Exxaro Resources Ltd Annual Report 2012

Plain-text annual report

F I N A O N P C E I A R L A T E I X O A C N C E A H L L I E L E A V N A M U H N E D C E ENSURE EXXARO’S ABILITY SUSTAIN N NATURAL I M P R O V E E X X A R O ’ S P O R T F O L I O NCIAL A FIN S O C I A L PROTECT AND BUILD EXXARO’S REPUTATION M A N U F A C T U R E D A N D P E O P L E L E A D E R S H P I D E V E L O P E X X A R O S ’ INTEGRATED REPORT 2012 www.exxaro.com EXXARO INTEGRATED REPORT 2012 p I CONTENTS 1 2 3 4 5 6 7 8 9 10 11 12 Proﬁle About this report Exxaro at a glance Mining and other operations Mining industry in South Africa Macro-economic context Message from the chairman Message from the CEO Business strategy Future focus/outlook Risk management and material issues Compliance Sustainability Stakeholder engagement Performance in 2012 Performance against targets Human capital People — development Safety People — workforce Health and hygiene Remuneration report Natural capital Environmental management Mineral reserves and resources Social capital Local economic development Developing the body of knowledge Sustainable procurement Infrastructure development Manufactured capital Financial capital Executive committee Directorate Governance practices Application of King III Abridged ﬁnancial statements Group ﬁnancial performance in brief Additional information Mining charter scorecard Assurance statement Shareholders analysis Notice of annual general meeting Form of proxy Administration 1 2 4 9 11 14 16 18 24 32 51 52 63 70 79 84 86 90 95 103 110 118 120 156 188 190 195 198 200 202 206 208 210 214 215 312 314 320 324 326 338 IBC p II PROFILE The story of Exxaro is an unfolding one — just six years since its formation, Exxaro nonetheless draws on a pedigree and wealth of skills that stretch back decades. It is a company rooted in South Africa and respected among its peers for its innovation, ethics and integrity. Building on an established base, Exxaro is one of the largest South African-based diversiﬁed resources groups, with interests in the coal, mineral sands, ferrous and energy commodities. The second-largest coal producer in South Africa with current production of 40 million tonnes per annum, Exxaro is listed on the JSE Limited, where it is a constituent of the Top 40 and the Socially Responsible Investment (SRI) indices respectively. At 31 December 2012, Exxaro had assets of R41,6 billion and a market capitalisation of R60 billion (US$7 billion). With a strong well-executed strategy, top-quartile returns, access to funds and good quality resources, Exxaro provides a unique listed investment opportunity into its chosen commodities. Exxaro was one of the top 10 globally in terms of total shareholder returns in 2012 (page 83). We are well on track to add signiﬁcant value to all our stakeholders by tripling our market value from the 2010 baseline to US$20 billion by 2020. TOTAL ASSETS OF R41,6bn SECOND-LARGEST COAL PRODUCER IN SA 40Mtpa COMMODITY PORTFOLIO COAL TITANIUM DIOXIDE FERROUS ENERGY R60bn MARKET CAPITALISATION HEPS of 1 401 cents — down 33% AEPS of 2 734 cents — up 24% Final dividend of 150 cents per share — down 70% Total dividend of 500 cents per share — down 38% ABOUT THIS REPORT EXXARO INTEGRATED REPORT 2012 p 01 Exxaro produces an integrated annual report detailing its economic, social and environmental performance for a group-wide understanding, and sets out the challenges and opportunities ahead. This report covers the ﬁnancial year to 31 December 2012, and key subsequent developments, and follows the 2011 report. Content is guided by legislative and regulatory requirements, including the Companies Act No. 71 of 2008, as amended (Companies Act), and the JSE Listings Requirements, as well as global best-practice standards, including the International Integrated Reporting Committee, United Nations Global Compact, Global Reporting Initiative (GRI G3), the King Report on Governance for South Africa 2009 (King III) and ongoing consultation with stakeholders. Given revised reporting requirements by the Department of Mineral Resources in terms of the mining charter scorecard, Exxaro will disclose its performance per mining right post the end-March deadline on its website www.exxaro.com. Group performance is disclosed in this report. The content of this report has again been prepared in line with GRI intermediate application level B+. The expanded GRI Index is available on the website www.exxaro.com The report, which is only produced in English, together with further elaboration is also available on our website www.exxaro.com or on CD on request. The methodologies for determining speciﬁc indicators are summarised in the text or detailed in our GRI index. Corporate activity and non-recurring transactions or accounting entries since Exxaro’s inception make data comparability challenging in some areas; this is explained where it will aid understanding. This report includes limited information on operations where we do not have management control but have a signiﬁcant equity interest which can include joint control: Chifeng Reﬁnery (Inner Mongolia, China), Mafube coal joint venture, Sishen Iron Ore Company and Cennergi (all in South Africa). We report on our mineral sands operations on a limited basis for the ﬁrst six months of the period only, after which management passed to Tronox Limited. We have reported LTIs and fatalities for our Mayoko operation, and in future, we will expand the sustainability indicators for this operation. Throughout its formative years, Exxaro’s earlier adoption of triple bottom-line reporting has remained a cornerstone of our commitment to sustainability and of our determination to entrench global safety and sustainability best practices in all operations. Disclaimer Opinions expressed in this report are, by nature, subject to known and unknown risks and uncertainties. Changing information or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited to differ materially from those expressed or implied in any forward- looking statements. Financial forecasts and data in this report are estimates which at times are based on reports prepared by experts who, in turn, may have relied on management estimates. Undue reliance should not be placed on such opinions, forecasts or data. No representation is made on the completeness or correctness of opinions, forecasts or data in this report. Neither the company nor any of its afﬁliates, advisors or representatives accepts any responsibility for any loss arising from the use of any opinion expressed, forecast or data in this report. Forward-looking statements apply only as of the date on which they are made and the company does not undertake any obligation to publicly update or revise any of its opinions or forward-looking statements, whether to reﬂect new data or future events or circumstances. The ﬁnancial information on which the forward-looking statements are based have not been audited nor reported on by the company’s independent external auditors. Ongoing feedback from a range of stakeholders helps us to contextualise certain issues better for more informed understanding by readers. Contact: Hanno Olinger | Manager: Sustainability Tel: +27 12 307 3359 | Fax: +27 12 307 5327 | Mobile: +27 83 609 1094 Email: Hanno.Olinger@exxaro.com | www.exxaro.com p 02 EXXARO AT A GLANCE Shareholding Coal Ferrous Mineral sands Base metals Energy Main Street 333 Proprietary Limited (BEE HoldCo) Industrial Development Corporation Eyesizwe• Eyabantu• TISO• Basadi Ba Kopane• Anglo American plc* Minorities (Free ﬂoat) Other non-public shareholders * Held through Anglo South Africa Capital Proprietary Limited • Special Purpose vehicles for shareholders in Main Street 333 Proprietary Limited % 52,14 15,3 54,1 9,7 9,7 11,2 9,71 35,29 2,86 EXXARO INTEGRATED REPORT 2012 p 03 Return to shareholders Since the creation of Exxaro in November 2006, the following dividends have been declared Period ended Dividend (cps) R million including STC1 Date declared Date paid/payable R million 30 June 2007 31 December 2007 30 June 2008 31 December 2008 30 June 2009 31 December 2009 30 June 2010 31 December 2010 30 June 2011 31 December 2011 30 June 2012 31 December 2012 60 100 175 200 100 100 200 300 300 500 350 150 211 353 620 710 356 357 715 1 074 1 076 1 771 1 252 537 211 15 August 2007 10 September 2007 353 20 February 2008 17 March 2008 620 13 August 2008 22 September 2008 710 23 February 2009 30 March 2009 356 357 19 August 2009 28 September 2009 24 February 2010 19 April 2010 715 11 August 2010 4 October 2010 1 074 23 February 2011 11 April 2011 1 076 16 August 2011 26 September 2011 1 771 21 February 2012 2 April 2012 1 252 31 July 2012 25 September 2012 537 6 March 2013 15 April 2013 1 No STC (secondary tax on companies) is payable due to the use of STC credits arising from dividend receipts from SIOC. The STC dispensation was replaced by a new dividends tax with effect from 1 April 2012. 