
repurchases, and for each 3%, on a cumulative basis,
granted/issued for cash, if the discount to the market
thereafter;
price at the time of exercise of the option or conversion
of the convertible security is not known at the time of
the grant/issue of the option or convertible security, or
if it is known that the discount will exceed 10% of the
30-day weighted average traded price of the security at
the date of exercise, then the grant/issue will be subject
to the company providing its shareholders with a fairness
opinion complying with Schedule 5 of the JSE Listings
Requirements from an independent expert acceptable to
the JSE, indicating whether or not the issue is fair as far
as the company’s shareholders are concerned.
The approval of a 75% majority of the votes cast by
shareholders present or represented by proxy at the
meeting is required for ordinary resolution number 8 to
become effective.
9.4 that the repurchase of shares shall not, in the
aggregate, in any one financial year, exceed 20% of
the company’s issued share capital at the time this
authority is given;
9.5 that at any one time, the company may only appoint
one agent to effect any repurchase;
9.6 that the repurchase of shares will not take place
during a prohibited period (unless it forms part of a
repurchase programme which meets the requirements
of the JSE) and will not affect compliance with the
shareholders’ spread requirements as laid down by
the JSE;
9.7 shares issued by the company may not be acquired
at a price greater than 10% above the weighted
average traded price of the company’s shares for the
five business days immediately preceding the date of
repurchase;
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
231
NOTICE OF ANNUAL GENERAL MEETING continued
9.8 The sponsor will sign off on working capital as per
•
the share capital and reserves of the company and the
Schedule 25 of the Listings Requirements of the JSE
group will be adequate for ordinary business purposes for
prior to the commencement of the general repurchase
a period of 12 (twelve) months after the date of the notice
and after the directors pass the resolution relating to
of the annual general meeting of the company; and
the solvency and liquidity of the company as required
•
the working capital resources of the company and the
in terms of section 85 (4) of the Act.”
The reason for this special resolution number 1 is, and the
effect thereof will be to grant, in terms of the provisions of the
group will be adequate for ordinary business purposes for
a period of 12 (twelve) months after the date of the notice
of the annual general meeting of the company.
Act and the Listings Requirements of the JSE, and subject
Litigation statement
to the terms and conditions embodied in the articles of the
company or any subsidiary and the said special resolution, a
general authority to the directors to approve the repurchase
by the company of its own shares.
At present the directors have no specific intention with
regard to the utilisation of this authority, which will only be
used if the circumstances are appropriate.
10. To transact such other business as may be transacted at
an annual general meeting.
DISCLOSURES REQUIRED IN TERMS OF THE LISTINGS
REQUIREMENTS OF THE JSE
In accordance with paragraph 11.26 of
the Listings
Requirements of the JSE, the following information is provided
in terms of special resolution number 1.
Other than disclosed or accounted for in these annual financial
statements, the directors of the company, whose names are
given on page 58 and 59 of these annual financial statements,
are not aware of any legal or arbitration proceedings, pending
or threatened against the group, which may have or have had a
material effect on the group’s financial position in the 12 months
preceding the date of this notice of annual general meeting.
Directors’ responsibility statement
The directors, whose names are given on page 58 and 59 of
these financial statements, accept responsibility for the accuracy
of the information given in this special resolution, and certify that
to the best of their knowledge and belief there are no facts that
have been omitted which would make any statements false or
misleading and that all reasonable enquiries to ascertain such
facts have been made.
Material changes
Working capital statement
The directors of the company agree that they will not undertake
any repurchase of its shares unless:
Other than the facts and developments reported on in these annual
financial statements, there have been no material changes in the
affairs, financial or trading position of the group since the signature
•
the company and the group will be able, in the ordinary
date of this annual report and the posting date thereof.
course of business, to pay its debts for a period of
12 (twelve) months after the date of the notice of the
The following further disclosures required in terms of the
annual general meeting of the company;
Listings Requirements of the JSE are set out in accordance
•
the assets of the company and the group (which latter
with the reference pages in these annual financial statements
have been consolidated, fairly valued in accordance with
of which this notice forms part:
International Financial Reporting Standards), will be in
• Directors and management – refer to pages 56 to 59 of this
excess of its liabilities and consolidated liabilities (recognised
report;
and measured in accordance with the accounting policies
• Major shareholders of the company – refer to page 71 of
used in the latest audited consolidated annual financial
this report;
statements) for a period of 12 (twelve) months after the date
• Directors’ interests in the company’s shares – refer page 71
of the notice of the annual general meeting of the company;
of this report;
• Share capital of the company – refer page 70 of this report.
