INTEGRATED
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
(cid:71)(cid:70)(cid:78)(cid:60)(cid:73)(cid:64)(cid:69)(cid:62)(cid:23)(cid:71)(cid:70)(cid:74)(cid:74)(cid:64)(cid:57)(cid:64)(cid:67)(cid:64)(cid:75)(cid:80)
PROFILE
One of the
largest black empowerment mining
companies on the JSE Limited, Exxaro Resources is a
constituent of the JSE’s Top 40 index and one of the
best-performing constituents of the JSE’s Socially
Responsible Investment index. At year end, Exxaro had
assets of R28,6 billion.
Exxaro is a diverse resources group with a portfolio
CONTENTS
Group in brief
Material issues
2 Values
2 Highlights
3 Business objectives
4 Key ratios
5 Shareholder structure
5 Group at a glance
8 Locations
9 Financial summary
10 Summary of business operations
of coal, mineral sands and base metals assets as well
Year under review
as a significant indirect interest in iron ore. The group
has operations in South Africa, Australia, Namibia and
China, and a pipeline of growth projects that is arguably
among the best in its peer group.
The group’s strategic focus, record of innovation and
commitment to sustainable development underpin
its promise to contribute to the economic growth of
South Africa.
ABOUT THIS REPORT
Guided by global best-practice standards, including the Global Reporting
Initiative (GRI) guidelines, King III and new legislation in South Africa, and
ongoing consultation with stakeholders, Exxaro produces an integrated annual
report detailing the group’s economic, social and environmental performance.
Any forward-looking information or statements in this report must not be
construed as an official forecast nor relied on. The financial information on
which any forward-looking information is based has also not been reviewed nor
reported on by Exxaro’s auditors.
This report is only available in English.
www.exxaro.com
PLEASE
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Information management
14 Approach to sustainable development
16 Risk management
21
22 Strategic focus areas
25 Stakeholder engagement
30 Report scope and boundary
32 Macro-economic and commodity review
38 Chairman’s statement
44 Chief executive officer’s review
48 Financial and operational review
60 Growth
Performance review
64 Review of mineral resources and reserves
78 Safety
83 Health and hygiene
91 Environment
120 Social performance
120 Human resources
129 Procurement
131 Socio-economic development
Governance review
140 Executive committee
142 Directorate
144 Regulatory compliance and
corporate governance
148 Corporate governance
156 Mining charter scorecard
160 Remuneration report
168 Shareholder information and analysis
170 Assurance report
175 GRI indicator index
Financial statements
183 Annual financial statements
Administration
304 Notice of annual general meeting
308 Biographies of directors up for re-election
309 Form of proxy
IBC Administration and shareholders’ diary
MATERIAL ISSUES
These material issues were identified by consulting with stakeholders and using GRI guidelines
(page 173). They are grouped and indexed according to Exxaro’s risk map (page 17) where
applicable, and cross-referenced to detailed explanations elsewhere in this report where
necessary.
Issue
> Water
Availability, security of supply, efficient and responsible use of
scarce water resources
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> Hazardous waste management
> Air quality management
> Climate change
> Cleaner production
> Energy and greenhouse gases
> Biodiversity management
Avoidance, minimisation, management and disposal of hazardous
as well as general waste generated from Exxaro operations
Quantifying and determining the impact of emissions from
Exxaro operations; managing non-compliance and ensuring
continuous improvement. Focus includes dust from mining
activities and emissions from smelters
Projected temperature increases could reduce water availability
significantly in southern Africa, reduce agricultural yields across
the continent, and place millions of people at risk of coastal
flooding each year. From a South African perspective, the eastern
part could experience higher rainfall while the western part could
face water scarcity
Reduce environmental footprint from waste production and water
use
Improve energy efficiency and increase use of renewable energy
Conserving biodiversity-rich sections, eradicating and controlling
alien invasive species
> Closure and rehabilitation
> Significant environmental
incidents
Continual review of rehabilitation assessments and
implementation plans
Consider third-party applications for mines in closure
Retaining our licence to operate through regulatory and
legislative compliance
> Socio-economic development
(projects, donations)
Approval and implementation of local economic development
projects and donations as per social and labour plans
> Social and labour plans
> Community engagement
> Development of artisanal and
small scale mining
> Employment opportunities
> Support for development of small
businesses and supply chain
management (procurement, local
procurement and empowerment)
Granting and execution of submitted plans
Consultation with all authorities and interested and affected
parties
Identification of small-scale mining projects
Preference for recruiting from areas surrounding current
operations and labour-sending areas
Employment equity progressively addressed in employment
practices
Facilitating socio-economic development and empowerment
Response
Integrated water and waste management programme implemented. Comprehensive plans being
developed for each business unit in addition to studies on water reclamation and reuse
Hazardous waste management targets will be set in 2011 after approval of a policy document
Updated targets will be set in 2011 to ensure compliance, as a minimum, with applicable national
standards
Risk map
Page
3, 9
95 — 98
3
3
99
105
The risks and related opportunities have been integrated into a climate change response strategy
7, 9
100
Budget allocation for numerous related projects requested
Developed energy management and tracking system; studies under way on renewable energy
projects
Biodiversity action plans developed for five operating units, with balance to be completed in 2011.
Expenditure of R30 million in 2010 expected to increase in subsequent years as plans are
implemented. Sponsoring research on biodiversity at selected universities, including specific
studies at Exxaro operations and areas surrounding these operations
Performance assessments against approved environmental management programmes completed
at eight operations and submitted to relevant authorities. Good progress with social and
rehabilitation plans at closed mines, Durnacol and Hlobane
Continuous discipline in complying to regulatory and legal requirements
Socio-economic funds paid to business units to implement projects and donations totalled 2,5%
of net profit after tax of managed operations in 2010. Total contribution to socio-economic
development projects, corporate commitment and donations was R38,6 million
With the focus on sustainability, financial support for the following university chairs was approved
in December 2010:
> Exxaro chair in global change and sustainability at Wits: R12,5 million (2011–2015)
> Exxaro chair in business and climate change at Unisa: R7,5 million (renewed support for
2011–2015)
> Exxaro chair on the interface between biodiversity and business at Pretoria: R3,4 million
(2011–2013)
Mining right conversions and new-order approvals for most of our operations have been granted
In terms of the social and labour plans and other socio-economic development-related activities,
engagement with all relevant stakeholders takes place at each business unit
At Grootegeluk mine, a feasibility study has been conducted for the Re a Dira small-scale mining
project. This will be considered for approval in 2011
90% of Exxaro’s learnership intake as well as some 80% of unskilled and semi-skilled employees
are from areas surrounding current operations, and 60% of these are from designated groups.
The housing project at Medupi created a number of employment opportunities for people from
the Lephalale area
Exxaro allocated over R13 million to developing enterprises, the bulk of its socio-economic
development funding
R3,8 billion of group procurement spend went to HDSA suppliers; 50% of the total discretionary
procurement spend
3, 7
3, 7
3
3
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3
105
100 — 105
107 — 112
112
115 — 116
132
132
132
132
132
123
129
MATERIAL ISSUES CONTINUED
> Safe workplace (fatalities,
lost-time injuries, health and
safety systems)
> Inadequate awareness of health and hygiene issues
> Employers to meet legislated targets on noise and dust by 2013
Issue
> Healthy people (occupational
diseases, HIV/Aids testing and
treatment, healthcare, medical
surveillance)
> High prevalence of HIV in South Africa and mining industry
> High incidence of TB in South Africa and in the industry
> Increase in cases of multidrug resistant strains due to patient
non-compliance with treatment protocols
> Training and development
> Career development
Initiatives are required to address literacy and numeracy levels as
well as to ensure continuous focus on the training and
development of artisans, skills and leadership development, and
the removal of development barriers
To develop and sustain core competencies and maximise human
capital to meet our strategic objectives and improve operational
performance
Individual development plans required for all employees
> Employment equity
Achieving regulatory and legislative targets
> Employee relations and wellness
Equalisation of conditions of employment in coal businesses
Adverse implications of industrial action
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> Decent wages and benefits
(retirement and medical plans)
Freedom of association
Collective bargaining
Wellness
Wages
Retirement funds
Medical schemes
Post-retirement liability for medical scheme
> Housing and living conditions
Home ownership
Hostels
> Women in mining
Women in core positions
> Contractor management
Policy and process
Control
Note 1: On Exxaro’s risk register but not in the top 20 based on residual risk ratings.
Response
> Fatalities and lost-time injuries both down on 2009 but target remains zero for both indicators
> Reviewed health and hygiene strategic framework, highlighting key health risks to be
communicated to employees
> Developed and implemented a tool for reporting early cases of hearing loss to management to
ensure proactive mitigation
Risk map
Page
3
78 — 90
> New management and reporting standards introduced. HIV testing above target, while all
Note 1
83 — 90
incidents of occupational diseases declining
> Exxaro HIV/Aids strategy implemented
> TB management standard implemented, providing a guide for managers, employees and
healthcare professionals
> A R3-million assessment workshop was opened at Grovos in Lephalale in April 2010
> 180 ABET learners in 2010
> 379 artisan learners at various stages of qualification
A formal succession programme is in place for all employees in the management and specialist
category
Progressive implementation of individual development plans for all Exxaro’s employees
Achieving the target for senior management level is an industry-wide challenge, but more women
from designated groups are being appointed in core positions
Subsequent to a wage demand in 2009, management and organised labour from the coal
businesses embarked on a process to progressively equalise conditions of employment
Employees at the KZN Sands operation embarked on a three-week strike in September 2010.
Exxaro supports amicable resolution without the need for industrial action
Employees have freedom of association and can join a union of their choice. Labour relations at all
Exxaro operations are managed to best facilitate progress towards an amicable and mutually
beneficial resolution
Trade unions with sufficient members at a specific employer are recognised and these unions
represent their members in collective bargaining processes
An employee assistance programme has been rolled out to all operations and is available for all
employees to use
Wages compare well in the industry as determined by six-monthly market surveys. Exxaro
complies with all requirements of the Basic Conditions of Employment Act and in most instances
exceeds minimum requirements
All employees belong to a retirement fund. Employer contribution ranges between 10% and 18%
Where employees are members of accredited medical schemes, Exxaro subsidises contributions
Certain employees of Exxaro Coal Mpumalanga and Namakwa Sands qualify for a post-retirement
contribution towards a medical scheme from their employer but no new entrants are allowed to
these arrangements. Adequate provision for actuarially valued liabilities is made in the financial
statements
Exxaro’s strategy was revised to comply with the new mining charter. The focus is still on home
ownership and employees receive (either as an allowance or part of inclusive package) a housing
or living-out allowance. In addition, 232 employees benefit from a home ownership subsidy
At all operations, except Tshikondeni, there is one person per room in the hostels; at Tshikondeni
some rooms have two occupants. Meals are provided at Matla and Tshikondeni, and the quality
and nutritional value are determined by a dietician
Although Exxaro already exceeds the prior mining charter target of having 10% of the workforce
staffed by women, attracting women (specifically from designated groups) to the group’s core
business remains a focus area. At present, women represent 7% of all learnerships for future core
positions and 29% of our bursar and professional in-training programmes
A group policy and process was developed to standardise contractor management. The HR
management system is used to capture contractors
Operations are responsible for managing contractors, ensuring progressive compliance to
Exxaro’s policies and procedures while monitoring data integrity
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3, 10
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120 — 128
120 — 128
120 — 128
120 — 128
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10
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Note 1
129
MATERIAL ISSUES CONTINUED
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> Economic value generated and
Transparency in disclosure to stakeholders
Issue
distributed
Market presence
> Black economic empowerment
Board structure – leadership and
governance
> Code of ethics
> Black ownership and control
> Stakeholder engagement
(business partners, shareholders,
employees etc)
> Material stewardship
> Fraud prevention
> Risk management
Code of ethics required to support the entrenched group value
system
Legal and regulatory compliance in South Africa
Ensure stakeholder concerns are identified and addressed
To reduce the impact of fraud on the group’s resources and
ensure that measures in place serve as a deterrent to
perpetrating fraud
Integrated enterprise risk management fundamental to
identifying and managing all risks in the organisation
Note 1: On Exxaro’s risk register but not in the top 20 based on residual risk ratings.
N/A: Not applicable.
Response
Risk map
Page
Cash value-added statement (page 179) reflects Exxaro’s cash taxation contribution to the fiscus,
amounts collected on behalf of government, and cash payments to external suppliers for goods
and services
Exxaro is the largest black empowered group on the JSE in terms of direct shareholding, while its
day-to-day management is the responsibility of an empowered and representative executive
committee
Zero-tolerance code of ethics in place with compliance monitored by an ethics committee.
Includes conflict-of-interest declarations and decisions
More than 50% of Exxaro is black owned and controlled
Exxaro is forming stakeholder engagement forums at each operation as well as a stakeholder
panel at the corporate office. A socio-economic assessment will be conducted at every business
unit in 2011 to capture and publish all stakeholder concerns, with detailed management responses
Sustainable supply chain management introduced, reflecting close collaboration with suppliers
Zero-tolerance approach to fraud. Effective anonymous reporting hotline in place for a number of
years. Managed by an ethics committee with access to experienced forensic team
3
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154
149
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149
Entrenched and integrated enterprise risk management philosophy, policy, methodology and
practice in the group. Risk management is integral to all strategic, business planning, and
day-to-day activities
N/A
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Group
in brief
EXXARO INTEGRATED ANNUAL REPORT 2010 1
DIVIDER PAGE 1 – BACK (GROUP IN BRIEF)
VALUES
> Empowered to grow and contribute — 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.
> Teamwork – we succeed together through a climate of respect and equality.
> Committed to excellence — we take ownership, provide visible leadership
and encourage collaboration, commitment and creativity for the benefit of all.
> Honest responsibility — we speak the truth and accept accountability for
our actions.
HIGHLIGHTS
> Improvement in safety performance with lost-time injury frequency rate down
24% to 0,25
> Global economic recovery faster than anticipated, resulting in generally increased
demand and higher prices
> Revenue up 14% to more than R17 billion
> Net operating profit increased R897 million to R2,6 billion, excluding the 2009
KZN Sands impairment
> Coal production up to 47Mt
> Commissioning and nameplate production capacity achieved at Kwinana pigment
plant and char plant
> Total dividend declared of 500 cents per share
> Net cash inflow of R1,4 billion
> Net debt to equity at 13%
> Healthy financial metrics, well positioned for growth
> Development of Fairbreeze approved subject to regulatory and environmental
authorisation
> Grootegeluk Medupi Expansion Project (GMEP) on time and within budget
LOWLIGHTS
> Two fatalities; two too many
> Continued logistical challenges for coal exports
> Substantial furnace downtime at KZN Sands and Namakwa Sands
> Currency strength impacted on earnings
2 EXXARO INTEGRATED ANNUAL REPORT 2010
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.
FINANCIAL TARGETS1 2
Return on equity (ROE) – attributable
earnings (%)
Net operating margin (%)
Return on capital employed (ROCE) (%)
EBITDA interest cover (times)
NON-FINANCIAL TARGETS
Safety
– fatalities
– lost-time injury frequency rate (per
200 000 hours)
Safety, health and environmental
certification (number)
Employment equity
– management (%)3
Functional literacy4 (%) (2014:100)
HIV/Aids voluntary testing and
counselling (%) (long-term target 95%)
Human resources development
(% spend of payroll)
Learnerships5
Procurement from HDSA companies
(%) (2014:56)
Community development (% of net profit
after tax)6
Energy efficiency (%)7
HDSA ownership 2014 (%)
Target
2011
Target
2010
Actual
2010
Actual
2009
Actual
2008
Actual
2007
>25
>20
>28
>4
0
0
17
100
75
50
>1,0
3
>25
>20
>28
>4
0
34
15
38
9
2
19
12
25
7
3
30
18
36
14
5
15
14
23
10
5
0,21
0,25
0,33
0,39
0,36
17
40
70
70
>3
363
47
1,0
4
26
14
50
79
70
5,1
379
50
2,5
0
52
13
48
70
58
5,0
691
45
1,8
52
9
42
64
5,2
678
39
9
36
30
6,5
408
35
56
56
1 Actual financial ratios disclosed exclude the impact of impairments.
2 Where relevant, actual financial ratios have been restated to ensure comparability.
3 Employment equity target is based on compliance with the mining charter.
4 Below NQF level 1.
5 Learnerships include all disciplines, eg mining, engineering and plant. Average number in the system.
6 Funds transferred to business units for implementation of social and labour plan projects.
7 Total target is 10% by end 2012. Target for 2012 is 3%.
EXXARO INTEGRATED ANNUAL REPORT 2010 3
KEY RATIOS
RATIOS
Profitability and asset management1
Return on net assets (%)
Return on ordinary shareholders’ equity
– Attributable earnings (%)
– Headline earnings (%)
Return on invested capital (%)
Return on capital employed (%)
Operating margin (%)
Solvency and liquidity
Net financing cost cover (times) – EBIT
Net financing cost cover (times) – EBITDA
Current ratio (times)
Net debt to equity (%)2
Net debt to earnings before interest, tax, depreciation and amortisation (times)
Number of years to repay interest-bearing debt
At 31 December
2010
Unaudited
Rm
20091
Unaudited
Rm
42
34
34
31
38
15
6
9
2
13
0,6
1
28
19
19
20
25
12
4
7
2
29
1,3
6
1 To achieve comparability, the impact of the R1 435 million impairment of the KZN Sands assets in 2009 has been excluded.
2 Ratio calculated excluding contingent liabilities of R1 007 million (2009: R875 million). If included, ratio would be 18% (2009: 36%).
WE CREATE VALUE FOR ALL STAKEHOLDERS
Cash disbursed among
stakeholders 2010
18%
Cash disbursed among
stakeholders 2009
18%
7%
7%
68%
15%
58%
Remunerate employees for services
Provide lenders with a return on borrowings
Pay direct taxes to the state
Provide shareholders with cash dividends
4 EXXARO INTEGRATED ANNUAL REPORT 2010
9%
Remunerate employees for services
Provide lenders with a return on borrowings
Pay direct taxes to the state
Provide shareholders with cash dividends
SHAREHOLDER STRUCTURE
OUR GROUP STRUCTURE (as at 31 December 2010)
15%
Industrial
Development
Corporation
55%
9,5%
Eyesizwe(cid:86)
Eyabantu(cid:86)
9,5%
Tiso(cid:86)
11%
Basadi Ba
Kopane(cid:86)
Anglo American
plc*
9,70%
BEE
Holdco
52,10%
Exxaro
MPOWER#
2,97%
Minorities
(free float)
35,23%
100%
100%
100%
COAL
SANDS
BASE METALS & INDUSTRIAL MINERALS
20%
SISHEN
IRON ORE
COMPANY
As at 31 December 2010
* Held through Anglo South Africa Capital (Pty) Ltd.
(cid:86) These are special purpose vehicles for shareholders in our black-owned holding company.
# Employee share ownership programme.
A detailed analysis of the registered shareholders of Exxaro appears in the regulatory compliance and corporate governance report on
pages 168 to 169.
EXXARO INTEGRATED ANNUAL REPORT 2010 5
GROUP AT A GLANCE
BUSINESSES
2010 CONTRIBUTION TO
GROUP REVENUE
61% R10 515 million
39%
Eight managed coal mines produce 46,8Mtpa of
power station, steam and coking coal. All power
station coal produced is supplied to the national
power utility, Eskom, and municipal power stations.
Grootegeluk is one of the most efficient mining
operations in the world, and operates the world’s
largest coal beneficiation complex. There is a robust
pipeline of greenfield and expansion projects under
way that will culminate in Exxaro becoming one of
the largest coal producers in South Africa. Exxaro
also produces char and related products for the
rapidly growing ferroalloys industry.
61%
27% R4 640 million
27%
73%
12% R1 995 million
12%
88%
Exxaro’s South African mineral sands operations
include KZN Sands and the Western Cape operations
of Namakwa Sands. In Australia, our interests are
housed in Australia Sands whose principal asset is
the Tiwest joint venture (with Tronox Inc), the
world’s largest integrated titanium minerals
production and manufacturing company.
Exxaro is one of the world’s largest suppliers of
titanium dioxide feedstock and zircon. Collectively,
the group’s minerals sands operations produced
284kt of slag, 196kt of zircon, 90kt of synthetic
rutile and 57kt of pigment in 2010.
The Rosh Pinah zinc/lead mine in southern Namibia
and Zincor electrolytic refinery in Gauteng are
among the few integrated zinc mining and refinery
operations worldwide. Exxaro has an interest in the
Chifeng zinc refinery in China. In 2010, Rosh Pinah
and Zincor produced 120kt each of zinc concentrate
and zinc metal. A dedicated plant in Pretoria
manufactures high-quality, gas-atomised ferrosilicon
while the Glen Douglas dolomite mine provides a
range of products for the steel, construction and
agricultural sectors. The interest in the Glen Douglas
operation was sold with effect from 1 January 2011.
Exxaro is also progressing the divestment of its base
metals interest.
Exxaro holds 20% of Sishen Iron Ore Company (Pty)
Limited. The company’s two mines produced some
43,3Mtpa of lumpy and fine iron ore; 43,1Mt was sold,
and more than 85% of sales from Sishen mine
exported. Sishen is one of the largest single open-pit
mines in the world, known for its high grade and
consistent product quality.
COAL
MINERAL SANDS
BASE METALS AND
INDUSTRIAL MINERALS
INVESTMENTS
IRON ORE
6 EXXARO INTEGRATED ANNUAL REPORT 2010
SALES FOR 12 MONTHS
TO 31 DECEMBER 20101
000
TONNES
%
EXPORT3
OPERATIONS
REGIONAL
LOCATION
OWNERSHIP1
Grootegeluk mine
Limpopo
Division of Exxaro Coal (Pty) Limited
Leeuwpan mine
Mpumalanga
Division of Exxaro Coal (Pty) Limited
PRODUCTS
Power station coal (Eskom)
Semi-soft coking coal
Steam coal
Power station coal (Eskom)
Steam coal
Tshikondeni mine
Limpopo
Division of Exxaro Coal (Pty) Limited
Coking coal (ArcelorMittal)
Mafube coal
Mafube JV2
Mpumalanga
Division of Exxaro Coal (Pty) Limited
Steam coal
Mpumalanga
Joint venture of Exxaro Coal Mpumalanga
(Pty) Limited (50%)
Power station coal (Eskom)
Steam coal
Inyanda mine
Mpumalanga
Division of Exxaro Coal (Pty) Limited
Exxaro reductants
Limpopo
Division of Exxaro Coal (Pty) Limited
Arnot mine
Mpumalanga
Matla mine
Mpumalanga
New Clydesdale mine
Mpumalanga
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Steam coal
Steam coal
Char
Power station coal (Eskom)
Power station coal (Eskom)
12 265
Power station coal (Eskom)
Steam coal
%
%
North Block Complex
Mpumalanga
Division of Exxaro Coal Mpumalanga
(Pty) Limited
Power station coal (Eskom)
Steam coal
KZN Sands
KwaZulu-Natal
Subsidiaries of Exxaro Resources Limited
and a division of Exxaro TSA Sands (Pty)
Limited and Exxaro Sands (Pty) Limited
Namakwa Sands
Northern Cape
Division of Exxaro TSA Sands (Pty) Limited
Australia Sands2
Australia
Subsidiary of Exxaro Resources Limited
which owns 50% in the Tiwest joint
venture
Zincor refinery
Gauteng
Rosh Pinah mine
Namibia
Division of Exxaro Base Metals
(Pty) Limited
Subsidiary of Exxaro Base Metals
(Namibia) (Pty) Limited (50,04%)
Chifeng refinery2
China
Associate (22,44%)
Black Mountain
Mining (Pty) Limited2
Northern Cape
Associate (26,00%)
Zircon
Rutile
Pig iron
Scrap iron
Chloride slag
Sulphate slag
Zircon
Rutile
Pig iron
Chloride slag
Sulphate slag
Zircon
Rutile
Synthetic rutile
Leucoxene
Pigment
Zinc metal
Sulphuric acid
Zinc concentrate
Lead concentrate
Zinc metal
Sulphuric acid
Zinc concentrate
Lead concentrate
Glen Douglas mine
Gauteng
Subsidiary of Exxaro Resources Limited
Metallurgical dolomite
FerroAlloys
Gauteng
Subsidiary of Exxaro Resources Limited
Atomised ferrosilicon
Aggregate
Lime
Sishen mine2
Northern Cape
Thabazimbi mine2
Limpopo
Division of Sishen Iron Ore Company (Pty)
Limited (20%)
Division of Sishen Iron Ore Company (Pty)
Limited (20%)
Lump ore
Fine ore
Lump ore
Fine ore
1 100% ownership unless otherwise indicated.
2 Sales tonnage reflects the group’s interest in the relevant subsidiary, joint venture or associate.
3 Export sales denote sales in any country other than South Africa.
EXXARO INTEGRATED ANNUAL REPORT 2010 7
14 904
1 754
1 584
1 805
1 162
260
1 321
949
32
1 784
24
122
4 173
96
710
2 236
518
55
29
108
3
136
19
147
31
86
128
20
41
19
30
16
55
90
125
98
20
29
51
18
19
410
783
45
6
5 155
3 069
74
324
17
4
23
98
83
98
86
96
87
100
100
100
100
83
100
96
100
100
100
100
100
100
100
100
100
100
86
91
LOCATIONS
Amsterdam
Zug
CHINA
17
Beijing
NAMIBIA
18
South Africa
AUSTRALIA
Perth
16
12
Brisbane
10
9
1
2 3
24
MPUMALANGA
Middleburg
22
23
South Africa
14
15
21
19
20
13
Witbank
11
8
6
4
7
5
GAUTENG
Detailed maps on page 65 and 77
Coal
1 Grootegeluk (GG)
2 Grootegeluk Medupi Expansion Project (GMEP)
3 Char Plant phase 2
4 Leeuwpan
5 Arnot
6 Matla
7 North Block Complex
8 New Clydesdale
9 Tshikondeni
10 Mmamabula Central
(coal bed methane project)
1 1 Inyanda
12 Moranbah South
13 Mafube*
Mineral sands
14 KZN Sands
15 Namakwa Sands
16 Australia Sands
Base metals and industrial minerals
17 Chifeng Zinc Refinery*
18 Rosh Pinah
19 Zincor
20 Glen Douglas
21 FerroAlloys
22 Black Mountain*
23 Sishen Iron Ore Company*
(Sishen and Thabazimbi mines)
Operations
Growth projects
Representative offices
* Joint ventures and investments not operationally controlled.
8 EXXARO INTEGRATED ANNUAL REPORT 2010
FINANCIAL SUMMARY
INCOME STATEMENTS
Revenue
Net operating profit1
Net financing cost
Investment and post-tax equity income
Tax
Non-controlling interest
Add back items for headline earnings
Headline earnings
Headline earnings per share (cents)
Dividends per share (cents)
Average realised exchange rate (R/US$)
STATEMENTS OF CASH FLOWS
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
12 months ended
31 December
2010
Audited
Rm
17 155
2 636
(455)
3 719
(665)
(27)
(22)
5 186
1 495
500
7,72
2 364
(978)
(269)
1 117
2009
Audited
Rm
15 009
304
(415)
1 900
(766)
1 491
2 514
729
200
8,39
(206)
(1 414)
874
(746)
As at 31 December
2010
Audited
Rm
2009
Audited
Rm
2 140
6 977
85
28 609
13 305
46
75
3 880
726
1 375
STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Property, plant and equipment
Biological assets
Intangible asset
Investments in associates and joint ventures
Deferred tax
Financial assets
Current assets
Cash and cash equivalents
Inventories, trade and other receivables
Non-current assets classified as held-for-sale
Total assets
Equity and liabilities
Capital and reserves
Equity attributable to owners of the parent
Non-controlling 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 classified as held-for-sale
Total equity and liabilities
Net debt
ANALYSIS PER SHARE2
Number of shares in issue (million)
Weighted average number shares in issue (million)3
Earnings per ordinary share
– Attributable earnings (cents)
– Headline earnings (cents)
Dividend per ordinary share (cents)
Dividend cover (times)
Net asset value per ordinary share (cents)
1 Includes a R1 435 million impairment of the carrying value of the KZN Sands assets in 2009.
2 To achieve comparability, the impact of the R1 435 million impairment of the KZN Sands assets in 2009 has been excluded, where relevant.
3 Shares issued to Mpower are classified as treasury shares and are excluded from the calculation of the weighted average number of shares.
716
3 237
52
28 609
2 220
1 501
1 495
500
3,00
4 870
3 644
2 193
–
1 353
17 437
(23)
17 414
358
347
11 869
41
87
1 966
629
1 217
1 023
6 311
86
23 229
12 908
1
12 909
4 347
1 853
75
995
407
2 594
49
23 229
3 731
357
345
712
729
200
3,56
3 616
EXXARO INTEGRATED ANNUAL REPORT 2010 9
SUMMARY OF BUSINESS OPERATIONS
000 tonnes produced
COAL
Coking coal
Grootegeluk
Tshikondeni
Power station coal (Eskom)
Grootegeluk
Leeuwpan
Matla
Arnot
New Clydesdale
North Block Complex
Mafube
Steam coal
Grootegeluk
Leeuwpan
New Clydesdale
North Block Complex
Inyanda
Mafube
Char
12 months ended 31 December
2010
2009
2008
2007
2 419
2 134
285
36 767
14 924
1 688
12 288
4 173
2 674
1 020
7 502
1 441
1 408
850
697
1 779
1 327
114
2 020
1 752
268
36 562
15 324
1 247
11 273
5 213
2 822
683
6 638
1 207
1 259
822
691
1 843
816
38
2 560
2 233
327
36 700
14 581
1 188
13 230
4 865
115
2 271
5 574
1 387
1 801
984
561
841
2 962
2 499
463
34 246
14 510
956
13 030
3 702
156
1 892
4 111
1 486
1 421
814
391
Total coal production
46 802
45 258
44 834
41 319
KZN SANDS
Ilmenite
Zircon
Rutile
Pig iron
Scrap iron
Chloride slag
Sulphate slag
236
33
17
71
12
113
29
368
36
20
108
15
104
24
229
34
19
50
16
95
18
367
34
17
90
20
150
26
10 EXXARO INTEGRATED ANNUAL REPORT 2010
000 tonnes produced
NAMAKWA SANDS1
Ilmenite
Zircon
Rutile
Pig iron
Scrap iron
Chloride slag
Sulphate slag
AUSTRALIA SANDS2
Ilmenite
Zircon
Rutile
Synthetic rutile
Leucoxene
Pigment
BASE METALS
Rosh Pinah (zinc concentrate)
Black Mountain (zinc concentrate)3
Zincor (zinc metal)
Zincor (sulphuric acid)
Chifeng (zinc metal)4
Rosh Pinah (lead concentrate)
Black Mountain (lead concentrate)3
INDUSTRIAL MINERALS
Glen Douglas
Metallurgical dolomite
Aggregate
Lime
FerroAlloys
Atomised ferrosilicon
IRON ORE5
Sishen
Thabazimbi
Total iron ore production
12 months ended 31 December
2010
2009
2008
2007
251
128
28
82
119
23
231
35
18
90
13
57
101
19
90
144
30
19
18
410
773
57
6
244
116
26
73
97
20
207
33
16
109
14
53
94
14
87
142
29
20
18
371
762
72
5
315
130
27
103
6
135
24
174
29
13
113
16
43
94
15
87
129
23
20
17
422
788
63
6
300
115
24
91
11
126
27
216
36
17
100
16
54
95
15
101
147
23
22
15
543
749
54
6
8 268
410
8 678
7 878
511
8 389
6 808
532
7 340
5 946
535
6 481
1 Physical information includes Namakwa Sands for 12 months from 1 January 2007 even though only acquired effective 1 October 2008.
2 Physical information reflects Exxaro Australia Sands’ 50% interest in the Tiwest joint venture.
3 Physical information reflects Exxaro’s 26% interest in Black Mountain Mining (Pty) Limited from 1 January 2007 even though only acquired effective
1 November 2008.
4 Physical information represents the effective interest in Chifeng (Hongye) refinery.
5 Physical information from 2007 reflects Exxaro’s 20% interest in Sishen Iron Ore Company.
EXXARO INTEGRATED ANNUAL REPORT 2010 11
12 EXXARO INTEGRATED ANNUAL REPORT 2010
DIVIDER PAGE 2 — FRONT (YEAR UNDER REVIEW)
Year under review
i
w
e
v
e
r
r
e
d
n
u
r
a
e
Y
EXXARO INTEGRATED ANNUAL REPORT 2010 13
DIVIDER PAGE 2 — BACK (YEAR UNDER REVIEW)
APPROACH TO
SUSTAINABLE DEVELOPMENT
DISCLOSURE ON MANAGEMENT APPROACH
Sustainability is generally defined as “development that meets the needs of the present without compromising the ability
of future generations to meet their own needs.” For Exxaro this means ensuring we do not undermine the capacity of the
natural environment to provide services, and that we do not contribute to any instability in the communities in which we
operate.
It also means balancing three aspects of business — economic, environmental and social — and integrating the requirements
of each of these into the group’s planning, decision-making and operations.
In line with the World Business Council for Sustainable Development and other global benchmarks, sustainability is a critical
thread woven through our broader strategy (page 22) and the different areas of our business. Spanning corporate
governance, ethics, workplace issues, intellectual property and stakeholder relations, the key benefits include:
> Eco-efficiency = reduced costs, costs avoided (eg through new technology) and optimal investment strategies
> Quality management = better risk management, greater responsiveness in volatile markets, more motivated and
committed staff, and enhanced intellectual capital
> Licence to operate = lower costs of compliance, improved reputation with key stakeholders and greater influence with
regulators
> Market advance = stronger brands, greater customer loyalty, lower cost of capital, new products and processes, attracting
(and retaining) the right talent
> Sustainable profits = new business/increased market share and enhanced shareholder value.
SUSTAINABLE
PROFITS
ECO-
EFFICIENCY
MARKET
ADVANCE
QUALITY
MANAGEMENT
LICENCE
TO OPERATE
14 EXXARO INTEGRATED ANNUAL REPORT 2010
SAFETY AND SUSTAINABLE DEVELOPMENT POLICY
At Exxaro Resources we actively care for the health and safety of our people, the environment, surrounding communities
and our resources by ensuring sustainable development in all our activities. Exxaro is committed to:
> Consulting with employees, representatives and other stakeholders in appropriate forums to develop, communicate and
review responsible and innovative policies, programmes and guidelines that safeguard the community, employees,
contractors, other stakeholders and the environment, while providing flexibility to meet the needs of our businesses
> Achieving high standards of environmental care and providing a safe and healthy workplace for employees, contractors
and other relevant stakeholders
> Ensuring an appropriate organisational structure and adequate resources to manage sustainable development,
including safety, health and environmental matters and comply with legislation
> Implementing internationally accepted and appropriate standards for safety, occupational health and hygiene,
environment and stakeholder engagement management systems
> Complying with all applicable legislation and international obligations as a minimum requirement and implementing
effective company standards, programmes and processes to manage risks
> Maintaining continuous hazard and aspect identification and risk assessment for safety, occupational health and
sustainable development in general
> Maintaining competence and awareness on relevant safety and sustainable development matters through training,
mentoring and communication to employees and contractors
> Conserving natural resources and reducing the environmental burden of waste generation and emissions to air, water
and land through strategies focusing on reducing, reusing, recycling and responsible disposal of waste
> Preventing injury, ill health, pollution and continually improving safety and sustainable development management and
performance
> Establishing objectives, targets and continuously improving operations in terms of safety and sustainable
development performance and management systems
> Ensuring that all incidents leading to fatalities, environmental impact, injury, occupational diseases, damage to
property, process losses, compliance notices, regulatory fines and penalties are reported and investigated
thoroughly to determine all contributing factors and promptly implementing corrective and preventive actions
> Establishing and maintaining appropriate controls, including periodic audits and reviews, to ensure this policy is
effectively implemented, updated and available to interested and affected parties
> Maintaining a high level of emergency preparedness and response to manage any potential emergency.
This policy informs the entire safety and sustainable development function as we aspire to be a responsible corporate
citizen that contributes to mitigating sustainable development challenges in our operating environments, as well as
international treaties to which South Africa is a signatory.
EXXARO INTEGRATED ANNUAL REPORT 2010 15
RISK MANAGEMENT
DISCLOSURE ON MANAGEMENT APPROACH
Risk philosophy
Effective risk management is central to maintaining competitive advantage and adapting to changes in the internal and
external business environment. The underlying principle of integrated enterprise-wide risk management (ERM) is that risk
management must form part of all strategic, business planning and day-to-day operational activities. Exxaro’s ERM adopts
a holistic approach to managing uncertainty, representing both risk and opportunity. The aim is to establish the acceptable
level of risk in each area of business, which should be as low as reasonably practical, while taking full advantage of the
highest returns possible to maximise shareholder wealth. In all risk management activities, compliance with South Africa’s
King III is achieved by coordinating and integrating these activities for effective integrated risk management governance.
Risk owners are responsible for continuous identification, assessment, mitigation and management of risks within the
existing and ever-changing risk profile of the environment in which they operate.
The internal auditors and chief audit executive, being responsible for the combined assurance process, evaluate the
effectiveness of the risk management process and report to the audit, risk and compliance committee (audit committee)
which, in turn, provides assurance to the board.
Risk appetite
The audit committee approves Exxaro’s consolidated risk appetite for residual risks (ie the result after applying mitigation
or control measures to the inherent risks identified and assessed), and ensures this is aligned with the group strategy.
Exxaro’s risk appetite is a function of its ability to withstand unexpected losses and their impact on the group’s ability to
continue as a going concern. Differentiated risk appetites apply at different levels throughout the group. The top residual
risks at different levels in the organisation receive continuous and enhanced attention and are subject to periodic monitoring
and reporting by risk owners to reduce the residual risk rating.
Risk identification and assessment process
The risk management process is continuous, with well-defined steps. Risks from all sources are identified and once they
pass a set materiality threshold, a formal process begins in which causal factors and consequences are identified and the
correlation with other risks and mitigating controls is reviewed.
The top residual business risks, appropriately categorised and based on impact and likelihood of occurrence, together with mitigating
control measures, are disclosed below in descending order. These risks do not exceed Exxaro’s risk appetite but have the highest residual
risk rating, warranting disclosure and continuous management as per the decision of the executive committee, audit, risk and compliance
committee of the board, and the board itself.
16 EXXARO INTEGRATED ANNUAL REPORT 2010
EXXARO’S TOP RESIDUAL BUSINESS RISK MAP FOR 2010
Financial
18
14
12
20
17
3
2
6
8
100%
4
1
5
15
19
Strategic
9
10
16
Legend for 2010 residual business risk map
Compliance
7
11
13
Residual risk rating (%)
Scores range from 71-100
Scores range from 39-70
Scores range from 0-38
Operations
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Infrastructure constraints impacting on current operations and growth aspirations (100)
Commodity price and currency volatility impacting on profitability, investment returns, project evaluations and BEE shareholding
structure (80)
Inability to maintain a licence to operate due to non-compliance with all applicable legal and regulatory frameworks (80)
Potential delays to operations and projects associated with the time taken to obtain approval for mining and environmental rights
(80)
Lack of security of, and cost of electricity, impacting adversely on safety and sustainable operations (80)
Inadequate regulatory changes to enable meaningful participation in IPPs in the South African industry (80)
Climate change impacting adversely on sustainable operations (64)
Late commissioning of growth projects fundamental to Exxaro’s future sustainability (60)
Insufficient supply of clean water for sustainable operations and communities (51)
Insufficient attraction and retention of key skills negatively impacting on current operations and growth aspirations (48)
Risks associated with the closure of current operations (48)
Adverse impact of above inflation increases on operating costs, profitability, and cost of capital projects (48)
Insufficient security of critical materials due to scarcity and price (48)
Fraud perpetrated resulting in quantifiable losses (40)
Risk of not successfully implementing improvement project initiatives (Project Siyaya) thereby not realising revenue, cost reduction
and increased operational efficiency targets (32)
Funding of current operations and growth aspirations hampered by balance sheet capacity and other resource constraints (32)
Risk of previous versions of software applications impacting negatively on information security and availability (32)
Investment opportunities do not yield expected returns (32)
Resource nationalisation resulting in sub-optimal utilisation of resources (24)
16.
17.
18.
19.
20. Reliance on a non-managed operation for financial stability (20)
Residual risk ratings (percentages) are disclosed in brackets after the description of the residual risk.
EXXARO INTEGRATED ANNUAL REPORT 2010 17
RISK MANAGEMENT CONTINUED
High-level business risks
Risk and category
Impact
Probability Control measures (mitigation)
Strategic and operations
High
High
Continuous collaboration with Transnet Freight Rail.
Infrastructure constraints impacting on
current operations and growth
aspirations
Upgrade loading facilities. Leasing or acquiring export
entitlement. Evaluate viability of own rolling stock
Strategic and financial
High
High
Continuous business improvement initiatives with
Commodity price and currency volatility
impacting on profitability, investment
returns, project evaluations, loan
covenant compliance and BEE
shareholding structure
rigorous tracking. Optimised use of operating assets to
leverage benefits of higher throughput. Increased
manpower productivity. Pursue downstream
beneficiation and integration. Diversification of markets
and product sector. Restructure, if necessary, to be
profitable throughout commodity cycles
Strategic and compliance
High
High
Engagement with relevant authorities and non-
Inability to maintain a licence to operate
due to non-compliance with applicable
legal and regulatory frameworks
governmental organisations. Ensure gap identification
and progressive compliance with revised mining charter,
King III report on governance for South Africa,
environmental and other legislation to ensure
sustainable operations within the framework of a
responsible corporate citizen
Compliance and operations
High
High
Continuous engagement with relevant authorities.
Potential delays to current operations
and projects associated with the time
taken to obtain approval for mining and
environmental rights
Operations
Lack of security, and cost, of electricity
impacting on safety and sustainable
operations
Ensure compliance with legal and regulatory
requirements to progress approvals required
High
High
Participation in industry forums that engage with Eskom
and the National Energy Regulator of South Africa
(NERSA). Investigation into co-generation and other
renewable energy sources. Implementing power-sharing
initiatives and examining alternatives for conserving
electricity in operations. Continued commitment to
Eskom to assist where possible with additional coal
supply to achieve stability in the power grid
Strategic
Inadequate regulatory changes to enable
meaningful participation in IPPs in the
South African industry
High
Medium
Ongoing engagement and participation in regulatory
processes and continued lobbying of decision makers
18 EXXARO INTEGRATED ANNUAL REPORT 2010
Risk and category
Operations
Impact
Probability Control measures (mitigation)
High
Medium
Continuous research and industry participation to
Climate change impacting on sustainable
understand and quantify impacts to ensure mitigation
operations
Strategic
Late commissioning of growth projects
critical to Exxaro’s sustainability
initiatives are current and effective
Medium
Medium
Robust project management discipline. Knowledge
sharing from experiences with previous projects
Strategic and operations
Medium
Medium
Continuous enhancement of current water management
Insufficient supply of clean water for
sustainable operations and communities
programmes combined with investigation of additional
mitigation initiatives
Strategic and operations
High
Medium
Implementation of effective retention strategy for key
Insufficient attraction and retention of
key skills impacting negatively on
current operations and growth
aspirations
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 multi-disciplinary project teams
Operations
High
Medium
Restructure, where necessary and where possible, to be
Risks associated with the closure of
current operations
profitable throughout commodity cycles
Continuous improvement to enhance efficiencies,
productivity and profitability
Investigate downstream opportunities or alternative
applications for current technology
Financial
High
Medium
Ensure comprehensive provision for escalation on
Adverse impact of above-inflation
increases on operating costs, profitability
and costs of capital projects
project costing and timing of long-lead items.
Continuous business improvement initiatives and
knowledge sharing
Operations
High
Medium
Strategic sourcing and long-term contracting with
Insufficient security of critical materials
reliable suppliers. Implement mitigation plans to avert or
due to scarcity and price
minimise potential impact
EXXARO INTEGRATED ANNUAL REPORT 2010 19
RISK MANAGEMENT CONTINUED
Risk and category
Financial
Fraud perpetrated, resulting in
quantifiable losses
Impact
Probability Control measures (mitigation)
High
High
Sound and entrenched internal controls and governance.
Discipline with procedural compliance. Zero tolerance to
fraud. Strong and experienced forensic investigation
capability. Continuous internal audit of controls and
assurance of effective functioning
Strategic
High
Medium
Robust execution of initiatives complemented by
Risk of not successfully implementing
improvement project initiatives thereby
not realising targets for revenue, cost
reduction and increased operational
efficiency
tracking to confirm set targets are realised
Strategic and operations
High
Medium
Ranking value-adding opportunities in an approved
Funding of current operations and
growth aspirations hampered by balance
sheet capacity and other resource
constraints
commodity strategy-aligned growth process and
acceptable capital structure, underpinned by cash flow
generation and preservation, giving credence to
maintaining Exxaro’s empowerment status
Explore alternatives to raise equity given the group’s
equity-raising restrictions
Compliance
High
Medium
Centralised control and enforcement of discipline
Risk of previous versions of software
applications impacting on information
security and availability
Financial
Investment opportunities do not yield
expected returns
combined with training opportunities on updated
software applications
High
Medium
Applying conservative and strict criteria for project
evaluation. Continuous update of prices and macro-
economic parameters complemented by a
comprehensive risk analysis
Strategic
High
Low
Influence decision-making through collective lobbying
Resource nationalisation resulting in
sub-optimal utilisation of resources
and discussions at participative industry forums
Financial
High
Low
Focus on sustainability of managed operations in
Reliance on non-managed operation for
isolation
financial stability
Due to a different assessment of the impact, probability or control measures, or a combination of these, certain business risks disclosed
in 2009 now have a residual risk rating that no longer warrants disclosure or the risk no longer exists, namely:
> Future of the KZN Sands operation
> Medium-term reserve confirmation for Namakwa Sands
> Long-term, viable quality zinc concentrate supply to Zincor
> Securing a strategic partner for Australia Sands
> Poor safety record resulting in government, labour union and stakeholder intervention
> HIV/Aids pandemic.
20 EXXARO INTEGRATED ANNUAL REPORT 2010
INFORMATION MANAGEMENT
Information technology is an integral part
also appointed a general manager:
of doing business
today as
it
is
information management. This senior
fundamental to the support, sustainability
executive is mandated to ensure Exxaro
and growth of Exxaro. It cuts across all
has an
integrated system capable of
aspects, components and processes in
supplying meaningful and accurate data on
business and is therefore not only an
sustainability elements in reporting to
operational enabler for Exxaro, but an
stakeholders within the new financial year.
important strategic asset that can be
leveraged to create opportunities and
As part of our ERP strategy, we are
gain competitive advantage.
migrating the group to the latest version
of SAP enterprise reporting at a total
However, by
its nature,
information
capital cost of R268 million. Given the
technology also presents significant risks
legacy issues and disparate systems so
and must be well governed and controlled
common to a merged group, we have
to ensure the function supports the
opted for a two-phased approach to the
group’s strategic objectives. In exercising
overall execution of this project. The first
their duty of care, Exxaro directors ensure
phase, focused on design/blueprinting,
that prudent and reasonable steps have
was
initiated
in November 2010 and
been taken in information management
completed in February 2011. The second
governance.
phase is implementing the new solution;
this will begin in March 2011 and be
One of Exxaro’s strategic focus areas is
completed by October 2011.
achieving operational excellence. This
involves simplifying, standardising and
Oversight for information management
optimising core processes and structures
(IM)
in Exxaro falls under the new
across the group to ensure a common
strategic business programme.
It
is
method of executing Exxaro business, and
monitored by
the finance director,
having exceptional services that support
general manager IM, and the executive
its growth and operational excellence.
general managers for coal, sands and
A strategic business programme was
committee meets quarterly, with ad hoc
launched (page 45) to address these and
meetings as required, and reports to the
other strategic goals such as generating
audit, risk and compliance committee of
base metals and corporate services. The
unrivalled value
in return on capital
the board.
employed, and creating robust businesses
that share, optimise cost structures,
The IM executive committee is mandated
improve throughput and optimise their
to ensure proper ICT (information and
sales mix.
communications technology) governance
and policies are in place, that overarching
Technology plays a key role in enabling this
ICT strategic direction
is aligned to
vision. Accordingly we
launched an
Exxaro’s strategy. The committee will also
investigation
in September 2010
to
monitor
ICT
value
delivery
and
understand the key business drivers and
performance, functional sustainability and
technology requirements of our business
compliance with statutory requirements
programme and determine the most
and corporate governance. This includes
appropriate enterprise resource planning
consultative processes with stakeholders
(ERP) strategy to enable our vision. We
such as employees and organised labour.
Governance of information
management
All activities in the information
management (IM) domain are governed
by the following principles:
> Strategic alignment — ensuring
IM strategy is aligned with business
strategy and that IM delivers against
the strategy
> Delivering value — optimising
expenditure, proving the value of
IM by delivering new investments
that support the enterprise
> Risk management — safeguarding
information communication and
technology assets and information,
disaster recovery and continuity of
operations
> Resource management — making
informed decisions about focus and
priority for the use of information
technology (IT) resources (finance,
people, applications, technology,
facilities, data), ensuring appropriate
IT and related business resources
are available to enable IM to deliver
on expectations
> Performance management —
tracking project delivery and
monitoring all information and
communications technology (ICT)
services to ensure operational
excellence.
EXXARO INTEGRATED ANNUAL REPORT 2010 21
STRATEGIC FOCUS AREAS
Exxaro’s business strategy is guided by
areas
below,
together with
our
relevant areas and our business objectives
five areas where the group believes it
understanding of each and the relevant
set out targeted financial and non-
must perform well to claim competitive
performance examples. The CEO and
financial indicators (page 3).
advantage and provide an attractive
financial
and
operational
reviews
investment case. We explain these focus
(pages 44 and 48) provide more detail in
Strategic focus area
Implementation
Measure
Results and target
Ensure Exxaro’s
sustainability
Integrated approach to risk
management
Access to good quality
long-term resources
Responsible, safe operations
Risk management part of
strategy, business planning
and day-to-day operations
Life of mine
Environmental footprint,
performance against safety
and health objectives
Regulatory compliance
Corporate citizenship
Responsible corporate
citizenship footprint.
Governance ratings (JSE)
and Socially Responsible
Investment Index (SRI)
Healthy balance sheet and
financial metrics
Financial performance
Protected intellectual
property
Appropriate new technology
development
Patent and trademark
registrations and protection
Technology pipeline aligned
with strategy
Entrenched integrated enterprise-wide
risk management governance in place
(page 16)
Long-term resources are aligned with
commodity strategy (page 60, 64)
Prudent ongoing rehabilitation and
provision for closure
Fatalities and lost-time injuries lower than
in 2009; target remains zero (page 78)
Integrated water and waste management
programmes implemented (page 95)
HIV and TB management strategies
implemented (page 88, 89)
Progressive compliance with King III and
revised mining charter (page 144, 156)
One of the best-performing constituents
of the JSE’s SRI Index (page 30)
Socio-economic spend of 2,5% of net
profit after tax from managed operations
(page 131)
Debt to equity ratio of 13%
Compliance achieved with all loan
covenants
Healthy financial metrics; geared for
growth
Refer to the financial and operational
review on page 48
Intellectual property committee formed
from internal resources and legal advisors
to ensure protection and currency of
patents and licenses where applicable
22 EXXARO INTEGRATED ANNUAL REPORT 2010
Strategic focus area
Implementation
Measure
Results and target
Protect and build
Exxaro’s reputation
Positive stakeholder
engagement
Representation and fair
workplace
Publicity/media coverage.
Feedback from stakeholder
interaction initiatives
Recognition as an employer
of choice
Legislative and regulatory
compliance
Transparent and compliant
reporting
Industry leader in
transformation
Integrated and transparent
reporting of economic,
social and environmental
performance
Compliance with revised
mining charter
Develop Exxaro’s
leadership and people
Preferred local and export
supplier
Living our values and brand
Feedback from customers
Internal and external
surveys
Develop effective leaders
Ensure right talent for
operational management
and growth
Reward and remunerate for
innovation and productivity
Recognise our people as our
strength
Leadership interventions,
cross-discipline exposure,
and management rotation
Benchmarked remuneration
Staff turnover rate
Internal recognition awards
Refer to stakeholder engagement
summary on pages 25 to 28
Rated second among the mining
companies that participated in the
Deloitte Best Company to Work For survey
Progressive compliance with employment
equity targets (page 123, 156)
Entrenched and compliant employment
practices supported by a code of ethics
and underpinned by a grievance and
disciplinary policy
2010 integrated annual report
More than 50% black ownership
Representative board and executive
committee overseeing strategy and
day-to-day management
Progressive compliance with employment
equity targets
50% of discretionary procurement spend
went to HDSA suppliers
Refer to stakeholder engagement
summary on page 25
Internal 360° peer evaluations reflect
Exxaro value entrenchment among
employees
Refer to social performance report on
pages 120 to 128
Exxaro’s Best Company to Work For rating
in 2010 was slightly lower than 2009,
primarily because of the restructuring
programme under way (page 45)
EXXARO INTEGRATED ANNUAL REPORT 2010 23
STRATEGIC FOCUS AREAS CONTINUED
Strategic focus area
Implementation
Measure
Results and target
Improve Exxaro’s
portfolio
Top-quartile performer in
peer group
Solid performance and
growth throughout the
commodity cycle
Innovation and
technological development
supporting Exxaro’s drive
for continuous improvement
and growth aspirations
JSE SRI Index rating
Return on capital employed
(ROCE) comparison to peer
group
Compound annual growth
rate (CAGR) for revenue and
net operating profit (EBIT)
Internal capacity and
experience of technology
resources
Research and development
(R&D) capacity and progress
Well-articulated growth
strategy with robust and
balanced opportunity and
project pipeline
Funding capacity to support
strategy realisation
Unambiguous growth
strategy known to all
stakeholders
Healthy financial metrics
External financial support
Credit rating
Achieve operational
excellence
Physical production
performance
Market share and reliability
of supply
Consistently achieve annual
stretched performance
targets
Rigorous performance
reviews for operations and
support services
Effective project execution
on time and within budget
Low-cost producer
Position on cash cost curve
One of the best-performing constituents
of the JSE’s SRI Index
ROCE at 38% exceeds internal target and
externally determined benchmark
CAGR for revenue and EBIT at 19% and
52% respectively since creation of Exxaro
Management of mega project
development, eg Grootegeluk mine
expansion for Medupi (GMEP) performed
with internal resources
Development of current application of
AlloystreamTM technology by internal R&D
resources
Refer to strategy in CEO report on
page 45 and growth report on page 60
Debt to equity ratio of 13%; healthy
financial metrics; compliance with all
external loan covenants; appetite from
financiers for Exxaro’s mega-project
financing (R4,5bn bridge facility for GMEP
in place); formal credit rating to be
considered in 2011
Coal production marginally higher in 2010;
aspiration to become the largest coal
producer in South Africa in the next few
years (currently second) — 75Mt coal and
750kt reductants per year
Increase coal export volumes and be a
reliable local supplier
Char plant ramped up to nameplate
capacity in last quarter of 2010. Pigment
plant expansion at Kwinana in Australia
ramped up to nameplate capacity in 2010
Maintain position among leading global
suppliers of titanium dioxide and zircon,
and increase share of global chloride
pigment market
Cash production costs year on year on
average below external inflation indicators
due to disciplined cost management
Business optimisation project (Siyaya)
aims to introduce a more effective
operating model with benefits of increased
revenue and lower service costs
24 EXXARO INTEGRATED ANNUAL REPORT 2010
STAKEHOLDER ENGAGEMENT
Engaging with our stakeholders is fundamental to creating value for all our investors. It also builds solid relationships with authorities
and interested and affected parties.
To further strengthen stakeholder engagement, Exxaro applies the AA1000SES standard based on the processes shown below. This is
supported by a new integrated software system to manage stakeholder engagement more effectively.
Exxaro communicates with each stakeholder group in a number of ways:
Stakeholder group
Objective
Issues raised
Progress
Employees are invited to
comment on any aspect of the
group through bi-monthly
newsletters, intranet, regular
employee surveys and feedback
from various forums
Customer perceptions are
surveyed through external
service providers and by
regular interaction
Supplier interaction is ongoing
through external perception
surveys, forums and other
initiatives
To maintain informed and
supportive employees
Retrenchment procedures
Strategic business
optimisation programme
Long-term security of supply
Long-term security of supply
Effectiveness of planned
procure-to-pay process
To ensure customers view
Exxaro as a reliable supplier
and partner
> Capitalise on our
purchasing power to drive
socio-economic
empowerment,
transformation and
development in South
Africa
> Maintain a constructive and
positive preferential
procurement relationship
between Exxaro and its
suppliers
Trade unions — regular
consultation with all recognised
unions by the group’s employee
relations management unit
To maintain a collaborative
relationship with accredited
trade unions
Retrenchment procedures
Strategic business
optimisation programme
Information-sharing sessions
held. Opportunity to
participate in consultation
phase facilitated
Continuous engagement on
mutually beneficial
contractual arrangements
Target exceeded for 2010.
Progress against targets in
new mining charter tracked
quarterly
Ongoing engagement
In 2010, Exxaro notified
unions of the planned
retrenchment of a maximum
of 300 employees. Through
consultation, we are still
examining all options to limit
the effect of restructuring on
our people
EXXARO INTEGRATED ANNUAL REPORT 2010 25
STAKEHOLDER ENGAGEMENT CONTINUED
Stakeholder group
Objective
Issues raised
Progress
To maintain informed and
supportive relationships with
authorities and regulators at
all levels that are important to
Exxaro’s business aspirations
Progress with mining right
conversions and approvals
Issuing of water permits and
environmental approvals
Authorities — consultation at
national, provincial, district and
local level. Key government
departments with which Exxaro
interacts include mineral
resources, water affairs, labour,
environmental affairs and trade
and industry
Regulators — senior Exxaro
members meet with officials
from relevant government
departments
Industry bodies
To participate in industry
forums instrumental to
Exxaro’s business
Revised mining charter.
Industry safety initiatives
Relationships at national and
international level are handled
by senior management. Local
and regional government
relations are handled by
experienced members of
Exxaro safety and sustainable
development department.
Understanding that sound
government relations
facilitate the group’s
compliance/licensing
requirements (mining rights,
water permits, etc) Exxaro will
centralise accountability for
national/international
relations, as well as oversight
of all group stakeholder
relations, as part of the
group’s strategic business
optimisation programme
Exxaro’s chief executive
officer has completed his third
term as president of the
Chamber of Mines, and the
group actively participates in
chamber issues
Investors — regular interaction
between management and
investor community includes
financial results presentations,
roadshows, site visits and
individual meetings. Investors
may request access to group
operations and management
To nurture solid relationships
with investors, fund managers
and investment analysts to
ensure that Exxaro’s strategy,
business plans and reported
results are understood
Clarity on mineral sands
strategy
Progress with energy portfolio
Progress with divesting zinc
interests
Formal programme being
developed to communicate
strategy, challenges and
targets to local and
international investors
Media — regular interaction
between management and
media representatives
To maintain informed and
supportive media
stakeholders
Coverage on mining groups’
alleged non-compliance with
environmental legislation
Proactive interactions for
insight on Exxaro’s strategy
and developments: news
releases, site visits, briefings,
interviews. Media relations to
manage ad hoc issues
26 EXXARO INTEGRATED ANNUAL REPORT 2010
Stakeholder group
Objective
Issues raised
Progress
Communities — in addition to
the stakeholder engagement
process, business units’
management members serve
on municipal forums for
integrated development
planning and local economic
development, and actively
participate in capacity-building
initiatives
To consult with stakeholder
communities on their needs,
project planning and
implementation
To provide details of
stakeholders, basis for
identification, engagement,
stakeholder concerns, use of
engagement information
To demonstrate commitment
to stakeholder involvement on
social sustainability issues
through policy and
implementation
Interest groups — Exxaro is
building strong relationships
with relevant non-government
bodies and interest groups
Collaboration and partnering
with interest groups that are
important to Exxaro’s
business operations
Employment opportunities
and environmental impacts
Some environmental groups
raised issues with the JSE and
in the media about mining
companies’ compliance with
environmental standards, and
whether JSE standards for
membership of the Socially
Responsible Investment index
need to be raised. For Exxaro,
issues included the alleged
absence of water licences at
specific operations and
unauthorised mining
operations at another
By June 2011 we aim to have a
standardised strategy and
systems in place to formalise:
> Identifying stakeholders
> Analysing stakeholder
issues
> Formulating company
responses
> Implementing stakeholder
engagement plans for each
operation
> Training all relevant
employees in the approach
to stakeholder engagement
Exxaro satisfied the JSE that
the required water licences
had been issued, and that no
unauthorised mining activities
were being undertaken at
Arnot’s Mooifontein section.
Exxaro also demonstrated
that an innovative solution
was being implemented at
Matla to preserve and
minimise mining impacts on
the wetland (page 97)
EXXARO INTEGRATED ANNUAL REPORT 2010 27
STAKEHOLDER ENGAGEMENT CONTINUED
Commitment to external initiatives
As part of our goal of leadership in sustainability, Exxaro actively participates in initiatives that benefit both the industry and South
Africa.
Initiative
Purpose
Progress
Community health project
To create HIV awareness and encourage
Projects initiated at Arnot, Leeuwpan and
HIV testing in communities surrounding
North Block Complex in 2010. This will be
our business units. We aim to create an
followed by Inyanda, Matla and New
environment that has no stigma against
Clydesdale in 2011
people living with HIV/Aids
Exxaro chair in earth science at University
Encourage research and dialogue
Support initiated until 2013
of Pretoria
University of Pretoria community-based
Develop standards and protocols
Standards and protocols periodically
project module
reviewed
Exxaro chair in business and climate
Encourage research and dialogue
Support renewed until 2015
change at Unisa
Exxaro chair for global change and
Promote thought leadership
New support to 2013
sustainability at Wits
Mineral Education Trust Fund
Pool industry resources to support
Annual contribution of over R1 million
National Business Initiative
tertiary education in the South African
minerals industry and jointly seek
solutions to related challenges
To ensure a coordinated response to
issues such as climate change and water
Corporate membership
Exxaro participates in the Carbon
Disclosure Project (CDP) programme for
energy and water to ensure responsible
stewardship
Bridging school
Enable school leavers to pursue tertiary
Annual funding of over R2 million
education
28 EXXARO INTEGRATED ANNUAL REPORT 2010
Case study — Grootegeluk expansion embodies Exxaro’s approach to sustainability
Grootegeluk mine’s expansion for Medupi (GMEP) is one of the largest mining growth projects in southern Africa, and bears
testimony to Exxaro’s ability to successfully plan, develop and implement projects of this magnitude. On completion, this expansion
will make Grootegeluk the largest coal operation in the world, producing around 33Mtpa of power station, coking and steam coal.
Realising the catalystic effect GMEP would have on the region and its infrastructure, Exxaro spearheaded the formation of the
Lephalale Development Forum. This body brings together national, provincial and local government, other industry participants
and civil society to meet the socio-economic development challenges that the Lephalale municipality would face.
The R9,5 billion GMEP project, near Lephalale in Limpopo province, entered a new phase in June 2010 as project team members
moved on site to start construction. At present, GMEP is scheduled to begin supplying 14,6Mtpa coal to Eskom’s new power station
(Medupi) from the second quarter of 2012, coinciding with the commissioning of the expansion project. Full coal production is
expected from 2014/2015.
The bulk of the long lead-time and major supply contracts for the project were finalised in mid-2010, including contracts for the
supply of stackers and reclaimers, as well as the in-pit crushing system (a mobile system that enables operations teams to crush
run-of-mine material as the mine pit advances. Material is then transported via conveyor belt to processing plants. Civil construction
is well underway.
What this means to Exxaro
> Grootegeluk will be able to supply the Medupi power station with over 14Mtpa of coal for the next 40 years from a beneficiation
plant that has been designed to be energy efficient and zero effluent
> It will enable Exxaro to increase its volumes available for export, and develop downstream products such as char and market coke
in line with government’s drive to add value to natural resources through beneficiation.
What it means to local labour
> Through Exxaro’s housing project (page 94), more than R25 million has been spent with(cid:3)local suppliers and sub-contractors. At
year end, the project had employed close to 500 local contractors, around 50% of its total labour force
> Around 100 people have been trained by Exxaro contractors as part of the group’s socio-economic development plan. This
includes health and safety training as well as specialised technical skills.
What it means to the region
> Additional housing, education, health and welfare services, sport and recreation facilities are being planned, in conjunction with
regional stakeholders
> The capacity of the local water-treatment works (which supplies most of the municipal area with potable water) is being doubled
at a capital cost of R100 million. This will supply 40 megalitres of drinking-quality water per day, which is expected to meet the
region’s needs into the foreseeable future. The upgrade started in April 2010 and will be completed by August 2011.
EXXARO INTEGRATED ANNUAL REPORT 2010 29
REPORT SCOPE AND BOUNDARY
Exxaro’s 2010 integrated annual report
Initiative (G3), and the content of this
Ongoing feedback from a range of
covers the group’s financial and non-
report has again been prepared in line
stakeholders helps us to contextualise
financial performance. This integrates our
with GRI
intermediate
application
certain issues better for more informed
economic, social and environmental
level B+.
results for a group-wide understanding,
understanding by readers. Feedback is a
critical element of our reporting process
and sets out
the challenges and
As a signatory to the United Nations
and the completed feedback form included
opportunities ahead. The report is also
Global Compact, Exxaro also reports
in this report should be directed to:
available at www.exxaro.com.
annually on progress in upholding the
Ramesh Chhagan
ten universally accepted principles of
Manager: Risk and Sustainable
The methodologies
for determining
human rights, labour, the environment
Development
specific indicators are described in the
and anti-corruption.
E-mail: ramesh.chhagan@exxaro.com
text, eg injuries, carbon footprint and air
Telephone: +27 12 307 4038
quality management.
Sustainability performance in this report
Fax: +27 12 307 5338
spans the 12 months from 1 January to
Mobile: +27 83 609 1446
Exxaro was formed in November 2006 by
31 December 2010. In addition to the
www.exxaro.com
merging the former Kumba Resources
printed report and web site, the report is
and Eyesizwe operations. While this
also available on CD.
process is largely complete, consolidation
of the Namakwa Sands business only
This report excludes operations where we
started towards the end of 2008. This has
made data comparability challenging in
do not have management control:
> Australia Sands — principal asset is a
JSE Socially Responsible
Investment (SRI) index
Exxaro was again ranked among the best
performers on the JSE’s revised SRI index
in 2010. This index identifies best practice
some areas. Throughout these processes,
50% ownership of Tiwest joint venture
in corporate social responsibility and
however, Exxaro’s earlier adoption of
> Chifeng Refinery — Exxaro has an
corporate governance in a benchmark
triple bottom-line reporting has remained
effective 22% economic interest in an
index. Exxaro is classified as having a high
a cornerstone of our commitment to
existing
refinery
facility
in
Inner
environmental
impact because
it
is
sustainable development and of our
Mongolia, China
involved in mining and metals.
determination to entrench global safety
> Mafube coal mine — joint venture in
and
sustainable
development
best
Mpumalanga, South Africa.
Solid progress is being made in areas that
practices
in all operations. Exxaro
> Sishen Iron Ore Company — Exxaro has
do not yet
fully comply with JSE
therefore reports against the 2006
a 20% equity interest
guidelines of
the Global Reporting
In determining material issues to include in this report, Exxaro uses the methodology
recommended by G3 which spans external and internal factors:
External
Internal
> Key sustainability issues raised
> Exxaro’s values, policies, strategies,
by stakeholders
processes and targets
> Sectoral issues and challenges
reported by peers and industry
bodies such as the Chamber of
Mines
> The interests and expectations of
stakeholders for whom our corporate
progress is paramount, including employees,
shareholders and suppliers
> Relevant legislation and
> Key risks defined by corporate risk
voluntary agreements (local
and international) of strategic
significance to the group and
its stakeholders
> High-profile sustainability
issues, impacts or
opportunities, from climate
change to HIV/Aids
methodologies
> Critical factors for Exxaro’s success,
including the synergy between our
operations and the universal aims of
sustainable development.
The outcome of this process identified a number of material issues pertinent to
business sustainability. These are disclosed on the foldout at the start of this report
and cross referenced to detailed commentary in relevant sections.
requirements,
specifically
providing
quantitative objectives and targets for
certain areas, and reporting on strategic
moves towards sustainability.
Assurance — broad-based
verification
Exxaro’s
internal systems record and
monitor
the
quality
(accuracy,
completeness
and
consistency)
of
management information and any data
gaps in the group.
In line with our commitment to the triple
bottom line, having the quality of our
disclosure independently assured is an
integral part of reporting to stakeholders.
Each year, the performance indicators and
physical sites selected
for external
assurance are assessed to ensure this
process
adds maximum
value
to
stakeholders. Ernst & Young’s report
appears on page 172.
30 EXXARO INTEGRATED ANNUAL REPORT 2010
Awards and recognition
Tshwane
International Trade and
Infrastructure
Investment
Award of excellence — alternative and renewable energies
conference
category
Energy Cybernetics — inaugural Energy Barometer awards
First place — corporate head office category — for actual
operational efficiency
SANAS reassessment — full decade of excellence since first
Namakwa Sands laboratories at the smelter and mineral
achieving IS 17025 accreditation in 2000
separation plant
NOSCAR — fifth consecutive award
Namakwa Sands — making it one of the top performing mines in
the country on safety, health and environment management
standards (only 80 of 13 000 companies using the NOSA system
have achieved this level of SHE performance)
Nedbank Capital Green Mining awards
Exxaro won joint first place in the socio-economic category for
its Zikhulise SME development and skills training centre project
in KwaZulu-Natal. The group was runner-up in the prestigious
sustainability category for the Lephalale eco-housing initiative,
and the only company to feature twice in the awards. Now in
their fifth year, the Green Mining awards acknowledge the
contribution responsible mining and mineral beneficiation makes
to economic development in Africa
SAICE Engineering Excellence awards
A KZN Sands team scooped Project of the Year and overall 2010
Innovation trophy at the annual Engineering Excellence awards,
held by the South African Institute of Chemical Engineers. The
awards recognise innovation and excellence in the field of
chemical engineering and pit some of the best engineering
projects in the country against each other. The Innovation
accolade is widely regarded as the most prestigious award for a
chemical engineer in South Africa. The same team has also been
nominated in four categories for the international awards for
innovation and excellence, held in the United Kingdom
2009 integrated annual report
Ranked among the 15 excellent reports by Ernst & Young’s
Excellence in Sustainability Reporting 2010
Corporate Research Foundation’s Best Employers survey 2010
Exxaro was ranked seventh among the top large-sized employers
Carbon Disclosure Project 2010
(more than 4 000 employees)
Exxaro took part in the Carbon Disclosure Project and again
improved its performance significantly; it was ranked fourth out
of 74 of the top 100 JSE listed companies
Exxaro was also one of the few mining companies to voluntarily
participate in the first CDP water project
2010 Shenhua Cup International Mining Skills Competition, China
Matla won: (1) gold in the continuous miner operations category;
(2) silver in electrical fault-finding (long-wall shearer); and (3)
bronze for long-wall mining operations
EXXARO INTEGRATED ANNUAL REPORT 2010 31
MACRO-ECONOMIC AND COMMODITY REVIEW
Following on the global recession of 2009,
6,4% due to monetary tightening in these
The key risks to the global economy in
the world economy was characterised by a
countries and slowing growth
in the
2011 are the possibility of more sovereign
two-speed recovery in 2010. Whereas the
export markets of Europe and Japan.
debt problems in Europe, as well as
advanced economies recorded real GDP
However, economic expansion in these
possible premature and excessive fiscal
(gross domestic product) growth of some
countries will remain the major engine of
and monetary tightening in this region
2,8%, the economies of emerging markets
growth in the world economy in 2011.
which would result in very weak growth. In
expanded by a much better 7,0%. The
emerging markets, on the other hand,
world as a whole recorded real GDP
Economic expansion
in the USA
is
there is the risk that central banks may
growth of 3,9%, with developing countries
expected to pick up steam in 2011, with the
not react quickly enough to counter the
growing at a fair rate of 4,0%.
country expected to record a respectable
inflationary threat and that price increases
real GDP growth rate of 3,2% based
could thus spiral out of control. Conversely,
Despite unprecedented monetary easing
primarily on private-sector recovery and
excessive
tightening would constrain
and stimulatory measures in advanced
the continuation of fiscal stimulus. The
economic growth. In the USA, the major
economies, these countries continued to
sovereign and banking-debt crisis
is
risk appears to be the possibility that the
face conditions typified by tight credit,
expected
to continue
to weigh on
property market could continue
to
stagnant consumer demand and business
confidence in Europe, with more countries,
stagnate, pushing a recovery
in this
investment, declining housing demand
such as Spain, Portugal and Belgium,
market beyond 2011. This risk is shared by
and prices, and high unemployment. In
thought to be at risk. Economic growth of
some countries in Europe, notably the UK,
addition, banking and sovereign debt
some 1,6% could be realised in Western
Spain, France and Sweden.
crises, notably in Greece and Ireland,
continued to undermine confidence in the
Europe. After a healthy recovery in 2010,
Japan’s real GDP growth is forecast to
Other economic risks facing the world
developed world, especially in Europe.
stall temporarily, reaching only about 1,2%
include
the
spectre of
increased
Real GDP growth in the USA and Western
in 2011.
Europe advanced by 2,9% and 1,7%
protectionism, currency manipulation and
capital controls due to real or perceived
respectively, while Japan’s GDP increased
Real GDP growth in China is anticipated to
exchange rate imbalances, the possibility
by an exceptional 4,0%.
be 9,5% in 2011. As with many other
of equity and property bubbles
in
emerging economies, the slowdown in
emerging economies, and spikes in the
In emerging markets, on the other hand,
growth is expected to be precipitated by
prices of oil, food and other commodities
monetary
easing
and
stimulatory
fiscal and monetary
tightening and
worldwide. The latter could continue to
measures had the desired effect and these
depressed market conditions in Europe
give rise to social unrest, especially in
countries continued to grow at a healthy
and Japan. Economic expansion in India,
countries with high unemployment.
pace
in 2010. China recorded real
however, is not expected to suffer much,
economic expansion of 10,3% and India
with real GDP growth of 8,3% forecast
8,5%. Improved intra-regional trade in
for 2011.
south-east Asia countered muted demand
conditions in the major consumer markets
of the USA and Europe. However, rising
Comparative GDP growth rates
inflationary
pressures
in
emerging
economies caused governments to resort
to monetary-tightening measures in the
second half of 2010, resulting
in a
moderate slowdown in growth generally.
In 2011, the two-speed recovery is likely to
remain a feature of the global economy.
Real GDP growth of some 3,5% is expected
worldwide, with growth
in advanced
economies decreasing to an expected rate
of 2,4% due to the persistence of
conditions noted earlier and the need for
fiscal tightening
in Europe especially.
Economic growth in emerging markets is
expected to decline moderately to about
16
14
12
10
8
6
4
2
0
-2
-4
)
e
g
n
a
h
c
%
(
h
t
w
o
r
g
P
D
G
32 EXXARO INTEGRATED ANNUAL REPORT 2010
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
China
South Africa
World
United States
Following on the dismal economic growth
rand is expected to remain strong in 2011,
prices increased by some 28% and steel
performance during
the worldwide
at an average exchange rate of 7,15 against
and stainless steel prices improved by
recession in 2009, South Africa’s real GDP
the US dollar. A strong rand will continue
about
30%.
Besides
commodity
growth recovered, albeit slower than
to put pressure on export earnings and on
production
and utilisation, mineral
expected, to 2,7% in 2010. Despite high
the competitiveness of exporters. Factors
markets were
influenced by supply
consumer debt levels, strict bank lending
that could have a major impact on the
disruptions,
including
weather-,
rules, continued job losses and elevated
exchange rate
include stronger-than-
infrastructure-,
labour- and politically-
energy costs, real private consumption
expected economic growth in the USA and
related events, exchange rate movements
expenditure increased at a healthy 4,7%.
further sovereign debt woes in Europe.
and investment demand, with the impact
of the last factor continuing to increase.
Expectations are that accommodative
monetary
policy,
together
with
Commodity review
China, and to a lesser extent India and
Estimates are that global crude steel
strengthening real disposable income and
other emerging economies, remained the
production increased by 15,0%, or by
an increase in consumer confidence, will
major engine of growth for commodity
184Mt, in 2010 compared to 2009. In China
result in improving demand conditions
demand
in 2010. Robust materials-
crude steel production expanded by about
and
the economic recovery gaining
intensive real fixed asset investment and
53Mt (9,3%) compared to 2009, totalling
momentum in 2011, leading to real GDP
industrial production growth, rising by
about 627Mt. Production in the rest of the
growth
increasing to 3,6%. This
is,
12,5% and 15,3% respectively, meant
world thus rose by some 20,0%, or about
however, still significantly below potential.
China again accounted for the major
131Mt, to 787Mt. However, this recovery in
local
High household debt, a strong
currency, uncertainty on future macro
portion of the increase in commodity
demand in 2010 with that country being
crude steel production in the rest of the
world has left output still some 4,8%
policy, high wage costs, electricity
responsible for over 30% of world demand
below the level of 2008, prior to the global
shortages and sharply higher electricity
for almost all major mineral commodities.
economic recession. Growth in global steel
prices,
infrastructure
inadequacy and
production is expected to continue in 2011,
skills shortages will continue to constrain
In 2010 commodity prices improved across
with emerging and advanced economies
the economy. Economic developments
the board, led by bulk prices, as advanced
participating in this expansion. Output of
elsewhere in the world will also continue
economies started recovering after the
crude steel is expected to increase by
to have a significant impact on economic
recession
and
emerging markets
some 5% — 10%. However, shortages of
conditions in South Africa.
continued to grow at a healthy pace. The
raw materials, particularly due to weather-
Economist Metals Price Index, based on
related supply disruptions, could hamper
South Africa’s average annual consumer
base metals prices, rose by 22%, crude oil
steel production.
price inflation declined to 4,3% in 2010
from 7,1% in 2009, allowing for further
monetary relaxation by the Reserve Bank
during this period. On a quarterly basis,
the inflation rate started levelling off in
the fourth quarter, at 3,5%, with increases
in administered prices and above-inflation
wage demands limiting the downward
potential. The average inflation rate in
2011 is expected to remain at the level of
2010.
The rand continued to strengthen against
the US dollar in 2010, recording an average
rate of 7,32 compared to 8,44 in 2009.
The rand strengthened significantly in the
last quarter of 2010, due mainly to
investment flows into the country as
emerging markets became the destination
of choice for foreign investors seeking
higher yields for their investments. The
Nominal historical contract iron ore prices
)
t
/
$
S
U
(
e
c
i
r
P
140
120
100
80
60
40
20
0
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
Australia-Asia lump ore
contract price
Australia-Asia fine ore
contract price
EXXARO INTEGRATED ANNUAL REPORT 2010 33
MACRO-ECONOMIC AND COMMODITY REVIEW CONTINUED
In the international coking coal market,
early-2011 could see prices rise significantly
increasing by more than 25% in these two
the
pricing mechanism
underwent
in the first quarter of 2011 or longer.
countries, whereas exports from Indonesia
fundamental change in 2010, moving from
Benchmark semi-soft coking coal and low-
and Colombia rose by some 17% and 10%
annual benchmark contract pricing to
vol PCI coal saw price rises above 80% in
respectively.
Export
volumes
from
quarterly or even monthly pricing. The
2010. Given the forecast tight market
Australia and South Africa were stagnant
coking coal market remained structurally
conditions for coking coal in 2011, these
due to logistical bottlenecks. The torrential
tight in 2010, driven primarily by rising
swing metallurgical products could enjoy
rains in north-eastern Australia in early
import demand from China and India and
another year of strong price increases.
2011 will cause steam prices to remain well
demand recovery in the rest of the world,
above the USD110/t mark in the first part
especially Europe. On the supply side,
The average Richards Bay spot steam coal
of 2011 with the average price probably
traditional swing producers, the USA and
price for 2010 of USD91,21/t was some
also reaching a level above USD110/t.
Canada, rose to the occasion by filling the
42% higher than the average for 2009.
Logistical capacity for seaborne coal is
gap in the market. The average spot
After starting the year at about USD83/t,
expected to remain lower than demand in
coking coal price in 2010 was USD222/t,
the price ranged between USD82-95/t
2011, which will also support higher prices.
some 53% higher than the average for
until the end of October, after which it
South Africa will not be able to capture
2009. Structurally the coking coal market
started rising significantly to exceed
the potential additional value
in the
is expected to remain tight in 2011, with
USD120/t at the beginning of 2011. The
market given that the ramp-up of rail
average prices probably remaining at
price increase was driven by weather-
capacity is much slower than that of
levels similar to 2010. However, significant
related supply disruptions, firstly
in
the port.
disruption to coking coal production and
transport in Queensland, Australia, due to
in
Indonesia and Colombia and then
Australia towards the end of the year.
In 2010 the
iron ore contract price
torrential
rains over end-2010 and
Demand from India and China saw imports
settlement mechanism between iron ore
Nominal historical coal prices
)
t
/
$
S
U
(
e
c
i
r
P
350
300
250
200
150
100
50
0
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
Hard coking coal
contract price
Semi-soft coking coal
contract price
RBCT steam coal
spot price
producers and steel mills generally
changed from an annual contract to
quarterly contracts, the latter being based
on a trailing three-month average of spot
prices for market transactions in China.
Monthly Chinese spot prices for fine ore
increased from about USD100/t at the
beginning of 2010 to about USD180/t in
June, before dropping to USD140/t in
September. The last quarter saw prices
rising again to USD170/t in December, for
an average of USD142/t for the year. This
was about 90% higher
than
the
comparable price in 2009. The Chinese
spot iron ore price trend followed the steel
production trend in that country. During
the year Chinese imports of iron ore
declined by about 2%, but domestic
34 EXXARO INTEGRATED ANNUAL REPORT 2010
production was significantly higher than
2010, dollar weakness and commodity
in stockpiles that keep on increasing.
in 2009. Iron ore imports in the rest of the
investment demand pushed prices to an
Nevertheless,
commodity
investment
world expanded by about 30%, consistent
average of USD2 281/t in December.
demand should sustain prices and an
with the recovery in steel production. The
average price of some USD2 200/t is
global iron ore market is expected to
In 2010 zinc demand grew by about 14%,
forecast for 2011.
remain tight
in 2011 and prices are
with advanced and emerging economies,
therefore forecast to increase by more
including China, contributing equally in
Following an approximate 9% increase in
than 20% on average. However, should a
percentage terms. Due to relatively high
mine production in 2010, zinc concentrate
shortage of coking coal, due to flooding in
zinc prices during the year, refined zinc
production is expected to increase only by
north-eastern Australia, cause
steel
production rose by 12%, resulting in a
about 5% in 2011. Forecasts are that the
production to be curtailed,
iron ore
market surplus of about 900kt. This
concentrate market will be in modest
demand and prices could come under
caused zinc stocks to continue expanding,
oversupply, but that realised contract zinc
pressure.
with LME inventories rising from about
treatment charges in 2011 will be lower
489kt at the beginning of 2010 to some
than 2010, as a result of spot zinc
In 2010 the average LME cash zinc price
701kt at the end of the year.
treatment charges being much lower than
was USD2 162/t, some 31% higher than in
realised contract treatment charges for all
2009. In the first half of 2010, the zinc
In 2011 refined zinc production is expected
of 2010, with the gap widening in the
price declined
from an average of
to expand by only about 3%, while demand
second half of the year. A zinc treatment
USD2 434/t in January to USD1 743/t in
is projected to expand by 6%, primarily
charge of USD210/t of concentrate is
June, with market fundamentals and a
strengthening dollar dictating the price
driven by China and other emerging
in the
economies. This should result
forecast for 2011.
trend. However, in the second half of
market surplus declining by 40%, but also
Due to the economic recession, the
Nominal historical zinc and lead prices
)
t
/
$
S
U
(
s
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
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
Zinc LME
spot price
Lead LME
spot price
Zinc realised treatment charge
(US$/t concentrate)
titanium dioxide pigment industry cut
back production
in 2009 to match
demand,
resulting
in
low capacity
utilisation rates. Inventories were also
drawn down to historically low levels. In
addition three western plants were closed
permanently during the recession, leading
to net capacity declining by 5%. In 2010,
demand recovered at a higher-than-
expected rate of about
10%, with
consumption increasing both in advanced
and emerging economies. Industry efforts
to ramp-up production to meet demand
and replenish inventories were not entirely
successful, due to production disruptions.