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. 01 mining and other operations Haultruck used at Grootegeluk to haul coal from benches to tipping bins p 06 MINING AND OTHER OPERATIONS Coal Through eight managed coal mines, Exxaro produces 40Mtpa of power station, steam and coking coal. All power station coal 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. A robust pipeline of greenﬁeld and expansion projects will result in Exxaro remaining one of the largest coal producers in South Africa. Exxaro also produces char and related products for the rapidly growing ferroalloys industry. Production for year ended 31 December (000t) Sales for year ended 31 December 2012 Operation Products 2012 2011 2010 000t % export Grootegeluk mine Power station coal (Eskom) 13 976 14 909 14 294 14 174 Semi-soft coking coal Steam coal Leeuwpan mine Power station coal (Eskom) Steam coal Tshikondeni mine Coking coal (ArcelorMittal) Mafube coal Steam coal Inyanda mine Steam coal Exxaro Reductants Char Arnot mine Matla mine Power station coal (Eskom) Power station coal (Eskom) New Clydesdale mine Steam coal North Block Complex Power station coal (Eskom) Steam coal 2 027 1 513 2 320 1 524 339 1 845 43 2 081 10 948 717 2 717 1 862 1 460 2 151 1 879 299 1 918 142 2 291 2 419 1 441 1 688 1 408 285 1 779 114 4 173 10 150 12 288 628 2 265 81 850 2 674 697 2 043 1 455 1 922 1 761 283 1 100 1 623 62 2 081 10 941 623 2 249 32 1 15 100 81 88 Mineral sands Exxaro’s mineral sands operations consist of a 26% direct equity interest in KZN Sands and the Western Cape operations of Namakwa Sands as well as a 44,65% equity interest in US-listed Tronox Limited (Tronox) which owns the remaining 74% in KZN Sands and Namakwa Sands in addition to other mineral sands interests outside of South Africa. Tronox is the world’s largest fully integrated producer of titanium ore and titanium dioxide (TiO2). EXXARO INTEGRATED REPORT 2012 p 07 Production for year ended 31 December (000t) 2012* 147 9 7 46 5 66 12 183 54 18 58 68 13 73 11 7 54 4 26 2011 168 2010 236 28 17 51 7 129 22 377 135 31 109 1 152 27 226 32 19 110 10 76 32 17 71 12 113 29 251 129 28 82 119 23 231 35 18 90 13 57 Sales for year ended 31 December 2012 (000t) 2012* 6 4 19 1 65 13 24 13 47 72 15 15 7 7 12 4 20 Operation KZN Sands Products Ilmenite Zircon Rutile Pig iron Scrap iron Chloride slag Sulphate slag Namakwa Sands Ilmenite Zircon Rutile Pig iron Scrap iron Chloride slag Sulphate slag Australia Sands Ilmenite Zircon Rutile Synthetic rutile Leucoxene Pigment * Production and sales volumes from 1 January 2012 to 15 June 2012 Base metals In line with its strategy to exit this commodity, Exxaro’s remaining base metals portfolio now only includes its effective 11,97% and 26% interests in the Chifeng zinc reﬁnery in China and Black Mountain in South Africa, respectively. The sale of Rosh Pinah mine was ﬁnalised in June 2012 and the Zincor reﬁnery closed in December 2011. Production for year ended 31 December (000t) Sales for year ended 31 December (000t) 2012 33 6 2011 89 73 16 2012 37 4 2011 86 18 Zinc concentrate (Rosh Pinah) Zinc metal (Zincor) Lead concentrate (Rosh Pinah) p 08 MINING AND OTHER OPERATIONS Ferrous Exxaro’s acquisition of African Iron Limited in 2012 gives substance to our strategy of expanding into the ferrous metals sector. This operation and related exploration opportunities in the Republic of Congo, an iron ore development frontier, provide an attractive platform for further growth in a key commodity. We believe the fundamentals of iron ore are positive in the medium to long term and we are drawing on inhouse expertise and experience in mining bulk commodities to unlock this potential. Production is expected to begin in the second half of 2013. On the alloy side of our business, Exxaro FerroAlloys produced and sold a record volume of gas-atomised ferrosilicon for use in dense medium separation plants during the year. AlloyStreamTM, a proprietary technology development in cooperation with Assmang to produce high-carbon ferromanganese, successfully operated a large-scale demonstration facility for a record campaign spanning seven months. The furnace will be relined for a second campaign beginning mid-2013. Energy In terms of Exxaro’s strategy, we are actively participating in renewable energy initiatives, both to ensure security of supply for our own operations and to reduce our carbon footprint. During the year, our joint venture with Tata Power was ofﬁcially launched as Cennergi Proprietary Limited. This company is the preferred bidder for the Department of Energy on two wind projects in the Eastern Cape: • Amakhala Emoyeni wind farm near Bedford (140MW) • Tsitsikamma Community wind farm in Mfengu community land (95MW). Encouragingly, Cennergi received an award for its contribution to the country’s wind industry from SAWEA (South Africa Wind Energy Association), reﬂecting both the quality of its projects and its broader contribution to developing renewable energy solutions. As part of each wind farm, Cennergi and its partners have developed detailed and consultative plans for community development. In addition, construction is under way on a co-generation plant at Namakwa Sands, on South Africa’s west coast. While this operation is now managed by Tronox Limited, we believe co-generation is an important alternative energy supply in our country. Beyond our borders, Exxaro is making progress on a coal-bed methane exploration project in Botswana. EXXARO INTEGRATED REPORT 2012 p 09 Watershed for the industry Trade union militancy and violence in the mining sector entered a new era in 2001 when new labour legislation enabled three strong unions (NUM1, UASA2 and Solidarity) to ﬁnalise the agreements that would ensure most workers were represented in all formal bargaining structures. Through consultation and collective bargaining, multi- year wage agreements became commonplace and the level of strike action dropped dramatically. Several factors coincided to create the ‘perfect storm’ in 2012. The rise of a breakaway union from NUM in the form of AMCU (Association of Mineworkers and Construction Union) and a breakaway party from the ruling ANC brought a new dimension to the trade union scene in South Africa, fanning a wave of unprotected strikes that cost the country over R10 billion in lost production and estimates of R18 billion once exports were included. Sadly, the strikes also cost individuals millions in lost wages, exacerbated by the impact of debt taken on to fund their lives and their families in the meantime. Protest actions were concentrated in the gold and platinum sectors, with some unrest in the iron ore and coal sectors. The tragic loss of life, scale of wage demands and protracted negotiations combined to dent conﬁdence and economic growth prospects, resulting in sovereign downgrades from ratings agencies. In October, the country’s ﬁnance minister noted that declining mining output and spread of strike activity had also depressed activity in related industries such as manufacturing, logistics and services, adversely affecting GDP, tax revenues, exports and employment. 1 National Union of Mineworkers 2 United Association of South Africa Mining industry in South Africa Following the discovery of diamonds and gold late in the 19th century, mineral wealth rapidly became the cornerstone of the South African economy. This changed midway through the 20th century as other sectors became more prominent in the makeup of gross domestic product or GDP. South Africa remains a major repository of global mineral reserves, the world’s leading producer of platinum, vanadium, ferrochromium, vermiculite, uranium, lead and copper, and among the top ten in gold, coal, nickel, iron ore, titanium oxide and aluminium. Pertinent to Exxaro, the value of coal exports now exceeds gold, with South Africa ranking fourth in world coal reserves, seventh in production and ﬁfth in exports. Leeuwpan mine p 10 MINING AND OTHER OPERATIONS Observers say labour action in 2012 arose because traditional unions appeared to be losing touch with the needs of their members, and due to the lack of signiﬁcant improvement in worker conditions — fertile ground for a new union or political party looking to win support. A respected South African economist stated at the time that while high salary demands had created impossible expectations, he believed the crisis would bring employers and unions together, given the growing understanding from all fronts that these high wage demands were just not possible and raised the risk of wide-scale job losses in the near future. As with all politically motivated interpretation, the very real progress made by the industry in the past decade was largely ignored — progress covering economic empowerment, improved working conditions and wage levels, often accompanied by monetary beneﬁts based on productivity and safety. Using Exxaro as example, our people became shareholders in 2006 and beneﬁted from a R1 billion