232
I E x x a r o A n n u a l R e p o r t 2 0 0 8
FURTHER DISCLOSURE REQUIRED IN TERMS OF THE
SHORT BIOGRAPHIES OF EXXARO DIRECTORS
COMPANIES ACT
SEEKING RE-ELECTION
The following information is provided in terms of special
Name: SEA Mngomezulu – Simangele (54)
resolution number 1:
Designation: Non-executive director
The company shall not make any payment in whatever form
Academic qualifications: diploma in public relations, diploma in
to acquire any share issued by the company if there are
community development, certificate in executive preparation
reasonable grounds for believing that:
programme
(a) the company is, or would after the payment be, unable to
Experience: Simangele Mngomezulu worked at Anglo
pay its debts as they become due in the ordinary course of
American Corporation of SA as an assistant information
business; or
retrieval officer for 15 years. She is the owner of Thandelike
(b) the consolidated assets of the company fairly valued
Investments & NESA Mining, chairperson of Black Economic
would after the payment be less than the consolidated
Empowerment Cleaning Association (BEECA), CEO of South
liabilities of the company.
By order of the board
MS Viljoen
Company secretary
Pretoria
23 February 2009
African Women in Mining Association (SAWIMA), member of
the advisory board for the Minister for Minerals and Energy,
member of the mining industry tripartite HIV and Aids
committee.
Name: J van Rooyen – Jeff (59)
Designation: Non-executive director
Academic qualifications: BCom, BCompt (Hons), CA(SA)
Experience: In February 1984 Jeff van Rooyen started his own
auditing practice, J van Rooyen & Co, to address the financial
services needs of the black community in general and black
business in particular. Due to the rapid growth of the practice,
a joint venture was established with Deloitte & Touche in 1988.
In April 1995 he was seconded by Deloitte & Touche as special
adviser to the Minister of Public Enterprises. In 2000 Jeff was
appointed as chief executive officer of the Financial Services
Board and to his current position as chief executive and founding
member of Uranus Investment Holdings (Pty) Limited.
Name: VZ Mntambo – Zwelibanzi (51)
Designation: Non-executive director
Academic qualifications: BJuris, LLB, LLM
Experience: Zwelibanzi is executive chairman of ASG Business
Solutions. He was previously senior lecturer at the University of
Natal; executive director of IMSSA; director-general of Gauteng
province and non-executive chairman of the Commission
for Conciliation, Mediation and Arbitration. He has extensive
experience in business strategy, performance management,
labour mediation and arbitration.
Name: NL Sowazi – Nkunku (45)
Designation: Non-executive director
Academic qualifications: BA, MA (UCLA)
Experience: Nkululeko is founding executive of the Tiso Group,
a BEE investment holding company with interests in natural
resources, infrastructure and industrial services. Nkululeko was
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
233
NOTICE OF ANNUAL GENERAL MEETING continued
previously executive deputy chairman of JSE listed banking
Resolution 4 and 5: Re-election of directors
group, African Bank Investments Limited (ABIL) and managing
Under the articles of association, one third of the directors are
director of the Mortgage Indemnity Fund (Pty) Limited. He
required to retire at each annual general meeting and may offer
is chairman of Idwala Industrial Holdings, the Home Loan
themselves for re-election. In addition, any person appointed
Guarantee Company, the Financial Markets Trust, and serves
to fill a casual vacancy on the board of directors, or as an
on the boards of Aveng Limited, Alstom South Africa, Trident
addition thereto, is similarly required to retire and is eligible for
Steel, EMIRA property fund and African Explosives Limited.
re-election at the next annual general meeting. Biographical
Name: D Zihlangu – Rain (42)
Designation: Non-executive director
details of the directors, who are offering themselves for re-
election, appear on page 233.
Academic qualifications: BSc (Min Eng) (Wits); MDP (SBL,
Resolution 6: Remuneration of non-executive directors
Unisa); MBA (WBS, Wits)
The company in general meeting as per the articles of
Experience: Dalikhaya is the chief executive officer of Eyabantu
association shall from time to time determine the remuneration
Capital Consortium. Between 1989 and 1994 he was a stoper/
of directors, subject to shareholders’ approval.
developer and shift boss at Vaal Reefs Gold Mining Company.