The tight market in 2010 resulted in
average worldwide
titanium dioxide
pigment prices rising at a healthy 13%
during the year. Continued low inventory
levels and expanding demand should
produce another tight market in 2011 with
a further increase in pigment prices.
EXXARO INTEGRATED ANNUAL REPORT 2010 35
MACRO-ECONOMIC AND COMMODITY REVIEW CONTINUED
Nominal historical TiO2 pigment, feedstock and zircon prices
1 000
900
800
700
600
500
400
300
200
100
0
)
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
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
i
P
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
Zircon price
Rutile price
Chloride
slag price
US import
pigment price
In 2010 higher-than-expected increases in
of low industry profitability. This leaves
demand for titanium dioxide feedstock
the supply industry with very little scope
from the pigment industry, estimated at
16%, led to a tight market during the year,
for new output expansion in the short to
medium term and higher prices are clearly
despite producers ramping up production
needed
to
induce
new
project
to operate at close to full capacity. Supply
development. In addition, significant cost
disruptions, noticeably
labour- and
pressures are being recorded
in the
production-related events
in southern
industry, notably electricity prices
in
Africa, exacerbated market tightness.
South Africa. Contracts that cap price
Average prices for titanium feedstocks
increases will also start expiring across
generally moved sideways or increased
the industry between 2011 and 2013, and
moderately. However, towards the end of
will not be renewed. Together, these
2010,
the outlook
for noteworthy
factors point to significant feedstock price
feedstock price increases in 2011 gained
increases in the next few years. In 2011
ground with producers and consumers
price improvements of around 15% and
alike realising that markets, especially for
more are anticipated.
high-grade feedstocks, would probably
remain tight in the next few years and
During the economic recession, production
could move into significant deficit in the
of zircon was curtailed to match demand
the mining industry by surprise, with
inventories being drawn down appreciably
and a market deficit developing. This,
coupled to the fact that no significant new
production capacity is likely to come on
stream before 2012, led to zircon prices
increasing markedly in the second half of
2010. This trend is expected to continue
into 2011 as world markets face a supply-
constrained future. Average international
bulk zircon prices rose by a projected 26%
in 2010. The average annual zircon price in
2011 is expected to be more than 60%
higher than in 2010.
In 2010 the dollar weakened by 5% — 15%
against
the
currencies
of major
commodity-exporting
countries.
This
softening was generally caused by the
accommodative monetary policy in the
USA and investment flows into emerging
markets, as well as countries like Australia,
where higher investment yields could be
realised. The weaker dollar resulted in
actual commodity-price increases in local
currency units to be lower than price rises
achieved in dollar terms. It also placed
pressure on the dollar-denominated cash
costs of companies operating in these
countries. Conversely, the strengthening
of the Chinese yuan against the dollar
decreased the cost of commodity imports
into China. The weakening of the dollar
against the currencies of commodity-
exporting countries
is expected
to
continue in 2011, but at a much more
medium term. This outlook is the result of
and to reduce high
inventory
levels.
modest rate.
serious underinvestment in the feedstock
However, the rapid recovery in demand in
industry over the last five years because
2010, driven primarily by China, caught
36 EXXARO INTEGRATED ANNUAL REPORT 2010
Mining costs generally increased in 2010
In 2010, according to the Metals Economics
due to strong commodity demand from
Group, estimated worldwide non-ferrous
emerging economies and some recovery
exploration spending improved by 44% to
from advanced economies
requiring
USD21,1 billion. This followed on the fall of
capacity
restarts
and
expansions.
42%
in 2009 due to the economic
Stronger producer currencies and higher
recession. The increase coincided with
energy prices added to these pressures.
improved commodity prices and greater
Generally lower grades and expensive
access to financing for junior explorers.
infrastructure
requirements also put
The
increase
in exploration spending
significant pressure on the cost of new
occurred over a broad front, including
projects.
major, intermediate and junior companies
and most countries. However, exploration
Global bulk freight rates were extremely
expenditure was still 16% below the record
volatile in 2010. The Baltic Dry Index
level of 2008, indicating that the appetite
increased by 35% in the first five months
for risk had not returned to
levels
of the year, then declined by 60% over the
experienced prior
to
the recession.
next two months. A recovery of 76% in the
Increasing
resource
nationalism
ensuing two months was followed by a fall
worldwide continued to add to the risk
of 43% to the end of December, to a level
faced
by
explorers.
Exploration
45% below that at the beginning of the
year. The major demand drivers of the
expenditure is expected to continue rising
in 2011.
market were the bulk commodity import
needs of China and India, which grew
strongly but were overshadowed by the
rise in capacity of the shipping fleet.
Estimates are that the Cape-size fleet
grew by a net 214 ships to 1 172 vessels, or
22%. As another significant increase is
expected in the shipping fleet in 2011,
freight rates are projected to remain low.
EXXARO INTEGRATED ANNUAL REPORT 2010 37
CHAIRMAN’S STATEMENT
LEN KONAR
reminder of how much more needs to be done to improve mine safety all over the world. In
South Africa, we exceeded the 20% annual milestone agreed by the mine health and safety
‘The Chilean mine rescue in October 2010 was an unmitigated triumph but an equally stark
tripartite alliance stakeholders, reducing the number of fatalities in the industry by 24%.’
MORE IMPORTANTLY, THERE HAS BEEN A
59% IMPROVEMENT SINCE 2003. RECORDING THIS
PROGRESS AT INCREASING OPERATIONAL DEPTHS,
COMBINED WITH A NATIONAL SKILLS SHORTAGE AND
SLOW INDUSTRY ADVANCES IN FOSTERING A GENERAL
CULTURE OF SAFETY, IS AN EXCEPTIONAL
ACHIEVEMENT.
38 EXXARO INTEGRATED ANNUAL REPORT 2010
Equally exceptional was the June 2010
According to the Chamber of Mines, in
Russia and Australia. The mining industry
launch of a strategy for sustainable
2009 total coal sales revenue exceeded
has a pivotal role to play in developing
growth and meaningful transformation of
R65 billion, followed by platinum group
people and communities, and investing in
the South African mining industry. This
metals or PGMs at R58 billion and then
the necessary research and development
was
an
important milestone
in
gold at R49 billion — together accounting
to beneficiate our minerals in support of
collaboration between government, the
for over 70% of South Africa’s mineral
sustainable
economic
growth. The
mining industry and organised labour.
sales in that year.
Critically,
it
is also a
fundamental
acknowledgement by all stakeholders that
But South Africa’s mining sector has
the prosperity of South Africa
is
shrunk over the
16 years to 2009,
inseparably
linked to the successful
compared to a global average growth rate
operational imperatives of its world-class
of 5%. The reasons for this are manifold,
and dynamic mining sector.
including those beyond the industry’s
control, such as a volatile rand/dollar
The mining industry is vital to South
exchange rate and the global economic
Africa’s economy, accounting for around
recession. However other constraining
9% of GDP, and 1 million direct and indirect
factors are now being addressed, to a
jobs of the 9 million people formally
greater or lesser extent. These include
employed. It accounts for more than 50%
infrastructural challenges, bureaucratic
of the country’s merchandise exports and
delays, regulatory uncertainty, the balance
is, by far, South Africa’s biggest earner of
between productivity and cost, and the
foreign exchange. The mining industry
pool of available skills.
accounts for about 35% of the value of
the JSE and maintains its profile as a
We remain concerned at the high levels of
significant contributor to the development
unemployment in South Africa compared
of infrastructure, quite frequently in deep
to major emerging economies, as well as
rural areas of South and southern Africa
the continued challenges of poverty and
where very little other economic activity
inequality. We must be vigilant in ensuring
takes place. In the areas of secondary
that
ongoing
above-inflation wage
beneficiation and final fabrication, about
increases are matched by productivity
R200 billion in value is added to South
gains.
Africa’s minerals with the country being
self-sufficient in steel and cement, and a
In the past year, we succeeded in being the
major producer of ferroalloys, chemicals,
best World Cup hosts. We need to build on
plastics and synthetic
fuels. These
that momentum and spirit and — in line
initiatives
save
the
country
some
with President Jacob Zuma’s recent state
R20 billion in imports and about 90% of
of the nation address — meet the
South Africa’s total electricity generation
challenges of job creation and functioning
is derived from power stations fuelled by
schools to produce new generations of
commitment of
the major mining
companies to this path is evident in a
range of collaborative
initiatives: the
mining industry growth and development
task team, the revised mining charter, and
the tripartite action plan on health and
safety. With ongoing cooperation between
government,
labour and
the mining
industry, we can ensure mining remains a
force in the South African economy.
Focus on water, energy and
climate change
Nine of the world’s 10 warmest years have
occurred since 2000, and 2010 was one of
the hottest globally since records began.
According to the UN World Meteorological
Association, over the past century the
global average has climbed from 13,6°C to
14,4°C. Rising temperatures have obvious
implications, particularly in water-scarce
regions such as southern Africa.
Last year, I noted that energy in its
broadest context must be dealt with as a
strategic imperative — we need to take a
multi-faceted approach to this issue. As
part of this process, Exxaro recommitted
to saving 10% on energy efficiency and
carbon emissions by 2012 — a savings
target that would be included in the
annual business planning process. We are
locally mined coal.
citizens ready to play their rightful role in
now in the second year of the three-year
a new and improved South Africa, as well
pledge, and we will strive even harder in
As chairman of one of South Africa’s
as beyond our borders.
2011 to achieve these targets.
major coal producers, it gives me great
pleasure to disclose that by sales value,
South Africa has been rated as the richest
Equally, we acknowledge the view that
coal has become the largest component
mineral resource holder in the world, well
human activity, especially
in burning
of our
country’s mining
industry.
ahead of resource-rich countries such as
fossil fuels, contributes to increasing the
EXXARO INTEGRATED ANNUAL REPORT 2010 39
CHAIRMAN’S STATEMENT CONTINUED
ACKNOWLEDGING THE POTENTIAL SEVERITY OF
WATER ISSUES — SUPPLY, QUALITY AND ACCESS — IN
SOUTH AFRICA, EXXARO LAUNCHED AN INTEGRATED
WATER AND WASTE MANAGEMENT PROGRAMME DURING
THE YEAR.
concentration
of
greenhouse
gas
Exxaro also voluntarily participated in the
While the charter has achieved the
emissions in the atmosphere; this in turn
first CDP water disclosure initiative and
difficult balance needed between the
contributes
to global warming and
will continue to do so (page 95).
imperatives of
transformation and
ultimately climate change that affects
encouraging investment in the South
social and economic wellbeing and the
Regulatory environment
African
mining
industry,
the
ecological balance
in different ways
Several key developments were finalised
interpretation of some provisions will be
across the world. As a responsible mining
during the review period. These included
important. These include the need for
group, Exxaro continues to participate in
agreements by the industry’s tripartite
clarity on the continued recognition of
the Carbon Disclosure Project (CDP)
stakeholders (government, the mining
empowerment transactions that have
and has again improved its performance
sector and organised labour) on strategic
established
independent and viable
significantly. In 2010, Exxaro was ranked
imperatives, particularly transformation
historically disadvantaged South African
fourth out of 74 of the top 100 JSE-listed
and growth, that will guide and direct
(HDSA) mining
companies.
The
companies.
mining sector decision-makers well into
requirements
and possible offsets
the future. The aim is to elevate the
relating to beneficiation also remain
It is now widely accepted that the first
industry to higher levels of effective
unclear, especially when the restrictive
effects of climate change will be
performance so that it is able to maintain
impact of potential electricity supply
experienced in the areas of water and
and increase its contribution to national
constraints on possible beneficiation
water management.
socio-economic
development
and
activities
is taken
into account. The
The
overriding
objectives
of
the
prosperity.
procurement requirements in the charter
will
remain
challenging
but we
programme are to:
Intrinsically linked to realising this aim is
acknowledge
the
importance
of
> Ensure a cost-effective
integrated
the revised mining charter which was
developing HDSA
enterprises; our
approach to water management
published in September 2010. Following
commitment is reflected in the solid
> Be environmentally responsible
extensive consultation, we believe the
progress made in this field (page 129).
> Be ecologically sustainable.
Department of Mineral Resources has
succeeded
in producing a reasonably
The mining
industry’s
regulatory
Accordingly, we commissioned an expert
balanced charter. In the new charter, some
framework has been critically examined
analysis on water reclamation and re-use
targets are specified in more detail which
and work has begun on a review of the
across our group. This formed the basis of
adds the important element of certainty,
Mineral
and
Petroleum Resources
developing a detailed action plan to
always a
top-end consideration
in
Development Act, the MPRDA. Proposed
address water and waste management for
investment decisions. New targets relating
amendments are expected to be finalised
Exxaro. The plan addresses all key
to the sustainability of the industry have
in 2011.
components — from risk management to
been added and the scorecard has been
stakeholder
engagement —
against
improved. We welcome the elevation of
measurable progress markers.
health and
safety performance
to
charter level.
40 EXXARO INTEGRATED ANNUAL REPORT 2010
Given that infrastructural inefficiency is
companies are measured. We support the
permeates throughout each company.
another area of concern affecting
transition
to
integrated
reporting
Exxaro is making good progress on both
industry growth and competitiveness, the
espoused by King III and the Global
aspects.
tripartite
stakeholders
decided
to
Reporting Initiative (GRI), believing this
establish a
long-term
infrastructure
approach will clearly communicate how
planning mechanism for the sector. The
Exxaro aligns sustainable development
Transformation and skills
development
primary purpose of this initiative is to
considerations with core enterprise-wide
South Africa
is currently producing
thoroughly research the infrastructural
strategy.
needs of the industry and provide inputs
around 5 600 qualified artisans each year,
well below the annual target of 12 500 set
to all other national
infrastructural
As part of our reporting process this
by the Department of Higher Education
processes. The ultimate intention is to
year, we used a multi-disciplinary
and Training. Exxaro has, similar to
fast-track
specific
infrastructural
approach to
identifying the group’s
previous years, contributed more than its
interventions so that mining commodities
material
issues. These
impacts were
proportionate share to skills development
can more effectively and
in greater
tested with a corporate stakeholder
in the wider industry in an attempt to
quantities be conveyed to global demand
forum
comprising
interested
and
address the ongoing shortage of skills in
destinations.
affected parties. Feedback from the
the country. Through our talent pipeline
forum was incorporated into divisional
programme
for graduates, we are
Sustainable development
plans to manage these
issues and
addressing future shortages of critical
Embedding sustainable practices as part
approved
by
Exxaro’s
executive
skills as part of our commitment to skills
of corporate strategy offers valuable
committee. Functional heads have
development within a broader socio-
environmental and social benefits, as well
committed to managing these issues by
economic development framework.
as greater business and shareholder value
either setting specific performance
in the long term. Exxaro has joined leading
targets or committing to do so in 2011.
Corporate governance
companies
around
the world
in
Exxaro and
its directors are
fully
entrenching this approach.
We were pleased to again be ranked
committed to sound corporate governance
among the
15 reports regarded as
and
to
the principles of
fairness,
While the business imperative to remain
excellent in the 2010 Ernst & Young
transparency, accountability, responsibility
profitable must be central to all Exxaro’s
Excellence
in Sustainability Reporting
and integrity in dealing with shareholders
actions, we recognise that sustainability
survey. We understand that reporting to
and all other stakeholders. We endorse
and social responsibility issues have a
stakeholders and providing assurance in a
the King
III
report on corporate
direct influence on our ability to perform
balanced way on financial and non-
governance released on 1 September 2009,
in future.
financial performance
is an evolving
and have begun to
implement these
discipline. At Exxaro, much effort goes
recommendations.
Sustainable development, or its end goal
into distilling this information each year to
of sustainability,
is a cornerstone of
present an honest picture of the group to
Good governance is the foundation of our
Exxaro’s business, strategy and culture.
all stakeholders. We therefore welcome
ongoing ethical approach to business. The
We aim to make Exxaro an undisputed
local and global initiatives under way to
board continued to focus on promoting
leader in sustainability. Equally, reporting
develop
standards
for
integrated
the high standards of conduct we expect
on
and
providing
assurance
to
reporting. This will make stakeholder
of our employees, customers and suppliers
stakeholders each year on financial and
reporting more meaningful by entrenching
around the world, recognising that our
non-financial performance is becoming a
a culture of sustainability and engaging
leadership and actions speak
louder
standard against which
responsible
board members to ensure that this
than words.
EXXARO INTEGRATED ANNUAL REPORT 2010 41
CHAIRMAN’S STATEMENT CONTINUED
A comprehensive governance report is
business objectives with
long-term
changes to the risk management process
published on pages 140 to 169 of this
shareholder interests. Exxaro’s strategic
were necessary.
report. The tone at the top and on the
objectives focus on delivering sustainable
board has fostered an environment that
value over time.
reinforces the commitment to high ethical
Safety, health and environment
Health and safety remain top priorities for
standards,
compliance with
legal
The board of directors and executive
the board and group as a whole.
requirements and resistance to market
management measure Exxaro’s progress
pressures for short-term results.
against
these
strategic
objectives.
We are committed to enforcing compliance
Progress is then benchmarked using both
with the requirements of the South
Our vision, our values and our commitment
financial and non-financial measures and
African Occupational Health and Safety
to accountability will keep us focused on
performance is appropriately rewarded.
Act 1993 (Act 85 of 1993). Management
our pursuit of excellence, regardless of
remains dedicated to identifying potential
how challenging the road ahead is.
A detailed remuneration report appears
hazards and reducing risks at all our
on page 160.
operations.
We believe in the importance of our
culture
and
ethics
in
business.
Integrated risk management
Our efforts in addressing environmental
Exxaro’s
long-standing
traditions of
Over the years, we have embedded robust
issues are constantly developing and we
financial strength, long-term customer
risk, capital management and internal
are
committed
to protecting
the
relationships and entrepreneurial, yet
controls group-wide.
environment.
responsible, management
are
as
important as ever.
Events during the year have powerfully
Dividend
Directorate
reinforced the need for boards to have a
While acknowledging the need for prudent
clear understanding of the risks their
cash flow management in an uncertain
The following changes took place in our
businesses face. We believe the Exxaro
global economic environment, Exxaro’s
directorate during the year. Ms Simangele
board and its committees have set a high
solid operational and financial results, and
Mngomezulu
resigned,
effective
standard and we continue to improve the
extensive growth aspiration, supported
21 December 2009, and Ms N Langeni was
manner in which we evaluate, formulate,
the board’s declaration of a final dividend
welcomed as her successor with effect
communicate and manage the broad
for the 2010 financial year of 300 cents
from 23 February 2010.
spectrum of risks to which our businesses
per share (2009: 100 cents). This brings
Remuneration
are exposed.
the total dividend for the year to 500 cents
per share (2009: 200 cents), covered
At Exxaro, we are committed to the
Our existing risk practices, frameworks
three
times by attributable
income.
principle of
sensible market-related
and procedures proved relatively robust
Particularly pleasing, some R27 million
remuneration, structured to align our
during the review period and no major
accrues to Exxaro’s non-management
42 EXXARO INTEGRATED ANNUAL REPORT 2010
category employees
in terms of an
success, operationally and in creating
industry more competitive. Mining is one
employee
share
ownership
plan
value for all stakeholders.
of the government’s top five priority
implemented subsequent to the creation
of the group in 2006. Since inception of
Prospects
growth areas and our industry is expected
to be a major contributor
to
the
the share ownership plan, these employees
Prospects for the mining industry in South
government’s new growth path target of
have benefited from dividend declarations
Africa are arguably more robust at present
creating five million jobs by 2020.
worth R66 million.
than any time since 2007, qualified by the
need for cost containment across the
Exxaro is ready to play its role in achieving
Appreciation
sector and fears of a protracted recovery
this vision, firstly because we are a South
The past two years have been among the
from the recession.
African company and, secondly, because
most challenging in mining history. The
in a world with a growing population and
young Exxaro group has weathered this
However, and to follow on from my
limited resources, there will always be
with
commitment
and
passion,
opening remarks, to avoid missing out on
demand for minerals and commodities.
underscoring its depth of mining and
the next commodities boom, South Africa
management talent. Sipho Nkosi, who
needs
to
prioritise
infrastructural
Through the resources, expertise and
also completed his third consecutive
investment, particularly rail, ports and
experience base of the wider group, our
term as president of the Chamber of
electricity supply.
In tandem, as an
goal is to unlock value for shareholders
Mines in the review period, and his
industry, we also need to concentrate on
associated with
our
portfolio
of
executive team have led by example in
innovation and beneficiation
in a
investments.
spearheading Exxaro’s continued growth
supportive regulatory environment.
and development. Behind them
is a
formidable
team of almost
11 000
These challenges will not be addressed by
dedicated professionals — we thank every
government alone. Electricity supply is
one of you.
probably the single-biggest constraint to
growth in the local mining sector. But
Thanks too to my fellow board members
meeting this need will take time. Recent
for their input and counsel, and ongoing
developments
spearheaded
by
the
contribution to the highest standards of
Chamber
of Mines
illustrate
an
corporate governance.
unprecedented
level of cooperation
Dr Len Konar
Chairman
between mining companies, labour and
15 March 2011
Exxaro continues
to make sterling
government to put the industry on a
progress since its formation four years
sustainable growth path — one that
ago and we are confident that the
incorporates
transformation
and
groundwork has been laid for continued
addresses the salient issues to make the
EXXARO INTEGRATED ANNUAL REPORT 2010 43
CHIEF EXECUTIVE OFFICER’S REVIEW
SIPHO NKOSI
operational performances, notable progress in the safety field, technological breakthroughs,
and pleasing progress in realising our growth opportunities, particularly the Grootegeluk
‘Exxaro’s fourth year as a listed empowered group was characterised by several excellent
mine expansion for Eskom’s Medupi power station (known as GMEP).’
THE GROUP’S SOLID PERFORMANCE FOR 2010 IS
REFLECTED IN CONSOLIDATED REVENUE RISING 14% TO
R17,2 BILLION AND NET OPERATING PROFIT BY 52% TO
R2,6 BILLION ON GENERALLY HIGHER SALES VOLUMES
AND COMMODITY PRICES, AND DESPITE THE IMPACT OF
A STRONGER RAND AND AUSTRALIAN DOLLAR TO THE
US DOLLAR.
44 EXXARO INTEGRATED ANNUAL REPORT 2010
Strategic intent
Exxaro’s strategic
intent
major expansion project at its Kwinana
environment: how to improve the return
is to be a
pigment plant,
increasing production
on capital employed to support the
diversified mining company with the
following commodity-specific aspirations:
capacity by 40 000tpa
to around
group’s growth plans; how to align and
150 000tpa. This will meet growing global
optimise operational structures and
> Coal
demand for its core product, titanium
processes in business units; and how to
— Develop mega mines such as GMEP
dioxide pigment.
— Increase export volumes as well as
entrench a culture of continuous
improvement in the group.
volumes to the metals market
Further growth initiatives aligned with
— Develop downstream value-adding
Exxaro’s strategic intent appear in the
The key elements of the proposed services
products such as char and market
growth report from page 60.
approach are largely internal and have
coke
— Pursue viable hard coking coal
projects
> Mineral sands
Compliance
At the time of writing, mining rights
These
include a clearer distinction
between the role of the corporate office
conversions had been granted for all but
(managing the group from a strategy, risk
been well communicated to employees.
— Maintain position among
leading
two of Exxaro’s operations. All Exxaro’s
and governance perspective by setting
global suppliers of titanium dioxide
and zircon, and increase share of
global chlorine pigment market
> Iron ore
new operations (or extensions to existing
direction,
implementing policies and
operations) have mining rights and
safeguarding the group) and the services
approved environmental management
unit
(providing efficient services
to
and social and labour plans, except Belfast.
internal clients, with no corporate control
— Increase Exxaro’s footprint by adding
Final revisions for this operation were
functions). The services function will
a direct, managed operational asset
submitted
to
the department
for
measure performance, set continuous
> Energy
consideration.
— Pursue
viable
clean-energy
improvement targets, define clear service
catalogues and manage Exxaro’s services
alternatives as part of a drive to
The compliance status of Exxaro’s
offering.
achieve energy security.
operations is disclosed in the governance
Progress against strategic
intent
> Excellent progress has been made on
our R9,5 billion GMEP to supply Eskom’s
Medupi power station with 14,6Mtpa of
coal for 40 years. First coal is due to be
supplied in early 2012. The project
was at 41% overall completion by
section on page 146 and 147.
Most
importantly
for
external
stakeholders, the proposals address the
Optimising our business
To realise our strategy, we initiated an
relatively high cost of Exxaro’s services,
which are at the upper end of industry
intense business-improvement process in
benchmarks. The proposed solution will
2009. Known as Siyaya, two specialised
move Exxaro to the lower end of that scale
teams were mandated to explore how best
by 2015 by entrenching a culture of
to help the group become operationally
continuous and disciplined improvement
excellent — a high-performing, low-cost
to enhance
the group’s
long-term
31 January 2011, and remains on
and sustainable business.
competitive advantage and optimise
schedule and within budget.
productivity.
> On 23 February 2011, the Exxaro board
In October 2010, a proposed solution for
approved the development of Fairbreeze
subject to normal regulatory and
the way forward was approved in principle,
The Siyaya services and core teams have
subject to the consultation process, by the
identified ways to potentially save over
environmental approvals. Fairbreeze
Exxaro board.
R700 million in costs, while releasing
will replace Hillendale mine which is
> The services element of Siyaya was
around R900 million in untapped revenue
nearing the end of its life of mine.
tasked with
redesigning Exxaro’s
potential.
> The four retorts at the char plant
services environment to better support
reached nameplate capacity in the last
the
group’s
operations,
growth
These proposals, if implemented, could
quarter of 2010.
aspirations and to achieve operational
result in a significant restructure of the
excellence.
group. About 1 300 employees could be
In October our Western Australia-based
joint venture, Tiwest, commissioned a
> The Siyaya core project focused on key
affected, either
through minor or
challenges
in Exxaro’s operational
substantial changes to their
jobs, a
EXXARO INTEGRATED ANNUAL REPORT 2010 45
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
GROUP SAFETY PERFORMANCE FOR THE YEAR SHOWED
EXCELLENT PROGRESS AT SEVERAL OPERATIONS, WITH
FATALITIES DECREASING FROM FOUR TO TWO AND A
RECORD 24% IMPROVEMENT IN THE LOST-TIME INJURY
FREQUENCY RATE TO 0,25.
reduction in the number of positions or
As an industry, we improved our safety
In the foreword to the 2010 Carbon
location changes. Exxaro has already
record by 24% in 2010, making it the best
Disclosure Project, CEO Paul Dickinson
announced
that
a maximum
of
safety year
in South Africa’s mining
made an interesting observation:
300 employees might be retrenched.
history. In no small measure, this reflects
These are exciting times for business, with
However, the group will do everything
possible to limit the impact on employees
and all options will be
investigated,
including.
> Offering voluntary severance packages
at Exxaro’s discretion
> Limiting external and temporary staff
appointments
> Strictly managing filling of vacancies
> Critically considering the use of external
contractors
> Offering early retirement at Exxaro’s
discretion
> Limiting excessive overtime
> Redeploying or reskilling employees.
Exxaro
has
started
a
formal
consultation process with trade unions,
in
accordance with
the
Labour
Relations Act. The process applies only
to
the
following employers: Exxaro
Resources, Exxaro Coal, Exxaro Coal
Mpumalanga, Exxaro Reductants, Exxaro
TSA Sands, Exxaro Sands and Ferroalloys.
Therefore Zincor, Rosh Pinah Zinc
Corporation, Glen Douglas and Ferroland
are excluded from the process.
Safety
While the lost-time injury frequency rate
the cooperation of the Department of
significant changes coming to the way we
Mineral Resources, the
leadership of
produce and consume energy. New power
organised labour and fellow mineworkers.
from low- or zero-emission sources is an
It is also testimony to the myriad initiatives
urgent priority for climate change policy
under way at each of the Chamber of
that simultaneously helps deliver energy
Mines’ member companies.
security. New technologies such as smart
grids, electric vehicles, alternative fuel
Among proposed changes to the Mine
sources,
advanced
telepresence
Health and Safety Act is a clause that
videoconferencing, are showing a clear
stipulates prison sentences for chief
case for business growth with reduced
executives found guilty of contravening
emissions. The opportunities for business
safety regulations. We welcome this
are enormous — it is through the intelligent
enforcement in the interests of a safer,
investment of capital
into the right
growing industry. The established mining
solutions,
identified by the business
industry has already demonstrated its
community, that we will achieve the low-
deep commitment to safety, recording a
carbon future we need.
24% decrease in mining fatalities in 2010.
In addition, 40 000 safety representatives
The CDP report also presented some
will be trained across the industry in the
thought-provoking context for climate
next four years as part of several
change:
initiatives to curb fatalities and reach
August 2010 (the month in which this CDP
international performance
standards
analysis was undertaken) was
an
by 2013.
interesting month
in
the
global
greenhouse:
it saw fire, drought and
Energy
The broader energy issues — securing
record-breaking temperatures in Russia,
floods in Pakistan, a “once-in-a-1 000-year
supply, reducing cost, reducing the impact
storm” in Tennessee, mudslides in China,
of
climate
change
and
limiting
and a 260km2
ice-sheet break off a
environmental impact — continue to be
Greenland glacier. Not only was there an
was weaker than our
internal target
elevated as a strategic priority for many
obvious and profound human cost to these
of 0,21, the steady
improvement
is
businesses,
including
Exxaro.
The
events, there were also visible impacts on
encouraging given that it reflects the all-
chairman has commented on water,
the global market: wheat prices hit a
important behavioural change.
energy and climate change in more detail.
22-month high; stock and bond trading
46 EXXARO INTEGRATED ANNUAL REPORT 2010
was at one stage curbed in Russia by as
Chaired by Dr Len Konar, our board of
Base metal prices are widely expected
much as 60% after wildfires east of
directors plays an
invaluable and
to be lower in the first half of 2011.
Moscow; and unseasonal wet weather
constructive role in our development and
Production and sales volumes should be
delayed the offloading of sugar from a
governance, for which we are most
in line with those achieved in 2010 with
record 122 ships at Brazil’s ports, causing
grateful.
the logistical chain to Zincor remaining
one market analyst to suggest that
a challenge.
weather-related issues will result in “this
The loyal support of our customers and
year’s worst-performing commodity to
suppliers around the world remains a
The group’s consolidated results for 2011
rise more than gold.
mainstay of our group while we value the
will continue to be affected by the trading
co-operation from regulatory authorities
levels of the local currency and Australian
Exxaro aims to be a carbon-neutral group
which is playing an integral and important
dollar against the US dollar.
— offsetting its carbon emissions in a
role in our aspirations.
number of ways from planting trees to
cleaner production and energy efficiency.
At the same time, we believe the active
Prospects
Given the prevailing uncertainty of the
participation of business across all sectors
strength and pace of an economic
is essential in developing national policy
recovery in 2011, Exxaro will continue with
that finds
the appropriate balance
prudent capital prioritisation and working
between environmental effectiveness,
capital management while pursuing
Sipho Nkosi
economic efficiency and social equity. To
business improvement initiatives.
Chief executive officer
meet the government’s commitment to a
+30% reduction in emissions by 2020 will
Coal
export
volumes,
at
higher
15 March 2011
require accelerated focus on energy
international prices, are expected to
efficiency across all sectors, a significantly
remain in line with the tonnage achieved
expanded low-carbon electricity supply
in 2010 despite the build up by Transnet
programme, introducing carbon-capture
Freight Rail to increase its total export
and storage
technologies, achieving
rail rate to Richards Bay Coal Terminal to
ambitious targets for vehicle efficiency,
70Mtpa. Prices to the domestic market
electric vehicles and passenger modal
for similar volumes should reflect normal
shifts,
and
promoting
enhanced
inflation
increases, however supply
agricultural practices.
agreements with pricing mechanisms
Appreciation
History has proven that challenging times
linked to hard coking coal prices should
reflect a considerable increase.
bring out the best and the worst in people.
The positive price trends for mineral
Throughout the review period, I have been
sands products recorded in the second
inspired and humbled by the dedication
half of 2010 are expected to continue
and passion evident at every level of our
while demand should remain strong in
group. Exxaro is indeed fortunate to have
the medium to long term until supply and
people of this calibre.
demand imbalances are corrected.
EXXARO INTEGRATED ANNUAL REPORT 2010 47
FINANCIAL AND OPERATIONAL REVIEW
WIM DE KLERK
recession as gains from generally greater demand at higher selling prices for Exxaro’s
commodities, coupled with disciplined cost management, more than offset the negative
‘Calendar 2010 saw Exxaro benefit from a faster-than-expected recovery from the global
impact of a stronger local and Australian currency to the US dollar.’
THE GROUP’S BALANCE SHEET AND KEY FINANCIAL
METRICS REMAIN HEALTHY AND PROVIDE A SOLID
PLATFORM TO SUPPORT ITS GROWTH ASPIRATIONS.
EXXARO REPORTED RECORD EARNINGS SINCE ITS
CREATION IN NOVEMBER 2006, IN TURN RESULTING IN
A RECORD DIVIDEND DECLARATION TO SHAREHOLDERS.
48 EXXARO INTEGRATED ANNUAL REPORT 2010
12 months ended
31 December
2010
20091
10 515
2 952
7 563
4 640
1 288
1 551
1 801
1 787
674
1 598
(485)
213
9 731
2 681
7 050
3 508
705
1 469
1 334
1 582
566
1 413
(397)
188
17 155
15 009
2 690
186
2 504
179
(66)
138
107
(113)
143
(171)
(85)
(120)
1 905
75
1 830
(124)
(12)
(2)
(110)
(8)
105
(47)
(66)
(34)
2 636
1 739
OVERVIEW
> Revenue increased 14% to R17,2 billion
> Comparable net operating profit up
52% to R2,6 billion
> Headline earnings per share up 105% to
1 495 cents per share
> Net cash inflow of R1,4 billion
> Net debt to equity of 13%
> Healthy financial metrics
COMPARABLE SEGMENTAL RESULTS
R million
REVENUE
Coal
Tied operations
Commercial operations
> Total dividend of 500 cents per share
Mineral sands
covered three times by attributable
KZN Sands
earnings
INTRODUCTION
The group’s audited financial results and
actual physical
information
for
the
Australia Sands
Namakwa Sands
Base metals
Rosh Pinah
12-month periods ended 31 December
Zincor
2010 and 2009 are not comparable due to
the R1 435 million impairment of the
carrying value of the assets of KZN Sands,
accounted for on 31 December 2009, and
the inclusion of the 50% proportionally
Inter-segmental
Other
Total external revenue
NET OPERATING PROFIT
consolidated
interest
in Mafube Coal
Coal
Mining
(Pty) Limited
(Mafube)
for
Tied operations
Commercial operations
Mineral sands
KZN Sands
Australia Sands
Namakwa Sands
Base metals
Rosh Pinah
Zincor
Other
Other
Total
12 months compared to seven months in
2009. To be meaningful, comparable
supplementary financial
results are
disclosed in this review by excluding the
2009 impairment of the carrying value of
the assets of KZN Sands.
After fulfilling all suspensive conditions,
Glen Douglas dolomite mine was sold to
Afrimat Limited effective 1 January 2011.
The operating results of Glen Douglas are
therefore still included for 12 months
in 2010.
An average exchange rate of R7,72 (spot
average R7,30) to the US dollar (USD) was
realised compared to R8,39 for the
corresponding
period.
In
addition,
unrealised foreign currency losses on the
revaluation
of
monetary
items
denominated in foreign currency were
recorded based on the relative strength of
the
local currency to the USD at
31 December 2010. The relative strength
of the Australian dollar (AUD), most
notably in the second half of 2010 when it
traded around parity against the USD,
continued to impact negatively on the
financial results of the mineral sands
operations in Australia. An average rate of
1 Unaudited due to restatement of net operating profit of KZN Sands in 2009.
USD0,87 cents (spot average of USD0,92
export sales volumes at higher export
cents) to the AUD was realised compared
prices.
with USD0,76 cents in 2009.
Revenue
Group consolidated revenue increased by
Mineral sands
Revenue
increased by 32% to over
R4,6 billion with increased sales volumes
14% to R17,2 billion due to generally higher
realising at higher prices.
sales volumes and commodity prices
despite the impact of a stronger local and
Australian currency.
Base metals
Revenue increased by 13% mainly as a
result of the higher zinc price at an
Coal
Revenue was up 8% due to higher
average zinc price for 2010 of USD2 161 per
tonne; 30% higher than in 2009 when an
domestic sales volumes at lower realised
average price of USD1 665 per tonne was
prices being only partially offset by lower
realised.
EXXARO INTEGRATED ANNUAL REPORT 2010 49
FINANCIAL AND OPERATIONAL REVIEW CONTINUED
Net operating profit
Group consolidated comparable net
operating profit was R897 million or 52%
higher at R2,6 billion at an operating
margin of 15% compared with 12% in
2009.
Coal
The coal business reported a 41% increase
in net operating profit to R2 690 million at
an operating margin of 26% with higher
export selling prices, higher sales volumes
to ArcelorMittal South Africa Limited
(AMSA) and Eskom, offset by lower sales
prices domestically, lower export volumes
and a stronger average realised local
currency.
Net operating income for the year for the
Higher revenue assisted in achieving a
tied mines increased 148% mainly due to
consolidated
net
operating
profit,
the non-recurring impact of Matla’s scope
increasing from a comparable loss in 2009
change in life of mine in the previous year
of R124 million to a profit of R179 million.
together with
the
inflation-related
Unlike 2009, where all three businesses
increase
in 2010
in terms of supply
reported net operating losses, only KZN
agreements with Eskom and AMSA.
Sands reported a loss in 2010.
Mineral sands
The mineral sands business reported a
Base metals
Despite higher revenue, a net operating
consolidated net operating profit as
loss of R113 million was reported due to
higher sales volumes at higher prices,
production challenges at Zincor refinery.
supported
by
disciplined
cost
This was exacerbated by the higher cost
management, were
instrumental
in
associated with external zinc concentrate
offsetting the significant impact of the
purchased, higher selling and distribution,
relative strength of both the local currency
electricity, labour, rehabilitation as well as
and AUD to the USD.
maintenance expenses.
The following graph reconciles comparable net operating profit for 2009 to that reported for 2010:
Comparable net operating profit: FY09* vs FY10
n
o
i
l
l
i
m
R
3 000
2 500
2 000
1 500
1 000
500
0
-500
-1 000
Coal
Mineral Sands
Base Metals
Other
Total
FY09
1 905
(124)
(8)
(34)
Price
Volume
Exchange
Inflation
564
504
141
12
764
674
7
8
(178)
(486)
102
18
(544)
(329)
(198)
(108)
(27)
(662)
Cost
(36)
(191)
(247)
(97)
(571)
FY10
2 690
179
(113)
(120)
2 636
1 739
1 221
1 453
*Excludes impairment of R1 435 million at KZN Sands in FY09
50 EXXARO INTEGRATED ANNUAL REPORT 2010
OPERATIONS
UNAUDITED PHYSICAL INFORMATION (000 TONNES)
12 months ended
31 December
6 months ended
30 June
2010
2009
2010
2009
Coal
Production
– Power station coal
Tied operations1
Commercial operations
– Coking coal
Tied operations1
Commercial operations
– Other coal
– Char
Coal buy-ins
Total
Sales
– Eskom coal
Tied operations1
Commercial operations
– Other domestic coal
Tied operations1
Commercial operations
– Coal export
– Char
Total
Mineral sands2
Production
– Ilmenite
– Zircon
– Rutile
– Synthetic rutile
– Pig iron (LMPI)
– Scrap iron
– Slag tapped
– Chloride slag
– Sulphate slag
– Leucoxene
– Pigment
Total
36 767
16 461
20 306
2 419
285
2 134
7 502
114
36 562
16 486
20 076
2 020
268
1 752
6 638
38
759
18 269
8 365
9 904
1 187
124
1 063
3 518
49
46 802
46 017
23 023
36 428
16 438
19 990
5 044
260
4 784
4 106
122
36 299
16 473
19 826
4 587
259
4 328
4 715
31
18 379
8 356
10 023
2 447
117
2 330
1 842
52
18 583
8 704
9 879
922
129
793
3 061
430
22 996
18 494
8 700
9 794
1 920
130
1 790
2 389
45 700
45 632
22 720
22 803
718
196
63
90
153
12
262
232
52
13
57
819
185
62
109
181
15
331
201
44
14
53
367
424
94
28
51
81
8
141
84
16
7
25
97
33
54
95
7
171
104
19
7
25
1 848
2 014
902
1 036
EXXARO INTEGRATED ANNUAL REPORT 2010 51
FINANCIAL AND OPERATIONAL REVIEW CONTINUED
UNAUDITED PHYSICAL INFORMATION (000 TONNES)
12 months ended
31 December
6 months ended
30 June
2010
2009
2010
2009
Sales
– Zircon
– Rutile
– Synthetic rutile
– Pig iron (LMPI)
– Scrap iron
– Chloride slag
– Sulphate slag
– Leucoxene
– Pigment
Total
Base metals
Production
– Zinc concentrate
Rosh Pinah
Black Mountain
– Zinc metal
Zincor
Chifeng3
– Lead concentrate
Rosh Pinah
Black Mountain
Sales
– Zinc metal sales
– Domestic
– Export
Lead concentrate sales
– Export
243
79
30
194
3
264
39
16
55
923
120
101
19
120
90
30
37
19
18
119
90
29
20
146
51
50
138
6
144
44
15
54
648
108
94
14
116
87
29
38
20
18
122
93
29
19
124
35
23
107
1
98
7
7
24
426
60
52
8
54
43
11
17
9
8
59
46
13
7
47
19
24
64
4
67
14
1
23
263
53
47
6
54
44
10
20
12
8
58
44
14
6
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 Exxaro Sands Australia’s interest in the Tiwest joint venture.
3 Exxaro’s effective interest in the Chifeng refinery is disclosed.
Coal
Production
Volumes were marginally higher than the
previous year. Power
station
coal
production at the Eskom tied mines was
25kt lower due to adverse geological and
technical issues at Arnot mine which were
Production at the commercial operations
only partially offset by higher production
was marginally higher than in 2009 as
at Matla mine. Production in 2009 at
higher production at Leeuwpan mine after
Matla mine was affected by a water
commissioning the crushing and screening
ingress
incident for which successful
plant in 2010, coupled with the inclusion of
mitigation was implemented in 2010.
production from Mafube for 12 months as
52 EXXARO INTEGRATED ANNUAL REPORT 2010
opposed to seven months in 2009, offset
free-on-rail basis or though the lease of
line with the decrease in smelter slag
lower production at Grootegeluk mine and
export entitlement.
output.
North Block Complex due to full stockpiles
at Eskom.
Sales of reductants from the char plant
Furnace 2 at Namakwa Sands will be down
improved threefold as 2010 was the first
for 103 days for a planned reline starting
Coking coal production
increased at
full production and sales year. Quality and
in February 2011.
Grootegeluk and Tshikondeni mines as a
demand for the product has exceeded our
result of increased demand mainly from
expectations.
ArcelorMittal SA Limited (AMSA).
The inclusion of production from the
Mafube joint venture for the full year in
Mineral sands
Production
At KZN Sands, there was a burn-through
2010 compared to seven months in 2009
at Furnace 2 on 26 October 2010.
At Australia Sands, synthetic rutile
production was lower due to the planned
38-day shut
late
in
the year and
maintenance-related challenges
in the
first quarter of 2010. The synthetic rutile
plant has a major shut every three years;
as well as higher production at
Fortunately there were no injuries but the
the previous shut was in 2007.
Grootegeluk, Leeuwpan, North Block
incident resulted in both furnaces being
Complex and New Clydesdale operations
out of commission simultaneously for two
The Kwinana pigment plant expansion in
due to higher demand and improved
months
in the
last quarter of 2010.
Australia was successfully commissioned
dispatches, offset by marginally lower
Furnace 1 was shut on 1 July 2010 for a
in late June 2010 and achieved nameplate
production at Inyanda, led to a 13%
planned reline and pre-heating has now
production capacity of 40ktpa in October.
increase in steam coal production.
been completed, with first production at
the end of January 2011.
Significant supply interruptions from a
key raw material supplier and an 11-day
The char plant production was 200%
shut in May to complete all the tie-ins for
higher than the previous year as the plant
Total run-of-mine tonnage was more than
the expansion
led to
lower pigment
only started production in the middle
a million tonnes lower in 2010 as the
production.
of 2009.
Sales
Power station and coking coal sales to
Hillendale mine in KwaZulu-Natal nears
the end of its life of mine. As a consequence
of this and lower grades, heavy mineral
Sales
Volumes
at
all
three
businesses
concentrate was 73kt
lower
in 2010
generally
increased on the back of
Eskom and AMSA respectively were
at 414kt.
marginally higher than the previous year.
stronger markets, further supported by
higher selling prices. High stockpiles at
Other domestic sales were however 10%
Zircon and rutile production was 11kt and
the end of 2009 were reduced significantly,
higher than in 2009 based on higher
1kt higher than the prior year respectively
improving cash flow.
demand from AMSA which was met by
as higher zircon production at Australia
redirecting sales destined for the export
Sands due to improved overall utilisation
market from Grootegeluk; this in turn was
of the dredge mine, coupled with improved
only possible because of lower availability
recoveries at Namakwa Sands despite
Base metals
Production
Zinc concentrate production at a higher
of trains and leased-in export entitlement.
lower zircon head grades, more than
grade at Rosh Pinah mine was 7kt higher
offset lower production at KZN Sands
than
in 2009 with
lead concentrate
Exxaro Coal’s strategy to increase export
resulting from the
lower concentrate
production 1kt lower.
volumes was hampered by
lower
grade.
availability of trains, the Transnet Freight
Production of zinc metal at the Zincor
Rail strike as well as
less export
Higher slag and pig iron production at
refinery of 90kt was more than 3kt higher
entitlement available for leasing. Exxaro’s
Namakwa Sands resulting
from
the
Richards Bay Coal Terminal (RBCT) export
benefits of increasing side feed into the
entitlement increased from 1,8Mt to 6,3Mt
furnaces was not sufficient to offset lower
than in 2009 and can be attributed to less
downtime on the acid plant. The 2009
production was also adversely affected by
per annum with the commissioning of the
furnace production at KZN Sands caused
the accident in September 2009.
Phase V expansion but Transnet Freight
by extended furnace downtime. Total slag
Rail’s constraints limited Exxaro’s export
tapped was 69kt lower at 262kt while low
capacity for 2010 at 3Mt per annum. The
manganese pig iron (LMPI) was 28kt lower
Sales
Zinc metal sales were 2% lower due to
remainder of exports were either sold on a
at 153kt. Ilmenite production was lower in
lower local demand.
EXXARO INTEGRATED ANNUAL REPORT 2010 53
FINANCIAL AND OPERATIONAL REVIEW CONTINUED
COMPARABLE EARNINGS
R million
Net operating profit excluding 2009 impairment
Income from investments
Net financing cost
Equity-accounted income – net of tax
Taxation2
Minority interest
Attributable earnings excluding impairment
Adjustments net of taxation impact
Headline earnings
Weighted average number of shares (millions)
Attributable earnings (cents per share)
Headline earnings per share (cents per share)
12 months ended
31 December
2010
2 636
2
(455)
3 717
(665)
(27)
5 208
(22)
5 186
347
1 501
1 495
20091
1 739
2
(415)
1 898
(371)
2 853
56
2 909
345
827
843
1 Not audited due to the comparability adjustment of 2009 figures.
2 A normalised rate of 28% was used in 2009 for comparative purposes.
Comparable attributable earnings, including Exxaro’s equity-accounted investment in associates, were R5 208 million or 1 501 cents per
share, up 81% from 2009.
Headline earnings were R5 186 million or 1 495 cents per share. This is a 105% increase on the disclosed 2009 earnings of R2 514 million
at 729 cents per share, but 77% higher on comparable 2009 HEPS of 843 cents.
Net financing costs
An analysis of the composition of the disclosed comparable net financing cost is shown below:
R million
Interest expense and loan cost
Finance lease
Interest income
Interest adjustment on non-current provisions
Total
12 months ended
31 December
2010
321
70
(135)
256
199
455
2009
460
66
(145)
381
34
415
The higher interest expense is due to the higher interest adjustment on non-current provisions, namely the unwinding of the discount
rate in respect of Exxaro’s environmental rehabilitation provisions accounted for at net present value, offset somewhat by a lower net
interest expense due to lower net debt levels.
54 EXXARO INTEGRATED ANNUAL REPORT 2010
Income from equity accounted investments — net of tax
Sishen iron ore company (Pty) Limited (SIOC) — 20%
Chifeng — 22% effective interest
Black Mountain — 26%
Total
12 months ended
31 December
2010
3 623
8
86
3 717
2009
1 762
13
123
1 898
The results of SIOC are fully reported by
Kumba Iron Ore Limited in its financial
results to 31 December 2010.
Production at the Chifeng zinc refinery
was marginally higher than in 2009.
Exxaro’s 26% share in Black Mountain,
acquired in the last quarter of 2008,
contributed R86 million to equity income;
DIVIDENDS
Exxaro intends to progress to distributing
50% of
attributable
earnings
to
shareholders by means of interim and
final dividend declarations. Dividend
declarations in the medium term may,
however, be lower to adequately provide
for funding of the current growth pipeline
of projects, comply with contractually
loan covenants, and maintain
agreed
lower than the 2009 contribution of
healthy key financial metrics.
R123 million.
Based on the record earnings and healthy
cash flow position, the Exxaro board
declared a total dividend of 500 cents per
share for the 2010 financial year; a
dividend
covered
three
times by
attributable earnings. The dividend
declarations took cognisance of Exxaro’s
significant short- to medium-term capital
expenditure requirements.
Taxation
Excluding post-tax equity accounted
income, the effective tax rate was 30%,
marginally higher than the statutory
rate of 28% due to the net effect of
non-permanent differences.
A reconciliation of the tax rate reflects
the following:
> Effective tax rate as a
percentage of profit
before tax
> Tax effect of:
– Share of associates
and joint ventures
– Prior-year tax
– Special tax allowances
– Exempt income
– Other
> Corporate tax rate
Percentage
(%)
11,3
17,6
(1,9)
1,3
0,7
(1,0)
28,0
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
30 June 2009
31 December 2009
30 June 2010
31 December 2010
Dividend
(cps) R million
R million
including
STC1
Date
declared
Date paid/
payable
15 August 2007
10 September 2007
20 February 2008
17 March 2008
13 August 2008
22 September 2008
23 February 2009
30 March 2009
19 August 2009
28 September 2009
24 February 2010
19 April 2010
11 August 2010
4 October 2010
211
353
620
710
356
357
715
211
353
620
710
356
357
715
1 074
1 074
23 February 2011
11 April 2011
60
100
175
200
100
100
200
300
1 No STC is payable due to the utilisation of STC credits arising from the dividend receipts from SIOC.
EXXARO INTEGRATED ANNUAL REPORT 2010 55
FINANCIAL AND OPERATIONAL REVIEW CONTINUED
Total dividends declared for the 2010 financial year of R1 789 million are paid or payable to shareholders as follows:
R million
Gross dividend declared
BEE Holdco
Public
Anglo American
Exxaro employee empowerment scheme (Mpower)1
1 50% of this dividend accrues to employee beneficiaries in the non-management category.
Total
1 789
933
629
174
53
Final
1 074
560
378
104
32
Final
interim
715
373
251
70
21
CASH FLOW
R million
Net cash retained from operations
Net financing 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 inflow/(outflow)
Share issue
Other movements in net debt
Decrease/(increase) in net debt
12 months ended
31 December
2010
4 106
(1 742)
(1 522)
(1 155)
(149)
1 817
60
(29)
2009
2 117
(2 323)
(990)
(992)
(1 090)
1 754
11
(107)
1 386
(1 620)
29
96
43
227
1 511
(1 350)
56 EXXARO INTEGRATED ANNUAL REPORT 2010
DEBT STRUCTURE AND FINANCIAL COVENANTS
The group’s debt structure at 31 December 2010 is:
R million
Long term
– Corporate
– GMEP
– Australia Sands
Cash and cash equivalents
Net debt
Short-term facilities
Drawn
4 360
3 576
784
(2 140)
2 220
Available
4 930
355
4 500
75
1 300
Repayment profile
2011
2012
2013
2014
After 2014
716
856
1 865
296
627
4 360
Cash retained from operations was
the receipt of R1 817 million in dividends,
Compliance with the group’s financial loan
R4 106 million for the group. This was
primarily from SIOC, the group had net
covenants with external financiers
is
primarily used to fund net financing
cash inflow of R1 386 million for the
shown below:
charges of R256 million,
taxation
financial year. The final dividend for
payments of R430 million, dividend
payments of R1 056 million and capital
payment in April 2011 will amount to a
further cash outflow of R1 074 million
expenditure of R2 677 million of which
offset by the dividend inflow from SIOC
R1 522 million was invested in new
of R1 623 million.
capacity and R1 155 million applied to
Net debt to equity (%)
EBITDA interest
cover (times)
HDSCR1
sustaining and environmental capital.
Net debt of R3 731 million at 31 December
CHDSCR2
Ratio Covenants
13
9
3,75
3,71
<80
>4
>1,3
>1,5
R918 million of expansion capacity
2009
accordingly
decreased
to
expenditure was for the Grootegeluk
R2 220 million at a net debt to equity ratio
mine expansion for Medupi (GMEP). After
of 13% at 31 December 2010.
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 flow), divided by
mandatory capital and interest payments on
financing facilities.
2 Cumulative HDSCR being cash and cash
equivalents at the beginning of the period, plus
free cash flow, less dividends paid, divided by
mandatory capital and interest payments on
financing facilities. Dividend payments may not
result in this calculation being less than 1,5.
EXXARO INTEGRATED ANNUAL REPORT 2010 57
FINANCIAL AND OPERATIONAL REVIEW CONTINUED
ORGANISATIONAL
STRUCTURE
Activities to optimise Exxaro’s zinc asset
portfolio continue to ultimately extract
the most value in the divestment process,
which is expected to start in 2011.
COMMODITY PRICE AND
CURRENCY HEDGING
A total of 60% of Rosh Pinah’s projected
zinc and
lead concentrate sales was
hedged in 2008 for the period July 2008
to December 2011 at forward prices
operations as well as USD52 million at an
ranging from USD2 215 to USD1 887 per
average rate of USD0,87c to the AUD for
tonne
for zinc and USD2 385
to
the Australian operation.
USD1 771 per tonne for lead. Taking the
favourable currency hedging in place on
these hedged prices, the average ZAR
price equates to R19 976 per tonne. These
hedges will mature in 2011.
CAPITAL EXPENDITURE
More detail is provided in the growth
report on page 60 of the capital
expenditure summary detailed below.
On 31 December 2010 Exxaro had
USD106 million of hedging in place at an
average exchange rate of R7,19 for local
R million
Sustaining and environmental
– Coal
– Mineral sands
– Base metals
– Other
Expansion
– Coal
– Mineral sands
– Base metals
– Other
Total
GMEP (incl capitalised interest)
Financial
year 2012
Estimate
Financial
year 2011
Estimate
12 months
ended
31 December
2010
12 months
ended
31 December
2009
3 956
2 204
1 610
142
3 717
3 655
62
7 673
3 190
2 244
1 014
676
150
404
5 957
5 872
41
10
34
8 201
5 231
1 155
516
398
169
72
1 522
1 225
294
3
2 677
918
992
432
340
127
93
990
492
486
12
1 9827
58 EXXARO INTEGRATED ANNUAL REPORT 2010
Capital expenditure for 2010 and the
Post 2012, sustaining capital expenditure
medium
term
is
dominated
by
is expected to revert to a normalised
Grootegeluk’s Medupi expansion project,
R1,3 billion per annum.
known as GMEP. The GMEP capital
disclosed includes capitalised interest.
ACKNOWLEDGEMENTS
I express my sincere appreciation to the
Further capital expenditure warranting
very competent Exxaro finance teams
mention is:
throughout the group for their continued
> Primary equipment replacement:
commitment, dedication and valuable
contributions.
— 2011 R263 million
— 2012 R635 million
— 2013 R608 million
> Grootegeluk backfill project:
— 2011 R243 million
— 2012 R700 million
— 2013 R368 million
> Investment
in developing Fairbreeze
of R2,4 billion over the next two years
Wim de Klerk
(included in sustaining capital)
Finance director
> Co-generation at Namakwa Sands of
R175 million
> SAP upgrade of R214 million.
15 March 2011
Share price volumes traded for the period 1 January 2010 to 31 December 2010
0
0
0
’
s
e
m
u
l
o
v
e
r
a
h
S
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
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2
Exxaro Resources volume
Exxaro Resources price
JSE All share
JSE Resource 20
160
140
120
100
80
60
40
20
0
S
h
a
r
e
p
r
i
c
e
(
Z
A
R
)
EXXARO INTEGRATED ANNUAL REPORT 2010 59
GROWTH
Introduction
In 2010, there was a strong recovery in
Globally, capital allocation has become
one of the most pressing strategic issues
Thabametsi
Thabametsi is a prospective greenfields
commodity markets and
faster-than-
anticipated
recovery
in
the global
economy. This renewed the focus on
carbon, reductants, ferrous and energy
growth projects in line with the group’s
approved
strategy
to maintain
a
diversified, sustainable and profitable
business portfolio.
for mining and metals companies. We
mine adjacent to Grootegeluk mine in the
believe correct capital allocation follows
Waterberg,
Limpopo
province.
a process of
comprehensive
risk
Development of this project was originally
management. By analysing scenarios
planned to coincide with Eskom’s future
and impacts, and setting strict minimum
developments in the Waterberg as well as
investment
criteria
against which
the Department of Energy’s formalisation
competing projects bid for scarce capital,
and establishment of an appropriate
we identify opportunities to preserve
enabling environment, governed by the
and grow shareholder value, refine
National Integrated Resource Plan 2010
One of the key risks to achieving this
processes and controls and remain agile
(NIRP 2010) to allow for new-generation
goal
is effective capital allocation.
in a competitive market.
Exxaro’s commodity strategy has been noted in the chief executive officer’s report on
page 45. The table provides a summary of a number of growth initiatives, followed by a
brief description of some projects:
Ownership
Scope
Estimated
capex
Status
Estimated
start up
Coal
Coal
Coal
Coal
Coal
GMEP
14,6Mtpa
R9,5 billion Construction
Char phase 2
140-280ktpa TBD
Feasibility
Belfast
Market coke
Moranbah South
(Australia) (50%)
3-5Mtpa
1Mtpa
6Mtpa
TBD
TBD
TBD
Pre-feasibility
Pre-feasibility
Pre-feasibility
Coal
Thabametsi
6-17Mtpa
TBD
Pre-feasibility
Sands
Fairbreeze mine
300ktpa
R2,4 billion Approved
February 2011
2012
2013
2014
2014
2015
2016
2013
capacity in terms of Eskom’s multi-site
base load independent power producer
(IPP) programme.
The draft NIRP 2010, released in October
2010, does not cater for any new coal-
fired power generation development
until 2027. The draft was subjected to a
public-review process in December 2010
and is expected to be finalised early in
2011 after receiving comments from all
stakeholders. Due to delays in these
initiatives, Exxaro’s focus is now on first
developing a smaller mine for coal
supply to the Limpopo IPP envisaged in
the draft NIRP 2010. A bankable
feasibility study as well as the public
consultation required for environmental
Sands Dry mine replacement
100-200ktpa TBD
Pre-feasibility
2013
approvals will begin once the scope for
(Australia) (100%)
Energy Co-generation
Namakwa Sands
14MW
TBD
Feasibility
Energy Wind energy
40-100MW TBD
Pre-feasibility
2012
2014
Coal
Grootegeluk mine expansion for Medupi (GMEP)
The Medupi coal supply and offtake agreement became unconditional and binding on
Exxaro and Eskom on 24 June 2010. In terms of the agreement, Exxaro will supply
14,6Mtpa to Medupi power station for a 40-year period post ramp-up. The total
capital cost of GMEP is forecast at R9,5 billion. First coal delivery will begin in May
2012 and full commissioning is expected during 2014/15. Project detailed design was
largely completed by the end of February 2011. Around 90% of the major construction
packages and plant equipment packages have already been placed, and the balance
will be placed during the first quarter of 2011. On-site construction has started with
most bulk earthworks nearing completion. Civil work is well under way after major
structural work was started in February 2011. Current indications are that the project
will be completed within schedule and budget.
The R4,5 billion bridge loan facility for GMEP was secured in the first half of 2010 with a
consortium of local and international financial institutions. First drawdown of the loan is
only expected in the second quarter of 2011.
the Limpopo IPP has been determined
and the final NIRP 2010 promulgated.
First coal production could be expected
by 2015/16, but depends on the Limpopo
IPP and water-supply development
schedules.
Mafutha
Exxaro has a prospecting joint-venture
agreement with Sasol Mining to investigate
the commercial viability of developing a
new coal mine in the Waterberg to supply
Sasol’s potential 80 000 barrels per day
inland coal-to-liquids facility. The study is
still in an extended pre-feasibility stage.
Mining the 170kt bulk sample for large-
scale gasification testing at the Sasol
Synfuels Secunda plant began in August
2009 and was completed in the second
quarter of 2010. Gasification tests are
expected to be complete in the first
quarter of 2011.
60 EXXARO INTEGRATED ANNUAL REPORT 2010
Waterberg infrastructure
development
An
integrated
infrastructure
plan
continues
to be developed
for the
Waterberg
coalfields with
relevant
remain encouraging. We anticipate that a
second half of 2011 with the commercial
feasibility study will be concluded in the
second half of 2012, with first production
expected in 2015. Moranbah South, which
joint venture with Anglo
is a 50%
operation date scheduled for the third
quarter of 2012. Clean Development
Mechanism-registration of this project
is well advanced.
stakeholders. Focus areas include the
American, has the potential to produce
> Exxaro continues to
facilitate the
some 6Mtpa of premium-quality hard
development of a 600–1 200MW coal-
supply of raw water to the area, rail, road,
housing and job creation. Exxaro has
completed phase I of its eco-friendly
housing project
in Lephalale, which
received an award at the 2010 Nedbank
coking coal.
Energy
The development of Exxaro’s energy
Capital Green Mining Awards
in the
portfolio to explore opportunities
in
sustainability category.
Sintel char and market coke
The Sintel char plant at Grootegeluk
energy markets is progressing according
to plan. The focus is on cleaner-energy
initiatives encompassing a combination of
co-generation, carbon credit
trading,
mine to produce reductants for the
renewable energy, coal-bed methane
ferroalloy
industry has been
fully
commissioned with all four retorts in
operation. The plant reached overall
design capacity in the last quarter of
2010. Exxaro
is currently evaluating
phase II expansion to produce a further
280ktpa of char as well as a study to
development, and coal base-load project
developments. Securing equity funding
partners for these projects continues in
parallel with investigations.
fired power station in the Waterberg
(Limpopo IPP). Non-binding term sheets
for the offtake of 1 150MW of electricity
have been signed between Exxaro and
industrial offtakers. The project is one
of the options being investigated to
enable the Thabametsi coal mine
referred to earlier.
Ferrous
Iron ore
Exxaro continues to evaluate opportunities
aligned with its strategy to establish a
direct footprint in the iron ore commodity.
Coal-bed methane development
Development of the first five-spot test for
AlloyStreamTM
Exxaro
successfully
concluded
an
produce market coke from semi-soft
the coal-bed methane project in Botswana,
agreement to partner with Assmang
coking coal at Grootegeluk mine as part
of its strategy of downstream integration
and beneficiation. These studies should
be completed during 2011.
Belfast
Exxaro’s application for a mining right for
to test for economic gas flow, is in the final
stages. Five wells have been drilled and
four of these have been fractured.
Dewatering of the well field is under way
and gas flow is steadily increasing. The
in 2011 until
wells will be operated
Limited to commercialise its AlloyStreamTM
technology to beneficiate manganese ore
into high-carbon ferromanganese alloy. A
large demonstration facility is planned to
be completed in 2011. Major benefits of
this technology include lower electrical
economical gas-flow levels have been
consumption
and
the
use
of
the Belfast project has been accepted by
obtained.
unagglomerated fine feed materials.
the Department of Mineral Resources
(DMR) and is being processed. Updated
specialist environmental
studies as
required by the national environmental
management and water acts will be
submitted to the relevant authorities in
the first half of 2011. The pre-feasibility
study was completed in December 2010
and the decision to proceed with a full
feasibility study will be evaluated in the
first quarter of 2011. Depending on the
outcome, start-up and first production is
anticipated in 2014.
Moranbah South
Exploration of the hard coking coal
Clean energy initiatives:
> The pre-feasibility study for a 100MW
wind farm on South Africa’s west coast
has been completed. An 80m mast was
installed at Brand se Baai in March 2010.
The study indicates an initial project of
between 40MW and 66MW is viable.
The bankable feasibility study is now
under way with completion planned for
Mineral sands
Fairbreeze
On 22 February 2011, the board approved
the development of Fairbreeze mine as a
replacement
feedstock producer
to
Hillendale mine at KZN Sands, subject to
obtaining the required regulatory and
environmental approvals. A possible
reversal or partial reversal of previous
the third quarter of 2011.
impairments of the carrying value of the
> A pre-feasibility study for a 76MW wind
assets will be considered simultaneously
in the Tsitsikamma region
farm
is
continuing. Exxaro has a 75% share in
this project. This study should be
completed by the end of 2011.
by the board.
resource on the Moranbah South property
> A bankable feasibility study for a 14MW
in the Bowen Basin of Queensland,
Australia, is progressing well and results
obtained during the pre-feasibility study
co-generation plant at Namakwa Sands
is in the final stages. Construction of
the power plant is planned for the
EXXARO INTEGRATED ANNUAL REPORT 2010 61
62 EXXARO INTEGRATED ANNUAL REPORT 2010
DIVIDER PAGE 3 — FRONT (PERFORMANCE REVIEW)
Performance review
i
w
e
v
e
r
e
c
n
a
m
r
o
f
r
e
P
EXXARO INTEGRATED ANNUAL REPORT 2010 63
REVIEW OF MINERAL RESOURCES AND RESERVES
The Mineral Resources and Ore Reserves
geological potential, the mineability and
The processes and calculations associated
underpinning Exxaro’s current operations
associated risks/opportunities to establish
with the estimate have been audited by
and growth projects are summarised in
an eventual extraction outline (EEO).
internal competent persons and are
the tables on pages 66 to 76. Mineral
Resources are reported inclusive of those
that have been converted to Ore Reserves
and at 100% ownership, irrespective of
the percentage attributable to Exxaro,
except in the case of Black Mountain,
Gamsberg and Swartberg, because figures
received
from Anglo Base Metals
represent resources exclusive of reserves.
Significant changes in the resource or
reserve figures have been explained by
relevant footnotes to each table. Resource
estimations are based on resource models,
which
incorporate all new validated
geological information and, if applicable,
revised
resource
definitions
and
classifications. The resource models are
compiled as a rule between June and
August of the reporting year. Ore Reserves
are estimated using the relevant modifying
factors at the time of reporting which
include mining, metallurgical, economic,
marketing, legal, environmental, social
and
governmental
regulatory
requirements. Mineral Resources in which
Exxaro held the controlling interest have
been reviewed during 2010 to comply with
“reasonable and realistic prospects for
Mineral Resources and Ore Reserves
audited by external consultants when
quoted
fall within existing Exxaro
deemed
essential
to
establish
Resources mine or prospecting rights.
transparency. For mines or projects in
Mining rights are of sufficient duration (or
which Exxaro does not hold the controlling
convey a legal right to convert or renew
interest, figures have been compiled by
for sufficient duration) to enable all
competent persons from the applicable
reserves to be mined in accordance with
companies and have not been audited by
current production schedules. Mineral
Exxaro. Resource and reserve estimation
Resources and Ore Reserves were
at Exxaro mines and projects in Australia
estimated by competent persons on an
were done by competent persons as
operational basis and in accordance with
defined by the JORC Code (2004).
the SAMREC Code (2007) for South
African properties and the JORC Code
The person in Exxaro designated to take
(2004) for Australian properties. Ore
corporate
responsibility
for Mineral
Reserves in the context of this report have
Resources and reserves, HJ van der Berg,
the same meaning as ‘Mineral Reserves’,
the undersigned, has reviewed and
as defined by the SAMREC Code 2007. All
endorsed the reported estimates.
competent persons have
sufficient
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 defined in these
codes at the time of reporting. These
HJ van der Berg
competent persons have signed off their
MSc (Geology), BSc (hon)
respective estimates
in
the original
Pr Sci Nat (400099/01)
Mineral Resource and Ore Reserve
Manager mineral assets
eventual economic extraction” (SAMREC
statements for the various operations and
Code 2007).
consent to the inclusion of the information
in this report in the form and context in
Exxaro uses a systematic review process
which
it appears. A
list of Exxaro’s
that measures the level of maturity of the
competent persons is available from the
exploration work done, the extent of the
company secretary on written request.
64 EXXARO INTEGRATED ANNUAL REPORT 2010
the
not
with
resource and
Exxaro’s tenure over its mineral assets as
listed in the tables was audited and is
confirmed
following
consideration: the deal to divest from Glen
Douglas dolomite mine was concluded and
the mine was transferred to Afrimat
Limited with ministerial consent. The Glen
reserve are
Douglas
therefore
reported. Numerous
conflicting prospecting right applications
were lodged by junior companies over
mineral areas held by Exxaro under a valid
mining or a prospecting right. In many of
those cases, the DMR has accepted the
applications. Exxaro has submitted written
objections to both the DMR and the
applicant on all known conflicting
applications. However, the conflicting
applications are not regarded as a threat
to any of the rights, because they are
illegal. Nevertheless Exxaro
in
continuous consultation with the DMR to
get these matters resolved.
is
It is anticipated that by the end of the
minister’s moratorium on accepting new
applications, all conflicting applications
will have been addressed.
The DMR has confirmed in writing that the
Grootegeluk, Tshikondeni, Gravelotte,
Matla and Strathrae mines have been
converted to new-order mining rights, but
none of these mining rights has yet been
the
executed. The notification
conversion of Arnot and Glisa is still
outstanding. All other Exxaro mines in
South Africa are operating under a new-
order mining right.
for
coal
projects
high-priority
As a result of the economic climate and
good management practice, all growth
projects, including exploration projects,
were evaluated and prioritised during the
year. Prospecting activities were focused
on the Waterberg coalfield and a number
of
in
Mpumalanga province, especially those
close to existing Exxaro mines. Exploration
drilling was conducted on priority targets
and the confidence in resource figures
improved, as shown
in the mineral
resource tables overleaf. This includes
additional drilling and geophysics done on
in
the Moranbah
Reportable
Queensland,
increased
resource
level of
significantly. The present
South
Australia.
project
tonnes
have
confidence in the mineral resource at this
project will support the prefeasibility
study, which is under way.
present
Exxaro recognises the importance and
value of its mineral assets as the base of
and
its
future
success
to manage,
sustainability. The drive
optimise and grow the company’s mineral
assets will therefore remain a focus in
2011. Mineral asset risks and opportunities
are being identified at each operation and
growth project and managed to improve
utilisation and profitability, while pursuing
safer working conditions and responsible
environmental practices. Simultaneously,
the growth strategy will focus on adding
quality new resources to Exxaro’s mineral
asset portfolio.
pressure
on mineral
As a result of changes in the resources
arena, both internally and internationally,
the
asset
management has increased over recent
years. Changing legislation and statutory
requirements mean operational standards
and procedures must be continually
compliant.
adjusted
Environmentally, the
inevitable visual
impact of mining has put the industry
under the spotlight. To manage its mineral
assets responsibly under these conditions,
Exxaro
standards and
modifying factors to apply the impact of
is adapting
remain
to
all these elements on mineral resource
estimation and classification. Although it
complicates the estimation process, we
regard it as the only way to identify,
quantify and apply risks and opportunities
in mineral asset optimisation and
responsible utilisation. All spheres of the
mining environment such as geology, the
natural environment, safety as well as
legal and statutory compliance has an
impact especially on ore
reserve
estimation in Exxaro.
management
The result is that important industry
drivers such as safety, profitability and
environmental
are
embedded in the way the mineral asset is
evaluated in the ground. If these principles
are applied continuously through the
execution process, the mine will comply
with statutory and legal requirements and
be profitable.
However, a further consequence of this
changing environment is that it places a
the economic
question-mark against
mineability of poorer mineral deposits and
puts pressure on the remaining high-
quality deposits. The envisaged small-
scale mining industry will find it difficult to
comply with these requirements and may
not develop as a viable branch of the
industry in South Africa at all.
Coal mines and projects in South Africa
EXXARO INTEGRATED ANNUAL REPORT 2010 65
REVIEW OF MINERAL RESOURCES AND RESERVES
CONTINUED
COAL
Coal Resources
The table below details the total inclusive Coal Resources estimated as at 31 December 2010
Commodity
Operation1
Coal
Mpumalanga
Arnot mine6 (UG)
(captive market)
Matla mine (>18MJ/kg) (UG)
(captive market)
Matla mine (Low CV,
15-18MJ/kg)7 (UG)
(captive market)
Matla mine (Total)7
(captive market) (UG)
Inyanda mine (OC)
Leeuwpan mine (OC)
Mafube mine8 (OC)
NBC mine9 (OC)
(North Block Complex)
NCC mine (UG/OC)
(New Clydesdale)
Glisa South project10 (OC)
(prospecting)
Belfast project11 (OC)
(prospecting)
% attributable
to Exxaro2
Resource
category
Tonnes
(million)3, 5
2010
100
100
100
100
100
100
50
100
100
100
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
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
Measured
Indicated
Inferred
TOTAL
169,3
46,0
48,8
264,1
313,5
335,4
179,7
828,5
129,4
28,7
39,1
197,2
442,9
364,1
218,8
1 025,8
11,4
–
–
11,4
179,7
2,8
–
182,5
112,4
–
52,0
164,4
26,0
5,1
0,2
31,3
11,5
42,2
–
53,7
20,0
47,1
9,4
76,6
83,2
24,2
25,9
133,3
2009
Tonnes
(million)3, 5
150,2
38,3
25,5
214,0
406,0
330,5
107,5
844,0
Grade4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Not reported
Not reported
12,6
–
–
12,6
181,7
2,8
–
184,5
121,1
–
57,3
178,4
30,7
5,1
0,2
36,0
13,9
42,2
–
56,1
Raw Coal4
–
–
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Not reported
107,7
3,7
7,1
118,5
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
%
change
23,4
(1,8)
N/A
N/A
(9,5)
(1,1)
(7,9)
(13,1)
(4)
N/A
13
Grade4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
–
–
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
66 EXXARO INTEGRATED ANNUAL REPORT 2010
Commodity
Operation1
Coal
Limpopo
Grootegeluk mine12 (OC)
Grootegeluk West project (OC)
(prospecting)
Waterberg North project13 (OC)
(prospecting)
Waterberg South project14 (OC)
(prospecting)
Tshikondeni mine (UG/OC)
(captive market)
Coal
Australia
Moranbah South project15 (UG)
(prospecting)
% attributable
to Exxaro2
Resource
category
Tonnes
(million)3, 5
2010
100
100
100
100
100
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
2 559
1 541
787
4 887
–
2 579
2 249
4 828
–
–
2 253
2 253
–
–
895
895
23,5
10,1
–
33,6
146,4
325,4
136,5
608,2
2009
Tonnes
(million)3, 5
2 610
1 290
787
4 687
–
1 021
3 617
4 638
–
–
2 176
2 176
–
–
699
699
24,0
10,1
–
34,1
56,0
150,0
60,4
266,4
Grade4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
Raw Coal4
–
–
Raw Coal4
Raw Coal4
–
–
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
%
change
4,3
4,1
–
–
3,5
28
(1,6)
128,3
Grade4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
Raw Coal4
–
–
Raw Coal4
Raw Coal4
–
–
Raw Coal4
Raw Coal4
Raw Coal4
–
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Raw Coal4
Rounding off of figures may cause computational discrepancies.
All changes more than 10% (significant) are explained.
1 Mining method: OC – open-cut, UG – underground.
2 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2010 only.
3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt. Coal Resources are quoted on a Mineable Tonnage In Situ (MTIS) and on an
air-dried basis.
4 Coal qualities are reported in Table 1 and are quoted on a Mineable Tonnage In Situ (MTIS) and on an air-dried basis.
5 Coal Resources are quoted “inclusive” of Coal Resources that have been modified to Coal Reserves unless otherwise stated.
6 The increase of ~50Mt is the result of the review of the geological database (update of new holes and correction of historical holes), subsequent update of the
geological model improving seam interpretation and a change in the quality cut-off parameters used (35% Ash).
7 Lower CV (15-18MJ/kg) coal from Seam 4 is utilised at Matla Mine 3 in addition to the Coal Resources (>18MJ/kg CV) previously reported. The inclusion of
these Coal Resources resulted in a significant increase in the Total Resource base.
8 Estimates are received from Anglo American and were not audited by Exxaro.
9 The decrease of 4,7Mt is due to mining depletion.
10 The project area is adjacent to the NBC mine and is reported for the first time following four years of extensive exploration.
11 The increase of 14,8Mt (13%) is the result of the inclusion of potentially opencastable seams 3 and 4, not reported in 2009.
12 Mining depletion of 36,7Mt has been positively offset by the increase in resource as a result of the update of the geological model with new drill hole information.
13 The increase of ~77Mt is the result of new drilling information.
14 The increase of ~196Mt is the result of new drilling information.
15 Estimates are received from Anglo American and not audited by Exxaro. The significant increase is primarily the result of the upgrading of Goonyella Middle (GM)
Seam resources (~350Mt) from low potential to reportable resources based on extensive exploration work.
EXXARO INTEGRATED ANNUAL REPORT 2010 67
REVIEW OF MINERAL RESOURCES AND RESERVES
CONTINUED
COAL RESOURCE QUALITIES
Table 1
Seam/
Layer/
Formation
Operation
Arnot mine
Matla mine
Seam 2
Seam 1
Seam 4
(Low CV)
Seam 4
Seam 2
Inyanda mine Main
Reserve
Pegasus –
South
Reserve
TC2
BC2
Leeuwpan
mine
NBC mine
Mafube mine Seam 2
Seam 1
NBC main
orebody
Strathrae
East
Eerstelings-
fontein
Glisa South
project
NCC mine
Belfast
project
Grootegeluk
mine
Grootegeluk
West project
Waterberg
North project
Waterberg
South project
A Grade
Coal
B Grade
Coal
Seam 4
Seam 3
Seam 2
Volksrust
Formation
Vryheid
Formation
Volksrust
Formation
Vryheid
Formation
Volksrust
Formation
Vryheid
Formation
Volksrust
Formation
Vryheid
Formation
Measured Resource
Tonnes
(Mt)1
164,3
5,0
CV
MJ/kg % VM % Ash
20,6
20,6
18,9
30,1
23,9
25,3
129,4
233,0
80,5
17,2
19,5
24,0
22,1
22,7
24,0
33,6
30,7
19,1
10,3
25,2
23,9
20,6
% S
1,0
1,5
0,8
1,1
0,9
1,9
1,1
24,2
24,2
20,9
1,7
112,8
66,9
115,1
3,2
16,60
23,9
22,5
20,4
17,50
21,8
22,4
22,7
40,10
22,1
23,9
31,3
0,90
1,1
0,8
0,9
21,7
19,7
21,2
29,9
0,5
3,7
24,7
22,9
19,0
24,3
22,6
18,2
20,0
19,0
20,3
32,0
10,8
25,5
23,8
20,2
0,8
23,2
21,6
23,2
2,2
6,3
74,7
15,9
21,4
24,7
20,9
23,1
23,0
40,2
27,8
18,2
0,9
0,8
0,8
0,9
0,7
0,7
1,2
1,0
1,1
2010
Indicated Resource
CV
MJ/kg % VM % Ash
20,8
24,0
19,4
29,9
23,8
25,0
Tonnes
(Mt)1
44,6
1,3
28,7
133,6
201,8
–
–
1,6
1,2
–
–
5,1
–
–
36,0
29,4
20,7
–
–
51,8
20,5
16,9
19,9
22,9
–
–
11,3
25,7
–
–
22,0
22,7
23,7
–
–
10,8
9,7
–
–
20,0
21,1
29,9
–
–
–
–
–
–
47,1
19,0
20,9
31,8
14,0
26,2
24,8
20,3
28,2
22,9
25,3
26,6
1,0
1,8
21,3
13,4
21,1
24,1
19,1
22,8
22,8
47,8
28,5
19,9
1 842
12,3
19,4
55,4
1,0
1 273
13,2
19,9
54,1
717
23,2
22,2
27,6
2,1
268
23,3
22,3
28,6
% S
0,9
2,7
1,0
1,0
1,0
–
–
0,7
0,7
–
–
0,9
–
–
1,0
0,9
0,9
1,1
1,5
1,0
1,0
2,2
Inferred Resource
Tonnes
(Mt)1
46,3
2,6
CV
MJ/kg % VM % Ash
20,2
24,4
19,8
29,8
24,2
24,8
39,1
129,0
50,7
16,3
19,9
20,6
21,3
22,8
20,4
37,5
29,1
29,8
–
–
–
–
10,7
34,5
–
–
–
–
21,8
20,2
–
–
–
–
22,7
22,4
–
–
–
–
25,6
31,3
0,2
21,5
21,4
25,0
–
–
–
–
–
–
–
–
% S
0,9
3,0
1,3
1,0
1,0
–
–
–
–
0,9
1,0
0,8
–
–
9,4
21,0
21,6
27,6
1,0
–
–
2,3
1,1
22,5
–
–
12,7
20,7
22,9
–
–
19,2
22,7
21,9
–
–
50,0
29,3
22,7
610
13,2
19,2
55,1
177
23,2
21,5
28,5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2 149
11,1
19,3
56,9
0,9
1 800
10,1
18,7
58,8
430
20,4
21,9
32,1
2,2
449
19,5
21,6
34,2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,0
22,8
–
–
–
–
1 468
10,8
19,0
56,8
785
18,1
21,7
36,2
354
14,1
23,2
44,9
541
17,1
21,6
36,1
0,7
–
–
–
–
0,6
136,5
27,0
17,9
21,9
0,6
–
–
0,8
1,1
1,1
1,3
2,0
0,9
2,1
0,9
1,8
1,1
2,1
–
23,5
30,8
Total
Tshikondeni
mine
Moranbah
project
26,0
146,4
VM – volatile matter, S – sulphur, CV – calorific value
Rounding-off of figures may cause computational discrepancies.
Coal qualities are quoted on a Mineable Tonnage In-Situ (MTIS) and on an air-dried basis
325,4
Total
18,2
26,9
30,8
22,0
10,1
19,0
22,0
25,7
14,0
0,7
0,6
1 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
2 TC – Top Coal, BC – Bottom Coal
68 EXXARO INTEGRATED ANNUAL REPORT 2010
COAL
Coal Reserves
The table below details the total Coal Reserve estimated as at 31 December 2010.