payout last year when our ﬁrst employee share option scheme matured. The new Mpower scheme runs until 2017. We have made excellent progress in housing, with two thirds of our workforce now providing their own accommodation (bought or rented). Over the past six years, Exxaro has spent almost R1 billion on training and development, and through the Exxaro Chairman’s Fund and Exxaro Foundation over R184 million in various community development initiatives — from literacy training to enterprise development, from community health to education. We understand these contributions underpin our own sustainability and, therefore, our ability to continue sharing our growth with stakeholders. We remain committed to this inclusive approach wherever we operate. Equally, the mining sector is critical to the economic health of the country. The sector accounts for around 30% of the value of the JSE and, according to the Chamber of Mines, contributes: • Almost 19% of the country’s GDP (over 9% direct). Because mineral resources are often concentrated in remote areas, mining can account for the bulk of regional or provincial GDP • Over 50% of the total foreign exchange earnings of South Africa • Over 1,3 million jobs (some 514 000 directly, translating into an annual wage bill of R90 billion). The social multiplier from mining is very signiﬁcant for South Africa Given a dependency ratio of about 10:1, this means over 13,5 million people depend daily on jobs created in the sector for the food on their table • Some R437 billion in expenditures, 90% of which is spent locally • About 25% of all investment in the economy is related to the mining sector • 50% of the carrying capacity of Transnet’s rail and ports networks • Helps provide around 72% of the country’s primary energy needs • Over 17% of direct corporate tax receipts (worth around R26 billion) and R5,5 billion in royalties • Some R800 million on corporate social investment programmes (2011), in addition to social and labour plan and mining charter commitments • Over R4 billion on skills development (2011). Given this strategic importance, in 2012, tripartite task teams composed of government, labour and business representatives identiﬁed a number of constraints that were affecting the growth and competitiveness of the South African mining industry. These include the shortage of key infrastructure, such as rail and port capacity and insufﬁcient supply of water and energy. These constraints have largely contributed to the decline in South Africa’s share of global exploration expenditure from 5% in 2004 to 1% in 2011. By reinstating mining as the cornerstone of the country’s economy, the tripartite initiative is ensuring focused and sustained political leadership. The announcement of a multi-year infrastructural programme by President Zuma in his February 2012 state of the nation address was an important breakthrough. State agencies such as Transnet and Eskom have subsequently made speciﬁc project announcements to alleviate the effects of constraints on the industry. As example, with the appropriate rail infrastructure in place, we could lift the mining sector’s annual growth rate from 1% to 7%. Despite the turmoil in the industry that made global headlines in 2012 and continued into the new year (sidebar), mining remains a key investment proposition in South Africa. All agree that the country’s mining sector has changed forever: labour costs will be higher in the long term, labour relations will remain unpredictable in the shorter term and risks will rise. However, over the past decade, mining companies operating in South Africa have built a proven record of managing these risks through formal bargaining structures, albeit more effectively at some times than others. EXXARO INTEGRATED REPORT 2012 p 11 Macro-economic context For most of 2012, global economic growth was suppressed by extreme uncertainty around policies in the critical economies of the United States (ﬁscal cliff), euro zone (sovereign-debt crisis) and China (political and economic transition). Since then, the United States has avoided the ﬁscal cliff, investors seem to be calmer about the euro zone debt crisis and China has escaped a hard landing. In 2013, global real GDP growth is expected to remain subdued at around 2,6% mainly due to mixed performances across regions. Early indications are that growth is picking up in China and Latin America, while the euro zone’s economy is stabilising (albeit at depressed levels). For different reasons growth is expected to weaken in North America (US ﬁscal tightening), Japan (downward trajectory of domestic demand) and the Middle East and North Africa (declining oil revenues). Emerging-market economies continued to grow at the 5% level and are on track to reach 5,3% in 2013. But growth is not projected to rebound to the higher rates of 7,34% and 6,21% recorded in 2010 and 2011, respectively. Supportive policies have underpinned much of the recent economic acceleration in many of these economies. South Africa’s GDP growth declined from 3,5% in 2011 to 2,5% in 2012. Growth is expected to remain below trend in 2013 since export growth is constrained by weak global demand and a volatile currency. Ongoing recessionary conditions in the euro zone will limit South Africa’s exports of manufactured goods, but an improved economic outlook for China should boost demand for resources. Domestically, the consumer’s personal ﬁnances are expected to be pressured by rising prices, fears of monetary tightening and high debt levels. Gross domestic product 10 8 6 4% 2 0 -2 World China USA Eurozone Japan South Africa 2011 2012 2013e p 12 MINING AND OTHER OPERATIONS South Africa’s average annual consumer price index (CPI) increased to 5,6% in 2012, after 5% in 2011. The 2013 rate is expected to be about 5,8% mainly as a result of the upward pressure from food prices and above-inﬂation wage and electricity tariff increases. The reweighting and rebasing of CPI, effective January 2013, is forecast to have limited impact. SA consumer price index 2013e 2012 2011 4,0 4,5 5,0 % 5,5 6,0 In the second half of 2012, for the ﬁrst time since the Eskom power challenges in 2008, local factors started to affect the rand. These are twofold: socio-economic and the balance of payments. Ongoing violent and unprotected labour strikes, coupled with several sovereign downgrades and widening of the current account deﬁcit weakened the currency, from an average of 7,93 to the dollar in the ﬁrst half of 2012 to 8,47 in the second half. These concerns spilled over into 2013 with the rand depreciating further to 9,16 to the dollar on 12 March 2013. The current account deﬁcit is expected to increase further as investment accelerates, particularly government infrastructure spending, necessitating higher imports, with exports lagging on slow global demand. Upward pressures on the rand, which are expected to cushion the longer-term depreciating bias of the currency, include South Africa’s steady accumulation of reserves, underpinning foreign-investor interest and rising commodity prices as global growth gradually increases. Rand volatility is expected to continue in 2013 — an average of 8,55 to the dollar is forecast for the year. ZAR/USD average exchange rate 2013e 2012 2011 6,5 7,0 7,5 8,0 8,5 9,0 % EXXARO INTEGRATED REPORT 2012 p 13 Commodity review While 2011 was a year of ‘storm after the calm’, 2012 was a ‘sideways to downwards’ year for commodity fundamentals. With a second-half price collapse and severe destocking, some commodities dipped to spot levels below marginal cost support. In contrast, 2013 is expected to be a ‘rebuilding’ year, with fundamentals and returns moving sideways to up as global commodity demand gradually picks up and works its way through still-constrained commodity production and distribution capacity. Global crude steel production is estimated to have risen by 1,2% in 2012 to 1 548Mt. In China, crude steel production expanded by about 3% from 2011 to some 717Mt. China’s share of world production increased from 45,4% in 2011 to 46,3% in 2012. Output in the USA increased by 2,5% while Europe declined by 2,7%. Global crude steel production is expected to continue growing in 2013 with output improving by a projected 3,4%. Global crude steel production 2013e Hard coking coal prices In the second half of 2012, coking coal prices fell to lows last seen during the global 2013e ﬁnancial crisis. Supply from the USA (as the swing producer) started to erode as a result. In 2013, market conditions are expected to improve on supply cuts and better steel market fundamentals in key Asian import markets, namely Japan, India and China. The average coking coal contract price is expected to range between US$175/t and US$200/t, free on board (FOB) Australia. Despite growing demand in Asia and economics that favoured coal over gas in Europe, 2012 seaborne steam coal market prices declined signiﬁcantly, even below marginal cost support