From 1995 until 2002, he was a shift boss, mine overseer,
Resolution 7 and 8: Directors’ control of unissued ordinary
operations manager and mine manager at Impala Platinum
shares
Limited. Dalikhaya was the chief executive officer of Alexkor
The existing authorities relating to resolutions 7 and 8 are
Limited from 2002 until 2005.
due to expire at the forthcoming annual general meeting. The
directors consider it advantageous to renew these authorities
EXPLANATORY NOTES TO RESOLUTIONS FOR
to enable the company to take advantage of future business
CONSIDERATION AT THE ANNUAL GENERAL MEETING
opportunities.
Ordinary business
Resolution 1: Approval of financial statements
Special business
The directors must present to shareholders at the annual
Special resolution 1: General authority to permit the
general meeting the annual financial statements incorporating
repurchase of shares
the directors’ report and the report of the auditors, for the
The reason for the special resolution is to grant the directors
period ended 31 December 2008. These are contained within
of the company a general authority for the acquisition of the
the annual report.
company’s shares by the company, or by a wholly owned
subsidiary of the company.
Resolution 2: Re-appointment of independent auditors
The reason for proposing ordinary resolution number 2 is to
The effect of the special resolution, once registered, will be to
confirm the re-appointment of Deloitte & Touche as external
permit the company or any of its subsidiaries to repurchase
auditors of the company and Mr BW Smith as the designated
such securities subject to the limitations applicable. This
partner. Deloitte & Touche was appointed as the company’s
authority will only be used if circumstances are appropriate.
statutory auditors since 16 February 2004.
Resolution 3: Auditors’ fees
It is usual for this matter to be left to the directors, as they will
be conversant with the amount of work that was involved in
the audit. The chairman will therefore move a resolution to this
effect authorising the directors to attend to this matter.
234
I E x x a r o A n n u a l R e p o r t 2 0 0 8
FORM OF PROXY
EXXARO RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2000/011076/06)
(“Exxaro” or “the company”)
JSE Share code: EXX
ISIN code: ZAE 000084992
POWERING POSSIBILITY
TO BE COMPLETED BY CERTIFICATED SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH “OWN
NAME” REGISTRATION ONLY
For completion by registered members of Exxaro unable to attend the annual general meeting of the company to be held at
10:00 on Friday, 8 May 2009, at the Exxaro Corporate Centre, Roger Dyason Road, Pretoria West, South Africa or at any
adjournment thereof,
I/We
of (address)
being the holder/s of
1.
2.
shares in the company, do hereby appoint:
or, failing him/her
or, failing him/her
the chairman of the annual general meeting, as my/our proxy to attend, speak and, on a poll, vote on my/our behalf at the annual
general meeting of members to be held at 10:00 on Friday, 8 May 2009 at Exxaro Corporate Centre, Roger Dyason Road,
Pretoria West, Gauteng or at any adjournment thereof, and to vote or abstain from voting as follows on the ordinary and special
resolutions to be proposed at such meeting:
For
Against
Abstain
Ordinary business
1. Resolution to adopt the 2008 audited group financial statements
2. Resolution to re-appoint Deloitte & Touche as auditors
3. Resolution to authorise the directors to determine auditors’ remuneration
4. Resolution to re-elect directors required to retire in terms of article 15.2 of the
articles of association
4.1 SEA Mngomezulu
4.2 J van Rooyen
5. Resolution to re-elect directors required to retire by rotation in terms of article 16.1
of the articles of association
5.1 VZ Mntambo
5.2 NL Sowazi
5.3 D Zihlangu
6. Resolution to approve the non-executive directors’ remuneration for the period
1 January 2009 to 31 December 2009
7. Resolution to authorise directors to allot and issue unissued ordinary shares
8. Resolution to authorise directors to allot and issue ordinary shares for cash
Special business
1. Special resolution to authorise directors to repurchase company shares
Please indicate with an “X” in the appropriate spaces provided above how you wish your vote to be cast. If no indication is given,
the proxy may vote or abstain as he/she sees fit.
Signed at
Signature
this
day of
2009
Assisted by me, where applicable (name and signature)
Please read the notes on the reverse side hereof.
E x x a r o A n n u a l R e p o r t 2 0 0 8 I
235
NOTES
1.