Commodity Operation1
%
attribut-
able to
Exxaro5
Reserve
category
ROM
(Mt)2, 3
Saleable product
(Mt)2, 4
ROM
(Mt)2, 3
Saleable product
(Mt)2, 4
%
change
2010
2009
Life of
Mine
Plan
(LoMP)
(Years)
Coal
Mpumalanga
Arnot mine7 (UG)
100
Proved
(captive market)
Inferred Resources in LoMP6
Probable
TOTAL
46,4
11,6
58,0
6,3
Matla mine8 (UG)
100
Proved
132,4
(captive market)
Inferred Resources in LoMP6
Probable
149,5
TOTAL
281,9
57
9,4
0,4
9,8
–
78,1
73,6
Inyanda mine9 (OC)
100
Proved
Probable
TOTAL
Inferred Resources in LoMP6
Leeuwpan mine10 (OC)
100
Proved
Probable
Inferred Resources in LoMP6
–
TOTAL
151,7
Coking
coal
Thermal
coal
Metal-
lurgical
coal
Coking
coal
Thermal
coal
Metal-
lurgical
coal
N/A
N/A
N/A
N/A
N/A
N/A
43,6
10,9
54,5
131,7
148,8
280,5
N/A
N/A
N/A
72,6
10,2
82,8
N/A
N/A
201,1
132,1
N/A
333,2
N/A
N/A
N/A
N/A
N/A
N/A
70,4
9,9
80,3
200,1
131,5
331,6
N/A
N/A
N/A
N/A
N/A
N/A
A-grade export steam coal
A-grade export steam coal
6,6
0,3
6,9
11,6
0,4
12,0
8,2
0,3
8,5
(29,9)
11,6
(15,4)
33
(18,4)
4,2
Export Thermal
Metal-
lurgical
5,5
–
5,5
25,6
21,4
47,0
12,4
20,3
88,3
64,8
32,7
153,1
Export
Thermal
4,2
–
4,2
35,4
9,4
44,8
Metal-
lurgical
9,5
23
32,5
(0,9)
22
EXXARO INTEGRATED ANNUAL REPORT 2010 69
REVIEW OF MINERAL RESOURCES AND RESERVES
CONTINUED
COAL continued
Coal Reserves continued
Commodity Operation1
%
attribut-
able to
Exxaro5
2010
2009
Reserve
category
ROM
(Mt)2, 3
Saleable product
(Mt)2, 4
ROM
(Mt)2, 3
Saleable product
(Mt)2, 4
%
change
Export Thermal
Metal-
lurgical
Export
Thermal
Metal-
lurgical
Life of
Mine
Plan
(LoMP)
(Years)
Coal
Mpumalanga
(continued)
Mafube mine11 (OC)
50
Proved
30,1
Probable
–
TOTAL
30,1
Inferred Resources in LoMP6
NBC12 (OC)
100
Proved
(North Block Complex)
Probable
TOTAL
Inferred Resources in LoMP6
NCC mine13 (OC, UG)
100
Proved
(New Clydesdale)
Probable
–
–
27,2
27,2
–
7,6
2,3
TOTAL
10,0
Inferred Resources in LoMP6
Belfast project14
(UG/OC)
(prospecting)
Inferred Resources in LoMP6
100
Proved
Probable
TOTAL
–
–
67,3
67,3
0,8
Coal
Limpopo
Grootegeluk mine (OC)
100
Proved
2 056
Probable
913
14,8
–
14,8
N/A
N/A
N/A
N/A
N/A
N/A
–
21,6
21,6
97,6
58,9
6,9
–
6,9
–
17,0
17,0
5,6
0,9
6,5
–
35,4
35,4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
35,6
67,3
102,9
26,9
4,1
31,0
11,7
–
11,7
91,9
3,0
94,9
900,5
356,9
91,0
21,9
2 140
666
18,4
25,1
43,5
N/A
N/A
N/A
N/A
N/A
N/A
56,8
–
56,8
96,4
33,0
8,2
21,2
29,4
24,5
3,7
28,2
7,6
–
7,6
29,9
–
29,9
905,3
309,6
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
83,3
33,7
(70,8)
6
(12,1)
6,3
(14,7)
6
(29,1)
21,1
TOTAL
2 969
156,5
1 257,4
112,9
2 806
129,4
1 214,9
117,0
5,8
54
Inferred Resources in LoMP6
302
Tshikondeni
mine (UG/OC)
(captive market)
100
Proved
3,65
Probable
–
TOTAL
3,65
1,85
–
1,85
N/A
N/A
N/A
3,98
–
3,98
2,11
–
2,11
N/A
N/A
N/A
(8,3)
6
Inferred Resources in LoMP6
–
Rounding off of figures may cause computational discrepancies. All changes more than 10% (significant) are explained. Reserves quoted are
inclusive of reported Mineral Resources unless otherwise stated.
1 Mining method: OC – open-cut, UG – underground.
2 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
3 Coal Reserves are quoted on a Run of Mine (RoM) reserve tonnage basis which represents the tonnages delivered to the plant at an applicable moisture and
quality.
4 Saleable reserve tonnage represents the product tonnes of coal available-for-sale on a applicable moisture basis. Qualities of saleable products are provided in
Table 2.
5 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2010 only.
6 Inferred resources in Life of Mine Plan (LoMP) refer to Inferred Resources considered for the Life of Mine Plan.
7 The decrease (30%) is the result of mining depletion (4,5Mt) and the exclusion of the envisaged open-cast areas due to technical investigations and pending
authorisations.
8 The net decrease of ~51Mt is the result of mining depletion (12,8Mt), changes in the resource base, exclusion (~40Mt) of potential stooping areas underlying
environmentally sensitive wetlands and the exclusion of Coal Reserves in Seam 2 attributed to safety conditions.
9 The net decrease is primarily the result of mining depletion (~2,3Mt). The Pegasus-South ore body which is situated within the mine right area, but to the
immediate north of the main ore body, has not been converted to Coal Reserves because of ongoing technical and environmental studies.
10 Measured Resources (reserve blocks OJ, OL, OI) have been converted to Probable Reserves due to metallurgical studies in progress and pending authorisations.
11 Figures are received from Anglo American and were not audited by Exxaro. Probable Reserves and Inferred Resources (considered for LoMP, ~66,6Mt) were
excluded pending the approval for conversion of prospecting right to mining right. Application for conversion to mining right will be submitted, pending the
completion of the Environmental Management Plan (EMP). Anglo American Thermal Coal has reasonable expectation that such conversion will not be withheld.
12 The decrease (3,7Mt) is the result of mining depletion. The Coal Reserve was moved to the Probable Reserve category pending the outcome of technical
investigations. The Reserve consists of the NBC main orebody (~23,97Mt), Strathrae East (0,57Mt) and Eerstelingsfontein (2,67Mt). The decrease in saleable
product is the result of a revised product specification adopted in 2010.
13 The decrease of 1,7Mt (~14%) is the result of mine depletion and a change in the resource base. The Haasfontein Reserves (~2,3Mt) was moved to the Probable
Reserve category during the alignment of mining activities to environmental compliances.
14 The decrease in the Reserve is the result of the re-evaluation of the economics of the project and changes in proposed mine methods. The Reserve has been
moved to the Probable Reserve category due to pending mine right and environmental authorisations.
70 EXXARO INTEGRATED ANNUAL REPORT 2010
COAL RESERVE QUALITIES
Table 2
Operation
Seam/Layer
Thermal saleable
(proved + probable)
Metallurgical saleable
(proved + probable)
Coking saleable
(proved + probable)
Arnot mine
Matla mine
Seam 4
Seam 2
Inyanda mine
Leeuwpan
mine
Mafube mine
TC2
BC2
NBC
Export
NBC Main
orebody
Strathrae East
Eerstelings-
fontein
NCC mine
Belfast
project
Thermal
Export
Grootegeluk
mine
Volksrust
Formation
Vryheid
Formation
Tshikondeni
mine
Tonnes
(Mt)1
CV
MJ/kg
54,2
130,9
151,0
7,6
24,3
18,7
21,7
27,5
%
VM
24,0
N/A
N/A
25,0
%
Ash
23,0
39,3
23,9
15,0
47,0
22,7
20,0
22,7
–
6,9
14,8
14,0
0,5
2,4
6,5
21,6
35,4
–
23,9
27,5
22,3
24,7
23,3
27,6
22,9
27,4
–
21,3
25,1
22,4
22,9
22,6
25,7
N/A
24,7
–
19,8
11,5
21,9
19,0
18,3
15,2
N/A
12,0
%
S
Tonnes
(Mt)1
CV
MJ/kg
%
VM
%
Ash
%
S
Tonnes
(Mt)1
CV
MJ/kg
%
VM
%
Ash
%
S
–
–
–
–
38,2
26,6
23,0
15,5
–
0,6
1,0
N/A
N/A
0,7
0,5
–
0,6
0,4
0,8
0,7
0,9
N/A
0,4
816,1
21,4
27,4
31,4
0,8
–
–
–
–
–
127,5
29,4
35,8
10,3
1,0
441,3
21,5
21,9
31,7
2,7
112,9
27,6
23,4
15,0
0,6
–
–
–
–
–
1,85
30,8
22,0
14,0
0,7
Saleable reserve tonnage represents the product tonnes of coal available for sale on a applicable moisture and air-dried quality basis.
VM – volatile matter, S – sulphur, CV – calorific value
Rounding off of figures may cause computational discrepancies.
1 Saleable product tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
2 TC – Top Coal, BC – Bottom Coal.
EXXARO INTEGRATED ANNUAL REPORT 2010 71
REVIEW OF MINERAL RESOURCES AND RESERVES
CONTINUED
MINERAL SANDS
Mineral Resources
The table below details the total inclusive Mineral Sands Resources estimated as at 31 December 2010.
Commodity
Operation1
Mineral Sands
KwaZulu-Natal
Hillendale mine (including Braeburn
+ Braeburn Extension)4
(OC)
%
attributable
to Exxaro2
Resource
category
Tonnes
(million)3
2010
Grade
% Ilmenite
Tonnes
(million)3
2009
Grade
% Ilmenite
% change
100
Measured
33,2
2,97
40,9
3,27
Indicated
Inferred
TOTAL
Fairbreeze A + B + C + C Ext + D5
100
Measured
(OC)
Block P
(OC)
Indicated
Inferred
TOTAL
100
Measured
Indicated
Inferred
TOTAL
Port Durnford project6
51
Measured
(prospecting)
(OC)
Indicated
Inferred
TOTAL
–
–
33,2
156,1
55,7
9,0
220,9
–
40,6
–
40,6
142,5
340,1
466,0
948,6
–
–
2,97
4,29
2,56
1,92
3,76
–
3,1
–
3,1
3,0
2,8
2,5
2,7
Mineral Sands
Eastern Cape
Mineral Sands
Limpopo
Eastern Cape project
100
Measured
(Nombanjana, Ngcizele, Sandy Point
old and recent)7
(OC)
Will apply for closure
Indicated
Inferred
TOTAL
Gravelotte sand and
100
Measured
pebbles
(OC)
Gravelotte rock
(OC)
Indicated
Inferred
TOTAL
100
Measured
Indicated
Inferred
TOTAL
Letsitele sand project
100
Measured
(prospecting)
(OC)
Indicated
Inferred
TOTAL
Letsitele rock project
100
Measured
(prospecting)
(OC)
Indicated
Inferred
TOTAL
75,1
–
31,3
106,4
–
–
112,3
112,3
12,5
–
–
12,5
–
53,6
–
53,6
9,1
–
4,0
7,6
–
–
20,7
20,7
10,5
–
–
10,5
–
25,9
–
25,9
72 EXXARO INTEGRATED ANNUAL REPORT 2010
–
–
40,9
202,1
26,9
–
229,0
–
40,6
–
40,6
142,5
340,1
466,0
948,6
226,2
9,9
19,8
255,9
75,1
–
31,3
106,4
–
–
112,3
112,3
12,5
–
–
12,5
–
53,6
–
53,6
–
–
3,27
3,72
2,50
–
3,60
–
3,1
–
3,1
3,0
2,8
2,5
2,7
4,6
3,3
3,9
4,5
9,1
–
4,0
7,6
–
–
20,7
20,7
10,5
–
–
10,5
–
25,9
–
25,9
(18,9)
(4)
0
0
N/A
0
0
0
0
Mineral Sands
Australia
Tiwest
– Cooljarloo mine9
(OC)
Mineral Sands Resources continued
Commodity
Operation1
%
attributable
to Exxaro2
2010
2009
Resource
category
Tonnes
(million)3
Grade
Tonnes
(million)3
Grade
% change
% Ilmenite
% Zircon
% Ilmenite
% Zircon
Mineral Sands
Western Cape
(OC)
Namakwa Sands mine8
100
Measured
Indicated
Inferred
TOTAL
50
Measured
Indicated
Inferred
TOTAL
344,0
385,9
199,5
929,4
232,3
193,0
–
425,4
–
62,3
36,5
98,8
–
25,6
–
25,6
55,2
12,0
15,9
83,1
3,27
2,07
2,31
2,57
% THM
2,3
1,9
–
2,1
% THM
–
2
2
2
–
6,0
6,0
4,5
4,8
4,0
4,5
0,82
0,49
0,65
0,64
0,7
0,7
0,3
0,6
578,1
258,1
84,8
921,0
95,0
234,1
10,0
339,1
3,0
2,5
1,5
2,7
% THM
2,9
2,3
2,4
2,5
% THM
Not reported in 2009
–
–
25,6
–
25,6
91,4
–
–
91,4
–
–
6,0
–
6,0
4,5
–
–
4,5
0,9
25,4
N/A
0
(9)
– Cooljarloo West project10
50
Measured
(OC)
– Jurien project
(OC)
Indicated
Inferred
TOTAL
50
Measured
Indicated
Inferred
TOTAL
– Dongara project11
50
Measured
(prospecting)
(OC)
Indicated
Inferred
TOTAL
% THM – percent total heavy minerals
Mineral Resources are quoted inclusive of Mineral Resources that have been modified to Ore Reserves unless otherwise stated.
Rounding off of figures may cause computational discrepancies.
All changes more than 10% (significant) are explained.
1 Mining method: OC – open-cut, UG – underground.
2 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2010 only.
3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
4 The decrease is primarily the result of mining depletion (~6Mt).
5 Geological models were revised and updated and Fairbreeze area D, previously reported separately, is now included in the Net Resource.
6 The project is reviewed due to changed economical assumptions. The prospecting right has lapsed and a new application has been submitted, outcome is pending.
7 Exxaro decided to disinvest as a result of technical and environmental constraints.
8 The movements within the resource categories are mainly the result of a revised resource classification and orebody delineation.
9 The increase of 86,6Mt (~25%) and the movement between the various resource categories, are the result of a combination of factors. Mining depletion (~24Mt), the update of
the geological model that incorporates new information obtained through an extensive exploration drilling programme executed during the last two years, as well as the
implementation of a larger, lower grade pit shell due to revised economical assumptions, are the primary contributors to the increase.
10 The project is reported for the first time this year.
11 Movements between the resource categories are the result of the review and update of the historical geological models.
EXXARO INTEGRATED ANNUAL REPORT 2010 73
REVIEW OF MINERAL RESOURCES AND RESERVES
CONTINUED
MINERAL SANDS
Ore Reserves
The table below details the total Mineral Sands Reserves estimated as at 31 December 2010.
Commodity
Operation1
%
attribut-
able to
Exxaro2
Reserve
category
ROM
(Mt)3
2010
2009
Grade
Total heavy mineral (THM) composition
%
THM
%
Ilmenite
%
Zircon
%
Rutile
%
Leuco-
xene
ROM
(Mt)3
Grade
Total heavy mineral (THM) composition
%
THM
%
Ilmenite
%
Zircon
%
Rutile
%
Leuco-
xene
Life of
Mine Plan
(LoMP)
(Years)
%
change
100
Proved
11,6
6,37
54,89
6,88
3,90
2,02
18,9
7,03
56,19
7,25
3,98
1,99
Mineral Sands
KwaZulu-Natal
Hillendale
mine5 (OC)
(including
Braeburn and
Braeburn
Extension)
Probable
TOTAL
Inferred Resources in LoMP4
Fairbreeze
A+B+C+ C Ext
and D6
(OC)
100
Proved
Probable
TOTAL
Mineral Sands
Limpopo
Inferred Resources in LoMP4
Gravelotte sand
100
Proved
(OC)
Probable
TOTAL
Inferred Resources in LoMP4
Mineral Sands
Western Cape
Namakwa Sands
mine7
(OC)
100
Proved
Probable
TOTAL
Inferred Resources in LoMP4
Australia
Tiwest
50
Proved
– Cooljarloo (OC)8
Probable
TOTAL
Inferred Resources in LoMP4
– Jurien (OC)
50
Proved
Probable
TOTAL
Inferred Resources in LoMP4
– Dongara (OC)
(prospecting)
50
Proved
Probable
TOTAL
Inferred Resources in LoMP4
–
6,37
–
54,89
7,74
5,02
7,24
13,0
–
13,0
12,67
9,87
10,50
2,3
2,1
2,2
–
7,9
7,9
7,3
–
7,3
62,73
56,19
61,54
85,0
–
85,0
28,57
28,06
28,19
59,2
57,7
58,9
–
54,0
54,0
48,6
–
48,6
–
6,88
8,52
7,81
8,39
N/A
–
N/A
8,45
6,38
6,95
9,2
9,8
9,4
–
10,0
10,0
10,1
–
10,1
–
3,90
3,46
3,29
3,43
N/A
–
N/A
2,05
1,72
1,81
5,1
4,8
5,0
–
6,8
6,8
7,0
–
7,0
–
2,02
1,71
1,50
1,67
N/A
–
N/A
4,50
4,05
4,19
2,8
3,4
2,9
–
2,3
2,3
2,0
–
2,0
–
18,9
–
7,03
–
56,19
161,1
20,4
181,5
52,4
–
52,4
393,6
120,0
513,6
93,3
17,0
110,3
–
15,7
15,7
29,5
–
29,5
6,64
4,16
6,36
13,0
–
13,0
8,96
6,94
8,34
2,7
2,7
2,7
–
7,9
7,9
7,3
–
7,3
60,39
49,04
59,11
85,0
–
85,0
35,49
32,85
34,77
60,6
56,0
58,1
–
54,0
54,0
48,6
–
48,6
–
7,25
8,19
7,36
8,09
N/A
–
N/A
8,15
7,49
7,55
8,8
13,4
9,0
–
10,0
10,0
10,1
–
10,1
–
3,98
3,43
2,69
3,34
N/A
–
N/A
2,23
2,16
2,16
4,6
5,2
4,5
–
6,8
6,8
7,0
–
7,0
–
1,99
1,65
2,07
1,70
N/A
–
N/A
4,58
4,18
4,56
3,0
2,8
2,9
–
2,3
2,3
2,0
–
2,0
(38,6)
1,5
(23)
10
0
11
14,5
20
163,2
12
0
0
5,2
9,8
–
11,6
–
114,3
25,4
139,6
3,0
52,4
–
52,4
–
133,1
454,8
587,9
109
232,3
58,0
290,3
–
–
15,7
15,7
–
29,5
–
29,5
–
% THM – per cent total heavy minerals
Rounding off of figures may cause computational discrepancies.
All changes more than 10% (significant) are explained.
Reserves quoted are inclusive of reported Mineral Resources unless otherwise stated.
1 Mining method: OC – open-cut, UG – underground.
3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
4 Inferred Resources in Life of Mine Plan (LoMP) refer to Inferred Resources considered for the Life of Mine Plan.
5 The decrease of ~7,3Mt is the result of mining depletion. Resource of 18,2Mt is not converted to Reserve mainly because of infrastructure.
6 The decrease of ~41Mt is mainly the result of a change in cut-off grade and movements within the resource categories.
7 The increase of 74Mt is primarily due to a review of the economic assumptions resulting in the inclusion of material previously regarded as uneconomical. The
East OFS Reserve (~180Mt) has been moved to the Probable Reserve category until further technical studies have been concluded.
8 The increase of 180Mt is the result of the positive change in the resource base and the implementation of a new larger, lower-grade pit shell based on reviewed
economic assumptions.
74 EXXARO INTEGRATED ANNUAL REPORT 2010
BASE METALS
Mineral Resources
The table below details the total inclusive Base Metal Resources estimated as at 31 December 2010.
Commodity
Operation1
Base Metals
Namibia
Rosh Pinah mine
(zinc and lead)
(UG)
2010
2009
%
attribut-
able to
Exxaro2
Resource
category
Tonnes
(million)3
Grade
50,04 Measured
Indicated
Inferred
TOTAL
Mt
4,2
5,2
2,9
12,3
% Zn
9,16
6,94
5,72
7,42
% Pb
2,12
2,29
0,99
1,92
Tonnes
(million)3
Mt
4,2
5,8
1,7
11,7
2010
2009
% Zn
8,51
6,66
4,81
7,06
Commodity
Base Metals
Northern Cape
Resource
category
Tonnes
(million)3
Grade
Tonnes
(million)3
%
attribut-
able to
Exxaro2
Operation1
Black Mountain Mining
– Deeps & Broken Hill4, 5
26 Measured
(zinc, lead, copper and silver)
(UG)
Indicated
Inferred
TOTAL
– Swartberg4, 6
26 Measured
(zinc,lead,copper and silver)
(UG)
Indicated
Inferred
TOTAL
Mt
3,7
6,0
9,6
19,3
–
16,4
31,9
48,3
Commodity
Operation1
%
attribut-
able to
Exxaro2
Resource
category
Tonnes
(million)3
– Gamsberg North4, 7
26 Measured
(zinc)
(OC)
Indicated
Inferred
Mt
43,3
57,5
53,3
TOTAL
154,1
% Zn
% Pb
% Cu
Ag g/t
3,57
3,92
2,60
3,20
–
2,91
2,73
2,79
0,38
0,49
0,53
0,49
–
0,64
0,67
0,66
41,17
56,99
24,85
37,96
–
35,4
32,2
33,3
2,67
3,09
2,75
2,84
–
0,68
0,65
0,66
Grade
% Zn
7,09
6,47
5,39
6,27
Mt
7,2
5,8
7,3
20,3
–
17,3
24,5
41,8
Tonnes
(million)3
Mt
43,3
57,5
53,3
154,1
Grade
% Zn
% Pb
% Cu
3,16
3,02
2,26
2,80
–
2,87
2,79
2,82
0,37
0,45
0,73
0,52
–
0,70
0,61
0,65
2,74
2,10
2,95
2,63
–
0,63
0,68
0,66
Grade
% Zn
7,09
6,47
5,39
6,27
Grade
%
change
% Pb
2,15
1,81
0,81
1,79
Ag g/t
38,50
44,69
25,94
35,78
–
35,0
41,0
39,0
5,4
%
change
(5)
15
%
change
0
% Zn – percent zinc, % Cu – percent copper, % Pb – percent lead, Ag g/t – grams per tonne silver
Mineral Resources are quoted inclusive of Mineral Resources that have been modified to Ore Reserves unless otherwise stated.
Rounding off of figures may cause computational discrepancies.
All changes more than 10% (significant) are explained.
1 Mining method: OC – open-cut, UG – underground.
2 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2010 only.
3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
4 Figures received from Anglo American and were not audited by Exxaro.
5 Resources quoted are in addition to reported Ore Reserves. Broken Hill and the Deeps Mineral Resources are combined for reporting purposes as both deposits
are geologically connected and make use of the same mining infrastructure.
6 Mine was placed on care and maintenance in 2007. No Ore Reserves, all remaining resources are declared. The increase is the result of a re-evaluation of the
cut-off and the use of updated 2010 economic assumptions.
7 Mineral Resources were formerly referred to as Gamsberg.
EXXARO INTEGRATED ANNUAL REPORT 2010 75
REVIEW OF MINERAL RESOURCES AND RESERVES
CONTINUED
BASE METALS
Ore Reserves
The table below details the total Base Metal Reserves estimated as at 31 December 2010.
2010
2009
ROM (Mt)3
Grade
Saleable product
Grade
Saleable product
3,7
2,8
6,5
–
% Zn
9,10
7,13
8,25
% Pb
1,97
2,06
2,01
2010
zinc metal
(x 1 000t)
lead metal
(x 1 000t)
ROM (Mt)3
336,0
198,9
535,0
72,8
57,5
130,3
2,8
2,0
4,8
% Zn
10,25
7,91
9,26
% Pb
2,50
1,68
2,16
2009
zinc metal
(x 1 000t)
lead metal
(x 1 000t)
%
change
Life of
Mine Plan
(LoMP)
(Years)
281,8
158,4
440,2
68,7
33,8
102,5
36
9,5
ROM
(Mt)3
%
attribut-
able to
Exxaro2
Reserve
category
Grade
Saleable product
ROM
(Mt)3
Grade
Saleable product
% Zn
% Pb
% Cu
Ag g/t
zinc
metal
(x 1 000t)
lead
metal
(x 1 000t)
copper
metal
(x 1 000t)
silver
metal (t)
% Zn
% Pb
% Cu
Ag g/t
zinc
metal
(x 1 000t)
lead
metal
(x 1 000t)
copper
metal
(x 1 000t)
silver
metal (t)
%
change
Life of
Mine Plan
(LoMP)
(Years)
26
Proved
3,6
2,75
3,76
0,33
41,07
98,5
134,9
11,8
147,3
4,9
3,52
3,64
0,38
42,51
171,2
176,6
18,5
206,8
%
attribut-
able to
Exxaro2
Reserve
category
Commodity Operation1
Base Metals
Namibia (zinc
and lead)
Rosh Pinah
mine5 (UG)
50,04
Proved
Probable
TOTAL
Inferred Resources inside LoMP4
Commodity Operation1
Base
Metals
Northern
Cape (zinc,
lead, copper
and silver)
Black
Mountain
mining
Deeps6 (UG)
Probable
TOTAL
3,27
3,01
2,80
3,28
0,43
0,38
47,47
44,27
117,1
215,6
100,3
235,1
15,4
27,2
170,0
317,3
2,8
7,7
2,03
2,97
2,64
3,27
0,41
0,39
50,41
45,43
57,4
74,7
228,5
251,6
11,6
30,0
142,6
349,5
(7)
8
3,6
7,2
9,6
Inferred Resources inside LoMP4
% Zn – percent zinc, % Cu – percent copper, % Pb – percent lead, Ag g/t – grams per tonne silver, N/A – not applicable
Reserves quoted are inclusive of reported Mineral Resources unless otherwise stated.
Rounding off of figures may cause computational discrepancies.
All changes more than 10% (significant) are explained.
1 Mining method: OC – open-cut, UG – underground.
2 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2010 only.
3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt.
4 Inferred Resources in Life of Mine Plan (LoMP) refer to Inferred Resources considered for the Life of Mine Plan.
5 The decrease of mining depletion (~0,7Mt) was offset by an increase of ~2,4Mt due to a change in the resource base and revised economic assumptions resulting
in a net increase of 1,7Mt.
6 Figures received from Anglo American and not audited by Exxaro. Reserves quoted are exclusive of reported Mineral Resources.
76 EXXARO INTEGRATED ANNUAL REPORT 2010
Mineral sand mines and projects in KwaZulu-Natal
Base metal and industrial mineral mines in Southern Africa
EXXARO INTEGRATED ANNUAL REPORT 2010 77
SAFETY
Disclosure on management
approach
Keeping our people safe
Our safety and sustainable development
incremental target of improving safety
awareness, varied safety competency
performance by 30% each year. This is
and non-adherence to corporate safety
measured by
the
lost-time
injury
standards. Collectively, these may result
frequency rate — or LTIFR, a standard in
in the perception of Exxaro being an
governance model begins with meeting
the mining industry.
unsafe business — a perception that
carries material risk to our sustainability.
legislative requirements as a minimum
standard. Sophisticated risk manage-
ment systems and processes are
then modelled around key risks for
implementation at operational level. A
risk-based approach also informs the
way resources are allocated and used in
the group to ensure ongoing progress
towards and beyond legal compliance.
Every lost-time injury is investigated by
Accordingly, we have developed a
the relevant business unit manager, while
timeline (opposite) to Exxaro’s desirable
all
fatalities are
investigated by a
state that includes:
committee with the appropriate skills,
> Zero fatalities
headed by an
independent chairman.
> Zero lost-time injuries
These are reported to the board and Exco.
> Hazard
identification
and
risk
Each business unit tracks its adherence to
assessments (HIRA)
standards and
legislation through a
> Visible felt leadership as a key driver
programme of self-assessments and
of safety excellence in Exxaro
To ensure effective communication,
corporate audits.
> Zero repeat incidents
Exxaro’s official language is English. All
formal communication takes place in
English, while remaining sensitive to
local conditions. Fanakalo (the hybrid
language traditionally used in South
African mines) is not encouraged and
no training and development takes
We aim to achieve this target through
Exxaro also has a policy detailing the
stringent application of management
protocols, programmes and systems.
approach to identifying, preparing for
and responding to emergency situations
Formal management-worker health and
affecting employees and surrounding
safety committees are in place at all
communities. This spans all known
operations, and meet regularly to ensure
types of emergency including fire, flood,
place in that language.
we reach our targets.
bomb threats, etc. Emergency situations
that have occurred in recent years have
Our ultimate
target remains zero
injuries and, therefore, zero fatalities.
To reach this goal, we have an
The 2009 strategic review of our safety
been well handled, demonstrating the
practices highlighted key risks facing our
effectiveness of both policy and
group,
particularly
limited
hazard
training.
78 EXXARO INTEGRATED ANNUAL REPORT 2010
Safety
During the reporting period, no fines or sanctions for non-compliance with safety and health laws and regulations were imposed on any
Exxaro operation.
2009
2010-2011
CEO Safety Summit outcomes:
Review priorities
1 Set up task teams to address focus
1 Review safety improvement plans
areas
(SIPs)
√
√
2012-2015
Review priorities
1 Annual CEO safety summit to
challenge safety performance
2 Develop safety communication
2 Set up and train peer review teams
2 Annual revision of SIPs
strategy
3 Consistent disciplinary code applied
3 Conduct group-wide peer reviews to
3 Periodic peer reviews
equally across all levels
promote implementation of SIPs
4 Revised HIRA standard to be
4 SIP progress reports every quarter
understood and applied by all
5 Revised visible felt leadership
5 CEO safety summits 2010 to discuss
standard consistently applied across
progress and challenges
Exxaro
6 Safety improvement plans as a result
6 Continue benchmarking and
of first summit
sourcing best practices
7 Standardised incident investigation
7 Develop competency on revised
process
HIRA standard
√
√
√
√
4 Develop competency on revised
HIRA standard
Flying the safety flag
Since May 2010, every Exxaro
operation has flown a ‘safe day’ flag
for each day without a lost-time
injury. These highly visible flagpoles
keep safety awareness high and
celebrate every day without injury.
In
this
the eight months of
campaign, flags were raised on
205 of 245 working days — reflecting
a safety-day rate of 84% at Exxaro.
Safety targets
Exxaro has committed R60 million
over five years (2009-2013) to achieve
its safety targets:
> Zero fatalities — actual for 2010 is
two fatalities
> 0,21 lost-time injury frequency rate
per 200 000 hours for 2010; annual
improvement of 30% — actual for
2010 0,25
Highlights
> Actual LTIFR of 0,25 is an annual
improvement of 24%, below the target
> North Block Complex achieved 20 000
fatality-free shifts in November 2010
> Arnot engineers developed a remote
of 30% but steady progress
> Namakwa Sands wins NOSA Top 100
Mining Companies safety award for
device that enables electricians to
switch oil circuit breakers from at least
20m away — a safety innovation with
third consecutive year, competing
group-wide application.
against
over
120
international
companies using
the NOSA SHE
management system
> KZN Sands’ Hillendale shift C and
residue dam B teams have maintained
their outstanding safety records since
2001 (zero fatalities and zero lost-time
injuries)
> Namakwa Sands’ smelter reached 1 134
LTI-free days by year end
> Namakwa Sands’ separation plants
Safety summits
In 2009 Exxaro initiated its group-wide
CEO Safety Summits under the theme
Safety Always, All the Way. These bi-
annual summits
involve a range of
stakeholders to identify key areas that will
make a tangible difference to safety
performance: consequence management,
safety training, culture (the Exxaro safety
way
of
life), mini-HIRA
(hazard
celebrated one year without a lost-time
identification and risk assessment) and
injury in June 2010 and reached 569
communication.
days by year end
EXXARO INTEGRATED ANNUAL REPORT 2010 79
SAFETY CONTINUED
Safety improvement plans in action
Following the 2009 safety summits, Exxaro’s safety programme, Safety Always All The Way, was launched across the group in 2010.
Since then, the people of Exxaro have been flying their Safe Day flags high, and monitoring and measuring their progress each step
of the way.
The people of Exxaro are flying the safety flag high, celebrating every “Safe Day”
(LTI-free day) by hoisting safety symbol flags at operations countrywide.
100%
90%
80%
70%
60%
50%
h
t
n
o
m
r
e
p
s
y
a
d
e
f
a
s
%
25 Safe
Days
25 Safe
Days
26 Safe
Days
26 Safe
Days
24 Safe
Days
23 Safe
Days
26 Safe
Days
28 Safe
Days
27 Safe
Days
23 Safe
Days
May
2010
June
2010
Jul
2010
Aug
2010
Sept
2010
Oct
2010
Nov
2010
Dec
2010
Jan
2011
Feb
2011
Health and hygiene
Occupational health hazards affect a large number of workers globally — the ILO estimates that some 200 000 workers globally lose
their lives at work and 68-157 million new cases of occupational diseases occur from various exposures in the workplace. In South
Africa, the Department of Mineral Resources reported 177 fatalities but over 10 000 cases of occupational diseases in the mining
industry in 2008. In 2009, this proportion had changed to 167 fatalities but over 8 000 cases of occupational diseases. Importantly,
deaths due to these diseases will often occur several years after the employee has left the industry. At Exxaro, the trend of more
occupational diseases than fatalities each year is similar but not nearly as pronounced:
> In 2008, 22 occupational diseases and five fatalities
> In 2009, 26 occupational diseases and four fatalities.
Healthy employees are essential for a safe workplace. Because the health effects of workplace hazards on an employee may only
manifest years after initial exposure, it is important that every employee is made aware of his/her role in preventing occupational
diseases, their impact and the means to mitigate the effects of potential exposure to workplace hazards.
Accordingly, Exxaro employees are made aware of hazards in the work environment, and the risk they pose to employee health:
> Health risks are identified; quantified and monitored through a ventilation and occupational hygiene surveillance programme
> Monitor health through the medical surveillance programme, to check that people are in good health
> Employees are:
— encouraged to be vigilant about conditions that could affect their own safety and health or that of their colleagues
— provided with information on the health implications of exposure to the risk
— made aware of measures that should be taken for them to maintain their health.
> The exposure risk to workplace hazards is managed through a hierarchy of controls by:
— eliminating the hazard at source
— substituting the equipment that generates the hazard
— controlling levels of exposure by either moving employees out of the work area or providing personal protective equipment.
Employees are also made aware of the contribution of occupational diseases to the quality of life and loss of potential income and are
encouraged to comply with mitigation measures in place in the workplace.
Environment
Sustainable development issues are central to Exxaro’s business, particularly the use of natural resources like water, air, biodiversity
and land. Using these responsibly means:
> Ensuring all activities are properly authorised
> Using energy and water as efficiently as possible
> Ensuring activities are conducted responsibly, from the twin perspectives of compliance and natural resource use.
80 EXXARO INTEGRATED ANNUAL REPORT 2010
With the support of government, Chamber
subsequently developed and introduced
of Mines and Exxaro’s recognised unions,
at Arnot uses initial/early examination to
this focus on safety is producing tangible
combat problems experienced with fall-of-
benefits. By year end, five business units
ground incidents and is yielding impressive
had worked for 12 months without a lost-
results. Since its implementation, Arnot
time injury (LTI) and the group LTIFR had
has recorded no lost-time injuries from
improved by 24% (page 82).
falls of ground, while production is up
Following on the CEO Safety Summit held
in April 2010,
the Exxaro
safety
Safety achievements
over 20% post training.
improvement plan was rolled out to all
business units. This plan focuses on
training VFL change champions (change
through
visible
felt
leadership),
communicating Exxaro’s zero-tolerance
safety rules, rolling out the safety training
Grootegeluk
Inyanda
matrix, safety communication guidelines
Matla mine 2
and mini hazard identification and risk
Matla coal operations
assessments (HIRA). This programme will
continue in 2011, supplemented by the
introduction of health, environment and
related issues to enhance awareness and
participation.
Matla mine 3
Tshikondeni
Arnot Coal
New Clydesdale
Matla mine 1
One of
the most notable
safety
Matla central
performances of the review period came
North Block Complex
Fatality-free
production
shifts
1 000
1 000
1 000
1 000
2 000
2 000
5 000
5 000
8 000
10 000
19 000
Case study — No injuries for
1 000 days at Namakwa Sands
In December, Namakwa Sands’
smelter reached a major safety
milestone of 1 134 days without a
lost-time injury. This is especially
significant considering a complete
furnace reline and two partial relines
were under way at the same time.
Also under construction were a
product storage shed, residue dam
and new fume-extraction plant.
All these activities involved large
numbers of contractors in addition to
inherent risks of a smelter
the
environment (where molten metal is
tapped at 1 600°C, carbon monoxide
gas is released during the tapping
process and large mobile machinery
is used in the smelting operation).
The
smelter’s previous LTI-free
record was 486 days, reflecting
benefits of the current and ongoing
focus on safety.
Case study — Safety at Namakwa Sands
Until recently, the high moisture content of material on the mill stockpile at Namakwa
Sands’ west mine presented a serious safety risk in the form of mud rushes. Other
potential risks included loss of production and equipment damage.
To address this, a project team developed and constructed a new oversize screening
system. Screening out oversize material (+30mm) allows this to bypass the run-of-
mine stockpile and regular screens, and feed directly into the oversize stockpile.
Construction started in January 2010, and the first feed went through in July. The
regular screens are now more efficient, and Exxaro’s engineers estimate that only
7% of the moisture is now discharged into the mill stockpile versus 15% before.
Slurry rushes inside and outside the mill feed tunnel have been eliminated and the
mill can now be fed safely and continuously.
The project was completed without a single lost-time injury.
from Namakwa Sands, which was also
ranked first
in the Top
100 Mining
Companies category at
the annual
National Occupational Safety Association
(NOSA) awards. This was the third
consecutive win for Namakwa Sands, with
its mine and smelter competing against
126 other international mining companies
using NOSA SHE management systems. To
qualify globally for entry, companies first
have to win their regional competitions in
which
they are evaluated on
their
compliance
to
recognised
SHE
management standards, legal compliance
and actual performance and experience.
This is done during the annual NOSA
grading audit conducted at all Exxaro’s
Namakwa
Sands
operations
and
companies using the same management
system.
Equally notable, Exxaro’s Arnot was
selected as the pilot site for the South
African coal sector as part of the
mining industry’s occupational safety and
health (MOSH) fall-of-ground initiative.
The customised
training
intervention
EXXARO INTEGRATED ANNUAL REPORT 2010 81
SAFETY CONTINUED
Challenges
Although key risks differ by operation,
LTIFR
Exxaro’s major challenges are vehicle
incidents, energy and machinery isolation,
and risk awareness and discipline at all
levels. Skills shortages exacerbate these
challenges and, accordingly, the group
concentrates on ensuring
sufficient
trained people are in place (page 124).
Improving safety performance extends to
contractors at all Exxaro operations as
part of a formal programme:
> Contractors are managed as part of
Exxaro’s workforce
> Adherence to corporate contractor
management standards is enforced by
each operation’s contractor manager
> Monthly inspections ensure compliance
> Induction and medical examinations are
required by all contractors before
starting work
> Contractors participate in monthly SHE
meetings at operations.
Safety statistics
Exxaro set a target of zero fatalities, and
an LTIFR (per 200 000 hours worked) of
0,21 for 2010. Despite a steady reduction
in the LTIFR from 0,52 in 2005, actual
d
e
k
r
o
w
s
r
u
o
h
0
0
0
0
0
2
0,5
0,4
0,3
0,2
0,1
0
Fatalities
5
4
3
2
1
0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
performance was 0,25 in 2010. This is a
Tshikondeni in March 2010 when he was
With all but three operations certified, the
record 24% improvement on the LTIFR of
caught between two vehicles in a towing
focus now shifts to maintaining and
0,33 in 2009. In risk-specific terms, the
process. In June 2010, an employee was
improving these standards.
leading cause of injury was lifting and
injured in a fall of ground, and passed
materials handling. The safety of our
away
in December 2010. An autopsy
Notably, Exxaro Reductants received
people remains
fundamental
to our
report from an independent pathologist is
integrated ISO and OHSAS accreditation
business, and we will not rest until we
awaited
to determine whether he
for environment,
risk and quality
achieve our safety goals through collective
succumbed to injuries as a result of this
standards. While ISO 14001 (environment)
responsibility, commitment and ongoing
accident. These cases were thoroughly
and OHSAS 18001 (occupational health
focus.
investigated, and the
lessons
learned
and safety) are corporate requirements,
incorporated into our safety programmes
the Reductants team believed it was
The fatality frequency rate per million
to create an injury-free work environment
equally important to be accredited to the
manhours worked
in 2010 was a
commendable 0,04, compared to 0,07 in
2009. Our target remains zero, as no
ISO/OHSAS certification
In 2010, another operation obtained both
ISO 9001 (quality) standard. This was a
singular achievement, given that plant
commissioning occurred in parallel with
death is acceptable. Despite excellent
international
health
and
safety
accreditation processes.
safety performances at several mines, we
accreditation
(OHSAS
18001)
and
regrettably lost a contractor employee at
environmental accreditation (ISO 14001).
82 EXXARO INTEGRATED ANNUAL REPORT 2010
HEALTH AND HYGIENE
Keeping our people healthy
Occupational health services aim to
> Monitoring and evaluation
The occupational health hazards to
> Consultation, information, instruction
which most Exxaro employees are
protect and promote workers’ safety,
and training
health and wellbeing, improve their
> Continuous improvement.
working conditions and working
exposed are noise and dust, and this is
reflected in the occupational disease
profile. Newly diagnosed cases are
environment.
Business units identify, rank and quantify
submitted
to
the
compensation
their
risks,
and
then
implement
authorities for confirmation that they
Industry
statistics
show
that
programmes to mitigate the
impact.
are work-related, and serve as an early
occupational diseases account
for
Workplace exposures are
linked
to
indicator of the possible occupational
around 50 times more cases than
individuals and this forms the basis of the
disease burden. Accepted cases are
safety-related fatalities.
In addition,
medical surveillance programme.
awarded compensation.
occupational diseases are often slow to
manifest and long lasting, underscoring
the importance of proactive initiatives
to keep workforces healthy.
In line with our drive to achieve zero
harm, our vision for health is to have a
work environment that has no adverse
health effects on our employees and
affected communities.
In 2010, we
reviewed our health and hygiene
strategic framework to improve our
proactive management of health. We
also updated our reporting framework
Health & Hygiene Strategic Framework
5. Consultation,
Information,
Instruction &
Training
REVIEW
EVIE
REEVIEW
ting
r
o
p
e
R
hemical
he
C
C
R e porting
1. Identification &
Classification of
Risks
P
h
y
PLAPLAAAN
PLAN
ANP
s
i
c
a
l
(cid:136)(cid:3) (cid:3)Chemical
Burns
(cid:136)(cid:3) (cid:3)Vapour
Exposed
Diseases
(cid:136)(cid:3) TB
(cid:136)(cid:3) (cid:3)(cid:51)(cid:71)(cid:71)(cid:18)(cid:3)(cid:3)(cid:37)(cid:87)(cid:88)(cid:76)(cid:81)(cid:69)(cid:3)
(cid:52)(cid:83)(cid:77)(cid:87)(cid:83)(cid:82)(cid:77)(cid:82)(cid:75)
(cid:136)(cid:3) HIV/AIDS
(cid:136)(cid:3) Bio-hazards
(cid:136)(cid:3) Chronic Diseases
(cid:136)(cid:3) TB
(cid:136)(cid:3) (cid:3)Other
Communicable
Diseases
R
e
p
o
r
t
i
n
g
2. Assessment
Assess
Su
& Surveillance
to help us track the implementation of
4. Monitoring
& Evaluation
our strategy.
The diagram shows the stressors to
which our employees are exposed and
the health conditions that may arise.
Managing these issues spans:
> Identifying and classifying risks
> Assessment and surveillance
> Prevention and control of risks
R
e
p
o
rting
(cid:136)(cid:3) NIHL
(cid:136)(cid:3) Lung Diseases
(cid:136)(cid:3) Thermal Stress
(cid:136)(cid:3) Fatigue
(cid:136)(cid:3) Radiation
Biological
3. Prevention and/or
Control of Risks
DO
R e p orting
(cid:55)(cid:88)(cid:86)(cid:73)(cid:87)(cid:87)(cid:83)(cid:86)(cid:87)
(cid:39)(cid:83)(cid:82)(cid:72)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)
EXXARO INTEGRATED ANNUAL REPORT 2010 83
HEALTH AND HYGIENE CONTINUED
2009
1 Status report on noise and
2010-2011
1 Review priorities
Status
Strategy revised
2012-2015
1 Review priorities
dust-control programmes
2 50% VCT
2 Track cases with >5% loss
Implemented
2 No cases >10% NIHL
of hearing (shift from
baseline)
3 A total of 200 peer
3 Reduce percentage of
In progress
3 >80% VCT;
educators trained
employees exposed to OEL
dust and fumes
>70% retention on
treatment programme
4 Implement TB standard at
4 70% VCT and 50%
38% retention on treatment
4 >85% TB cases complete
three business units
retention on treatment
programme
treatment
programme
5 TB treatment provided at
2011 audit to assess
5 Reduce new HIV infections
50% of business units
implementation
by 5%
6 Occupational risk and
Under development
6 Reduce indirect costs due
exposure profiling standard
7 Baseline study of indirect
In progress
costs of HIV/Aids
8 Awareness campaign on
In progress
noise, dust and thermal
stress at all business units
to HIV/Aids by 5% from
baseline
Health and hygiene targets
statistics
team include:
> Reduce
NIHL
(noise-induced
> Reached our target of a 70% testing
> Training occupational hygienists on the
> Developed standard for reporting and
management. Projects undertaken by this
hearing loss) to less than 10% loss
rate for HIV.
use of the hearing protection device
tool developed by MOSH (page 86) to
of hearing (shift from baseline) per
individual by 2013
> Reduce compensation costs for
occupational diseases
> Reduce incidence of HIV
> Raise awareness of health and
hygiene programme.
Highlights
> Interdisciplinary approach to health
management implemented
> Pilot site Matla reduced dust levels by
40% in a MOSH project that will be
rolled out to other sites and by other
companies
in the mining
industry
(page 86)
> Introduced early reporting of noise-
induced hearing
loss to proactively
identify and minimise noise exposure to
employees and enable Exxaro to track
the effectiveness of
its
control
programmes
> Revised corporate standard for medical
surveillance
Acknowledging that collaboration across
assist in selecting appropriate devices
departments
is essential
for health
for various employee categories
and hygiene
initiatives
to succeed,
> Refresher training on reading X-rays
during the year Exxaro formalised its
to
identify early markers of
lung
interdisciplinary approach
to health
diseases
management in a forum represented by
> Developing procurement guidelines for
technology,
information management,
selecting equipment based on noise
human
resources and supply chain
levels.
Medical aid
Production changes
Employment benefits
Candidates/recruits
HHHHuman
Humann
rerereeesosososososooururururururu cecececececessssss
resources
New positions
Absenteeism
HHHealth and
eae ltth annnnndddddd
hyhyhyhyyygigigigigigigieneneneneneneneeeeee
hygiene
Transfers
Sick notes
Wellness
Contractors
Contractors
PPE
Equipment
Chemicals
New area
MiMine Mine
plplplplllanananananananninininininingngngngngng
plppp anningggg
PPPrPrPrPrPrPrPrPPrPPrrococococococococococcocococurururururururururururururururu ememememememememememememememememeeneneneneneneneneneneneeneeentttttttttttt
PProcuremennt
New processes
PPrPrPrPrPrPrPrPrPPrPPrrojojojojojojojojojojojojojojojjjececececececececeeceeceeececttttstststsstststststs
Projects
Collaboration across departments essential for health and hygiene to be a success
84 EXXARO INTEGRATED ANNUAL REPORT 2010
Reporting standards
Exxaro has finalised a new management
standard on health and hygiene reporting
criteria across the group. In terms of this
> Assessing
the health
status of
employees by
regularly collecting
relevant health information to detect
adverse health effects at the earliest
Meeting mining sector targets
Dust and noise-reduction targets set by
the mining industry aim to reduce the
number of NIHL and silicosis cases. This
standard, business units will report to the
opportunity and ensure continued
depends on:
executive committee monthly, quarterly
fitness to work
> Minimising noise and dust exposure to
and annually on key health and hygiene
> Enabling management
to
take
below occupational exposure
levels
issues including noise, airborne pollutants,
appropriate and timely corrective action
(OEL)
hazardous chemicals,
thermal stress,
to safeguard the health and wellbeing
> Reducing the time spent by employees
fatigue, biological hazards and radiation.
of employees
in noisy and dusty areas
Detailed monthly reports will provide a
> Improving
risk management
by
> Proper use of personal protective
holistic view of health and hygiene
identifying adverse health effects
equipment.
standards and trends across the group.
among employee groups exposed to
similar
occupational
hazards
Initiatives to reduce noise include:
This will enable management to more
(homogeneous exposure groups)
> Enclosing machines with open cabins
effectively monitor the risk identification
> Enabling employees to be fully informed
> Boxing work benches
and assessment process, comply with
of the risks associated with their work
> Installing silencers on auxiliary fans
legislation and reporting requirements for
and procedures to minimise those risks
> Training.
listed
companies,
and
track
the
implementation of programmes against
set targets.
and prevent occupational diseases
> Identifying occupational disease from
previous and current occupational
Initiatives to reduce dust include:
> Removal of coal crusher at one of our
exposure,
and
referring
affected
sites
Medical surveillance
A new standard was developed in 2010
covering medical
surveillance
of
employees and contractors in terms of the
employees for confirmation of diagnosis,
> Extraction
fans at primary and
treatment
where
appropriate,
secondary crushers
rehabilitation and proper placement
> Use of water in stockpile areas
> Submitting claims for compensation
> Dust suppression on opencast surface
Mine Health and Safety Act (29 of 1996),
where necessary.
roads
Occupational Diseases in Mines and Works
Act (78 of 1993 as amended), Occupational
Health and Safety Act (85 of 1993),
National Nuclear Regulator Act (47 of
1999) and Compensation for Injuries and
Diseases Act (130 of 1993).
> Increased ventilation in underground
As per
legislative
requirements, all
employees and contractors are required
to undergo medical surveillance in terms
sections
> Wet plants
> Training.
of the risk assessment. This spans:
> Pre-employment/pre-placement
medical examination
The objectives of Exxaro’s new risk-based
> Periodic medical examination
medical surveillance standard include:
> Early detection of adverse health effects
> Transfer medical examination
> Out-of-cycle medical examination
and
occupational
diseases
from
> Exit medical examination.
workplace exposure
EXXARO INTEGRATED ANNUAL REPORT 2010 85
HEALTH AND HYGIENE CONTINUED
Case study — Reducing dust at Matla
Exxaro’s Matla coal mine was selected as a pilot site for the mines occupational safety and health initiative, known as MOSH. Given
that the impact of dust is a key issue in preventing silicosis in the industry, the first project at Matla focused on reducing dust both
on surface and underground. In tandem with assessing available dust-suppression systems, Matla initiated a broad and consultative
communication process with employees, facilitated by union representatives.
For the surface installation, the project addressed the high dust load at the plant secondary crushers. Automatically activated, a
micro dust-suppression system produces atomised mist that has reduced respirable and total dust levels by more than 90%.
Underground, previous measurements had indicated high dust levels in intake airways. Using a fogger dust-suppression system at
major points and air-scrubbing technology for airways, bunkers and silos, respirable dust levels dropped over 40% while total dust
was reduced by more than 30%.
Key lessons learned from the pilot site have industry-wide application. These range from the importance of risk assessment to
facilitating communication by involving unions and related associations.
Case studies
Reducing tuberculosis cases at Matla
In 2009, 12 accepted cases of pulmonary TB were from Matla. A three-year analysis of data on results of personal coal-dust levels,
number of TB cases (reported and accepted for compensation) and affected occupations showed a correlation between increased
dust exposure levels and the number of TB cases. The analysis also identified specific problematic work areas and work areas
where personal dust levels were decreasing.
Actions implemented to control or reduce dust levels included:
> Suppression to reduce respirable dust levels
> Investigating new technology for respirators.
In 2010, Matla also had 12 accepted cases of occupational TB. However, two of these were first reported in 2005, which means a
20% decrease in accepted TB cases for the review period.
Reducing cases of noise-induced hearing loss (NIHL) at Matla
Given that around two-thirds of NIHL cases accepted for compensation by Exxaro in 2009 were from Matla, an investigation was
conducted to:
> Determine the proportion of personal noise samples exceeding 85dB(A) over an eight-hour shift
> Identify the number of noise sources and their sound levels
> Identify the number of people exposed to these noise levels and affected occupations.
Corrective action included:
> Identifying priority equipment for replacement
> Supplying customised hearing protection devices to employees exposed to noise levels >90dB(A)
> Conducting hearing conservation awareness campaign.
In 2010 improvement was evident: Matla reported no new cases of NIHL; and had two cases accepted for compensation as opposed
to 11 cases in 2009.
86 EXXARO INTEGRATED ANNUAL REPORT 2010
Occupational diseases
Two
pieces of
legislation
of Mines, unions and Department of
an early
indicator of
the possible
govern
Health
respectively)
for
former
occupational disease burden. These
compensation:
Compensation
for
Occupational Injuries and Diseases Act
(COIDA) and the Occupational Diseases in
Mines and Works Act which provides for
medical benefits for former employees.
Therefore, Exxaro educates employees on
benefits they can access in their own
health management but, more importantly,
focuses on improving their health to avoid
unnecessary or premature loss of life.
Exxaro
is also participating
in a tri-
partite initiative (employers-employees-
government represented by the Chamber
Cumulative occupational diseases
mineworkers to improve access to medical
were occupational TB (52); NIHL (12);
benefits as envisaged by the act. Internally
pneumoconiosis (23); dermatitis (1) and
we will also focus on education and
work-related upper-limb disease (WRULD)
awareness of the benefits of preventive
(1). Tracking this data indicates potential
measures in the workplace for employee
cases that could be compensated and
health and wellbeing, as well as employees
provides an opportunity to reinforce
benefits provided for by legislation.
preventive programmes.
Reported cases are those newly diagnosed
In 2010, Exxaro had 35 occupational
and submitted to the compensation
disease cases accepted for compensation:
authorities to confirm they are work
nine of NIHL, two of pneumoconiosis, 21 of
related and eligible for compensation. In
occupational TB, two of dermatitis, and
2010 Exxaro reported 89 occupational
one WRULD. The five-year trend is shown
diseases (compared to 85 in 2009): this is
below.
s
e
s
a
c
d
e
t
p
e
c
c
A
25
20
15
10
5
0
NHL
Pneumoniocosis
Silicosis
Occupational TB
Lung disease
Dermatitis
WRULD
2006
2007
2008
2009
2010
EXXARO INTEGRATED ANNUAL REPORT 2010 87
the
TB in South Africa
South Africa has
largest
tuberculosis (TB) burden in the world
with 900-1 000 new cases per
100 000 people each year. In this
country,
the high rate of HIV
prevalence (70%) among TB patients
contributes to the death rate of
people with HIV/Aids.
The coal-mining industry’s focus on
TB in recent years is reflected in
statistics well below the industry
level. Of almost 4 500 cases of
occupational TB reported in 2009 by
the mining industry, only 207 were
from collieries. This translates to a
rate of 345/100 000 compared to
900/100 000 in the broader mining
industry.
Some 10 000 new cases of multidrug-
resistant TB occur each year in South
Africa — indicating failure in the
control of TB. Although treatment is
available at primary healthcare
facilities, resource constraints and
other social issues make treatment
supervision and follow-up difficult.
The Chamber of Mines has initiated a
review of TB programmes in the
industry and Exxaro will
mining
review its own programme in 2011 to
assess the implementation of its own
TB management standard.
HEALTH AND HYGIENE CONTINUED
In 2010, there was a decrease in NIHL, but
TB and HIV holistically through better
no decrease
in pneumoconiosis and
surveillance, diagnosis, treatment and
occupational TB. Efforts
to
reduce
monitoring. At each business unit, TB
employees’ high noise exposure continue.
education initiatives reach employees at
There is also increased susceptibility to
least once a year. These
include
TB, possibly fuelled by the increase in the
information on symptoms and
the
number of individuals with compromised
importance of early diagnosis for effective
immune systems. There have been no
treatment. Adhering to this new standard
cases of silicosis.
is expected to reduce the risk of
developing, contracting and spreading
In 2011, Exxaro will concentrate on a
multiple- and extensively drug-resistant
hearing
conservation
programme,
TB in Exxaro. This programme will be
ensuring each business unit has a
reviewed in 2011.
dedicated and functioning committee to
report and investigate incidents of hearing
loss above 5% and to review that unit’s
noise-related procurement policy and
criteria. This will be supplemented by
awareness campaigns across the group
and system
accurate reporting.
improvements
for more
Tuberculosis
New cases of non-occupational TB
increased from 2008 (63) to 2009 (83 out
of 11 180 employees). In 2010, there were
30 new cases. The new TB standard issued
for the group in 2009 to ensure uniform
and comprehensive management of
employees with TB has been implemented.
This disease remains a focus for Exxaro’s
health and hygiene team, given the scope
Number of TB cases
100
80
60
40
20
0
2008
2009
2010
of related risks, including:
> Spread of TB in the communities where
Areas for improvement that will influence
the number of TB cases will be identified
employees and contractors live
from the TB programme audit conducted
> Significant risk of co-worker infection
in 2011. Ensuring early enrolment of HIV-
(10 to 18 people are infected by one
positive employees onto
the HIV
active TB patient)
management programme will also ensure
> The high prevalence rate of HIV (which
early
identification and treatment of
compromises
individual
immune
patients co-infected with HIV and TB.
systems) is a known risk factor for
developing TB, therefore TB and HIV/
Aids programmes need to be reinforced
H1N1 (swine flu)
There was one recorded case of H1N1 in
> Workplace exposure to mining dust is a
Exxaro in 2010 compared to three cases
contributing factor to TB.
reported across the group in 2009. The
individual was treated and recovered fully.
Given the dramatic increase in TB rates in
Exxaro will continue to monitor and
South Africa and in the mining industry in
manage potential risks as the flu season
recent years, it is important to manage
approaches.
88 EXXARO INTEGRATED ANNUAL REPORT 2010
HIV/Aids
Material issue — healthy people
While there is effective treatment for people infected with HIV, the disease is running
rampant globally, with two-thirds of the HIV burden being in sub-Saharan Africa.
More than 33 million people are estimated to be living with HIV (including 2 million
children) — 5,7 million of these are in South Africa, the highest prevalence in the
world. Mining is one of the industries bearing the brunt of Aids-related deaths (along
with transport, heavy construction, agriculture and fishing). A recent report from
the Actuarial Society of South Africa estimates the mining industry’s Aids-related
death costs at 3,4% of total salary cost. The society believes that without the rollout
of anti-retroviral programmes and other initiatives, associated insurance claims
could have reached R3 billion in 2010 instead of the R2,4 billion paid out. At Exxaro,
we have devoted considerable time and cost to educating our people about this
pandemic and the latest results are indeed encouraging. With appropriate counselling
and support, 70% of our workforce has now been voluntarily tested and the numbers
enrolling on treatment programmes are rising steadily.
The prevalence of HIV/Aids across Exxaro
is currently estimated at 13%, compared
to 25% across the industry. At the end of
2010, we had reached our target of a 70%
testing rate for HIV, reflecting the impact
of extensive campaigns to inform and
counsel employees ahead of testing. Our
target for 2011 is to have 75% of our
employees participate
voluntary
counselling and testing.
in
Other initiatives include:
> Peer educators are supported each
month in sessions for debriefing and
training
> Exxaro has started a programme to
destigmatise HIV/Aids in the group and
encourage employees to enrol on the
HIV management programme and
access treatment timeously
> The projected number of HIV-infected
people not enrolled on the treatment
programme
is tracked monthly to
encourage 13% of Exxaro employees
(projected to be HIV positive) to enrol
on the HIV management programme.
> Ongoing awareness campaigns help
the
group employees understand
importance of their HIV status and
information for appropriate
provide
lifestyle choices such as
joining a
treatment programme or keeping their
status negative.
has
initiated
Community HIV programme
Exxaro
community
programmes at Arnot, Leeuwpan and
North Block Complex, which will be rolled
out to three other sites (Inyanda, Matla
and New Clydesdale) in 2011.
situational analysis
Following a
in
communities around each of the business
units, groups were identified for HIV/Aids
training. The aim
is to provide HIV
education and encourage related testing
in communities around our business units
to foster:
> Lower-risk lifestyles
> Increased access to available ARV
treatment programmes
> An overall reduction in HIV/Aids-related
stigma that makes it easy for our
employees to openly discuss their
status both within the company and
outside, and support existing initiatives.
Arnot has completed training the first
group of 35 community peer educators
from the Mafube, Beestepan, Mooifontein
and Rietkuil communities. Community
learners were enthusiastic and talked
openly about many of the problems facing
the community, including the difficulty in
talking to their children about HIV/Aids
issues. For an HIV/Aids programme to
from all
it needs support
succeed,
The statistics show Exxaro is making
headway in its fight against the
spread of HIV/Aids. Since December
2008:
> 10 376 people have attended HIV
training
> 9 319 (90%) were counselled
> 8 696 (84%) were tested and
8 343 (80%) know their status
> 3 933 had never tested before
(or not in the prior two years)
> 1 163 tested HIV positive; and
583 (50%) were testing for the
first time
> 7 483 tested HIV negative; and
3 317 (40%) had never tested
before
> 115 more people enrolled onto the
HIV management programme in
2010, bringing the total to 448
> 323 are on anti-retroviral treatment
stakeholders
in the community who
represent religious, cultural and moral
values:
> Community members highlighted the
link between HIV and poverty, alcohol
lack of
abuse, migrant
education
labour and
> One learner said “There is a need for a
coordinated and robust programme that
delivers
life skills programmes. Our
culture might have made us who we are,
but who we become is up to us”
> Many learners recognised they needed
to become HIV ambassadors in their
their own
community and within
families. One learner stated “This course
is going to build a strong relationship
between me and my family because we
will understand the danger of HIV”.
three
traditional
At Leeuwpan, HIV/Aids training will be
provided to three groups: 35 community
members,
health
practitioners and 40 caregivers from the
Ekhukhanyeni Drop-in Centre near
Leeuwpan. The centre provides cooked
meals for orphans and vulnerable children,
home visits and referrals for chronically ill
conduct
patients.
caregivers
The
EXXARO INTEGRATED ANNUAL REPORT 2010 89
HEALTH AND HYGIENE CONTINUED
awareness campaigns and training on
various wellness
topics. They are
monitored by a supervisor who conducts
audits. Caregivers have no formal HIV/
Aids training and little training in first aid.
They have 379 patients on their database
and about 70 orphans.
> Management consultations
> Personal emotional: In 2010 depression
has been a particular challenge for
employees across Exxaro’s operations —
we believe this is a stark reflection of
the impact of two years of economic
turmoil
and
tests
units
business
Wellness
Most
arranged
in 2010. Service
wellness days
providers conduct different health-
screening
advise
participants on lifestyle issues. These
days are open to employees, family
members
broader
community. Although participation is
voluntary, attendance is very good
and contributes to the effectiveness
of our wellness programme.
and
the
safety, production requirements and the
company’s values. We recognise that
employees and their families face a range
of chronic and life-threatening diseases
with social and financial implications. We
strive to minimise these
implications
through our comprehensive and proactive
employee wellness programmes.
> Work-related reasons
> Financial: Again reflecting the economic
climate, some 1 900 of our people have
garnishee and maintenance orders
deducted from their monthly pay. On
average, affected employees are each
paying R470 monthly against these
orders. Every effort is being made to
help
their
obligations and regain their financial
footing.
these employees
fulfil
Exxaro is aware of social, psychological
and mental health challenges and has
programmes in place at all business units
to manage
these challenges both
reactively and proactively.
Exxaro also has a programme focusing on
executive wellness. This consists of a
holistic assessment as well as general
support to the executive team.
The importance of employee wellness is
recognised in terms of ethical, legislative,
empower
programmes
Wellness
employees to manage their own wellbeing
by raising awareness and disseminating
information through work-site posters,
booklets, an annual wellness calendar, and
wellness days at business units that
include health screenings.
Exxaro’s HIV/Aids service
Exxaro’s HIV/Aids service offers employees support focused on four key areas:
Prevention:
> Employees are trained and offered the opportunity to test for HIV
> Peer educators are trained and supervised in conducting prevention programmes
and providing information to colleagues
> Condom distribution.
Detection:
> Voluntary HIV testing.
Treatment:
> Employees who test positive for HIV can enrol on a treatment programme through
their own medical aid, or through Exxaro’s outsourced service provider.
Care and support:
> A service provider call centre stays in touch with people registered on the
programme
> Trained peer educators provide information about HIV/Aids to colleagues
> Health professionals are available on-site to provide technical support to peer
educators.
At North Block Complex, HIV/Aids training
and support will be provided to two
existing projects
in the Siyathuthuka
community just outside Belfast:
> The Impilo Ende coal yard — provide HIV/
Aids training to members of an existing
project sponsored by North Block
Complex
> Sizimisele Home-based Care which has
been operating since 2006. A team
of 12 caregivers provides Siyathuthuka
community with home-based care
services and HIV/Aids awareness. They
assist around 90 patients with chronic
diseases and also provide services for
orphaned and vulnerable children, TB
patients
are
schoolchildren and old people who
cannot take care of themselves).
of whom
(some
Employee wellness
To ensure support for any of our people
experiencing difficulties, an employee
assistance programme provides access to
an external counselling service. The
is a preventive measure
programme
that helps employees take the necessary
steps to manage personal concerns,
and assists management in minimising
productivity issues.
The overall objective is early identification,
referral and resolution of personal and
work-related problems before they affect
job performance and productivity. To
achieve this, various role players are
trained to recognise and deal with
personal issues that may be affecting a
staff member’s work performance and
provide guidance on how to use the
employee assistance programme as a
management tool.
the
employee
During the review period, our people
accessed
assistance
programme service for the following
reasons in order of priority:
> Couple and family issues
> Dependency
90 EXXARO INTEGRATED ANNUAL REPORT 2010
ENVIRONMENT
Disclosure on management approach
Exxaro’s core focus is on conserving natural resources and reducing the burden of pollutants on the environment by:
> Minimising the use of natural resources
> Complying with all statutory environmental requirements as a minimum and actively participating in all non-statutory
environmental compliance requirements such as the Carbon Disclosure Project and its new water disclosure initiative, among
others. Our aim is to exceed statutory compliance
> Developing innovative policies and programmes for addressing environmental impacts and use of natural resources.
All Exxaro’s South African operations have environmental management programmes (EMPs) as required under the Mineral and
Petroleum Resources Development Act (MPRDA) and the National Environmental Management Act (NEMA). While a record number
of integrated water use licences were approved in the review period, the Department of Water Affairs directed the Arnot Mooifontein
open-cast operation to cease using a haul road constructed over a water course. The Department of Mineral Resources directed
North Block Complex’s Glisa operation to update and submit its EMPR. Both directives have been fully complied with. North Block
Complex’s EMP is being updated to align all activities with environmental management plan reporting requirements, while the EMP
amendment to Arnot’s Mooifontein operation is being considered by the authorities. All EMPs are key indicators in ensuring that
Exxaro remains a sustainable business. Exxaro also adopts the precautionary principle entrenched in NEMA in evaluating all the
environmental impacts of business opportunities.
To enhance implementation of these legal requirements and the sustainable use of natural resources, group standards for air
quality management, water management, biodiversity management, rehabilitation and mine closure management, and incident
management were implemented in 2010.
A strategic review of key environmental risks from Exxaro’s mining activities in 2009 highlighted:
> Air quality management, water quality management, water security and surface disturbance
> Cost of, and provision for, environmental liabilities
> Lead time for securing environmental authorisations
> Increasing statutory and non-statutory environmental requirements.
Exxaro believes conservation is becoming increasingly important, given the enormous value of biodiversity and tourism to the
South African economy. Accordingly, Exxaro intends to be a mining company that leads by example in protecting, enhancing and
conserving the country’s biodiversity and demonstrating that mining activities can co-exist with world-class biodiversity
conservation initiatives. That way, we ensure the right of future generations to a healthy, complete and rich environment.
Under this policy, various conservation measures are being implemented that underscore Exxaro’s commitment to entrench duty-
of-care principles.
EXXARO INTEGRATED ANNUAL REPORT 2010 91
ENVIRONMENT CONTINUED
Exxaro’s green timeline
2011
> Continue to develop cleaner energy initiatives encompassing a combination of co-generation, carbon credit trading,
renewable energy, coal-bed methane development and coal base load projects.
2010
> Exxaro participated in the inaugural CDP water project
> Record number of integrated water use licences approved
> Major water management programme introduced
> Sophisticated fume-extraction system installed at Namakwa Sands, with noticeable reduction of visible fumes
> Final feasibility study under way on using furnace offgas to co-generate electricity
> Developing renewable energy projects
> Exxaro pays R912 million for electricity
> Group budget for energy and carbon management programme is R9 million — programme broadened to focus on
climate change and associated risks
> Exxaro involved in industry engagement on future policies.
2009
> Exxaro pays over R600 million for electricity
> Energy and carbon strategy framework approved
> Exxaro participates in SA Research Centre for Carbon Capture and Storage with local and international partners
> Exxaro score in CDP leadership index improves 9 percentage points
> Comprehensive response developed to energy, carbon and climate change management to enable and achieve the
group’s vision.
2008
> South Africa realises the extent of its energy crisis
> Energy efficiency forum established, champions at each business unit
> Exxaro places fifth in South Africa’s CDP leadership index chapter for the energy-intensive sector
> Exxaro sponsors Unisa Chair in Business and Climate Change for three years
> Exxaro spends R460 million on electricity.
2007
> Carbon emissions reported for the first time (1,9 million tonnes of CO2e)
> Exxaro spends R358 million on electricity.
2006
> Electricity highlighted as a major cost to the group
> Exxaro adopts Energy Efficiency Accord.
92 EXXARO INTEGRATED ANNUAL REPORT 2010
Feature case study — Grootegeluk expansion illustrates Exxaro’s approach to environmental impact
The energy-efficiency goals set by the Department of Mineral Resources were analysed and incorporated into the housing plans.
One of the key points to consider was that, wherever possible, the efficient use of renewable energy (such as solar water heating,
solar architecture, and energy-efficient appliances) had to be used. The houses were carefully planned with the following features:
> Units face north-east, between trees for better temperature regulation and efficient lighting
> Houses have insulation for better temperature regulation to save on energy costs
> Grey-water recycling — recycled water used for toilets, gardens and washing cars, etc
> House built with overhanging roofs to capture rainwater that can be used for cooking, washing and gardening
> Solar systems to heat water, save electricity and reduce greenhouse emissions.
EEEEEEEEEEEEEEEEEEEEEEEEXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXAAAAAAAAAAAAAAAAAAAAAAAAAAARRRRRRRRRRRRRRRRRRRRRRRRRRRRROOOOOOOOOOOOOOOOOOOOOOO LLLLLLLLLLLLLLLLLLLEEEEEEEEEEEEEEEEEEEEEEEEEEPPPPPPPPPPPPPPPPPPPPPPPPPPPPPHHHHHHHHHHHHHHHHHHHHHAAAAAAAAAAAAAAAAAAAAAAAAALLLLLLLLLLLLLLLLLLLLAAAAAAAAAAAAAAAAAAAAAAAAAAALLLLLLLLLLLLLLLLLLLEEEEEEEEEEEEEEEEEEEEEEEEEE GGGGGGGGGGGGGGGGGGGGGGGGGOOOOOOOOOOOOOOOOOOOOOEEEEEEEEEEEEEEEEEEEEEEEEESSSSSSSSSSSSSSSSSSSSSSSSS GGGGGGGGGGGGGGGGGGGGGGGRRRRRRRRRRRRRRRRRRRRRRRRRRRRREEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNN
EXXARO LEPHALALE GOES GREEN
EXXARO LEPHALALE GOES GREEN
EEEEEEEXXXXXXXXXXXAAAAAARRRRROOOO LLLLLLEEEEEEEPPPPHHHHAAAALLLLLLAAAAAAALLLLLEEEEEEE GGGGGGOOOOEEEEEESSSSSSS GGGGGGRRRREEEEEEEEEEEEENNNNNN
Houses positioned
between trees for shade
Evaporative
cooling system
Solar panels
heating up
water
Hot air escaping
through louvres in roof
Reuse
rainwater
captured in
watertank
Shade provided on walls
with big roof overhang
Green housing
The purpose of the project was to build eco-friendly houses that did not rely on electricity supplies as their main sources of energy,
guided by the following objectives:
> Construct 797 housing/flat units of mixed architectural design, combining eco-friendly, renewable energy and ordinary building
techniques to satisfy Exxaro’s housing needs.
> Create a specific mix of housing types and location to ensure affordability across the range of income groups in the group.
> Complete the project within the time, cost and quality constraints determined by Exxaro.
> Ensure housing units meet the energy-efficiency goals set by the Department of Mineral Resources. These goals include energy
savings for buildings.
> Housing units should comply to all relevant legislation.
> Endeavour to use local resources to promote economic growth and skills development: 50-70% local labour to be trained in key
construction skills by the end of the project.
> The project was governed by Exxaro’s BEE policies: contract awards had to comply with strict broad-based black economic
empowerment codes.
Prior to embarking on the Lephalale housing project, Exxaro piloted five eco-friendly houses in nearby Marapong. Sustainability
aspects addressed included piloting environmentally friendly building materials and appliances, such as eco-friendly bricks, zinc-
fuel battery systems to power lights and small electrical appliances, to prove their cost-effectiveness for future Exxaro housing
projects and the provincial housing department.
In addition, to meet housing demand in the area, Exxaro initiated the Lephalale Development Forum in conjunction with Eskom,
Sasol, all levels of government and local stakeholders. The forum concentrates on infrastructure, housing, education, health and
welfare services, sport and recreation facilities.
EXXARO INTEGRATED ANNUAL REPORT 2010 93
ENVIRONMENT CONTINUED
Feature case study — Grootegeluk expansion illustrates Exxaro’s approach to environmental impact
continued
A compliance certificate was submitted with building plans for approval from the Lephalale Municipality.
This project cuts across all sustainable development areas. In the social arena, it offers mixed and affordable housing types;
environmentally there is reduced requirement for energy and water; while economically it has provided skills training and small
enterprise development.
In maximising the impact of a R590 million budget, the project also provided a number of benefits to the community and Exxaro
employees:
> In Marapong, 24 direct jobs were created in constructing the eco-friendly houses and there were 101 indirect beneficiaries
> In Lephalale, 1 124 employees were housed in mixed-use houses and flats
> Green alternatives were incorporated in building these houses and flats. Energy savings are estimated at 2 334MWh per annum,
at 2 400 tonnes CO2e
> Of 1 023 contractors, 50% were from the local community (many of whom first had to complete artisan training offered by Exxaro
and the European Union to build the required base of skills)
> The project has constructed infrastructure for Lephalale Municipality to support the housing units — including roads, water
recycling systems
> In Grootegeluk, 41 people were trained and mentored in-house on road construction and brick-making
> Entrepreneurial training has been offered by Exxaro to those showing interest
> Exxaro has funded an upgrade of the water reticulation and sewerage system in Grootegeluk
> There has been a significant improvement in infrastructure at Lephalale which will contribute to its maintenance and growth
> The community is more environmentally responsible.
2011
2012
2012 — 2015
1 Develop and implement air quality
Review priorities
1 Review performance on air-quality
Review priorities
1 Exxaro-wide strategic environmental
management plans — Inyanda, KZN
management plans for Grootegeluk,
risk assessment
Sands and Zincor
2 EIA-EMP amendments (14)
3 Eight site-closure reviews
New Clydesdale, Matla
2 Water business case implementation
2 Review performance on integrated
3 Review implementation of closure
water-use licence for Namakwa Sands,
activities at mines in closure
4 Ferroland divestment (Gravelotte and
Arnot, North Block Complex, Glisa,
4 Environmental liability management
Hlobane)
Grootegeluk and selected projects
process (EERF, Arnot-Matla)
5 Approval of closure EMPR for Hlobane
3 EIA-EMP amendments
6 Develop and implement integrated
4 Ferroland divestment from Hlobane
water-use licence (Glen Douglas,
and Gravelotte
Tshikondeni opencast and
Eerstelingsfontein project)
5 Biodiversity action plans — Arnot-
Matla, North Block Complex,
7 Assurance preparedness — all findings
Grootegeluk, KZN Sands, Namakwa
8 Biodiversity action plans
Sands, Rosh Pinah
6 Roll out of recommendations from the
water business study
7 Implementation of closure activities at
Northfields and KZN Sands according
to plan
8 Transfer of Glen Douglas
environmental provisions to new
owners Afrimat
9 Approval of closure EMPRs for
Durnacol and Hlobane
Most of these have at least a 12-month cycle
Key: EIA — environmental impact assessment; EMP — environmental management plan; EMPR — environmental management plan report; EERF — Exxaro
environmental rehabilitation fund
94 EXXARO INTEGRATED ANNUAL REPORT 2010
Highlights
> Water
management
management programme was finalised,
> Waste management (domestic waste
programme
drawing on internal and external expertise,
and industrial residues)
introduced, supported by revised policy
and funds approved for implementation.
> Water and salt balances
and management standard
The programme is based on a wide-
> Monitoring and auditing systems.
> Group standards implemented for air
ranging group water management policy
quality management,
biodiversity
management, rehabilitation and mine
closure management, and
incident
management
and standard, and includes Exxaro’s waste
The aim of this comprehensive programme
management activities through integrated
is to achieve responsible and sustainable
water and waste management plans being
water management use across Exxaro.
developed for each business unit that
The programme will concentrate on
> Exxaro in top three mining companies
encompass:
relevant water-risk issues — from security
on carbon disclosure standards in South
Africa and participated
in the first
water-disclosure
initiative
issued by
> Quantitative impact assessment and
of supply and water efficiency to water-
prediction of future impacts (pollution
cost management — and manage these to
sources and receiving environment)
ensure current and future anticipated
global body, Carbon Disclosure Project
> Water supply
regulatory compliance. Exxaro also plans
(CDP).
> Water resource conservation and/or
to create awareness of water
issues
> Record integrated water use licences
reuse and reclamation
through communication and training, and
approved
> Storm water management
wider competency in water-management
> Process water management
issues
through
research and skills
New water management
programme
Water management is a material issue for
Exxaro. During
the year a water
> Water treatment
> Pollution control dams
> Groundwater management
development. Initial areas of focus include
reporting and assurance, measurements
technology solutions and
and data,
management principles.
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Regulatory and Stakeholder Requirements
tory and Stakeholder Requ
RRRRRRRRRRReeeeeeeeeeeggggggggggguuuuuuuuuullllllllllaaaaaaaaaaatttooorrrryyy annndddddd SSSStttaakkkeeehhhhoollddeeeerrrrrrr RRRRReeeequuuuuuuuuuiiiiiiiiiirrrrrrrrreeeeeeeeeemmmmmmmmmmmeeeeeeeeeeennnnnnnnnnnttttttttttssssssssss
Exxaro Strategy
Vision, mission and values
S & SD Strategy
Water Strategy, Policy,
and Standards
d
e
n
c
Reportin g a
Assura n
Risk R
e
s
p
o
n
s
e
Water and Cost
Management
Supply, Effi ciency, Waste, R e h a b
Measurements
and Data
Compliance
House in order, Main t a i n
Technical
Guidelines
Operational and Pro j e c t
s
Technology
Solutions
Business
Opportunities
Water as commod i t y
Knowledge, Skills, Competence and Researc h
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EXXARO INTEGRATED ANNUAL REPORT 2010 95
ENVIRONMENT CONTINUED
Material issue — Water use
For any company to truly understand its water use, and the impact of its activities on water, measurements and data on quality,
quantity and cost are essential. Exxaro’s data on the first two factors is relatively well established, and processes are being
strengthened to ensure that cost is a standardised reporting indicator across our business units.
Exxaro is investing in systems to more accurately measure water withdrawal by source at each operation. This will in turn provide
a better understanding of our broader impact (water withdrawal, reduced access to water, loss of natural water resources, reduced
agricultural activity) and our specific environmental impact (withdrawal impact on source, potential lowering of water table, reduced
flow, draining of wetlands, downstream activities).
The group is also enhancing systems to measure total water discharge by quality and destination. This will enable us to address
specific impacts of water discharge on the receiving environment, as well as other environmental issues around quality and quantity
(including total dehydration of source, loss of wetlands and associated fauna and flora, degradation of the quality of the resource
due to pollution).
To determine the level of reporting maturity on these factors across our operations, site visits began with Grootegeluk, Exxaro’s
largest operation.
Reportable data types
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Data categories
Data categories
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Quality
Raw data
Primary data
Volume
Source
Estimations
Secondary data
• Evaporation
• Seepage
• Production
• Losses
• Recharge
• Dust suppression
• Chemistry
• Biodiversity
Two quality aspects,
1) Chemical composition, and
2) Impact on environment.
• Processed
• Potable
• Seepage
• Rainfall
• Dams
• Rivers
• Boreholes
Has characteristics
associated with each source
type.
Some water data is acquired using estimations, since
direct measurement is not possible or practical.
Derived
Tertiary data
Water used
Total water used is derived from a combination of the
primary and secondary data categories.
• Ground water
Water volumes can be broadly grouped into
ground and surface. Both are required to
calculate the total water salt balance.
Volumes
• Surface water
Quality
Costs
• Total water salt balance
The data required for water management reporting was discussed.
It can be categorised into three areas. Some sub-categories can
represent both water inflows and water outflows, for example
‘seepages’.
96 EXXARO INTEGRATED ANNUAL REPORT 2010
A steering committee of subject-matter
> New Clydesdale Colliery
experts, environmentalists and members
> KZN Sands (Fairbreeze)
of senior management reports to the
> Zincor (NRDF)
Exxaro executive committee and board
> Inyanda
sub-committee for safety and sustainable
development.
The
programme
is
While Exxaro already reports on water
supported by a stakeholder engagement
issues against relevant GRI indicators as
and communications process that will be
well as UN Global Compact principles, and
rolled out in 2011.
the
ICMM
sustainable development
framework, standardised processes will
One of the early successes of the
enhance data from the new financial year.
programme
was
Exxaro’s
recent
submission to the first CDP Water
During the year, some environmental
Disclosure, a voluntary but detailed
groups raised issues with the JSE and in
submission on water-related data that will
the media about mining companies’
provide valuable insight into the water
compliance with environmental standards,
strategies of many of
the
largest
and particularly about whether JSE
companies in the world.
standards for membership of the Socially
Responsible Investment index needed to
Water licensing
Most of Exxaro’s operations have their
the
raised. Exxaro was among
be
companies singled out for attention, citing
water use authorised under the old water
the alleged lack of water licences at
act. However, all operations have since
specific
operations
and
allegedly
had their integrated water-use licences
unauthorised mining operations
at
(or IWULs) submitted to the appropriate
another. Exxaro was able to prove to the
authorities for consideration and approval.
JSE that the required water licences had
Tshikondeni mine and mine pit expansion
been issued, and that no unauthorised
was the first Exxaro operation to receive
mining activities were being undertaken
an integrated water-use licence — the
at Arnot’s Mooifontein section. In addition,
culmination of detailed consultation with
Exxaro was able to prove that an
authorities. Licences have since been
innovative solution was being implemented
approved for:
> Grootegeluk mine
at Matla to preserve and minimise mining
impacts of the wetland (right).
> Grootegeluk mine: Medupi expansion
project (GMEP)
> Char plant
> Matla mine
> Matla mine river diversion project
> North Block Complex
(Eerstelingsfontein)
Exxaro has
a proven
record of
environmental
conservation
and
management, as illustrated in case studies
in this report.
Case study — Limiting wetland
damage at Matla
Exxaro’s planned expansion of
underground operations at Matla
coal mine in Mpumalanga will enable
the group to increase capacity and
supply the Eskom power station while
preserving the ecologically sensitive
and valuable wetland systems on the
province’s Highveld.