levels at some stages, as global supply remained abundant. In response, suppliers rationalised production. The average Richards Bay FOB spot steam coal price for 2012, at US$93,09/t, was some 20% lower than in 2011. The 2013 price outlook for steam coal remains ﬂat with downward risk. In September 2012, the iron ﬁne ore spot price declined to US$86,7/t, cost and freight (CFR) China — levels last seen in 2009 — given particularly bearish global sentiment, uncertainty in the Chinese steel sector and a focus on deeper-than-anticipated destocking. This has led to the reassessment and review of some existing iron ore projects. In turn, 2013 has started on a positive note with spot prices reaching highs of US$158,9/t. Supply concerns, restocking efforts and positive sentiment were key drivers of this price rally. The average 2013 Australian FOB contract ﬁne ore price is expected to remain around US$120-130/t. Calendar 2012 was a challenging time for the titanium value chain. Prices for both feedstocks and titanium dioxide (TiO2) pigment weakened after a period of extended increases. The zircon market declined drastically, following a cycle of rapid price increases with signiﬁcant structural changes in zircon intensity in porcelain tile manufacturing. The demand gap of 2012 is expected to continue into 2013, with average prices for TiO2 feedstocks, zircon and TiO2 pigment considerably lower. Seaborne steam coal spot prices 2013e Contract iron ore prices 2013e TiO2 feedstocks, Zircon and TiO2 pigment prices 2013e p 14 MESSAGE FROM THE CHAIRMAN Calendar 2012 will long be remembered as a watershed in the South African mining industry, a time in which the industry faced a number of challenges. Externally, these included political posturing with calls for nationalisation and enforced transformation. Internally, the industry faced a wave of unprotected strikes often with tragic consequences and an estimated total value of production lost of over R10 billion. Cumulatively, these challenges dented conﬁdence and economic growth prospects after international ratings agencies downgraded the sovereign outlook. Equally, they have also raised investor concern about the security of their investments in the domestic mining industry. We believe that the South African mining industry remains a signiﬁcant and strategic force in the national economy, accounting for over 500 000 direct jobs, with the estimated number of dependants ranging up to ﬁve million, and another 800 000 jobs indirectly. South Africa is also one of the world’s richest countries by mineral reserves and production. As rising populations and urbanisation fuel demand for natural resources, the country heads global production of a number of key minerals. Equally, the South African mining industry is mature, innovative and world-class in many instances, and we believe opportunities for sustained growth are plentiful. While Exxaro was relatively untouched by labour unrest in 2012, incidents of labour unrest have occurred at a number of Exxaro’s operations in March 2013. Respective employers in the Exxaro group signed an agreement on 22 March 2013 with the National Union of Mineworkers (NUM) to end the unprotected strike, which had lasted approximately three weeks, in terms of which all employees would return to work on 25 March. The full ﬁnancial impact of the strikes is still to be determined, but all attempts will be made to make up the deﬁcits. We will also continue working closely with the Chamber of Mines and our peers to ensure the sustainability of our collective industries. As detailed in our strategy section on page 20, to succeed as a diversiﬁed miner in such a ﬂuid environment requires a dynamic approach to fulﬁlling the inherent prerequisites. 1 2 3 4 5 6 STRATEGY Clear execution of strategy COMMODITIES Choosing the right commodities to be exposed to MANAGEMENT Deep management track record and experience CAPITAL ALLOCATION Correct allocation of capital CAPITALISED Remain adequately capitalised with stable dividend policy RISKS Understanding and mitigating risks EXXARO INTEGRATED REPORT 2012 p 15 The extent to which Exxaro is succeeding in fully developing its strategy is clear. On the all-important measure of total return to shareholders, Exxaro ranks among the world’s best. Our focus on protecting and conserving our environment sets the group apart, as evidenced by our top ranking in the international Carbon Disclosure Project. Our record of innovation continues to expand, as does our reputation as an employer, reinforcing our sustainability. Exxaro’s governance standards were developed against best practice, and they continue to guide our group as we expand our operating areas. Compliance, for our group, is a minimum standard and this report highlights areas where we are not only exceeding compliance but setting new standards for the industry. As the discipline of integrated reporting evolves, Exxaro has taken a different approach to reporting to our stakeholders this year. Instead of detailed reports from the chairman and chief executive ofﬁcer, we have included discussions on our performance drivers (page 72), approach to sustainability (page 54), operating environment, risk management and material issues (page 34). The in-depth report is available on our website www.exxaro.com and distilled into a concise, printed integrated report. We welcome your feedback on this approach. Our aim is to make our reporting understandable, meaningful and accurate, and this process will only be facilitated by your participation. Exxaro is a young company, but backed by decades of experience. Despite a challenging year, its results are testimony to the calibre of people on the board, throughout the executive management structures — so capably led by Sipho Nkosi — and in the commitment of a workforce of over 7 700 people. My thanks to every one of you. The building blocks for Exxaro’s long-term growth are ﬁrmly in place. While any mining company will always face risks beyond its control, the board believes Exxaro has the discipline, resources and people to deliver on its full potential. Dr Len Konar Chairman 28 March 2013 p 16 MESSAGE FROM THE CEO Exxaro’s 2012 integrated annual report details the company’s vision, strategy, progress, risks and opportunities. As noted by the chairman, we are reporting in a different and more integrated format, and that gives me the latitude to communicate with you, our stakeholders, on what it is that sets Exxaro apart. When Exxaro was formed six years ago through the merger of Kumba Resources and Eyesizwe, we committed to creating a company that would make a sustainable difference to South Africa both economically and socially. This was embodied in our vision: Through our innovation and growth, we will be a powerful source of endless possibilities. It was articulated in our belief that everything we do and deliver today will allow others to realise their vision tomorrow. It is evident in our practice of looking beyond our current commodities and operations to see the impact we have on people and the planet. It is embedded in a philosophy that enables our people to truly live by our values: empowered to grow and contribute, teamwork, committed to excellence and honest responsibility. This approach gives us ﬂexibility in a world changing every few months, and the understanding that we are part of the developing world, which is driving global growth. Equally, we have developed an operating model that contributes to earnings, growth and sustainability. The past year has been an important one in Exxaro’s strategic development towards tripling our market value to US$20 billion by 2020. We have made solid progress on most elements of our strategy, most notably: • Optimising our portfolio: reducing our exposure to base metals, merging our mineral sands interests with Tronox Limited, expanding our presence in the ferrous market and completing a major expansion in the coal market. • Ensuring Exxaro’s sustainability: our approach is based on best practice in integrating the constituent elements and stakeholders that make up our group and operating our business in a way that serves the best interests of all — from total returns to shareholders (page 83) to relocating protected baboon spiders (page 146) and spearheading innovations that will change an industry (page 204) • Protect Exxaro’s reputation: growing brand awareness, achievements and accolades during the year were our commitment to growing stronger • Develop our leadership and people: each year we invest well over the stipulated level in developing our people and the beneﬁts are clear at every level, from research breakthroughs to real transformation in our management ranks • Achieve operational excellence: this will always be a process of continual improvement but our progress is evident in our results. With these pillars entrenched in our business, we are well on track to tripling our market value in the next eight