A form of proxy is only to be completed by those ordinary
shareholders who are:
For shareholders on the South African register:
Computershare Investor Services (Pty) Ltd
1.1 holding ordinary shares in certificated form; or
Ground Floor
1.2 recorded on sub-register electronic form in ‘own
70 Marshall Street
name’.
Johannesburg
2001
2.
If you have already dematerialised your ordinary shares
PO Box 61051
through a Central Securities Depository Participant (CSDP)
Marshalltown
or broker and wish to attend the annual general meeting,
2107
you must request your CSDP or broker to provide you with
www.computershare.com
a letter of representation or you must instruct your CSDP
Tel: +27 11 370 5000
or broker to vote by proxy on your behalf in terms of the
agreement entered into between yourself and your CSDP
or broker.
Over-the-Counter American Depositary Receipt (ADR)
holders:
Exxaro has an ADR facility with The Bank of New York
3.
A member may insert the name of a proxy or the names
(BoNY) under a deposit agreement. ADR holders may
of two alternative proxies of the member’s choice in the
instruct BoNY as to how the shares represented by their
space. The person whose name stands first on the form
ADRs should be voted.
of proxy and who is present at the annual general meeting
of shareholders will be entitled to act to the exclusion of
American Depositary Receipt Facility (ADR)
those whose names follow.
Bank of New York
101 Barclay Street
4.
On a show of hands a member of the company present in
New York, NY 10286
person or by proxy shall have one (1) vote irrespective of
www.adrbny.com
the number of shares he/she holds or represents, provided
shareowners@bankofny.com
that a proxy shall, irrespective of the number of members
Tel: +(00-1) 888 815 5133
he/she represents, have only one (1) vote. On a poll a
member who is present in person or represented by proxy
7.
The completion and lodging of this form of proxy will not
shall be entitled to that proportion of the total votes in the
preclude the relevant member from attending the annual
company, which the aggregate amount of the nominal
general meeting and speaking and voting in person thereat
value of the shares held by him/her bears to the aggregate
to the exclusion of any proxy appointed in terms hereof.
amount of the nominal value of all the shares issued by the
company.
8.
Documentary evidence establishing the authority of a
person signing this form of proxy in a representative
5.
A member’s instructions to the proxy must be indicated by
capacity or other legal capacity must be attached to this
the insertion of the relevant numbers of votes exercisable
form of proxy, unless previously recorded by the transfer
by the member in the appropriate box provided. Failure
secretaries or waived by the chairman of the annual
to comply with the above will be deemed to authorise the
general meeting.
proxy to vote or to abstain from voting at the annual general
meeting as he/she deems fit in respect of all the member’s
9.
Any alteration or correction made to this form of proxy
votes exercisable thereat. A member or the proxy is not
must be initialled by the signatory/ies.
obliged to use all the votes exercisable by the member or
by the proxy, but the total of the votes cast and in respect
10. Notwithstanding the aforegoing, the chairman of the
of which abstention is recorded may not exceed the total
annual general meeting may waive any formalities that
of the votes exercisable by the member or by the proxy.
would otherwise be a prerequisite for a valid proxy.
6.
Forms of proxy must be lodged at, or posted to
11. If any shares are jointly held, all joint members must sign
Computershare Investor Services (Pty) Limited, to be
this form of proxy. If more than one of those members is
received not later than 48 hours before the time fixed for
present at the annual general meet either in person or by
the meeting (excluding Saturdays, Sundays and public
proxy, the person whose name first appears in the register
holidays).
shall be entitled to vote.
236
I E x x a r o A n n u a l R e p o r t 2 0 0 8
ADMINISTRATION
Secretary and registered office
MS Viljoen
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
Pretoria
0183
PO Box 9229, Pretoria
0001
South Africa
Telephone +27 12 307 5000
Company registration number: 2000/011076/06
JSE share code: EXX
ISIN code: ZAE000084992
Auditors
Deloitte & Touche
Private Bag X6
Gallo Manor
2052
Commercial bankers
Absa Bank Limited
SHAREHOLDERS’ DIARy
FINANCIAL YEAR-END
ANNUAL GENERAL MEETING
REPORTS AND ACCOUNTS
Announcement of annual results
Annual Report
Interim report for the half-year ending 30 June
DISTRIBUTION
Final dividend declaration
Payment
Interim dividend declaration
Payment
Corporate law advisers
CLS Consulting Services (Pty) Limited
United States ADR Depositary
The Bank of New York
101 Barclay Street
New York NY 10286
United States of America
Sponsor
Deutsche Securities (SA) (Pty) Limited
3 Exchange Square
87 Maude Street
Sandton
2196
Registrars
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown
2107
31 December
April/May
Published
February
March
August
February
March
August
September
The front section of this document is printed on Magno Matt paper. This paper only uses wood from sustainable forests, is manufactured from TCF (totally
chlorine free) pulp and is acid free. The back section of this document is printed on Cartridge 120gsm. A minimum of 30% fibre used in making this paper
comes from well-managed forests independently certified according to the rules of the Forest Stewardship Council.