This unique wetland project combines
an adaptation of the mining model
with a 14km diversion of the Rietspruit
River, a tributary of the Olifants River
which in turn is a major water source
for several mines
in the area,
including Exxaro’s Inyanda mine and
New Clydesdale mine.
As a result of the controlled impacts
of mining and controlled water use,
the flow and functioning of the
Rietspruit ecosystem has been
maintained and
its biodiversity
protected. We believe this is a good
example of mining innovation and
nature working together: at Matla, we
are going below the wetland using
undermining, a technique typically
used when a mine extends under a
building, roadway or town.
To date, Exxaro has spent R31 million
on constructing the river diversion
and another R1 million on monitoring
biodiversity in the wetland project.
Monitoring will continue until 2017
when mining ends at Matla. However
we will continue to monitor the
performance of the wetland for a
further three years after mining has
ceased
to
record
post-mining
conditions. Should results be positive
after this period, monitoring will be
stopped.
EXXARO INTEGRATED ANNUAL REPORT 2010 97
ENVIRONMENT CONTINUED
Water efficiency projects
Business unit
Description
Grootegeluk
In pit storage of stormwater run-off for plant utilisation (after pH neutralisation plant to avoid corrosion)
Dewatering of the Basalt aquifer and re-use as process water
The Basalt aquifer is fed mainly by seepage from the unlined pollution control dams, stockpile areas and
slimes facility
Water recovery from the slimes disposal facility is re-used as process water
The beneficiation plant at Grootegeluk mine expansion for Medupi (GMEP) has been designed to be zero-
effluent in terms of water
Matla
Arnot
Excess water from underground is being considered for distribution to Eskom as process water
No formal water reclamation used in plant plan in place
Leeuwpan
Water recovery from the slimes disposal facility
Inyanda
Water reclamation from the slimes facility is used as process water
Storm water run-off recycled and re-used via the process water dams
Stormwater run-off from the plant area is captured and returned to the plant for re-use
Pit water from groundwater flow and run-off is pumped back to the dirty-water facilities for re-use
Tshikondeni
Slimes disposal with percolated water recovery for re-use in the plant area
Stormwater run-off at the plant area is recycled back as process water
Pit stormwater run-off is used for dust suppression
North Block Complex
Excess water from pit and stormwater run-off is collected in pollution control dams for dust suppression
Zincor
Rainwater collection from roofs is used to augment process water
Glen Douglas
KZN Sands
Borehole abstraction used to draw back pollution plume and augment process water
Stormwater run-off into opencast areas used as process water in the plant area
Reclamation of rainwater to augment water from Umgeni Water
Seepage and run-off at CPC is collected and used as process water
Namakwa Sands
Seawater is used as process water
Process water is recycled from the disposal facilities and re-used in the plant
Projects are now being tracked through the water steering committee
Total water withdrawal by
source
Given the growing demand for water and
scarcity of this natural resource in an arid
South Africa, Exxaro is concentrating on
optimising its water use by reusing and
reclaiming contaminated water to the
fullest possible extent. In doing so, Exxaro
process, Exxaro will regularly update its
can minimise raw-water abstraction.
operational water balances and develop
system changes to minimise consumption
It is a permit condition for water use
of raw water while preventing losses from
licences to be audited; these audits will be
the water reticulation system.
coordinated
through
the new water
management programme. As part of this
98 EXXARO INTEGRATED ANNUAL REPORT 2010
Water withdrawal by source
l
k
c
o
B
h
t
r
o
N
l
x
e
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Source
Municipal,
boreholes
Unwa Dam,
boreholes
Municipal
NAM-Water
Municipal,
boreholes,
rainwater
harvest
Municipal
(Waterboard
— River
abstraction)
Major
climatic
region
Temperate
Highveld
region
Tropical
summer
rainfall area
Temperate
Highveld
region
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Temperate
Highveld
region
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east coast
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a
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(Western
Cape
seawater);
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(Smelter)
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t
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Source
Eskom
a
s
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Municipal,
boreholes
Major
climatic
region
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region
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Eskom
boreholes, pit
(Mpumalanga),
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(Mpumalanga)
water
Tropical
summer
boreholes
Temperate
Temperate
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Highveld
rainfall area
region
Highveld
region
Highveld
region
Highveld
region
Consumption per business unit (000m3)
30
25
20
15
10
5
0
Hazardous waste management
In 2010, a multi-disciplinary task group
incidents and to keep personal radiation
exposure limits as low as possible. The
was formed to focus on developing
an
integrated approach to managing
air, water and biodiversity. Detailed
action plans should be finalised in 2011.
A
company-wide policy on waste
management will be finalised in 2011. This
will address material issues, such as the
avoidance, minimisation, management
and disposal of hazardous as well as
general waste generated from Exxaro
group complies with the conditions of
applicable authorisations and limits set by
the
International
Commission
on
Radiological Protection or
ICRP. This
includes developing an appropriate policy,
implementing
radiation
protection
programmes to protect workers and
members of the public, and enforcing an
emergency preparedness policy
that
spans transportation and physical security
operations.
procedures.
2008
2009
2010
Radioactive materials are a potential risk
at KZN Sands, Namakwa Sands and Zincor.
Exxaro aims to have zero radiation
To date, there have been no breaches of
Exxaro’s licence conditions issued by the
National Nuclear Regulator for radioactive
waste.
EXXARO INTEGRATED ANNUAL REPORT 2010 99
ENVIRONMENT CONTINUED
Energy and climate change
Management approach
Given that energy and climate challenges are broad, and potential solutions complex, Exxaro is simultaneously addressing three
imperatives: energy security, economic productivity and environmental impact.
To remain competitive and sustainable, Exxaro is dealing with potential energy shortages, rising costs of energy, climate change
and related environmental concerns as imperatives in the group’s long-term business strategy. A dual approach is currently being
implemented:
> An energy and carbon management programme is addressing mitigation and adaptation issues
> Exxaro is evaluating and developing a growth pipeline of environmentally friendly energy projects.
These two programmes are linked by Exxaro’s drive to become carbon neutral and the need to thrive in a low-carbon economy.
Risks and opportunities of climate change
Following an independent physical climate-risk assessment of Exxaro’s operations in southern Africa in early 2009, the key risks to
the group from climate change are floods, droughts, heat, disrupted transport infrastructure and increased vulnerability of local
communities and workforces. The possible implications are outlined below:
> Flooding
— Infrastructure damage leading to production losses
— Pit and dam flooding causing contamination of clean water and operating licence transgressions
— Deterioration of product quality.
> Drought
— Water scarcity and increased cost of water for the whole region
— Increased cost of land management — fauna, flora and rehabilitation
— Increased fire hazards
— Higher demand for dust suppression.
> Heat
— Fatigue from heat, humidity and dehydration leading to increased accidents
— Evaporation from dams will upset mine water balance
— Skills retention and talent management in unattractive environment.
These risks, and related opportunities, were integrated into a climate change response strategy that requires an internal and
external approach.
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••• Energy planning
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Data collection and
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100 EXXARO INTEGRATED ANNUAL REPORT 2010
Energy and carbon management programme
The energy and carbon management strategy drives the programme shown below. It deals with both operational management and
energy project development and has six focus areas.
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Energy and carbon
footprint data
Management and
monitoring processes
and systems
Energy consumption
management
Consumption
management platform
Energy trading
platform
A platform for
electricity trading
(PCP/RTC, cogen and
renewables)
Energy efficiency
improvement
projects
Energy efficiency
improvements and
current operations
Energy and
carbon efficiency
specifications for
capital projects
Energy and carbon
efficient capital project
implementation
Becoming carbon
neutral
Clean energy project
implementation
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Reporting
Assurance
Regulatory and stakeholder requirements
Exxaro has consolidated its approach to
clean energy at group level in recent
years. The 2007 strategic map included
initiatives
around
the
regulatory
environment,
energy
efficiency,
implementation of cleaner technologies
and reputational issues to thrive in a low-
carbon economy. In 2009, this map was
further refined to
include a strong
supporting programme.
In 2010, the focus has been on high
energy-consumption areas, specifically
electricity consumption. This
includes
special attention to items such as electric
motors, lighting, water heating, conveyors
and HVAC (heating, ventilation and air-
conditioning). By questioning basic design
and use factors, the energy teams have
already made headway in all these areas.
As an example, preliminary results on a
conveyor installation at Grootegeluk show
an efficiency saving of 25% — far above
what was expected at concept and
feasibility stage.
These initiatives will in time be expanded
to other business units including other
sources of energy such as diesel,
illuminating paraffin and petrol. This will
The next step will be to critically evaluate
facilitate an accurate measure of total
current
plant
processes. Continual
energy use from all sources across all
improvement is embedded in Exxaro’s
business units, and how this relates to
culture and we believe there is solid
production measurements such as run-of-
potential to increase energy efficiency
mine tonnes, making it easier to effectively
and reduce emissions through operational
compare and measure energy efficiency.
and process improvements.
Case study: Namakwa Sands
The largest consumers of electricity at Namakwa Sands are the arc furnaces,
accounting for over 90% of the electrical energy used at the smelter plant. Using
furnace off-gas to generate electricity is one of the biggest opportunities for this
business unit to become more energy efficient. The project is at feasibility stage and
all indications are that, once complete, it could generate around 13MW.
Case study: Grootegeluk
Despite difficult test work to prove the technology, the Grootegeluk energy
champions successfully implemented a variable speed drive pilot project. A conveyor
installation direct-on-line starter was replaced by a variable speed drive, with an
energy efficiency saving of 25%. With appropriate funding participation, Exxaro
plans to roll out the project to other conveyor installations.
Grootegeluk is already using an electricity-based trolley-assist system in the pit in
which trucks use electricity rather than diesel. This translates to a cost saving of
some R165 per truck. The saving for 2010 was some R8 million.
EXXARO INTEGRATED ANNUAL REPORT 2010 101
ENVIRONMENT CONTINUED
Energy and carbon footprint data
Reflecting the investment and effort of recent years, Exxaro’s data management and
reporting is steadily maturing. This is aligned with internal and external reporting
requirements, and is moving onto the main systems platform. This will become the basis
of reporting on carbon disclosure and carbon footprint statistics.
Total CO2e Exxaro Group
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700
600
500
400
300
200
100
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2010
2009
Energy consumption management
Updated metering
equipment was
installed at our business units to facilitate:
> Consumption management (including
managing Eskom’s power conservation
to
programme allocations — refer
sidebar)
> Tracking
electrical
verifying
and
efficiency initiatives
> Verification of electricity accounts.
Exxaro now has a centralised real-time
metering capability, independent business
unit monitoring and is ready for Eskom’s
power conservation programme (page 103).
Total energy Exxaro Group
For the review period, actual average
energy consumed was 12% lower than the
collective Exxaro group baseline. The
improved performance
is a combined
result of lower production in the current
economic climate and work completed to
get the largest Exxaro electricity baselines
adjusted and accepted by Eskom. To date,
Eskom has approved the Grootegeluk,
Namakwa Sands smelter, Brand se Baai,
Matla, KZN Sands smelter, Hillendale mine
and Zincor baselines. These are subject to
the new draft power
change
in
conservation programme rules.
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2010
2009
102 EXXARO INTEGRATED ANNUAL REPORT 2010
Review of South Africa’s
energy efficiency strategy
In 2010, the 2005 energy efficiency
accord
was
reviewed
and
reconstituted
as
the Business
Network for Leadership in Energy
Efficiency. The review was prompted
by the 2009 energy shortages, price
increases
and
new
national
electricity-provision policies. The new
business network facilitates the move
towards mandatory requirements. It
applies to all business sectors, and is
intended
to encourage business
collaboration and
leadership on
energy issues, enhance interaction
with government and provide a
measure of flexibility
for
the
legislature.
The overarching objective is to drive
continuous improvement of energy
efficiency in the SA business sector,
in support of the national energy-
efficiency
strategy,
leading
to
enhanced
international
competitiveness and greenhouse gas
reductions.
The network offers considerable
value for businesses:
> Effective management of energy,
improved
to
leading
competitiveness
> Access to best practice, technical
expertise and experience of others
> Public reporting leading to public
recognition and improved brand
equity
> Better understanding of regulatory
requirements, resulting in targeted
responses
> Standardised
reporting,
approaches
to
measurement,
monitoring and verification
> Constant
feedback
through
member
participation
and
interaction with government.
Preparing for power outages
Following the 2007/8 power outages that resulted in widespread load shedding, a multi-stakeholder working group was established
to develop a national code of practice on how future load shedding and load curtailment should be managed. As part of this process,
South Africa now has a specification for the national power grid that provides three options for how customers like Exxaro are
expected to act in a system emergency.
Option 1: load shedding
When instructed by the national system operator (Eskom), the customer must immediately reduce consumption by at least 25% by
disconnecting loads automatically or manually.
Option 2: load curtailment
This happens in five stages, as shown below:
Stage
Type
Customer action
0
1
2
3
4
Unscheduled (pre-agreed)
Reduce consumption by 25% for two hours within an agreed time (typically
10 minutes
Scheduled (notified)
Reduce normal demand by 10% within two hours of notification (excludes customers
who participate under stage 0)
Scheduled (notified)
Scheduled (notified)
Reduce normal demand by 20% within two hours of notification
Unscheduled (instructed)
Reduce normal demand as instructed
Option 3: demand market participation (DMP)
This is an agreement between Eskom and customer to interrupt loads on a commercial basis. Customers who participate in DMP are
exempt from stages 0, 1 and 2 load curtailment, and receive monetary compensation for the load curtailment. While this
compensation will not make up for the potential loss in production, in some cases (Namakwa Sands and KZN Sands) the impact is
minimal.
What this means to Exxaro
Namakwa Sands already participates in DMP and will be exempt from stages 0, 1 and 2. KZN Sands has selected the DMP option and
is in the implementation stages. KZN Sands will also be exempt from stages 0, 1 and 2.
As critical suppliers to Eskom, Zincor, Grootegeluk and Matla cannot allow their loads to be shed nor is DMP an option. These
operations therefore have selected option 2 — load curtailment.
Eskom’s power conservation programme
The South African electricity supply/demand balance is overly tight, and latest forecasts indicate this could worsen from 2011 to
2012. This means availability rather than capacity is the key challenge, and that the security-of-supply risk is high. To mitigate this,
Eskom’s power conservation programme (PCP) is scheduled for implementation in January 2011. While not yet finalised, the
programme is focused on lowering absolute electrical consumption by 10% (for businesses) and charging punitive rates for
exceeding agreed baselines. The financial implications of this programme could be significant.
KZN Sands, Namakwa Sands, Zincor, Grootegeluk and Matla are the five largest consumers (90%) of electricity in Exxaro and would
potentially be impacted by the implementation of PCP. As key suppliers, Matla and Grootegeluk are excluded from the programme.
Exxaro’s energy team will monitor both the finalisation of the programme and consumption at business unit level to optimise
performance in terms of consumption versus allocation.
EXXARO INTEGRATED ANNUAL REPORT 2010 103
ENVIRONMENT CONTINUED
South Africa’s energy debate
The ongoing debate around South Africa’s energy industry, coupled with the fact that coal remains the country’s most affordable
electricity resource, raises a serious question: how do we as a nation balance the need to reduce our carbon footprint with the need
to provide significantly more power at a price that keeps the industry competitive?
The question of price versus demand is one of the issues central to the government’s recently released second integrated resource
plan (IRP), a 20-year plan that predicts how much electricity the country will need in the next two decades, how this demand could be
met, and what it will cost.
The IRP 2010 sketches the ideal scenario for electricity generation in South Africa, the sources of that energy, and the price at which
it will be sold to the industry and public. It takes into account carbon emissions, production costs, security of electricity supply,
sustainable job creation and water use.
The summary of the balanced scenario which the IRP 2010 proposes as the optimal electrical energy mix by 2030 envisages coal
comprising 48% of the feedstock mix (compared to 80% at present), with baseload nuclear and renewable energies comprising 14%
and 16% respectively (see pie chart below). Expectations are that the IRP 2010 proposal will be promulgated by early 2011.
IRP 2010 balanced scenario
6%
5%
2%
9%
16%
14%
Baseload coal
Baseload nuclear
Renewable energy (dispatchable)
Peaking open cycle gas turbine
Peaking pump storage
Mid-merit gas
Baseload import hydro
48%
What does this mean for Exxaro?
In its current draft, the IRP could have major implications for Exxaro’s business:
> The only coal-fired power to be implemented after Kusile will be in 2027. This will temper Exxaro’s current coal ambitions in South
Africa
> The significant roll out of renewable energy sources supports Exxaro’s plans to develop its renewable energy business
> The IRP gives an indication of the long-term electricity price, which is more than 150% of the current price. This will significantly
increase operating costs at Exxaro’s smelters.
What does it mean for consumers?
> The long-term electricity price is even higher than current indications from Eskom and the National Energy Regulator of South
Africa. This will put households under even more financial strain
> The burden of higher electricity prices will make local industry less competitive on a global scale, which could affect employment
> Positively, however, the draft IRP 2010 provides for the large-scale roll out of renewable and nuclear energy, which will result in
cleaner air and fewer carbon emissions.
104 EXXARO INTEGRATED ANNUAL REPORT 2010
and
change
Energy efficiency improvement
projects
To remain competitive while dealing with
related
climate
environmental
is
improving its energy efficiency and has
committed to:
> Reduce costs by
improving energy
efficiency from 2009 baseline by 10%
by 2012
concerns, Exxaro
its
> Promoting the use of sustainable and
renewable energy
> Promoting the use of clean technologies.
In 2009, the electricity baseline was
established for all business units. In 2010,
conducted at
energy audits were
Leeuwpan, North Block Complex, New
Clydesdale, Tshikondeni, Grootegeluk,
Namakwa Sands, Arnot, Matla, Inyanda,
and KZN Sands, as well as the research
and development unit and corporate
office. The top projects were identified
and
solutions are being
investigated.
common
Becoming carbon neutral
A feasibility study on co-generation to
produce some 15MW of electricity from
waste energy at our Namakwa Sands
operation is well advanced. This project
could save almost 150 000 tonnes of CO2e
per annum and offers significant financial
benefits via carbon credits.
Further co-generation studies are under
way for projects at our own and other
organisations’ operations with a potential
150MW generation capacity, equating to a
potential 1,5Mt CO2e per annum.
The objective is to minimise energy waste,
thus increasing energy efficiency. The
carbon footprint of electricity from these
sources is virtually zero.
the roll out of an enabling policy
environment).
The group is also participating in carbon
capture and storage developments by
playing an active role in establishing the
South African Centre for Carbon Capture
and Storage (SA Centre for CCS).
Carbon disclosure project reporting
Exxaro again participated in the Carbon
Disclosure Project (CDP), the
leading
proponent of climate change and carbon
disclosure. In 2010 the CDP represented
over 530 investors with USD64 trillion of
assets under management; a total of
1 800 companies participated worldwide,
including around 80% of the FTSE Global
500. Companies listed on the JSE have
participated for the last four years; in
2010 74% of the top 100 companies (by
the JSE
market capitalisation) on
responded.
Exxaro performed well on both CDP
measures:
> The carbon disclosure rating focuses on
disclosure of emissions, the degree to
which a company has identified its risks
and opportunities from climate change,
internal
and
structures for information management
and governance. Exxaro ranked fourth
with a score of 87% (compared to the
first mining company at 93%)
performance
the development of
rating,
introduced in 2010: this indicates the
degree to which a company is taking
positive actions that contribute to
climate change mitigation, adaptation
and
transparency. Companies are
ranked in four performance bands —
leading, fast-following, on the journey
and just starting. Exxaro was rated in
the second category.
carbon
> The
Despite delays due to the global economic
slowdown, Exxaro remains committed to
by
carbon
reducing
implementing these projects as well as
renewable energy initiatives (subject to
footprint
its
Cleaner production
Exxaro has several research projects
under way to reduce its environmental
footprint from waste production and
water use. With a budget of over
R1 700 million for the review period
(mostly for scouting work), these include:
> Dry beneficiation
> Building environmental competency
> Power generation from waste coal
> Slimes community of practice
> Water community of practice
> Water conservation and purification.
some
included
By year end, dry beneficiation technologies
were being tested for various applications,
with
in
already
Grootegeluk’s Medupi designs. In addition,
solid progress has been made in raising
awareness of the importance of water
conservation and treatment, as well as
slimes treatment, across the group’s
business units.
Air quality management
Exxaro has implemented an air quality
management framework for quantifying
and determining the
impact of our
ambient emissions, and managing non-
compliance and continuous improvement
(below). This approach is aligned to the
requirements of
the 2007 national
framework for air quality management in
South Africa, and provides a standardised
methodology across
for
quantifying emissions and determines the
appropriate action
in mitigating their
impact.
the group
In applying this framework, particularly
the emission inventory process, across
our operations, it is evident that most of
our ambient pollution
impacts are
associated with emissions of particulate
In
matter or dust mining activities.
addition, Exxaro also operates smelting
operations in its mineral sands and base
metals commodity businesses. Emissions
from these smelters are regulated by a
registration certificate issued by the chief
air pollution control officer
the
Department of Water and Environmental
Affairs (DWEA). Emissions of concern
from these smelters are particulate
matter (represented as PM10), sulphur
dioxide (SO2) and nitrogen oxide (NOx).
in
EXXARO INTEGRATED ANNUAL REPORT 2010 105
ENVIRONMENT CONTINUED
Air quality management framework
Business unit’s emission inventory
Point sources
(eg stacks)
Line sources
(roads)
Area sources
(discard dumps)
Volume sources
(fuel storage tanks)
Air quality impact
assessment
If above government
emission
requirements
Result of emission
inventory
If below government
emission
requirements
Air quality dispersion
modelling
Development and implement
air quality management plan
s
t
u
p
n
I
Meteorological
data
Developing
monitoring
network
Developing
mitigation plan
Compliance reporting
(monthly and annual reports)
Yes
Pivot compliance:
reporting below
emissions limits
No for three consecutive
reporting periods
Inputs
Meteorological
data
Digital terrain
data
Emission
inventory
Emissions from mining operations
Every day, Exxaro addresses the challenges of dust-generating activities (blasting, vehicle
entrainment and wind erosion of exposed operational areas) through environmental
management measures. These include dust-suppressant agents on haul roads, applying
water to secondary unpaved operational roads, and vegetating topsoil and overburden
material.
All mining operations monitor daily fallout dust rates and results are assessed against
national standards (SANS)(figure 1).
Figure 1: National standards (SANS)
Case study — Improving air
quality at Namakwa Sands
One of the biggest environmental
challenges at the Namakwa Sands
smelter has been solved by a new
extraction plant that removes dust
and fumes from the tapfloor during
tapping operations.
Namakwa Sands has an obligation to
keep the West Coast environment as
beautiful as it is, and provide a safe
environment for employees. But the
previous fume-extraction system had
become inefficient and conditions in
the furnace building were unpleasant
during taps. On a calm day the red
dust hanging over
the
furnace
building was visible from a distance.
Construction of
the new
fume-
extraction plant took 13 months at a
cost of R63 million and, importantly,
was completed without a lost-time
injury. The plant uses the most
modern filtration equipment and
energy-efficient fans run at reduced
power
between
taps.
Most
importantly, it improves conditions
on the tapfloor.
Level
Target
Action residential
Action industrial
Alert threshold
Dust fallout rate
(mg/m2/day) Permitted frequency
300
600
Three in any year, no sequential months
1 200
Three in any year, no sequential months
2 400
None. First exceedance requires remediation and compulsory report to authorities
Figure 2: Results from Exxaro’s monitoring points
Number of monthly exceedances 2010
Points monitored
with single-unit
fallout dust bucket
600mg/m2/day
>3 months/year
1 200 mg/m2 day
>3 months/year
58
36
9
10
5
7
4
5
1
2
Commodity
Coal
Mineral sands and
base metals
106 EXXARO INTEGRATED ANNUAL REPORT 2010
Performance of smelters
Business unit
Namakwa Sands
No of points
2
Pollutant
PM
KZN Sands
Zincor
2
1
14
2
SO2
SO2
PM
SO2
PM: particulate matter, SO2: sulphur dioxide
Permitted
emission rate Units
30 mg/m3 (24hr
average)
Assessed
Bi-annually
500 mg/m3 (1hr
Bi-annually
average)
500 mg/m3 (1hr
Quarterly
average)
50 mg/m3 (24hr
average)
Quarterly
500 mg/m3 (1hr
Continuous
average)
Number of
exceedances
recorded
for 2010
0
0
0
2
0
Exxaro’s
operations
Although
are
classified under industrial targets, some
are close to densely populated areas. As
such, tracking compliance against the
more stringent residential limit as opposed
to
limit provides a
standardised and more appropriate
management approach to move our
operations towards the long-term target
of 300mg/m2/day.
industrial
the
The tables on page 106 give a consolidated
view of our performance against air
quality guidelines. In total, coal operations
recorded four monthly exceedances of
the industrial limit of 1 200mg/m2/day.
The SANS guideline allows operations to
have at most three exceedances per year
without any reporting. Given the strong
performance of our coal operations in
2010, the guideline industrial limit was
exceeded by one month. The mineral
sands and base metal operations also
registered exceedances of the industrial
limit for five months in 2010.
We are concentrating on improving our
mitigation measures
for operational
activities that contribute significantly to
dustfall. This will ensure fallout dust is
reduced to national residential guidelines
of 300mg/m2/day.
Emissions from smelting
operations
All Exxaro’s smelters have registration
certificates under section
10 of the
Atmospheric Pollution Prevention Act,
1965, which has been superseded by the
National Environment: Air Quality Act, 34
of 2004. These stipulate acceptable stack
emissions for particulate matter at KZN
Sands smelters; particulate matter, NOx
and SO2 at Namakwa Sands; and SO2 at
the zinc smelter. The performance of our
smelters against permit conditions
is
shown below.
Biodiversity management
Exxaro-owned and -managed land has
significant biodiversity given the wide
geographical spread of
the group’s
operations. As part of the process of
biodiversity management
developing
plans
for each business unit, a
comprehensive study has determined
vegetation types on all land held by Exxaro
and quantified greenhouse gas reduction
as a result of vegetation. The carbon
quantities captured in the 32 types of
vegetation
land under operational
control are estimated to be around
tonnes. A summary of
30 million
biodiversity management
shown
overleaf.
in
is
terms of a
formal biodiversity
In
management policy, revised in 2010, group
operations are mandated to ensure that
conserving biodiversity and using natural
co-exist
through mining
resources
through proper planning, decision making,
conservation and offsets.
The objectives of this policy focus on
protecting and conserving biodiversity-
rich sections of undisturbed areas,
preventing or limiting destruction of Red
Data faunal and floral species, and
eradicating and controlling alien invasive
species
through practical and cost-
effective management skills, programmes
and action plans.
A detailed management standard was
issued at the end of the review period to
guide business units
implementing
group policy. The standard aims to:
> Ensure a cost-effective
integrated
in
approach to biodiversity management
> Be environmentally
responsible
in
protecting and managing biodiversity
> Be ecologically sustainable by ensuring
biodiversity-rich areas are contained
within mining right areas, to manage
and monitor protected and threatened
Red Data species, and control declared
category 1, 2 and 3 declared invasive
plants from spreading.
Detailed desktop studies at all business
units have been completed while specialist
biodiversity assessments have been
completed for Tshikondeni, Inyanda, New
Clydesdale, Leeuwpan, KZN Sands and
Namakwa Sands. Assessments are under
way for Grootegeluk, North Block Complex
and Arnot. Identification, mapping and
management plans for the control and
eradication of category 1, 2 and 3 species
were
the biodiversity
in
assessments. Management plans for these
species per business unit will be finalised
included
and
implemented
in 2011 although
EXXARO INTEGRATED ANNUAL REPORT 2010 107
ENVIRONMENT CONTINUED
implementation is already under way at
where protected trees were impacted in
West University on the ecology of the
Grootegeluk and KZN Sands. Marking
2010 had approved permits for the
relocated species began in January 2011,
protected
trees and compiling and
removal/destruction and transport of
in conjunction with SANBI (SA National
submitting permit applications for various
protected trees.
Biodiversity Institute) and the Mpumalanga
developments
at Grootegeluk
and
Tourism and Parks Agency.
Tshikondeni (the only two business units
At Inyanda relocation of the Red Data
where this was required to date) was
species Frithia humilis was completed and
To date, biodiversity action plans have
conducted for various developments. All
will be monitored until 2012. A post-
been developed for five of Exxaro’s 17
activities at Grootegeluk and Tshikondeni
graduate research project with the North
operating units. The balance will be
Biodiversity management
Inyanda
Zincor
Tshikondeni
Location/size of land
owned, leased, managed
or adjacent to protected
areas of high biodiversity
value
Land adjacent to
protected areas
X
(cid:22)
(Next to
RAMSAR
site)
(cid:22)
Adjacent to Kruger National Park. Lies
within the Gariep Centre of Plant
Endemism
Significant impacts of
activities: total land owned/
leased/managed for
production or extractive use
Size of land assessed (ha)
1 747
295,5
22 385,89
Buildings (farm buildings,
mine buildings, etc)
12
38,29
Buildings (farm buildings,
mine buildings, etc)
Cultivation
Grassland scrub
Mine tailings, pits, bare soil,
airfields
Open water
249
18
0
4
Bushveld
0
0 Cultivated fields
106,77
Floodplain bushveld
0
Inland forest
71,52
4 457,49
708,97
26,81
235,34
Plantations
57
9,34 Mine tailings, pits, bare soil,
131,76
Grassland (natural)
1 372
airfields
24,29 Mopani bushveld
5 710,09
Grassland secondary/
transformed grassland
Wetland grassland
Stream vegetation
Sugarcane
Degraded bushveld
Thicket and encroached
bushveld
35
113,4 Mountain bushveld
3 920,79
0
0
0
0
0
0
3,41 Open bushveld
0 Open water
0
0
0
0
0
Riparian forest
Sand banks
Stream vegetation
(bushveld)
Thicket and encroached
bushveld
Transformed/degraded
bushveld
0 Wetland grassland
0 Woodland
–
–
–
–
662,98
196,69
472,92
176,67
412,01
4 469,23
589,52
40,19
102,91
22 385,89
Total
1 747
295,5
108 EXXARO INTEGRATED ANNUAL REPORT 2010
completed in 2011. Expenditure of around
After a directive from the Department of
Measures
include ongoing mitigation
R30 million in 2010 is expected to increase
Water Affairs on the haul road in the
initiatives and offset areas of similar
as biodiversity action plans are fully
eastern pit of Mooifontein operation, we
biodiversity functionality. Stakeholders
implemented and declared category 1, 2
stopped using and then closed this haul
and interested and affected parties have
and 3 alien invader species are eradicated.
road.
been duly consulted on these envisaged
measures.
During the year, biodiversity was affected
We have prioritised rehabilitation of the
at Arnot Mooifontein where mining
affected wetland area
to
improve
operations intruded on a wetland area.
biodiversity and ecological functionality.
Namakwa Sands
Rosh Pinah
KZN Sands
KZN – Hillendale & Port
Durnford
(cid:22)
(Close to Tongaland-
Pondoland Regional Centre
of Floral Endemism)
CPC
BSB
CPS
Smelter
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
66,35
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
0
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
0
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
0
5 418,51
Buildings (farm
buildings, mine
buildings, etc)
Coastal forest
Cultivation
(harvested
sugar cane)
Dune scrub
Mine tailings,
borrow pits,
bare soil,
airfields
Plantations/
woodlots
Secondary/
transformed
grassland
Stream
vegetation
Sugarcane
Wetland
grassland
–
–
–
–
–
–
–
5 418,51
180,63
1,25
679,34
341,9
525,74
390,72
24,55
157,37
23,3
3 091,16
3,8
0
0
0
0
0
0
0,12
25,19
2,1
3,38
15,52
5,07
0
5,23
8,22
0,27
0
0
0
0
0
66,35
Not assessed in 2009/2010
0
0
0
(cid:22)
(Adjacent to Sperr Gebied/
Richtersveld National Park/
endemic hotspot area
1 250,75
23,47
34,52
121,36
455,42
615,98
Buildings (farm
buildings, mine
buildings, etc)
Desert wash
Mine tailings,
borrow pits,
bare soil,
airfields
Mountain
desert
Sandy plains
desert
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
0
0
0
0
0
0
0
0
1 250,75
EXXARO INTEGRATED ANNUAL REPORT 2010 109
ENVIRONMENT CONTINUED
Biodiversity management
Inyanda
Zincor
Tshikondeni
Location/size of land
owned, leased, managed
or adjacent to protected
areas of high biodiversity
value
Land adjacent to
protected areas
X
(cid:22)
(Next to
RAMSAR
site)
(cid:22)
Adjacent to Kruger National Park. Lies
within the Gariep Centre of Plant
Endemism
Size of land assessed (ha)
1 747
295,5
22 385,89
Protected:
X
Restored
Habitats protected/restored?
Exxaro general biodiversity
strategy (draft)
Management plan (EMPR)
Strategies, actions and plans
for managing impacts on
biodiversity
Biodiversity action plans
IUCN Red List and national
conservation lists species
affected by operations
–
Red Data
species
relocated
to offset
areas
under
MTPA
(provincial)
manage-
ment
(cid:22)
(cid:22)
Draft 2
under review
to update
category 1,
2 and 3
manage-
ment
measure
Red Data
species
Frithia
humilis
relocated
to three
offset
areas.
Continuous
monitoring
by North
West
University
till 2012.
Research
project on
lifecycle
started in
2011
(cid:22)
(RAMSAR
site)
(cid:22)
(wetland
with Red
Data)
(cid:22)
(Kruger National Park)
Adjacent to protected area
– limited impact due to
underground mining
activities
(cid:22)
(cid:22)
(cid:22)
(cid:22)
Draft 2
under
review to
update
manage-
ment of
Kniphofia
sp
manage-
ment
measure
(cid:22)
Recorded
but not
currently
affected/
population
of
Kniphofia
typhoides
is stable
and healthy
Draft update of certain
sections in 2010 incomplete
(cid:22)
Various species recorded in
areas adjacent to current
and future operations.
Recorded but not currently
affected by underground
mining operations. Potential
that future opencast
operations may impact on
Red Data listed species
110 EXXARO INTEGRATED ANNUAL REPORT 2010
KZN Sands
KZN – Hillendale & Port
Durnford
(cid:22)
(Close to Tongaland-
Pondoland Regional Centre
of Floral Endemism)
5 418,51
X (No mining
activities at
Port Durnford)
X
(cid:22)
(cid:22)
(Only
Hillendale
– Port
Durnford
no mining
activities)
Draft reviewed.
Update
category 1, 2
and 3 declared
invader
species
management
measure
(Hillendale
only)
(cid:22)
Recorded and
currently
affected
(Hillendale
– habitat
transformation)
Namakwa Sands
Rosh Pinah
CPC
BSB
CPS
Smelter
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
66,35
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
0
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
0
(cid:22)
(Southern
Namaqualand
Strandveld
Centre of
Plant
Endemism)
0
(cid:22)
(Adjacent to Sperr Gebied/
Richtersveld National Park/
endemic hotspot area
1 250,75
(cid:22)
X
(cid:22)
(cid:22)
X
(cid:22)
X
(cid:22)
(cid:22)
X
(cid:22)
X
(cid:22)
(cid:22)
X
X
X
(cid:22)
(cid:22)
(cid:22)
X
(cid:22)
(cid:22)
Completed but
not submitted
Biodiversity
study
complete as
part of EMPR
amendment.
Require
biodiversity
action plan
X
None recorded
to date
(cid:22)
Recorded and
currently
affected
(cid:22)
Recorded and
currently
affected
(cid:22)
Recorded and
currently
affected
(cid:22)
Recorded
various IUCN
Red Data plant
species
– affected
during
previous
exploration
activities. Dust
is currently the
biggest impact
on Red Data
flora species.
High number
of endemic
species
present and
recorded.
EXXARO INTEGRATED ANNUAL REPORT 2010 111
ENVIRONMENT CONTINUED
Legal framework for managing biodiversity in Exxaro
Biodiversity management in South Africa is based on the clause in the country’s
constitution that stipulates ‘everyone has the right to an environment that is not
harmful to their health or wellbeing and to have the environment protected, for the
benefit of present and future generations’. It is governed primarily by the National
Environmental Management Act, and supporting legislation, summarised in the
following
legislative framework that guides Exxaro’s policy on biodiversity
management:
> National Environmental Management Act (NEMA) (Act No 107 of 1998, Mine
rehabilitation)
> National Environmental Management Biodiversity Act (NEMBA) (Act No 10 of
2004) and its annexures on threatened or protected species
> National Environmental Management: Protected Areas Act (NEMPAA) (Act No 57
of 2003)
> National Water Act (NWA) (Act No 36 of 1998)
> Mineral and Petroleum Resource Development Act (MPRDA) (Act No 28 of 2003)
> National Environmental Management: Air Quality Act (NEMAQA) (Act No 39 of
2004)
> Environment Conservation Act (ECA) (Act No 73 of 1989)
> Conservation of Agricultural Resources Act (CARA) (Act No 43 of 1983)
> World Heritage Convention Act (WHCA) (Act No 49 of 1999)
> National Forests Act (Act No 84 of 1998)
> Draft integrated coastal management bill (2006)
> Marine Living Resources Act (Act No 18 of 1998)
> Marine Pollution (Intervention) Act (Act No 64 of 1987)
> Dumping at Sea Control Act (Act No 58 of 1973)
> Sea-Shore Act (Act No 21 of 1935):
> Sea Fisheries Act (Act No 58 of 1973)
In terms of Exxaro’s biodiversity policy, all related risks need to be identified,
assessed and prioritised for all activities at business units. This includes the control
and management of all Category 1 alien invaders, the protection and management of
biodiversity hotspot areas/biodiversity-rich ecosystems, conservation of fauna and
flora of business units situated in or adjacent to sensitive areas such as centres of
plant endemism (Fairbreeze, Rosh Pinah) sensitive ecological areas (Matla river
diversion), adjacent to RAMSAR sites (Zincor) or adjacent to protected areas or
areas of high sensitivity for the tourism industry (Tshikondeni).
Mine rehabilitation
Exxaro’s mine rehabilitation policy and
management standard follows a legal and
risk approach — chronological steps that
optimise ongoing rehabilitation
from
feasibility stage through all operational
phases and, ultimately, preparing for
efficient closure of any mining operation.
This
framework
dictates
physical
processes, financial provisions, and
rehabilitation performance indicators.
Business units report quarterly on these
indicators. By monitoring
this data,
rehabilitation backlogs are
identified
before undue financial
liabilities are
incurred. The goal of the environmental
rehabilitation department is to budget for
and schedule ongoing
rehabilitation
aligned with the mining plans of each
business unit. Integral to this process is
minimising any negative mining impacts
on affected parties or the environment
and communicating rehabilitation actions
via established forums.
Exxaro contributed roughly R68 million in
2010 and had R502,5 million in its trust
fund at 31 December 2010 for mine-closure
activities.
Updating
and
revising
rehabilitation provisions annually also
highlights
potential
rehabilitation
alternatives that could decrease the
closure liabilities of mines in the long
term.
112 EXXARO INTEGRATED ANNUAL REPORT 2010
Closure-cost reviews were completed at
eight operations, including five inactive
sites. Performance assessments against
15 000
the
objectives
of
environmental
12 000
management plan reports were completed
for eight operations and submitted to
DMR. In line with the growing government
focus on rehabilitation, Exxaro is ensuring
that all group business units have reviewed
their rehabilitation plans (with appropriate
9 000
6 000
3 000
schedules and budgets) and that these are
0
being implemented.
13 081,1 hectares
4 317,3 hectares
Land disturbed
Land rehabilitated
During the period, the Department of
Mineral Resources Mpumalanga served
Arnot Colliery with a directive to submit
an EMPR (environmental management
plan report) performance assessment
report. This is a regulatory tool introduced
the
to monitor
by
implementation of the EMPR. It is also a
department
requirement
in terms of the Exxaro
environmental
liability management
framework that operations conduct EMPR
performance assessments, and that such
assessments
be
reported
to
the
department.
Scheduling
these
assessments is done through the Exxaro
environmental rehabilitation fund. The
Arnot EMPR performance has since been
completed
and
submitted
to
the
department in Mpumalanga.
Exxaro’s North Block Complex also
Mine closure
Exxaro has two mines at different stages
Current mining
legislation presents a
number of risks specific to mine closure.
of their closure plans — Durnacol and
These
include possible pressure from
In 2010, R145 million was
Hlobane.
budgeted for mines in closure, spanning
increase the
affected communities to
corporate contribution to mine-closure
implementation of the relevant social
social programmes which will escalate the
plans and rehabilitating negative and
longer-term financial requirement. An
latent environmental impacts.
additional risk comes from third-party
applications for continued mining at mines
During
the year,
implementation of
in closure
(Hlobane and Durnacol).
Durnacol’s social plan gained new
Continued mining at these old workings
momentum and projects such as the
are exceptionally dangerous and any
training centre, bakery and steelworks are
incidents will have an impact on Exxaro’s
now operational, underscoring
solid
image. Future liability is likely to escalate
working
relationship
between
this
as new mining and old mining impacts
community and Exxaro. Shaft-sealing and
cannot be separated in terms of water
dump rehabilitation activities during the
quality, subsidence and crack formation.
year have improved water, dust and visual
With any mine closure, there is also the
received a directive from the department
impacts at Durnacol.
risk that implementing the closure plan
might not address all negative impacts.
on the need to align mining activities
(including the washing plant) with the
EMPR. Since the processes of updating
these documents had already started in
2010, the required EMPR update was
finalised and submitted to the department
At Hlobane, the group policy of completing
Exxaro has prepared as fully as possible
rehabilitation work manually has created
for these contingencies in its existing
job opportunities during the construction
closure plans.
phase. Crack and subsidence sealing at
Hlobane has improved water quality in the
in Mpumalanga.
catchment area.
EXXARO INTEGRATED ANNUAL REPORT 2010 113
ENVIRONMENT CONTINUED
Broader industry participation
As a stakeholder in the mining industry,
publication of Climate Change: A Guide for
Corporates (Unisa Press, 2009), the pace
Environmental performance
Exxaro has a standardised system in all
Exxaro actively participates in shaping
appropriate policies
in South Africa
through many channels, including:
> The Chamber of Mines
has accelerated considerably since the
business units to ensure the effective
appointment of Dr Godwell Nhamo. Since
management of all incidents, leading to
August 2009, four research papers have
a safer and more sustainable work
been published, nine conference papers
environment. This
integrated platform
> NERSA (National Energy Regulator of
presented, and related courses at honour’s
tracks and manages incidents; identifies
South Africa)
level proposed. The Exxaro group was
root causes and ensures proper incident
> EIUG (Energy Intensive Users Group)
used as the first of a series of case studies
reporting and management. Environmental
> NERT (National Electricity Response
examining
how
companies
intend
incidents are categorised as:
Team)
operating in a low-carbon economy. The
> Level 3 — Environmental incidents with
> Energy efficiency accord through the
Exxaro study was published in 2009.
irreversible on-site,
immediate and
technical committee facilitated by the
Dr Nhamo is also a member of the National
remote-area impacts, will involve long-
National Business Institute (NBI)
Business Initiative (South Africa) climate
term clean-up activities and a negative
> Industry
energy
policy-influence
change committee working group, and a
impact on shareholder value (eg over
workshops
member of the Department of Trade and
R500 000 in damage has definitely
> World Wildlife Fund (WWF) round table
Industry/Business Unity South Africa
occurred)
event
climate change forum. Dr Nhamo was
> Level 2 — Environmental incidents with
> South African Chamber of Commerce
named Unisa’s researcher of the year in
reversible on-site and
immediate
Industry’s
and
dialogue
(SACCI) electricity
> National trade delegation to the UK in
2009, a significant vote of confidence in
the chair’s activities.
surrounding impacts, will involve more
than 48 hours in clean-up activities and
a negative impact on shareholder value
March 2010
Given this important progress, Exxaro has
(eg R50 000 — R500 000 in damage
> SANBI
(the
national
body
for
renewed its sponsorship of this chair until
has definitely occurred)
biodiversity).
2015. This will maintain the current
> Level 1 — Environmental incidents with
momentum and strengthen the chair’s
reversible on-site impacts, will involve
Exxaro is also involved in the initiatives of:
> South African
Independent Power
critical research, advocacy and tuition
immediate clean-up and a negative
activities in advancing the business and
impact on shareholder value (eg under
Producers Association (SAIPPA)
climate change agenda.
R50 000).
> Coaltech 2020
> Fossil Fuel Foundation
> Peace Parks Foundation
> SA Centre for Carbon Capture and
From 2010, research will be streamlined to
Reportable
environmental
incidents
focus mainly on business and address
across the group are shown alongside. A
climate policy at national, regional and
total of 30 level 2 incidents occurred in
Storage with international and local
international
levels,
including
the
2010, and were reported to the relevant
partners
> Clinton Foundation.
Four years ago, Exxaro began sponsoring
the Chair in Business and Climate Change
transition to a low-carbon economy (ie
authorities. Corrective actions to remedy
issues
relating
to green/sustainable
the incidents and prevent them from
procurement), energy and climate change,
recurring were approved by authorities
integrated reporting and other emerging
prior to implementation. There were no
areas. Research topics will address climate
significant (level 3) incidents reported
at Unisa to create a centre of excellence in
change and business issues on four key
in 2010.
business and climate change research,
education and advocacy. While solid
progress was made in the early years of
thematic areas: mitigation, adaptation,
greenhouse gas inventories, research and
Fifteen of Exxaro’s 17 business units have
development
(including breakthrough
ISO 14001 accreditation, reflecting the
this sponsorship, including the landmark
low-carbon technologies).
global industry standards in place.
114 EXXARO INTEGRATED ANNUAL REPORT 2010
Case study — Carbon offset project
Each year, Exxaro offsets the environmental impact of its annual report and group newsletter. The carbon footprint of the paper,
printing and distribution is quantified under the international greenhouse gas reporting protocol. To ensure the integrity of an
offset project, five criteria set by the World Bank must be followed:
1. The project must be additional (ensuring the project is not claiming reductions that would already occur)
2. It must result in real emission reductions (ensuring project activity is monitored and claimed emission reductions are verified)
3. Emission reductions from the offset project must not be double-counted (the same emission reductions cannot be sold to
several buyers at the same time)
4. Emission reductions must be permanent
5. The offset project should result in community benefits.
In 2009, we installed a 300-litre solar-powered geyser at the Badirammogo Home in Olievenhoutbosch, a low-cost housing area
close to Exxaro’s corporate centre. The home offers full-time care to eight elderly residents and will benefit from the significant
reduction in monthly running costs.
In 2010, we planted sufficient trees in and around our operations to offset the impact of the annual report and Exxaro’s internal
newsletter.
Environmental incidents — group
Commodity business
EXXARO COAL
Arnot
Char plant
Durnacol
Grootegeluk
Hlobane
Inyanda
Leeuwpan
Matla
New Clydesdale Colliery
North Block Complex
Tshikondeni
MINERAL SANDS
KZN Sands
Namakwa Sands
BASE METALS AND INDUSTRIAL MINERALS
Glen Douglas
Rosh Pinah
Zincor
CORPORATE OFFICE
Alloystream
Ferroalloys
Head office
R & D
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
Level 1
Level 2
Level 3
2010
2009
2010
2009
2010
2009
500
50
54
0
61
0
22
103
109
94
4
3
330
86
244
101
30
0
71
0
0
0
0
0
495
75
23
0
135
0
37
28
51
72
26
48
339
79
260
188
47
0
141
0
0
0
0
0
18
1
0
0
1
0
11
0
1
1
2
1
12
11
1
0
0
0
0
0
0
0
0
0
6
0
0
0
2
0
4
0
0
0
0
0
14
10
4
0
0
0
0
0
0
0
0
0
931
1022
30
20
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
EXXARO INTEGRATED ANNUAL REPORT 2010 115
ENVIRONMENT CONTINUED
Environmental incidents — level 2
Business unit
Grootegeluk
Description
Accidental diversion of reclaimed slimes
Receiving environment
Groundwater
Matla
Arnot
KZN Sands — Hillendale
KZN Sands — CPC
KZN Sands — Hillendale
KZN Sands — Hillendale
KZN Sands — Hillendale
KZN Sands — Hillendale
KZN Sands — Hillendale
KZN Sands — Hillendale
KZN Sands — CPC
KZN Sands — CPC
North Block Complex Glisa
North Block Complex Strathrae
Tshikondeni
Inyanda mine
Inyanda mine
Inyanda mine
Inyanda railway siding
Inyanda railway siding
Inyanda mine
dam water to an unlined slimes dam
caused localised pollution.
Graves were discovered during mining-
related activities; area demarcated and
South African Heritage Resource Agency
(SAHRA) informed.
Temporary silt damwall broke and caused
slurry to run into field.
Failure of a slimes transfer pipeline
Heritage resource
Soil and natural vegetation
Soil and natural vegetation
feeding the residue dam.
Burn-through on furnace 2 shell during a
Air
metal tap with dust and iron oxide fumes.
Breach in berm caused sediment to wash
off site into Umhlathuze River.
Water from backfill cyclones breached
the berm; discoloration of Umhlathuze
River.
Burst pipe caused slimes to spray onto
neighbouring property.
Subsoil saturated due to elevated water
ingress from hydro cyclone underflow;
discoloration and retarded growth of
sugar cane in neighbouring field.
Blocked channel caused surface runoff to
neighbouring properties with damage to
tomato crops.
HDPE pipe burst caused ROM to spill
offsite.
Stack emission exceeded permit
requirements for particulate matter.
Blockage in small disintegrator delivery
line caused excessive visual smoke and
particulate matter emissions
Decant water from block B flowing into a
clean water environment.
Slurry spill into the field.
Discharge of sewage.
Dust concentrations exceeded air quality
standards five times in 12 months.
Coal sediment and contaminated water
spilled into a clean environment
Heavy rainfall caused return-water dam
Surface water
Surface water
Soil and crops
Subsoil and crops
Surface water
Soil
Air
Air
Surface water
Soil and natural vegetation
Soil and natural vegetation
Air
Surface water
Soil and groundwater
level to exceed lined level.
Dust concentrations exceeded air quality
Air
standards once in 12 months.
Pollution control dam overflowed twice in
12 months.
Evaporation dam overflowed
Surface water
Surface water
116 EXXARO INTEGRATED ANNUAL REPORT 2010
Consumption per business unit: 1 January — 31 December 2010
Electricity (GJ)
Diesel (GJ)**
Sasol gas (GJ)
Petrol used (GJ)
Total energy
use (GJ)*
Water (m3)
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
Commodity
business
COAL
Arnot
Char plant
Durnacol
Grootegeluk
Hlobane
Inyanda
Leeuwpan
Matla
1 956 915
1 835 131
2 126 313
2 199 610
188 997
201 082
232 783
341 106
18 517
9 266
318
–
4 574
5 750
5 272
–
962 169
904 342
640 167
727 756
32
–
1 409
–
25 972
22 997
140 017
134 678
88 354
76 144
558 251
427 349
491 807
463 723
68 640
64 618
New Clydesdale Colliery
53 440
37 566
125 202
158 273
North Block Complex
8 826
5 184
314 028
307 630
Tshikondeni***
118 483
114 828
35 492
32 929
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15 808
14 899
4 099 036
4 049 640
10 830 228
11 345 080
3 140
3 307
424 920
545 494
755 441
1 045 197
–
198
3 818
215
–
–
–
–
23 091
14 538
92 111
62 165
6 266
–
–
–
4 623
1 606 154
1 636 721
6 326 873
6 673 009
–
–
–
1 656
–
–
–
165 989
157 675
853 200
778 205
646 605
503 492
493 965
414 856
3 318
5 035
563 765
533 377
1 522 054
1 573 593
–
–
–
–
178 642
195 839
295 505
274 493
322 854
312 814
336 776
1 103
5 120
1 933
159 095
149 690
154 303
522 459
MINERAL SANDS
3 682 239
4 214 567
497 116
481 817
257 426
307 040
5 741
3 888
4 442 522
5 007 312
11 419 905
13 029 937
KZN Sands***
1 637 787
2 298 182
71 255
71 067
257 426
307 040
–
–
1 966 468
2 676 289
8 983 419
11 115 338
Namakwa Sands
2 044 452
1 916 384
425 861
410 750
BASE METALS AND
INDUSTRIAL MINERALS
Glen Douglas
Rosh Pinah
Zincor
1 674 769
1 697 593
162 521
153 602
35 753
44 809
57 796
61 296
156 318
161 225
63 650
61 169
1 482 698
1 491 559
41 075
31 137
CORPORATE OFFICE
51 757
48 506
430
1 670
4 881
17 679
19 195
24 329
24 430
8 079
–
–
–
430
–
–
–
–
–
–
Alloystream
Ferroalloys
Head Office
R & D
Total
–
–
–
–
–
1 335
–
1 335
–
–
–
–
–
–
–
–
–
–
–
5 741
3 888
2 476 054
2 331 023
2 436 486
1 914 599
401
401
–
–
2 261
72
51
2 138
–
395
1 837 691
1 851 591
2 701 754
2 731 962
395
93 950
106 501
295 706
289 315
–
–
–
–
–
–
–
219 968
222 394
1 033 549
1 149 524
1 523 773
1 522 696
1 372 499
1 293 123
55 783
48 506
1 742
4 881
19 065
19 195
26 897
24 430
8 079
–
–
–
–
–
–
–
–
–
–
–
7 365 680
7 795 797
2 786 380
2 835 029
258 761
307 040
24 211
19 183
10 435 032
10 957 049
24 951 887
27 106 979
* Total energy figures comprise electricity, diesel, petrol and Sasol gas
** Figures are based on SAP issue reports
*** Recommissioned furnace in 2009 ramping up to production
Energy consumption was 4,8% lower in 2010 mainly due to the unplanned downtime on furnaces at KZN Sands.
EXXARO INTEGRATED ANNUAL REPORT 2010 117
ENVIRONMENT CONTINUED
Operational intensities
Commodity business
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
Saleable product
(kt)
Energy/t
Electricity/t
Diesel/t
Water/t
COAL
Arnot
Char plant
Durnacol
Grootegeluk
Hlobane
Inyanda
Leeuwpan
Matla
New Clydesdale Colliery
North Block Complex
Tshikondeni
MINERAL SANDS
KZN Sands
Namakwa Sands
BASE METALS AND INDUSTRIAL MINERALS
Glen Douglas
Rosh Pinah
Zincor
CORPORATE OFFICE
Alloystream
Ferroalloys
Head Office
R & D
Total
Eco-efficiency
COAL
MINERAL SANDS
BASE METALS AND INDUSTRIAL
MINERALS
44 436
36 412
4 167
5 211
114
–
n/a
–
18 426
13 521
–
1 830
3 149
–
n/a
2 585
12 336
11 254
858
3 278
278
838
499
339
1 269
1 061
118
90
–
–
–
–
–
785
2788
268
984
659
325
1 440
1 228
121
91
–
–
–
–
–
0,10
0,10
0,20
–
0,09
–
0,09
0,21
0,05
0,21
0,10
0,57
5,30
3,94
7,29
1,45
0,09
1,86
0,11
0,10
0,40
–
0,12
–
0,21
0,19
0,05
0,25
0,11
0,56
10,60
2,98
7,61
1,28
0,08
1,82
0,05
0,05
0,16
–
0,05
–
0,01
0,03
0,04
0,06
0,00
0,43
4,39
3,28
6,02
1,32
0,03
1,32
0,05
0,04
0,25
–
0,07
–
0,03
0,03
0,04
0,05
0,00
0,43
4,28
3,49
5,89
1,18
0,04
1,33
17,01
16,78
16,55
16,43
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0,05
0,06
0
–
0,03
–
0,08
0,18
0,01
0,15
0,10
0,13
0,59
0,14
1,25
0,13
0,05
0,54
0,46
–
–
–
–
–
0,06
0,07
0,14
–
0,05
–
0,18
0,17
0,01
0,20
0,11
0,12
0,49
0,11
1,26
0,11
0,05
0,51
0,34
–
–
–
–
–
0,27
0,18
0,81
–
0,34
–
0,47
0,16
0,12
0,34
0,10
0,55
13,62
18,00
7,18
2,13
0,28
8,73
0,31
0,20
1,70
–
0,49
–
1,04
0,16
0,14
0,35
0,00
1,95
13,24
16,86
5,89
1,90
0,24
9,49
15,32
14,24
–
–
–
–
–
–
–
–
–
–
46 544
38 836
0,25
0,27
0,17
0,20
0,07
0,07
0,59
0,70
Energy (GJ/t)
Water (m3/t)
Energy (GJ/t)
Water (m3/t)
Energy (GJ/t)
Water (m3/t)
2010
0,1
0,27
5,3
13,62
1,45
2,13
2009
0,11
0,31
5,09
13,24
1,29
1,90
2008
0,09
0,27
4,65
27,00
1,28
2,11
118 EXXARO INTEGRATED ANNUAL REPORT 2010
CO2 from electricity purchased and diesel
Commodity business
2010
2009
2010
2009
2010
2009
CO2 from electricity purchased
(kt)*
CO2 from diesel (kt)**
Total CO2 emissions (kt)
COAL
Arnot
Char plant
Durnacol
Grootegeluk
Hlobane
Inyanda
Leeuwpan
Matla
New Clydesdale Colliery
North Block Complex
Tshikondeni
MINERAL SANDS
KZN Sands
Namakwa Sands
BASE METALS AND
INDUSTRIAL MINERALS
Glen Douglas
Rosh Pinah
Zincor
Alloystream
Ferroalloys
Head Office
R & D
Total
* Electricity purchased * 0,98/1 000
** Diesel used * 0,00271/1 000
CORPORATE OFFICE
14,08
13,44
532,67
51,45
5,00
0,09
509,71
55,86
2,57
–
261,92
251,21
0,00
7,07
24,05
133,88
14,55
2,40
32,25
–
6,39
21,00
128,81
10,44
1,44
32,00
1 002,39
1 170,71
445,84
556,55
638,38
532,33
157,66
17,26
0,34
0,43
47,47
0,10
10,38
41,39
5,09
9,29
23,28
2,63
36,86
5,28
31,58
163,07
25,29
0,39
–
690,33
68,71
5,34
0,51
672,78
81,14
2,96
–
53,95
309,39
305,16
–
9,98
31,68
4,79
11,73
22,81
2,44
0,11
17,46
65,45
–
16,37
52,68
138,97
133,60
23,83
25,69
34,88
22,17
24,25
34,44
35,72
1 039,25
1 206,43
5,27
30,45
451,12
588,12
643,65
562,78
455,92
471,45
12,00
11,39
467,92
482,83
9,73
42,55
12,45
45,00
403,63
414,00
0,46
4,80
6,62
2,20
1,36
5,30
6,79
–
4,30
4,70
3,00
0,03
–
–
0,03
–
4,54
4,54
2,31
–
–
–
–
–
14,03
47,25
16,99
49,54
406,63
416,31
14,11
13,44
0,46
4,80
6,66
2,20
1,36
5,30
6,79
–
1 990,97
2 151,87
206,52
210,17
2 197,49
2 362,04
EXXARO INTEGRATED ANNUAL REPORT 2010 119
SOCIAL PERFORMANCE
Our people
Disclosure on management approach
Exxaro’s approach to its people is guided by a comprehensive suite of policies that covers employment, labour/management
relations, occupational health and safety, training and education, and diversity and equal opportunity.
For a number of reasons, South Africa is particularly challenged by the shortage of specific skills and a national plan is in place to
address this. Known as critical or scarce competencies, attracting, retaining and developing these skills is a focal area for all mining
companies and a competitive point of difference. Supported by the leading practices developed in recent years, Exxaro concentrates
on exceeding compliance targets in South Africa by training and development to maximise individual potential, equality and safety
in the workplace, meeting our employment equity targets and improving standards of living in our stakeholder communities.
Collectively, our initiatives are also contributing to reducing the shortage of skills in our industry.
Exxaro follows a total remuneration approach with guaranteed and variable components. The group’s vision, mission, business
strategy and culture drive this philosophy and strategy, in tandem with governance structures and external statutory regulations
(SA Revenue Services, King III and IFRS II). The components include guaranteed pay, short-term performance incentives and long-
term incentives such as share schemes and other benefits linked to longer-term targets to ensure sustainability. All components are
benchmarked against the external market to ensure Exxaro remains competitive.
Wage agreements on remuneration are in place at all group employers, while formal processes determine remuneration for non-
unionised employees. Six-monthly market surveys ensure total remuneration is market related.
At all levels, minimum conditions of employment exceed the requirements of South Africa’s Basic Conditions of Employment Act.
Through Exxaro’s human resource development policy, we aim to:
> Develop and sustain core competencies and maximise human resources to meet the group’s strategic objectives and improve
operational performance
> Create a learning culture by assisting and facilitating the process in which employees and their dependants take responsibility for
improving their own educational and competency levels, to the mutual benefit of the individual and the organisation
> Ensure integration and uniformity in all learning and development processes by leveraging technologies
> Support and reinforce our values through various learning and development initiatives
> Ensure learning and development initiatives are career-focused and aligned with business objectives
> Establish life-long learning as the major thrust of learning and development.
Diversity and equal opportunity
When we created Exxaro — the largest black-owned mining company in the country — we stated our intention of being the best
example of how South African companies could and should be run. We made a commitment to our people to ensure their progress
and to build the skills base we needed to fulfil our vision. Employment equity is just one of the ways in which we are doing this.
While employment equity is certainly a legal issue, with strict targets imposed by both the mining charter and the government’s
black economic empowerment codes, for Exxaro it is also a moral imperative.
At the heart of our employment equity strategy are detailed plans developed by each business unit in consultation with its
employees and unions. These are updated and progress reported to the board quarterly and government annually.
By following these plans, each unit ensures that recruitment and skills development are conducted responsibly, encouraging
transformation without affecting existing positions in the company. Each business unit has a formally assigned senior manager for
employment equity, and an employment equity forum responsible for ensuring appropriate plans are developed, executed,
monitored and communicated to employees.
120 EXXARO INTEGRATED ANNUAL REPORT 2010
Highlights
> New R3 million assessment workshop opened in April at Grovos training centre in Lephalale
> 201 learners enrolled in 2010
Workforce
Exxaro’s staff complement was 10 937 at 31 December 2010, split into employees in bargaining units and the management and specialist
category. In the bargaining units, there are 8 597 employees, with 1 913 employees in the management and specialist category. Regional
distribution is shown below:
Region
Gauteng
KwaZulu-Natal
Limpopo
Mpumalanga
Western Cape
Namibia
Expatriates
Local nationals*
Total
* Australia office.
Bargaining
unit
Management
and specialist
category
Temporary
employees
880
529
2 395
3 552
771
469
1
8 597
151
64
16
153
35
8
611
167
480
294
253
98
4
6
Total
1 642
760
2 891
3 999
1 059
575
4
7
1 913
427
10 937
The HR management system introduced in
and timely business
information, and
there
is no discrimination between
March 2009 is providing the group with
effective forecasting of people-related
salaries of men and women
in this
end-to-end business process integration,
information (employees and contracting
category.
In
the management and
including
e-learning
and medical
workforce).
surveillance. This advanced environment
specialist category, all employees are on
performance contracts and
individual
has enhanced Exxaro’s ability to monitor,
There were again no reported incidents of
salaries are based on performance, not
control and enforce compliance (medical
discrimination in the group during the
gender or race.
and
induction expiries, overtime and
year. As collective agreements determine
statutory leave). It also ensures accurate
specific guaranteed minimum salaries,
The breakdown of employees by gender and age is shown below.
Region
Gauteng
KwaZulu-Natal
Limpopo
Mpumalanga
Western Cape
Namibia
Expatriates
Local nationals
Total
Bargaining unit
Management and
specialist category
Temporary
employees
Male
Female
Male
Female
702
466
2 144
3 110
673
438
7 533
178
63
251
442
98
31
1
1 064
411
134
416
250
204
71
4
5
1 495
200
33
64
44
49
27
1
418
Male
113
41
8
113
25
4
Female
38
23
8
40
10
4
Total
1 642
760
2 891
3 999
1 059
575
4
7
304
123
10 937
EXXARO INTEGRATED ANNUAL REPORT 2010 121
SOCIAL PERFORMANCE CONTINUED
Bargaining unit
Management and special
Temporary employees
18-25
26-35
36-45
46-55
56-65
66-68
18-25
26-35
36-45
46-55
56-65
18-25
26-35
36-45
46-55
56-65
66-75
Total
Gauteng
KwaZulu-Natal
Limpopo
Mpumalanga
Western Cape
Namibia
Expatriates
Local
nationals
Total
239
56
820
1 014
73
88
117
10
213
246
7
27
20
4
19
20
10
1
1
38
55
181
302
103
51
237
274
588
1 079
326
193
249
134
593
910
262
110
1
157
50
142
87
60
33
2
1
213
64
154
91
102
31
2
4
730
2 697
2 259
2 290
620
1
74
532
661
161
34
122
82
70
29
1
499
60
15
43
14
11
4
62
13
2
44
17
2
22
17
5
69
10
3
25
9
5
27
2
3
13
16
3
6
1
25
7
1
4
4
4
2
2
1
1 642
760
2 891
3 999
1 059
575
4
7
147
140
126
71
39
41
9
10 937
The challenge of finding suitable skills to staff new projects is ongoing. Exxaro has an active retention programme to maintain scarce
skills that accounts for 5-6% of total payroll. Equally, considerable attention is given to building a sustainable talent pipeline of skills in
critical or scarce competencies.
Employee turnover
Between 1 January and 31 December 2010, Exxaro’s average employee turnover rate was 6% (2009: 4%), primarily because of death,
resignation, dismissal and disability. The turnover rate by employee group is show below:
Employment equity – occupational levels
% of workforce
Number
Terminations January – December 2010
Top management
Senior management
Professional, specialist and middle management
Skilled technical, academically qualified and junior
management
Semi-skilled and discretionary decision making
Unskilled staff
0
0
0
1
5
0
6
Breakdown of turnover statistics
Gender
Race
Reasons for terminations
l
i
a
s
s
m
s
D
i
d
e
n
g
s
e
R
i
79
262
Turnover
numbers
Total
F
M
A
Grand total
602
61
541
371
C
59
I
14
d
e
d
n
o
c
s
b
W A
158
40
y
t
i
l
i
b
a
s
D
i
66
h
t
a
e
D
85
122 EXXARO INTEGRATED ANNUAL REPORT 2010
Turnover by age groups
57
d
e
r
i
t
e
R
70
119
114
20-30 years
41-50 years
61-70 years
31-41 years
51-60 years
0
19
13
74
475
21
602
131
181
Employment equity
The breakdown of Exxaro’s annual employment equity reports, as submitted to the Department of Labour, is shown below. As these
reports are for the period 1 August 2009 to 31 July 2010, totals differ from year-end numbers.
Top management
Senior management
Professional,
specialists and
middle management
Skilled technical,
academically
qualified and junior
management
Semi-skilled and
discretionary
decision making
Unskilled and
defined decision
making
Total permanent
Temporary
employees
Total
Male
C
1
2
I
5
A
2
9
W
3
63
A
2
Female
C
I
1
W
8
217
29
33
491
72
9
22
131
Foreign
M
F
Total
6
91
2
1 015
1
9
1 206
213
42
1 251
228
51
24
358
11
2
3 386
3 536
447
11
272
317
79
9
59
71
4 801
929
5 899
41
5 940
692
2
694
30
91
2 110
32
91
2 142
159
778
16
794
2
141
3
144
3
559
20
579
56
2
58
6
98
1 129
4
10 428
116
98
4
10 544
A – African, I – Indian, C – Coloured, W – White.
Excludes international employees and local nationals in Australia
Percentage of employees with NQF
level 1 qualifications and above
79%
In 2010, 180 employees completed various
ABET levels successfully (14 passed ABET
level 4, 53 passed level 3, 34 level 2,
59 level 1 and 20 pre-ABET). Over 150 non-
Exxaro employees completed different
ABET levels during the year.
66%
68%
68%
2007
2008
2009
2010
Literacy and numeracy
Exxaro’s target is to provide all employees
with qualifications below NQF level 1 the
opportunity
to become
functionally
literate. Exxaro employees with a
qualification of below NQF level 1 now
form 21% of the total workforce.
Exxaro offers sponsored, voluntary adult
basic education and training (ABET)
programmes at all commodity businesses
and carries the
full cost of these
programmes. This initiative amounted to
R1,9 million in 2010, a significant increase
on the prior year (2009: R1,3 million).
To ensure informed decisions, candidates
are screened and counselled, and an
incentive scheme for each level completed
encourages more employees to become
functionally literate and numerate. Almost
1 200 employees have passed one or more
ABET levels since the inception of this
programme.
EXXARO INTEGRATED ANNUAL REPORT 2010 123
SOCIAL PERFORMANCE CONTINUED
Exxaro has accredited ABET training centres at Grootegeluk, Tshikondeni, Matla and Arnot mines. An ABET centre was launched at
North Block Complex in September 2009, while Tshikondeni centre introduced full-time classes in 2010. The group’s annual training
reports and workplace skills plans, approved by the MQA, reflects the number of ABET candidates completing various levels as well as
those planned for the years ahead.
Functionally literate and numerate
Total staff count
Employees below ABET level 3
Employees on ABET level 3
Employees above ABET level 3
* Number of full-time employees.
Training and education
Number of people
2010
10 510*
1 683
511
8 316
2009
11 180
2 236
345
8 599
Material issue: Training and development
The critical shortage of artisans in South Africa, and around the world, is affecting virtually every aspect of our economy from
municipal service delivery to routine maintenance.
At the heart of the issue lies the lack of suitably qualified candidates with the necessary entry skills, particularly in science and
mathematics. These subjects are the basis of many trades. The situation is compounded by emigration, significantly reduced
corporate training because of the government’s SETA learnership programme, and the fact that almost half our existing artisan
population is over the age of 50.
South Africa is currently producing around 5 600 qualified artisans each year — well below the target of 12 500 set by the
Department of Higher Education and Training. Estimates of the country’s requirement range from 50 000 to 80 000 artisans — our
current artisan workforce is estimated at 1 340.
In 2010, Exxaro had 379 people at different stages of their artisan qualifications. To put this contribution into perspective, Exxaro
alone accounts for a sizeable portion of all engineering learnerships registered with the MQA. This training will lead to full artisan
status in trades such as electrician, fitter, plater, diesel mechanic and millwright. All these trades appear on South Africa’s scarce
skills list.
Exxaro’s human resources development professionals also contribute significantly to the national and sectoral transformation
process by participating in bodies such as Business Unity South Africa, Chamber of Mines’ education advisory committee, and the
MQA’s sector skills planning committee and standards-generating bodies.
124 EXXARO INTEGRATED ANNUAL REPORT 2010
At Exxaro, we believe that empowering all
termination as part of the social and
management is also included in a web-
staff with the knowledge and skills they
labour plan for each mine.
based induction programme.
need to develop personally will also help
us grow the company. In 2010, 7 013
To preserve technical and engineering
Employees in the bargaining unit are not
Exxaro employees successfully completed
competence
in the group, aggressive
part of Exxaro’s formal performance
some form of relevant development
retention
and
succession-planning
management system. Their development
training. Exxaro’s policy is to invest an
strategies are
in place for technical
is guided by individual development plans
appropriate amount of total payroll each
and other categories. Comprehensive
based on the job profile, formal career
year on human resource development. In
training and growth opportunities provide
path and individual preference.
2010, this was 5,1% or an investment of
continual rotation and exposure of talent
R140 million (2009: 5% or R126 million).
to multi-disciplinary teams.
We encourage our people to accept joint
responsibility in managing their career
In 2010, the group continued its broader
Across
the
group,
training
and
growth.
Exxaro
financially
assists
focus on skills development, moving
development is based on a comprehensive
permanent employees with potential to
from engineering learnerships to include
needs analysis,
incorporating business
continue their education through part-
other
learnerships
and
skills
strategy, identified skills deficiencies via
time studies of recognised, approved
programmes. During the year, Exxaro
the performance management process,
courses and programmes. Employees
enrolled 166 new engineering learners,
succession-planning
requirements,
nominated by the company to attend
17 mining learners, 12 operator learners,
employee
career
progress
and
courses or programmes are
fully
seven administrative learners and 18
the Grootegeluk
for
plant
learners
employment equity plans.
tuition, examinations,
sponsored
travel, accommodation costs and study
for
Medupi expansion project.
All employees outside bargaining units
leave.
receive formal performance and career
The ratio of learnerships in the pipeline to
development
reviews
bi-annually.
Specific
strategies
to ensure
the
the number of artisans employed
in
Management members are assessed
accelerated learning and development of
various trades is monitored as part of our
throughout the year as the basis for
black people, women and people with
artisan retention strategy. This ratio is
individual succession plans and talent
disabilities include:
currently 1:3.
management. These assessments are also
> Fast-tracking employees with leadership
linked to reward and remuneration.
and management potential
E-learning is an integral part of our
> Accelerated
development
for
training
delivery
approach
and
New management and specialist-category
occupation-based skills
implemented across the organisation.
employees undergo
training on
the
> Formal study assistance
Portable skills training is provided to
reinforce the concept that reward
is
> Life skills programmes
assist employees
in managing career
driven by performance. Performance
> Learnerships.
performance management process to
> Adult basic education
Skills development
Description
Total leviable amount (payroll)
Total training spend
Total training spend on black people
Total training spend on black women
Total training spend on white women
* Numbers as per skills development plan submitted to Department of Labour on 31 March 2010
Spent
2010*
Rm
2 736
140
115
21
11
2009
Rm
2 045
126
89
11
9
EXXARO INTEGRATED ANNUAL REPORT 2010 125
SOCIAL PERFORMANCE CONTINUED
Career development
To ensure solid learning foundations,
further skills development only takes
place once employees have been
declared competent
in their current
positions.
In most
cases,
further
development is focused on a career path
in the department in which the employee
is currently working.
Exxaro’s strategy is to ensure 75% of all
new appointments are made internally.
Our
integrated process
is therefore
aligned with both our strategy and
industry needs to provide a steady flow
advancement. The overarching objective
at a cost of R11 million: two-thirds are
is to ensure that trainees entering the
historically
disadvantaged
South
group are empowered, challenged and
Africans and 30% are women.
appropriately rewarded:
> Exxaro people development
> Professionals-in-training
initiative
Exxaro granted 30 bursaries in 2010 to
programme
In this three-year programme that
school leavers interested in technical
blends academic theory with the work
disciplines
such
as
engineering,
environment, each professional-in-
geology
and mine
surveying.
training has a mentor who supervises
Candidates must be grade 12 students
exposure to the various commodities,
from Exxaro mining communities who
leadership and management training,
want to study for a technical degree or
and formal training from professional
diploma. On completing their studies,
bodies.
In
2010,
there were
candidates are considered for an
73 professionals in training throughout
of qualified talent for our growth and
Exxaro bursary.
expansion projects.
In 2010, there were 221 participants on
programmes
supporting
internal
> Bursary programme
There are currently
118 bursars
studying at South African institutions
Exxaro in a R40-million programme:
65% are from designated groups and
29% of those are women.
Getting the golden ticket
In 2009, Exxaro introduced a programme to help employees obtain their government certificate of competence (GCC) in electrical
or mechanical engineering. Given the pass rate of around 20%, obtaining the GCC offered by the Department of Mineral Resources
has been a formidable obstacle to many engineers in the past.
The Exxaro programme, developed by a manager in the engineering field at Matla, prepares qualifying employees by building on
the practical engineering exposure and training they have received in the years prior to registering for the GCC examination.
Since the introduction of the course, Exxaro’s pass rate has risen from 20% to 50%.
Grovos conducting trade tests
Trainee electricians, fitters and millwrights are enjoying the benefits of the new R3-million assessment workshop that opened at
the Grovos training centre in Lephalale in April. This is in line with legislation that requires training providers to conduct their final
trade tests at a different venue to where learners were trained.
The launch of the assessment centre follows a series of improvements over the past four years, in which Grovos has increased the
intake of new learners by 56%, while setting a record with an 89% qualification rate in 2009. In 2010, the qualification rate dropped
slightly to 85%.
The centre is now equipped to train 180 learners per year, many of whom will be placed at Grootegeluk to support its expansion plans.
Case study — Exxaro learner management programme has industry-wide benefits
Exxaro’s learner management programme is instrumental in designing skills programmes for the engineering and mining disciplines
in the coal industry. Once approved by the MQA, courses are loaded onto the MQA database for national use. In addition, Exxaro
loads course material onto its own e-learning platform for other business units to use.
During the year, two more groups of gas-testing and flame-proofing learners graduated. To date, 72 employees have been trained
in gas-testing 720 unit standards and 38 employees in flame-proofing 141 unit standards.
126 EXXARO INTEGRATED ANNUAL REPORT 2010
Leadership development
Formal leadership development initiatives, mentorship programmes and succession-planning workshops involving senior management
and employees are ongoing. Building and retaining a pool of current and future leaders is a priority for the group and appropriate
initiatives include a comprehensive succession-planning process and enhancing strategic leadership competencies.
The professionals-in-training programme supports the success of critical skills in the management and specialist categories. The
programme also assists in achieving the group’s employment equity targets.
New leadership programme — (In)Credible Leadership
Exxaro has developed a unique leadership philosophy dedicated to strategic business objectives and personal improvement on all
levels. Hundreds of leaders in Exxaro have contributed to developing a sound philosophy that encourages leadership credibility first
and incredibility to follow.
Credible
Competence: Leaders have basic functional and managing competencies to lead.
Self: Leaders have a value-centred, accountable and reflective character.
People orientated: Leaders have basic rational skills including diversity, respect and constructive discipline.
Communication: Leaders have foundational communication attitudes such as openness, listening and positive attitude.
Incredible
Involved: Leaders create a context for meaningful participation of teams through diversity, trust and alignment.
Inspire: Leaders connect people with the dream and maintain motivation for the vision.
Invest: Leaders facilitate knowledge and understanding of people.
Influence: Leaders influence achievement of goals through respect, understanding and openness to change.
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
sustainability.
In
practice,
these
communities have lowered the risk of
losing key knowledge workers, and
In September 2010, members of NUM
> Housing allowance and/or company
employed
in the bargaining unit at
accommodation
Exxaro Sands operations in KwaZulu-
> Guaranteed annual holiday bonuses/
Natal went on strike over a wage dispute.
13th cheque
for bargaining unit
The strike was resolved after three
employees
weeks. Labour relations at all other
> Travel/commuting allowances
Exxaro operations are managed in such a
> Standby and call-outs as well as
way that they facilitate progress towards
amicable
and mutually
beneficial
payment for overtime worked
leave, sick
> Annual
leave, maternity
brought new people up to speed more
resolution.
rapidly.
leave, family responsibility leave
> On-target short-term incentive schemes
Labour relations
Almost 70% of Exxaro’s employees are
represented
by
affiliated
unions,
Exxaro has a disciplinary code that is used
> Long-term incentives — either based on
when necessary. The code is based on the
share price appreciation or
the
principle of fairness as required by labour
achievement of
longer-term targets
law. Supervisors have
the skill
to
aimed at sustainable operations.
predominantly
National
Union
of
implement the code.
Mineworkers
(NUM)
(54,5%),
and
Solidarity
(10,7%). Other
recognised
unions are Mineworkers Union of Namibia
(MUN), National Union of Metalworkers in
South Africa
(NUMSA), and United
Association of South Africa (UASA).
Negotiations for improved wages and
conditions of employment are conducted
in various in-house forums and through
Retirement and other benefits for all
Employee benefits
Through collective bargaining, full-time
permanent employees are provided by
independent defined contribution funds.
employees receive a range of benefits —
The employer contribution to retirement
many exceeding legislative stipulations
funds in the group ranges from 10% to
for South Africa’s basic conditions of
18% of employee pensionable earnings,
employment — including:
and is expensed as it occurs. All retirement
> Retirement fund membership including
funds are governed by the South African
contributions by the employer
Pension Funds Act
(1956), with no
> Medical aid membership subsidised by
members on defined benefit plans.
the Chamber of Mines.
the employer
EXXARO INTEGRATED ANNUAL REPORT 2010 127
SOCIAL PERFORMANCE CONTINUED
In 2010, employees participating
in
Exxaro’s Mpower (empowerment scheme
holding around 3% of Exxaro’s shares to
broaden
share participation among
Home owners (bought company property)
workers) received their fifth dividend
Hostels
payment. Since inception in November
Single quarters
2006, each of the Mpower beneficiaries
(9 289 at year end) has received some
R5 670 in dividends.
Rental and other
Total
Number of employees
2010
948
40
1 505
8 017
2009
929
594
1 343
8 314
2008
822
389
1 336
7 588
10 510
11 180
10 135
Housing
Exxaro continues to focus on home
ownership. To comply with the mining
charter and our own business needs, a
new
long-term housing strategy was
developed two years ago.
In 2009, the group introduced a five-year
subsidy for first-time homebuyers who
are permanent employees. This was
the
welcome
particularly
given
unprecedented scarcity of bank mortgage
finance
at
that
time.
To
date,
232 employees have benefited from this
subsidy to make home-ownership more
affordable.
While Exxaro’s housing policy focuses on
home ownership, employees receive a
housing or living-out allowance to assist
them in obtaining accommodation. The
total value of these allowances in 2010
was over R137 million.
The steady increase in the number of
In 2010, five women aiming to become
home owners
reflects
the group’s
miners began their training programme at
commitment to facilitating affordable
Tshikondeni. By the end of November, they
ownership. At all operations, except
had completed the first phase of their
Tshikondeni due to the current life of
studies at the Colliery training college and
mine, there is only one person per room in
will train for another 12 months on-site
the hostels; at Tshikondeni some rooms
before qualifying as miners.
have two occupants.
Exxaro provides meals at Matla and
Human rights
Exxaro complies with labour legislation in
Tshikondeni where
the quality and
South Africa and International Labour
nutritional value are determined by a
Organisation guidelines. As a signatory to
dietician. Qualified
staff continually
the United Nations Global Compact, the
monitor
adherence
to
contractual
group encourages freedom of association
obligations. Employees have accessible
and collective bargaining, ensures child
mechanisms to engage both management
labour is not tolerated and that forced or
and suppliers on food issues.
compulsory labour is not practised.
Women in mining initiatives
Although Exxaro already exceeds prior
Induction programmes educate employees
about
human
rights. Policies
on
mining charter targets of having 10% of
discrimination, harassment and racism
the workforce
staffed by women,
are in place, as are structures to protect
attracting women to work in the group’s
employees’ human rights in the workplace.
core business remains a focus area.
All security personnel are fully trained
after appointment on human rights
aspects relevant
to each operation.
Refresher courses also cover human
rights issues.
128 EXXARO INTEGRATED ANNUAL REPORT 2010
SUSTAINABLE PROCUREMENT
Disclosure on management
approach
Sustainable procurement
Exxaro is adapting its supply chain
operations to ensure we source,
contract,
lease, hire and procure
goods and services from suppliers
that
practise
sustainable
development value-chain principles
that minimise harm to ourselves,
others, the environment and our
planet. This will include implementing
warehouse
and
inventory
management practices that minimise
waste and excessive consumption or
use of our natural resources.
Equally, our supply chain partners
important
in
are
addressing inefficiencies that might
stakeholders
impact negatively on health, hygiene,
safety and the environment.
Progress
In the review period Exxaro developed a
sustainable supply-chain philosophy that
will be adopted across the group as an
initial milestone in building competency in
this field. In terms of this philosophy, all
employees and other stakeholders making
procurement decisions are encouraged
to support our supply-chain function in
building relationships with suppliers that
demonstrate commitment to sustainable
business practices including:
> Upholding basic human rights and
complying to relevant labour legislation
Preferential procurement
Management approach on
disclosure
Preferential procurement
The group’s preferential procurement
policy tasks the business to capitalise
on its purchasing power to ensure
that, in business practices, we engage
and contract with external suppliers
with strong BEE credentials or that
are making a tangible effort to
transform their business to be BEE
compliant. This
is an
important
> Integrating sound health, safety and
element of material stewardship.