years. Importantly, given that world knowledge doubles every ﬁve years, we believe research and development is key to competing effectively. The beneﬁts of our lengthy investments in research and development are now unfolding as a number of innovations become commercial operations. At Exxaro, innovation is a creative and systematic approach to our work to create new value from existing operations, as well as from emerging markets and technologies. Innovation is a key enabler of our organisational growth strategy and involves each critical stage from generating ideas, to discovery, development, demonstration and industrialisation of sustainable solutions for conventionally complex and unresolved problems. In essence, we give people a chance to test ideas and we accept failure when the result is learning. EXXARO INTEGRATED REPORT 2012 p 17 Our path towards our goal of becoming a US$20 billion company is also the springboard to international competition. Our project pipeline will give us the required critical mass to reach that goal by 2020. Our strategy remains focused on an evolutionary journey towards being a major sustainable diversiﬁed mining company with a global footprint encompassing signiﬁcant investments in carbon, reductants, mineral sands, ferrous and energy. Looking ahead for 12 months, the 2013 ﬁnancial and operational results are expected to be impacted by commodity price volatility, the ZAR/US$ exchange rate ﬂuctuations as well as the availability of trains in the export coal business. Both thermal and coking coal seaborne markets are expected to be soft as a result of sluggish demand in Europe, India and China, exacerbated by increased stock levels. As a result, Exxaro will continue to pursue new domestic markets, albeit at lower prices, in the short to medium term. The domestic steam coal market is expected to remain stable, with a marginal increase in demand from Eskom. Cost management across the group will remain a priority for the year ahead. As part of overcoming current economic challenges, Exxaro will continue to strive for cost reduction and increased efﬁciencies in all its processes. The group is focused on developing a clear ramp-up strategy for the Grootegeluk Medupi expansion project, incorporating possible effects of current labour unrest at the Medupi power station. The ferrous project team continues to work ahead on the Mayoko project to ensure the 2Mtpa Phase I is delivered successfully, on time and within budget. This will include ﬁnalisation of key concessions with the government of Republic of Congo. Exxaro’s equity income in 2013 will remain under pressure, but is expected to improve toward the second half. Pigment markets are expected to be soft in the ﬁrst half of 2013, resulting in tighter supply-demand conditions in the second half. Tronox is also expected to be in a position to fully demonstrate the value of its vertically integrated structure and the material cost advantage generated by this structure. As reported in the Kumba Iron Ore results in February 2013, annual production volumes from Sishen mine are expected to increase in 2013, while export sales volumes are expected to be similar to those in 2012. Sipho Nkosi Chief executive ofﬁcer 28 March 2013 02 business strategy Raw coal and discard bunkers in construction for the Grootegeluk Medupi Expansion Project (GMEP) p 20 BUSINESS STRATEGY US$20 billion market capitalisation by 2020 F I N A O N P C E I A R L A T E I X O A C N C E A H L L I E L E A V N A M U H N E D C E ENSURE EXXARO’S ABILITY SUSTAIN N NATURAL I M P R O V E E X X A R O ’ S P O R T F O L I O NCIAL A FIN S O C I A L PROTECT AND BUILD EXXARO’S REPUTATION M A N U F A C T U R E D A N D P E O P L E L E A D E R S H P I D E V E L O P E X X A R O S ’ Further detail on the integration between Exxaro’s strategic objectives and sustainability capitals is provided on page 61. EXXARO INTEGRATED REPORT 2012 p 21 Overview of strategy A track record of delivering Coal • Secure incremental RBCT export allocation • Move downstream in reductant market • RBCT allocation more than doubled • Char in production, char phase 2 bankable feasibility • Grootegeluk expansion (GMEP) • Develop Inyanda, Mafube and Belfast study under way • GMEP delivered ﬁrst coal to Medupi power station • Inyanda, Mafube in production; Belfast project in process, temporary mining licence approved in March 2013 • Progress study on Moranbah South • Moranbah prefeasibility study complete in 2012 in Australia • Progress independent power producer • Thabametsi phase 1 bankable feasibility study opportunities in the Waterberg complete in 2013 Iron ore • Grow iron ore exposure • Acquired 100% of African Iron Limited • Mayoko phased project development in Republic of Congo Titanium dioxide • Grow mineral sands business • Exercise option to acquire Namakwa Sands • Namakwa Sands acquired on 1 October 2008 • Organic growth of Tiwest and development • Expansion of Tiwest capacity in Western Australia • Mineral sands business sold to Tronox Limited, listed of local interests on NYSE: — Tronox is the only fully integrated global producer of TiO2 and mineral sands — Third largest global producer and marketer of TiO2 manufactured via chloride technology — Second largest global producer of titanium feedstock — Second largest global producer of zircon • Development of Fairbreeze • Fairbreeze resource secured — to be developed by Tronox AlloyStream™ • Patent and test process technology • Partnership envisaged • Testing of commercial viability 2012/2013 • Project Letaba joint venture with Assmang Base metals and industrial minerals • Reduce interest in base metal commodities • Divest from non-core interests in industrial minerals • Zincor plant closed in December 2011 • Rosh Pinah sold to Glencore International AG in 2012 • Glen Douglas sold in 2010 to Afrimat Limited Energy • Develop scenarios on increased demand and prices as well as possible supply interruptions • Cennergi joint venture with Tata Power • First co-generation plant at Namakwa Sands • Coal-bed methane exploration in Botswana • Formulate views on renewable and green with Sekaname energy in striving to reduce carbon footprint • Preferred bidder on two wind projects in Eastern Cape p 22 BUSINESS STRATEGY Continued strong focus on executing strategy 1 Ensuring Exxaro’s sustainability through focusing on: • Safety: Continuous awareness campaigns and training and retraining • Fatality-free year (12 June 2011 to 12 June 2012) • Infrastructure: water, transport and energy, and optimisation programmes • Risk management: enterprise risk management and corporate governance compliance frameworks; integrated approach to risk management, compliance and assurance ensuring risk mitigation 2 Protecting and building Exxaro’s reputation through: • Blue Drop certiﬁcation: R100 million upgrade on the Zeeland project recently completed • Community outreach: community development programmes in priority areas • Growing brand: employees carry it with pride 3 Developing Exxaro’s leadership and people: Strong leadership: • Board and executive committee — signiﬁcant industry experience • Well-equipped to successfully formulate and execute strategy 4 Empowering employees through: • Ongoing training: 5,5% of payroll spent on training • Employment equity: outperform in four of six categories • Recognition: focus on performance and recognition • Sharing Mpower 2012: 7 086 employees each received 387 units to the value of R75 000. This scheme will run for the next ﬁve years • Strong relationship with unions: constructive negotiations and well-established process of involvement and communication 5 Portfolio improvement: Focus on globally diversiﬁed portfolio Coal: • Innovative, integrated and synergistic coal and reductants business with global footprint • GMEP, Moranbah South, Thabametsi mine Titanium dioxide: • • Increase exposure to integrated value chain Investment in Tronox Divesting of non-core assets: • Zinc — consider alternative options for plant utilisation EXXARO INTEGRATED REPORT 2012 p 23 Ferrous: • African Iron Ore acquired • 10 million tonnes per annum of iron ore by 2017 • Mayoko phased project : — Phase 1: 30kt pa by 2013 and 2Mt pa by 2014 — Phase 2: Bankable feasibility study to increase in excess of 7Mt • AlloyStream: Project Letaba — JV with Assmang Energy: • Ensure energy security for own operations • Cennergi JV • Coal bed methane in Botswana Operational excellence: • Performance Regularly achieving annual stretched performance targets: • Low-cost producer with standardised processes • Rigorous performance reviews to continuously improve operations and services — Skills: Appropriately skilled, competent and value-driven workforce — Safety: Internalised safety and sustainable development — Projects: High-quality project execution on time, within budget — Logistics and supply: Secured long-term critical/strategic commodity supply to enable seamless management of commodity ﬂows 03 