Carbon offset
The carbon footprint arising from the paper production, printing and distribution of this annual report will be assessed and offset by installing one solar geyser
at a charitable organisation by December 2009. We will disclose this information in our next report.
BASTION GRAPHICS
POWERING POSSIBILITY
EXXARO CORPORATE CENTRE
Pretoria, South Africa
P: +27 12 307 5000
F: +27 12 307 4760
Roger Dyason Road, Pretoria West 0183, South Africa
PO Box 9229, Pretoria 0001, South Africa
www.exxaro.com
E
X
X
A
R
O
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
8
POWERING POSSIBILITY
WHAT DRIVES EXXARO
VISION
Through our innovation and
growth, we will be a powerful
source of endless possibilities.
MISSION
We create unrivalled value
for all stakeholders of our
diversified resources business
through our processes, thinking
and passion.
VALUES
EMPOWERED TO
gROW AND
CONTRIBUTE
TEAMWORK
COMMITTED TO
EXCELLENCE
HONEST
RESPONSIBILITy
Developing and deploying
our knowledge and
ingenuity to achieve
our vision. We focus on
people, create freedom to
innovate and collaborate,
respect individuality, have
fun and rise to challenges.
We succeed together
through a climate of
respect and equality.
We take ownership,
provide visible
leadership and
encourage collaboration,
commitment and
creativity for the benefit
of all.
We speak the truth and
accept accountability for
our actions.
ANNUAL REPORT 2008
COVER PICTURE: Safety: Plant operator Eric Mashaba is
part of the team at North Block Complex mine which was
Profitability: The performance turnaround
named best-performing coal mine in South Africa by the
of KZN Sands was assisted by mineral sands
South African Colliery Managers’ Association in recognition of
technology expertise acquired with the
26 years of fatality-free shifts (page 13).
Namakwa Sands transaction.
THE EXXARO gROUP
With assets of R23 billion, Exxaro is one of the
top 40 companies on the JSE Limited (JSE) by
market capitalisation, and a constituent of the
JSE’s Socially Responsible Investment index.
Exxaro is a diverse mineral resources group –
with a portfolio spanning coal, mineral sands,
base metals and iron ore – and operates in
South Africa, Australia and Namibia. Reflecting
the benefits of this diverse portfolio, Exxaro has
an unfolding pipeline of growth projects that is
arguably among the best in its peer group.
The group’s strong positioning in each of
its chosen commodity markets, locally or
internationally, record of innovation and focus
on sustainable development underpin its
promise to change the face of mining.
ABOUT THIS REPORT
Guided by consultation with stakeholders,
Exxaro produces an integrated annual
report detailing our economic, social and
environmental performance. Following
feedback on earlier reports, we have
repositioned all content relating to sustainable
development in a dedicated section. So, while
sustainable development is inextricably woven
through our operations and our reporting,
interested readers will find all the information
required in the governance and sustainability
section.
In addition, case studies that illustrate our
approach are available on our website and
indicated in this report by
for ease of
reference.
To facilitate discussion with stakeholders on
Exxaro’s corporate reporting, particularly
this annual report, a blog will be run during
April 2009.