Since the promulgation of the new
mining charter in September 2010,
we have reviewed our policy and
to accommodate multi-
strategy
national suppliers of capital goods
that wish to contribute 0,5% of
annual
income generated
from
Exxaro into a special fund for the
socio-economic development of local
communities.
hygiene management practices into all
aspects of their businesses
> Implementing effective and compliant
environmental management in design,
manufacturing and waste management
processes
> Commitment to Exxaro’s ethical code of
conduct in dealing with internal and
external stakeholders
> Supporting and contributing to the
economic and social development of
communities in which Exxaro operates.
All
collaborative efforts with our
stakeholders and partners will be carried
out in the spirit of support for sustainable
business practices, enhancing Exxaro’s
level of competence
in supply-chain
sustainability. Current focus areas are
strategic sourcing, supplier management,
procurement,
logistics and
inventory
management.
EXXARO INTEGRATED ANNUAL REPORT 2010 129
SUSTAINABLE PROCUREMENT CONTINUED
Procurement from HDSA suppliers
)
%
(
60
50
40
30
20
10
0
2005
2006
2007
2008
2009
2010
% HDSA spend
Preferential procurement targets
60
50
40
30
20
10
0
2009
2010
2011
2012
2013
2014
% HDSA spend
Progress
Our current policy
incorporates BEE
targets specified by expenditure on capital
goods, operational goods and services. We
have demonstrated our commitment to
procuring from HDSA companies through
steady progression from 16% in 2004 to
over 45% in 2009. We exceeded our
2010 target of 47%, recording an actual
procurement level of 50% from HDSA
companies.
For the review period, the 50% level
achieved represents R3,8 billion spent
with HDSA-owned companies, reflecting
numerous BEE capital contracts for the
Medupi project among others.
The target for 2011
is 50%, rising
incrementally to 56% by 2014. Accurately
reflecting spending on suppliers by
category as required by the mining
charter
is
important
to
track our
performance against targets and we have
configured our systems to report quarterly
)
%
(
progress
in terms of capital goods,
consumable
goods
and
services.
Configuring and developing our systems
to
track multi-national
supplier
contributions remains an industry-wide
challenge.
130 EXXARO INTEGRATED ANNUAL REPORT 2010
SOCIO-ECONOMIC DEVELOPMENT
Disclosure on management approach
Communities
Exxaro’s community activities are directly linked to its strategy by ensuring the group’s sustainability, and protecting and building
its reputation by fostering mutually beneficial relationships with local communities. A local community is defined as a community
in the immediate area of Exxaro’s operations and from labour-sending areas.
In considering any project, our overarching objective is to alleviate poverty and improve the life of identified communities. This is
even more important given the rural location of most of our operations — areas characterised by the level of unemployment and
relevant development needs.
Socio-economic development projects refer to the application of funds, goods and labour to provide sustainable services for the
local community, which can be owned, managed and maintained by that community. Unlike a donation, Exxaro’s role in these
projects extends beyond providing funds to active involvement in applying these funds, as well as a project management role.
In South Africa, all mining groups are required to have social and labour plans supporting the key provisions of the mining charter.
Exxaro’s social and labour plan strategy describes each plan as a set of initiatives designed to minimise any negative social impacts
and maximise the positive social opportunities of mining operations. The objective is to ensure real sustainable development and
growth in communities.
An important element in Exxaro’s approach is generating new non-mining economic opportunities within identified local
communities, particularly for local BEE companies and SMEs owned by disadvantaged groups. Exxaro’s role is to ensure that
measures are in place to support the establishment and growth of SMEs and to develop effective linkages with funded, accredited
training and development institutions.
In terms of socio-economic development, Exxaro implements social responsibility strategies that reflect ongoing commitment from
the company via the Exxaro Chairman’s Fund and Exxaro Foundation, aimed at entrenching the image of Exxaro as a caring
corporate citizen in the community.
Exxaro encourages volunteerism and participation in local economic development projects to create of a culture of socially
conscious employees.
EXXARO INTEGRATED ANNUAL REPORT 2010 131
SOCIO-ECONOMIC DEVELOPMENT CONTINUED
Focus areas
Exxaro’s
sustainable
Although not all our social and labour
development
plans have been approved by
the
activities,
including
socio-economic
initiatives and donations, are focused on
areas that are relevant and strategic to
South
Africa’s
socio-economic
development. Accordingly, we
are
Department of Mineral Resources, those
already in place are mainly implemented
according to set targets. These plans
focus on communities close to our
operations, as well as
labour-sending
Monitoring and evaluation
currently
We are
implementing a
monitoring and evaluation system to
measure progress and identify challenges.
This system is also aligned with Exxaro’s
internal
socio-economic development
technology platform.
It will be fully
currently focusing on:
> Formal education
> Skills development and capacity building
> Enterprise development
> Health and welfare
> Environment
> Infrastructure
(related
to
socio-
economic projects)
> Agriculture
> Tourism
> Sport and recreation.
In implementing our strategy, we aim to
integrate social sustainability into our
business activities, creating public-private
partnerships (PPPs) where possible to
extend the impact. We accept that the
areas, to ensure they benefit from the
operational by November 2011.
mine’s presence in multiple ways.
Exxaro’s policy is to actively recruit labour
from local communities wherever possible,
and training initiatives focus on developing
the skills of community members to fulfil
the group’s requirements.
In
2010,
Exxaro
allocated
some
R38,6 million
to
socio-economic
development projects currently under
way, corporate projects and other
some
initiatives.
includes
This
discretionary donations made by the
corporate centre and individual business
units. Most of these initiatives stem from
Project implementation
Exxaro’s
five-year
socio-economic
development projects focus on enterprise
development, infrastructure development
and poverty alleviation as requested by
the Department of Mineral Resources.
In terms of the group’s social and labour
plans, Exxaro has 55 sustainable projects
unfolding over a five-year period. These
are being implemented in conjunction
with all relevant stakeholders to ensure a
collaborative approach. The number of
jobs being created through these projects
exceeds 670, indirectly benefiting over
sustainability of host communities extends
identified community needs and are
11 400 people.
beyond the finite time frames associated
considered against the local municipality’s
with our operations, and this is an integral
integrated development plan.
part of the closure plan for each mine.
Exxaro Chairman’s Fund and Exxaro Foundation
Funds allocated 1 January – 31 December 2010: R38,6 million
12%
8%
6%
26%
Skills development
Environment
Education
Enterprise development
Sport and recreation
Infrastructure
Donations
12%
1%
35%
Exxaro also contributed more
than
R16 million in 2010 via corporate projects
and commitments, including university
chairs, skills development and membership
fees to national and international bodies
such as the National Business Initiative,
WWF and the Peace Parks Foundation.
Some of Exxaro’s
local economic
development projects are detailed as case
studies overleaf.
132 EXXARO INTEGRATED ANNUAL REPORT 2010
Case study — Zikulise skills training and SME development centre
The Zikulise centre was officially opened in November 2007 as a partnership project
between Exxaro KZN Sands, uMhlathuze Municipality, NGO Zikulise Community
Upliftment and the European Union.
This project will be worth R6 million on completion and will offer skills training in
various areas including sewing, beading, baking, pottery, and handcrafted jewellery.
It also caters for blind people who are trained by the Blind Society of KZN in weaving
baskets and cane furniture production. Off-site training in bricklaying, plumbing,
plastering and carpentry will be offered.
Five SME companies have been established to date, with three currently moving
through the incubation phase. Established SMEs are mentored by the centre for
three months after completing skills and business training to ensure their
sustainability. To date, 1 800 people from the community have been trained by the
centre.
The centre also promises to become an important tourist attraction with visitors
able to view training sessions and buy products from trainees. An attractive cafeteria,
where bakery trainees also learn more about hospitality training, gives visitors to
chance to enjoy unique African baking and delicacies like home-made ginger beer.
Once a month, a morning market enables all SMEs to market their products at the
centre.
Zikulise is rapidly becoming a prime training centre, concentrated on two of
government’s main focus areas in alleviating poverty, skills training and enterprise
development.
the
that aims
comprehensive
Case study: Agri-business
takes root at Grootegeluk
At Grootegeluk, the success of a rural
community is as integral to the mine
as its operations. Grootegeluk has
partnered with
Lephalale
Agricultural Corridor (LAC) project —
agri-business
a
initiative
to alleviate
poverty by linking the burgeoning
mining economy in Lephalale with
the poorer marginalised economy of
the broader region. Our goal is to
establish the local rural villages of
Seleka, Shongoane and Langa as
sustainable food sources that can
supply both local and international
markets. Good progress
is being
made:
> A new pump and water reservoir
have been installed to draw and
store water from the nearby river
> Main-line irrigation has been set up
both at the reservoir and on
selected areas of farming ground.
This system is designed to best suit
the water needs of the area and
type of crops that will be grown —
instead of irrigating upwards, the
water goes directly into the ground
> Storage areas are being built in the
communities to hold agricultural
produce.
industries
Besides this infrastructure, the LAC
will also help these communities sell
their products to
for
catering purposes, as well as to local
supermarkets and the community at
large. The traditional leader for the
area, Queen Langa, is exceptionally
pleased with the progress on this
project since Grootegeluk came on
board.
EXXARO INTEGRATED ANNUAL REPORT 2010 133
SOCIO-ECONOMIC DEVELOPMENT CONTINUED
Case study — Innovative
Case study: Inyanda supports infrastructure development
beneficiation at Namakwa
Over the last three years, Inyanda has spent R3,3 million to maintain the 11km stretch
Sands
of Zaaihoek Road that leads to the mine from Oosbank siding. The most recent
Namakwa Sands’ mine at Brand-se-
upgrades were completed in October, and maintenance will continue in 2011.
Zaaihoek Road is an important link for farming and Klarinet’s developing
communities, being one of the access roads on the north-eastern side leading to the
town of eMalahleni (formerly Witbank). The road is also shared by school buses and
other mining houses. Employees of Inyanda Coal use the road to get to work and the
mine transports coal products to local and overseas markets. Prior to Inyanda
assuming this maintenance responsibility, the road was in serious disrepair.
Baai is like a huge sandpit next to the
Atlantic Ocean. But this sandpit
provides a livelihood for over 1 000
employees and their families now and
20 years
into
the
future. The
sustainability of
this deposit
is
therefore a key focus area for the
Namakwa
Sands
geology
and
planning departments.
Traditionally, mining and beneficiation
at Namakwa Sands included high-
grade zones and low-grade zones,
also known as waste. But the mining
method resulted in erratic feed to the
primary concentration plants, which
affected recovery of the revenue-
generating minerals.
The geology department recently
instituted a grade-control programme
to stabilise feed to the plants by
cutting out waste material and
blending sand from different pits.
Using
technology, an
innovative
method
was
developed
to
communicate this to the mining
department and to brief them on
their daily targets, thus ensuring the
sustainability of the deposit for many
years to come.
134 EXXARO INTEGRATED ANNUAL REPORT 2010
Case study: Arnot hydroponics project
This 10-hectare project is in the Steve Tshwete municipal area, in Mpumalanga. It involves 21 local community members, who have
been trained in open-field vegetable production. Arnot Coal is assisting beneficiaries in all phases to achieve the following
objectives:
> Build a sustainable BEE farming business
> Create jobs for 21 community members
> Alleviate poverty
> Contribute to reforming agribusiness in the municipal area
> Develop skills for a number of prospective farmers from previously disadvantaged communities
The best site was identified by Arnot’s stakeholders forum, including representatives from the local municipality, an agricultural
specialist from the Department of Agriculture, Forestry and Fisheries, and the National Union of Mineworkers.
The mine provides funding and ongoing quality control, with appropriate employees using their time and skills to assist in building
capacity. The mine’s sustainable development manager is overseeing the project daily and is responsible for ensuring that the
monitoring and evaluation system is in place.
Beneficiaries growing their first vegetables
And selling their produce
EXXARO INTEGRATED ANNUAL REPORT 2010 135
SOCIO-ECONOMIC DEVELOPMENT CONTINUED
Case study – Official opening of Lepharo incubation project
Lepharo, an incubation project registered as a section 21 company (in the name of Seda Ekurhuleni Base Metals Incubator) was
officially opened by the executive mayor of Ekurhuleni, Clr Mondli Gungubele, on 23 February 2011. In his address, the mayor
applauded the alignment with government’s drive to create jobs, skills development and reduce reliance on hand-outs.
The idea of establishing a base metals incubator to develop SMMEs in Ekurhuleni was conceived as an Exxaro and Impala Refineries
initiative in 2003. The reasoning was simple: there was no downstream beneficiation business in base metals, particularly in zinc
and copper, for small entrepreneurs. Traditionally, this segment was the domain of large companies.
A feasibility study on this initiative was conducted by IZASA and results showed that sustainable SMMEs in sheet-metal work and
spin-casting using base metals could be established.
An expression of interest was submitted to GODISA (now Seda Technology Programme) for funding to start a base metals incubator
in Ekurhuleni. GODISA was the main funder of incubators in South Africa at the time.
GODISA accepted our expression of interest and funds were raised among the partners (Seda Technology Programme, Exxaro,
Impala Refineries, Ekurhuleni Municipality) to establish and manage the centre.
The facilities were completed in 2009 and all machinery installed in 2010.
There are two main businesses being incubated in this centre. These are spin-casting manufacturing keyholders, tin/bottle openers,
medals, name tags, plate tags, trophies, etc, and sheet-metal work manufacturing gutters, down pipes, roof sheets, fascia boards,
welding, etc. Two enterprises, Finecast and Medu Gutters and Installations, have graduated and are in business.
View www.lepharo.co.za
Case study: Makuya farmers’ cooperative
Exxaro’s Tshikondeni mine is partnering with national, provincial and local authorities as well as development agencies to help local
farmers implement better farming methods and grow lucerne for animal feed which will in turn produce better livestock.
This R1,5 million project (Exxaro’s contribution) is expected to create 40 direct jobs, with 150 indirect project beneficiaries.
During the year, work was started on the loading zones for the crush pens, which are now being constructed, and two boreholes
sunk to produce 2 000 litres per day. The administration block and engine room were completed and Eskom will install electricity.
The University of Venda is conducting research on the most suitable types of livestock to be farmed.
136 EXXARO INTEGRATED ANNUAL REPORT 2010
Case study: Namakwa Sands making a difference
The Pholla Park project will bring electricity to around 400 households in Vredendal on South Africa’s west coast, benefiting some
1 600 people. This was part of a resettlement process in which informal housing was moved to designated areas and then connected
to the electricity infrastructure, greatly improving the residents’ quality of life. In 2010, all 400 households were moved and the
project completed two years ahead of schedule.
Of the total project cost of R3,42 million, Namakwa Sands contributed R1,95 million. The costs saved by completing the project
ahead of schedule will be allocated to other approved projects, with agreement from the Department of Mineral Resources.
Pholla Park informal settlement — before
Newly constructed power lines
Serviced stands to which dwellings were removed
New serviced plots with informal houses established
EXXARO INTEGRATED ANNUAL REPORT 2010 137
138 EXXARO INTEGRATED ANNUAL REPORT 2010
DIVIDER PAGE 4 – FRONT (GOVERNANCE REVIEW)
Governance review
i
w
e
v
e
r
e
c
n
a
n
r
e
v
o
G
EXXARO INTEGRATED ANNUAL REPORT 2010 139
DIVIDER PAGE 4 – BACK (GOVERNANCE REVIEW)
EXECUTIVE COMMITTEE
1. Sipho Nkosi
2. Wim de Klerk
3. Trevor Arran
4. Mxolisi Mgojo
during this period. From 2001, he managed
Exxaro’s mineral sands commodity business
and then the base metals businesses in 2008.
He was appointed finance director in 2009.
4. Mr MDM Mgojo — Mxolisi (50)
Executive general manager: coal
BSc (hons) energy studies, MBA, Advanced
management programme (Wharton)
Previously at Eyesizwe Coal, Mxolisi was
responsible for marketing. Before assuming
his current position, he was responsible for
the base metals and
industrial minerals
commodity business.
3. Mr PT Arran — Trevor (43)
Executive general manager: sands and base
metals
BSc (hons)(econ geo), Advanced
management programme (UP/GIBS), BEP,
diploma project management
Trevor has a wide mining background,
supplemented by financial experience gained
in equity markets, investment banking and
new business. He assumed responsibility for
his current portfolio early in 2009.
1. Mr SA Nkosi — Sipho (56)
Chief executive officer (executive director)
BCom (hons)(econ), MBA (Univ Mass, USA),
Diploma in marketing management,
Advanced management leadership
programme
After 20 years in the industrial and mining
sectors, Sipho was a founder of Eyesizwe
Holdings and served as chief executive officer
before its merger into Exxaro in 2006. He was
appointed CEO of Exxaro in September 2007.
2. Mr WA de Klerk — Wim (47)
Finance director (executive director)
BCom (hons), Acc, CTA CA(SA), Executive
management programme (Darden),
Strategic marketing diploma (Harvard)
Wim served on the executive management
team of Iscor, responsible for strategy and
continuous improvement. He also managed
Iscor quarries and the Grootegeluk coal mine
140 EXXARO INTEGRATED ANNUAL REPORT 2010
5. Retha Piater
6. Ernst Venter
7. Marie Viljoen
8. Willem van Niekerk
5. Mrs M Piater — Retha (56)
Executive general manager: human
resources
BCom (hons), MBA, Advanced management
programme (Insead)
Retha has 26 years of human resources
experience across the various business units
and commodities, specifically in the area of
remuneration.
6. Mr PE Venter — Ernst (54)
Executive general manager: business growth
BEng (hons), MBA, Advanced management
programme (Insead)
Ernst has headed a number of portfolios
including base metals, consulting services,
mining technology, coal beneficiation, process
development and plant metallurgy. Prior to
assuming his current position, he was
responsible for the coal commodity business.
7. Mrs MS Viljoen — Marie (64)
Company secretary
Marie has 24 years’ experience in the field.
She is responsible for the group’s corporate
governance and business administration to
comply with statutory and legal requirements.
8. Dr WH van Niekerk — Willem (51)
Executive general manager: corporate
services
BSc (hons), MSc, PhD (met eng)(Univ of
Pretoria), BCom (Unisa), MBA (Henley
Management College, London),
TEP (Darden)
Willem started his career as a metallurgist
with Iscor in 1985, progressing to general
manager corporate technology by 2001. At
Exxaro, he has headed Zincor and Australia
Sands, and is now responsible for technology,
information management, logistics and supply
chain management.
EXXARO INTEGRATED ANNUAL REPORT 2010 141
DIRECTORATE
Mr SA Nkosi — Sipho (56)
Chief executive officer (executive director)
Page 140
Mr WA de Klerk — Wim (47)
Finance director (executive director)
Page 140
Sipho Nkosi
Wim de Klerk
Mr CI Griffith — Chris (46)
Non-executive director, member of Tremco
BEng (mining)(hons), PrEng
Current directorships: CEO Kumba Iron Ore, chairman Sishen Iron Ore Company,
director Kumba International Trading SA, member of Anglo American plc executive
committee
Other memberships: registered professional engineer with the Engineering Council
of South Africa, member of South African Institute for Mining and Metallurgy and
Association of Mine Managers.
Mr JJ Geldenhuys — Jurie (68)
Independent director, chairman of S&SD committee, member of Tremco
BSc (eng)(elec), BSc (eng)(min), MBA (Stanford), professional engineer
Current directorships: non-executive chairman Astral Food Limited and chair
human resources and remuneration committee.
Prior directorships: Avgold Limited, Anglovaal Ltd, Avmin Ltd, Freegold
Consolidated Mines Ltd, Hartebeestfontein Gold Mining Company Ltd, Lorraine
Gold Mines Ltd, Eastern Transvaal Gold Mines Ltd, Iscor Ltd, Sallies Ltd. President
Chamber of Mines (1993-1994), served on Atomic Energy Council and National
Water Advisory Council.
Chris Griffith
Jurie Geldenhuys
Ufikile Khumalo
Len Konar
Mr U Khumalo — Ufikile (45)
Non-executive director
BSc (eng), MSc (eng)(UCT), MAP (Wits), Senior executive development
programme (Harvard), Advanced management programme (Insead)
Current responsibilities: IDC divisional executive responsible for investments in
resources and beneficiation sectors, food beverage and agro industries, energy
and infrastructure sectors as well as high-technology venture capital.
Prior directorships: non-executive director of many companies including JSE-listed
DigiCore Holdings.
Dr D Konar — Len (57)
Independent director, chairman of the board and nomination committee
BCom, CA(SA), MAS, DCom
Current directorships: chairman — Steinhoff International, Mustek Limited; director
— Illovo Sugar, South African Reserve Bank, Sappi, JD Group; member ad hoc
United Nations ethics panel.
Prior directorships: member of safeguards panel of International Monetary Fund,
Washington; co-chairman of implementation oversight panel of World Bank,
past chairman and member of external audit committee of International
Monetary Fund.
Tremco = transformation, remuneration, human resources and nomination committee
142 EXXARO INTEGRATED ANNUAL REPORT 2010
Mr VZ Mntambo — Zwelibanzi (53)
Non-executive director, member of Tremco
BJuris, LLB (Univ of North West), LLM (Yale)
Current directorships: executive chairman Xalam Performance, chairman Metrobus
(Pty) Ltd, Mainstreet 333 (Pty) Ltd, director SA Tourism (Pty) Ltd and trustee of
Paleo-Anthropological Scientific Trust.
Prior directorships: executive director IMSSA, director-general of Gauteng Province
and chairman of Commission for Conciliation, Mediation and Arbitration of South
Africa.
Mrs N Langeni — Noluthando (67)
Non-executive director, member of the S&SD committee
BA(Cur) (Unisa), Diploma in nursing education (University of Natal)
Current directorships: CEO South African Women in Mining Investment Holdings
(Pty) Ltd, group CEO Bambizandla Holdings, director National African Women’s
Alliance (Pty) Ltd (NAWA), chairman Basadi ba Kopane Investments (Pty) Ltd.
Prior directorships: Protea Hotels Group, group CEO NAWA.
Zwelibanzi Mntambo
Noluthando Langeni
Mr RP Mohring — Rick (64)
Independent director, chairman of Tremco, member of audit, risk and compliance
committee, member of S&SD committee
BSc (eng)(mining), MDP, professional engineer
Prior directorships: CEO NewCoal, an empowerment initiative and forerunner to
Eyesizwe Coal.
Mr NL Sowazi — Nkunku (47)
Non-executive director, member of audit, risk and compliance committee
BA, MA (UCLA)
Current directorships: founding executive chairman of Tiso Group, chairman of
Idwala Industrial Holdings, Home Loan Guarantee Company, Financial Markets
Trust; director Aveng Ltd, Alstom South Africa, Trident Steel, Emira Property Fund
and African Explosives Ltd.
Prior directorships: executive deputy chairman of African Bank Investments
Limited, MD Mortgage Indemnity Fund (Pty) Limited.
Rick Mohring
Nkunku Sowazi
Mr J van Rooyen — Jeff (61)
Independent director, chairman of audit, risk and compliance committee
BCom, BCompt (hons), CA(SA)
Current directorships: Uranus Group, non-executive director of MTN Group and
Pick n Pay Stores. Trustee of International Financial Reporting Standards (IFRS)
Foundation, member of University of Pretoria’s faculty of economic and
management sciences oversight board. Founder member and former president of
Association for the Advancement of Black Accountants of South Africa.
Prior directorships: partner Deloitte and Touché, chairman Public Accountants and
Auditors Board, CEO Financial Services Board, advisor to the Minister of Public
Enterprises.
Mr D Zihlangu — Rain (44)
Non-executive director, member of S&SD committee
BSc (min eng) (Wits), MDP (SBL, Unisa), MBA (WBS, Wits)
Current directorships: CEO Eyabantu Capital Consortium; non-executive director
PetroSA, chairman of its human capital committee, member of its business
strategy committee; director of Sentula Mining.
Prior directorships: CEO Alexkor Limited
Jeff van Rooyen
Rain Zihlangu
EXXARO INTEGRATED ANNUAL REPORT 2010 143
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE
. . . MOVING TOWARDS AN INTEGRATED REGULATORY
AND COMPLIANCE PROCESS, SUPPORTED BY ENABLING
TECHNOLOGY
Disclosure on management approach
Exxaro is systematically developing a dedicated, transformed board, equipped with the necessary skills and knowledge to make
timely and effective decisions to ensure the group’s sustainability. The board provides strategic direction through in-depth knowledge
of Exxaro’s markets and operations, and viable board processes.
To ensure the base of knowledge, Exxaro pays market-related directors’ fees, and annually allocates sufficient funds for director
induction and training. Continuing development is both direct through leading service providers and via the national skills levy. In
2010, this amounted to R168 000. Regular meetings with the Exxaro management team are supplemented with communiqués to
board members on topical matters to facilitate strategic thinking, planning and compliance. Quarterly information packs on broad
business developments and legal issues are distributed. The chairman of the board meets weekly with executive management. Site
visits are arranged as required and board members regularly attend group functions, including the CEO Safety Summits.
Leadership
Understanding the importance of diligent succession planning to the sustainability of the group, Exxaro has launched a unique
leadership programme for all line managers. The programme is aimed at creating a signature-style single leadership philosophy.
Exxaro is one of the first organisations to move away from a commercial leadership approach to a customised programme linked to
our brand and values. To date 619 line managers have attended this programme at a cost to the group of R345 000.
In terms of its charter, it is the responsibility
A compliance policy was adopted by the
of
the board
to govern
the
legal
board in 2008 and sets out the integrated
compliance management processes of the
compliance processes
in Exxaro. The
group. The board is assisted by the audit,
policy is based on the standards of the
risk and compliance committee which,
Compliance Institute of South Africa. In
inter alia, assesses legal and compliance
this policy, compliance risk is defined as
risks that may have an impact on the
the risk to earnings, capital and reputation
annual consolidated financial statements.
arising from violations or non-compliance
Safety, health and environmental risks are
with
laws,
regulations,
supervisory
monitored by the safety and sustainable
requirements, prescribed practices or
development committee.
ethical standards.
We manage our compliance risks
through:
> Awareness training for employees
and other affected stakeholders on
high compliance risks identified from
time to time
> Monitoring and reporting on the
level of compliance with regulatory
requirements
> Providing advice and formal legal
opinions on current and envisaged
actions and business processes.
144 EXXARO INTEGRATED ANNUAL REPORT 2010
Calendar 2010 proved an important year
for Exxaro from a compliance perspective,
with the adoption and proposed adoption
of a number of key regulatory changes in
the corporate and mining spheres,
including:
> The adoption of the new mining charter
in September 2010
> The King Report on Corporate
Governance for South Africa and the
King Code of Governance Principles
(King III), which became effective on
1 March 2010
Key objectives for 2010
Progress
Implementation of the new
A corporate forum has been established to monitor
mining charter
and evaluate progress on social and labour plans as
well as the mining charter each quarter. A similar
forum will be established at each business unit. The
first progress reports were submitted to the
Department of Mineral Resources at the end of
March 2011.
Conducting an independent
A favourable report was received by our
King III readiness assessment
independent external corporate governance
to ascertain compliance gaps
advisers. A summary of the findings is discussed on
page 150.
> Approval of the new Companies Act 71
Implementing e-learning
The Competition Act was identified as a high
of 2008 by parliament, but still not
training and awareness on
compliance risk due to the potential impact and
effected
business implications of the
probability of non-compliance.
> Proposed Competition Act amendments
Competition Act
> Consumer Protection Act 68 of 2008,
with commencement deferred to April
2011
> Amendments to the National Credit
Act 34 of 2005
> Stricter enforcement of the body of
legislation relating to weighbridges,
A Competition Act awareness programme was
launched to address risks associated with
non-compliance. At 31 December 2010, 558 of
the targeted 667 employees in the group had
completed the relevant e-learning training.
A process is in place to ensure all participants
complete the training.
particularly the Trade Metrology Act 77
Continual monitoring of the
The board and management receive a quarterly
of 1973.
status of converting mining
report on the status of all mining and prospecting
rights and considering
rights, which sets out the risk attached to the rights
These changes formed the foundation of
associated risks
in terms of conflicting and competing applications
Exxaro’s key compliance objectives, with
progress set out below.
and mitigating actions discussed.
Monitoring compliance to
The investment in socio-economic development for
social and labour plans
2010 was 2,5% of net profit after tax. Of 13 social
and labour plans, 11 have been granted.
Conducting compliance audits
To date 10 integrated water use licence applications
on the status of integrated
have been approved with seven still outstanding.
water-use licences in terms of
the National Water Act
EXXARO INTEGRATED ANNUAL REPORT 2010 145
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Key objectives for 2010
Progress
Raising awareness of the
Presentations on the status and major business
business implications of the
implications were made to the board, management
new Companies Act
and business units as well as major subsidiary
companies.
Training related to contract law
Training was provided to the following business
and basic contractual
units:
management
> Medupi project team
> Matla
> Arnot
> Namakwa Sands
> North Block Complex
> New Clydesdale
> Leeuwpan
> Inyanda.
Training will be extended to the remaining business
units in 2011.
(MPRDA), Exxaro must comply with the
relevant approved mine works programme,
social and labour plan and environmental
management programme as approved
by the DMR for each mining right held.
Compliance audits on the implementation
and management of these programmes
will be conducted in 2011 for all Exxaro
mining rights and, where applicable,
the required amendments applied for.
The MPRDA requires in section 28(2) that
all holders should annually submit
financial reports reflecting profits and
losses as well as a report on its compliance
with the mining charter and MPRDA.
Compliance audits on
this annual
reporting (as well as the monthly return)
will be conducted in 2011 for all Exxaro
Environmental laws awareness
Awareness training was provided at:
mining rights.
training
> Grootegeluk
> Arnot
> North Block Complex
> Corporate centre.
Health, safety and labour
Training was conducted at:
Awareness training will be ongoing in 2011.
awareness training
> KZN Sands
> Zincor
> Grootegeluk
> Inyanda
> Matla.
The year was marked by an increase in
conflicting
prospecting/mining
right
applications being accepted and granted
by the DMR. Exxaro has established an
internal monitoring and reporting process,
through Mineral Asset Management and
its
legal advisers, to deal with such
applications by third parties. The DMR
itself recognised this as an area of concern
and implemented an administrative action
plan together with a moratorium on new
prospecting right applications until end
Legal liability training on health and safety will be
February 2011.
rolled out in 2011. This will focus on line managers,
mining/plant discipline at shopfloor or coal-face
level, legal appointees, appointment letters and
statutory lines of reporting.
In addition to conflicting applications,
third parties have approached the DMR to
apply for prospecting rights on old dumps/
slurry ponds, etc owned by Exxaro. The
necessary legal opinions on the status of
Status of converting mining
rights
It is imperative that mining rights be
secured by Exxaro for its existing mines
Strathrae. Execution and registration of
these dumps have been obtained and
all granted conversions, and obtaining
Exxaro has successfully prevented such
conversion for the old-order rights for
rights being considered by the DMR. The
Arnot and North Block Complex, have
business units affected (Hlobane, Durnacol
and new mining opportunities. In 2010
been prioritised for 2011.
and Zincor) have been briefed on the legal
status of the dumps to ensure consistency
conversion was granted by the Department
of Mineral Resources (DMR) for the old-
order mining rights held for Matla and
In terms of the Mineral and Petroleum
in Exxaro’s approach to the DMR and third
Resources Development Act
2002
parties.
146 EXXARO INTEGRATED ANNUAL REPORT 2010
Exxaro mineral asset status as at 31 December 2010.
Locations of Exxaro’s mines are shown on pages 8, 65 and 77.
In place
In process
Not in place
Mining operation conversions
Commodity Region
Mines
Mineral sands KZN
Hillendale
Fairbreeze A, B, C, D and Block P
Reserve 10 (Hillendale)
Mining*
right
granted
Mining(cid:204)
right
executed Action
Documents submitted for registration
at Mining Titles Office
Documents submitted for registration
at Mining Titles Office
Documents submitted for registration
at Mining Titles Office
Western Cape Namakwa Sands
Complete
Coal
Limpopo
Gravelotte
Grootegeluk
Tshikondeni
Mpumalanga
Leeuwpan
Mafube
Arnot
Glisa (North Block Complex)
Matla
Strathrae (North Block Complex)
New mining rights
Commodity Region
Mines
Mineral sands KZN
Fairbreeze C Ext
Braeburn (Hillendale)
UVS and Braeburn Ext
(Hillendale)
Limpopo
Goni (Tshikondeni)
Coal
Mpumalanga
Inyanda
Leeuwpan Ext
Eerstelingsfontein
New Clydesdale Colliery
Belfast
Awaiting execution date from DMR
Formal application for historical gas
Execution date postponed on
27 October 2010 till further notice
Documents submitted for registration
at Mining Titles Office
Cession confirmed
Conversion application lodged
Conversion application lodged
Due for follow up
Due for follow up
Mining
right
granted
Mining
right
executed Action
Mining commencement extension
granted
Complete
Complete
Complete
Power of attorney, captive three
portions
Documents submitted for registration
at Mining Titles Office
Renewal due
DMR to approve amended layout plan
for registration
DMR meeting scheduled
* Granted = an administrative right granted prior to acceptance of terms and conditions.
(cid:204) Executed = approval of the EMPR and commencement date
EXXARO INTEGRATED ANNUAL REPORT 2010 147
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Corporate governance
The provisions of King III became effective
on 1 March 2010. The group is committed
Key objectives for 2010
Progress
Identify and appoint a
Dr D Konar was appointed chairman of the board on
chairman in line with our
23 February 2010, and re-elected for one year on
to applying these principles to all its
BEE status
22 February 2011.
subsidiaries as appropriate. However,
Exxaro
understands
that
effective
governance practices should be embedded
in all its business processes rather than
following a simple tick-box approach.
As proposed in King III, the office of the
company secretary
is responsible for
implementing and monitoring compliance
to corporate governance best practices
across the group. Our company secretary,
Mrs MS Viljoen, serves as a member of the
executive committee (Exco); she reports
directly to the CEO and has direct access
to the chairman. She works closely with
internal audit, the acting group risk
manager, the chief audit executive and
our outsourced legal advisers to promote
a culture of good governance and
compliance in the group.
The independent corporate governance
compliance review conducted in 2008 was
followed by an
independent King
III
Awareness programmes to the
Presentations were made to the board, Exco and
board and key business units
major business units and subsidiaries on the key
requirements of King III.
The Exxaro sustainability and assurance steering
committee was established to drive integrated
reporting in the group.
Conduct an independent
Review concluded in June 2010 with findings
King III readiness assessment
presented to the board and management. The
to ascertain compliance gaps
status of compliance and action steps for
continuous improvement are discussed on
page 150.
Initiate an integrated risk and
A project was initiated in conjunction with our risk
compliance process adhering
management advisers to address current
to best-practice standards,
supported by enabling
shortcomings of our risk management methodology
and to align with industry best practices such as
technology
ISO 31000. The first phase of the project —
identifying relevant gaps and making
recommendations — is complete.
The second phase – refining the current
methodology and implementing enabling
technology — is under way.
readiness assessment in 2009, undertaken
by our independent sustainability and
Review current board
committee structures,
The review was completed in December 2010
and comparative benchmarks obtained for
governance
advisers.
Through
composition and terms of
implementation in 2011.
independent advice, we ensure we
reference against best-practice
continue to improve our well-established
requirements
corporate governance processes and
Review organisational
As part of the Siyaya programme it was proposed
remain abreast of the latest industry
structures and processes to
that governance, risk and compliance be merged
developments.
address governance, risk and
into a single business unit to ensure all related
compliance in an effective,
processes are integrated and that monitoring risk
integrated and consistent
and compliance is done independently.
manner
The review and adoption of a
A new fraud-prevention policy was adopted in
new fraud-prevention policy
November 2010, supported by a dedicated
and process
governance forum, the ethics committee, to ensure
effective management of the process.
Conduct independent board
To assess the skills and experience of each board
assessments
member and the board as a whole, an independent
board assessment was conducted by the Institute of
Directors.
148 EXXARO INTEGRATED ANNUAL REPORT 2010
Ethics
Exxaro
is committed to the highest
reported at corporate level for forensic
totally anonymous for their protection.
In 2010, 31 cases of alleged fraud were
people report incidents while remaining
standards of honesty,
integrity and
fairness, and has zero tolerance for the
commissioning
or
concealment
of
fraudulent acts by employees, contractors
or suppliers. To support this approach, a
revised
fraud-prevention policy was
adopted during the review period.
The group has an ethics committee
comprising executives and representatives
of internal audit and the chief audit
executive. The committee, chaired by the
finance director, meets monthly
to
consider issues of non-compliance to the
group code of ethics and/or conflict of
investigation, 11 of these via the ethics line.
Eight of these led to disciplinary action
and the dismissal of employees concerned.
Four cases were also reported to the
Key findings of the King III
readiness assessment
The release of King III is a milestone in the
South African Police Service (SAPS) for
evolution of corporate governance in South
criminal prosecution. The estimated
Africa and offers significant opportunities
impact or saving to the group of prompt
for Exxaro to enhance current corporate
action against suspected
fraud was
governance practices. King III has opted
R4,5 million. At business unit level, over
for an “apply or explain” governance
160 cases of alleged fraud were reported,
framework. This means that where the
resulting in disciplinary action in 36 cases
board believes it to be in the best interests
and 17 cases reported to SAPS.
of the company, it can adopt a different
The types of fraud investigated included:
> Fraudulently changing bank accounts
practice
from
that recommended
in
King III, but must explain this.
interest policy as well as matters reported
> Credit card fraud
The table summarises key observations
on the ethics line or to management.
Required investigations are conducted by
a dedicated forensics team. This approach
> Tender fraud
> A fraudulent payment scheme (crime
is reinforced by articles highlighting the
syndicate)
independent review of the principles of
King III and its adoption in Exxaro. The
findings are the result of an independent
> Submitting false qualifications
and areas for consideration from an
importance of ethical behaviour in the
> Fraudulent orders (crime syndicate with
review completed by a leading corporate
quarterly internal newsletter.
possible employee collusion).
governance adviser in the second half of
A dedicated ethics line is in place to
report all ethical matters
including
possible fraud and corruption. This is
independently operated by Tip-Offs at a
cost of R100 000 per annum.
Employees and all stakeholders can
with King III, the reasons are given.
report suspected incidents of fraud or
Actions initiated to apply or enhance the
corruption to Tip-offs at 0800 203 579
principles are shown in the last column.
last year. Where Exxaro does not comply
or exxaro@tip-offs.com. This
is an
independent service designed to help
For a copy of King III contact the Institute
of Directors at www.iodsa.co.za.
EXXARO INTEGRATED ANNUAL REPORT 2010 149
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Key:
No or minor adjustments required to conform with King III principles.
Specific gaps identified that would require focused management action to conform with King III principles.
Non-conformance with King III principles. Significant management effort required.
Chapter Governance element
Status Summary of findings
1
Ethical leadership and
corporate citizenship
No major findings.
2
Board of directors
No major findings.
Exxaro is currently not able to
adopt all the principles on the
composition of boards as our
board structure is regulated by
our articles of association
based on the Pangolin
shareholders’ agreement
entered into between various
parties in November 2006.
For more information, please
contact the company secretary.
The role of the audit committee
must be re-assessed in light of
its changed role, more
specifically the:
> review of integrated reporting
> implementation of a
combined assurance model
> approving disclosure of
sustainability issues.
The current risk management
framework should be more
integrated and aligned to
industry best practice.
3
Audit committee
4
The governance of risk
Action steps for continuous
improvement
> Governance forum known as the ethics
committee has been established.
> Fraud-prevention policy adopted by the
board in November 2010.
See page 149 for statistics.
Exxaro will continue with its board induction
and extensive knowledge-enhancement
programmes.
The structure, composition and terms of
reference for all board committees, including
the audit committee, were reviewed in
December 2010 and January 2011, for
finalisation in 2011.
At the request of the audit, risk and
compliance committee, Exxaro has initiated a
project to ensure that a new integrated risk
management framework is designed and
implemented across the group.
The new framework will be supported by
best-practice enabling technology that
includes the ability to monitor all risks,
including risks related to compliance and
information technology.
The first phase of the project, which identified
gaps with ISO 31000, from an organisational
structure and process perspective, was
concluded in October 2010. The next phase,
which examines the implementation of
enabling technology, will be finalised in 2011.
150 EXXARO INTEGRATED ANNUAL REPORT 2010
Chapter Governance element
Status Summary of findings
5
6
7
8
The governance of
information technology
(IT)
Compliance with laws,
rules, codes and
standards
Internal audit
Governing stakeholder
relations
This is the only new chapter in
King III.
The findings relate to:
> The board not being
sufficiently involved in IT
strategy and governance
> IT risk being managed in a
fragmented manner
> The board not being
sufficiently involved in the
acquisition and disposal of IT
goods and services.
Although Exxaro has adopted a
compliance policy, the
associated processes have not
been implemented.
Exxaro should integrate risk
management and control in its
business processes to create
value.
Current stakeholder relations
policies need to be reviewed by
the board.
The integrated report should
also disclose the nature and
outcome of Exxaro’s dealings
with stakeholders.
9
Integrated reporting and
disclosure
No major findings.
Action steps for continuous
improvement
The new integrated risk management
framework will include management of all IT
risks (page 21).
Integrated compliance risk management was
addressed from an organisational structure
and process point of view.
The proposed new process adheres to the
standards of the Compliance Institute of South
Africa and was finalised in November 2010.
We expect the integrated compliance risk
management process to be implemented
in 2011.
See 4.
Exxaro has implemented a stakeholder
relations strategy that is two pronged: a
stakeholder management process at each
business unit to ensure all material issues for
internal and external stakeholders have been
identified and a management response
instituted; secondly, forming a stakeholder
panel comprising independent experts and
NGOs in the social and environment fields to
verify that all relevant material issues have
been identified. The report of the stakeholder
panel is included on page 172.
A sustainability and assurance steering
committee has been established that meets
at least quarterly to discuss:
> Material issues and their communication
to the board
> Regulatory changes that may impact the
nature of reporting to stakeholders
> The scope of external reporting and
assurance.
EXXARO INTEGRATED ANNUAL REPORT 2010 151
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
leadership
Board
Role and composition
A highlight of 2010 was the appointment
of Dr Len Konar as chairman of the
board on 23 February 2010. Dr Konar
has extensive experience as chairman
and provides overall
to
the board without limiting the principle
of collective responsibility of board
decisions. Dr Konar is also chairman for
purposes of in-committee discussions at
the transformation, remuneration, human
resources and nomination committee
and
is not a member of any other
committee of the board. He brings a
wealth of financial, governance, industry
international knowledge (detailed
and
on page
the
In
recommendations of King III, Exxaro has
a unitary board structure, comprising:
> Four
non-executive
independent
line with
142).
directors
> Six non-executive directors
> Two executive directors.
In assessing the status of directors, the
principles contained in King III and the
Listings Requirements of the JSE Limited
were used.
is also visible
At Exxaro we understand
that by
promoting transformation actively in all
our structures, a sustainable future will be
ensured in the communities in which we
operate. This
in the
composition of our board: we are proud
that the majority of our board members
are historically disadvantaged South
Africans. The diverse backgrounds of
directors ensure a wide
range of
experience in commerce, industry and
engineering. The directors have access to
management as required, and Dr Konar
regularly meets individually with senior
management to share knowledge.
The board defines the levels of authority
in Exxaro and reserves specific powers to
itself while
to
delegating
management. The collective responsibility
of management vests
the chief
executive officer, Mr Sipho Nkosi. Mr Nkosi
provides regular reports to the board on
progress towards the group’s objectives
others
in
The board is ultimately accountable and
responsible to its shareholders for the
performance and affairs of Exxaro. The
board therefore retains full and effective
control over Exxaro and gives strategic
direction to its management. The board is
also responsible for ensuring compliance
with all relevant laws, regulations and
codes.
In addition, the board has a responsibility
the broader stakeholder base –
to
which
includes present and potential
beneficiaries of Exxaro products and
services, clients, lenders and employees –
to achieve continuing prosperity and
ensure its sustainability.
its powers,
The board has a written charter that
governs
functions and
responsibilities; and ensures that no one
board member has unfettered powers of
decision making. The charter is reviewed
annually. The board
also
formalises policies on board membership,
composition, procedures, compliance and
risk management, board evaluation,
induction and remuneration. A broadened
policy on board appointments has been
approved by the board.
charter
The board selects and appoints the
company secretary and recognises the
pivotal role to be played by this person in
entrenching good corporate governance.
All directors have access to the advice and
services of the company secretary. The
board has an established procedure
for directors
independent
to obtain
professional advice at the group’s cost.
New directors are informed of their duties
and responsibilities by way of extensive
induction material, and also have access
to key management members where
information on Exxaro’s operations may
be obtained. Visits
to operational
businesses are included in the annual
board programme.
A formal ongoing directors’ development
programme was instituted in 2008, giving
members the opportunity to attend
briefing sessions to ensure they are kept
up to date with
industry
developments, risk management, financial
reporting and corporate governance best
practice.
local and
An independent appraisal of the board
was undertaken at the end of 2009 by the
Institute of Directors. Feedback sessions
were held with individual directors by the
chairman.
The chief executive officer’s performance
is also evaluated against his performance
contract. This is approved annually by
the transformation, remuneration, human
resources and nomination committee,
in conjunction with the chairman of
the board.
Attendance
Board meetings 2010
D Konar (chairman)
WA de Klerk
JJ Geldenhuys
CI Griffith
U Khumalo
N Langeni
VZ Mtambo
RP Mohring
SA Nkosi
NL Sowazi
J van Rooyen
D Zihlangu
b
e
F
3
2
P
P
P
A
A
NM
P
P
P
P
P
P
y
a
M
7
2
l
a
i
c
e
p
S
n
u
J
7
l
a
i
c
e
p
S
n
u
J
4
1
l
a
i
c
e
p
S
l
u
J
4
1
g
u
A
0
1
l
a
i
c
e
p
S
g
u
A
1
3
l
a
i
c
e
p
S
p
e
S
4
1
l
a
i
c
e
p
S
t
c
O
6
2
P
P
P
P
P
P
A
P
P
P
P
P
P
P
N
N
P
N
A
A
P
P
P
P
P
P
N
N
A
N
N
P
P
A
P
N
P
P
T
T
A
P
P
P
P
A
P
P
P
P
P
P
P
P
P
P
P
P
P
T
T
P
A
P
P
T
P
P
P
P
P
A
P
P
P
N
A
A
A
P
P
A
P
P
P
P
P
A
P
P
A
P
A
P
P
P
v
o
N
0
3
P
P
P
P
A
P
P
P
P
P
P
A
and strategy.
P = present, A = apology, T = teleconference, N = not required, NM = not member
152 EXXARO INTEGRATED ANNUAL REPORT 2010
its duties, powers
Committees of the board
The board committees assist the board in
executing
and
authorities. The board delegates to each
of the committees the authority required
to enable the committees to fulfil their
respective
formal
functions
board-approved terms of reference.
through
Delegating authority to board committees
or management does not mitigate or
discharge the board and its directors of
their duties and responsibilities. This is
reflected
in the Exxaro delegation-of-
authority framework which is managed by
the office of the company secretary. This
framework has been adopted by all wholly
owned subsidiaries and
is reviewed
annually.
The board has three committees through
which it operates:
> Audit, risk and compliance committee
> Safety and sustainable development
committee
> Transformation, remuneration, human
resources and nomination committee.
In the spirit of transparency and full
disclosure, each committee’s independent
chairman reports formally to the board
after each meeting on all matters within
its duties and responsibilities, including
recommendations on envisaged action
steps.
Board committees and members are
authorised to obtain independent outside
professional advice when considered
necessary. The company secretary assists
board committees and members
in
obtaining any such professional advice.
Audit, risk and compliance
(audit) committee
Apart from the statutory duties of
the audit committee as set out in the
Corporate Laws Amendment Act, and
the JSE Listings
the provisions of
Requirements and King III, the role of
this committee has been expanded to
include issues of risk management and
compliance.
The committee met its responsibilities
under the current terms of reference for
the review period.
The terms of reference will be expanded
to include new areas of responsibility, eg
integrated reporting and
information
technology.
The committee assists the board in:
> Examining and reviewing the group’s
financial statements and reporting of
interim
the
final
accompanying message to stakeholders
and any other announcements on the
company’s results or other financial
information to be made public
results,
and
> Overseeing cooperation between the
internal and external auditors, and
serving as a link between the board and
these functions
> Overseeing the external audit function
> Approval of the internal audit plan, fees
internal
the
and qualifications of
auditors
> Evaluating
the
qualification
and
independence of the external auditor
> Approval of the external audit fees
> Ensuring effective
controls are in place
internal financial
> Reviewing the integrity of risk control
systems and risk policies
> Evaluating the scope and effectiveness
of the internal audit function
> Evaluating the competency level of the
financial director
> Appointing the chief audit executive
> Complying with legal and regulatory
requirements.
The committee meets at least four times
a year.
The three members of the committee are
non-executive members, and two of these
are independent. The finance director,
Wim de Klerk, and chief audit executive,
Rian Strydom, attend meetings by
invitation. During the review period, the
committee considered, and was satisfied
with the adequacy and resources of the
group’s finance function, including the
appropriateness, expertise and experience
of the finance director.
Although Exxaro is only required to rotate
the senior partner responsible for the
group’s audit, we recognise that a periodic
change
in external auditors supports
good governance and have appointed
PricewaterhouseCoopers
external
auditors from 1 January 2011.
as
in the
To ensure consistency in sustainability
reporting, the services of the current
assurance provider on sustainability
integrated report were
issues
retained. The audit committee has
considered the disclosure of sustainability
issues in the integrated report and is
satisfied with the contents.
The committee has satisfied itself on the
independence of the external auditor in
accordance with section 270A of the
Principal matters
Companies Act.
considered in determining independence
included those arising from the ownership
of shares, the quantum of the audit fee
and the types and quantum of the non-
audit services provided by the firm.
Requisite assurance was sought and
provided by the external auditor that
internal governance processes in the firm
support and demonstrate its claim to
independence.
The committee also determines and
carefully monitors the use of the external
auditor for non-audit-related services and
is guided by a formal policy that precludes
from providing
the external auditor
services
audit
that would
independence. The non-audit services
rendered by the external auditors during
tax advisory
the period comprised
services,
services,
tax
accounting opinions and other advisory
services. The fees applicable to these
services totalled R747 288.
compliance
impair
committee
nominated
The
the
appointment of PricewaterhouseCoopers
(PwC) as registered auditors for the 2011
financial year and Mr D Shango, the audit
partner, as the independent registered
auditor of the company. The committee
also considered and satisfied itself that
PwC, including its advisors, is accredited
in terms of the JSE list of accredited
auditors as contemplated in paragraph
3.86 of the JSE Listings Requirements.
following
The
documents were submitted
committees and board for noting:
> Directors’ liability in terms of safety and
compliance-related
the
to
environmental statutes
> Directors’
liability
in terms of the
Competition Act 1 of 2009 (which seeks
to amend the Competition Act 89 of
1998)
EXXARO INTEGRATED ANNUAL REPORT 2010 153
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
> Gap analysis on the King III report and actions required by the board and management
> The impact of the proposed Companies Act 71 of 2008
> Quarterly information manuals updating the board on industry, regulatory, legal and
statutory matters.
Audit meetings 2010
23 Feb
26 May
10 Aug
30 Nov
J van Rooyen (chairman)
RP Mohring
NL Sowazi
T
P
P
P = present, A = apology, T = teleconference
P
P
P
P
P
P
P
P
P
Safety and sustainable
development (S&SD) committee
The name of this committee was changed
from safety, health and environment
committee
in 2010 to encompass
its
obligations to the environment, employees
and communities impacted by operations
in support of sustainable development.
The committee’s purpose is to provide
advice to the board and, as necessary, to
the audit, risk and compliance committee
Transformation, remuneration,
human resources and
nomination committee
The purpose of this committee (known as
Tremco) is to:
> Guide, monitor, review and evaluate
Exxaro’s progress with transformation,
with specific reference to the three
primary pillars: employment equity,
> Reviewing and recommending to the
on S&SD risk matters.
board its annual training programme
> Maintaining procedures to review board
In executing the governance function, the
members’ interests.
committee will:
> Assess
the
effectiveness
of
Although the board chairman is not a
management’s
approach
to
and
member of this committee, a separate
activities
in managing sustainability
agenda is set for nominations committee
risks
matters and the board chairman takes
> Review significant S&SD
incidents,
community
involvement
and
the chair.
preferential procurement
> Make
recommendations
on
Attendance
remuneration policies and practices for
the company’s executive directors,
senior management and personnel
> Review compliance with all statutory
and best-practice requirements on
labour
and
industrial
relations
management.
Tremco
meetings
2010
RP Mohring
(chairman)
JJ Geldenhuys
CI Griffith
Although this is a combined committee, a
VZ Mntambo
3 Feb 21 May 4 Nov
P
A
NM
P
P
P
P
P
P
P
A
P
process has been put in place to ensure
the following responsibilities for the
nomination element are carried out:
> Providing recommendations on the
composition of the board and board
committees and ensuring that the
board comprises individuals equipped
to fulfil the role as directors of the
company
D Konar
Invitee Invitee Invitee
P = present, A = apology, NM = not member
Nomination committee
Nomination
3 Feb 21 May 4 Nov
committee
meetings
2010
> Annual revision of corporate governance
D Konar
guidelines and related documents, and
(chairman)
providing recommendations
to
the
board as deemed advisable
> Providing comments and suggestions
on committee
structures of
the
board, committee operations, member
RP Mohring
JJ Geldenhuys
CI Griffith
VZ Mntambo
P
P
A
NM
P
P
P
P
P
P
P
P
P
A
P
qualifications and member appointment
P = present, A = apology, NM = not member
> Establishing
and
maintaining
procedures for interested parties to
communicate with board members
154 EXXARO INTEGRATED ANNUAL REPORT 2010
performance indicators and compliance
> Report to the board on developments,
trends or significant
legislation on
S&SD matters relevant to Exxaro’s
operations, assets and employees
> Identify issues and elements arising
from
national
and
international
protocols applicable to Exxaro’s S&SD
> Ensure the company reports annually
through an integrated report on S&SD
issues affecting it.
The committee meets at least three times
a year.
Attendance
S&SD
meetings
2010
JJ Geldenhuys
(chairman)
N Langeni
RP Mohring
D Zihlangu
10 Mar 21 Jul 4 Nov
P
P
A
P
P
P
P
P
P
A
P
P
P = present, A = apology
Management committees
Executive committee
The executive committee
(Exco)
is
constituted in terms of the articles of
association to assist the chief executive
officer (CEO) in managing the group.
Exco assists the CEO to guide and control
Recommendations to terminate initiatives
> Ensuring the company’s offshore offices
the overall direction of the company and
already in the current strategy or to
are effectively staffed, managed and
acts as a medium of communication and
proceed with initiatives or projects not
utilised.
coordination between the business units,
included
in the current strategy are
corporate service departments and the
subject to agreed governance procedures.
The committee meets quarterly, or more
subsidiary companies and the board.
frequently if required.
The duties of Exco include:
> Overseeing the financial, operational
Investment review committee
The
investment review committee
is
constituted as a management committee
External communications
Briefing analysts,
investors and fund
and safety performance of Exxaro
to assist the CEO with the management
managers
is
integral to maintaining
> Guiding Exxaro in its relations with
process of the group.
shareholders and key stakeholders,
investor relations. However, we only
provide price-sensitive information after
including
personnel,
regulators,
The
committee
oversees
approval
disclosing that information to the market.
environmental interests and the media
processes for
investments. These are
> Developing group strategy for board
designed to ensure they are aligned to the
Broader stakeholder communication plans
approval
group’s agreed strategies and values, risks
are in place. The group believes in clear,
> Receiving and considering
regular
are identified and evaluated, investments
transparent,
concise
and
timely
reports from businesses in Exxaro to
are
fully optimised to produce the
dissemination of relevant information to
monitor
and manage
financial
maximum shareholder value within an
all stakeholders. This is achieved through
performance
> Ensuring
coordination
between
business units and corporate service
acceptable risk framework and appropriate
risk management strategies are pursued.
a multitude of channels and media,
including written, electronic and verbal
presentations. Specifically, there are a
departments
The main purpose of the committee is to
number of mechanisms for stakeholders
> Regularly reviewing the adequacy of
review investments in a structured, formal
to interact with the board and its sub-
reporting
arrangements
and
and transparent manner to ensure:
committees. These include annual general
effectiveness of internal control and
> Each project meets the strategic,
meetings, representative
forums and
risk management
technical and investment requirements
internal communications across a range
> Approving or recommending to the
of
the company, which
includes
of platforms.
board expenditure and other financial
identifying and managing all project-
commitments as specified
in
the
related risks
framework
for
the delegation of
> Critical decisions, project parameters,
Marketing communication
In line with its corporate values, Exxaro
authority
safety, health and environmental
communicates regularly and openly with
> Acting as a responsible corporate
impacts and governance processes are
all stakeholders. At all
times, our
citizen with an ethical culture.
followed and addressed prior
to
communications adhere to the
laws,
committing funds
standards and voluntary codes of accepted
> Each project enhances the portfolio
marketing communication in the areas
Portfolio review committee
The portfolio
review committee
is
value of the company.
constituted as a strategy management
committee to assist the CEO with portfolio
management.
Offshore review committee
This committee assists the CEO and
finance director with the management
The
committee ensures
that new
process of Exxaro’s portfolio of offshore
opportunities fit Exxaro’s portfolio and
investments and interests. The primary
where we operate. During the year, no
incidents
of
non-compliance were
recorded.
Implementation of the mining
charter
In 2009, the Department of Mineral
determines strategic priorities. It oversees
responsibilities of the committee include:
Resources promulgated codes of good
strategic initiatives and investigations into
> Financial control and governance of
practice for the mining industry. In 2010,
the viability of potential
investment
Exxaro’s offshore
investments and
the review of the mining charter was
projects
throughout
the group. The
multi-disciplinary interests
finalised and the accompanying scorecard
committee discusses and challenges
> Efficient financial structuring
adjusted. Exxaro already complies with
Exxaro’s portfolio performance as well as
> Providing
for
funding
offshore
several aspects of the revised scorecard
intended strategic initiatives and projects.
investments and expenditure
and steady progress is being made in
Initiatives aligned with
the current
> Ensuring financial reporting, auditing
those areas where the group does not
strategy are included in proceedings of
and tax-related
issues are properly
fully comply. The table overleaf sets out
the
investment
review
committee.
managed
the status on compliance:
EXXARO INTEGRATED ANNUAL REPORT 2010 155
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
MINING CHARTER SCORECARD
In 2009, the Department of Mineral Resources promulgated codes of good practice for the mining
industry. In 2010, the review of the mining charter was finalised and the accompanying scorecard
adjusted. Exxaro already complies with several aspects of the revised scorecard and steady progress
is being made in those areas where the group does not fully comply.
Exxaro Resources: 2010 scorecard for the broad-based socio-economic mining empowerment charter
Element
Reporting
Ownership
Description
Measure
Compliance target by 2014
Has the company reported the
level of compliance with the
charter for the calendar year
Minimum target for effective HDSA
ownership
Documentary proof of receipt from
the department
Annually
Meaningful economic participation
26%
Housing and
living conditions
Conversion and upgrading of
hostels to attain the occupancy
rate of one person per room.
Full shareholder rights
Percentage reduction of
occupancy rate towards 2014
target
26%
Occupancy rate of one person per
room
Conversion and upgrading of
hostels into family units
Percentage conversion of hostels
into family units
Family units established
Procurement and
enterprise
development
Procurement spent on BEE entity
Capital goods
Services
Consumable goods
Annual spend on procurement
from multi-national suppliers
Top management (board)
Senior management
Middle management
Junior management
Core skills
HRD expenditure as percentage of
total annual payroll (excluding
mandatory skills development
levy)
Employment
equity
Multinational suppliers
contribution to the social fund
Diversification of the workplace to
reflect the country’s demographics
to attain competitiveness
Human resources
development
Developing requisite skills,
including support for South
Africa-based research and
development initiatives intended
to develop solutions in exploration,
mining, processing, technology
efficiency (energy and water use in
mining), beneficiation as well as
environmental conservation
40%
70%
50%
0,5%
40%
40%
40%
40%
40%
5%
156 EXXARO INTEGRATED ANNUAL REPORT 2010
Compliance target
2010
Mining charter report will be submitted to DMR during March 2011
Progress achieved by
15%
15%
Accommodation
> Number of people sharing hostel rooms = 40.
> Number of employees accommodated in single quarters (one person per room) = 1 505
> Number of employees staying in family quarters = 417
> Number of company houses sold to employees = 948
Bargaining unit employees receive either a housing allowance or a living-out allowance for accommodation.
These allowances differ by job grading and are annually revised through collective bargaining. Non-bargaining
unit employees receive an all-inclusive remuneration package.
5%
30%
10%
0,5%
20%
20%
30%
40%
15%
3%
Actual
2010
52,10%
52,10%
1,15% of
employees
in company
– provided
accommodation
417 family units
established
43%
24%
25%
0,5%
50%
30%
51%
63%
25%
5,1%
EXXARO INTEGRATED ANNUAL REPORT 2010 157
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
MINING CHARTER SCORECARD CONTINUED
Exxaro Resources: 2010 scorecard for the broad-based socio-economic mining empowerment charter (continued)
Element
Description
Measure
Compliance target by 2014
Mine community
development
Conduct ethnographic community
consultative and collaborative
processes to delineate community
needs analysis
Sustainable
development and
growth
Improvement of the industry’s
environmental management
Improvement of the industry’s
mine health and safety
performance
Utilisation of South Africa-based
research facilities for analysis of
samples across the mining value
Implement approved community
projects
Up-to-date project implementation
Implement approved
environmental management
programmes (EMPs)
Implementation of tripartite action
plan on health and safety
Percentage of samples in South
African facilities
100%
100%
100%
Beneficiation
Contribution towards beneficiation
(effective from 2012)
Added production volume
contributory to local value addition
beyond the baseline
Section 26 of MRPDA (% above
baseline)
158 EXXARO INTEGRATED ANNUAL REPORT 2010
Progress achieved by
Compliance target
2010
Actual
2010
> Continual engagement with all stakeholders (ie authorities, interested and affected parties) ensures a
collaborative approach in implementing community projects
> The establishment of a formal ethnographic consultative and collaborative socio-economic development
forum at each business unit to be finalised during June 2011
> Total spend on socio-economic development in 2010 was 2,5% of net profit after tax
Programmes are in place to achieve the compliance target by 2014
In terms of implementing the tripartite action plan, Exxaro has developmental plans for 70% of the actions.
These span continuous improvement in safety and health, transforming our culture, training, adopting leading
practices, and supporting related research.
Exxaro has a research and development department and commissioned research was 100% South Africa-based
in 2010.
> In addition, Exxaro approved three tertiary chairs as part of its research support initiatives:
> Exxaro chair in global change and sustainability at Wits
> Exxaro chair in business and climate change at Unisa
> Exxaro chair in biodiversity and business at University of Pretoria
Exxaro is in the business of mining and beneficiating minerals. Products like coal and zinc are sold as final
products and used in other processes; they therefore cannot be further beneficiated. Other products like
mineral sands are beneficiated to a semi state (slag). While these products are being investigated to increase
beneficiation rates, they are technically complex processes and thus long-term projects.
Exxaro does not benefit from incentives in the mining charter for beneficiation as the group cannot offset
ownership with beneficiation initiatives. Exxaro is already BEE owned. Exxaro is a founder member of SAMMRI
(an industry/government (dti)/academic institution) initiative on long-term research in beneficiation to develop
value-adding technologies and internal skills (HDSA) in South Africa.
A downstream project is our market coke initiative, where we are investigating the production of market coke
as a reductant for the chrome industry. Certain technology evaluation accompanies this initiative. Our coal
beneficiation target for 2014 is 0,5%.
Calendar 2009 was the first full production year for Exxaro’s char plant. Coal from Grootegeluk is beneficiated
in the char plant, and the product sold locally to ferrochrome smelters as a reductant. Tar is processed as a
by-product and sold to a tar-refining company for further processing into products such as wood preservatives.
The full production capacity of the plant is 140ktpa char and 8ktpa of tar.
The mineral sands business unit is investigating downstream beneficiation opportunities for titania slag and
zircon. A number of new titanium metal production technologies were investigated with the aim of establishing
a local production facility. Investigations and studies are long term and ongoing.
EXXARO INTEGRATED ANNUAL REPORT 2010 159
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Remuneration report
Introduction
As indicated in the legal, regulatory and
compliance review, PwC was engaged to
assess compliance with the King III report,
including a remuneration perspective. A
number of actions were undertaken in
2010 to align with these remuneration
requirements; however, achieving
full
compliance will be an ongoing exercise in
coming years.
Remuneration philosophy
The Exxaro brand is built on a strong
vision – everything we do and deliver
today will allow others to realise their
vision tomorrow. Exxaro believes in the
power of people and their ability to
explore and shift boundaries that lead to
success. Exxaro’s people strategies have
been developed to reinforce the brand
values of:
> People powered
> Inspired leaders
> Leading performance
> Sustainable effort.
A total remuneration approach is followed.
This includes guaranteed and variable
components which play a critical role in
attracting, motivating and retaining the
high-performing and talented individuals
required to achieve Exxaro’s objectives.
We recognise that one of our competitive
sources of value is our people, and we
believe that to meet our corporate goals
and business objectives, our reward
policies and objectives must:
> Be an integral part of an overall human
resource strategy, geared to support
business strategies
> Be designed to motivate and reinforce
At the annual general meeting to be held
superior performance
on 19 May 2011, shareholders will be
> Be designed to motivate and reinforce
requested to approve the remuneration
living the values in an outstanding and
policy as outlined in this report and that
demonstrable manner
the board of directors be authorised to
> Encourage
the
development
of
undertake
the necessary
acts
to
organisational
and
individual
implement the remuneration policy as
performance
summarised
here. Resolutions
for
> Encourage
the
development
of
consideration are included in the notice of
competencies required to meet future
meeting on page 304.
business needs
> Be based on the premise that employees
should share in the success of the
company
Remuneration benchmarking
External remuneration benchmarking for
executives and general staff positions is
> Be designed to attract and retain high-
done continually and external comparisons
quality individuals with the optimum
are reported to Tremco every six months.
mix of competencies
> Be aimed at securing our people’s
The benchmarking used
for median
commitment to goals via the optimum
performance of the management and
mix of financial and non-financial
rewards.
specialist category is the 50th percentile
(median) of the market’s guaranteed
Remuneration governance
The transformation, remuneration, human
remuneration values. Exxaro allows for a
30% differentiation from median market
values depending on the performance
resources and nomination committee
rating of the individual.
(Tremco) sets and monitors non-executive
and executive remuneration policies for
the
company. This
committee
is
Remuneration policy
The total remuneration approach includes
responsible for making recommendations
guaranteed and variable components, as
on remuneration policies and practices for
noted earlier, to attract, motivate and
the company’s executive directors, senior
retain the caliber of individuals required to
management and personnel in general.
achieve Exxaro’s objectives.
The committee comprises four non-
executive directors. The CEO, finance
director (FD), executive general manager:
human resources, and compensation and
benefits advisers may be invited to attend
any meeting but they have no voting
rights. For full details on the committee,
refer to the review on page 154.
160 EXXARO INTEGRATED ANNUAL REPORT 2010
Exxaro remuneration: overview
Remuneration elements
F band
E band
DU band
DL band
CU band
A-DL band
Management and specialist category employees
employees
Bargaining category
Guaranteed
Notional cost of
Annual adjustments based on:
remuneration
employment or
> Performance
basic salary
> External market benchmark
> Internal parity
> Affordability
Annual adjustments
based on:
> Wage negotiations
> Mandate on
affordability
Benefits
> Retirement fund: employer and employee contributions
> Medical aid: employer and employee contributions
> Housing: Company housing or allowances/subsidies applicable to a specific business unit
Circumstantial
> Job-specific
remuneration
> Skills scarcity
Variable
Short-term
remuneration
incentives
Long-term
Incentives
Not applicable
Special performance:
> Individual
performance base
> On-target incentive:
> Business unit stretch budget achievement
Second and third tier above target improvement incentives:
> Capped at 30% of Exxaro above-budget improvement
> Annually set stretched targets
Deferred
Not applicable
bonus
plan
> Share
match
Long-term incentive
Not applicable
scheme
> Performance
conditions
Share appreciation right scheme
Not applicable
> Performance conditions
Not applicable
Mpower scheme
> 3% and five-year employee share option scheme
EXXARO INTEGRATED ANNUAL REPORT 2010 161
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Guaranteed remuneration
Management and specialist
category
Employees
in
the management and
> Affordability: all salary account-related
mandates first to be included in Exxaro
financial
forecasting model
to
determine affordability.
specialist category, including executives,
are remunerated on a total-package
approach. Guaranteed
remuneration
adjustments to employees’ are based on
Non-management category
in
Employees
the non-management
category are remunerated on a traditional
Retirement funds
Retirement fund contributions are made
according to the specific conditions of
employment and fund rules for the
different
levels and
categories of
employees. Employer and employee
contributions to these funds are reflected
in note 30 of the annual financial
the following fundamental principles:
menu package consisting of basic salary,
statements.
> Remuneration based on performance:
housing allowance, employer contributions
individual performance contracting and
to retirement and medical funds. Annual
assessment
adjustments are determined
through
> External competitiveness: use
the
wage negotiations as applicable.
market median for median performance
per job family, per level as reference
point to determine competitiveness
> Internal equity: same
job – same
Benefits
Contributions to retirement funds and
medical aids are made by both employees
performance – same pay
(except
and employers.
circumstantial)
Employees belong to any one of the following retirement funds:
Fund description
Chamber of Mines
Sentinel Funds
Mine Employees Pension Funds
Namakwa Sands Sentinel Funds
Alexander Forbes Pension Fund
Coris Capital Pension Funds (non-package and notional cost of
employment)
Rosh Pinah Retirement Fund
BillProv
Iscor Employees Umbrella Provident Fund
Mine Workers Provident Funds
Namakwa Sands Provident Funds (C up & D+)
Zincor: Iscor Provident Fund – old
Employee
% contribution
or range
Employer
% contribution
or range
Total
% contribution
or range
13,20
7,50-10,70
7,50-10,70
6,50-7,50
7,50
7,00
9,75
7,00
7,00
11,45
12,50-20,52
12,50-15,00
13,90-26,60
12,50
10,00
16,25
10,50
10,00
24,65
20,00-28,02
20,00-24,65
20,40-34,10
20,00
17,00
26,00
17,50
17,00
7,50-10,70
7,50
8,00
12,50-15,00
9,00-15,00
14,74
20,00-24,65
16,50-22,50
22,74
Zincor: Selector Umbrella – (new and old)
7,00-8,00
10,00-14,74
17,00-22,74
Exxaro-accredited retirement funds are defined contribution funds. Any actuarially valued defined benefit fund obligation disclosed in
the annual financial statements (refer to note 30) merely recognises past practice with no new entrants allowed.
162 EXXARO INTEGRATED ANNUAL REPORT 2010
Medical benefit funds
Employees may annually elect to belong to any of the following medical schemes:
Business unit
Fund names
Exxaro Coal
Mpumalanga
Namakwa Sands
Exxaro Sands
Zincor
Exxaro Other
Bonitas
Bonitas
Bonitas
Bonitas
Discovery
Discovery
Discovery
Discovery
Discovery
Sizwe
WCMAS (ring-
fenced)
Employee
contributions
Employer
contributions
50%
50%
* Employer contribution included in package.
Umvuzo
Sizwe
Sizwe
50%
50%
*100%
0%
50%
50%
Umvuzo
40%
60% to a max of
R1 765
Exxaro does not provide any post-
retirement medical benefits. The post-
Individual performance reward
A short-term incentive scheme focused on
The second and third tier are profit based
and 30% of gains above budget are
retirement benefit obligation disclosed in
the individual is used to augment the
shared with employees.
the annual financial statements (note 30)
people performance management process
merely recognises past practice which
and retention strategy.
was discontinued with the creation of
Exxaro in November 2006.
Three-tier performance incentive
This
three-tier
performance
is
a
Incentives are profit-based and gains
above set targets are shared (up to a
maximum of 30%) with employees.
Contributions to medical funds, charged
incentive
created
to
reinforce
a
The
three-level short-term
incentive
against
income, are also reflected
in
performance culture. Accordingly, all full-
scheme structure is set out below:
note 30.
Variable remuneration
Exxaro strives to create a culture of
powering possibilities, based on the belief
that people can make the difference and
are a major resource in delivering sterling
business results. Incentive schemes are
focused on the strategic objectives of the
organisation.
Short-term incentives
The following schemes based on individual
business unit, commodity and group level
performance are in place:
> Individual performance reward
> A three-tier performance incentive
— On-target business unit incentive
— Commodity improvement incentive
— Group improvement incentive.
time employees participate
in
this
incentive scheme.
Three-tier performance incentive
t
e
g
d
u
b
n
o
t
n
e
m
e
v
o
r
p
m
i
%
Tier 3
Tier 2
Stretch
budget
Tier 1
Potential pay-out
EXXARO INTEGRATED ANNUAL REPORT 2010 163
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
First tier
The first tier is a line-of-sight incentive
Second tier
The second tier is based on exceeding the
Long-term incentives
Exxaro makes general share offers to
based on achieving 100% of the business
budgeted consolidated net operating
participants once a year in terms of the
unit’s set net operating profit target and is
profit
target by
an
improvement
following approved schemes:
currently equal to 8,33% of annual gross
percentage at commodity level.
> Exxaro share appreciation right scheme
remuneration for all full-time employees
of every business unit, commodity and
corporate staff department.
Third tier
The third tier is based on exceeding the
budgeted
consolidated
group
net
operating profit target above the second-
tier level.
(SAR)
> Exxaro long-term incentive plan (LTIP)
> Deferred bonus plan (DBP).
The table below summarises Exxaro’s long-term incentives:
Rights
shares on
31 Dec
2009
Maximum
award per
individual
Date
implemented
Performance
condition
Vesting
period
Total
grants
since
inception
to 31 Dec
2010
Grants
during
2010
01-03-2007
6 937 922
193 364 HEPS*
3 years
1 797 040
6 847 500
01-03-2007
523 789
156 632
performance
condition
50% TSR**
50% ROCE***
performance
condition
3 years
427 542
1 670 112
31-08-2007
96 374
18 285 None
3 years
31 318
104 700
Plan
Share
appreciation
rights
Long-term
incentive plan
Deferred bonus
plan
Eligibility
D3-F5
employee
Paterson
band
E2-F5
employee
Paterson
band
E4-F5
employee
Paterson
band
* Headline earnings per share
** Total shareholder return
*** Return on capital employed
Exxaro share appreciation right scheme
Share appreciation rights are rights to receive Exxaro shares equal to the value of the difference between the exercise price and the
grant price.
Vesting of the share appreciation rights is subject to a HEPS performance condition, over a three-year performance period, set by
Tremco. If the performance condition is met, the share appreciation rights vest and participants have a further period of seven years
from date of original offer in which to exercise these.
Total rights granted and cancelled: 31 December 2009 to 31 December 2010
Share incentive scheme
Number of rights/shares
not yet exercised on
31 Dec 2009
Offered
2010
Cancelled
2010
Number of rights/shares
not yet exercised on
31 Dec 2010
Share appreciation right scheme
5 851 231
1 797 040
322 769
6 937 921
Details of transactions by participants have been excluded.
164 EXXARO INTEGRATED ANNUAL REPORT 2010
Long-term incentive plan (LTIP)
Exxaro employees in top and senior management levels participate in the LTIP with total shareholder return and return on capital
employed performance conditions
The LTIP allows for the conditional grant of Exxaro shares to qualifying employees, subject to performance conditions being met over a
performance period of three years. The number of shares vesting of the conditional share award, after the performance period, depends
on the extent to which the performance conditions, total shareholder return and return on capital employed as determined by Tremco
have been satisfied.
Under the rules of the LTIP, Exxaro will procure the delivery of Exxaro shares to settle the value of the vested portion of the conditional
share award. The conditional share awards which do not vest at the end of the performance period will lapse.
Total awards granted and cancelled: 31 December 2009 to 31 December 2010
Share incentive scheme
Number of shares
not yet exercised on
31 Dec 2009
Offered
2010
Cancelled
2010
Number of shares
not yet exercised on
31 Dec 2010
Long-term incentive plan
1 549 575
427 542
39 361
1 523 789
Details of transactions by participants have been excluded.
Deferred bonus plan (DBP)
The purpose of the DBP is to encourage directors and senior employees to use part of their after-tax values of short-term incentive and
special performance reward payment to acquire shares (pledged shares) in Exxaro. Participants who own pledged shares are entitled to
all rights in respect of these shares, including dividend and voting rights.
If the pledged shares are held for the pledge period of three years and the participants remain in the employ of the company for the
pledge period, then the company will provide a matching award of free shares (matching shares).
Total awards granted and cancelled: 31 December 2009 to 31 December 2010
Share incentive scheme
Deferred bonus plan
Number of rights/shares
not yet exercised on
31 Dec 2009
Offered
2010
Cancelled
2010
Number of rights/shares
not yet exercised on
31 Dec 2010
67 114
31 318
0
96 374
Details of transactions by participants have been excluded.
Kumba share option scheme
Details on the discontinued Kumba share option scheme are comprehensively addressed under equity compensation benefits in note 30
to the annual financial statements.
Date
implemented
Options on
31 Dec
2009
Maximum
award per
individual
Performance
condition
Vesting
period
Total
issued
since
inception
to 31 Dec
2010
Options
granted
during
2010
03-12-2001
1 459 520
77 880
none
7 years
0
0
Plan
Eligibility
Exxaro options
Unbundling of
Kumba
Resources on
26-11-2001
The option scheme was discontinued after the introduction of the share appreciation right scheme.
EXXARO INTEGRATED ANNUAL REPORT 2010 165
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Mpower (Exxaro employee share option scheme)
This scheme provides incentives to participants, attracts new employees and retains current staff. Another key purpose is to promote
BEE in the company. The trust obtained some 3% of Exxaro’s shares:
> All shares are unitised and granted to qualifying employees
> The initial award – all employees in service on 26 November 2006 received 1 068 units with pro rata awards to new employees after
this date.
Dividends are paid to participants: they qualify for 50% of each dividend (tax free) and the remaining 50% of dividend services the loan.
The capital appreciation period for the scheme is five years and ends in November 2011, when proceeds calculated in accordance with
the trust deed and applicable taxation legislation will be paid to participants.
Current unit status of Mpower Trust:
2009
Closing unit balance
31 Dec 2009
Units cancelled
Units cancelled death
Units awarded
Closing unit balance
31 Dec 2010
2010
8 806 243
(365 071)
(83 331)
177 732
8 535 573
Remuneration of:
Executive directors, non-executive directors and senior managers
Directors
Information of the remuneration of executive directors and non-executive directors is reflected in the directors’ report on page 190.
Senior managers
Recommended practice, in line with King III (2.26.2), is to disclose the salaries of the three most highly paid employees who are not
directors. Exxaro decided to disclose the top four.
Earnings of four top earners excluding executive directors:
Annual (2010)
Guaranteed
Short-term incentives
Company
contributions
retirement
and medical
Totals
STI
SPI
Total
244 334
206 986
230 634
255 450
3 271 203
2 982 106
3 051 468
3 030 570
436 871
268 386
430 298
365 881
773 729
566 592
627 625
551 444
1 210 600
834 978
1 057 923
917 325
Total
package
3 026 869
2 775 120
2 820 834
2 775 120
Long-term
incentives
Grant face
value
exercised
31 Dec 2009
– 31 Dec 2010
1 171 640
617 635
1 111 767
483 709
Name and initials
Venter PE
Arran PT
Mgojo MDM
Van Niekerk WH
RP Mohring
Chairman
Transformation, human resources and remuneration committee
166 EXXARO INTEGRATED ANNUAL REPORT 2010
Shareholder
information and
analysis
Market listings and other
information
The principal market for Exxaro is the JSE
Limited. As a constituent of the All Share
Top 40 Index (ALSI40 Index), Exxaro
shares trade through the Strate system.
Closing JSE share prices are published in
most national and regional South African
newspapers and are available during the
day on the Exxaro and other websites.
Share prices are also available on I-Net
Bridge, Reuters and Bloomberg.
Exxaro has an over-the-counter sponsored
American depositary receipt (ADR) facility
with the Bank of New York (BoNY) under a
deposit
agreement.
For
additional
information, please refer to the BoNY
website: www.adrbny.com.
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
All enquiries about shares held in ADR
financial institutions holding ADRs for
form should be directed to BoNY, with
shareholder clients are responsible for
contact details set out on the inside back
forwarding shareholder
information to
cover.
their clients.
Dividend determination
Dividends are determined in South African
Shareholders can obtain details about
their own shareholding on the internet.
Full details, including how to gain secure
rand (ZAR) and declared payable
in
access to this personalised enquiry facility,
the same currency by the group. ADR
are provided on the Computershare
shareholders are paid in US dollars by the
website: www.computershare.com.
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
Publication of financial
statements
Shareholders wishing to view the annual
report or interim report in electronic
rather than paper form can access it on
the Exxaro website: www.exxaro.com.
Major shareholders
As of 31 December 2010, the one entity
concerning shareholders
(other
than
known to Exxaro as owning more than
shares held in ADR form) should be
10% of its shares is Main Street 333
directed to the registrar. Computershare’s
(Pty) Limited with 186 550 873 shares,
contact details are on the inside back
representing 52,10% of the number of
cover.
Shareholders must
notify
shares in issue. This entity is commonly
Computershare promptly in writing of any
referred to as BEE Holdco (page 5).
change of address.
EXXARO INTEGRATED ANNUAL REPORT 2010 167
REGULATORY COMPLIANCE AND
CORPORATE GOVERNANCE CONTINUED
Registered shareholder spread
as at 31 December 2010
Issued share capital: 358 089 230
Registered shareholder spread
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 above
Total
Public and non-public shareholdings
Shareholder spread
NON-PUBLIC SHAREHOLDERS
Main Street 333 (Pty) Limited
Anglo American Corp of SA Limited
Exxaro Employee Empowerment
Kumba Management Share Trust
Kumba Bestuursaandele Trust
D Konar
WA De Klerk
SA Nkosi*
VZ Mntambo*
D Zihlangu*
NL Sowazi*
Number
of holders
% of total
shareholders
Number
of shares
% of
issued capital
19 748
3 327
603
152
23
82,79
13,95
2,53
0,64
0,10
5 836 578
9 685 427
19 244 323
42 245 466
281 077 436
23 853
100,00
358 089 230
1,63
2,70
5,37
11,80
78,50
100,00
Number
of holders
% of total
shareholders
Number
of shares
% of
issued capital
65,24
52,10
9,70
2,97
0,41
0,04
0,00
0,02
7
1
1
1
1
1
1
1
0,05
0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00
233 573 805
186 550 873
34 730 282
10 618 974
1 459 520
159 038
168
54 950
9 698 806
5 529 881
2 818 552
3 038 387
PUBLIC SHAREHOLDERS
Total
* Indirectly held through Main Street 333 (Pty) Limited.