future focus Rope shovel bucket used to load coal from the benches p 26 FUTURE FOCUS Future focus — ferrous Since acquiring African Iron early in 2012, and assuming direct management and operational control, Exxaro has completed a broad ﬁnancial, technical and operational review of African Iron’s projects in the Republic of Congo (Congo). YAOUNDÉ CAMEROON Mbalam Sundance Resources Limited Douala Kribi Bata Nabeba Sundance Resources Limited River Avima Core Mining Limited EQUATORIAL GUINEA Badondo Equatorial Resources Limited Sembé Ouesso Mekambe Youkou Waratah Gold Limited Makokou R i v e r Belinga CMEC Booué LIBREVILLE R ail w a y Port Gentil GABON MAYOKO IRON ORE PROJECT REPUBLIC OF CONGO (ROC) Franceville Mbinda Mayoko-Moussondji Iron Ore Project Equatorial Resources Limited Mossenjo Bambama Zanaga Iron Ore Project Sintoukola Potash Project Limited Elemental Minerals Limited R a i l w a y Makolaa Potash Project MAG Industries Corp Pointe-Noire Dolisie BRAZZAVILLE KINSHASA CABINDA (ANGOLA) DEMOCRATIC REPUBLIC OF CONGO (DRC) Iron ore project Potash project plant Oil gas field National capital city Major sea port EXXARO INTEGRATED REPORT 2012 p 27 Unlike its much larger neighbour, Democratic Republic of the Congo or DRC, Congo enjoys a stable government and has good relations with South Africa. Exxaro has developed a healthy working relationship with the Congolese government. Early ﬁndings from the project at Mayoko indicate that this mine has signiﬁcant potential in terms of resource quality and size, with much of the groundwork for this near-term development opportunity in an emerging iron ore province already completed by African Iron. The project currently has a JORC-compliant mineral resource of 685Mt of iron ore, consisting of a hematite cap of direct shipping ore (DSO) at 55% Fe and beneﬁciable DSO ore at 41% Fe. With a revised exploration programme and accelerated drilling, production is expected to begin in 2013. This will be an economic boost for the small village of Mayoko and the broader region, from which much of the required labour will be drawn. Given the remote location, many villagers have not worked in industry before but are eager to acquire new skills. While there will be some deforestation involved in preparing for mining operations, the requisite rehabilitation and environmental plans will be put in place. To accommodate its target of producing 10Mtpa of iron ore by 2017, Exxaro is looking at expanding rail facilities. The existing rail corridor was one of the most important attributes of this opportunity and although the rail line is in good repair, its capacity would need to be expanded. The existing port in capital city Pointe-Noire does not have the capacity for iron ore exports. Given the scale of mining activity under way a new bulk commodities port is being developed to the north, facilitated by investments from Exxaro and other major mining companies. Exxaro is also investigating additional regional potential in terms of size and quality, with exploration drilling under way at: • Ngoubou-Ngoubou (untested licence area spanning 944km2), adjacent to Mayoko (Exxaro holds an 85% interest in the prospecting authority) • Mt Lekoumou (some 1 000km2 licence area) — limited exploration to date • Mt Mipoundi. p 28 FUTURE FOCUS Prospects for iron ore from this region are promising. Although logistical infrastructure will be key to future development, global seaborne trade is expected to increase to over 1,4 billion tonnes from 1,16 billion tonnes in 2011. The shortfall in lump ore production, due to growing production from Brazil and India, means production of pellets could double by 2021. For Exxaro, unlocking the full potential of this opportunity will require an intense focus on capital intensity to move Mayoko further down the US$/tonne scale, where it is already positioned in the lower half. As it has proven with the Inyanda and Mafube coal mines in South Africa, Exxaro has the expertise and experience to develop an iron ore project from conceptual phase to production. This includes extensive engineering capabilities in design, operational expertise, maintenance and project management, as well as experience with bulk mining, opencast and underground operations, beneﬁciation and downstream processing and value-added products. Inyanda mine EXXARO INTEGRATED REPORT 2012 p 29 Future focus — coal Over 50% of South Africa’s remaining reserves lie in the Waterberg coalﬁelds, a 3 500km2 expanse of Limpopo that stretches into Botswana and hosts almost 76 billion tonnes of in-situ inferred resources in 11 coal-bearing zones. WATERBERG LIMPOPO GAUTENG FREE STATE MPUMALANGA KWAZULU-NATAL Waterberg feeder Coal backbone system Coal export line Swazi line system Exxaro’s Grootegeluk mine lies near the country’s largest remaining coal reserves. The logistics of moving mined product to market, and the infrastructure required, have until now been obstacles to capitalising on the wealth of the Waterberg. Collective effort by government, parastatals and industry will make this aspiration possible. p 30 FUTURE FOCUS Adjacent to our Grootegeluk mine in Limpopo, Exxaro has inferred resources of over three billion tonnes in its Waterberg properties. While coordinated plans to develop the required infrastructure for this region are ﬁnalised by numerous public and private stakeholders, Exxaro has continued to reﬁne its own development plan, now extending to 2025: • Phase 1: Grootegeluk mine’s brownﬁelds expansion to supply Eskom’s Medupi power station delivered its ﬁrst coal on time, with full production scheduled for 2016. This 45-year contract will see Grootegeluk deliver 14,6Mtpa to the 4 800MW power station • Phase 2: Thabametsi mine is a greenﬁelds development — an open-pit coal mine and beneﬁciation complex also supplying independent power producers (2 000MW). With an estimated time frame of 2015 — 2025, Thabametsi will supply 17Mtpa to power stations and 2,8Mtpa to other markets • Phase 3: By developing other greenﬁelds coal mines, Exxaro will produce 13Mtpa for exports from 2018 to 2025. Other downstream opportunities for Exxaro’s Waterberg resources include: • Char plant: ﬁrst phase is operational, and the feasibility study for phase II is under way • Market coke: feasibility study under way • Electricity generation: advanced plans include co-generation and independent power producers, as well as a solar plant (through Cennergi). Conveyor belts carry coal from Grootegeluk to Matimba and Medupi power stations. Conveyor belts between the mine and power stations are 4km and 9km respectively EXXARO INTEGRATED REPORT 2012 p 31 Several key challenges remain to unlocking the potential of the Waterberg. These are depicted below: Power generation Exports Reducing the carbon footprint Ore beneficiation Reductants coal-to-liquid Domestic Power generation Industry Mining Co-generation Solar Ore reserves 04 risk management and material issues Semi-mobile tip and crusher being tested at the Grootegeluk Medupi Expansion Project (GMEP) before hot commissioning p 34 RISK MANAGEMENT AND MATERIAL ISSUES Managing risk and compliance to ensure Exxaro’s sustainability An integrated risk and compliance framework Exxaro understands that risk and compliance run across our ﬁve sustainability capitals and need to be managed across the organisation in a standardised, consistent manner to ensure they contribute to our drive for sustainability. Traditionally mining companies have very mature safety risk management programmes and processes, but this level of maturity is often not replicated in other areas. Over the years frameworks have been developed to address risks on a functional basis, rarely integrating all aspects of risk (regardless of origin) to business processes. With our new enterprise risk management (ERM) framework, Exxaro has departed from this concept and developed a ﬁve-layered approach, which integrates all functional risk management processes and links strategic risk management with operational risk management. This approach to risk management is graphically illustrated below — the ﬁrst diagram shows our ERM process. STRATEGY AND OBJECTIVES Risk identiﬁcation Risk assessment Risk treatment Risk reporting Communication and consultation MONITORING The ERM process is illustrated in ﬁve layers, shown below: All types of risks and all types of impacts, eg licence to operate, finance, safety, environment and regulatory, community etc Strategic risk assessment Major hazard/threat baseline risk assessment Project/issue risk assessment Routine and non-routine task planning risk assessment Continuous risk assessment This allows an individual to assess the potential safety or ﬁnancial impact if an identiﬁed event takes place, as well as possible operational, environmental, health, legal/compliance, quality and information technology (IT) consequences. Our quantitative and qualitative impact matrix is fully scalable for the group and its operations, projects and services, and considers our strategic objectives where exposure limits have been set. Compliance risk is no longer viewed as a separate process, but integrated into our risk management process, ensuring Exxaro has true transparency on its strategic risk exposures, including compliance and legal/regulatory events. This process also formed the basis of our combined assurance approach: Exxaro is one of few companies that EXXARO INTEGRATED REPORT 2012 p 35 can link its combined assurance initiatives to up-to-date, standardised cross-functional risk registers for all operations as well as the group. Board disclosure Please refer to section 4.1 in the King III compliance report on page 232. 