You are invited to participate on
www.exxaro.com
www.exxaro.com
POWERING POSSIBILITY
ADMINISTRATION
Secretary and registered offi ce
MS Viljoen
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
Pretoria
0183
PO Box 9229, Pretoria
0001
South Africa
Telephone +27 12 307 5000
Company registration number: 2000/011076/06
JSE share code: EXX
ISIN code: ZAE000084992
Auditors
Deloitte & Touche
Private Bag X6
Gallo Manor
2052
Commercial bankers
Absa Bank Limited
SHAREHOLDERS’ DIARY
FINANCIAL YEAR-END
ANNUAL GENERAL MEETING
REPORTS AND ACCOUNTS
Announcement of annual results
Annual Report
Interim report for the half-year ending 30 June
DISTRIBUTION
Final dividend declaration
Payment
Interim dividend declaration
Payment
Corporate law advisers
CLS Consulting Services (Pty) Limited
United States ADR Depositary
The Bank of New York
101 Barclay Street
New York NY 10286
United States of America
Sponsor
Deutsche Securities (SA) (Pty) Limited
3 Exchange Square
87 Maude Street
Sandton
2196
Registrars
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown
2107
31 December
April/May
Published
February
March
August
February
March
August
September
The front section of this document is printed on Magno Matt paper. This paper only uses wood from sustainable forests, is manufactured from TCF (totally
chlorine free) pulp and is acid free. The back section of this document is printed on Cartridge 120gsm. A minimum of 30% fi bre used in making this paper
comes from well-managed forests independently certifi ed according to the rules of the Forest Stewardship Council.
Carbon offset
The carbon footprint arising from the paper production, printing and distribution of this annual report will be assessed and offset by installing one solar geyser
at a charitable organisation by December 2009. We will disclose this information in our next report.
BASTION GRAPHICS
POWERING POSSIBILITY
EXXARO CORPORATE CENTRE
Pretoria, South Africa
P: +27 12 307 5000
F: +27 12 307 4760
Roger Dyason Road, Pretoria West 0183, South Africa
PO Box 9229, Pretoria 0001, South Africa
www.exxaro.com
E
X
X
A
R
O
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
8
POWERING POSSIBILITY
WHAT DRIVES EXXARO
VISION
Through our innovation and
growth, we will be a powerful
source of endless possibilities.
MISSION
We create unrivalled value
for all stakeholders of our
diversifi ed resources business
through our processes, thinking
and passion.
VALUES
EMPOWERED TO
GROW AND
CONTRIBUTE
TEAMWORK
COMMITTED TO
EXCELLENCE
HONEST
RESPONSIBILITY
Developing and deploying
our knowledge and
ingenuity to achieve
our vision. We focus on
people, create freedom to
innovate and collaborate,
respect individuality, have
fun and rise to challenges.
We succeed together
through a climate of
respect and equality.
We take ownership,
provide visible
leadership and
encourage collaboration,
commitment and
creativity for the benefi t
of all.
We speak the truth and
accept accountability for
our actions.
ANNUAL REPORT 2008
COVER PICTURE: Safety: Plant operator Eric Mashaba is
part of the team at North Block Complex mine which was
Profi tability: The performance turnaround
named best-performing coal mine in South Africa by the
of KZN Sands was assisted by mineral sands
South African Colliery Managers’ Association in recognition of
technology expertise acquired with the
26 years of fatality-free shifts (page 13).
Namakwa Sands transaction.
THE EXXARO GROUP
With assets of R23 billion, Exxaro is one of the
top 40 companies on the JSE Limited (JSE) by
market capitalisation, and a constituent of the
JSE’s Socially Responsible Investment index.
Exxaro is a diverse mineral resources group –
with a portfolio spanning coal, mineral sands,
base metals and iron ore – and operates in
South Africa, Australia and Namibia. Refl ecting
the benefi ts of this diverse portfolio, Exxaro has
an unfolding pipeline of growth projects that is
arguably among the best in its peer group.
The group’s strong positioning in each of
its chosen commodity markets, locally or
internationally, record of innovation and focus
on sustainable development underpin its
promise to change the face of mining.
ABOUT THIS REPORT
Guided by consultation with stakeholders,
Exxaro produces an integrated annual
report detailing our economic, social and
environmental performance. Following
feedback on earlier reports, we have
repositioned all content relating to sustainable
development in a dedicated section. So, while
sustainable development is inextricably woven
through our operations and our reporting,
interested readers will fi nd all the information
required in the governance and sustainability
section.
In addition, case studies that illustrate our
approach are available on our website and
indicated in this report by
for ease of
reference.
To facilitate discussion with stakeholders on
Exxaro’s corporate reporting, particularly
this annual report, a blog will be run during
April 2009.
You are invited to participate on
www.exxaro.com
www.exxaro.com