23 846
23 853
99,95
124 515 425
100,00
358 089 230
34,76
100,00
168 EXXARO INTEGRATED ANNUAL REPORT 2010
Beneficial shareholdings above 3%
Beneficial shareholdings
Main Street 333 (Pty) Limited
Anglo American Corp of SA Limited
Public Investment Corporation
Total
Beneficial shareholder categories
Category
Black economic empowerment
Pension funds
Corporate holding
Unit trusts
Other
Retail investor
Employees
Insurance companies
Foreign government
American depositary receipts
Investment trust
University
Charity
Local authority
Other
Total
1 Includes categories above 2% only.
Total
shareholding
% of
issued capital
186 550 873
34 730 282
19 001 010
240 282 165
52,10
9,70
5,31
67,10
Total
shareholding
% of
issued capital
186 550 873
37 917 173
35 276 164
31 874 508
16 557 128
16 080 438
10 618 974
8 443 831
6 110 896
572 441
393 903
154 540
60 709
34 000
7 443 652
52,10
10,59
9,85
8,90
4,62
4,49
2,97
2,36
1,71
0,16
0,11
0,04
0,02
0,01
2,08
358 089 230
100,00
EXXARO INTEGRATED ANNUAL REPORT 2010 169
INDEPENDENT ASSURANCE REPORT TO THE
DIRECTORS AND MANAGEMENT OF EXXARO
RESOURCES LIMITED
for the year ended 31 December 2010
Scope of our engagement
We have completed our
independent
assurance engagement to enable us to
express our limited assurance conclusions
on Exxaro Resources Limited’s (‘Exxaro’s’)
reporting
of material
sustainable
development risks and opportunities and
used
to manage
identified material
Assurance Engagements Other Than
sustainability risks and opportunities as
Audits or Reviews of Historical Financial
related to the following key performance
Information. This standard requires us to
indicators:
> Fatalities (page 82);
comply with ethical requirements and to
plan and perform our engagements to
> Lost Time Injuries (LTI) (page 82);
obtain limited assurance regarding the
> LTI frequency rate (LTIFR) (page 82);
Report and the specified Key Performance
views and expectations of its stakeholders;
and
Indicators contained in the Report, as
that Exxaro’s Sustainability Performance
> Electricity (page 117).
expressed in this report.
Review 2010 (‘the Report’) for the period
ending 31 December 2010, has been
prepared,
in all material respects,
in
accordance with the self-declared Global
Reporting Initiative (GRI) G3 Guidelines B+
application level using the principles of
materiality,
completeness
and
sustainability
context; and Exxaro’s
performance for
identified risks and
opportunities by way of the following
selected key performance indicators:
> Occupational
Tuberculosis
(TB)
(page 88)
> Pneumoconiosis (page 87)
> Noise Induced Hearing Loss (NIHL)
(page 87)
Our responsibility
in performing our
independent
limited and
reasonable
Basis of work and limitations
The procedures selected depend on our
assurance engagements
is to Exxaro
judgement, including the assessment of
Resources Limited only and in accordance
the risks of material misstatement of the
with the terms of reference for this
subject matter and the purpose of our
engagement as agreed with them. To the
engagement.
In
making
these
fullest extent permitted by law, we do not
assessments, we have considered internal
accept or assume responsibility to anyone
control relevant to the entity’s preparation
other than Exxaro Resources Limited, for
and presentation of the Report and the
our work, for this report, or for the
conclusions we have reached.
information contained therein, in order to
for
design
appropriate
procedures
Directors’ responsibility
Exxaro’s Directors are responsible for the
gathering
sufficient
appropriate
assurance evidence to determine that the
information in the Report is not materially
preparation and presentation of the
misstated or misleading as set out in the
> HIV/AIDS voluntary counselling and
Report
and
the
information
and
summary of work performed below. Our
testing (VCT) (page 89)
> Diesel (page 117)
> Gas (page 117)
> Hazardous waste disposed of (page 99)
> Indirect CO2 emissions (from electricity
and diesel only) (page 119)
> Level 2 and 3 environmental incidents
(page 115/6)
> Water consumption (page 117)
assessments contained in the Report in
assessment of relevant internal control is
accordance with the relevant criteria. This
not for the purpose of expressing a
responsibility
includes:
designing,
conclusion on the effectiveness of the
implementing and maintaining appropriate
entity’s internal controls.
performance management and systems to
record, monitor and improve the accuracy,
We have planned and performed our work
completeness and
reliability of
the
to obtain all
the
information and
sustainability data and to ensure that the
explanations
that we
considered
information and data reported to meet the
necessary to provide a basis for our
> Status of Integrated Water User licence
requirements of the relevant criteria, and
limited
and
reasonable
assurance
(IWUL) applications (page 97)
contains all relevant disclosures that could
conclusions pertaining to the Report and
> Land
disturbed
vs
rehabilitated
materially affect any of the conclusions
the specified KPIs, expressed below. We
(page 113)
drawn.
> Employment Equity (EE) (page 123)
> ABET training numbers (page 123)
> Preferential procurement (page 129)
> Socio-economic development
(SED)
project spend as per Social and Labour
plans (page 132)
We have completed our
independent
assurance engagement to enable us to
express our reasonable limited assurance
conclusions on whether the description of
the systems and approaches Exxaro
Assurance provider’s
responsibility
Our responsibility is to express our limited
have no responsibility to update this
report for events and circumstances
occurring after the date of the report, nor
will we perform any work in this regard.
and reasonable assurance conclusions on
Where a limited assurance conclusion is
the areas as highlighted under the scope
expressed, our
evidence
gathering
above. Our
independent
limited and
procedures are more limited than for a
reasonable assurance engagement was
reasonable assurance engagement, and
performed
in accordance with
the
therefore less assurance is obtained than
International Federation of Accountants’
in a reasonable assurance engagement.
(IFACs)
International
Standard
on
Assurance Engagements (ISAE) 3000
Our report does not extend to providing
assurance on historical data.
170 EXXARO INTEGRATED ANNUAL REPORT 2010
We provide no assurance over the web
We believe that the evidence obtained as
content relating to the Report and the
part of our assurance engagement, is
specified KPIs. Assurance is provided only
sufficient and appropriate to provide a
on the Report and specified KPIs as
basis for our findings and our limited and
included
in pdf
format on Exxaro
reasonable
assurance
conclusions
Resources Limited’s website.
expressed below.
Summary of work performed
Set out below is a summary of the
Conclusions
Based on the work performed and subject
procedures performed pertaining to the
to
the
limitations described above,
Report and the specified KPIs which were
managements disclosures pertaining to
included in the scope of our assurance
Fatalities, LTIs, LTIFR and Electricity
engagement.
consumption are fairly stated.
> We obtained an understanding of:
Based on the work performed and subject
— The entity and its environment;
to the limitations described above, nothing
— Entity-level controls;
has come to our attention that causes us
— The stakeholder dialogue process;
to believe that Managements disclosures
— The selection and application of
pertaining to Occupational TB; NIHL;
sustainability reporting policies;
— The significant reporting processes
including how information is initiated,
Pneumoconiosis; HIV/AIDS VCT; Diesel;
Sasol gas; Hazardous waste; CO2 emissions
(from electricity and diesel only); Level 2
recorded, processed, reported and
and 3 environmental
incidents; Water
incorrect information is corrected, as
consumption; Status of IWUL applications;
well as the policies and procedures
Land disturbed versus rehabilitated; EE;
within the reporting processes.
ABET
training numbers; Preferential
> We made
such
enquiries
of
procurement; SED project spend as per
management, employees and those
Social and Labour plans; and the self-
responsible for the preparation of the
declared B+ GRI G3 application level are
Report and the specified KPIs, as we
not fairly stated.
considered necessary.
> We
inspected
relevant supporting
documentation and obtained such
external
confirmations
and
management representations as we
Ernst & Young Inc
considered necessary for the purposes
Director — Alasdair Stewart
of our engagement.
Registered Auditor
> We performed analytical procedures
Chartered Accountant (SA)
and limited tests of detail responsive to
our risk assessment and the level of
Ernst & Young
assurance
required,
including
52 Corlett Drive
comparison of judgementally selected
Johannesburg
information to the underlying source
15 March 2011
documentation
from which
the
information has been derived.
> We
considered whether
Exxaro
Resources Limited has applied the GRI
G3 Guidelines to a level described on
page 30.
EXXARO INTEGRATED ANNUAL REPORT 2010 171
INDEPENDENT ASSURANCE
Stakeholder panel feedback –
executive summary
stakeholder
The
panel
comprises
academics
from related
faculties at
leading
universities,
sustainability
practices within
leading professional
services firms and independent experts.
Key material issues: no consensus by
panelists; key material issues ranged from
climate change/greenhouse gas emissions
(2) to economic value added and fatalities.
One panelist grouped his most pressing
issues as water withdrawal, mine closure,
green procurement, working conditions,
LTI, health and safety systems, occupational
diseases, medical surveillance, decent
wages,
risk management and clean
production.
However, from their general comments,
understanding that the amount of
against the political backdrop, the most
hazardous material disposed of could
pressing issues in 2010 appear to be:
impact mine closure costing)
1) economic value added
(spanning
> stakeholders: who are
they
(how
ownership, employment equity, decent
identified,
how
engaged,
how
wages and living conditions, and labour
addressed).
relationships);
2)
climate
change/
greenhouse gas emissions, and 3) safety
All highlighted the importance of context:
and health (including pollution impacts on
for example an aggregate figure for water
health of communities in general).
withdrawal is meaningless if one operation
is in a desert and another next to a river.
All panelists noted that to be effective,
Equally, celebrating the creation of 100 jobs
stakeholder reporting needs to begin from
(enterprise development) becomes hollow
a base of proper planning: understanding
in the context of shedding 1 000 members
and mapping
the
inter-relationships
of the workforce (retrenchment).
between
the
various
issues,
and
developing a strategic, holistic approach
This feedback was an important part of
to them. Specific pointers included:
> process of determining material issues:
the progress Exxaro has made
in
enhancing its stakeholder reporting in
context, cross-cutting issues (such as
2010. The role of the panel will be expanded
in 2011.
172 EXXARO INTEGRATED ANNUAL REPORT 2010
GRI INDICATOR INDEX
Index to Global Reporting Initiative G3 indicators
This index includes the 2007 GRI guidelines (G3) and 2009 mining and minerals sector supplement.
Reasonable assurance by E&Y
Limited assurance by E&Y
Exxaro material issue
GRI Topic
Strategy and analysis
Statement from senior management
Key impacts, risks and opportunities
Organisational profile
Name
Primary products
Operational structure
Location of head office
Countries of operation
Nature of ownership
Markets served
Scale of organisation
Significant changes to organisation
Awards
Report parameters
Reporting period
Date of previous report
Reporting cycle
Contact points
Process for defining report content
Boundary of report
Limitations
Basis for reporting on joint ventures, etc
Data measurement techniques and assumptions
Explanation of restatements
Significant changes to scope, boundary or methods
GRI index
Policy and practice on external assurance
1.1
1.2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
Page
41
Foldout, 16
Cover
6
5
IBC
8
6-7
6-7
6-7
na
31
30
30
30
30
30
30
30
30
nr
9
zero
176
30
EXXARO INTEGRATED ANNUAL REPORT 2010 173
GRI INDICATOR INDEX CONTINUED
GRI Topic
Governance, commitments and engagement
Governance structure
Status of chairperson
Independent non-executive directors
Mechanisms for stakeholders to interact with board
Link between compensation and performance
Process for avoiding conflict of interest
Expertise of board
Policies on economic, environmental and social performance
Procedures for board oversight of economic, environmental and social performance
Board performance
Precautionary approach
External principles endorsed
Membership of industry associations and advocacy groups
Stakeholder groups
Basis for identification
Approach to stakeholder engagement
Topics and concerns raised, response
Economic
Economic value generated and distributed – including payments to local communities as part of land-use
agreements, excluding land purchases. Report countries of operation that are either candidate to or
compliant with the Extractive Industries Transparency Initiative (EITI).
Financial implications, risks and opportunities due to climate change
Coverage of defined benefit plan obligations
Significant financial assistance from government
Standard entry-level wage compared to local minimum wage
Policy, practices, and spending on local suppliers
Procedures for local hiring, proportion of senior management and workforce from local community
Development and impact of infrastructure investments and services for public benefit
Significant indirect economic impacts
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
EC1
EC2
EC3
EC4
EC5
EC6
EC7
EC8
EC9
Page
148
152
152
155
160
149
152
154
154
152
92
30, 28
28
25
25
25
25
181
100
160
zero
160
129
120
132
132
174 EXXARO INTEGRATED ANNUAL REPORT 2010
GRI Topic
Environmental
Materials
Materials used by weight or volume
Percentage recycled input materials (includes post-consumer recycled material and waste from industrial
sources, but excludes internal recycling within facility (home scrap).
Energy
Direct consumption by primary energy source
Indirect consumption by primary source
Energy saved from conservation and efficiency improvements
Reductions from energy-efficient or renewable energy-based products and services
Initiatives to reduce indirect energy consumption, reductions achieved
Water
Total water withdrawal by source. Water use, including water quality
Sources significantly affected by withdrawal
EN1
EN2
EN3
EN4
EN5
EN6
EN7
EN8
EN9
EN10 Percentage and volume recycled and reused
Biodiversity
EN11
Location and size of land owned, leased, managed or adjacent to protected areas, areas of high
biodiversity value
EN12
Description of significant impacts of activities.
Where possible, describe impact (gain/loss) on sustainable land use. Include impacts of resettlement and
closure activities reported under MM9 and MM10 respectively.
MMI
Amount of land (owned/leased, managed for production or extractive use) disturbed or rehabilitated
EN13 Habitats protected or restored. Report on biodiversity offsets
EN14 Strategies, actions and plans for managing impacts on biodiversity. Disclose consideration of ecosystems
services and associated values.
MM2
EN15
Number and percentage of total sites requiring biodiversity management plans according to stated criteria,
and number (percentage) of sites with plans in place
IUCN Red List species and national conservation list species in areas affected by operations
Emissions, effluents, and waste
EN16 Total direct and indirect greenhouse gas emissions
EN17 Other relevant indirect greenhouse gas emissions
EN18
Initiatives to reduce greenhouse gas emissions, reductions achieved
EN19 Emissions of ozone-depleting substances
Management of radioactive material
EN20 NOx, SOx, and other significant air emissions by type and weight. Include emissions from major mobile
sources and on-site stationary sources
EN21 Total water discharge by quality and destination
EN22 Total weight of waste by type and disposal method. Site waste and construction waste. Large-volume mining
and mineral processing waste to be reported under MM3
MM3
Total amounts of overburden, rock, tailings and sludges and their associated risks
Page
nr
nm
117
117
101, 117
101
101-105
99
99
nr
107-111
108-111
108-111
113
108-111
108-111
108-111
108-111
102, 117
117
100-105
105
99
117
nr
nr
nr
EN23 Total number and volume of significant spills. Include spills of tailings, slimes or other significant process
115-116
materials. Report follow-up actions to reduce number and severity of spills, even at a level before emergency
procedures are required.
EN24 Waste transported under terms of Basel Convention (Annex I, II, III, VIII)
EN25
EN26
Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly
affected by discharges of water and runoff
Products and services
Initiatives to mitigate environmental impacts of products, extent of mitigation
EN27 Percentage of products sold and packaging materials reclaimed by category
Compliance
EN28 Significant fines, sanctions for non-compliance with environmental laws and regulations
Transport
EN29 Significant impacts of transporting products, and members of workforce
EN30 Total environmental protection expenditures and investments by type
na
nr
105
na
Zero
nr
nr
EXXARO INTEGRATED ANNUAL REPORT 2010 175
GRI INDICATOR INDEX CONTINUED
GRI Topic
Social performance: labour practices and decent work
Employment
Workforce by employment type, employment contract and region
Number and rate of employee turnover by age group, gender, and region
Benefits for full-time employees not provided to temporary/part-time employees
Labour/management relations
Percentage employees covered by collective bargaining agreements
LA1
LA2
LA3
LA4
LA5 Minimum notice period on significant changes, including specified in collective agreements
MM4 Number of strikes and lock-outs exceeding one week’s duration, by country
LA6
LA7
LA8
LA9
Occupational health and safety
Percentage workforce represented in formal joint health and safety committees to monitor and advise on
programmes
Rates of injury, occupational diseases, lost days, absenteeism, work-related fatalities. Describe each
fatality, and subsequent actions
Education, training, counselling, prevention, and risk-control programmes to assist workforce members,
their families or community members with serious diseases
Health and safety topics covered in formal agreements with trade unions
Training and education
LA10 Average hours of training per year per employee by employee category
LA11
Programmes for skills management and lifelong learning that support continued employability
Page
121
122
127, 160
127
127
127
80
82, 87
83
83
125
125
LA12 Percentage of employees receiving regular performance and career development reviews.
124, 160
Diversity and equal opportunity
LA13 Composition of governance bodies and breakdown of employees per category: gender, age group, minority
group membership, and other indicators of diversity
LA14 Ratio of basic salary of men to women by employee category
Social performance: human rights
Investment and procurement practices
Percentage and number of significant investment agreements with human rights clauses or human rights
screening
Percentage significant suppliers and contractors screened on human rights and actions taken
Total hours and percentage employee training on aspects of human rights relevant to operations
Non-discrimination
Total number of incidents of discrimination and actions taken
Freedom of association and collective bargaining
HR1
HR2
HR3
HR4
HR5 Operations where right to freedom of association and collective bargaining may be at significant risk,
actions taken to support rights.
HR6 Operations with significant risk for incidents of child labour, measures to eliminate
HR7 Operations with significant risk of forced or compulsory labour, measures to eliminate
Security practices
Percentage security personnel trained in policies/procedures on human rights relevant to operations
HR8
Total number of operations in/adjacent to indigenous peoples’ territories, and number and percentage of
operations/sites with formal agreements with indigenous peoples’ communities
Indigenous rights
MM5
HR9 Number of violations involving rights of indigenous people and actions taken
123
121
nr
nr
128
Zero, 121
127
Zero
Zero
128
nr
nr
176 EXXARO INTEGRATED ANNUAL REPORT 2010
GRI Topic
SO1
Social performance: society
Community
Programmes and practices to manage impacts of operations on communities, including entering, operating,
and exiting. Exxaro donations
Disclose how Exxaro acts to mitigate negative impacts and contribute to local development, and how
consultation processes ensure that assessing impacts and evaluating benefits properly reflect local views.
Report on extent to which community participation processes are socially inclusive and ensure engagement
with disadvantaged groups (social responsibility aspect) or means to oppose operations if they do not feel
they are treated equitably (risk mitigation aspect).
Issues for particular consideration include:
(cid:33)(cid:3) (cid:3)Community economic development planning processes, including sources of community income, access to
services and social infrastructure, access to capital and natural resources, and access to further education
and skills training.
(cid:33)(cid:3) (cid:3)Co-ordination with other agencies, eg on poverty alleviation and natural resource management.
(cid:33)(cid:3) (cid:3)Procedures for identifying and protecting subsistence-related resources of local communities, including
water, plants and wildlife.
(cid:33)(cid:3) (cid:3)Measures of community health and wellbeing, incl prevalence of cultural practices and associations.
MM6 Number and description of significant disputes on land use, customary rights of local communities and
indigenous peoples
MM7
Extent to which grievance mechanisms were used to resolve disputes above, and outcomes
MM8 Number (and percentage of operating sites where artisanal and small-scale mining (ASM) takes place on/
adjacent to the site; associated risks and actions taken to manage and mitigate these risks
MM9
Sites where resettlements took place, number of households resettled, and how livelihoods affected
MM10 Number and percentage of operations with closure plans
SO2
SO3
SO4
SO5
SO6
SO7
SO8
Corruption
Percentage and number of business units analysed for risks related to corruption
Percentage of employees trained in anti-corruption policies and procedures
Actions taken in response to incidents of corruption
Public policy
Public policy positions and participation in policy development and lobbying
Total value of financial and in-kind contributions to political parties, politicians, and related institutions
Anti-competitive behaviour
Legal actions for anti-competitive behaviour, anti-trust and monopoly practices, outcomes
Compliance
Significant fines, sanctions for non-compliance with laws and regulations. Summary of judgments against
Exxaro on health and safety and labour laws.
Page
131-136
nr
nr
nr
nr
113
nr
145
149
28
zero
Zero
Zero, 144
EXXARO INTEGRATED ANNUAL REPORT 2010 177
GRI INDICATOR INDEX CONTINUED
GRI Topic
Social performance: product responsibility
Customer health and safety
Programmes and progress relating to materials stewardship
Life cycle stages in which impacts of products and services are assessed for improvement, percentage of
significant products and services categories subject to such procedures
Number non-compliances with regulations and voluntary codes on health and safety impacts of products and
services during life cycle, by types of outcomes
Products and service labelling
Type of information required, percentage of significant products concerned
Incidents of non-compliance with regulations and voluntary codes on labelling
Practices related to customer satisfaction
Marketing communications
Programmes for adherence to laws, standards, and voluntary codes
Incidents of non-compliance
Customer privacy
Substantiated complaints on breaches of customer privacy and losses of customer data
Compliance
Significant fines for non-compliance with laws and regulations concerning provision and use of products and
services.
MM11
PR1
PR2
PR3
PR4
PR5
PR6
PR7
PR8
PR9
nm – not measured
nr – not reported
na – not applicable
Page
nr
nr
na
na
na
na
155
Zero
na
na
178 EXXARO INTEGRATED ANNUAL REPORT 2010
GROUP CASH VALUE ADDED STATEMENTS
for the year ended 31 December 2010 (Unaudited)
The value added statement shows the wealth the group has created through mining, beneficiation, trading and investing operations. Exxaro
generates and creates value for many of its stakeholders as follows:
– Exxaro’s biggest assets: employees receive salaries/wages, as well as bonuses.
– The governments of the countries where Exxaro has operations receive taxes and royalty payments.
– Suppliers and contractors are supported through the procurement of consumables, services and capital goods.
– To ensure sustainability and expansion continual and substantial re-investment into the group is necessary.
– Shareholders receive a fair return on their investment through dividends and growth on the share price.
The statement below summarises the total cash wealth created and how it was disbursed among the group’s stakeholders, leaving a retained
amount which was reinvested in the group for the replacement of assets and further development of operations.
Cash generated
Cash derived from sales and services
Income from investments and interest received
Paid to suppliers for materials and services
Cash value added
Cash utilised to:
Remunerate employees for services
Pay direct taxes to the state
Provide lenders with a return on borrowings
Provide shareholders with cash dividends
Cash disbursed among stakeholders
Cash retained in the group to maintain and develop operations
Total cash value disbursed or retained
Notes to the group cash value added statement
1. Taxation contribution
Direct taxes (as above)
Value added taxes levied on purchases of goods
and services
Gross contributions
2. Additional amounts collected by the group on behalf of government
Value added tax and other duties charged on turnover
Employees’ tax deducted from remuneration paid
Unemployment Insurance Fund
Withholding tax
3. Levies paid to government
Rates and taxes paid to local authorities
Royalties paid to government
Workers’ Compensation Fund
Unemployment Insurance Fund
Skills Development Levy
31 December
2010
Rm
31 December
2009
Rm
16 524
1 817
(10 044)
8 297
14 812
1 754
(10 802)
5 764
4 056
430
391
1 056
5 933
2 364
8 297
430
2 010
2 440
2 091
1 016
30
4
3 141
28
115
10
30
30
213
3 502
892
526
1 050
5 970
(206)
5 764
892
1 915
2 807
1 976
652
32
2 660
35
80
6
32
30
183
Cash disbursed among stakeholders 2010
Cash disbursed among stakeholders 2009
18%
18%
7%
7%
Remunerate employees
for services
Pay direct taxes
to the state
Provide lenders with
a return on borrowings
Provide shareholders
with cash dividends
15%
68%
9%
58%
EXXARO INTEGRATED ANNUAL REPORT 2010 179
SELECTED GROUP FINANCIAL DATA
TRANSLATED INTO US DOLLARS
for the year ended 31 December 2010 (Unaudited)
The group statutory 2010 financial statements have been expressed in US dollars for information purposes.
The average US dollar/rand of USD1:R7,30 (2009: USD1:R8,35) has been used to translate the income and statement of cash
flows,whilst the statement of financial position has been translated at the closing rate on the last day of the reporting period of USD1:R6,63
(2009: USD1:R7,40).
INCOME STATEMENTS
Revenue
Operating expenses
NET OPERATING PROFIT
Net financing costs
Income from equity-accounted investments
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE YEAR
Profit attributable to:
Owners of the parent
Non-controlling interests
Attributable earnings per share (cents)
Headline earnings
Headline earnings per share (cents)
STATEMENTS OF FINANCIAL POSITION at 31 December 2010
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
Other
Non-current assets classified as held-for-sale
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Non-controlling interests
Non-current liabilities
Interest-bearing borrowings
Deferred tax, non-current provisions and financial liabilities
Current liabilities
Interest-bearing borrowings
Other
Non-current liabilities classified as held-for-sale
TOTAL EQUITY AND LIABILITIES
NET DEBT (refer definitions on page 181)
STATEMENTS OF CASH FLOWS for the year ended 31 December 2010
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
180 EXXARO INTEGRATED ANNUAL REPORT 2010
2010
USD
million
2 350
(1 989)
361
(62)
509
808
(91)
717
714
4
717
206
710
205
2 007
7
11
585
110
208
323
1 052
13
4 316
2 630
(3)
550
535
108
488
8
4 316
335
324
(134)
(37)
153
2009
USD
million
1 797
(1 761)
36
(50)
228
214
(92)
122
122
122
36
301
87
1 605
6
12
266
85
164
138
853
12
3 141
1 745
588
395
55
351
7
3 141
504
(25)
(169)
105
(89)
DEFINITIONS
Attributable cash flow per
ordinary share
Cash flow from operating activities after
adjusting
for participation of non-
controlling interests therein divided by the
weighted average number of ordinary
shares in issue during the year.
Capital employed
Total equity plus net debt minus non-
current financial asset.
Cash and cash equivalents
Comprise cash on hand and current
— EBITDA: net operating profit (before
interest, tax, depreciation, amortisation,
impairment charges and net deficit/
surplus on sale of investments and
assets) divided by net financing costs.
Headline earnings yield
Headline earnings per ordinary share
divided by the closing share price on the
JSE Limited.
Invested capital
Total equity, interest-bearing debt, non-
current provisions and net deferred tax
accounts in bank, net of bank overdrafts,
less cash and cash equivalents.
together with any highly liquid investments
readily convertible to known amounts of
cash and not subject to significant risk of
Net assets
Total assets less current and non-current
Return on ordinary
shareholders’ equity
— Attributable earnings
Earnings attributable to owners of the
parent as a percentage of average
equity attributable to owners of the
parent.
— Headline earnings
Headline earnings attributable
to
owners of the parent as a percentage of
average equity attributable to owners
of the parent.
Return on invested capital
Net operating profit plus income from
non-equity accounted investments plus
income from investments in associates
as a percentage of the average invested
changes in value.
liabilities
less non-controlling
interests
capital.
which equates to equity of owners of the
parent.
Net debt to equity ratio
Interest-bearing debt less cash and cash
Return on net assets
Net operating profit plus income from
non-equity accounted investments plus
income from investments in associates as
equivalents as percentage of total equity.
a percentage of the average net assets.
Net equity per ordinary share
Equity attributable to owners of the
Revenue per employee
Revenue divided by the average number
parent divided by the number of ordinary
of employees during the year.
shares in issue at the year end.
Current ratio
Current assets divided by current
liabilities.
Dividend cover
Attributable earnings per ordinary share
divided by dividends per ordinary share.
Dividend yield
Dividends per ordinary share divided by
the closing share price on the JSE Limited.
Earnings per ordinary share
— Attributable earnings basis
Number of years to repay
interest-bearing debt
Interest-bearing debt divided by cash
Earnings attributable to owners of the
flow from operating activities before
parent divided by the weighted average
dividends paid.
number of ordinary shares in issue
during the year.
— Headline earnings basis
Operating margin
Net operating profit as a percentage
Earnings attributable to owners of the
of revenue.
parent adjusted for profits and losses
on items of a capital nature recognising
the tax and non-controlling interests
impacts on these adjustments, divided
Operating profit per employee
Net operating profit divided by the
average number of employees during the
by the weighted average number of
year.
ordinary shares in issue during the year.
NET FInancing cost cover
— EBIT: net operating profit
Return on capital employed
Net operating profit plus income from
(before
non-equity-accounted
investments plus
interest and
tax) divided by net
income from investments in associates as
financing costs
a percentage of average capital employed.
Total asset turnover
Revenue divided by average total assets.
Weighted average number of
shares in issue
The number of shares in issue at the
beginning of the year, increased by shares
issued during the year, weighted on a time
basis for the period in which they have
participated in the income of the group.
In the case of shares issued pursuant to a
share capitalisation award
in
lieu of
dividends, the participation of such shares
is deemed to be from the date of issue.
EXXARO INTEGRATED ANNUAL REPORT 2010 181
182 EXXARO INTEGRATED ANNUAL REPORT 2010
DIVIDER PAGE 5 – FRONT (FINANCIAL STATEMENTS)
GROUP ANNUAL FINANCIAL STATEMENTS
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
for the year ended 31 December 2010
Financials
CONTENTS
Financial statements
184 Directors’ responsibility for financial
reporting
184 Certificate by company secretary
185 Independent auditors’ report
186 Report of the directors
189 Directors’ remuneration
206 Income statements and statements
of comprehensive income
207 Statements of financial position
208 Statements of cash flows
209 Group statement of changes in equity
210 Company statement of changes in equity
211 Notes to the annual financial statements
Annexures
297 1. Non-current interest-bearing borrowings
299 2. Investments in associates, joint
ventures and other investments
301 3. Investments in subsidiaries
Administration
304 Notice of annual general meeting
308 Biographies of directors up for re-election
309 Form of proxy
IBC Administration and shareholders’ diary
s
l
a
i
c
n
a
n
F
i
EXXARO INTEGRATED ANNUAL REPORT 2010 183
DIVIDER PAGE 5 – BACK (FINANCIAL STATEMENTS)
DIRECTORS’ RESPONSIBILITY FOR FINANCIAL
REPORTING
TO THE MEMBERS OF EXXARO RESOURCES LIMITED
The directors of the company are responsible for maintaining
adequate accounting records, the preparation of the annual
financial statements of the company and the group and to develop
and maintain a sound system of internal control to safeguard
shareholders’ investments and the group’s assets. In presenting
the accompanying financial statements, International Financial
Reporting Standards have been followed, applicable accounting
policies have been used and prudent judgements and estimates
have been made.
In order for the directors to discharge their responsibilities,
management has developed and continues to maintain a system
of internal control aimed at reducing the risk of error or loss in a
cost-effective manner. Such systems can provide reasonable but
not absolute assurance against material misstatement or loss. The
directors, primarily through the audit, risk and compliance
committee which consists only of non-executive directors, meet
periodically with the external and internal auditors, as well as
executive management to evaluate matters concerning accounting
policies, internal control, auditing, financial reporting and risk
management. The group’s internal auditors independently evaluate
the internal controls and coordinate their audit coverage with the
external auditors. The external auditors are responsible for reporting
on the financial statements. The external and internal auditors have
unrestricted access to all records, property and personnel as well
as to the audit, risk and compliance committee. The directors are
not aware of any material breakdown in the functioning of these
controls and systems during the year under review.
The directors are of the opinion, based on the information and
explanations given by management and the internal auditors, and
on comments made by the external auditors on the results of their
audit conducted for the purpose of expressing their opinion on the
annual financial statements, that the internal accounting controls
are adequate, such that the financial records may be relied on for
preparing the financial statements and maintaining accountability
for assets and liabilities.
The directors have reviewed the group’s financial budgets with its
underlying business plans for the period to 31 December 2011. In
light of the current financial position and existing borrowing facilities,
they consider it appropriate that the annual financial statements be
prepared on the going-concern basis.
Against this background, the directors of the company accept
responsibility for the annual financial statements, which were
approved by the board of directors on 22 February 2011 and are
signed on its behalf by:
SA Nkosi
Chief executive officer
WA de Klerk
Finance director
The external auditor has audited the annual financial statements of
the company and group and their unmodified report appears on
page 185.
CERTIFICATE BY COMPANY SECRETARY
In terms of the Companies Act No 61 of 1973 of South Africa, as amended, I, MS Viljoen, in my capacity as company secretary, confirm that
for the year ended 31 December 2010, the company has lodged with the Registrar of Companies all such returns as are required of a public
company in terms of this Act and that all such returns are true, correct and up to date.
MS Viljoen
Company secretary
22 February 2011
184 EXXARO INTEGRATED ANNUAL REPORT 2010
REPORT OF THE INDEPENDENT AUDITOR ON
THE ANNUAL FINANCIAL STATEMENTS TO THE
MEMBERS OF EXXARO RESOURCES LIMITED
We have audited the annual financial statements of Exxaro
Resources Limited, which comprise the statement of financial
position as at 31 December 2010, and the statement of
comprehensive income, statement of changes in equity and
statement of cash flows for the year then ended, and a summary of
significant accounting policies and other explanatory information,
and the directors’ report, as set out on the attached pages.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL
STATEMENTS
The directors are responsible for the preparation and fair
presentation of these financial statements in accordance with
International Financial Reporting Standards and in the manner
required by the Companies Act of South Africa, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Exxaro Resources Limited as at
31 December 2010, and its financial performance and its cash
flows for the year then ended in accordance with International
Financial Reporting Standards and in the manner required by the
Companies Act of South Africa.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about
whether
from material
misstatement.
the financial statements are
free
Deloitte & Touche
Registered auditor
Per BW Smith
Partner
22 February 2011
Buildings 1 and 2, Deloitte Place
The Woodlands Office Park
Woodlands Drive, Sandton
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
National Executive: GG Gelink (Chief Executive),
AE Swiegers (Chief Operating Officer)
GM Pinnock (Audit), DL Kennedy (Risk Advisory), NB Kader (Tax
& Legal Services), L Geeringh (Consulting), L Bam (Corporate
Finance), JK Mazzocco (Human Resources), CR Beukman
(Finance), TJ Brown (Clients), NT Mtoba (Chairman of the Board),
MJ Comber (Deputy Chairman of the Board)
A full list of partners and directors is available on request.
BBBEE rating: Level 2 contributor/AAA (certified Empowerdex)
Member of Deloitte Touche Tohmatsu Limited
EXXARO INTEGRATED ANNUAL REPORT 2010 185
REPORT OF THE DIRECTORS
The directors have pleasure in presenting the annual financial
statements of Exxaro Resources Limited (Exxaro) and the group for
the year ended 31 December 2010.
The group aims to cover its annual net funding requirements
through longer-term loan facilities with maturities spread evenly
over time.
NATURE OF BUSINESS
Exxaro, incorporated in South Africa, is a mining group of
companies focusing on extracting and processing a range of
minerals and metals including coal, mineral sands, base metals
and selected industrial minerals. Exxaro also holds a 20% interest
in Sishen Iron Ore Company (Pty) Limited, which extracts and
processes iron ore.
CORPORATE GOVERNANCE
The board of Exxaro endorses the principles contained in the
King III report.
Full details on how these principles were applied in Exxaro and the
actions undertaken to achieve full compliance are set out in the
corporate governance report on page 140.
REGISTRATION DETAILS
Exxaro is a company listed on the JSE Limited. The company
registration number is 2000/011076/06. The registered office is
Roger Dyason Road, Pretoria West, 0183, Republic of South
Africa.
ACTIVITIES AND FINANCIAL RESULTS
Summarised information on the activities and performance of the
group and the various divisions of the group are contained in the
reports on pages 6 to 11 as well as in the financial and operational
review on pages 48 to 59. These reports are unaudited.
CAPITAL MANAGEMENT
As a diversified mining company Exxaro is exposed to the cyclical
price movements associated with its suite of commodities. The
group’s policy is therefore to ensure it maintains a robust capital
structure with strong financial metrics underpinned by adequate
borrowing
in
commodity cycles. Growth opportunities, debt levels and dividend
distributions to shareholders are considered against this backdrop.
facilities to withstand a significant downturn
The board of directors is ultimately responsible to monitor debt
levels, return on capital as well as compliance with contractually
agreed loan covenants. For the year under review the following key
metrics were achieved:
Net debt/equity ratio (%)
Net financing cost cover – EBITDA
(times)
Return on capital employed (%)
(Refer definitions on page 181)
2010
2009
13
9
38
29
7
15
The capital base consists of total shareholders’ equity as disclosed,
as well as interest-bearing borrowings. As a new-generation
empowerment company with a 56% BEE shareholding, Exxaro is
constrained from issuing equity, and its memorandum and articles
of association accordingly incorporate various provisions limiting
the issue of new shares or alterations to its share capital that could
result in a loss of its empowerment status.
Although the intention is to progress to distributing 50% of
attributable earnings to shareholders, adequate provision is made
for future commitments and working capital requirements in
determining the level of interim and final dividends to shareholders.
The group may from time to time repurchase its own shares in the
open market, depending on prevailing market prices. These share
repurchases are primarily intended to settle the group’s various
employee share incentive schemes and decisions are made on a
specific transaction basis by the executive committee. The group
does not, however, have a defined share buyback plan.
During the year, the group complied with all its contractually agreed
loan covenants.
There were no changes in the group’s approach to capital
management during the year. The group continuously reviews its
capital expenditure programmes, including sustaining capital to
ensure that its capital structure remains robust to withstand any
downturns. Neither the company nor any of its subsidiaries are
subject to externally imposed regulatory capital requirements.
PROPERTY, PLANT AND EQUIPMENT
Capital expenditure for the period was R2 677 million (2009:
R1 982 million).
SHAREHOLDERS’ RESOLUTIONS
At the ninth annual general meeting of shareholders, held on
21 May 2010, the following resolutions were passed:
• renewal of the authority that unissued shares be placed under
the control of the directors
• general authority to issue shares for cash
• resolution to approve amendments to the 2006 incentive plans
• resolution to authorise directors to issue and allot shares in terms
of the 2006 incentive plans
• special resolution to authorise directors to repurchase company
shares.
Exxaro and its subsidiaries have passed no other special or
ordinary shareholders’ resolutions of material interest or of a
substantive nature.
SHARE CAPITAL
The total number of shares in issue increased during the year to
358 089 230. The increase can be summarised as follows:
Opening balance
Issued in terms of the Kumba
management share option
scheme due to options
exercised at market prices
ranging from R106,03 to
R140,09
Closing balance
Date of
issue
Number of
shares
356 940 200
4 January 2010
to
17 December
2010
1 149 030
358 089 230
186 EXXARO INTEGRATED ANNUAL REPORT 2010
SHAREHOLDERS
An analysis of shareholders and shareholdings appears on
page 168 of the annual report.
DIRECTORATE AND SHAREHOLDINGS
The names of the directors in office at the date of this report are set
out on page 142.
DIVIDEND PAYMENTS
Dividend number 15
Interim dividend number 15 of 200 cents per share was declared in
South African currency for the period ended 30 June 2010. The
dividend was paid on Monday, 4 October 2010 to shareholders
recorded in the register of the company at close of business on
Friday, 1 October 2010. To comply with the requirements of
Strate, the last day to trade cum dividend was Thursday,
23 September 2010. The shares commenced trading ex dividend
on Monday, 27 September 2010 and the record date was Friday,
1 October 2010.
Dividend number 16
Final dividend number 16 of 300 cents per share was declared in
South African currency for the period ended 31 December 2010.
No Secondary Tax on Companies (STC) was payable on these
dividends after taking into account STC credits on the dividends
received from SIOC.
The dividend payment date is Monday, 11 April 2011 to
shareholders recorded in the books of the company at close of
business on Friday, 8 April 2011. To comply with the requirements
of Strate, the last day to trade cum dividend is Friday, 1 April 2011.
The shares will commence trading ex dividend on Monday,
4 April 2011 and the record date is Friday, 8 April 2011.
INVESTMENTS AND SUBSIDIARIES
The financial
in
subsidiaries of the company is disclosed in annexures 2 and 3 to
the financial statements.
investments and
information on
interests
EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any matter or circumstance arising
after the statement of financial position date up to the date of this
report not dealt with in this report or in the group financial
statements that would significantly affect the operations or the
results of the group.
On 1 January 2011 the Glen Douglas investment was sold to JSE-
listed materials supplier Afrimat Limited. On 31 December 2010,
this investment still constituted a non-current asset classified as
held for sale.
The Fairbreeze project was approved by the board and construction
is expected to start in the second quarter of 2011 subject to normal
regulatory and environmental approvals. A possible reversal or
partial reversal of the previous impairments of the carrying value of
the assets will be considered during 2011.
The following changes occurred to the board in 2010:
• Ms N Langeni was appointed as a non-executive director of the
board on 23 February 2010 as the Basadi Ba Kopane
Investments (Pty) Limited nominated representative.
• The acting chairman, Dr D Konar, was elected as chairman of
the board with effect from 23 February 2010. J van Rooyen was
appointed as Chairman of the Audit, Risk and Compliance
Committee (audit committee) on the same date.
The directors below are required to retire by rotation in terms of
clause 16.1 of the articles of association of the company, and being
eligible for re-election, offer themselves for re-election at the
forthcoming annual general meeting:
• VZ Mntambo
• NL Sowazi
• J van Rooyen
• D Zihlangu
COMPANY SECRETARY
The company secretary is MS Viljoen. The company secretary’s
registered address is:
Roger Dyason Road
Pretoria West
0183
South Africa
PO Box 9229
Pretoria
0001
South Africa
AUDIT COMMITTEE
The audit committee (referred to as the audit, risk and compliance
committee) of Exxaro operates within prescribed terms of reference
incorporating all duties and responsibilities as required by the:
• Corporate Laws Amendment Act
• The JSE Listings Requirements
• King III.
The committee has reviewed the scope as well as the independence
and objectivity of the external auditor and satisfied itself that the
external auditor is independent as defined by the Companies Act,
and the committee has approved the audit fees for the period
ended 31 December 2010. The committee has nominated
PricewaterhouseCoopers (PwC) as external auditor for the 2011
financial year for approval at the annual general meeting on
19 May 2011. Refer to the section on corporate governance
on page 153 for further details on the composition, role, purpose
and principal functions of the audit committee.
At the board meeting on 22 February 2011, Mr J van Rooyen was
re-elected as chairman of the audit, risk and compliance committee
for the following year.
EXXARO INTEGRATED ANNUAL REPORT 2010 187
REPORT OF THE DIRECTORS CONTINUED
The group’s capital base, the borrowing powers of the company
and the group were set at 125% of shareholders’ funds for both
the 2010 and 2009 financial years.
GOING CONCERN
The directors believe the group has adequate financial resources to
continue in operation for the foreseeable future and accordingly the
financial statements have been prepared on a going-concern
basis. The board is not aware of any new material changes that
may adversely impact the group. The board is not aware of any
material non-compliance with statutory or regulatory requirements.
EMPLOYEE INCENTIVE SCHEMES
Details of the group’s employee incentive schemes are set out on
page 164 of this report.
ANNUAL GENERAL MEETING
The tenth annual general meeting of members of Exxaro will be
held at the corporate office, Roger Dyason Road, Pretoria West,
South Africa, at 09:00 on Thursday, 19 May 2011. Refer to
pages 304 to 308 of these annual financial statements for further
details of the ordinary and special business for consideration at
this meeting.
INDEPENDENT AUDITOR
In line with the group’s practice of reviewing its service providers
every five years, Exxaro appointed PricewaterhouseCoopers (PwC)
as its statutory auditor from the 2011 fiscal year to replace Deloitte
& Touche subsequent to its audit of Exxaro’s financial results for the
year ended 31 December 2010.
NON-AUDIT SERVICES
Exxaro has an approved board policy to regulate the use of non-
audit services by our independent auditors. The policy differentiates
between permitted and prohibited non-audit services, and specifies
a monetary threshold by which approvals are considered. During
the year under review, Deloitte & Touche were engaged for tax
advisory and compliance services, accounting opinions and other
advisory services. The fees applicable to these services totalled
R0,8 million.
CHANGE IN ACCOUNTING POLICIES
The accounting policies are consistent with those applied in the
annual financial statements for the year ended 31 December 2009.
BORROWING POWERS
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
GROUP
2010
Rm
21 850
4 360
17 490
2009
Rm
16 136
4 754
11 382
188 EXXARO INTEGRATED ANNUAL REPORT 2010
DIRECTORS’ REMUNERATION
This report on remuneration and related matters covers issues
which are the concern of the board as a whole, in addition to those
which were dealt with by the transformation, remuneration, human
resources and nomination committee (Tremco).
DIRECTORS’ SERVICE CONTRACTS
All executive directors’ normal contracts are subject to six calendar
months’ notice. Non-executive directors are not bound by service
contracts.
REMUNERATION POLICY
Tremco has a clearly defined mandate from the board aimed at:
• ensuring
the company’s chairman, directors and senior
executives are fairly rewarded for their individual contributions to
the company’s overall performance
• ensuring the company’s remuneration strategies and packages,
including incentive schemes, are related to performance, suitably
competitive and give due regard to the interests of the
shareholders and the financial and commercial health of the
company (page 160).
There are no restraints of trade associated with the contracts of
executive directors.
EXXARO INTEGRATED ANNUAL REPORT 2010 189
DIRECTORS’ REMUNERATION CONTINUED
SUMMARY OF REMUNERATION for the year ended 31 December 2010
Executive directors
SA Nkosi
WA de Klerk
Less: Gains on share scheme
Add: Share-based payment expense
Total remuneration paid by Exxaro
Non-executive directors
JJ Geldenhuys
CI Griffith4
U Khumalo4
Dr D Konar (chairman)
N Langeni3
VZ Mntambo
RP Mohring
NL Sowazi4
J van Rooyen
D Zihlangu
Total remuneration paid by Exxaro
Basic salary
R
Fees for services
R
5 233 180
2 879 349
8 112 529
8 112 529
411 680
236 487
200 120
603 200
191 622
268 460
509 330
297 770
371 031
268 460
3 358 160
1 All incentive schemes are performance related and were approved by the board. The three-tier short-term incentive scheme applies to all employees throughout
the group.
2 Include travel allowances.
3 Appointed on 23 February 2010.
4 Fees paid to the respective employer and not the individual.
Retirement amounts paid or received by executive directors are paid or received under defined contribution retirement funds.
190 EXXARO INTEGRATED ANNUAL REPORT 2010
Performance
bonuses1
R
Benefits and
allowances2
R
Retirement fund
contributions
R
3 150 335
1 633 632
4 783 967
97 403
225 137
322 540
458 341
274 397
732 738
Gains on
management
share option
scheme
R
4 457 001
2 231 251
6 688 252
Other
R
6 005
3 488
9 493
4 783 767
322 540
732 738
6 688 252
9 493
34 003
6 569
26 520
3 179
70 271
Total
R
13 402 265
7 247 254
20 649 519
(6 688 252)
9 890 618
23 851 885
445 683
236 487
200 120
603 200
198 191
268 460
535 850
297 770
371 031
271 639
3 428 431
EXXARO INTEGRATED ANNUAL REPORT 2010 191
DIRECTORS’ REMUNERATION CONTINUED
SUMMARY OF REMUNERATION for the year ended 31 December 2009
Executive directors
SA Nkosi
WA de Klerk3
DJ van Staden4
Less: Gains on share scheme
Add: Share-based payment expense
Total remuneration paid by Exxaro
Non-executive directors
PM Baum5, 6
JJ Geldenhuys
CI Griffith5, 7
U Khumalo5
Dr D Konar (chairman)
VZ Mntambo
RP Mohring
SEA Mngomezulu8
NL Sowazi5
J van Rooyen
D Zihlangu
Total remuneration paid by Exxaro
Basic salary
R
Fees for services
R
4 051 228
2 232 764
489 511
6 773 503
6 773 503
123 720
379 440
76 850
184 440
570 000
247 440
469 440
184 440
240 737
274 440
247 440
2 998 387
1 All incentive schemes are performance related and were approved by the board. The three-tier short-term incentive scheme applies to all employees throughout
the group.
2 Include travel allowances.
3 Appointed on 1 March 2009
4 Retired on 28 February 2009
5 Fees paid to the respective employer and not the individual
6 Resigned on 15 July 2009
7 Appointed on 16 July 2009
8 Resigned on 21 December 2009
Retirement amounts paid or received by executive directors are paid or received under defined contribution retirement funds.
192 EXXARO INTEGRATED ANNUAL REPORT 2010
Performance
bonuses1
R
Benefits and
allowances2
R
Retirement fund
contributions
R
2 373 637
1 708 603
308 427
4 390 667
135 713
215 838
426 980
778 531
368 187
217 551
51 117
636 855
Gains on
management
share option
scheme
R
1 644 031
1 644 031
Other
R
4 728
2 843
529
8 100
Total
R
6 933 493
6 021 630
1 276 564
14 231 687
(1 644 031)
3 288 279
4 390 667
778 531
636 855
1 644 031
8 100
15 875 935
35 241
19 693
11 696
66 630
123 720
414 681
76 850
184 440
570 000
247 440
489 133
184 440
240 737
274 440
259 136
3 065 017
EXXARO INTEGRATED ANNUAL REPORT 2010 193
DIRECTORS’ REMUNERATION CONTINUED
Directors’ beneficial interest in Exxaro shares at 31 December 2010
Direct
Indirect
1 462
168
9 698 806
5 529 881
3 038 387
2 818 552
54 950
Director
SA Nkosi
WA de Klerk
JJ Geldenhuys
CI Griffith
U Khumalo
Dr D Konar (chairman)
N Langeni
VZ Mntambo
RP Mohring
NL Sowazi
J van Rooyen
D Zihlangu
Directors’ non-beneficial interest in Exxaro shares at 31 December 2010
Director
SA Nkosi
WA de Klerk
JJ Geldenhuys
CI Griffith
U Khumalo
Dr D Konar (chairman)
N Langeni
VZ Mntambo
RP Mohring
NL Sowazi
J van Rooyen
D Zihlangu
194 EXXARO INTEGRATED ANNUAL REPORT 2010
Directors’ beneficial interest in Exxaro shares at 31 December 2009
Direct
Indirect
Director
SA Nkosi
WA de Klerk
JJ Geldenhuys
CI Griffith
U Khumalo
Dr D Konar (chairman)
VZ Mntambo
RP Mohring
NL Sowazi
J van Rooyen
D Zihlangu
Directors’ non-beneficial interest in Exxaro shares at 31 December 2009
Director
SA Nkosi
WA de Klerk
JJ Geldenhuys
CI Griffith
U Khumalo
Dr D Konar (chairman)
VZ Mntambo
RP Mohring
NL Sowazi
J van Rooyen
D Zihlangu
1 462
168
8 016 068
5 529 881
2 181 590
2 818 552
54 950
There has been no change to the interest of directors in share capital since the year-end.
On 31 December 2010 Mr SA Nkosi held 2,7% (2009: 2,3%), Mr VZ Mntambo held 1,5% (2009: 1,6%) and Mr NL Sowazi held 0,8% (2009:
0,6%) directly or indirectly in the share capital of the company.
EXXARO INTEGRATED ANNUAL REPORT 2010 195
DIRECTORS’ REMUNERATION CONTINUED
Directors’ share options and restricted share awards
The following options and rights in shares in the company were outstanding in favour of directors of the company under the company’s share
option schemes:
Management share option scheme for the year ended 31 December 2010
Executive director
WA de Klerk
Options held at
31 December 2010
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2010
R
3 230
29 130
8 750
41 110
13,62
12,90
19,62
16/03/2011
16/03/2011
22/04/2012
440 055
3 968 671
1 192 100
5 600 826
1 Based on a share price of R136,24 which prevailed on 31 December 2010.
Management share option scheme for the year ended 31 December 2009
Executive director
WA de Klerk
Options held at
31 December 2009
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2009
R
3 230
29 130
8 750
13,62
12,90
19,62
16/03/2011
16/03/2011
22/04/2012
337 535
3 044 085
914 375
Total
41 110
4 295 995
1 Based on a share price of R104,50 which prevailed on 31 December 2009.
196 EXXARO INTEGRATED ANNUAL REPORT 2010
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
Pre-tax gain if
exercisable at
31 December 20101
R
396 063
3 592 894
1 020 425
5 009 382
Pre-tax gain if
exercisable at
31 December 20091
R
293 542
2 668 308
742 700
2 140
4 000
2 840
1 710
9 790
11,48
11,48
10,76
10,76
10,76
3 704 550
20 480
92,11
91,20
91,51
91,30
91,00
172 548
318 880
229 330
137 723
785 550
1 644 031
26/10/2009
26/10/2009
26/10/2009
26/10/2009
26/10/2009
EXXARO INTEGRATED ANNUAL REPORT 2010 197
DIRECTORS’ REMUNERATION CONTINUED
Management share appreciation right scheme for the year ended 31 December 2010
Executive director
SA Nkosi
WA de Klerk
Rights held at
31 December 2010
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2010
R
38 680
41 780
67 430
45 474
193 364
19 330
16 410
37 760
21 478
94 978
60,60
112,35
67,07
126,77
60,60
112,35
67,07
126,77
01/03/2014
01/04/2015
01/04/2016
01/04/2017
01/03/2014
01/04/2015
01/04/2016
01/04/2017
5 269 763
5 692 107
9 186 663
6 195 378
26 343 911
2 633 519
2 235 698
5 144 422
2 926 163
12 939 802
1 Based on a share price of R136,24 which prevailed on 31 December 2010
Management share appreciation right scheme for the year ended 31 December 2009
Executive director
SA Nkosi
WA de Klerk
Rights held at
31 December 2009
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 20091
R
38 680
41 780
67 430
147 890
19 330
16 410
37 760
73 500
60,60
112,35
67,07
60,60
112,35
67,07
01/03/2014
01/04/2015
01/04/2016
01/03/2014
01/04/2015
01/04/2016
4 042 060
7 046 435
11 088 495
2 019 985
3 945 920
5 965 905
1 Based on a share price of R104,50 which prevailed on 31 December 2009.
It is assumed that directors will not exercise rights which are out of the money.
198 EXXARO INTEGRATED ANNUAL REPORT 2010
Pre-tax gain if
exercisable at
31 December 20101
R
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
2 925 755
998 124
4 664 133
430 639
9 018 651
1 462 121
392 035
2 611 859
203 397
4 669 412
Pre-tax gain if
exercisable at
31 December 20091
R
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
1 698 052
2 523 905
4 221 957
848 587
1 413 357
2 261 944
EXXARO INTEGRATED ANNUAL REPORT 2010 199
DIRECTORS’ REMUNERATION CONTINUED
Management share scheme – long-term incentive plan for the year ended 31 December 2010
Rights held at
31 December 2010
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2010
R
Executive director
SA Nkosi
WA de Klerk
41 782
67 438
47 412
156 632
16 418
37 764
21 478
75 660
01/04/2011
01/04/2012
01/04/2013
5 692 380
9 187 753
6 459 411
21 339 544
01/04/2011
01/04/2012
01/04/2013
2 236 788
5 144 967
2 926 163
10 307 918
1 Based on a share price of R136,24 which prevailed on 31 December 2010.
Management share scheme – long-term incentive plan for the year ended 31 December 2009
Executive director
SA Nkosi
WA de Klerk
Rights held at
31 December 2009
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2009
R
38 682
41 782
67 438
147 902
19 334
16 418
37 764
73 516
01/03/2010
01/04/2011
01/04/2012
01/03/2010
01/04/2011
01/04/2012
4 042 269
4 366 219
7 047 271
15 455 759
2 020 403
1 715 681
3 946 338
7 682 422
1 Based on a share price of R104,50 which prevailed on 31 December 2009.
200 EXXARO INTEGRATED ANNUAL REPORT 2010
Pre-tax gain if
exercisable at
31 December 20101
R
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
15 434
1 821
649
20 778
38 682
13 452
3 421
1 900
561
5 692 380
9 187 753
6 459 411
21 339 544
2 236 788
5 144 967
2 926 163
116,00
116,01
116,05
116,25
1 790 344
211 254
75 316
2 415 443
05/03/2010
05/03/2010
05/03/2010
05/03/2010
116,25
116,26
116,28
116,31
4 492 357
1 563 795
397 725
220 932
65 250
05/03/2010
05/03/2010
05/03/2010
05/03/2010
10 307 918
19 334
2 247 702
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
Pre-tax gain if
exercisable at
31 December 20091
R
4 042 269
4 366 219
7 047 271
15 455 759
2 020 403
1 715 681
3 946 338
7 682 422
EXXARO INTEGRATED ANNUAL REPORT 2010 201
DIRECTORS’ REMUNERATION CONTINUED
Management share scheme – deferred bonus plan for the year ended 31 December 2010
Rights held at
31 December 2010
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2010
R
Executive director
SA Nkosi
WA de Klerk
718
2 573
213
2 315
6 620
466
1 433
3 527
420
18 285
542
1 398
182
1 644
3 000
326
1 003
2 083
262
10 440
28/02/2011
28/02/2011
01/09/2011
02/03/2012
31/03/2012
31/08/2012
01/03/2013
31/03/2013
31/08/2013
28/02/2011
28/02/2011
01/09/2011
02/03/2012
31/03/2012
31/08/2012
01/03/2013
31/03/2013
31/08/2013
97 820
350 546
29 019
315 396
901 909
63 488
195 232
480 518
57 221
2 491 149
73 842
190 464
24 796
223 979
408 720
44 414
136 649
283 788
35 695
1 422 347
1 Based on a share price of R136,24 which prevailed on 31 December 2010.
202 EXXARO INTEGRATED ANNUAL REPORT 2010
Pre-tax gain if
exercisable at
31 December 20101
R
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
361
112,68
40 677
08/09/2010
97 820
350 546
29 019
315 396
901 909
63 488
195 232
480 518
57 221
2 491 149
73 842
190 464
24 796
223 979
408 720
44 414
136 649
283 788
35 695
361
212
112,68
40 677
23 888
08/09/2010
1 422 347
212
23 888
EXXARO INTEGRATED ANNUAL REPORT 2010 203
DIRECTORS’ REMUNERATION CONTINUED
Management share scheme – deferred bonus plan for the year ended 31 December 2009
Rights held at
31 December 2009
Exercise price
R
Exercisable period
Proceeds if
exercisable at
31 December 2009
R
Executive director
SA Nkosi
WA de Klerk
361
718
2 573
213
2 315
6 620
466
13 266
212
542
1 398
182
1 644
3 000
326
7 304
01/10/2010
01/04/2011
01/04/2011
01/10/2011
01/04/2012
04/05/2012
01/10/2012
01/10/2010
01/04/2011
01/04/2011
01/10/2011
01/04/2012
04/05/2012
01/10/2012
37 725
75 031
268 879
22 259
241 918
691 790
48 697
1 386 299
22 154
56 639
146 091
19 019
171 798
313 500
34 067
763 268
1 Based on a share price of R104,50 which prevailed on 31 December 2009.
204 EXXARO INTEGRATED ANNUAL REPORT 2010
Pre-tax gain if
exercisable at
31 December 20091
R
Options exercised
during the year
Exercise price
R
Sale price/
market price
R
Pre-tax gain
R
Date exercised
37 725
75 031
268 879
22 259
241 918
691 790
48 697
1 386 299
22 154
56 639
146 091
19 019
171 798
313 500
34 067
763 268
EXXARO INTEGRATED ANNUAL REPORT 2010 205
INCOME STATEMENTS AND STATEMENTS
OF COMPREHENSIVE INCOME
for the year ended 31 December 2010
Revenue
Operating expenses
NET OPERATING PROFIT/(LOSS)
Interest income
Interest expense
Income from investments
Income from equity-accounted investments
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE YEAR
Profit attributable to:
Owners of the parent
Non-controlling interests
Notes
2
3
5
5
6
14
7
STATEMENTS OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive income:
Exchange differences on translating foreign operations
Cash flow hedges
Share of comprehensive income of associates
Income tax relating to components of other comprehensive
income
Net gain/(loss) recognised in other comprehensive income
26
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
ATTRIBUTABLE EARNINGS PER SHARE (CENTS)
8
– basic
– diluted
GROUP
COMPANY
2010
Rm
17 155
(14 519)
2 636
135
(590)
2
3 717
5 900
(665)
5 235
5 208
27
5 235
2009
Rm
15 009
(14 705)
304
145
(560)
2
1 898
1 789
(766)
1 023
2010
Rm
1 048
(1 295)
(247)
64
(295)
3 205
2 727
(36)
2 691
2009
Rm
1 009
(4 320)
(3 311)
51
(390)
6 731
3 081
(2)
3 079
1 023
2 691
3 079
1 023
2 691
3 079
5 235
1 023
2 691
3 079
2
3
2
2 693
3
3 082
2 693
3 082
2 693
3 082
(9)
227
40
(115)
143
5 378
5 408
(30)
5 378
1 501
1 443
(35)
(474)
(34)
142
(401)
622
759
(137)
622
297
286
206 EXXARO INTEGRATED ANNUAL REPORT 2010
STATEMENTS OF FINANCIAL POSITION
at 31 December 2010
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates
and joint ventures
Investments in subsidiaries
Deferred tax
Financial assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
TOTAL ASSETS
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium
Other components of equity
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Financial liabilities
Deferred tax
Total non-current liabilities
Current liabilities
Trade and other payables
Interest-bearing borrowings
Current tax payable
Current provisions
Total current liabilities
Non-current liabilities classified as held for sale
TOTAL EQUITY AND LIABILITIES
NET DEBT
GROUP
2010
Rm
COMPANY
2009
Rm
2010
Rm
2009
Rm
Notes
11
12
13
14
15
23
16
17
18
19
20
21
22
23
24
21
22
19
13 305
11 869
266
240
46
75
41
87
3 880
1 966
1
10
6 017
6 668
726
1 375
629
1 217
85
12
87
11
19 407
15 809
6 381
7 016
3 120
3 752
105
2 140
9 117
85
3 133
3 121
57
1 023
7 334
86
8 054
7 090
1 229
9 283
10
14
343
7 447
18
28 609
23 229
15 674
14 481
2 170
2 321
12 946
17 437
(23)
2 141
2 046
8 721
12 908
1
2 347
1 143
8 656
12 146
2 318
1 041
7 038
10 397
17 414
12 909
12 146
10 397
3 644
2 193
1 353
7 190
3 057
716
147
33
3 953
52
28 609
2 220
2 718
27
3 335
28
4 347
1 853
75
995
7 270
2 745
3 363
2 510
407
57
27
3 001
49
23 229
3 731
366
417
359
362
783
721
15 674
1 906
14 481
3 354
EXXARO INTEGRATED ANNUAL REPORT 2010 207
STATEMENTS OF CASH FLOWS
for the year ended 31 December 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated by/(utilised in) operations
Net financing costs
Tax paid
Dividends paid
CASH FLOWS FROM INVESTING ACTIVITIES
Investments to maintain operations
Investments to expand operations
Investment in intangible assets
Proceeds from disposal of property, plant and equipment
(Increase)/decrease in investments in other non-current assets
Income from equity accounted investments
Income from investments
Foreign currency translations
Notes
25.1
25.2
25.3
25.4
25.5
25.6
25.7
25.8
25.9
25.10
NET CASH INFLOW/(OUTFLOW)
CASH FLOWS FROM FINANCING ACTIVITIES
Non-current interest-bearing borrowings raised
Non-current interest-bearing borrowings repaid
Current interest-bearing borrowings raised/(repaid)
Proceeds from issuance of share capital
Increase in loans from non-controlling interests
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
CALCULATION OF MOVEMENT IN NET DEBT:
GROUP
2010
Rm
4 106
(256)
(430)
(1 056)
2 364
(1 155)
(1 522)
60
(149)
1 815
2
(29)
(978)
1 386
345
(960)
311
29
6
(269)
1 117
1 023
2 140
2009
Rm
2 117
(381)
(892)
(1 050)
(206)
(992)
(990)
(19)
11
(1 090)
1 752
2
(88)
(1 414)
(1 620)
1 572
(658)
(93)
43
10
874
(746)
1 769
1 023
COMPANY
2010
Rm
(24)
(231)
2009
Rm
(788)
(337)
(1 073)
(1 328)
(1 066)
(2 191)
(68)
1
606
(88)
(19)
(795)
2 205
2 131
2
2 746
1 418
(526)
(35)
29
1
1 230
(961)
1 301
(674)
157
42
(532)
826
886
343
1 229
(135)
478
343
Net cash inflow/(outflow) as above
1 386
(1 620)
Add:
– proceeds from issuance of share capital
– loans from non-controlling interests
– non-cash flow movements in net debt applicable to currency
translation differences of transactions denominated in foreign
currency
– non-cash flow movements in net debt applicable to currency
translation differences of net debt items of foreign entities
DECREASE/(INCREASE) IN NET DEBT
29
6
43
10
187
340
(97)
1 511
(123)
(1 350)
208 EXXARO INTEGRATED ANNUAL REPORT 2010
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2010
Other components of equity
Foreign
currency
trans-
lations
Rm
Financial
instru-
ments
revalu-
ation
Rm
Share
capital
Rm
Share
premium
Rm
Attribut-
able to
owners
of the
parent
Rm
Non-
control-
ling
interests
Rm
Total
equity
Rm
Equity-
settled
Rm
Retained
income
Rm
4
2 094
964
(162)
43
145
1 081
8 708
12 996
128
13 124
(142)
1 063
160
(137)
759
43
160
622
43
160
(1 050)
(1 050)
(1 050)
10
10
4
2 137
802
(86)
29
3
1 241
8 721
12 908
1
12 909
213
5 281
5 408
(30)
5 378
148
29
148
29
148
(1 056)
(1 056)
(1 056)
6
6
4
2 166
716
216
1 389
12 946
17 437
(23)
17 414
OPENING BALANCE AT
1 JANUARY 2009
Total comprehensive income
Issue of share capital1
Share-based payment movements
(restated)
Non-controlling interests additional
contributions
Dividends paid2
BALANCE AT
31 DECEMBER 2009
Total comprehensive income
Issue of share capital1
Share-based payment movement
Non-controlling interests additional
contributions
Dividends paid2
BALANCE AT
31 DECEMBER 2010
Dividend paid per share (cents) in
respect of the 2009 financial year
Dividend paid per share (cents) in
respect of the 2010 interim period
Final dividend payable per share
(cents) in respect of 2010 financial
year
200
200
300
1 Issued to the Kumba Resources Management Share Trust due to options exercised.
2 The STC on these dividends amount to Rnil after taking into account STC credits.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign entities that are not integral to the operations of the group.
Financial instruments revaluation reserve
The financial instruments revaluation reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments where the hedged transaction has not yet occurred.
Equity-settled reserve
The equity-settled reserve represents the fair value of services received and settled by equity instruments granted.
EXXARO INTEGRATED ANNUAL REPORT 2010 209
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2010
Other components of equity
Foreign
currency
trans-
lations
Rm
Financial
instru-
ments
revalu-
ation
Rm
Share
capital
Rm
Share
premium
Rm
OPENING BALANCE AT 1 JANUARY 2009
4
2 272
Total comprehensive income
Share-based payment movements (restated)
Cash dividends paid1
Issue of share capital2
BALANCE AT 31 DECEMBER 2009
Total comprehensive income
Share-based payment movements
Cash dividends paid1
Issue of share capital2
42
4
2 314
29
(3)
3
2
Equity-
settled
Rm
Retained
income
Rm
Total
equity
Rm
949
5 025
8 247
3 079
3 082
92
92
(1 066)
(1 066)
42
1 041
7 038
10 397
2 691
2 693
100
100
(1 073)
(1 073)
29
BALANCE AT 31 DECEMBER 2010
4
2 343
2
1 141
8 656
12 146
Dividend paid per share (cents) in respect of the
2009 financial year
Dividend paid per share (cents) in respect of the
2010 interim period
Final dividend payable per share (cents) in respect of
2010 financial year
200
200
300
1 The STC on these dividends amount to Rnil after taking into account STC credits.
2 Issued to the Kumba Resources Management Share Trust due to options exercised.
210 EXXARO INTEGRATED ANNUAL REPORT 2010
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS
for the year ended 31 December 2010
1. ACCOUNTING POLICIES
Principal accounting policies
The principal accounting policies of the group and the
disclosures made in the annual financial statements comply
with
(IFRS)
International Financial Reporting Standards
effective for the group’s financial year, as well as the AC 500
statements as issued by the Accounting Practices Board or
its successor, schedule 4 Part IV of the South African
Companies Act, No 61 of 1973, as amended, and the Listings
Requirements of the JSE Limited.
The financial statements are prepared on the historical cost
basis, except for the revaluation to fair value of financial
instruments and biological assets. Where comparative
financial information is reported, the accounting policies have
been applied consistently for all periods.
Adoption of new and revised standards and interpretations
In May 2010, the International Accounting Standards Board
(IASB) issued amendments to the standards as part of the
annual improvements process. The amendments result from
proposals that were contained in the exposure draft of
proposed amendments to IFRS published in August 2009
and in the exposure draft Rate-regulated Activities published
in July 2009. The annual improvements process provides a
vehicle for making non-urgent but necessary amendments to
IFRS. Some amendments involve consequential amendments
to other IFRS.
The topics addressed by these amendments are as follows:
• IFRS 1 First-time Adoption of International Financial
Reporting Standards
• IFRS 3 Business Combinations
• IFRS 7 Financial Instruments: Disclosures
• IAS 1 Presentation of Financial Statements
• IAS 27 Consolidated and Separate Financial Statements
• IAS 34 Interim Financial Reporting
• IFRIC 13 Customer Loyalty Programmes
The effective date of each amendment is included in the list of
the new and revised standards and interpretation list below.
The following Standards and Interpretations have been
applied, where relevant, to the financial statements for the
period ended 31 December 2010:
• Amended IFRS 1 First-time Adoption of International
Financial Reporting, effective for annual periods beginning
on or after 1 July 2009.
• Amended IFRS 2 Share-based Payment resulting from
April 2009 Annual Improvements to IFRS, effective for
annual periods beginning on or after 1 July 2009.
• Amended IFRS 2 Share-based Payment, effective for
annual periods on or after 1 January 2010.
• Amended IAS 17 Leases, effective for annual periods
beginning on or after 1 January 2010.
• Revised IAS 27 Consolidated and Separate Financial
Statements, effective for annual periods beginning on or
after 1 July 2009.
• Revised IAS 28 Investments in Associates, effective for
annual periods beginning on or after 1 July 2009.
• Revised IAS 31 Interests in Joint Ventures, effective for
annual periods beginning on or after 1 July 2009.
• Amended IAS 32 Financial Instruments: Presentation,
for annual periods beginning on or after
effective
1 February 2010.
• Amended IAS 36 Impairment of Assets, effective for annual
periods beginning on or after 1 January 2010.
• Amended IAS 38 Intangible Assets, effective for annual
periods beginning on or after 1 January 2010.
• Amended IAS 39 Financial Instruments: Recognition and
Measurement, effective from 1 July 2009.
• Amended IAS 39 Financial Instruments: Recognition and
Measurement, effective for annual periods ending on or
after 30 June 2009.
• Amended IAS 39 Financial Instruments: Recognition and
Measurement, amendments resulting from April 2009
Annual Improvements to IFRS, effective for annual periods
beginning on or after 1 January 2010.
• Amended IFRIC 9 Reassessment of Embedded Derivatives,
for annual periods beginning on or after
effective
1 July 2009.
• IFRIC 17 Distributions of Non-cash Assets to Owners,
for annual periods beginning on or after
effective
1 July 2009.
• IFRIC 18 Transfers of Assets from Customers, effective
from 1 July 2009.
The adoption of the amended and revised standards did not
have a significant impact on the measurement or disclosure
and presentation of items included in the financial statements.
No standards were early adopted during 2010 or 2009.
At the date of authorisation of these financial statements, the
following Standards and Interpretations were in issue but not
yet effective:
• Amended IFRS 7 Financial Instruments: Disclosures,
for annual periods beginning on or after
effective
1 January 2011.
• IFRS 9 Financial
Instruments – Classification and
Measurement, effective for annual periods beginning on or
after 1 January 2013.
• Amended IAS 24 Related Party Disclosure, effective date
for annual periods 1 January 2011.
• Amended IAS 34 Interim Financial Reporting, effective for
annual periods beginning on or after 1 January 2011.
• IFRIC 13 Customer Loyalty Programmes, effective for
• Revised IFRS 3 Business Combinations, effective for annual
annual periods beginning on or after 1 January 2011.
periods beginning on or after 1 July 2009.
• Amended IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, effective for annual periods
beginning on or after 1 July 2009.
• Amended IFRS 8 Operating Segments, effective for annual
periods beginning on or after 1 January 2010.
• Amended IAS 1 Presentation of Financial Statements,
effective for annual periods beginning on or after 1 January
2010.
• Amended IAS 7 Statement of Cash Flows, effective for
annual periods beginning on or after 1 January 2010.
• IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their interaction,
effective
for annual periods beginning on or after
1 January 2011.
• IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments, effective for annual periods on or after
1 January 2011.
The directors believe that none of the other new or revised
standards and interpretations will have an effect other than
enhanced disclosure.
EXXARO INTEGRATED ANNUAL REPORT 2010 211
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
1. ACCOUNTING POLICIES (continued)
Basis of consolidation
The group annual financial statements present
the
consolidated financial position and changes therein, operating
results and cash flow information of the company and its
subsidiaries. Subsidiaries are those entities in which the group
has an interest of more than half of the voting rights or the
power to exercise control.
The results of subsidiaries are included for the duration of the
period in which the group exercises control over the subsidiary.
All intercompany transactions and resultant profits and losses
between group companies are eliminated on consolidation.
Where necessary, accounting policies for subsidiaries are
changed to ensure consistency with the policies adopted by
the group. If it is not practical to change the policies, the
appropriate adjustments are made on consolidation to ensure
consistency within the group.
The results of special purpose entities that, in substance, are
controlled by the group, are consolidated.
The company carries its investments in subsidiaries at cost
less accumulated impairment losses.
Goodwill
Goodwill is reflected at cost less accumulated impairment
losses, if any. It represents the excess of the cost of a business
combination over the fair value of the group’s share of the
identifiable net assets and contingent liabilities of that entity at
the date of acquisition. Goodwill is assessed for impairment
on an annual basis.
The gains or losses on disposal of an entity includes the
balance of goodwill relating to the entity.
Negative goodwill arising on a business combination
represents the excess of the fair value of the net identifiable
assets and contingent liabilities of the entity acquired over the
cost of acquisition, and is recognised immediately in profit or
loss.
Investments in associates and joint ventures
The company carries its investments in associates and joint
ventures at cost less accumulated impairment losses.
An associate is an entity over which the group has the ability
to exercise significant influence, but which it does not control.
A joint venture is an entity jointly controlled by the group and
one or more other venturers in terms of a contractual
arrangement requiring unanimous consent for strategic
financial and operating decisions. It may involve a corporation,
partnership or another entity in which the group has an
interest.
Investments in associates are accounted for in the group
financial statements using the equity method for the duration
of the period in which the group has the ability to exercise
significant influence. Equity accounted income represents the
group’s proportionate share of profits of these entities and the
share of tax thereon. The retained earnings of an associate,
net of any dividends, are classified as distributable reserves.
The group’s interest in associates is carried in the statement of
financial position at an amount that reflects its share of the net
assets and the unimpaired portion of goodwill on acquisition.
Where the group’s share of losses of an associate exceeds
the carrying amount of the associate, the investment in the
associate is carried at nil value. Additional losses are only
recognised to the extent that the group has incurred further
funding obligations or provided guarantees or sureties in
respect of the associate.
Investments in joint ventures are accounted for in the group
financial statements using the proportionate consolidation
method.
Where necessary, the results of associates and joint ventures
are restated to ensure consistency with group policies.
Unrealised profits and losses are eliminated.
Property, plant and equipment
Land and extensions under construction are stated at cost
and are not depreciated. Buildings, including certain non-
mining residential buildings and all other items of property,
plant and equipment are reflected at cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is charged on a systematic basis over the
estimated useful lives of the assets after taking into account
the estimated residual value of the assets. Useful life is either
the period of time over which the asset is expected to be used
or the number of production or similar units expected to be
obtained from the use of the asset.
Moulds and refractory furnace relines are depreciated based
on the usage thereof.
Items of property, plant and equipment are capitalised in
components where components have a different useful life to
the main item of property, plant and equipment to which the
component can be logically assigned.
The estimated useful lives of assets and their residual values,
are reassessed periodically with any changes in such
accounting estimates being adjusted in the financial year of
reassessment and applied prospectively.
212 EXXARO INTEGRATED ANNUAL REPORT 2010
1. ACCOUNTING POLICIES (continued)
Property, plant and equipment (continued)
The estimated useful lives of items of property, plant and equipment are:
2010
Buildings and infrastructure (including residential buildings)
Mineral properties
Fixed plant and equipment
Mobile equipment, built-in process computers, underground mining
equipment and reconditionable spares
13 000 – 50 000 hours
or 1 – 17 years
Coal
Mineral sands
1 – 25 years
1 – 25 years
1 – 25 years
1 – 10 years
1 – 20 years
10 years
1 – 25 years
3 – 40 years
3 – 29 years
1 – 30 years
3 – 25 years
3 – 10 years
10 – 20 years
4 – 6 years
3 – 29 years
Loose tools and computer equipment
Development costs
Refractory relines
Site preparation, mining development and exploration
Buildings and infrastructure (including residential
buildings)
Mineral properties
Fixed plant and equipment
Mobile equipment, built-in process computers,
underground mining equipment and reconditionable
spares
Loose tools and computer equipment
Development costs
Refractory relines
2009
Buildings and infrastructure (including residential buildings)
Mineral properties
Fixed plant and equipment
Loose tools and computer equipment
Development costs
Refractory relines
Site preparation, mining development and exploration
Buildings and infrastructure
(including residential buildings)
Mineral properties
Fixed plant and equipment
Mobile equipment, built-in process computers,
underground mining equipment and reconditionable
spares
Loose tools and computer equipment
Development costs
Refractory relines
Base metals
Industrial minerals
Other
2 years – indefinite
10 – 25 years
20 – 25 years
n/a
n/a
2 years – 50 years
5 – 25 years
n/a
5 years
2 – 15 years
2 – 8 years
5 – 15 years
5 years
2 – 5 years
3 – 5 years
n/a
n/a
n/a
n/a
Coal
Mineral sands
n/a
n/a
n/a
3 – 40 years
3 – 29 years
1 – 30 years
3 – 25 years
3 – 15 years
10 – 20 years
4 – 6 years
3 – 29 years
2 – 25 years
2 – 25 years
2 – 25 years
1 – 5 years
8 – 20 years
n/a
0 – 25 years
Base metals
Industrial minerals
Other
2 years – indefinite
10 – 25 years
20 – 25 years
n/a
n/a
n/a
2 years – 50 years
5 – 25 years
5 – 10 years
2 – 15 years
2 – 8 years
n/a
n/a
5 – 15 years
5 years
n/a
n/a
2 – 5 years
3 – 5 years
n/a
n/a
6 years
Mobile equipment, built-in process computers, underground mining
equipment and reconditionable spares
13 000 – 40 000 hours
or 1 – 14 years
Site preparation, mining development and exploration
7 – 25 years
20 years
Site preparation, mining development and exploration
7 – 25 years
20 years
EXXARO INTEGRATED ANNUAL REPORT 2010 213
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
1. ACCOUNTING POLICIES (continued)
Property, plant and equipment (continued)
Maintenance and repairs which neither materially add to the
value of assets nor appreciably prolong their useful lives are
taken to profit or loss.
Direct attributable expenses relating to mining and other
major capital projects, site preparations and exploration are
capitalised until the asset is brought to a working condition for
its intended use. These costs include dismantling and
site restoration costs to the extent that these are recognised
as a provision.
Financing costs directly associated with the construction or
acquisition of qualifying assets are capitalised at interest rates
relating to loans specifically raised for that purpose, or at the
average borrowing rate where the general pool of group
borrowings was utilised. Capitalisation of borrowing costs
ceases when the asset is substantially complete.
Directly attributable costs associated with the acquisition,
installation of certain software are
development and
capitalised. Such assets are depreciated using
the
amortisation methods and periods applicable to computer
equipment.
Gains and losses on the disposal of property, plant and
equipment are taken to profit or loss.
Leased assets
Leases involving plant and equipment whereby the lessor
provides finance to the group with the asset as security and
where the group assumes substantially all the benefits and
risks of ownership, are classified as finance leases. Assets
acquired in terms of finance leases are capitalised at the lower
of fair value and the present value of the minimum lease
payments at inception of the lease and depreciated over the
useful life of the asset. The capital element of future obligations
under the leases is included as a liability in the statement of
financial position. Each lease payment is allocated between
the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The interest element
of the finance charge is charged against income over the
lease period using the effective interest rate method.
For a sale and leaseback transaction that results in a finance
lease, any excess of sales proceeds over the carrying amount
is deferred and recognised on the straight-line basis over the
period of the lease.
Leases of assets to the group under which all the risks and
benefits of ownership are effectively retained by the lessor, are
classified as operating
leases. Payments made under
operating leases are charged against income on the straight-
line basis over the period of the lease.
Arrangements that contain the right to use an asset are
evaluated for recognition, classification as a finance or
operating lease, measured, and accounted for accordingly.
Biological assets
Biological assets are measured on initial recognition and at
each financial year-end at their fair value less estimated point-
of-sale costs and any change in value is included in the net
profit or loss for the period in which it arises.
Plantations are measured at their fair value less estimated
point-of-sale costs. The fair value of the plantations is
214 EXXARO INTEGRATED ANNUAL REPORT 2010
determined by an independent appraiser, based on the
Faustman Formula as applied within the forestry industry.
Livestock are measured at fair value less estimated point-of-
sale costs, fair value being determined by the age and size of
the animals and the market price. Market price is determined
on the basis that the animal is sold to be slaughtered.
Livestock held for sale is classified as consumable biological
assets (inventories). Game is measured at fair value less
estimated point-of-sale costs, fair value being determined as
the market price. Market price is determined with reference to
the most recent live auction selling prices. Game held for sale
is classified as consumable biological assets (inventories).
Intangible assets
An intangible asset is recognised at cost if it is probable that
future economic benefits will flow to the enterprise and the
cost can be reliably measured. Amortisation is charged on a
systematic basis over the estimated useful lives of the
intangible assets.
Subsequent expenditure on capitalised intangible assets is
capitalised only if it increases the future benefits embodied in
the specific asset to which it relates.
Intangible assets with finite useful lives are amortised on the
straight-line basis over their estimated useful lives. The
amortisation methods and estimated remaining useful lives
are reviewed at least annually. The estimated maximum useful
lives of intangible assets in respect of patents, licences and
franchises are 25 years.
The carrying amounts are reviewed at each financial year-end
to determine whether there is any indication of impairment.
Research, development and exploration costs
Research, development and exploration costs are charged
against income until they result in projects that are evaluated
as being technically or commercially feasible, the group has
sufficient resources to complete development and can
demonstrate how the asset will generate future economic
benefits, in which event these costs are capitalised and
amortised on the straight-line basis over the estimated useful
life of the project or asset. The carrying amounts are reviewed
at each financial year-end to determine whether there is any
indication of impairment.
Impairment of assets
The carrying amounts of assets are reviewed at each financial
year-end to determine whether there is any indication of
impairment. If any such indication exists, the recoverable
amount is estimated as the higher of the net selling price and
the value in use.
In assessing value in use, the expected future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset. An impairment loss
is recognised whenever the carrying amount exceeds the
recoverable amount.
For an asset that does not generate cash inflows largely
independent of those from other assets, the recoverable
amount is determined for the cash-generating unit to which
the asset belongs. An impairment loss is recognised whenever
the carrying amount of the cash-generating unit exceeds its
recoverable amount.
1. ACCOUNTING POLICIES (continued)
Impairment of assets (continued)
A previously recognised impairment loss is reversed if there
has been a change in the estimates used to determine the
recoverable amount, however not to an amount higher than
the carrying amount that would have been determined (net of
depreciation) had no impairment loss been recognised in prior
years. For goodwill a recognised impairment loss is not
reversed.
Financial instruments
Recognition
A financial instrument is recognised when the group becomes
a party to a contract which entitles it to receive contractually
agreed cash flows on the instrument. All acquisitions of
financial assets that require delivery within the timeframe
established by regulation or market convention (regular-way
purchases) are recognised at trade date, which is the date on
which the group commits to acquire the asset.
Derecognition
The group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the rights to receive the contractual cash flows on
the financial asset in a transaction in which substantially all the
risks and rewards of ownership of the financial assets are
transferred. Any interest in financial assets transferred that is
created or retained by the group is recognised as a separate
asset or liability.
The group may enter into transactions whereby it transfers
assets recognised on its statement of financial position, but
retains either all risks and rewards of the transferred assets or
a portion of them. If all, or substantially all, risks and rewards
are retained, then the transferred assets are not derecognised
from the statement of financial position.