2012 achievements Training was provided to all risk champions in the group on ERM to ensure they are familiar with the new process and that a healthy risk culture is embedded throughout all operations as well as our corporate service functions and major projects. Risk registers were reviewed and updated in 2012. The top risks identiﬁed through these processes were reported to the sustainability, risk and compliance committee each quarter and led to a number of initiatives to address strategic risks raised. These include: • Post-implementation reviews on new operating system modules • Reviewing the status of compliance to our social and labour plans • Reviewing the status of compliance to the mining charter at operational level • Compiling an updated regulatory universe for Exxaro • Compiling practical executive summaries of all laws and regulations with which Exxaro must comply • Conducting licence-to-operate regulatory training at all business units/operations. Exxaro has successfully implemented an appropriate risk management enabler. The system was rolled out at one business unit as a pilot during the year and will be rolled out to the remaining business units, regional ofﬁces, corporate ofﬁce and service functions in the ﬁrst half of 2013. What makes this system unique is that it also supplies the platform for effective compliance management and monitoring. User acceptance testing on the compliance enhancement has already taken place. Looking forward The governance, risk and compliance department has planned the following activities for 2013: • Rolling out the risk management enabler to remaining business units • Risk review sessions • Establishing risk appetite levels per strategic objective for the company and obtaining board approval. Regular board monitoring and review of these levels • Documenting a risk aggregation policy • Documenting a risk escalation policy • Updating the ERM framework • Linking key performance indicators (KPIs) and key responsibility indicators (KRIs) to management performance contracts • Conducting a risk maturity self-assessment • Conducting compliance reviews on all activities with an environmental impact • Compiling compliance risk management plans enabled by the new risk management enabler. p 36 RISK MANAGEMENT AND MATERIAL ISSUES Outcome The following table illustrates the updated top 10 strategic risks for the group based on the review process followed during the year. These risks have been benchmarked against local and global surveys and correlated with risks identiﬁed at business units, service functions, major projects and at commodity business level. The risks are also compared to the residual risk gap of the previous ﬁnancial year and trends analysed to indicate whether mitigation controls had the desired impact in closing the gap. Summary of top 10 risks No Strategic objective Risk Potential impact Ensure Exxaro’s sustainability • Regulatory compliance State intervention in the mining sector • Strategic • Financial Risk response Accept Residual risk gap trend Sustainability capital* KPIs Financial • Costs • Shareholders’ return Government relationships • Strategic • Financial Accept NEW Financial Social 1 2 3 4 5 Protect and build Exxaro’s reputation • Sound governance practices Improve Exxaro’s portfolio • Secured infrastructure to serve our growth aspirations Ensure Exxaro’s sustainability • Responsible, safe operations Ensure Exxaro’s sustainability • Regulatory compliance • Responsible, safe operations Protect and build Exxaro’s reputation • Sound governance practices • Number of projects delayed • Opportunity losses • Return on capital employed (ROCE) • Financial Reduction Manufactured Financial • Financial • Environmental Reduction NEW Financial Social Natural • Costs • Biodiversity Infrastructure capacity, access, development and funding Ability to accurately determine ﬁnancial closure obligations (cost of closure) Compliance to environmental legislation • Financial • Environmental • Reputational Reduction Natural • Biodiversity • Energy • Green house gas emissions • Water • Waste • Ongoing rehabilitation costs EXXARO INTEGRATED REPORT 2012 p 37 Risk response Reduction Residual risk gap trend Sustainability capital* KPIs Social • Compliance No Strategic objective Risk Potential impact Maintain social licence to operate • Financial • Reputational Protect and build Exxaro’s reputation Industry leader in • transformation Ensure Exxaro’s sustainability • Regulatory compliance Ensure Exxaro’s sustainability • Responsible, safe operations Achieve operational excellence • Consistently achieve annual stretched performance targets • Rigorous performance reviews to continuously improve operations and services 6 7 8 9 10 Mine rehabilitation Ability to meet production demands (throughput) • Financial • Environmental • Reputational • Financial • Operational Reduction NEW Natural • Biodiversity Reduction NEW Financial • Revenue • Operating proﬁt margins • ROCE Ensure Exxaro’s sustainability • Regulatory compliance Legal and regulatory compliance • Financial • Reputational Reduction NEW • Compliance Financial Human Manufactured Natural Social Cost competitiveness of assets (cost/ tonne) Achieve operational excellence • Consistently achieve annual stretched performance targets • Rigorous performance reviews to continuously improve operations and services • Financial Reduction Financial • Revenue • Costs • Operating proﬁt margins • ROCE * Further details on the capital model are provided on page 54 of this report Key Description Current residual gap rating Increased Current residual gap rating decreased NEW A new top 10 risk was identiﬁed p 38 RISK MANAGEMENT AND MATERIAL ISSUES Top 10 risk trend report The change in the residual risk gap (difference between current residual risk and desired residual risk) for the top 10 strategic risks is shown below. Risk ranking Risk name State intervention in the mining sector Inherent risk 74 Government relationships 76 Residual risk gap 2011 Risk trend Residual risk gap 2012 Reason for change in trend or advent of a new top risk 8 – 35 Onerous and often impractical recommendations in the Minerals and Petroleum Amendment Bill 2012. Ongoing discussions on increased royalties, resource taxes and other encumbrances on the mining industry. NEW 30 Lack of coordination between different government departments compounded by delayed responses, resulting in costly time delays which affect the ability of business to execute on business and project plans, often with adverse consequences on employment. Infrastructure capacity, access, development and funding Ability to accurately determine financial closure obligations (cost of closure) Compliance with environmental legislation 59 47 74 21 25 Increasing mismatch of projects’ and operations’ demands for both funding and infrastructure construction. – NEW 20 Changes in legislation, coupled with more onerous interpretation, and heightened stakeholder involvement. 24 18 1 2 3 4 5 6 Maintain social licence to operate 64 27 18 Exxaro rolled out training to all operations on key licence-to-operate requirements such as MPRDA, NEMA, NWA and MHSA activities, resulting in enhanced awareness and effort to address. Provincial audits (DWA Mpumalanga) conducted on compliance to water use licence conditions at Leeuwpan, Matla and New Clydesdale, with feedback awaited. After follow- up DWA audits in Limpopo, identified gaps addressed. Exxaro rolled out training to all operations on key licence-to-operate requirements such as MPRDA, MHSA, BBBEE and Companies Act activities. Compliance audits on social licence to operate issues such as our social and labour plans and the mining charter. Gaps identified were discussed and are being addressed via the new social and labour plan (SLP) forum and in the plans for 2013-2017. Regular engagements held with key stakeholders such as the Department of Mineral Resources and the JSE. EXXARO INTEGRATED REPORT 2012 p 39 Risk ranking Risk name Inherent risk Residual risk gap 2011 Risk trend Residual risk gap 2012 Reason for change in trend or advent of a new top risk 7 8 9 Mine rehabilitation Ability to meet production demands (throughput) Legal and regulatory compliance 10 Cost competitiveness of assets (cost/tonne) Key Description 52 56 47 56 NEW NEW NEW – – – 6 18 A deliberate focus on ongoing rehabilitation of the existing environmental footprint is required as opposed to primarily providing resources for final closure in future. 