The rights and obligations retained in the transfer of financial
instruments are recognised separately as assets and liabilities
as appropriate. In transfers where control over the asset
is retained, the group continues to recognise the asset to
the extent of its continuing involvement, determined by the
extent to which it is exposed to changes in the value of
the transferred asset.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in
equity and debt instruments, trade and other payables, cash
and cash equivalents, loans and borrowings and trade and
other receivables.
Non-derivative financial instruments are recognised initially
at fair value plus, in the case where financial instruments
are not at fair value through profit or loss, any directly
initial
attributable
transaction costs. Subsequent
recognition, non-derivative
are
measured as described below.
instruments
financial
to
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand form
an integral part of the group’s cash management system and
are included as a component of cash and cash equivalents for
purposes of the cash flow statements. Cash and cash
equivalents are measured at amortised cost.
Financial instruments at fair value through profit or loss
The group designates financial assets and liabilities at fair
value through profit or loss when either:
• the assets or liabilities are managed, evaluated and reported
internally on a fair value basis;
• the designation eliminates or significantly reduces an
accounting mismatch which would otherwise arise; or
• the assets or liabilities contain an embedded derivative that
significantly modifies the cash flows that would otherwise
be required under the contract and has to be separately
disclosed and fair-valued through profit or loss.
All of the group’s financial instruments designated as at fair
value through profit or loss were designated as such as it is
the designation significantly reduces an
believed
accounting mismatch which would otherwise arise.
that
to
initial
Subsequent
instruments
designated or classified as at fair value through profit or loss
are measured at fair value with changes in fair value recognised
in profit or loss.
recognition, financial
Available-for-sale financial assets
The group has designated certain assets as available-for-sale
financial assets. In other circumstances available-for-sale
financial assets are classified as such because they do not fall
within the classification of loans and receivables, held to
maturity investments or financial assets at fair value through
profit or loss. Gains or losses on available-for-sale financial
assets are recognised directly in equity, except for impairment
losses and foreign exchange gains and losses on monetary
items. When the financial asset
is derecognised, the
cumulative gain or loss previously recognised in equity is
recognised in profit or loss.
Financial instruments not at fair value through profit or
loss, and not available-for-sale
• Receivables
Long-term receivables and trade and other receivables are
measured at amortised cost using the effective interest rate
method. Effective interest rate method is a method of
calculating the amortised cost of a financial asset or liability
(or group of financial assets or financial liabilities) and
allocating the interest income or interest expense over the
relevant period. Amortised cost is the amount at which the
long-term receivables and trade and other receivables is
measured at initial recognition, minus principal repayments,
plus or minus the cumulative amortisation using the
effective interest rate method of any difference between the
initial amount recognised and the maturity amount, minus
any reduction for impairment or uncollectability.
• Loans and borrowings
Loans and borrowings are measured at amortised cost
using the effective interest rate method.
• Payables
Trade and other payables are reported at amortised cost,
namely original debt less principal repayments and any
amortisation using the effective interest rate method.
EXXARO INTEGRATED ANNUAL REPORT 2010 215
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
1. ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial instruments not at fair value through profit or
loss, and not available-for-sale (continued)
• Investment in equity instruments
The fair value of investments is based on quoted bid prices
for listed securities or valuations derived from discounted
cash flow models for unlisted securities. Equity instruments
fair values cannot be measured reliably
for which
are recognised at cost less impairment. When equity
instruments classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments are
included in profit or loss as gains and losses from investment
securities.
• Held to maturity investments
Investments with a fixed maturity that management has the
intent and ability to hold to maturity are classified as held to
maturity. These investments are included in non-current
assets, except for maturities within 12 months from the
financial year-end date, which are classified as current
assets. Held to maturity investments are carried at
amortised cost using the effective interest rate method.
Derivative financial instruments
The group holds derivative financial instruments to hedge its
foreign currency, interest rate and price risk exposures.
Embedded derivatives are separated from the host contract
and accounted for separately if the economic characteristics
and risks of the host contract and the embedded derivative
are not closely related, a separate instrument with the same
terms as the embedded derivative would meet the definition
of a derivative, and the combined instrument is not measured
at fair value through profit or loss.
Derivative instruments are recognised initially at fair value,
attributable transaction costs are recognised in profit or loss
when incurred. Subsequent to initial recognition, derivative
instruments are measured at fair value, and changes in fair
value are accounted for as described below.
Fair value hedges
When a derivative is designated as a hedge of the change in
fair value of a recognised asset or liability or a firm commitment,
changes in the fair value of the derivative are recognised
immediately in profit or loss together with changes in the
fair value of the hedged item that are attributable to the
hedged risk.
If the derivative expires or is sold, terminated, or exercised, or
no longer meets the criteria for fair value hedge accounting, or
the designation is revoked, hedge accounting is discontinued.
Any adjustment up to that point, to a hedged item for which
the effective interest rate method is used, is amortised to profit
or loss as part of the recalculated effective interest rate of the
item over its remaining life.
Cash flow hedges
When a derivative is designated as a hedge of the variability in
cash flows attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast
transaction that could affect profit or loss, the effective portion
of changes in the fair value of the derivative is recognised
directly in equity. The amount recognised in equity is removed
and included in profit or loss in the same period as the hedged
item’s cash flows affect profit or loss under the same income
216 EXXARO INTEGRATED ANNUAL REPORT 2010
statement line item as the hedged item. Any ineffective portion
of changes in the fair value of the derivative is recognised
immediately in profit or loss.
If the derivative expires or is sold, terminated, or exercised, or
no longer meets the criteria for cash flow hedge accounting,
or the designation is revoked, then hedge accounting is
discontinued and the amount recognised in equity remains in
equity until the forecast transaction affects profit or loss. If the
forecast transaction is no longer expected to occur, then
hedge accounting is discontinued and the balance in equity is
recognised immediately in profit or loss.
Economic hedges
Hedge accounting is not applied to derivative instruments that
economically hedge monetary assets and
liabilities
denominated in foreign currencies. Changes in the fair value
of such derivatives are recognised in profit or loss as part of
foreign currency gains and losses.
Net investments in foreign operation hedges
When a derivative, or a non-derivative financial liability, is
designated as a hedge of a net investment in a foreign
operation instrument, the effective portion of changes in the
fair value of the hedging instrument is recognised directly in
equity, in the foreign currency translation reserve. Any
ineffective portion of changes in the fair value of the derivative
instrument is recognised immediately in profit or loss. The
amount recognised in equity is removed and included in profit
or loss on disposal of the foreign operation.
Separable embedded derivatives
Changes in the fair value of separable embedded derivatives
are recognised immediately in profit or loss.
Impairment of financial assets
A financial asset is assessed at each reporting date to
determine whether there is any objective evidence that it is
impaired. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have
had a negative effect on the estimated future cash flows of
that asset. An impairment allowance is raised when there is an
indication of impairment and a write-off is only effected when
the debtor is deemed to be fully impaired and not recoverable.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its
carrying amount, and the present value of the estimated
future cash flows discounted at the original effective interest
rate. An impairment loss in respect of an available-for-sale
financial asset is calculated by reference to its fair value.
Individually significant financial assets are
for
impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar
credit risk characteristics.
tested
All impairment losses are recognised in profit or loss.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss
was recognised. For financial assets measured at amortised
cost and available-for-sale financial assets that are debt
securities, the reversal is recognised in profit or loss. For
available-for-sale financial assets that are equity securities, the
reversal is recognised directly in equity.
1. ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Offset
Financial assets and liabilities are set off and the net amount
presented in the statement of financial position when, and
only when, the group has a legal right to set off the amounts
and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Determining fair values
The determination of fair values of financial assets and financial
liabilities is based on quoted market prices or dealer price
quotations for financial instruments traded in active markets.
For all other financial instruments, fair value is determined by
using generally accepted valuation techniques. Valuation
techniques
the
discounted cash flow method, comparison
to similar
instruments for which market observable prices exist, and
valuation models. The group uses widely recognised valuation
models for determining the fair value of common and more
simple financial instruments like interest rate and currency
swaps. For these financial instruments, inputs into models are
available on the market.
include net present value
techniques,
The fair value of long and medium-term borrowings is
calculated using quoted market prices, or where such prices
are not available, discounted cash flow analysis using the
applicable yield curve for the duration of the borrowing are
used. The fair value of financial assets and financial liabilities
with standard terms and conditions and traded on active
liquid markets, is determined with reference to quoted market
prices. The fair value of other financial assets and financial
liabilities (excluding derivative instruments) is determined in
accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from widely
available current market transactions. The fair value of
derivative instruments is calculated using quoted prices.
Where such prices are not available, use is made of discounted
cash flow analyses for the duration of the instruments for non-
optional derivatives, and option pricing models for optional
derivatives.
Financial guarantee contracts
Financial guarantees are contracts that require the group to
make specified payments to reimburse the holder for a loss it
incurs because a specified debtor fails to make payment
when due in accordance with the terms of a debt instrument.
Financial guarantee liabilities are initially recognised at their fair
value, and the initial fair value is amortised over the life of the
financial 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.
Net finance costs
Finance income comprises interest income on funds invested
including available-for-sale financial assets and hedging
instruments that are recognised in profit or loss. Interest
income is recognised as it accrues in profit or loss, using the
effective interest rate method.
Finance expenses comprise interest expense on borrowings
and agreements for the use of assets classified as finance
leases
IFRIC 4 Determining whether an
Arrangement contains a Lease, unwinding of the discount on
provisions, and dividends on preference shares classified as
terms of
in
liabilities. All borrowing costs are recognised in profit or loss
using the effective interest rate method.
Foreign currency gains and losses are reported on a net basis.
Fees and commission
Fees and commission income and expenses that are integral
to the effective interest rate on a financial asset or financial
liability are included in the measurement of the effective
interest rate.
Other fees and commission expenses relate mainly to
transaction and service fees and are expensed as the services
are received.
Inventories
Inventories are valued at the lower of cost, determined on the
moving average basis, and net realisable value. The cost of
finished goods and work-in-progress comprises
raw
materials, direct labour, other direct costs and fixed production
overheads, but excludes interest charges. Fixed production
overheads are allocated on the basis of normal capacity.
Write-downs to net realisable value and inventory losses
are expensed in the period in which the write-downs or
losses occur.
Foreign currencies
Transactions and balances
Transactions denominated
foreign currencies are
translated at the rate of exchange ruling at the transaction
date. Monetary items denominated in foreign currencies
are translated at the rate of exchange ruling at the reporting
date. Gains or losses arising on translation are credited to
or charged against income.
in
Foreign entities
The financial statements of foreign entities are translated into
South African rand as follows:
• assets and liabilities at rates of exchange ruling at the
reporting date;
• income, expenditure and cash flow items at weighted
average rates;
• goodwill and fair value adjustments arising on acquisition at
rates of exchange ruling at the reporting date.
All resulting exchange differences are reflected as part of
shareholders’ equity. On disposal, such translation differences
are recognised in the income statement as part of the
cumulative gain or loss on disposal.
Foreign currency hedges
Foreign currency hedges are dealt with in the financial
instruments accounting policy.
Exchange rates used
The average US dollar to South African rand conversion rate,
where applicable, of US$1:R7,30 (2009: US$1:R8,35) has
been used to translate the income and statements of cash
flows while the statement of financial position has been
translated at the closing rate at the last day of the reporting
period US$1:R6,63 (2009: US$1:R7,40).
Revenue recognition
Revenue, which excludes value added tax, represents the
gross value of goods invoiced. Export revenues are recorded
according to the relevant sales terms, when the risks and
rewards of ownership are transferred.
EXXARO INTEGRATED ANNUAL REPORT 2010 217
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
1. ACCOUNTING POLICIES (continued)
Revenue recognition (continued)
Exchange rates used (continued)
Revenue from the sale of goods is recognised when significant
risks and rewards of ownership of the goods are transferred to
the buyer.
Revenue arising from services and royalties is recognised on
the accrual basis in accordance with the substance of the
relevant agreements.
Interest and dividend income
Interest is recognised on the time proportion basis, taking
account of the principal outstanding and the effective rate
over the period to maturity, when it is determined that such
income will accrue to the group.
Dividends are recognised when the right to receive payment is
established.
Income tax expense
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the income
statement because it excludes items of income or expense
that are taxable or deductible in other years in determination
of taxable profit (temporary differences), and it further excludes
items that are never taxable or deductible (non-temporary
differences). The group’s liability for tax is calculated using tax
rates that have been enacted or substantively enacted at the
reporting date.
Deferred tax
Deferred tax is provided using the balance sheet liability
method on all temporary differences between the carrying
amounts for financial reporting purposes and the amounts
used for tax purposes.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which the associated unused tax losses and deductible
temporary differences can be utilised. The carrying amount of
deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax is calculated using tax rates that have been
enacted at the reporting date. The effect on deferred tax of
any changes in taxation rates is charged or credited to the
income statement, except to the extent that it relates to items
previously charged or credited directly to equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the group intends
and has the ability to settle its current tax assets and liabilities
on a net basis.
Provisions
Provisions are recognised when the group has a present legal
or constructive obligation as a result of past events, for which
it is probable that an outflow of economic benefits will be
required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation. Where the effect of
218 EXXARO INTEGRATED ANNUAL REPORT 2010
discounting to present value is material, provisions are
adjusted to reflect the time value of money, and where
appropriate, the risk specific to the liability.
is made
Decommissioning and environmental rehabilitation
Provision
for environmental rehabilitation and
decommissioning costs where either a legal or constructive
obligation is recognised as a result of past events. Estimates
are based upon costs that are regularly reviewed and adjusted
as appropriate for new circumstances.
Where a provision is made for dismantling and site restoration
costs, an asset of similar initial value is raised and amortised
in accordance with the group’s accounting policy for property,
plant and equipment.
Annual contributions are made to the group’s Environmental
Rehabilitation Fund, created in accordance with statutory
requirements, to provide for the funding of the estimated cost
of pollution control and rehabilitation during, and at the end of
the life of mines. The Exxaro Environmental Rehabilitation
Fund is consolidated.
Expenditure on plant and equipment for pollution control is
capitalised and depreciated over the useful lives of the assets
whilst the cost of ongoing current programmes to prevent and
control pollution and to rehabilitate the environment is charged
against profit or loss as incurred.
Employee benefits
Post-employment benefits
Retirement
The group provides defined contribution retirement funds for
the benefit of employees, the assets of which are held in
separate funds. These funds are funded by contributions from
the
employees and
recommendations of independent actuaries. The group’s
contribution to the defined contribution fund is charged to the
income statement in the year to which it relates.
taking account of
the group,
The group does not provide guarantees in respect of returns
in the defined contribution funds.
Provision for severance benefits is made in accordance with
Namibian law for the Namibian operations. As the severance
benefits are only payable on retirement or the involuntary
termination of service from the side of the employer, this is
accounted for as a post-retirement service. The plan is a
defined benefit obligation. The cost of providing these benefits
is determined based on the projected unit credit method and
actuarial valuations are performed at every reporting date. The
defined benefit obligation presented in the statement of
financial position represents the sum of the present value of
the obligation less the fair value of plan assets plus/minus any
balance of unrecognised actuarial gains or losses, minus any
balance of unrecognised past service costs.
Unrecognised actuarial gains or losses are recognised in profit
or loss based on the corridor method. In other words, an
excess of the balance of unrecognised gains or losses over
10% of the greater of the present value of the obligation or fair
value of the plan assets is recognised in profit or loss over the
expected remaining working lives of participating employees.
Past service cost is recognised immediately to the extent that
the benefits are vested and recognised over the remaining
period until vesting for benefits that are unvested.
1. ACCOUNTING POLICIES (continued)
Employee benefits (continued)
Post-employment benefits (continued)
Medical
A post-retirement medical contribution obligation exists for
certain in-service and retired employees who are members of
accredited medical aid funds. This benefit is no longer offered
to employees. The actuarially determined liability is raised as a
non-current provision.
Short- and long-term benefits
The cost of all short-term employee benefits, such as salaries,
bonuses, housing
and other
contributions, are recognised during the period in which the
employee renders the related service.
allowances, medical
The vesting portion of long-term benefits is recognised and
provided for at financial year-end, based on current total cost
to company.
Termination benefits
Termination benefits are payable whenever an employee’s
employment is terminated before the normal retirement date
or whenever an employee accepts voluntary redundancy in
exchange for these benefits.
to either
its commitment
The group recognises termination benefits when it has
demonstrated
the
employment of current employees according to a detailed
formal plan without possibility of withdrawal or to provide
termination benefits as a result of an offer made to encourage
voluntary redundancy. If the benefits fall due more than
12 months after the reporting date, they are discounted to
present value.
terminate
Equity compensation benefits
Senior management, including executive directors, and
eligible employees participated in the share appreciation right
scheme (SARs), long-term incentive plan (LTIP), deferred
bonus plan (DBP), share option scheme and the employee
empowerment participation scheme (MPower).
SARs, LTIP, DBP, share options and MPower are treated as
equity-settled share-based payment schemes with the fair
value being expensed over the vesting period of the instrument
with a corresponding increase in equity. The fair value of these
schemes are determined at grant date and subsequently
reviewed at each reporting period only for changes in non-
market performance conditions and employee attrition rates
applicable to each scheme.
Only share options issued to certain executives and senior
managers (phantom options) are treated as cash-settled
share-based payments. A liability equal to the portion of
goods and services received is recognised at the current fair
value determined at each financial year-end.
Dividend
Dividends paid are recognised by the company when the
shareholder’s right to receive payment is established. These
dividends are recorded and disclosed as dividends paid in the
statement of changes in equity. Dividends proposed or
declared subsequent to the year-end are not recognised at
the financial year-end, but are disclosed in the notes to the
financial statements.
Secondary tax on companies
Tax costs incurred on dividends are included in the taxation
line in the income statement in the year in which the related
dividends are declared.
Discontinued operations and non-current assets held
for sale
Discontinued operations are significant, distinguishable
components of an enterprise that have been sold, abandoned
or are the subject of formal plans for disposal or discontinuance.
The profit or loss on the sale or abandonment of a discontinued
operation is determined from the formalised discontinuance
date.
If the carrying amount of a non-current asset and liability or
disposal group will be recovered principally through a sale
transaction rather than through continuing use, such an asset
and liability is classified as non-current assets and liabilities
held for sale and measured at the lower of carrying amount
and fair value less cost to sell. This condition is regarded as
met only when the sale is highly probable and the asset and
liability (or disposal group) are available for immediate sale in
its present condition. Management must be committed to the
sale, which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
Segment reporting
Exxaro is a mining group of companies focusing on extracting
and processing a range of minerals and metals including coal,
mineral sands, base metals, and selected industrial minerals.
Exxaro also holds a 20% interest in Sishen Iron Ore Company
(Pty) Limited which extracts and processes iron ore.
Segments are based on the group’s different products and
operations as well as the physical location of these operations
and associated products. The group’s reportable segments
are tied coal operations, commercial coal operations, KZN
Sands, Namakwa Sands, Australia Sands, Rosh Pinah,
Zincor, other base metals and other. The basis of segment
reporting is representative of the internal structure used for
management reporting.
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and
cash equivalents comprise cash on hand, deposits held on
call, and investments in money market instruments, net of
bank overdrafts, all of which are available for use by the group
unless otherwise stated. The carrying amount of these assets
approximates their fair value.
following
Judgements made by management
The
involving
judgements, apart
estimates (as mentioned below) have been made by
management
the group’s
accounting policies that have the most significant effect on
the amounts recognised in the financial statements:
• The identification of special purpose entities controlled by
the process of applying
those
from
in
the group which must be consolidated (refer note 28).
• In applying IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, management has made
to which non-current assets and
judgements as
discontinued operations fall within the scope of the
standard and had to be reclassified and measured in terms
of IFRS 5;
EXXARO INTEGRATED ANNUAL REPORT 2010 219
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
1. ACCOUNTING POLICIES (continued)
Judgements made by management (continued)
• In applying IFRS 2 Share-based Payment, management
has made certain judgements in respect of the fair value
option pricing models to be used in determining the various
share-based arrangements in respect of employees, as
well as the variable elements used in these models (refer
note 30).
• In applying IFRIC 4 Determining whether an Arrangement
contains a Lease, and IAS 17 Leases, contractual
agreements were assessed to determine whether they
convey the right to use an asset and their classification as
either an operating or finance lease.
• In applying IFRS 8 Operating Segments, the identification of
reportable operating segments of the group.
• In applying IAS 19 Employee Benefits, the identification as
to the nature of benefits provided by each scheme and
thereby determine the classification of each scheme.
Key assumptions made by management in applying
accounting policies
The following key assumptions concerning the future, and
other key sources of estimation uncertainty at the financial
year-end, may have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year if the assumption or estimation
changes significantly:
Going concern
Management considers key financial metrics and loan
covenant compliance in its approved medium-term budgets,
together with its existing term facilities, to conclude that
the going-concern assumption used in compiling its annual
financial statements, is relevant.
Share-based payments
For share-based payments, estimates are made in determining
the fair value of equity instruments granted. The assumptions
are used in the Black-Scholes methodology and the Monte
Carlo valuation methodology and
include assumptions
regarding future dividend yield, risk-free rate, expected
employee attrition rate, expected share volatility and expected
option life. Refer note 30.
Environmental and decommissioning provision
Provision is made for environmental and decommissioning
costs where either a legal or constructive obligation is
recognised as a result of past events. Estimates are made in
determining the present obligation of environmental and
decommissioning provisions, which
the actual
estimate, the discount rate used and the expected date of
closure of mining activities in determining the present value of
environmental and decommissioning provisions. Estimates
are based upon costs that are regularly reviewed, by internal
and external experts, and adjusted as appropriate for new
circumstances. Refer note 22.
include
Post-retirement obligations
For defined benefit schemes, management is required to
make annual estimates and assumptions about future returns
on classes of schemes’ assets, future remuneration changes,
employee attrition rates, administration costs, changes in
benefits, inflation rates, exchange rates, life expectancy and
expected remaining periods of service of employees. In
making these estimates and assumptions, management
considers advice provided by external advisers, such as
actuaries. Refer note 22.
220 EXXARO INTEGRATED ANNUAL REPORT 2010
Other provisions
For other provisions, estimates of legal or constructive
obligations are made resulting in the raising of provisions, and
the expected date of probable outflow of economic benefits
to assess whether the provision should be discounted. Refer
note 22.
Impairments and impairment reversals
Impairment tests are performed when there is an indication
of impairment of assets or a reversal of previous impairments
of assets. Management therefore has implemented certain
impairment indicators and these include movements in
exchange rates, commodity prices and the economic
environment its businesses operate in.
Estimates are made in determining the recoverable amount of
assets which include the estimation of cash flows and
discount rates used. In estimating the cash flows, management
base cash flow projections on reasonable and supportable
assumptions that represent managements’ best estimate of
the range of economic conditions that will exist over the
remaining useful life of the assets, based on publicly available
information. The discount rates used are pre-tax rates that
reflect the current market assessment of the time value of
money and the risks specific to the assets for which the future
cash flow estimates have not been adjusted.
Contingent liabilities
Management considers the existence of possible obligations
which may arise from legal action as well as the possible non-
compliance of the requirements of completion guarantees
and other guarantees provided. The estimation of the amount
disclosed is based on the expected possible outflow of
economic benefits should there be a present obligation. Refer
note 31.
Deferred tax assets
Deferred tax assets are recognised based on the probability
that sufficient future taxable income will be available to reduce
the asset carried. This requires management to make
assumptions on a subsidiary by subsidiary level of future
taxable income in determining the deferred tax asset to be
raised. Refer note 23.
Useful life and residual values
The depreciable amount of assets is allocated on a systematic
basis over their useful lives. In determining the depreciable
amount management makes certain assumptions in respect
of the residual value of assets based on the expected
estimated amount that the entity would currently obtain from
disposal of the asset, after deducting the estimated cost of
disposal. If an asset is expected to be abandoned the residual
value is estimated at zero.
In determining the useful life of assets, management considers
the expected usage of assets, expected physical wear and
tear, legal or similar limits of assets such as mineral rights as
well as obsolescence.
Mineral resources
Management makes estimates of mineral resources and ore
reserves in accordance with the SAMREC Code (2000) for
South African properties and the JORC Code (2004) for
Australian properties. Such estimates relate to the category
for the resource (measured, indicated or inferred), the
quantum and the grade.
2. REVENUE
Sale of goods
Services
3. OPERATING EXPENSES
Cost by type
GROUP
COMPANY
Notes
2010
Rm
2009
Rm
2010
Rm
2009
Rm
17 127
15 009
28
17 155
15 009
1 048
1 048
1 009
1 009
Raw materials and consumables
3 470
3 538
30
Staff costs
– salaries and wages
– share-based payments
– termination benefits
– pension and medical costs
General charges
Royalties
Railage and transport
Repairs and maintenance
Impairment charges of non-current assets
Impairment charges and write-offs of trade and
other receivables
Energy
Depreciation of property, plant and equipment
Amortisation of intangible assets
4
11
13
Movement in inventories
Own work capitalised
Sublease rentals received
Cost by function
3 702
3 253
145
6
282
2 277
114
1 109
1 808
4
45
946
1 367
13
(631)
(125)
(13)
91
4
245
2 751
86
1 008
1 585
1 435
217
761
1 123
13
(1 295)
(97)
(13)
566
67
36
479
2
4
48
10
7
41
9
(4)
35
508
37
34
389
1
5
3 273
6
25
9
(1)
(1)
14 519
14 705
1 295
4 320
Costs of goods sold/services rendered
13 539
12 199
1 237
1 048
Selling and distribution costs
Sublease rentals received
Impairment charges of non-current assets
4
Impairment charges, write-offs of trade and
other receivables
944
(13)
4
867
(13)
1 435
45
217
48
10
14 519
14 705
1 295
(1)
3 273
4 320
EXXARO INTEGRATED ANNUAL REPORT 2010 221
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
GROUP
COMPANY
Notes
2010
Rm
2009
Rm
2010
Rm
2009
Rm
3. OPERATING EXPENSES (continued)
The above costs are stated after including:
Auditors’ remuneration
– audit fees
– other services
Consultancy fees
Contingent rentals paid
Contingent rentals received
Currency exchange differences
– net realised losses on currency exchange differences
– net unrealised losses on currency exchange differences
Depreciation and amortisation
– buildings
– mineral properties
– residential buildings
– buildings and infrastructure
– machinery, plant and equipment
– leased assets under finance lease
– site preparation, mining development, exploration and
rehabilitation
– amortisation of intangible assets
Directors’ emoluments (refer to the Directors’
remuneration report, page 192)
– executive directors
– remuneration received by directors of the company
– bonuses and cash incentives
– non-executive directors
– remuneration received by directors of the company
16
1
224
13
(58)
125
30
16
185
6
151
916
44
49
13
16
1
166
12
(37)
576
45
1
180
6
125
767
9
35
13
11
11
11
11
11
11
11
13
Exploration expenditure
60
115
Fair value (gains)/losses on financial assets at fair value
through profit or loss:
– designated upon initial recognition
– held for trading
– ineffectiveness arising from cash flow hedges (gains)/
losses
(13)
(483)
(19)
(465)
(5)
60
5
148
4
2
5
1
78
8
8
41
25
9
9
19
5
3
11
4
3
(1)
222 EXXARO INTEGRATED ANNUAL REPORT 2010
GROUP
COMPANY
Notes
2010
Rm
2009
Rm
2010
Rm
2009
Rm
3. OPERATING EXPENSES (continued)
Fair value losses/(gains) on financial liabilities at fair value
through profit or loss:
– designated upon initial recognition
– held for trading
Net fee costs on financial liabilities not at fair value
through profit or loss
Impairment charges of non-current assets
Inventories write down to net realisable value
Provisions expenses
Net (profit)/loss on disposal or scrapping of property,
plant and equipment
4
22
Reconditionable spares usage
Operating lease rentals expenses
– property
– equipment
Operating sublease rentals received
– property
Research and development costs
Impairment charges, write-offs of trade and other
receivables1
36
5
4
50
47
(32)
6
14
118
(13)
3
45
(7)
26
5
1 435
2
23
84
4
15
71
(13)
7
217
5
48
(1)
6
10
3
5
4
7
14
(1)
3
10
3 273
1 Consequent to the impairment of the KZN Sands businesses in 2009, intergroup loans receivable by the company (included in trade and other receivables)
were impaired to an amount of R3 273 million.
Note:
Pensions
Retirement amounts paid or receivable by executive directors are paid or received under defined contribution retirement funds.
Operating lease arrangements – contingent rent received
The group has entered into various operating lease arrangements, of which some will include contingent rent received. The major
arrangements’ basis to determine contingent rent received is the useful life of property, plant and equipment.
Operating lease arrangements – contingent rent paid
The basis to determine contingent rent paid is the difference between fixed escalations as specified in the contracts and producer price
index (PPI) escalations.
EXXARO INTEGRATED ANNUAL REPORT 2010 223
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
4.
IMPAIRMENT CHARGES NON-CURRENT ASSETS
Included in operating expenses are the following impairment losses:
Impairment of property, plant and equipment1
Impairment of investments2
Impairment of property, plant and equipment held for sale3
Total impairment charges
Tax effect
Net effect on attributable earnings
1 435
1 435
1 435
4
4
(1)
3
48
48
48
1 The impairment of the investment in the KZN Sands operation resulted in the R1 435 million impairment on property, plant and equipment in 2009. The two
Sands businesses in KZN are viewed as a single economic unit as the operations are interdependent and neither can operate economically without the
other. The recoverable amount of the assets have been determined by the calculation of its value in use for which a discount of 8,4% was used compared
to 8,3% used for the similar calculation performed on 30 June 2009. As at 31 December 2010, a similar evaluation of the value in use has been performed.
The results thereof indicated that neither a further impairment nor a reversal of the previous impairment is required.
2 Relates to the impairment of the Botswana investment held by the company. Due to the risk profile and early stage of the exploration phase of the project,
the entire investment has been impaired until such time as the economically exploitable profile of the gas reserves is better understood.
3 The anticipated sale of the Glen Douglas mine as a disposal group, requires an impairment to the fair value less costs to sell in terms of IFRS 5 Non-current
Assets Held for Sale.
GROUP
COMPANY
5. NET FINANCING COSTS
Interest expense and loan costs
Finance leases – interest
Interest income
Net interest expense
Interest adjustment on non-current provisions (refer note 22)
Borrowing costs capitalised during the year amounted to
R46 million (2009: R6 million).
Included in interest expense is the following:
Interest expense on financial liabilities measured at amortised cost
Interest expense on bank overdrafts
Interest expense on financial liabilities designated at fair value
through profit or loss
Interest expense or non-financial liabilities
Included in interest income is the following:
Interest income on unimpaired loans and receivables
Interest income on unimpaired available-for-sale financial assets
Interest income on cash and cash equivalents
Interest income on financial liabilities designated at fair value
through profit or loss
Interest income on financial assets designated at fair value through
profit or loss
2010
Rm
321
70
(135)
256
199
455
313
2
6
(26)
(89)
(2)
(18)
2009
Rm
460
66
(145)
381
34
415
450
9
1
(38)
(13)
(75)
2010
Rm
2009
Rm
294
388
(64)
230
1
231
293
1
(51)
337
2
339
386
2
(63)
(50)
(19)
(1)
(1)
224 EXXARO INTEGRATED ANNUAL REPORT 2010
6.
INCOME FROM INVESTMENTS
Subsidiaries
Unlisted shares
– dividends
– net interest received
Associates
– dividends
Other
Listed shares
– dividends
Total
7.
INCOME TAX EXPENSE
Charge to income
South African normal tax
– Current – current year
– prior year
– Deferred – current year
– prior year
Foreign normal tax
– Current – current year
– prior year
– Deferred – current year
– prior year
Total
Reconciliation of tax rates
Tax as a percentage of profit before tax
Tax effect of:
– assessed losses not provided for
– capital losses
– disallowable expenditure
– exempt income
– special tax allowances
– share of associates and joint ventures
– tax rate differences
– imputed income
– prior year tax
– derecognition of deferred tax asset
– write down of subsidiaries’ loans
Standard tax rate
Effective tax rate for operations, excluding income
from equity accounted investments, impairment charge
and share of tax thereon
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
1 016
378
1 394
4 616
371
4 987
1 811
1 744
2
2
2
2
3 205
6 731
405
29
434
139
91
230
56
(12)
44
(46)
3
(43)
665
%
11,3
(0,2)
(0,3)
(0,2)
0,7
1,3
17,6
0,1
(0,2)
(1,9)
(0,2)
462
(51)
411
343
1
344
36
14
50
(46)
7
(39)
766
%
42,8
(1,5)
(1,3)
(1,3)
2,2
2,1
29,6
0,5
(0,8)
1,7
(46,0)
28,0
28,0
30,5
57,8
13
13
23
23
36
%
1,3
(24)
(24)
4
22
26
2
%
0,1
(1,3)
29,0
(0,2)
57,8
(0,5)
(0,5)
28,0
(29,7)
28,0
EXXARO INTEGRATED ANNUAL REPORT 2010 225
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
8. EARNINGS PER SHARE
Basic headline earnings per share is calculated by dividing the headline earnings by the weighted
average number of ordinary shares in issue during the year.
Headline earnings (R million) (refer note 10)
Weighted average number of ordinary shares in issue (million)
Headline earnings per share (cents)
For the diluted headline earnings per share the weighted average number of ordinary shares is
adjusted to assume conversion of not yet released purchased shares and options under the
employees’ share schemes, net of shares held by the schemes for releasing purposes. Diluted
headline earnings per share is calculated by dividing headline earnings by the adjusted weighted
average number of shares in issue.
Weighted average number of ordinary shares in issue (million) as calculated above
Adjusted for options and net purchased shares in terms of the employees’ share schemes (million)
Weighted average number for diluted headline earnings per share (million)
Diluted headline earnings per share (cents)
Basic attributable earnings per share is calculated by dividing the net profit attributable to
shareholders by the weighted average number of ordinary shares in issue during the year.
Profit for the year attributable to equity holders of the parent (R million)
Weighted average number of ordinary shares in issue (million)
Basic earnings per share (cents)
For the diluted attributable earnings per share the weighted average number of ordinary shares is
adjusted as above.
Diluted earnings per share (cents)
For the 2010 and 2009 financial years, shares under option had an effect on the adjusted weighted
average number of shares in issue as the average option price attached to the option shares was
lower than the average market price.
GROUP
2010
Rm
2009
Rm
5 186
347
1 495
2 514
345
729
347
14
361
1 437
5 208
347
1 501
361
1 443
345
13
358
702
1 023
345
297
358
286
226 EXXARO INTEGRATED ANNUAL REPORT 2010
9. DIVIDEND
Dividends paid during the year:
Cash dividends
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
1 056
1 050
1 073
1 066
STC on these dividends amounts to nil (2009: nil) after taking into account STC credits.
10. RECONCILIATION OF GROUP HEADLINE EARNINGS
Profit for the year attributable to owners of the parent
Adjusted for:
– impairment of property, plant and equipment
– losses on disposal of property, plant and equipment
– share of associates’ gains or losses on disposal of property,
plant and equipment
Headline earnings
Profit for the year attributable to owners of the parent
Adjusted for:
– impairment of property, plant and equipment
– gains or losses on disposal of property, plant and equipment
– share of associates’ gains or losses on disposal of property,
plant and equipment
Headline earnings
For the year ended 31 December 2010
Gross
Rm
Tax
Rm
Non-
controlling
interest
Rm
4
(26)
1
(21)
(1)
(1)
For the year ended 31 December 2009
Gross
Rm
Tax
Rm
Non-
controlling
interest
Rm
1 435
88
(8)
1 515
(24)
2
(22)
(2)
(2)
2010
cents
Net
Rm
5 208
3
(26)
1
5 186
Net
Rm
1 023
1 435
62
(6)
2 514
2009
cents
Group headline earnings per share for the year ended 31 December 2010
Headline earnings per share (refer note 8)
– basic
– diluted
1 495
1 437
729
702
EXXARO INTEGRATED ANNUAL REPORT 2010 227
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
11. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
Rm
Mineral
properties
Rm
Residential
land and
buildings
Rm
Buildings
and
infra-
structure
Rm
Machinery,
plant and
equipment
Rm
Site pre-
paration,
mining
develop-
ment,
exploration
and
rehabili-
tation
Rm
Extensions
under
con-
struction
Rm
Total
Rm
972
17
1 591
1 749
20 723
2 677
562
20
146
728
20
16
(8)
28
2 640
180
2 969
11 809
1
1
67
11
823
42
66
(1)
(29)
(311)
5
(25)
35
1 105
7
10
10
(1 136)
2 998
13 503
1 072
2 214
23 248
(7)
174
48
6
856
151
4 542
960
395
49
(1)
(13)
(215)
3
20
(2)
3
2
53
997
5 305
449
120
(341)
63
6
6 626
1 367
(229)
29
7 793
672
1 406
142
2
2 228
(17)
655
(61)
1 345
142
2
2 150
(78)
6
(87)
2 559
765
185
3
8
961
6
6
700
1 592
121
1 346
6 853
481
2 212
13 305
GROUP
2010
Gross carrying amount
At beginning of year
Additions
Changes in
decommissioning assets
Disposals of items of
property, plant and
equipment
Exchange differences
on translation
Other movements
At end of year
Accumulated
depreciation
At beginning of year
Depreciation charges
Accumulated depreciation
on disposals of items of
property, plant and
equipment
Exchange differences on
translation
Other movements
At end of year
Impairment of assets
At beginning of year
Disposals of items of
property, plant and
equipment
At end of year
Net carrying amount
at end of year
228 EXXARO INTEGRATED ANNUAL REPORT 2010
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Land and
buildings
Rm
Mineral
properties
Rm
Residential
land and
buildings
Rm
Buildings
and
infra-
structure
Rm
Machinery,
plant and
equipment
Rm
Site pre-
paration,
mining
develop-
ment,
exploration
and
rehabili-
tation
Rm
Extensions
under
con-
struction
Rm
Total
Rm
2 262
184
106
147
27
2 309
10 060
403
1 020
776
87
1 887
17 625
339
1 982
Increase in joint venture
349
87
2
7
7
81
15
704
17
(2)
39
1 228
(4)
(4)
(186)
(36)
(230)
1
(78)
562
1
1
18
9
282
2 640
575
180
5
5
1
180
42
6
(1)
7
167
2 969
727
125
5
(3)
5
(3)
(5)
51
150
11 809
3 787
776
44
(94)
30
(1)
11
81
972
355
35
5
20
765
48
856
4 542
395
2
7
(606)
1 591
(3)
86
(4)
20 723
5 487
1 123
72
(97)
45
(4)
6 626
6
6
227
495
445
911
63
79
38
829
1 435
672
1 406
142
(36)
2
(36)
2 228
542
1 869
132
1 441
5 861
435
1 589
11 869
EXXARO INTEGRATED ANNUAL REPORT 2010 229
GROUP
2009
Gross carrying amount
At beginning of year
Additions
Changes in
decommissioning assets
Disposals of items of
property, plant and
equipment
Net reclassification to
non-current assets
classified as held for sale
Exchange differences
on translation
Other movements
At end of year
Accumulated
depreciation
At beginning of year
Depreciation charges
Increase in joint venture
Accumulated depreciation
on disposals of items of
property, plant and
equipment
Exchange differences on
translation
Other movements
At end of year
Impairment of assets
At beginning of year
Impairment charges
(refer note 4)
Disposals of items of
property, plant and
equipment
At end of year
Net carrying amount
at end of year
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
11. PROPERTY, PLANT AND EQUIPMENT (continued)
The net carrying amount of machinery, plant and equipment includes:
Assets held under finance leases (refer note 21)
– cost
– accumulated depreciation
For detail of property, plant and equipment pledged as security refer to annexure 1.
A register of land and buildings is available for inspection at the registered office of the company.
2010
Rm
2009
Rm
196
112
84
197
69
128
Land and
buildings
Rm
Mineral
properties
Rm
Residential
land and
buildings
Rm
Buildings
and
infra-
structure
Rm
Machinery,
plant and
equipment
Rm
Site pre-
paration,
mining
develop-
ment,
exploration
and
rehabili-
tation
Rm
Extensions
under
con-
struction
Rm
Total
Rm
COMPANY
2010
Gross carrying amount
At beginning of year
Additions
Disposals of items of
property, plant and
equipment
Other movements
At end of year
Accumulated
depreciation
At beginning of year
Depreciation charges
Accumulated depreciation
on disposals of items of
property, plant and
equipment
At end of year
Net carrying amount
at end of year
230 EXXARO INTEGRATED ANNUAL REPORT 2010
12
(2)
10
5
(2)
3
7
215
15
(3)
21
248
69
41
(2)
108
140
87
53
(21)
119
314
68
(5)
377
74
41
(4)
111
119
266
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Land and
buildings
Rm
Mineral
properties
Rm
Residential
land and
buildings
Rm
Buildings
and
infra-
structure
Rm
Machinery,
plant and
equipment
Rm
Site pre-
paration,
mining
develop-
ment,
exploration
and
rehabili-
tation
Rm
Extensions
under
con-
struction
Rm
Total
Rm
COMPANY
2009
Gross carrying amount
At beginning of year
Additions
Disposals of items of
property, plant and
equipment
Other movements
At end of year
Accumulated
depreciation
At beginning of year
Depreciation charges
Accumulated depreciation
on disposals of items of
property, plant and
equipment
At end of year
Net carrying amount at
end of year
11
1
12
5
5
7
114
22
(4)
83
215
48
25
(4)
69
146
104
66
(83)
87
229
88
(4)
1
314
53
25
(4)
74
87
240
EXXARO INTEGRATED ANNUAL REPORT 2010 231
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
12. BIOLOGICAL ASSETS
GROUP
2010
Carrying amount
At beginning of year
Gains attributable to physical and price changes
Net reclassification to inventory
At end of year
Fair value of biological assets can be split as follows:
– mature
– immature
The plantation was valued by Mr J M Potgieter, an independent
appraiser, on 17 November 2010.
2009
Carrying amount
At beginning of year
(Losses)/gains attributable to physical and price changes
Net reclassification to inventory
At end of year
Fair value of biological assets can be split as follows:
– mature
– immature
Plantations consist of wattle and blue gum trees.
Livestock consists of cattle and horses.
Plantation
Rm
Livestock
Rm
Game
Rm
Total
Rm
7
1
8
4
4
8
8
(1)
7
4
3
7
7
4
(4)
7
7
7
6
3
(2)
7
7
7
27
5
(1)
31
31
31
20
9
(2)
27
27
27
41
10
(5)
46
42
4
46
34
11
(4)
41
38
3
41
Game consists of rhino, buffalo, warthog, giraffe, ostrich and a large variety of antelope.
232 EXXARO INTEGRATED ANNUAL REPORT 2010
13.
INTANGIBLE ASSETS
Patents, licences and franchises
Gross carrying amount
At beginning of year
Additions
Exchange differences
At end of year
Accumulated amortisation
At beginning of year
Amortisation charge
Exchange differences
At end of year
Net carrying amount at end of year
All intangible assets have finite useful lives and are amortised on
the straight-line basis over the respective useful lives.
14.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
143
2
145
56
13
1
70
75
121
19
3
143
42
13
1
56
87
19
19
9
9
18
1
19
19
9
9
10
ASSOCIATED COMPANIES (Unlisted)
3 880
1 965
JOINT VENTURES (Unlisted)
– incorporated
Total
3 880
1
1 966
Refer to annexure 2 for market and directors’ valuations of investments.
Associate companies
Joint ventures
Investments
Rm
Loans1
Rm
Total
Rm
Investments
Rm
Loans
Rm
Total
Rm
2010
GROUP
At beginning of year
1 810
155
1 965
Transfer (to)/from other assets
Net share of results
Per income statement
Elimination of intergroup profits
Dividends paid
Exchange difference adjustments
Share of reserve movements
3 655
3 654
1
(1 815)
(12)
24
63
63
3 718
3 717
1
(1 815)
(12)
24
1
(1)
1
(1)
At end of year (refer annexure 2)
3 662
218
3 880
1 These loans are interest free and have no fixed repayment terms. These loans have been subordinated to other debt until such time that the associate’s
assets exceeds its liabilities. The net share of results arises from the recoupment of previous impairments by way of current trading income.
EXXARO INTEGRATED ANNUAL REPORT 2010 233
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
Associate companies
Joint ventures
Investments
Rm
Loans1
Rm
Total
Rm
Investments
Rm
Loans
Rm
Total
Rm
14.
INVESTMENTS IN ASSOCIATES
AND JOINT VENTURES
(continued)
2009
GROUP
At beginning of year
Net share of results
Per income statement
Elimination of intergroup profits
Dividends paid
Exchange difference adjustments
Share of reserve movements
1 816
1 776
1 776
(1 752)
(38)
8
32
123
122
1
1 848
1 899
1 898
1
(1 752)
(38)
8
1
1
At end of year (refer annexure 2)
1 810
155
1 965
1
1
1 These loans are interest free and have no fixed repayment terms. These loans have been subordinated to other debt until such time that the associate’s
assets exceeds its liabilities. The net share of results arises from the recoupment of previous impairments by way of current trading income.
Aggregate post-acquisition reserves:
– associate companies
– joint ventures
Total
2010
Rm
3 380
3 014
6 394
2009
Rm
1 466
2 982
4 448
1 These loans are interest free and have no fixed repayment terms. These loans have been subordinated to other debt until such time that the associate’s
assets exceeds its liabilities.
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
15.
INVESTMENTS IN SUBSIDIARIES
Shares at cost less impairment losses
Indebtedness
– by subsidiaries
– to subsidiaries
Total (refer annexure 3)
Less: Current portion included in trade and other receivables
Less: Current portion included in trade and other payables
Non-current portion
Aggregate attributable after tax profits and losses of subsidiaries:
– profits
– losses
2 563
(658)
1 743
(3 617)
3 290
3 322
10 745
10 358
(97)
10 648
(8 018)
97
2 727
6 017
(105)
10 253
(7 012)
105
3 346
6 668
234 EXXARO INTEGRATED ANNUAL REPORT 2010
16. FINANCIAL ASSETS
Environmental Rehabilitation Trust asset
Long-term receivables
Investments (refer annexure 2)
For details refer to note 27 on financial instruments.
17.
INVENTORIES
Finished products
Work-in-progress
Raw materials
Plant spares and stores
Merchandise
Included above are inventories relating to Exxaro Sands (Pty)
Limited, Rosh Pinah Zinc Corporation (Pty) Limited and Exxaro
Base Metals (Pty) Limited which might be sold or utilised in
production over more than 12 months. Included in merchandise are
biological assets held for sale classified as inventories. There was
no inventory sold in which delivery was delayed at the buyer’s
request. No inventories were pledged as security for liabilities in
both 2010 and 2009.
The amount of inventory carried at net realisable value (NRV) is
R750 million (2009: R528 million).
18. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Indebtedness by subsidiaries (refer note 15)
Indebtedness by subsidiaries
Specific allowances for impairment
Derivative financial instruments (refer note 27.1)
Non-financial instrument receivables
Specific allowances for impairment
Collective allowances for impairment
Included in non-current assets classified as held for sale
(refer note 19)
GROUP
COMPANY
2010
Rm
522
477
376
2009
Rm
422
420
375
2010
Rm
2009
Rm
12
11
1 375
1 217
12
11
1 312
1 404
671
586
544
7
659
527
537
6
3 120
3 133
2 554
209
2 620
240
192
848
(50)
(1)
51
433
(221)
(2)
38
8 018
11 298
(3 280)
2
(4)
40
7 012
10 285
(3 273)
34
5
(1)
3 752
3 121
8 054
7 090
22
3 774
18
3 139
10
8 064
18
7 108
EXXARO INTEGRATED ANNUAL REPORT 2010 235
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
18. TRADE AND OTHER RECEIVABLES (continued)
Trade receivables are stated after the following allowances
for impairment:
Specific allowances for impairment
At beginning of year
Impairment loss recognised
Indebtedness by subsidiaries impairments
Indebtedness by subsidiaries reversals
Impairment loss reversals
Other reconciling items
At end of year
Of which relates to:
Trade receivables
Other receivables
Subsidiaries
Collective allowances for impairment
At beginning of year
Other reconciling items
At end of year
Of which relates to:
Trade receivables
For a detailed analysis of the trade and other receivables refer to
note 27 on financial instruments.
19. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
Assets
Property, plant and equipment
Financial assets
Inventories
Trade and other receivables (refer note 18)
Tax receivable
Liabilities
Other long-term payables
Non-current provisions
Deferred tax liabilities
Trade and other payables (refer note 24)
Tax payable
Total at end of year
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
(221)
(45)
(9)
(220)
(3 274)
(1)
(3)
(23)
16
(3 273)
216
(50)
(3)
(47)
(50)
(2)
1
(1)
(1)
(1)
34
21
8
22
85
(29)
(8)
(14)
(1)
(52)
33
3
5
(221)
(3 284)
(3 274)
(217)
(4)
(221)
(2)
(2)
(2)
(2)
38
17
8
18
5
86
(28)
(9)
(12)
(49)
37
(4)
(3 280)
(3 284)
(1)
(3 273)
(3 274)
10
10
18
18
10
18
Included above are the assets and liabilities of a subsidiary, Glen Douglas Dolomite (Pty) Limited, classified as held liabilities for sale
(disposal group) and other assets and liabilities classified as held for sale. The Glen Douglas subsidiary was sold with an effective date of
1 January 2011.
236 EXXARO INTEGRATED ANNUAL REPORT 2010
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
20. SHARE CAPITAL
Share capital at par value
Authorised
500 000 000 ordinary shares of R0,01 each
Issued
358 089 230 (2009: 356 940 200) ordinary shares of R0,01 each
5
4
5
4
5
4
5
4
Share premium
2 343
2 314
2 343
2 314
Shares held by Kumba Resources Management Share Trust and
the Exxaro Employee Empowerment Participation Scheme Trust
(MPower)
Total
The Kumba Resources Management Share Trust and the Exxaro
Employee Empowerment Participation Scheme Trust (MPower)
have been consolidated.
Refer to statements of changes in equity (pages 209 to 210) for
details of movements.
Reconciliation of authorised shares not issued (million)
Number of authorised unissued ordinary shares
at beginning of year
Number of shares issued during the year
Number of unissued authorised shares at end of year
(177)
2 170
(177)
2 141
2 347
2 318
143
(1)
142
145
(2)
143
143
(1)
142
145
(2)
143
The following resolutions pertain to the unissued ordinary shares under the control of the directors until the forthcoming annual general
meeting:
1.
Control of authorised but unissued shares
The authorised but unissued shares in the capital of the company be and are hereby placed under the control and authority of the
directors and that they be and are hereby authorised to allot, issue and otherwise dispose of such shares to such person or persons
on such terms and conditions and at such times as they may from time to time and at their discretion deem fit, subject to the
provisions of the Companies Act, No 61 of 1973, as amended, article 3.2 of the articles of association of the company and the JSE
Listings Requirements. The issuing of shares granted under this authority will be 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 be required, subject to article 3.2 of the articles of association of the company, to be allotted and issued by the
company pursuant to the company’s approved employee share incentive schemes.
EXXARO INTEGRATED ANNUAL REPORT 2010 237
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
20. SHARE CAPITAL (continued)
2. General authority to issue shares for cash
The directors of the company be and they are hereby authorised, by way of a general authority, to issue the authorised but unissued
shares in the capital of the company for cash, as and when they in their discretion deem fit, subject to article 3.2 of the articles of
association of the company, the Companies Act, No 61 of 1973, as amended and the JSE Listings Requirements, when applicable
and the following limitation, namely that:
• the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case,
must be limited to such securities or rights that are convertible into a class already in issue;
• any such issue will only be made to “public shareholders” as defined in the JSE Listings Requirements and not to related parties;
• the number of shares issued for cash shall not in the aggregate in the current financial year exceed 10% of the company’s issued
share capital of ordinary shares. For purposes of determining the securities comprising the 10% number in any one year, account
must be take of the dilution effect, in the year of options/convertible securities, by including the number of any equity securities
which may be issued in future arising out of the issue of such options/convertible securities. The number of ordinary shares which
may be issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares
issued during the current financial year (or to be issued arising from options or convertible securities issued), provided that any
ordinary shares to be issued pursuant to a rights issue (announced and irrevocable and underwritten) or acquisition (which has had
final terms announced) may be included as though they were shares in issue at the date of application;
• this authority is valid until the company’s next annual general meeting, provided that it shall not extend beyond 15 months from the
date that this authority is given;
• a paid press announcement giving full details, including the impact on the net asset value and earnings per share, will be published
at the time of any issue representing, on a cumulative basis within one financial year, 5% or more of the number of shares in issue
prior to the issue; and
• the maximum discount permitted at which equity securities may be issued is 10% of the weighted average traded price on the JSE
of those shares over the 30-business days prior to the date that the price of the issue is agreed between the company and the
party subscribing for the securities.
This ordinary resolution is required, under the JSE Listings Requirements, to be passed by achieving a 75% majority of the votes cast
in favour of such resolution by all members present or represented by proxy and entitled to vote, at the annual general meeting.
3. General authority to repurchase shares
Subject to compliance with the JSE Listings Requirements, the Companies Act, No 61 of 1973, as amended, and article 36 of the
articles of association of the company, be and are hereby authorised at their discretion to procure that the company or subsidiaries
of the company acquire by repurchase on the JSE ordinary shares issued by the company provided that:
• the number of ordinary shares acquired in any one financial year shall not exceed 20% of the ordinary shares in issue at the date
on which this resolution is passed;
• this must be effected through the order book operated by the JSE trading system and done without any prior understanding or
arrangement between the company and the counterparty;
• this authority shall lapse on the earlier of the date of the next annual general meeting of the company or 15 months after the date
on which this resolutions is passed; and
• the price paid per ordinary share may not be greater than 10% above the weighted average of the market value of the ordinary
shares for the five business days immediately preceding the date on which a purchase is made.
238 EXXARO INTEGRATED ANNUAL REPORT 2010
20. SHARE CAPITAL (continued)
3.
General authority to repurchase shares (continued)
The reason for and effect of this special resolution is to authorise the directors, if they deem it appropriate in the interests of the
company, to procure that the company or subsidiaries of the company acquire or repurchase ordinary shares issued by the company
subject to the restrictions contained in the above resolution.
At the present time the directors have no specific intention with regard to the utilisation of this authority which will only be used if the
circumstances are appropriate. The directors, after considering the effect of a repurchase of up to 20% of the company’s issued
ordinary shares, are of the opinion that if such repurchase is implemented:
• the group and company and its subsidiaries (“the group”) will be able to pay its debts in the ordinary course of business for a period
of 12 months after the date of this notice;
• recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements,
the assets of the company and the group will exceed the liabilities of the company and the group for a period of 12 months after
the date of this notice;
• the ordinary capital and reserves of the company and the group will be adequate for the purposes of the business of the company
and the group for a period of 12 months after the date of this notice;
• the working capital of the company and the group will be adequate for the purposes of the business of the company and the group
for a period of 12 months after the date of this notice;
• the company or its subsidiaries will not repurchase securities during a prohibited period as defined in paragraph 3.67 of the
JSE Listings Requirements unless the company has a repurchase programme in place where the dates and quantities of securities
to be traded during the relevant prohibited period are fixed (not subject to any variation) and full details of the programme have been
disclosed in an announcement released on SENS prior to the commencement of the prohibited period;
• when the company or its subsidiaries has cumulatively repurchased 3% of the initial number of the relevant class of securities, and
for each 3% in aggregate of the initial number of that class acquired thereafter, an announcement will be made;
• the company at any point in time, only appoints one agent to effect any repurchase(s) on its behalf; and the company undertaking
that it will not enter the market to repurchase the company’s securities until the company’s sponsor has provided written confirmation
to the JSE regarding the adequacy of the company’s working capital in accordance with Schedule 25 of the JSE Listings
Requirements.
The above authorities are valid until the next annual general meeting.
EXXARO INTEGRATED ANNUAL REPORT 2010 239
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
21.
INTEREST-BEARING BORROWINGS
Non-current borrowings
Summary of loans by financial year of redemption
2010
2011
2012
2013
2014
2015
2016 onwards
Total non-current borrowings (refer annexure 1)
Current portion included in current liabilities
Total
Details of interest rates payable on borrowings are shown in
annexure 1.
Included in the above interest-bearing borrowings are obligations
relating to finance leases (refer note 11). Details are:
Minimum lease payments:
– less than one year
– more than one year and less than five years
– more than five years
Total
Less: Future finance charges
Present value of lease liabilities
Representing lease liabilities:
– current
– non-current (more than one year and less than five years)
– non-current (more than five years)
Total
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
362
617
617
1 701
200
200
3 697
(362)
3 335
716
856
407
827
723
417
617
1 865
1 886
1 701
200
200
3 135
(417)
2 718
296
285
342
4 360
(716)
3 644
66
262
3 230
3 558
3 290
268
5
10
253
268
304
264
343
4 754
(407)
4 347
63
256
3 302
3 621
3 361
260
5
13
242
260
Exxaro entered into numerous operating and finance lease arrangements. All major lease arrangements are renewable if there is mutual
agreement between the parties to the arrangements with some contracts specifying extension periods. Arrangements containing
escalation clauses are usually based on CPI or PPI indexes. None of the lease arrangements contain restrictive clauses that are unusual
to the particular type of lease.
There were no defaults or breaches in terms of interest-bearing borrowings during both reporting periods.
240 EXXARO INTEGRATED ANNUAL REPORT 2010
Environ-
mental
rehabili-
tation
Rm
Decom-
mission-
ing
Rm
Restruc-
turing
Rm
Post-
retirement
medical
obligation
Rm
Post-
retirement
defined
benefit
obligation
Rm
Cash-
settled
share-
based
payment
Rm
Total
Rm
22. PROVISIONS
GROUP
2010
At beginning of year
1 323
442
30
Charge to operating expenses
Additional provision
Unused amounts reversed
28
31
(3)
8
8
77
9
9
Interest adjustment (refer note 5)
134
56
6
3
Provisions capitalised to property, plant
and equipment
Utilised during year
Exchange differences
Reclassification to non-current assets
held for sale
120
1
(14)
1
(1)
At end of year
1 471
627
Current portion included in
current liabilities
(27)
Total non-current provisions
1 444
627
(6)
30
(6)
24
2009
At beginning of year
1 274
395
27
Charge to operating expenses
Additional provision
Unused amounts reversed
Interest adjustment (refer note 5)
Provisions capitalised to property, plant
and equipment
Increase in joint venture
Utilised during year
Exchange differences
Reclassification to non-current assets
held for sale
(3)
2
(5)
8
39
3
12
12
16
30
(12)
4
(1)
At end of year
1 323
442
Current portion included in current
liabilities
(21)
Total non-current provisions
1 302
442
8
(5)
30
(6)
24
89
89
68
7
7
2
77
77
3
2
2
5
5
3
3
3
3
5
1 880
47
50
(3)
199
120
(21)
2
(1)
(1)
4
2 226
(33)
4
2 193
3
4
4
(2)
1 767
23
28
(5)
34
39
30
(19)
7
(1)
5
1 880
(27)
5
1 853
EXXARO INTEGRATED ANNUAL REPORT 2010 241
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
Environ-
mental
rehabili-
tation
Rm
Decom-
mission-
ing
Rm
Restruc-
turing
Rm
Post-
retirement
medical
obligation
Rm
Post-
retirement
defined
benefit
obligation
Rm
Cash-
settled
share-
based
payment
Rm
Total
Rm
22. PROVISIONS (continued)
COMPANY
2010
At beginning of year
Charge to operating expenses
Additional provisions
Interest adjustment (refer note 5)
Utilised during the year
Total non-current provisions
2009
At beginning of year
Charge to operating expenses
Additional provisions
Interest adjustment (refer note 5)
Utilised during year
Total non-current provisions
23
(1)
(1)
1
23
21
2
23
5
28
(1)
(1)
1
(1)
27
24
4
4
2
(2)
28
(1)
4
3
4
4
(2)
5
Environmental rehabilitation
Provision is made for environmental rehabilitation costs where either a legal or constructive obligation is recognised as a result of past
events. Estimates are based upon costs that are regularly reviewed and adjusted as appropriate for new circumstances.
Decommissioning
The decommissioning provision relates to decommissioning of property, plant and equipment where either a legal or constructive
obligation is recognised as a result of past events. Estimates are based upon costs that are regularly reviewed and adjusted as appropriate
for new circumstances.
Funding of environmental and decommissioning rehabilitation
Contributions towards the cost of the mine closure are also made to the Exxaro Environmental Rehabilitation Fund and the balance of the
fund amounted to R539 million (2009: R429 million) at year-end.
Of this amount, R521 million (2009: R422 million) is included in financial assets and R18 million (2009: R7 million) in trade and other
receivables of the group. Cash flows will take place when the mines are rehabilitated.
Restructuring
The liability includes accruals for plant and facility closures, including the dismantling costs thereof, and employee termination costs in
terms of the announced restructuring plans for the Hlobane and Durnacol mines. Provision is made on a piecemeal basis only for those
restructuring obligations supported by a formally approved plan.
The restructuring for Durnacol mine will be completed within the next six years and for Hlobane mine in the next 16 years.
242 EXXARO INTEGRATED ANNUAL REPORT 2010
22. PROVISIONS (continued)
Post-retirement medical obligation
A post-employment healthcare benefit had been provided to a group of continuation and in-service members on the Witbank Coal
Medical Aid Scheme and the BHP Billiton SA Medical Scheme. This benefit, which is no longer offered, applied to certain employees
previously employed by Eyesizwe or Ingwe Coal and comprises a subsidy of contributions.
At Namakwa Sands a post-retirement medical obligation remains. The post-retirement liability is of a defined benefit 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 upon the death of the primary member, either pre- or post-
retirement. This benefit, which is no longer offered, applied to employees employed prior to 2001 by Namakwa Sands.
The obligations represents a present value amount, which is actuarially valued on an annual basis. Any surplus or deficit arising from the
valuation is recognised in the income statement. The provision is expected to be utilised over the expected lives of the remaining
participants of the scheme.
Post-retirement defined benefit obligation
Provision for severance benefits is made in accordance with Namibian law for the Namibian operations. As the severance benefits are
only payable on retirement or the involuntary termination of service from the side of the employer, this is accounted for as a post-
retirement service. The plan is a defined benefit obligation. The cost of providing these benefits is determined based on the projected unit
credit method and actuarial valuations are performed at every reporting date. The defined benefit obligation presented in the statement
of financial position represents the sum of the present value of the obligation less the fair value of plan assets plus/minus any balance of
unrecognised actuarial gains or losses, minus any balance of unrecognised past service costs. The provision is expected to be utilised
over the expected lives of the participants of scheme.
Cash-settled share-based payment
Exxaro offered a cash-settled share-based payment, based on the company’s share price performance, to certain individuals who were
under an embargo and not entitled to accept share scheme offers, due to their involvement in the empowerment transaction.
23. DEFERRED TAX
The movement on the deferred tax account is as follows:
At beginning of year
Foreign currency adjustment
Increase in joint venture
Share-based payments movements
Items charged directly to other components of equity
Transferred to non-current assets held for sale
Income statement charge (refer note 7)
– current
– prior
At end of year
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
366
(42)
115
1
93
94
627
174
5
26
(16)
(126)
(2)
297
8
366
(87)
(104)
(21)
(9)
23
(85)
4
22
(87)
EXXARO INTEGRATED ANNUAL REPORT 2010 243
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
23. DEFERRED TAX (continued)
Comprising:
Deferred tax liabilities
– property, plant and equipment
– bad debt reassessment
– income received in advance
– inventories
– leave pay accrual
– financial instruments
– provisions
– Exxaro Environmental Rehabilitation asset
– decommissioning provision
– share-based payments
– hedge premium
– restoration provision
– prepayments
– unrealised profits
– assessed losses
Deferred tax assets
– provisions
– property, plant and equipment
– Exxaro Environmental Rehabilitation asset
– decommissioning provision
– financial instruments
– share-based payments
– hedge premium
– unrealised foreign exchange profit/(loss)
– restoration provision
– inventories
– bad debt reassessment
– lease liability
– leave pay accrual
– prepayments
– tax losses carried forward
– derecognition of deferred tax assets
– foreign tax losses carried forward
244 EXXARO INTEGRATED ANNUAL REPORT 2010
1 438
(8)
(7)
13
(30)
20
36
104
(11)
(19)
1
(187)
14
(5)
(6)
1 353
(96)
292
33
(11)
(157)
(42)
(1)
145
(113)
(3)
(1)
(75)
(13)
20
1 113
(46)
6
(31)
(6)
86
(6)
(6)
2
(95)
7
(25)
(4)
995
(88)
137
22
(9)
(126)
(17)
(1)
98
(109)
(3)
(1)
(72)
(13)
14
(2)
6
4
(35)
(7)
(2)
4
(13)
(1)
(6)
(6)
(5)
(1 241)
(1 017)
(45)
(64)
833
(296)
(726)
627
822
(266)
(629)
366
(85)
(85)
(87)
(87)
23. DEFERRED TAX (continued)
Calculated tax losses
– Tax losses available for set off against future South African
taxable income
– Tax losses available for set off against future foreign taxable
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
4 454
3 646
161
229
income
1 082
950
The total deferred tax assets raised with regard to assessed losses
amount to R706 million (2009: R465 million), and is mainly
attributable to the Exxaro sands businesses. The total deferred tax
assets not raised amount to R907 million (2009: R877 million).
24. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Non-financial instrument payables
Leave pay accrual
Indebtedness to subsidiaries (refer note 15)
Derivative financial instruments (refer note 27.1)
Included in non-current assets classified as held for sale
(refer note 19)
25. NOTES TO THE CASH FLOW STATEMENT
25.1 Cash generated by/(utilised in) operations
Net operating profit/(loss)
Adjusted for non-cash movements
– depreciation and amortisation
– impairment charges of non-current assets
– impairment charges and write-offs of trade and other
receivables
– provisions
– foreign exchange revaluations and fair value adjustments
– reconditionable spares usage
– net (profit)/loss on disposal or scrapping of property, plant
and equipment
– share-based payment expenses
Cash inflows from operations
Working capital movements
– increase in inventories
– (increase)/decrease in trade and other receivables
– increase/(decrease) in trade and other payables
– utilisation of provisions (refer note 22)
1 085
898
835
229
10
3 057
14
3 071
932
775
532
226
45
2 510
12
2 522
39
54
155
21
97
366
24
61
115
20
105
34
359
366
359
2 636
304
(247)
(3 311)
1 380
4
1 136
1 435
45
47
(93)
6
(32)
80
217
23
2
4
84
83
4 073
3 288
(11)
(478)
543
(21)
(643)
(612)
103
(19)
50
48
10
(1)
3
26
(111)
84
4
(1)
(24)
34
3 273
3
7
30
36
(365)
(457)
(2)
(788)
Cash generated by/(utilised in) operations
4 106
2 117
EXXARO INTEGRATED ANNUAL REPORT 2010 245
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
25. NOTES TO THE CASH FLOW STATEMENT (continued)
25.2 Net financing costs
Net financing costs
Financing costs not involving cash flow (refer note 22)
25.3 Normal tax paid
Amounts (unpaid)/receivable at beginning of year
Amounts charged to the income statements
Arising on translation of foreign entities
Non-current assets classified as held for sale
Amounts unpaid/(receivable) at end of year
25.4 Dividends paid
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
(455)
199
(256)
(478)
1
5
42
(430)
(415)
34
(381)
(433)
(461)
2
(892)
(232)
1
(231)
13
(13)
(339)
2
(337)
(10)
24
(14)
Dividends declared and paid
(1 056)
(1 050)
(1 073)
(1 066)
(68)
(68)
(88)
(88)
606
(795)
606
(795)
25.5
Investments to maintain operations
Replacement of property, plant and equipment
Reconditional spares
25.6
Investments to expand operations
Expansion and new technology
25.7
Investment in other non-current assets
Increase in associates, joint ventures
Decrease/(Increase) in investments in subsidiaries
Increase in non-current financial assets
Increase in investment in joint venture
During July 2009, the group invested R1 082 million in
Mafube Coal Mining (Pty) Limited, its joint venture with
Anglo South Africa Capital (Pty) Limited, which is included
in the coal segment results.
The increase consists of the following:
Property, plant and equipment
Non-current financial assets
Inventories
Trade and other receivables
Deferred tax
Provisions
Trade and other payables
25.8
Income from equity-accounted investments
Income from equity-accounted investments as per income
statement
Dividends received from equity-accounted investments
Non-cash flow income from equity-accounted investments
(1 109)
(46)
(1 155)
(1 522)
(1 522)
(149)
(149)
3 717
1 815
(3 717)
1 815
(960)
(32)
(992)
(990)
(990)
(1 082)
(8)
(1 090)
1 156
3
36
49
(26)
(30)
(106)
1 082
1 898
1 752
(1 898)
1 752
246 EXXARO INTEGRATED ANNUAL REPORT 2010
25. NOTES TO THE CASH FLOW STATEMENT (continued)
25.9
Income from investments
Income from investments as per income statement
Non-cash flow dividends in specie received from subsidiary
25.10 Foreign currency translation reserve
At beginning of year
Closing balance
Movement
Unrealised losses/(profits) in relation to foreign transactions
Revaluation of non-current loans
Arising on translation of foreign entities:
– inventories
– trade and other receivables
– financial assets
– trade and other payables
– utilisation of provision
– taxation paid
– property, plant and equipment acquired
– intangible assets
– investments acquired
– non-current loans
– current loans
– non-controlling interests loans
– share capital
GROUP
2010
Rm
2009
Rm
COMPANY
2010
Rm
2009
Rm
2
2
(802)
716
(86)
(8)
(43)
108
10
17
1
3
3
(1)
(32)
(1)
12
99
(2)
(1)
(29)
2
2
(964)
802
(162)
(48)
(172)
294
20
30
8
5
1
(43)
(2)
30
123
(1)
123
(88)
3 205
(1 000)
2 205
6 731
(4 600)
2 131
2
2
2
(2)
3
3
(3)
4
(3)
(2)
(3)
2
1
25.11 Translation of foreign cash and cash equivalents
Translation differences on cash and cash equivalents
14
67
26. OTHER COMPREHENSIVE INCOME (RESTATED)
GROUP
Exchange differences on translating foreign operations
Share of other comprehensive income of associates
Financial instruments fair value gains/(losses)
recognised in equity on cash flow hedges:
COMPANY
Exchange differences on translating foreign operations
2010
2009
Before-
tax
amount
Rm
(9)
40
227
258
2
2
Tax
Rm
(38)
(77)
(115)
Net-of-
tax
amount
Rm
Before-
tax
amount
Rm
(47)
40
150
143
2
2
(35)
(34)
(474)
(543)
3
3
Tax
Rm
(62)
15
189
142
Net-of-
tax
amount
Rm
(97)
(19)
(285)
(401)
3
3
EXXARO INTEGRATED ANNUAL REPORT 2010 247
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS
27.1 Carrying amounts and fair value amounts of financial instruments
The tables below set out the group’s and company’s classification of each class of financial assets and liabilities, as well as their
fair values.
At fair value through profit or loss
Held for
trading
Rm
Designated
Rm
GROUP
2010
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates and joint ventures
Deferred tax
Financial assets, consisting of:
– Exxaro Environmental Rehabilitation Trust asset
– Richards Bay Coal Terminal (RBCT)
– Ndzalama Game Reserve
– Long-term receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Derivative financial instruments
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Other components of equity
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Deferred tax
Total financial non-current liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Interest-bearing borrowings
Current tax payable
Current provisions
Total current liabilities
Non-current liabilities classified as held for sale
Total liabilities
248 EXXARO INTEGRATED ANNUAL REPORT 2010
529
522
7
529
21
550
136
136
28
28
164
192
192
192
10
10
10
Held-to-
maturity
investments
at amortised
cost
Rm
Loans and
receivables
at amortised
cost
Rm
Available-for-
sale financial
assets at
fair value
Rm
Financial
liabilities
at amortised
cost
Rm
Non-financial
assets and
liabilities
at cost
Rm
Total
carrying
amount
Rm
Fair value
of financial
instruments
Rm
Maximum
exposure
of carrying
amount to
credit risk
Rm
477
477
477
2 712
2 140
4 852
22
5 351
369
369
369
369
13 305
46
75
3 880
726
18 032
3 120
848
105
4 073
43
22 148
2 170
2 321
12 946
17 437
(23)
17 414
201
2 193
1 353
3 747
3 307
3 307
1 983
1 064
622
2 605
14
5 926
66
147
33
1 310
38
22 509
13 305
46
75
3 880
726
1 375
522
369
7
477
19 407
3 120
3 560
105
192
2 140
9 117
85
28 609
2 170
2 321
12 946
17 437
(23)
17 414
3 644
2 193
1 353
7 190
3 047
10
716
147
33
3 953
52
28 609
1 375
522
369
7
477
2 712
192
2 140
1 375
522
369
7
477
192
2 140
42
42
3 443
1 983
10
650
14
EXXARO INTEGRATED ANNUAL REPORT 2010 249
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
GROUP
2009
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates and joint ventures
Deferred tax
Financial assets, consisting of:
– Exxaro Environmental Rehabilitation Trust asset
– Richards Bay Coal Terminal (RBCT)
– Ndzalama Game Reserve
– Long-term receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax receivables
Derivative financial instruments
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Other components of equity
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Derivative financial instruments
Deferred tax
Total non-current liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Interest-bearing borrowings
Current tax payable
Current provisions
Total current liabilities
Non-current liabilities classified as held for sale
Total liabilities
At fair value through profit or loss
Held for
trading
Rm
Designated
Rm
429
422
7
429
17
446
153
153
28
28
181
51
51
51
75
75
45
45
120
As disclosed in the table above, financial liabilities with a carrying amount and fair value of R163 million (2009: R181 million) have
been designated at fair value through profit or loss.
The carrying amount of the financial liabilities designated at fair value through profit or loss at 31 December 2010 was the same
as the contractual amount at maturity date for the year ended 31 December 2009.
250 EXXARO INTEGRATED ANNUAL REPORT 2010
Held-to-
maturity
investments
at amortised
cost
Rm
Loans and
receivables
at amortised
cost
Rm
Available-for-
sale financial
assets at
fair value
Rm
Financial
liabilities
at amortised
cost
Rm
Non-financial
assets and
liabilities
at cost
Rm
Total
carrying
amount
Rm
Fair value
of financial
instruments
Rm
Maximum
exposure
of carrying
amount to
credit risk
Rm
420
420
420
2 649
1 023
3 673
23
4 116
368
368
368
368
11 869
41
87
1 966
629
14 592
3 133
421
57
3 611
47
18 250
2 141
2 046
8 721
12 908
1
12 909
211
1 853
995
3 059
92
49
57
27
225
37
16 230
11 869
41
87
1 966
629
1 217
422
368
7
420
15 809
3 133
3 070
57
51
1 023
7 334
86
23 229
2 141
2 046
8 721
12 908
1
12 909
4 347
1 853
75
995
7 270
2 465
45
407
57
27
3 001
49
23 229
1 217
422
368
7
420
1 217
422
368
7
420
2 649
2 649
51
1 023
51
1 023
40
40
4 136
75
2 373
45
358
12
3 983
3 983
2 373
330
2 703
12
6 698
EXXARO INTEGRATED ANNUAL REPORT 2010 251
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
At fair value through profit or loss
Held for
trading
Rm
Designated
Rm
12
12
12
COMPANY
2010
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Deferred tax
Financial assets, consisting of:
– Exxaro Environmental Rehabilitation Trust asset
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Other components of equity
Retained earnings
Equity attributable to equity holders of the parent
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Total financial non-current liabilities
Current liabilities
Trade and other payables
Interest-bearing borrowings
Total current liabilities
Total equity and liabilities
252 EXXARO INTEGRATED ANNUAL REPORT 2010
Held-to-
maturity
investments
at amortised
cost
Rm
Loans and
receivables
at amortised
cost
Rm
Available-for-
sale financial
assets at
fair value
Rm
Financial
liabilities
at amortised
cost
Rm
Non-financial
assets and
liabilities
at cost
Rm
Total
carrying
amount
Rm
Fair value
of financial
instruments
Rm
Maximum
exposure
of carrying
amount to
credit risk
Rm
2 726
2 726
8 052
1 229
9 281
12 007
266
1
3 291
85
3 643
2
2
10
266
1
6 017
85
12
6 381
8 054
1 229
9 283
10
3 655
15 674
2 347
1 143
8 656
12 146
12 146
27
27
176
176
2 347
1 143
8 656
12 146
12 146
2 718
27
2 745
366
417
783
2 726
2 726
12
12
8 052
1 229
8 052
1 229
2 718
190
417
2 718
2 718
190
417
607
3 325
12 349
15 674
EXXARO INTEGRATED ANNUAL REPORT 2010 253
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
At fair value through profit or loss
Held for
trading
Rm
Designated
Rm
11
11
11
34
34
34
34
34
34
COMPANY
2009
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Deferred tax
Financial assets, consisting of:
– Exxaro Environmental Rehabilitation Trust asset
Total non-current assets
Current assets
Trade and other receivables
Current tax receivable
Derivative financial instruments
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Other components of equity
Retained earnings
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Total financial non-current liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Interest-bearing borrowings
Total current liabilities
Total liabilities
254 EXXARO INTEGRATED ANNUAL REPORT 2010
Held-to-
maturity
investments
at amortised
cost
Rm
Loans and
receivables
at amortised
cost
Rm
Available-for-
sale financial
assets at
fair value
Rm
Financial
liabilities
at amortised
cost
Rm
Non-financial
assets and
liabilities
at cost
Rm
Total
carrying
amount
Rm
Fair value
of financial
instruments
Rm
Maximum
exposure
of carrying
amount to
credit risk
Rm
3 346
3 346
7 056
343
7 399
10 745
240
10
3 322
87
3 659
14
14
18
240
10
6 668
87
11
7 016
3 346
3 346
11
11
7 056
7 056
7 056
14
34
343
7 447
18
34
343
34
343
3 691
14 481
2 318
1 041
7 038
2 318
1 041
7 038
10 397
10 397
3 335
3 335
28
28
190
135
362
552
135
3 335
28
3 363
325
34
362
721
3 887
10 560
14 481
3 335
190
34
362
EXXARO INTEGRATED ANNUAL REPORT 2010 255
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
As disclosed in the table above, there were no financial liabilities designated at fair value through profit or loss as at
31 December 2010 for the company.
The Exxaro Environmental Rehabilitation Trust Fund (EERF) was created and complies with the requirements of both the Minerals
and Petroleum Resources activities.
The EERF receives, holds and invests funds contributed by the Exxaro group of companies for the rehabilitation or management
of negative environmental impacts associated with mining and exploration activities. The EERF receives, holds and invests funds
contributed by the Exxaro mining operations, which contributions are aimed at providing for sufficient funds at date of estimated
closure of mining activities to address the rehabilitation and environmental impacts.
The trustees of the fund are appointed by Exxaro and consist of sufficiently qualified Exxaro employees capable of fulfilling their
fiduciary duties.
The funds are invested by Exxaro’s in-house treasury department with reputable financial institutions in accordance with a strict
mandate to ensure capital preservation and real growth.
Funds accumulated for a specific mine or exploration project can only be utilised for the rehabilitation and environmental impacts
of that specific mine or project.
If a mine or exploration project withdraws from the fund for whatever valid reason, the funds accumulated for such mine or
exploration project are transferred to a similar fund approved by the Commissioner of South African Revenue Services. The fund
cannot be closed down without the permission of the Commissioner of the South African Revenue Services. R106 million
(2009: R67 million) of the investments designated at fair value through profit or loss and the EERF are equity investments listed on
the JSE Limited.
Included in the long-term receivables is an amount of R449 million (2009: R420 million) recoverable from Eskom in respect of the
rehabilitation and environmental expenditure of the Matla and Arnot mines at the end-of-life of these mines. The corresponding
anticipated liability is disclosed as part of non-current provisions (refer note 22).
A 2% increase in the JSE industry average at reporting date would have increased equity by R0,7 million (2009: Rnil) after tax; an
equal change in the opposite direction would have decreased equity by R0,7 million (2009: Rnil). The impact on profit or loss
would have been an increase or decrease of R0,7 million (2009: Rnil) after tax. The analysis has been performed on the same basis
for 2009.
There were no allowances for impairments on long-term receivables or investments in equity instruments at cost during the period
under review.
Fair values
Fair value hierarchy level
Financial assets and liabilities at fair value have been categorised in the following hierarchy structure:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 – Inputs other than quoted prices included in level 1 that are either directly or indirectly observable for the asset/liability.
Level 3 – Inputs for the asset/liability that are not based on observable market data (unobservable inputs).
256 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
Fair value
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
GROUP
2010
Financial assets held for trading at fair value through profit
or loss
– Current derivative financial instruments
Financial assets designated as at fair value through profit
or loss
– Exxaro Environmental Rehabilitation Trust
– Ndzalama Game Reserve
Available-for-sale financial assets
– Richards Bay Coal Terminal
Financial liabilities held for trading at fair value through profit
or loss
– Current derivative financial instruments
Financial liabilities designated as at fair value through profit
or loss
– Non-current interest-bearing borrowings
– Current interest-bearing borrowings
192
192
549
542
7
369
369
10
10
164
136
28
542
542
Total
1 284
542
192
192
10
10
164
136
28
366
7
7
369
369
376
Reconciliation of level 3 hierarchy
Opening balance
Movement during the year
Purchases
Settlements
Closing balance
Ndzalama Game Reserve
Rm
Richards Bay Coal Terminal
Rm
7
7
368
36
(35)
369
EXXARO INTEGRATED ANNUAL REPORT 2010 257
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
Fair value
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
COMPANY
2010
Financial assets designated as at fair value through profit
or loss
– Exxaro Environmental Rehabilitation Trust
11
11
GROUP
2009
Financial assets held for trading at fair value through profit
or loss
– Current derivative financial instruments
Financial assets designated as at fair value through profit or
loss
– Exxaro Environmental Rehabilitation Trust
– Ndzalama Game Reserve
Available-for-sale financial assets
– Richards Bay Coal Terminal
Financial liabilities held for trading at fair value through profit
or loss
– Non-current derivatives
– Current derivatives
Financial liabilities designated as at fair value through profit
or loss
– Non-current interest-bearing borrowings
– Current interest-bearing borrowings
Total
Reconciliation of level 3 hierarchy
Opening balance
Movement during the year
Total gains or losses for the period recognised
in profit or loss
Purchases
Sales
Transfers out of level 3
Closing balance
422
422
51
51
429
422
7
368
368
120
75
45
181
153
28
1 149
422
Ndzalama
Game Reserve
Rm
Richards Bay
Coal Terminal
Rm
6
1
7
351
50
(33)
368
51
51
120
75
45
181
153
28
352
Igoda
Rm
25
7
7
368
368
375
Mafube
Rm
5
(25)
(5)
258 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.1 Carrying amounts and fair value amounts of financial instruments (continued)
Fair value
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
COMPANY
2009
Financial assets held for trading at fair value through profit
or loss
– Current derivative financial instruments
34
Financial assets designated as at fair value through profit
or loss
– Exxaro Environmental Rehabilitation Trust
11
11
At 31 December 2010 the carrying amounts of cash and cash equivalents, trade and other receivables and trade and other
payables approximate their fair values due to the short-term maturities of these assets and liabilities.
Of the financial assets and liabilities as at 31 December 2010 and 2009, the interest-bearing borrowings had their fair values
determined based on published price quotation in active market. The borrowings’ net present value (NPV) is calculated using the
nominal annual compounding annually (NACA) rate.
No financial assets and liabilities had their fair value determined using valuation techniques during the year ended 31 December
2010 or 2009.
For the financial year ended 31 December 2010, the investment in Richards Bay Coal Terminal (RBCT) had no active market
available. RBCT is the largest single export coal terminal in the world and is situated in Richards Bay. It is a 24-hour operation
shipment/export. Exxaro acquired 8 662 shares (1,20% stake) in RBCT through the merger of the former Eyesizwe (Pty) Limited
and Kumba Resources Limited which was valued at R2 million on 1 November 2006. Additional 10 000 shares were acquired in
RBCT on 30 June 2008 for R213 million. These shares were purchased at a price of US$30 million. The 10 000 ordinary shares
entitle Exxaro to a 1,39% shareholding in RBCT. The 10 000 shares also entitle Exxaro to 1Mt of export allocation. All the
shareholders in RBCT acquire equity instruments in order to obtain the right to export coal. The South Dunes Coal Terminal (SDCT)
also holds an investment in RBCT, of which Exxaro Coal (a 100% subsidiary of Exxaro Resources Limited) holds 33% in SDCT,
with the effective value of R186 million at 31 December 2010 (2009: R186 million). All this coupled with minor wharfage expenses,
results in the overall investment in RBCT with a carrying value of R400 million (2009: R401 million). The fair value could not be
measured reliably because RBCT shares do not form part of an active market as there are no other shares available in South
Africa. Willing buyers and sellers cannot be found at any time (restricted to a select few) of the same nature (homogenous) and
prices are not available to the public. Although one could attach a certain set of market influences that significantly affect the value
of such shares, the volatility of e.g. freight rates would cause the valuation to vary significantly.
The fair value of the financial instruments at initial recognition was determined to be the transaction price. Upon initial recognition
no differences existed as a result of the fair value upon initial recognition differing to the value of the financial instrument determined
using a valuation technique.
Subsequent to initial recognition, as the fair value of the investment in RBCT could not be measured reliably, the investment has
been carried at cost. The carrying value of the investment in RBCT is R400 million (2009: R401 million).
It is not anticipated that the RBCT investments will be disposed of in the near future as the group has no intention to dispose of it.
27.2 Reclassification of financial assets
No reclassification of financial assets occurred during the period.
EXXARO INTEGRATED ANNUAL REPORT 2010 259
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
27. FINANCIAL INSTRUMENTS (continued)
27.3 Statement of changes in equity
Included in the statement of “other comprehensive income
non-owner related movements” are the following pre-tax
adjustments relating to financial instruments:
– Effective portion of change in fair value of cash flow hedge
310
(256)
The above amounts are all included in the hedging reserve.
27.4 Risk management
27.4.1
Financial risk management
The group’s corporate treasury function (other than Exxaro Australia Sands (Pty) Limited which operates on a
decentralised basis but within the approved group policies), provides financial risk management services to the business,
co-ordinates access to domestic and international financial markets, and monitors and manages the financial risks
relating to the operations of the group through internal risk reports which analyses exposures by degree and magnitude
of risks. These risks include market risk (including foreign currency risk, interest rate risk, and price risk), credit risk and
liquidity risk.
The group’s objectives, policies and processes for measuring and managing these risks are detailed below. The group’s
management of capital is detailed in the report of the directors.
The group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk
exposures. The use of derivative financial instruments is governed by the group’s policies approved by the board of
directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial
derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and
exposure limits is reviewed by the internal auditors on a continuous basis and results are reported to the board audit
committee.
The group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes. The group enters into financial instruments to manage and reduce the possible adverse impact on earnings
and cash flows of changes in interest rates, foreign currency exchange rates and commodity prices. Compliance with
policies and exposure limits is reviewed by the internal auditors annually, with the results being reported to the audit
committee.
27.4.2 Market risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices
and equity prices will affect the group’s income or the value of its holdings of financial instruments.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
whilst optimising the return on risk.
The group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see
27.4.2.1 below), commodity prices (see 27.5.2.2 below) and interest rates (see 27.4.2.3 below). The group enters into
a variety of derivative financial instruments to manage its exposure to interest rate, foreign currency risks and commodity
price risks, including:
• forward foreign exchange contracts (FECs) and currency options to hedge the exchange rate risk arising on the
export of coal, base metal and mineral sands products as well as imported capital expenditure;
• forward interest rate contracts to manage interest rate risk;
• interest rate swaps to manage the risk of rising interest rates;
• forward exchange contracts to hedge the commodity prices arising on the export of zinc and lead.
260 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.1
Foreign currency risk management
The group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise. The currency in which transactions are entered into is mainly denominated in US dollars
(USD), euro, and Australian dollars (AUD). Exchange rate exposures are managed within approved policy
parameters utilising FECs, currency options and currency swap agreements.
The group maintains a fully covered exchange rate position in respect of foreign currency borrowings and
imported capital equipment resulting in these exposures being fully converted to rand. Trade-related import
exposures are managed through the use of economic hedges arising from export revenue as well as through
FECs. Trade-related export exposures are hedged using FECs and options with specific focus on short-term
receivables.
Uncovered foreign debtors at 31 December 2010 amount to US$114 million (2009: US$142 million),
whereas uncovered cash and cash equivalents amount to US$44 million (2009: US$40 million). All capital
imports were fully hedged. There were no imports which were not fully hedged during both 2009 and 2009.
Monetary items have been translated at the closing rate at the last day of the reporting period US$1:R6,60
(2009: US$1:R7,40).
The FECs which are used to hedge foreign currency exposure mostly have a maturity of less than one year
from the reporting date. When necessary, FECs are rolled over at maturity.
Pre-tax unrealised exchange losses amounting to Rnil (2009: Rnil) arising from the revaluation of Exxaro
Australia Sands Pty Limited foreign currency loans for which an economic hedge exists through specific
future export sales revenue, are recognised in equity as hedge accounting has been applied.
The following significant exchange rates applied for both group and company during the year:
2010
USD
Euro
Australian dollar
2009
USD
Euro
Australian dollar
Average
spot rate
Average
achieved rate
Closing
spot rate
7,30
9,68
6,71
8,38
11,81
6,75
7,72
9,94
6,80
8,39
12,25
6,58
6,63
8,83
6,75
7,40
10,64
6,64
EXXARO INTEGRATED ANNUAL REPORT 2010 261
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.1
Foreign currency risk management
Foreign currency
Material FECs and currency options, which relate to specific balance sheet items, that do not form part of
a hedging relationship or for which hedge accounting was not applied at 31 December 2010 and
31 December 2009, are summarised as follows:
Market-
related
value
Rm
Foreign
amount
million
Contract
value
Rm
Recognised
fair value
profits/
(losses)
Rm
676
101
726
50
164
22
175
11
GROUP
2010
Exports
United States dollar – FECs
2009
Exports
United States dollar – FECs
Cash flow hedges – foreign currency risk
The group has entered into certain forward exchange contracts, which relate to specific foreign commitments
not yet due and export earnings for which the proceeds are not yet receivable. Details of the contracts at
31 December 2010 and 31 December 2009 were as follows:
Market-
related value
Rm
Foreign
currency
million
Contract
value
Rm
Recognised
fair value
in equity
Rm
GROUP
2010
Imports
United States Dollar – FECs
Euro – FECs
Less than three months
Three months
Total
Less than three months
Six months
One year
Total
Exports
United States dollar – FECs
Less than three months
Three months
Six months
United States dollar – Note
holders’ loan
One year
> three years
Total
10
1
11
10
6
23
39
179
106
60
30
407
782
1
1
2
1
1
2
4
27
16
9
5
61
118
10
1
11
10
7
28
45
214
126
64
30
518
952
(5)
(5)
(35)
(20)
(4)
(111)
(170)
Note: In respect of an US$83 million (2009: 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.
262 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.1
Foreign currency risk management (continued)
Cash flow hedges – foreign currency risk (continued)
With respect to the above-mentioned cash flow hedges, the future expected cash flows are represented below:
Expected future cash flows
– United States dollar – FECs
– United States Dollar – Note holders’
loan
Expected gain/(loss) in profit or loss
(at maturity)
– United States dollar – FECs
– Euro – FECs
– United States dollar – Note holders’
loan
GROUP
2009
Imports
United States dollar – FECs
Euro – FECs
Less than three months
Six months
Total
Less than three months
Three months
Total
Exports
United States dollar – Note
holders’ loan
Less than three months
One year
> three years
Total
2011
Rm
404
(59)
(6)
(111)
2012
Rm
>2012
Rm
Total
Rm
30
407
404
437
(59)
(6)
(111)
(222)
Market-
related value
Rm
Foreign
currency
million
Contract
value
Rm
Recognised
fair value
in equity
Rm
12
2
14
11
2
13
133
12
432
577
3
3
1
1
18
2
58
78
10
3
13
10
2
12
135
12
432
579
1
1
1
1
(2)
(2)
Note: In respect of an US$60 million (2008: 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.
EXXARO INTEGRATED ANNUAL REPORT 2010 263
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.1
Foreign currency risk management (continued)
Cash flow hedges – foreign currency risk (continued)
With respect to the above-mentioned cash flow hedges, the future expected cash flows are represented below:
Expected future cash flows
– United States dollar – FECs
– Euro – FECs
– United States dollar – Note holders’
loan
Expected gain/(loss) in profit or loss
(at maturity)
– United States dollar – FECs
– Euro – FECs
2010
Rm
135
12
(2)
1
2011
Rm
>2011
Rm
12
432
Total
Rm
135
12
444
(2)
1
Market-
related value
Rm
Foreign
currency
million
Contract
value
Rm
Recognised
fair value
in equity
Rm
COMPANY
2010
Imports
Euro – FECs
Less than three months
Total
1
1
1
1
With respect to the above-mentioned cash flow hedges, the future expected cash flows are represented below:
2011
Rm
>2011
Rm
2012
Rm
1
Market-
related value
Rm
Foreign
currency
million
Contract
value
Rm
Total
Rm
1
Recognised
fair value
in equity
Rm
Expected future cash flows
Euro – FECs
COMPANY
2009
Imports
– United States dollar – FECs
Less than three months
Total
1
1
1
1
264 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.1
Foreign currency risk management (continued)
Cash flow hedges – foreign currency risk (continued)
With respect to the above-mentioned cash flow hedges, the future expected cash flows are represented below:
Expected future cash flows
– United States dollar – FECs
Foreign currency sensitivity
2010
Rm
>2011
Rm
2011
Rm
1
Total
Rm
1
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$), an increase in the exchange rate of the rand (ZAR) against the dollar (US$) (e.g. FEC taken
out on exports at R7,94:US$1, with actual rate coming out at R8,73:US$1) represents a weakening of the
rand against the US dollar, which results in a loss incurred of R0,79. The opposite applies for a decrease in
the exchange rate.
Profit or loss
Equity
GROUP
United States dollar
Euro
COMPANY
2010
Rm
179
45
2009
Rm
2010
Rm
2009
Rm
167
(29)
(28)
United States dollar
3
17
For imports (euro), an increase in the exchange rate of the rand (ZAR) against the Euro (e.g. 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. 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.
EXXARO INTEGRATED ANNUAL REPORT 2010 265
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.2 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 flow price hedges for coal at year-end are insignificant due to limited hedged
exports and fixed price agreements.
During 2010 , the ineffective portion of the cash flow hedges reported in profit/(loss), amounted to R5 million
(2009: Rnil). The current price hedges on lead and zinc will mature in December 2011.
As of 31 December 2010 the net fair value of commodity derivatives reflected a R55 million loss (2009:
R87 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 R13 million
(2009: R13 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 flow volatility. Price hedging is also undertaken for future lead
sales at Rosh Pinah.
The potential profit 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 2009.
Profit or loss
Equity
Lead
Zinc
2010
Rm
2009
Rm
2010
Rm
(2)
(11)
2009
Rm
(2)
(11)
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 flow hedges – commodity risk
The forward hedged position at balance sheet date is shown below:
2010
Recognised transactions
Lead
Price
Currency
Zinc
Price
Currency
Attributable to:
– tax
– non-controlling interests
Market-
related
value
Rm
Tons
Foreign
currency
million
Contract
value
Rm
Recog-
nised
fair value
in equity
Rm
5 500
26 700
92
74
438
281
11
11
55
41
72
105
365
399
885
118
941
(21)
31
(73)
118
21
10
86
The above-mentioned hedges mature in 2011, which year the future expected cash flows are expected.
266 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.2 Commodity risk management (continued)
Cash flow hedges – commodity risk (continued)
2009
Recognised transactions
Lead
Currency
Zinc
Price
Currency
Attributable to:
– tax
– non-controlling interests
Market-
related
value
Rm
Tons
Foreign
currency
million
Contract
value
Rm
Recog-
nised
fair value
in equity
Rm
10 675
53 100
138
158
1 237
1 070
20
20
114
85
186
186
1 056
1 185
2 603
239
2 613
(48)
28
(181)
115
(18)
(9)
(113)
With respect to the above-mentioned hedges, the future expected cash flows are represented below:
2010
2011
2012
2013
Total
Expected future cash inflows
Lead
Zinc
27.4.2.3
Interest rate risk management
162
917
210
931
372
1 848
The group is exposed to interest rate risk as it borrows and deposits funds at both fixed and floating interest
rates on the money market. The risk is managed by maintaining an appropriate mix between fixed and
floating rate borrowings taking into account future interest rate expectations. The financial institutions
chosen are subject to compliance with the relevant regulatory bodies.
The interest rate repricing profile is summarised below:
AT 31 DECEMBER 2010
Term borrowings (under the IFRS 7 scope)
% of total borrowings
AT 31 DECEMBER 2009
Term borrowings (under the IFRS 7 scope)
% of total borrowings
1 – 6
months
Rm
7 – 12
months
Rm
Beyond
1 year
Rm
Total
borrowings
Rm
3 706
85
3 790
85
654
15
704
15
4 360
100
4 494
100
EXXARO INTEGRATED ANNUAL REPORT 2010 267
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.2 Market risk management (continued)
27.4.2.3
Interest rate risk management (continued)
The group makes use of interest rate derivatives to hedge specific exposures in the interest rate repricing
profile of existing borrowings. The value of borrowings hedged by interest rate derivatives, the instruments
used and the respective rates applicable to these contracts are as follows:
Borrowings
hedged
Rm
Floating
interest
payable
%
Floating
interest
receivable
%
Fixed
interest
payable
%
Fixed
interest
receivable
%
Recog-
nised
fair value
gain/(loss)
%
At 31 December 20091
Local
Interest rate derivatives
beyond one year:
– Interest rate swaps
675
3 month
Jibar
11,1
(13)
1 The interest rate swap ceased at the end of November 2010.
The following table reflects the potential impact on earnings, given a movement in interest rates of
50 basis points:
Profit/(loss)
27.4.3
Liquidity risk management
Increase of 50 basis points
in interest rate
Decrease of 50 basis points
in interest rate
2010
Rm
(18)
2009
Rm
(18)
2010
Rm
18
2009
Rm
18
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient 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 flows 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 financial 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.
268 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.3
Liquidity risk management (continued)
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
GROUP
2010
Rm
21 850
4 360
17 490
2009
Rm
16 136
4 754
11 382
The group’s capital base, the borrowing powers of the company and the group were set at 125% of shareholders’ funds
for both the 2010 and 2009 financial 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, financial risk management policies and procedures are entrenched to
ensure the timeous matching of orders placed with goods received notes or services acceptances and invoices.
Maturity profile of financial instruments
The following table details the group’s contractual maturities of financial liabilities:
Maturity
Carrying
amount
Rm
Contrac-
tual
cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
More
than 5
years
Rm
367
277
7
113
31
62
61
19
10
448
163
3
133
2
1 099
17
594
2 564
285
594
10
2 564
42
285
5
GROUP
2010
Financial assets
Exxaro Environmental Rehabilitation
Trust asset
Richards Bay Coal Terminal (RBCT)
Ndzalama Game Reserve
Derivative financial instruments
Long-term receivables
Trade and other receivables
Cash and cash equivalents
Percentage profile (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Derivative financial instruments
Percentage profile (%)
Derivative financial liabilities
(Included in the above)
Foreign exchange forward contracts
used for hedging
– Sell (rands inflow)
Other forward exchange contracts
– Buy (rands outflow)
542
369
7
192
477
2 734
2 140
6 461
100
4 093
1 997
10
6 100
100
726
56
542
369
7
192
477
2 734
2 140
6 461
100
4 093
1 997
10
6 100
100
192
2 734
2 140
5 066
78
650
1 997
10
2 657
44
EXXARO INTEGRATED ANNUAL REPORT 2010 269
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.3
Liquidity risk management (continued)
Maturity profile of financial instruments (continued)
Maturity
Carrying
amount
Rm
Contrac-
tual
cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
GROUP
2009
Financial assets
– Exxaro Environmental Rehabilitation
Trust asset
– Richards Bay Coal Terminal (RBCT)
– Ndzalama Game Reserve
– Long-term receivables
439
368
7
420
439
368
7
420
– Trade and other receivables
2 673
2 673
2 673
11
33
108
99
7
More
than 5
years
Rm
320
235
420
– Derivative financial instruments
– Cash and cash equivalents
Percentage profile (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Derivative financial instruments
51
1 023
4 981
100
4 494
2 385
120
51
1 023
4 981
100
4 494
2 385
120
51
1 023
3 747
75
407
2 385
45
6 999
6 999
2 837
Percentage profile (%)
100
100
40
44
1
214
4
975
20
742
3 345
75
817
12
3 345
48
Derivative financial liabilities
(Included in the above)
Foreign exchange forward contracts
used for hedging
– Sell
Other forward exchange contracts
– Buy
175
24
270 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.3
Liquidity risk management (continued)
Maturity profile of financial instruments (continued)
Maturity
Carrying
amount
Rm
Contrac-
tual
cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
12
12
10 778
10 778
10 778
1 229
1 229
1 229
12 019
12 019
12 007
100
100
99
12
12
3 135
3 135
190
190
3 325
3 325
100
100
417
190
607
18
617
2 101
617
2 101
19
63
COMPANY
2010
Financial assets
Exxaro Environmental Rehabilitation
Trust asset
Trade and other receivables
Cash and cash equivalents
Percentage profile (%)
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Percentage profile (%)
Derivative financial liabilities
(Included in the above)
Foreign exchange forward contracts
used for hedging
– Buy
1
EXXARO INTEGRATED ANNUAL REPORT 2010 271
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.3
Liquidity risk management (continued)
Maturity profile of financial instruments (continued)
COMPANY
2009
Financial assets
Exxaro Environmental Rehabilitation
Trust asset
Trade and other receivables
Derivative financial instruments
Intercompany loan debits
Cash and cash equivalents
Maturity
Carrying
amount
Rm
Contrac-
tual
cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
11
11
11
10 402
10 402
10 402
34
34
34
343
343
343
10 790
10 790
10 779
11
Percentage profile (%)
100
100
100
Financial liabilities
Interest-bearing borrowings
Trade and other payables
Derivative financial instruments
Percentage profile (%)
Derivative financial liabilities
(Included in the above)
Foreign exchange forward contracts
used for hedging
3 697
3 697
301
32
301
32
4 030
4 030
100
100
362
301
32
695
17
619
2 716
619
16
2 716
67
– Buy
1
272 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.4
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 financial institutions of high credit standing. The group exposure and the credit
ratings of its counterparties are continuously 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 credit worthiness or country risk assessment, is further mitigated through a combination of confirmed
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 specific loss
component that relates to individually significant 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 financial assets.
At the reporting date, the amount of change in the fair value of financial liabilities designated at fair value through profit
or loss, attributable to credit risk is as follows:
Cumulative
Current financial year
Exposure to credit risk
GROUP
COMPANY
2010
Rm
(2)
2009
Rm
(2)
(8)
2010
Rm
2009
Rm
The carrying amount of financial assets represents the maximum credit exposure. None of the financial instruments
below was held as collateral for any security provided.
The maximum exposure to credit risk at both reporting dates was equal to the carrying value of financial assets for both
group and company.
Detail of the trade receivables credit risk exposure:
By industry
Manufacturing (including structural metal and steel)
Public utilities
Other
By geographical area
South Africa
Asia
Europe
USA
Other
GROUP
2010
%
24
31
45
100
50
9
20
20
1
2009
%
25
32
43
100
41
9
21
15
14
100
100
EXXARO INTEGRATED ANNUAL REPORT 2010 273
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.4
Credit risk management (continued)
Exposure to credit risk (continued)
The group does not have any significant 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 specified payments to reimburse the holder for a loss
it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.
Guarantee provided by banks to secure financing
The carrying amount of the financial assets at
reporting date was:
Neither past due nor impaired
– trade and other receivables
– other financial assets
– derivative financial instruments
– non-current assets held for sale
– cash and cash equivalents
Past due or impaired
– trade and other receivables
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
6 457
2 729
1 375
192
21
4 978
2 670
1 217
51
17
12 019
10 779
11
–
10 791
10 402
12
34
2 140
1 023
1 229
343
45
234
3 293
3 289
Total financial assets
6 502
5 212
15 312
14 080
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 norm.
There were no financial assets with renegotiated terms during the 2010 or 2009 reporting periods.
274 EXXARO INTEGRATED ANNUAL REPORT 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.4
Credit risk management (continued)
Exposure to credit risk (continued)
Trade and other receivables age analysis
Past due but not impaired
One – 30 days overdue
61 – 90 days overdue
Total carrying amount of financial instruments
past due but not impaired
Past due and impaired
Total carrying amount of financial instruments
past due and impaired
Total carrying amount of financial instruments
past due or impaired
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
5
5
40
40
45
1
1
2
233
3 293
3 289
233
3 293
3 289
235
3 293
3 289
Before the financial 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.
No collateral was held by the Exxaro group as security and other enhancement over the financial assets during the years
ended 31 December 2010 or 2009.
Loans and receivables designated at fair value through profit or loss
The group had no loans and receivables designated as at fair value through profit 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 respect to the transaction with
that third party.
EXXARO INTEGRATED ANNUAL REPORT 2010 275
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
27. FINANCIAL INSTRUMENTS (continued)
27.4 Risk management (continued)
27.4.4
Credit risk management (continued)
The carrying value of financial assets that may be repledged or resold by counterparties are as follows:
Collateral (continued)
GROUP
COMPANY
Trade and other receivables
Cash and cash equivalents
2010
Rm
2009
Rm
2010
Rm
44
61
105
2009
Rm
41
45
86
These transactions are conducted under terms that are usual and customary to standard lending and borrowing
activities.
No financial assets were repledged during the year under review for collateral purposes.
Guarantees
The group did not during the period obtain financial or non-financial assets by taking possession of collateral it holds as
security or calling on guarantees.
There were no guarantees provided by banks to secure financing during the financial years ended 31 December 2010
or 2009. For all other guarantees, refer to note 31 on contingent liabilities.
27.4.5 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.
28. 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 finance costs or expenses in respect of bad debts or doubtful debts incurred with regard to the joint ventures or the
associates during the financial years ended 31 December 2010 or 2009.
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 (refer note 18)
– included in trade and other payables (refer note 24)
– included in cash and cash equivalents
– included in financial assets
2010
2009
Joint
ventures
Rm
Associates
Rm
Joint
ventures
Rm
Associates
Rm
53
344
3
10
24
582
7
89
224
156
10
311
38
79
223
162
48
164
1
28
During both years under review, there was no provision raised for doubtful debts related to the outstanding balances above.
276 EXXARO INTEGRATED ANNUAL REPORT 2010
28. RELATED PARTY TRANSACTIONS (continued)
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 significant service level commitment fees and 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
Special purpose entities
2010
Rm
764
143
152
2009
Rm
708
139
152
The group has an interest in the following special purpose entities which are consolidated unless otherwise indicated:
Entity
Exxaro Environmental Rehabilitation Fund
Nature of business
Trust fund for mine closure
Exxaro Employee Empowerment Participation Scheme Trust
Employee share incentive trust
Exxaro Foundation
Exxaro Chairman’s Fund
Local social economic development1
Local social economic development1
Exxaro People Development Initiative
Local social economic development – bridging classes1
Kumba Resources Management Share Trust
Management share incentive trust
Mafube Coal Mining (Pty) Limited
1 Non-profit organisations.
Directors
Trust fund for mine closure
Details relating to directors’ emoluments and shareholdings (including options) in the company are disclosed in the Directors’
remuneration report.
Senior employees
Details relating to option and share transactions are disclosed in note 30.
Key management personnel
For Exxaro Resources Limited other than the executive and non-executive directors, no other key management personnel were identified.
Refer to page 192 for details on directors’ remuneration.
For the group, for 2010 and 2009, the executive committee has been identified as being key management personnel.
Short-term employee benefits
Share-based payments – related expense
Total compensation paid to key management personnel
Shareholders
2010
Rm
35
21
56
2009
Rm
34
7
41
The principal shareholders of the company at 31 December 2010 are detailed in the “Analysis of Shareholders” schedule on page 168 of
the annual report.
Contingent liabilities
Details are disclosed in note 31.
EXXARO INTEGRATED ANNUAL REPORT 2010 277
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
29. 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 profit or losses and assets and liabilities by reportable segment:
Segment profit or loss
Segment revenue
Total revenue
Inter-segmental
External
Segment net operating profit/(loss)
Interest income (external)
Interest expense
Interest adjustment on non-current provisions (refer note 22)
Depreciation and amortisation of intangible assets
Impairment charge and reversals
Income tax expense/(income)
Other non-cash flow items not disclosed above
Cash inflow from operations
Cash generated by operations
Income/(loss) from equity accounted investments
Capital expenditure
Segment assets and liabilities
Deferred tax assets
Investments in associates (equity accounted)
External assets (excluding deferred tax and investments in equity
accounted associates and joint ventures)
Total assets
Liabilities (external)
Deferred tax liabilities
Current tax payable
Total liabilities
Additions in non-current assets1
Coal
Tied operations
Commercial
operations
KZN Sands
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2 952
2 681
7 563
7 050
1 288
705
2 952
2 681
7 563
7 050
1 288
705
75
2 504
1 830
(66)
(1 447)
186
2
32
39
135
18
243
206
44
22
121
569
556
21
2
(60)
42
(42)
22
139
177
67
31
61
4
70
8
3
50
(7)
467
249
171
478
185
3 094
2 482
2 999
1 943
1 435
358
29
188
(311)
3
(44)
150
251
1 740
924
52
87
48
22
100
179
1 333
1 333
629
121
16
766
623
623
816
9 792
8 566
2 741
1 943
9 840
8 588
2 841
2 122
2 487
1 606
533
426
60
1 135
5
132
899
20
881
3 754
2 525
1 741
2 006
533
52
426
87
1 Excluding financial instruments, deferred tax, post-employment benefit assets and rights under insurance contracts.
The group relies on two of its major customers for its revenue from the tied coal operations, commercial coal operations, base metals
Zincor and “Other” reportable segments. The group has revenues from two external customers which account for at least 10% or more
individually to the group’s revenues (15% and 28% (2009:15% and 31%)). The total amount of revenue from these two customers was
R2 538 million and R4 754 million respectively (2009: R2 249 million and R4 643 million respectively).
278 EXXARO INTEGRATED ANNUAL REPORT 2010
Mineral sands
Base metals
Other
Total
Namakwa Sands
Australia Sands
Rosh
Pinah
Zincor
Other base metals
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2010
Rm
2009
Rm
2010
Rm
2009
Rm
1 801
1 334
1 551
1 469
1 801
1 334
1 551
1 469
107
(110)
138
2
3
3
(3)
3
43
9
(2)
4
48
10
674
(485)
189
143
4
1
(1)
166
147
186
161
52
(30)
(13)
307
667
(71)
66
103
(87)
(24)
31
298
109
23
182
260
43
19
216
167
(397)
169
105
5
7
12
55
22
43
203
188
566
1 113
1 016
213
188
17 155
15 009
485
397
1 598
1 413
(171)
(47)
(85)
(66)
5
25
58
(62)
(2)
(115)
(191)
1
1
18
53
(9)
5
11
(35)
5
26
3
(58)
(58)
93
213
(120)
71
255
2
56
(22)
41
23
(62)
(44)
188
17 155
15 009
(34)
60
389
4
2 636
135
391
199
304
145
526
34
39
1 380
1 136
4
1 435
665
53
766
413
4 073
3 288
4 106
2 117
37
40
45
52
(1)
1
(7)
(65)
(70)
136
3 624
1 762
3 717
1 898
217
182
424
557
76
69
96
69
1
72
93
2 677
1 982
55
58
(15)
(82)
136
83
3 273
3 415
3 021
3 453
3 328
3 473
3 006
3 371
369
299
1 355
1 229
369
217
299
182
1 355
1 229
424
557
620
620
161
87
1
249
76
473
473
183
64
247
69
1 208
1 110
1 344
1 193
574
563
16
579
69
574
96
60
369
40
469
6
1
7
38
342
331
726
629
292
3 511
1 674
3 880
1 966
65
1 975
986
24 003
20 634
395
5 828
2 991
28 609
23 229
41
(39)
4
6
1
3 581
4 105
9 695
9 268
10
(3)
11
12
1 353
147
995
57
3 588
4 128
11 195
10 320
129
119
2 735
3 090
EXXARO INTEGRATED ANNUAL REPORT 2010 279
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
29. OPERATING SEGMENTS (continued)
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
2010
Rm
2009
Rm
2010
Rm
2009
Rm
9 908
9 279
14 454
12 532
2
4 046
1 151
1 000
1 048
17 155
4
3 445
886
31
1 364
15 009
308
335
78
2 499
55
1 079
17 339
14 001
1 Excluding financial instruments, deferred tax, post-employment benefit assets and rights under insurance contracts.
No asymmetrical (irregular) allocations to reportable segments occurred during the periods under review. There were no material changes
in total assets disclosed from the last annual financial statements.
Total segment revenue, which excludes value added tax, represents the gross value of goods invoiced. Export revenue is recorded
according to the relevant sales terms, when the risks and rewards of ownership are transferred. The group uses the basis of significant
marketing regions to allocate external revenues to the individual countries.
Total segment revenue further includes operating revenues directly and reasonably allocable to the segments. These sales are made on
a commercial basis.
Segment net operating profit equals segment revenue less segment expenses and includes impairment charges and goodwill amortisation.
Segment expenses represent direct or reasonably allocable operating expenses on a segment basis.
Segment assets and liabilities include directly and reasonably allocable operating assets and liabilities. This information is not regularly
provided to the chief decision maker.
There were no differences in the way segment profit or loss is measured in comparison to the previous annual period or between the
reportable segments’ profits or losses and the group’s profit or loss.
280 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS
Retirement funds
Independent funds provide retirement and other benefits for all permanent employees, retired employees, and their dependants. At the
end of the financial year, the main defined 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; and
• 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 after all regulatory approvals had been obtained.
Members generally pay a contribution of 7%, with the employer’s contribution of 10% in general 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).
Defined contribution funds
Membership of each fund at 31 December 2010 and 31 December 2009 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
members1
2010
Number
Working
members1
2009
Number
Employer
contri-
butions
2010
Rm
Employer
contri-
butions
2009
Rm
2 473
3 038
986
1 840
1 111
992
2 516
3 625
893
1 906
1 177
421
75
33
14
13
32
18
66
37
12
15
31
8
10 440
10 538
185
169
643
85
42
770
702
131
38
871
27
1
3
31
25
1
2
28
1 Working members who are contributing members to an accredited retirement fund.
Due to the nature of these funds the accrued liabilities by definition equate to the total assets under control of these funds.
EXXARO INTEGRATED ANNUAL REPORT 2010 281
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Defined benefit funds
Exxaro previously disclosed its interest as a participating employer in the closed defined benefit funds namely the Mittal Steel South Africa
Pension funds and Iscor Retirement Fund. Such interest was disclosed while final confirmation 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. Both such final confirmations were received in 2007.
The group has a defined benefit obligation for the provision of severance benefits to employees of the Rosh Pinah operation in accordance
with Namibian law. As the severance benefits are only payable on retirement or the involuntary termination of services from the side of the
employer, this is accounted for as a post-retirement service obligation. This plan is a defined benefit obligation. No other post-retirement
benefits are provided to these employees.
The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 December 2009 by
Alexander Forbes. The present value of the defined obligation, and the related current service cost and past service cost, were measured
using the projected unit credit method.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Discount rate
Inflation rate
Salary increase rate
Amounts recognised in profit or loss in respect of the defined benefit plan were as follows:
Current service cost
Interest on obligation
The expense for the year is included in the employee benefits expense in the income statement.
Reconciliation of the opening and closing balances of the present value of the defined obligation:
Defined benefit obligation at beginning of year
Plus: Current service cost
Plus: Interest cost
Defined benefit obligation at end of year
Refer note 22 for detail on liability.
Determination of estimated post-retirement expense for the next financial year:
Current service cost
Interest cost
Expense
2010
%
7,50
4,00
5,50
2010
Rm
1
1
2
3
1
1
5
2011
Rm
1
1
2
2009
%
7,50
4,00
5,50
2009
Rm
3
3
3
3
2010
Rm
1
1
2
282 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS (continued)
Medical funds
The group and company contribute to defined benefit medical aid schemes for the benefit 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
R92 million (2009: R75 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. Exxaro Coal Mpumalanga’s contribution
to the post-retirement medical aid obligation for the year ended 31 December 2010 amounted to R2 million (2009: R1 million).
The post-retirement liability of Namakwa Sands is of a defined benefit 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 benefit, which is no longer offered,
applied to employees employed prior to 2001 by Namakwa Sands.
The obligation represents a present value amount, which is actuarially valued on an annual basis. Any surplus or deficit arising from the
valuation is recognised in the income statement. The provision is expected to be utilised over the expected lives of the participants of
scheme.
Equity compensation benefits
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) in December 2006. Kumba Resources was renamed
Exxaro Resources Limited (Exxaro) on 27 November 2006.
As Sishen Iron Ore was a wholly owned subsidiary of Kumba Resources before the unbundling of Kumba Iron Ore, senior employees and
directors of Sishen Iron Ore 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.
Shares and/or options held in terms of Kumba Management Deferred Purchase Share Scheme are released in five equal tranches
commencing on the second anniversary of an offer date and expire on the ninth anniversary of an offer date.
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.
Options granted in terms of the Kumba Management Share Option Scheme can be exercised over five years commencing on the first
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 first anniversary of offer date;
• additional 20% after second anniversary of offer date;
• additional 20% after third anniversary of offer date;
• additional 25% after fourth anniversary of offer date; and
• additional 25% after fifth anniversary of offer date.
The options not exercised lapse by the seventh anniversary of the offer date.
EXXARO INTEGRATED ANNUAL REPORT 2010 283
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (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 option with reference to the volume weighted average price (VWAP) at which Exxaro and Kumba
Iron Ore traded for the first 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 the Kumba Management Share Option schemes are released on the dates that the original options
would have vested.
Their options relating to Kumba Iron Ore were released on the earlier of:
• the date that the original options would have vested; or
• 24 months from the date of unbundling (20 November 2006).
The Kumba Iron Ore options held by Exxaro employees were all exercised during 2010 before the official lapse date of 20 May 2010.
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 certain 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, remuneration, human resources 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 of 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 relevant
adjustments.
Targets are set by the committee based on existing ROCE performance in the base year of an LTIP award and planned ROCE performance
in the final year of the LTIP performance period.
According to the Deferred Bonus Plan (DBP) rules, executive directors and certain senior employees of Kumba Resources and its
subsidiaries have the opportunity to acquire shares (pledged shares) on the open market with 50% of the after-tax component of their
annual short term incentives. After the pledged shares have been acquired, the shares are held by an escrow agent for the absolute
benefit 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 LTIP and DBP initiatives that existed in Kumba Resources Limited prior to the creation of Exxaro in November 2006 were collapsed
and subsequently replaced by similar initiatives in Exxaro. The extent to which the conditions were satisfied up to the date of the
unbundling, determined the number of shares deemed to vest for each participant.
284 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
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;
• 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; and
• 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 33 250 shares are outstanding as
31 December 2010 (2009: 43 150).
Exxaro made the first 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 first review was on 1 March 2010. Rights 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 certain employees 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 five-year
period ending November 2011. By the end of the five-year period or capital appreciation period, the units that employee beneficiaries hold
in the trust, will be sold. The capital distribution is the profit that is made on the share units after they are 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, DBP 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, remuneration, human resources 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 one percent of the shares then in issue in the share capital of Exxaro.
As at 31 December 2010 the maximum number of shares approved and allocated by shareholders for the purposes of the schemes,
30 million (2009: 30 million) represent 8,4% (2009: 8,4%) of the issued shares. Of the total of 30 million shares, 20,0 million
(2009: 19,9 million) shares are available in the share scheme for future offers to participants, whilst 10,0 million (2009: 10,1 million) shares
(2,8% of the issued shares) are allocated as options, LTIP, DBP, deferred purchase shares, or SARS to participants.
EXXARO INTEGRATED ANNUAL REPORT 2010 285
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
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
2010
Million
30,0
(10,0)
20,0
2009
Million
30,0
(9,8)
(0,3)
19,9
At 31 December 2010 the company’s loan from the Kumba Resources Management Share Trust amounted to R30 066 270
(2009: R39 539 138). The loan is interest free and has no fixed repayment terms. This amount is reflected as an inter company 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 R2 722 401 631 (2009: R2 078 809 095).
Details of the schemes and plans are:
Outstanding at beginning of year
Exercised
Lapsed/cancelled2
Outstanding at end of year
Options1
Exxaro employees
Kumba Iron Ore employees
December
2010
’000
December
2009
’000
December
2010
’000
December
2009
’000
2 295
(796)
(39)
1 460
3 554
(1 067)
(192)
2 295
344
(344)
1 272
(928)
344
1 No further grants are made under these schemes and plans that are being phased out have been replaced by the new share incentive schemes.
2 Exercise price range for lapsed/cancelled options: R40,68 – R47,73 (2009: R12,16 – R47,73).
Outstanding at beginning of year
Exercised
Outstanding at end of year
Deferred purchase1
Exxaro employees
Kumba Iron Ore employees
December
2010
December
2009
December
2010
December
2009
200
(200)
4 200
(4 000)
200
400
(400)
400
400
1 No further grants are made under these schemes and plans that are being phased out have been replaced by the new share incentive schemes.
286 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
Outstanding at beginning of year
Issued
Exercised
Lapsed/cancelled
Outstanding at end of year
Outstanding at beginning of year
Issued
Exercised
Lapsed/cancelled
Outstanding at end of year
Deferred Bonus Plan
Long-term Incentive Plan1
December
2010
’000
December
2009
’000
December
2010
’000
December
2009
’000
67
31
(2)
96
18
55
(1)
(5)
67
1 550
427
(414)
(39)
1 524
906
772
(21)
(107)
1 550
Phantom scheme
SARS
December
2010
’000
December
2009
’000
December
2010
’000
December
2009
’000
43
(10)
33
74
(31)
43
5 851
1 804
(394)
(323)
6 938
3 097
3 194
(8)
(432)
5 851
1 There is no amount payable by participants on vesting. They will be awarded rights to ordinary shares in the company.
Details of issues during the period
are as follows:
Deferred Bonus Plan
Long-term Incentive Plan
December
2010
December
2009
December
2010
December
2009
Expiry date
2013
2012/2013
2013
2012/2013
Exercise price (share price range)
(R)
Total proceeds if options are
exercised at reporting period/
deferred purchase shares at
reporting date paid (R million)
Expiry date
Exercise price per share
(share price range) (R)
Total proceeds if rights are
immediately exercised (R million)
120,50 – 128,14
65,58 – 91,08
120,39 – 126,77
69,06 – 85,00
0,3
SARS
December
2010
2016/2017
4,0
54,1
53,4
December
2009
2016
88,72 – 129,77
62,83 – 112,35
228,0
221,8
EXXARO INTEGRATED ANNUAL REPORT 2010 287
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
Details of options/deferred purchase shares exercised during the year are as follows:
Options
Long-term Incentive Plan
December
2010
December
2009
December
2010
December
2009
106,03 – 140,09
61,40 – 104,50
113,50 – 131,90
76,50 – 77,30
305,00 – 379,00
140,00 – 306,17
Exercise price per share
(share price range) (R)
– Exxaro employees in Exxaro
(post-unbundling)
– Exxaro employees in Kumba
Iron Ore (post-unbundling)
– Kumba Iron Ore employees in
Exxaro (post-unbundling)
103,00 – 133,30
63,16 – 78,00
Total proceeds if shares are issued
(R million)
Exercise price per share
(share price range) (R)
Total proceeds if shares are issued
(R million)
Exercise price per share
(share price range) (R)
Total proceeds if shares are issued
(R million)
436,9
541,6
37,1
1,6
Deferred Bonus Plan
Deferred Purchase
December
2010
December
2009
December
2010
December
2009
117,48 – 117,80
77,32
109,5
65,75 – 66,50
Phantom scheme1
SARS
December
2010
December
2009
December
2010
December
2009
0,3
76,00
76,00 – 91,28
105,90 – 138,80
67,83 – 92,00
20,7
0,2
1 The phantom option awards are classified as cash-settled since no shares will be issued when exercised.
288 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
Terms of the options and deferred purchase shares outstanding at 31 December 2010 are as follows:
Share options held by Exxaro employees in Exxaro:
Expiry date
2011
2012
2013
Total
Total proceeds if shares are issued
(R million)
Expiry date
2011
2012
2013
Total
Total proceeds if shares are issued
(R million)
Expiry date1
2011
2012
2014
2015
2016
2017
Total
Total proceeds if shares are issued
(R million)
Options
Long-term Incentive Plan
Exercise price
R
12,90 – 13,62
18,38 – 32,84
33,47 – 47,73
Outstanding
’000
Exercise price
R
Outstanding
’000
85,00 – 112,45
63,45 – 69,06
120,39 – 126,77
203
483
774
1 460
44,0
408
696
420
1 524
145,3
Deferred Bonus Plan
Exercise price
R
89,60 – 111,88
65,58 – 91,08
120,50 – 128,14
Outstanding
’000
14
51
31
96
2,5
SARS
Phantom scheme
Exercise price
R
60,60 – 112,35
112,35
59,42 – 104,99
62,83 – 155,69
63,45 – 92,51
110,91 – 131,47
Outstanding
’000
Exercise price
R
Outstanding
’000
6
2
765
1 565
2 860
1 740
6 938
633,5
19,62 – 32,84
33
33
1 Exxaro made the first annual grant in the share appreciation rights scheme (SARS) to participants in 2007. The lapse date is regarded as the seventh
anniversary of the grant. No issues were made during the unbundling year of 2006.
EXXARO INTEGRATED ANNUAL REPORT 2010 289
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
Terms of the options and deferred purchase shares outstanding at 31 December 2009 are as follows:
Share options held by Exxaro employees in Exxaro:
Options
Long-term Incentive Plan
Expiry date
2010
2011
2012
2013
Total
Total proceeds if shares are issued
(R million)
Expiry date
2010
2011
2012
Total
Total proceeds if shares are issued
(R million)
Expiry date
2010
2012
2014
2015
2016
Total
Total proceeds if shares are issued
(R million)
Exercise price
R
7,32 – 11,59
19,90 – 19,62
13,72 – 32,84
33,47 – 47,73
Exercise price
R
60,60 – 102,14
69,06 – 112,35
63,45 – 67,07
Outstanding
’000
71
437
717
1 070
2 295
64,8
Deferred Bonus Plan
Deferred purchase
Exercise price
R
18,36
Exercise price
R
86,45
89,60 – 111,88
65,58 – 91,08
Outstanding
’000
2
14
51
67
5,2
Outstanding
424
415
711
1 550
94,8
Outstanding
200
200
SARS
Phantom scheme
Exercise price
R
Outstanding
’000
Exercise price
R
Outstanding
’000
59,42 – 104,99
62,83 – 155,69
63,45 – 92,51
1 179
1 723
2 949
5 851
457,6
19,62
19,62
10
33
43
290 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
Share options held by Exxaro employees in Kumba Iron Ore:
Expiry date
2010
Total
Total proceeds if shares are issued
(R million)
Share options held by Kumba Iron
Ore employees in Exxaro:
Expiry date
2010
Total
Total proceeds if shares are issued
(R million)
Options
Exercise price
R
15,38 – 97,74
Outstanding
’000
1 018
1 018
49,9
Options
Deferred purchase
Exercise price
R
6,91 – 47,73
Outstanding
’000
Exercise price
R
Outstanding
344
344
9,0
21,06
400
400
The exercise prices of the options held by Exxaro employees in Exxaro and Kumba Iron Ore respectively at 31 December 2008 and
31 December 2009, have been recalculated with reference to the VWAP split of 32,81% for Exxaro and 67,19% for Kumba Iron Ore. The
last date for exercising these options was 20 May 2010.
Details of options vested but not sold during the year are as follows:
Options
December
2010
December
2009
Exxaro employees in Exxaro
(post-unbundling)
Number of shares
1 129 010
1 346 500
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)
12,90 – 47,73
7,34 – 47,73
1 018 210
15,38 – 97,74
343 890
6,91 – 47,73
EXXARO INTEGRATED ANNUAL REPORT 2010 291
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Equity compensation benefits (continued)
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
Directors’ interests in shares
Options
’000
2 639
2 295
344
(1 179)
1 460
1 460
Long-term
Incentive
Plan
’000
Deferred
Bonus Plan
’000
Deferred
purchase
’000
1 550
1 550
(26)
1 524
1 524
67
67
29
96
96
SARS
’000
Total
’000
5 851
5 851
10 107
9 763
1 087
6 938
6 938
344
(89)
10 018
10 018
For details refer to the report of the directors’ remuneration.
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 modification. 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
modification 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 modification amounted to
R12,55 whilst the incremental fair value for a repriced option amounted to R14,93.
292 EXXARO INTEGRATED ANNUAL REPORT 2010
30.
EMPLOYEE BENEFITS (continued)
Fair value of equity-settled share-based payment transactions with employees (continued)
2010
2009
Exxaro
Kumba
Iron Ore
Exxaro
Kumba
Iron Ore
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 (%)
49,00
34,76
13,12
37,90
3,11
4
8,26
4,0
110,00
71,18
26,86
37,90
3,08
4
8,26
4,0
49,00
34,76
13,12
37,90
3,11
4
8,26
10,0
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 2010 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 2009 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
three years
SARs
vesting in
four years
126,84
126,77
45,13
5,00
4,52
8,01
4,0
74,20
67,70
44,20
5,00
8,52
8,58
10,0
126,84
126,77
44,14
5,50
4,66
7,85
4,0
74,20
67,70
43,19
5,50
8,68
8,65
10,0
110,00
71,18
26,86
37,90
3,08
4
8,26
10,0
SARs
vesting in
five years
126,84
126,77
43,15
6,00
4,72
7,77
4,0
74,20
67,70
42,19
6,00
8,96
8,72
10,0
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.
EXXARO INTEGRATED ANNUAL REPORT 2010 293
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
30.
EMPLOYEE BENEFITS (continued)
Fair value of equity-settled share-based payment transactions with employees (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
1/4/2010
1/4/2009
1/4/2008
28/2/2007
126,84
74,20
110,35
61,24
7,53
3,89
N/A
7,85
6,39
N/A
8,88
2,81
N/A
7,70
4,08
36,80
Three years
from date
of grant
Three years
from date
of grant
Three years
from date
of grant
Three years
from date
of grant
Expected employee attrition (%)
2,90
2,90
2,90
2,90
The inputs to the DBP model are as follows:
Year of grant
Average share price at grant date(s) (R)
Risk-free rate (%)
Dividend yield (%)
Expected volatility (%)
Time to vesting
2010
92,38
7,44
3,96
N/A
2009
77,06
7,49
6,66
N/A
2008
111,88
8,88
2,77
N/A
2007
61,24
7,70
4,08
36,80
Three years
from date
of grant
Three years
from date
of grant
Three years
from date
of grant
Three years
from date
of grant
Expected employee attrition (%)
5,00
5,00
5,00
5,00
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(s) at grant date(s) (R)
Risk-free rate (%)
Dividend yield (%)
Expected volatility (%)
Time to vesting
294 EXXARO INTEGRATED ANNUAL REPORT 2010
1/31/2007
71,00
8,20
3,00
37,00
28/11/2011
100
1/12/05 – 22/4/05
19,62 – 32,84
6,5
4,7
38,00
Mainly over
five years
in tranches
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
59
99
31. CONTINGENT ASSETS AND LIABILITIES
Contingent assets
Surrender fee on prospect rights, exploration rights
and mining rights.
63
An outstanding insurance claim for the Furnace 2 incident at Exxaro
TSA Sands (Pty) Limited for which settlement was received in the
first half of 2010.
Contingent liabilities
Contingent liabilities at balance sheet date, not otherwise provided
for in these annual financial statements, arising from:
– guarantees in the normal course of business from which it is
anticipated that no material liabilities will arise:
– other1
1Includes the group’s share of contingent liabilities of associates and joint
ventures of R117 million (2009: R61 million). The increase in 2010 and 2009 is
mainly attributable to guarantees to the Department of Mineral and Resources
(DMR) in respect of environmental liabilities on immediate closure of mining
operations.
The timing and occurrence of any possible outflows are uncertain.
32. COMMITMENTS
Capital commitments at 31 December 2010
707
300
562
155
1
151
48
Capital expenditure contracted for plant and equipment
6 475
3 550
67
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 financed 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 financed by ArcelorMittal
SA Limited and Eskom respectively.
2 490
1 420
173
556
565
1
18
97
78
EXXARO INTEGRATED ANNUAL REPORT 2010 295
NOTES TO THE
ANNUAL FINANCIAL STATEMENTS CONTINUED
for the year ended 31 December 2010
GROUP
COMPANY
2010
Rm
2009
Rm
2010
Rm
2009
Rm
32. COMMITMENTS (continued)
A trust known as New Africa Mining Fund (the Fund) was
established during 2003 to make portfolio investments in junior
mining projects within 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 expired on 28 February
2009. Since then, up until 28 February 2013 no new investments in
new funds may be undertaken by the Fund, however, Exxaro may
still be required to invest funds into established investments limited
to the initial R20 million commitment.
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 five years
– more than five years
Total
Operating sublease receivable
Non-cancellable operating lease rentals are receivable as follows:
– less than one year
– more than one year and less than five years
Total
8
7
15
57
67
8
132
2
4
6
44
42
6
92
1
3
4
7
5
12
1
1
296 EXXARO INTEGRATED ANNUAL REPORT 2010
ANNEXURE 1
NON-CURRENT INTEREST-BEARING BORROWINGS
LOCAL
Unsecured loans
Secured loans
Rate of interest per
year (payable
half-yearly)
Rate of interest per
year (payable
half-yearly)
GROUP
COMPANY
2010
2009
2010
2009
2010
2009
Fixed
%
Floating
%
Fixed
%
Floating
%
Rm
Rm
Rm
Rm
6,810
6,810
6,810
6,810
6,910
6,810
6,910
6,810
6,910
6,810
6,910
6,810
7,610
8,110
9,350
10,540
8,510
8,510
8,510
8,610
8,510
8,610
8,510
8,610
8,510
8,610
8,510
7,610
9,120
10,540
6
150
415
540
675
100
125
180
224
48
60
180
1 000
181
150
342
405
675
75
125
135
224
36
60
108
800
167
6
150
342
405
675
75
125
135
224
36
60
108
800
150
415
540
675
100
125
180
224
48
60
180
1 000
3 308
3 884
3 135
3 697
Final
repay-
ment
date
2011
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2015
2016
2016
2011
12,130
2011
17,490
2012
11,420
2013
13,540
2025
8,330
2026
10,710
2031
22,200
2032
32,930
12,130
17,490
11,420
13,540
8,330
10,710
22,200
32,930
1
2
3
4
5
6
7
8
1
1
1
6
23
12
87
137
268
2
1
1
8
24
12
86
126
260
EXXARO INTEGRATED ANNUAL REPORT 2010 297
ANNEXURE 1 CONTINUED
NON-CURRENT INTEREST-BEARING BORROWINGS
Rate of interest per
year (payable
half-yearly)
Rate of interest per
year (payable
half-yearly)
GROUP
COMPANY
Final
repay-
ment
date
2010
2009
2010
2009
2010
2009
Fixed
%
Floating
%
Fixed
%
Floating
%
Rm
Rm
Rm
Rm
FOREIGN
Unsecured loans (US$)
2011
8,050
5,6209
2016
6,640
6,640
FOREIGN SECURED
LOANS (US$)
Total non-current interest-bearing
borrowings (refer note 21)
2012
3,790
10
11
166
444
610
236
387
623
161
4 360
4 754
3 135
3 697
Finance leases recognised due to IFRIC 4 (Determining whether an Agreement contains a Lease)
1 Finance lease agreement between Exxaro Sands (Pty) Limited and Mhlathuze Water in respect of a plant with a book value of Rnil (2009: R1 million).
2 Finance lease agreement between FerroAlloys (Pty) Limited and African Oxygen Limited (Afrox) in respect of machinery and equipment with a book value of Rnil
(2009: Rnil).
3 Finance lease agreement between Exxaro Sands (Pty) Limited and Eskom in respect of buildings with a book value of Rnil (2009: R1 million).
4 Finance lease agreement between Exxaro TSA Sands (Pty) Limited and Air Products in respect of a plant with a book value of R3 million (2009: R4 million).
5 Finance lease agreement between Exxaro TSA Sands (Pty) Limited and Mhlathuze Water in respect of a plant with a book value of R13 million (2009: R20 million).
6 Finance lease agreement between Exxaro TSA Sands (Pty) Limited and Eskom in respect of buildings with a book value of R9 million (2009: R13 million).
7 Finance lease agreement between Exxaro Sands (Pty) Limited and Kusasa Bulk Terminals (Phase 1) in respect of a plant with a book value of R28 million
(2009: R43 million).
8 Finance lease agreement between Exxaro Sands (Pty) Limited and Kusasa Bulk Terminals (Phase 2) in respect of a plant with a book value of R31 million
(2009: R47 million).
9 A syndicated loan facility of US$45 million (variable interest rate), of which US$34 million was drawn on 31 December 2010 (US$21 million 31 December 2009).
10 US$60 million senior notes (fixed interest rate) issued by Ticor Finance (A.C.T.) Pty Limited, an entity controlled by Exxaro Australia Sands (Pty) Limited.
11 A trade receivable facility from Investec Limited that is secured for the outstanding amount of US$24,250,000, against pigment receivables for that amount.
298 EXXARO INTEGRATED ANNUAL REPORT 2010
Year-end
other
than
31 Dec
30 June
ANNEXURE 2
INVESTMENTS 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
2010
%
2009
%
2010
Rm
2009
Rm
2010
Rm
2009
Rm
ASSOCIATED COMPANIES
Unlisted
Black Mountain Mining (Pty) Limited
A
RSA
260
26,00
26,00
242
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
Mafube Coal Mining (Pty) Limited
RoshSkor Township (Pty) Limited
South Dunes Coal Terminal Co. (Pty) Limited
Thakweneng Mineral Resources (Pty) Limited
Rosh Pinah Health Care (Pty) Limited
Total joint ventures investments
(refer note 14)
Unincorporated
Moranbah Coal Project
Tiwest
INVESTMENT COMPANIES
Unlisted
Richards Bay Coal Terminal3
Other
Total other investments (refer note 16)
TOTAL INVESTMENTS
The investments are valued at balance sheet
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 & 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
92
35
3 511
3 880
A
C
A
E
C
A
A
RSA
NAM
RSA
RSA
NAM
50
50
1 333
1
31
50,00
50,00
33,33
50,00
31,00
50,00
50,00
33,33
50,00
31,00
50,00
50,00
50,00
50,00
155
102
35
1 673
1 965
1
1
369
7
376
368
7
375
4 256
2 341
20 782
14 165
407
408
Where the above entities’ financial year-ends are not co-terminous with that of the company, financial information has been obtained from published information or management
accounts as appropriate.
1 A – Mining, C – Service, E – Exploration, M – Manufacturing.
2 RSA – Republic of South Africa, CH – People’s Republic of China, NAM – Namibia
3 Included in the directors’ valuation of 2010 is an amount of R31 million (2009: R33 million) in respect of RBCT, which is classified as part of other debtors.
EXXARO INTEGRATED ANNUAL REPORT 2010 299
ANNEXURE 2 CONTINUED
INVESTMENTS IN ASSOCIATES, JOINT VENTURES AND OTHER INVESTMENTS
The group’s effective share of balance sheet, income statement and cash flow items in respect of associated companies and joint ventures is
as follows:
INCOME STATEMENTS
Revenue
Operating expenses
NET OPERATING PROFIT/(LOSS)
Net financing costs
PROFIT/(LOSS) BEFORE TAX
Income tax expense
PROFIT/(LOSS) FOR THE YEAR
Profit/(loss) for the year attributable to owners of the parent
STATEMENT OF FINANCIAL POSITION
Non-current assets
Current assets
TOTAL ASSETS
Equity and liabilities
Associated companies
Joint ventures
2010
Rm
2009
Rm
2010
Rm
2009
Rm
8 614
(3 473)
5 141
(34)
5 107
(1 390)
3 717
3 717
3 718
2 462
6 180
5 419
(2 687)
2 732
(49)
2 683
(785)
1 898
1 898
2 714
1 302
4 016
2 147
(1 835)
1 484
(1 500)
312
(101)
211
(33)
178
178
3 873
1 801
5 674
(16)
(5)
(21)
(21)
(21)
3 591
1 506
5 097
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
3 670
1 759
2 942
2 913
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Deferred tax and other
Current liabilities
Interest-bearing borrowings
Other
856
201
557
94
802
990
126
521
112
508
TOTAL EQUITY AND LIABILITIES
6 180
4 016
STATEMENT OF CASH FLOWS
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Foreign currency translations
Net increase/(decrease) in cash and cash equivalents
1 829
(974)
(121)
37
771
159
(835)
(2)
29
(649)
320
261
496
63
1 592
5 674
110
(456)
322
165
249
64
28
1 678
5 097
216
(567)
275
(24)
(76)
300 EXXARO INTEGRATED ANNUAL REPORT 2010
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 Coal Botswana Holding
(Pty) Limited4
Exxaro Employee Empowerment
Participation Scheme Trust
Exxaro Environmental Rehabilitation Fund
Exxaro Esmore Cooperatief U.A5
Exxaro FerroAlloys (Pty) Limited
Exxaro Foundation
Exxaro Holdings (Pty) Limited
Exxaro Holdings Sands (Pty) Limited
Exxaro Insurance Company Limited
Exxaro On-Site (Pty) Limited
Exxaro People Development Initiative
Exxaro Properties (Groenkloof) (Pty) Limited
Exxaro TSA Sands (Pty) Limited
Exxaro Sands (Pty) Limited
Ferroland Grondtrust (Pty) Limited
Glen Douglas Dolomite (Pty) Limited6
Kumba Resources Management
Share Trust
Rocsi Holdings (Pty) Limited
Skyprops 112 (Pty) Limited
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
Bot
RSA
RSA
NE
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
M
H
H
B
A
H
M
T
A
H
T
T
J
M
T
H
H
I
C
E
B
M
A
D
A
T
H
H
Issued
capital-
unlisted
ordinary
shares
R
1
1
1
200
1 000
Interest of company
Investment in shares
2010
R
2009
R
Indebtedness
2010
Rm
2009
Rm
1
746 163
1
2 518 966
1 000
1
746 163
1
2 518 966
1 000
17
2
16
2
1
5 500 000
1
247 712 500
1
247 712 500
768
375
1
200
1 000
1 000
4 936
4 787
32 742 723
1
1
1
566 827
40 000
50
1
459 517 297
1 869 951 859
5 000 000
1
459 517 297
1 869 951 859
5 000 000
1
1
510
200
2
10 000
1
510
6 003 355
2
1
510
6 003 355
2
647 044 943
100
653 722 945
44 389 208
653 722 945
44 389 208
(32)
52
1
3 531
150
22
(30)
488
20
(22)
28
3 651
250
10
(40)
308
20
EXXARO INTEGRATED ANNUAL REPORT 2010 301
ANNEXURE 3 CONTINUED
INVESTMENTS IN SUBSIDIARIES1
Country
of
incor-
poration2
Nature
of
business3
RSA
AUS
AUS
NAM
HK
NE
Bot
RSA
RSA
NE
IRL
AUS
NE
NE
NE
AUS
TUR
TUR
NE
RSA
NE
RSA
RSA
AUS
PERU
MAU
AUS
NAM
NAM
AUS
AUS
RSA
AUS
AUS
AUS
AUS
AUS
AUS
A
A & P
C
H
H
P
P
A
M
J
F
H
H
C
C
H
P
P
P
M
H
B
A
A
G
F
C
H
A
C
C
A
F
F
H
H
H
A
Issued
capital-
unlisted
ordinary
shares
R
5 000
11
2 038 299 354
100
1 354
119 209
200
100 000
1
893 656 391
5
662 037
172 866
172 866
5
32 512
6 436 530
134 973
1
169 999
136 500 000
1 000
31 740 964
10
1
10
1 000
2 280
10
10
3 675
10
10
8 111 062
10
85 101 240
48 216 010
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 (Pty) Limited (75%)
Exxaro Coal Mpumalanga (Pty) Limited
Exxaro Coke (Pty) Limited
Exxaro Esmore Cooperatief U.A
Exxaro Finance Ireland
Exxaro Holdings (Australia) Pty Limited
Exxaro International BV
Exxaro International Coal Trading BV
Exxaro International Trading BV
Exxaro Investments (Australia) Pty Limited
Exxaro Maden Arama ve Madencilik
Limited. Sti.
Exxaro Madencilik Sanayi Ve Ticaret
Anonim Sirketi (76%)
Exxaro Mineral Sands BV
Exxaro Reductants (Pty) Limited
Exxaro Sands Holdings BV
Ferrowest (Pty) Limited (95%)
Inyanda Coal (Pty) Limited
Magnetic Minerals Pty Limited6
Omacor Sac
Oreco Leasing Limited
Pigment Holdings Pty Limited
Rosh Pinah Mine Holdings (Pty) Limited
Rosh Pinah Zinc Corporation (Pty) Limited
(50,0264%)
Senbar Holdings Pty Limited
Synthetic Rutile Holdings Pty Limited
The Vryheid (Natal) Railway Coal and
Iron Company Limited
Ticor Energy Pty Limited6
Ticor Finance (A.C.T.) Pty Limited
Ticor Resources Pty Limited
Tific Pty Limited
TiO2 Corporation NL
Yalgoo Minerals Pty Limited
TOTAL INVESTMENTS IN
SUBSIDIARIES (refer note 15)
Interest of company
Investment in shares
2010
R
2009
R
Indebtedness
2010
Rm
(35)
1
241
2009
Rm
(42)
(1)
3
262
494
616
1
1
3
4
18
25
3 289 564 811
3 322 307 534
10 648
10 253
1 At 100% holding except where otherwise indicated
2 RSA – Republic of South Africa, AUS – Australia, NAM – Namibia, HK – Hong Kong, IRL – Ireland, MAU – Mauritius, NE – Netherlands, Bot – Botswana,
TUR – Turkey
3 A – Mining, B – Property, C – Service, D – Land management, E – Section 21 company, F – Finance, G – Dormant, H – Holdings, I – Insurance, J – Cooperative,
M – Manufacturing, P – Exploration, T – Trust
4 A wholly owned subsidiary of Exxaro Coal (Pty) Limited in 2008 – transferred to Exxaro Resources Limited in 2009.
5 Cooperative in Rotterdam, Netherlands with the following members: Exxaro Resources Limited and Exxaro Holdings (Pty) Limited.
6 Reclassified during 2008 as non-current asset classified as held for sale. This investment was sold with effective date 1 January 2011.
302 EXXARO INTEGRATED ANNUAL REPORT 2010
INVESTMENTS IN SUBSIDIARIES
TERMS AND CONDITIONS OF INDEBTEDNESS TO AND FROM SUBSIDIARIES
Rate of interest per year
(payable half-yearly)1
2010
Floating
%
2009
Floating
%
Final
repayment date
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2015
6,810
6,810
6,810
6,910
6,810
6,910
6,810
6,910
6,810
6,910
6,810
7,610
8,510
8,510
8,510
8,610
8,510
8,610
8,510
8,610
8,510
8,610
8,610
7,610
Total unsecured non-current loans
Interest-bearing current loans payable/(receivable)2
Current portion of non-current loans
Non-interest-bearing current loans
Current loans
Total
1 There were no indebtedness to and from subsidiaries with fixed rate of interest per year.
2 Interest charged at average overnight money market rates.
2010
Rm
150
178
270
675
75
100
90
224
24
60
80
800
2 726
1 369
421
6 132
7 922
10 648
2009
Rm
150
342
405
675
100
100
134
224
36
60
120
1 000
3 346
509
330
6 068
6 907
10 253
EXXARO INTEGRATED ANNUAL REPORT 2010 303
NOTICE OF ANNUAL GENERAL MEETING
Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(“Exxaro” or “the company”)
Notice is hereby given that the tenth annual general meeting of members of Exxaro will be held at the corporate office, Roger Dyason Road,
Pretoria West, South Africa, at 09:00 on Thursday, 19 May 2011 to consider, and if deemed fit, pass with or without modification, the following
resolutions:
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 2010, including the directors’ and
independent auditors’ reports thereon.
2. ORDINARY RESOLUTION NUMBER 2: RE-ELECTION OF DIRECTOR
To re-elect by separate resolution VZ Mntambo who offers himself for re-election;
3. ORDINARY RESOLUTION NUMBER 3: RE-ELECTION OF DIRECTOR
To re-elect by separate resolution NL Sowazi who offers himself for re-election;
4. ORDINARY RESOLUTION NUMBER 4: RE-ELECTION OF DIRECTOR
To re-elect by separate resolution J van Rooyen who offers himself for re-election; and
5. ORDINARY RESOLUTION NUMBER 5: RE-ELECTION OF DIRECTOR
To re-elect by separate resolution D Zihlangu who offers himself for re-election
as directors of the company, who retire by rotation in terms of article 16.1 of the company’s articles of association. A brief résumé for each
director standing for re-election appears on page 308 of this annual report.
6. ORDINARY RESOLUTION NUMBER 6: NON-EXECUTIVE DIRECTORS’ FEES
6.1 To ratify the remuneration of non-executive directors for the period 1 January 2010 to 31 December 2010 (refer to page 190 of the
annual report).
6.2 To approve the remuneration of non-executive directors for the period 1 January 2011 to 31 December 2011.
Chairman
Director
Audit committee chairman
Audit committee member
Board committee chairman
Board committee member
Current
Proposed
R433 600
R650 000
R200 120
R216 130
R184 880
R199 670
R97 650
R105 460
R143 220
R154 680
R68 340
R73 810
7. ORDINARY RESOLUTION NUMBER 7: APPOINTMENT OF AUDIT, RISK AND COMPLIANCE COMMITTEE MEMBERS
“Resolved that the members of the audit, risk and compliance committee, be and are hereby appointed in accordance with the
recommendations of King III. The membership as proposed by the board of directors is J van Rooyen (chairman), RP Mohring and
NL Sowazi.”
304 EXXARO INTEGRATED ANNUAL REPORT 2010
8. ORDINARY RESOLUTION NUMBER 8: APPROVAL OF REMUNERATION POLICY
“Resolved to approve, through a non-binding advisory note, the company’s remuneration policy and its implementation, as set out in the
Remuneration Report, which appears on page 160 of the annual report.”
9. ORDINARY RESOLUTION NUMBER 9: APPOINTMENT OF INDEPENDENT AUDITORS
To appoint PricewaterhouseCoopers (PwC), with the designated audit partner being Mr D Shango, as independent auditors of the
company for the ensuing year.
10. ORDINARY RESOLUTION NUMBER 10: AUDITORS’ FEES
To authorise the directors to determine the auditors’ remuneration for the period ended 31 December 2010.
11. ORDINARY RESOLUTION NUMBER 11: CONTROL OF AUTHORISED BUT UNISSUED SHARES
“Resolved that the authorised but unissued shares in the capital of the company be and are hereby placed under the control and authority
of the directors and that they be and are hereby authorised to allot, issue and otherwise dispose of such shares to such person or persons
on such terms and conditions and at such times as they may from time to time and at their discretion deem fit, subject to the provisions
of the Companies Act, No 61 of 1973, (as amended), or the Companies Act, No 71 of 2008, should it become effective prior to the annual
general meeting, article 3.2 of the articles of association of the company and the JSE Listings Requirements. The issuing of shares
granted under this authority will be at their discretion until the next annual general meeting of the company, after setting aside so many
shares as may be required, to be allotted and issued by the company pursuant to the company’s approved employee share incentive
schemes.”
12. ORDINARY RESOLUTION NUMBER 12: GENERAL AUTHORITY TO ISSUE SHARES FOR CASH
“Resolved that the directors of the company be and are hereby authorised, by way of a general authority, to issue the authorised but
unissued shares in the capital of the company (and/or any options/convertible securities that are convertible into ordinary shares) for cash,
as and when they in their discretion deem fit, subject to article 3.2 of the articles of association of the company, the Companies Act,
No 61 of 1973, (as amended), or the Companies Act No 71 of 2008, should it become effective prior to the annual general meeting, and
the JSE Listings Requirements, when applicable and with the following limitation, namely that:
• the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must
be limited to such securities or rights that are convertible into a class already in issue;
• any such issue will only be made to “public shareholders” as defined in the JSE Listings Requirements and not to related parties, unless
the JSE otherwise agrees;
• the number of shares issued for cash shall not in the aggregate in the current financial year exceed 10% (ten per cent) of the company’s
issued share capital of ordinary shares (for purposes of determining the securities comprising the 10% number in any one year, account
must be taken of the dilution effect, in the year of options/convertible securities, by including the number of any equity securities which
may be issued in future arising out of the issue of such options/convertible securities). The number of ordinary shares which may be
issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares issued during
the current financial year (or to be issued arising from options or convertible securities issued), provided that any ordinary shares to be
issued pursuant to a rights issue (announced and irrevocable and underwritten) or acquisition (which has had final terms announced)
may be included as though they were shares in issue at the date of application;
• this authority is valid until the company’s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from
the date that this authority is given;
• a paid press announcement giving full details, including the impact on net asset value and earnings per share, will be published at the
time of any issue representing, on a cumulative basis within 1 (one) financial year, 5% (five per cent) or more of the number of shares in
issue prior to the issue; and
• the maximum discount permitted at which equity securities may be issued is 10% (ten per cent) of the weighted average traded price
on the JSE of those shares over the 30 (thirty) business days prior to the date that the price of the issue is agreed between the company
and the party subscribing for the securities.
This ordinary resolution is required, under the JSE Listings Requirements, to be passed by achieving a 75% (seventy five per cent) majority
of the votes cast in favour of such resolution by all members present or represented by proxy and entitled to vote, at the annual general
meeting.”
13. ORDINARY RESOLUTION NUMBER 13: AUTHORISE DIRECTORS AND/OR THE COMPANY SECRETARY
To authorise any one director and/or the Company Secretary or equivalent, to do all such things and sign all such documents as are
deemed necessary to implement the resolutions set out in the notice convening the annual general meeting at which these resolutions
will be considered.
EXXARO INTEGRATED ANNUAL REPORT 2010 305
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
14. SPECIAL RESOLUTION NUMBER 1: GENERAL AUTHORITY TO REPURCHASE SHARES
“Resolved that, subject to compliance with the JSE Listings Requirements, the Companies Act (Act 61 of 1973), as amended, or the
Companies Act, No 71 of 2008 (“the New Companies Act”) should it become effective prior to the annual general meeting, and article 36
of the articles of association of the company, the directors be and are hereby authorised at their discretion to procure that the company
or subsidiaries of the company acquire or repurchase ordinary shares issued by the company, provided that:
• the number of ordinary shares acquired in any one financial year shall not exceed 20% (twenty per cent) of the ordinary shares in issue
at the date on which this resolution is passed;
• this must be effected through the order book operated by the JSE trading system and done without any prior understanding or
arrangement between the company and the counterparty;
• this authority shall lapse on the earlier of the date of the next annual general meeting of the company or 15 (fifteen) months after the
date on which this resolution is passed;
• in respect of share repurchases to be undertaken after the introduction of the New Companies Act, (i) the board of directors pass a
resolution that they have authorised the repurchase, (ii) that the company pass the solvency and liquidity test and (iii) that since the
solvency and liquidity test was done there have been no material changes to the financial position of the group;
• in the event that the New Companies Act has become effective and the company’s articles does not require this resolution to be
proposed and adopted as a special resolution, it be adopted as an ordinary resolution, provided that it is supported by at least 75%
(seventy five per cent) majority of the votes cast in favour of such resolution by all members present or represented by proxy and entitled
to vote, at the annual general meeting; and
• the price paid per ordinary share may not be greater than 10% (ten per cent) above the weighted average of the market value of the
ordinary shares for the five business days immediately preceding the date on which a purchase is made.
The reason for and effect of this special resolution is to authorise the directors, if they deem it appropriate in the interests of the company,
to procure that the company or subsidiaries of the company acquire or repurchase ordinary shares issued by the company subject to the
restrictions contained in the above resolution.
At present, the directors have no specific intention on the utilisation of this authority which will only be used if circumstances are
appropriate. The directors undertake that, to the extent it is still required by the JSE Listings Requirements and the New Companies Act,
they will not implement the repurchase as contemplated in this special resolution while this general authority is valid, subject to the
following limitations, namely that:
• the company and the group will be able to pay its debts in the ordinary course of business for a period of 12 (twelve) months after such
repurchase;
• recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements, the
assets of the company and the group will exceed the liabilities of the company and the group for a period of 12 (twelve) months after
such repurchase;
• the ordinary capital and reserves of the company and the group will be adequate for the purposes of the business of the company and
the group for a period of 12 (twelve) months after such repurchase;
• the working capital of the company and the group will be adequate for the purposes of the business of the company and the group for
a period of 12 (twelve) months after such repurchase;
• the company or its subsidiaries will not repurchase securities during a prohibited period as defined in paragraph 3.67 of the JSE Listings
Requirements unless the company has a repurchase programme in place where the dates and quantities of securities to be traded
during the relevant prohibited period are fixed (not subject to any variation) and full details of the programme have been disclosed in an
announcement released on SENS prior to the commencement of the prohibited period;
• when the company or its subsidiaries have cumulatively repurchased 3% (three per cent) of the initial number of the relevant class of
securities, and for each 3% (three per cent) in aggregate of the initial number of that class acquired thereafter, an announcement will
be made;
• the company at any time only appoints one agent to effect any repurchase(s) on its behalf; and
• the company undertaking that it will not enter the market to repurchase its own securities until the company’s sponsor has provided
written confirmation to the JSE regarding the adequacy of the company’s working capital in accordance with schedule 25 of the JSE
Listings Requirements.”
15. To transact such other business as may be transacted at an annual general meeting.
306 EXXARO INTEGRATED ANNUAL REPORT 2010
DISCLOSURES REQUIRED IN TERMS OF THE JSE LISTINGS REQUIREMENTS
The following information is provided in accordance with paragraph 11.26 of the JSE Listings Requirements and relates to special resolution
number 1.
LITIGATION STATEMENT
Other than disclosed or accounted for in these annual financial statements, the directors of the company, whose names are given on page 142
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 142 of these financial statements, collectively and individually accept full 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
and that this resolution and additional disclosure in terms of paragraph 11.26 of the JSE Listings Requirements pertaining thereto contain all
information required by law and the JSE Listings Requirements.
MATERIAL CHANGES
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 date of this annual report and the posting date thereof.
The following further disclosures required in terms of the JSE Listings Requirements are set out in accordance with the reference pages in
these annual financial statements of which this notice forms part:
• Directors and management – refer to pages 140 to 143 of this report;
• Major shareholders of the company – refer to page 168 of this report;
• Directors’ interest in the company’s shares – refer page 194 of this report;
• Share capital of the company – refer page 168 of this report.
In terms of schedule 14 of the JSE Listings Requirements, equity securities held by a share trust or a scheme will not have their votes at a
general meeting or annual general meeting taken into account for the purposes of resolutions proposed in terms of the JSE Listings
Requirements.
By order of the board
MS Viljoen
Company Secretary
Pretoria
15 March 2011
EXXARO INTEGRATED ANNUAL REPORT 2010 307
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
SHORT BIOGRAPHIES OF EXXARO DIRECTORS SEEKING RE-ELECTION
Name: VZ Mntambo – Zwelibanzi (53)
Designation: Non-executive director
Academic qualifications: BJuris, LLB (UNW), LLM (Yale)
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 chairman of the Commission for Conciliation, Mediation and Arbitration. He is
chairman of Metrobus (Pty) Limited, Mainstreet 333 (Pty) Limited, director of SA Tourism (Pty) Limited and Aveng Limited.
Name: NL Sowazi – Nkululeko (47)
Designation: Non-executive director
Academic qualifications: BA; MA (UCLA)
Experience: Nkululeko is founding executive chairman of the Tiso Group, a black-controlled investment holding company with interests in
natural resources, infrastructure and industrial services. Nkululeko was previously executive deputy chairman of JSE-listed banking group,
African Bank Investments Limited (ABIL) and managing director of the Mortgage Indemnity Fund (Pty) Limited. He is chairman of Idwala
Industrial Holdings, the Home Loan Guarantee Company, the Financial Markets Trust, and serves on the boards of Aveng Limited, Alstom
South Africa, Trident Steel, Emira Property Fund and African Explosives Limited.
Name: J van Rooyen – Jeff (61)
Designation: Non-executive director
Academic qualifications: BCom (SA); BCompt (hons) (SA); CA(SA)
Experience: Director of various companies in the Uranus Group. Non-executive director of MTN Group Limited and Pick n Pay Stores Limited.
Trustee of the International Accounting Standards Committee Foundation and member of the University of Pretoria’s faculty of economic and
management sciences oversight board. Former partner in Deloitte and Touche, former chairman of Public Accountants and Auditors Board,
former CEO of Financial Services Board and former adviser to the late Ms Stella Sigcau, Minister of Public Enterprises. Jeff is a founder
member and former president of the Association for the Advancement of Black Accountants of South Africa.
Name: D Zihlangu – Rain (44)
Designation: Non-executive director
Academic qualifications: BSc (min eng) (Wits); MDP (SBL, Unisa); MBA (WBS, Wits)
Experience: Dalikhaya is chief executive officer of Eyabantu Capital Consortium. Between 1989 and 1994 he was a stoper/developer and shift
boss at Vaal Reefs Gold Mining Company. From 1995 until 2002, he was a shift boss, mine overseer, operations manager and mine manager
at Impala Platinum Limited. Dalikhaya was chief executive officer of Alexkor Limited from 2002 until 2005. From 2006, Dalikhaya has been a
non-executive director of the South African National Oil and Gas Company (PetroSA). He is chairman of PetroSA’s human capital committee
and serves on its business strategy committee.
308 EXXARO INTEGRATED ANNUAL REPORT 2010
FORM OF PROXY
EXXARO RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration No 2000/011076/06)
JSE share code: EXX
ISIN: ZAE 000084992
ADR code: EXXAY
(“Exxaro” or “the company”)
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 09:00 on Thursday,
19 May 2011, at the Exxaro Corporate Centre, Roger Dyason Road, Pretoria West, South Africa or at any adjournment of that meeting.
A shareholder is entitled to appoint one or more proxies (none of whom needs to be a shareholder of Exxaro) to attend, speak and vote or
abstain from voting in the place of that shareholder at the annual general meeting.
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 09:00 on Thursday, 19 May 2011 at the Exxaro Corporate Centre, Roger Dyason Road, Pretoria West,
Gauteng or at any adjournment of that meeting, 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 2010 audited group financial statements
2. Resolution to re-elect VZ Mntambo as director required to retire by rotation in terms of article
16.1 of the articles of association
3. Resolution to re-elect NL Sowazi as director required to retire by rotation in terms of article 16.1
of the articles of association
4. Resolution to re-elect J van Rooyen as director required to retire by rotation in terms of article
16.1 of the articles of association
5. Resolution to re-elect D Zihlangu as director required to retire by rotation in terms of article 16.1
of the articles of association
6. Resolution to ratify/approve non-executive directors’ fees
6.1 Ratification of the remuneration of non-executive directors for the period 1 January 2010 to
31 December 2010
6.2 Approval the remuneration of non-executive directors for the period 1 January 2011 to
31 December 2011
7. Resolution to appoint audit, risk and compliance committee members
8. Resolution to approve, through a non-binding advisory note, the company’s remuneration policy
and its implementation, as set out in the Remuneration Report
9. Resolution to appoint PricewaterhouseCoopers (PwC) as independent auditors of the company
and to note D Shango as the designated audit partner
10. Resolution to authorise the auditors’ fees for the period ended 31 December 2010
11. Resolution to authorise directors to allot and issue unissued ordinary shares
12. Resolution to authorise directors to issue shares for cash
13. Resolution to authorise directors and/or the Company Secretary to implement the resolutions set
out in the notice convening the annual general meeting
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
Assisted by me, where applicable (name and signature)
Please read the notes on the reverse side hereof.
this
day of
2011
EXXARO INTEGRATED ANNUAL REPORT 2010 309
NOTES TO THE FORM OF PROXY
1. A form of proxy is only to be completed by those ordinary shareholders who are:
1.1 holding ordinary shares in certificated form; or
1.2 recorded on sub-register electronic form in ‘own name’.
2.
3.
4.
5.
If you have already dematerialised your ordinary shares through a central securities depository participant (CSDP) or broker and wish to
attend the annual general meeting, you must request your CSDP or broker to provide you with a letter of representation or you must
instruct your CSDP or broker to vote by proxy on your behalf in terms of the agreement entered into between yourself and your CSDP or
broker.
A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space. The person
whose name stands first on the form of proxy and who is present at the annual general meeting of shareholders will be entitled to act to
the exclusion of those whose names follow.
On a show of hands, a member of the company present in person or by proxy will have one vote, irrespective of the number of shares
he/she holds or represents, provided that a proxy shall, irrespective of the number of members he/she represents, have only one vote.
On a poll, a member who is present in person or represented by proxy will be entitled to that proportion of the total votes in the company
which the aggregate amount of the nominal value of shares held by him/her bears to the aggregate amount of the nominal value of all
shares issued by the company.
A member’s instructions to the proxy must be indicated by inserting the relevant numbers of votes exercisable by the member in the box
provided. Failure to comply with this will be deemed to authorise the 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 exercisable votes. A member or the proxy is not obliged to use all the votes exercisable
by the member or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of
the votes exercisable by the member or by the proxy.
6.
Forms of proxy must be lodged at or posted to Computershare Investor Services (Pty) Limited, to be received not later than 48 hours
before the time fixed for the meeting (excluding Saturdays, Sundays and public holidays).
For shareholders on the South African register:
Computershare Investor Services (Pty) Limited
Ground Floor
70 Marshall Street
Johannesburg
2001
PO Box 61051
Marshalltown
2107
www.computershare.com
Tel: +27 11 370 5000
Over-the-counter American depository receipt (ADR) holders:
Exxaro has an ADR facility with The Bank of New York (BoNY) under a deposit agreement. ADR holders may instruct BoNY how the
shares represented by their ADRs should be voted.
American Depository Receipt Facility (ADR)
Bank of New York
101 Barclay Street
New York, NY 10286
www.adrbny.com
shareowners@bankofny.com
Tel: +(00-1) 888 815 5133
7.
8.
Completing and lodging this form of proxy will not preclude the relevant member from attending the annual general meeting and speaking
and voting in person to the exclusion of any appointed proxy.
Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity or other legal capacity
must be attached to this form of proxy, unless previously recorded by the transfer secretaries or waived by the chairman of the annual
general meeting.
9. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.
10. Notwithstanding the aforegoing, the chairman of the annual general meeting may waive any formalities that would otherwise be a
prerequisite for a valid proxy.
11. If any shares are jointly held, all joint members must sign this form of proxy. If more than one of those members is present at the annual
general meet, either in person or by proxy, the person whose name first appears in the register will be entitled to vote.
310 EXXARO INTEGRATED ANNUAL REPORT 2010
ADMINISTRATION
Secretary and registered office
MS Viljoen
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
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
Corporate law advisers
CLS Consulting Services (Pty) Limited
United States ADR Depository
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
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
31 December
May
Published
February
March
August
February
March/April
August
September/October
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the NAPM recycled mark. The body of this document is printed on Cartridge 105gsm. 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
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BASTION GRAPHICS
Exxaro Resources Limited
Roger Dyason Road
Pretoria West
Pretoria
0183
Telephone
+27 12 307 5000
www.exxaro.com
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