15 13 Exxaro’s significant contribution to international, but primarily local, demand for coal. Introduction of various new laws and regulations have the potential to impact business and require additional resources to be committed. 12 Greater awareness to ensure value to all stakeholders. Current residual gap rating Increased Current residual gap rating decreased NEW A new top 10 risk was identiﬁed p 40 RISK MANAGEMENT AND MATERIAL ISSUES Top 10 heat map This illustrates the top 10 strategic risks (inherently before any controls) as identiﬁed through our ERM process and approved by the board. 4 1 2 3 6 8 7 10 5 9 Y T I L I B A B O R P 5 4 3 2 1 RANGE 1 2 3 4 5 IMPACT Probability/likelihood of occurrence Impact Range Factor Description Range Factor Description 5 4 3 2 1 >80 — 100 Almost certain >61 — 80 Likely >36 — 60 Possible >10 — 35 Unlikely < and = 10 Rare Sustainability capital 5 4 3 2 1 >80 — 100 Extreme >61 — 80 Major >36 — 60 High >10 — 35 Moderate < and = 10 Negligible Financial Human Manufactured Natural Social EXXARO INTEGRATED REPORT 2012 p 41 Top ten risks Risk 1 State intervention in the mining sector (resource nationalism) Risk description State intervention in the mining sector that goes beyond taxation in seeking greater participation and value from the sector. This may include mandatory beneﬁciation, full or partial resource nationalisation or export levies that could impact on ﬁnancial performance in the sector and may discourage investors/stakeholders from investing Risk category Root cause in the industry. Political Potential impact Mitigating controls • Proposed changes to legislation • Financial losses Exxaro inﬂuences decision-making by participating with limited stakeholder • Labour unrest in recognised forums, having regular meetings involvement. • Disinvestment and loss with government and commenting on proposed of employment legislative changes KPIS • Costs • Shareholders’ return Risk 2 Government relationships Risk description Ineffectiveness within the government administrative process may result in approvals not being obtained in time, negatively impacting on the effective and efﬁcient operations of the company, and timely delivery of projects Risk category Root cause Political Potential impact Mitigating controls • Ineffective administration • Production stoppages • Active and constant interaction with processes delaying approvals • Financial losses • Disinvestment and loss of employment government to speed up the approval process • Constant follow-up with authorities to obtain all required approvals • Opportunity losses • Long-term mine plans to indicate all likely approvals that need to be obtained to ensure approval requests are submitted timeously to the relevant authority • Long-term mining activities are included in approved EMPs to reduce unnecessary interim approvals • Regular management and executive level meetings in the company KPIS • Number of projects delayed • Opportunity losses p 42 RISK MANAGEMENT AND MATERIAL ISSUES Risk 3 Infrastructure capacity, access, development and funding Risk description Lack of sufﬁcient infrastructure capacity, access, development and funding Risk category Root cause Infrastructure Potential impact Mitigating controls • Competition for limited • Financial losses • Collaboration with other stakeholders and infrastructure resources • Limitations on potential to expand government on a plan to improve and align • Funding for large infrastructure • Opportunity losses for new employment still limited and costly • Delays in government infrastructure aspirations to assist with mining industry growth aspirations KPIS Return on capital employed existing infrastructure, and undertake new infrastructure initiatives • Identify other stakeholders to co-develop a solution with shared beneﬁts and to extend infrastructure • Understand return on infrastructure and consider appropriate funding Risk 4 Ability to accurately determine ﬁnancial closure obligations (cost of closure) Risk description Financial mine-closure obligations may be inaccurately determined, resulting in additional unplanned funding commitments during life-of-mine and at closure Risk category Root cause Financial Potential impact Mitigating controls • Heightened awareness of • Financial loss • Documented procedure guides management the social cost of closure of • Delayed rehabilitation operations • Stricter interpretation of legislative requirements • Community unrest • Non-compliance to licence-to- operate regulatory requirements KPIS Biodiversity • Total land rehabilitated • Total land disturbance • Land use in protected areas of high biodiversity value Ongoing rehabilitation costs when calculating closure cost and now includes greater awareness of the social cost of closure • EMP extension for mining footprint includes detail on measurable closure objective • Independent consultants conduct closure cost assessments and/or reviews of internal assessments • Monthly reporting and meetings on ﬁnancial standing • Ongoing consultation with authorities • Knowledge shared between business units Future actions • Mining biodiversity guidelines published in 2013 will be used to update action plans EXXARO INTEGRATED REPORT 2012 p 43 Risk 5 Compliance to environmental legislation Risk description Non-compliance to environmental legislation Risk category Root cause Environmental Potential impact Mitigating controls • Changes in legislation • Financial impact • External specialist updates Exxaro on legal • Lack of human resources or • Reputational damage changes specialists • Community unrest • Lack of awareness/knowledge • Litigation exposure • External audits conducted by departments of water affairs, environment, and mineral (environmental issues) • Directives issued that may stop resources • Shortage of water in the area operations • No proper mine closure plan that incorporates mine rehabilitation plan • Environmental compliance in the past may not have been within required legal prescriptions KPIs Biodiversity • Total land rehabilitated • Total land disturbance • Land use in protected areas or areas of high biodiversity value — to be updated against new industry guidelines Energy • Energy consumption • Energy by source • Electricity efﬁciency • Diesel efﬁciency GHG emissions • Total emissions • Total emission reduction • External companies assess environmental management programmes (EMPs) • External companies assist with monitoring and reporting on environmental issues • Updated integrated audit schedules • Compulsory inductions provided to all personnel and visitors • Internal environmental incident reporting • Qualifying environmental incidents reported to the authorities • Scheduled dust and/or noise measuring and monitoring • Service contracts in place for waste management • Regular training and awareness campaigns • Regular liaison with authorities Water • Total water withdrawal split by source • Total volume of water recycled or reused • Total water discharge • Water efﬁciency Waste • Total amounts of overburden, rock, tailings and sludges • Hazardous waste p 44 RISK MANAGEMENT AND MATERIAL ISSUES Risk 6 Maintain social licence to operate Risk description Unable to meet all the requirements needed to maintain a social licence to operate Risk category Root cause Licence to operate Potential impact Mitigating controls • Unable to achieve social and • Production stoppages • Drive existing social and labour plan labour plan (SLP) targets as • Financial losses programmes to achieve more than compliance approved, most notably the potential impact on communities surrounding our operations • Reputational damage • Community unrest • Non-compliance to laws and regulations that may affect mining rights to all aspects of the mining charter • Pursue identiﬁed initiatives to progressively improve Exxaro’s current level 4 contributory status under the DTI’s BBBEE codes • Adhere as a minimum to commitments in SLPs • Proactive sustainable socio-economic development initiatives in the communities in which we operate KPIS • Amount allocated to community development per annum • Sustainable community development projects as per social and labour plans • Community engagement (negative impacts) • BBBEE score Risk 7 Mine rehabilitation Risk description Ability to effectively rehabilitate the mine. Matching funding to achieve approved Risk category Root cause technical solution Environmental Potential impact Mitigating controls • Insufﬁcient funding available for rehabilitation • Reputational damage • Financial losses • Legacy projects managed, eg village handover to municipalities under way in Tshikondeni • Changes in legislation • Environmental impact (habitat • EMP in place and to be updated • Uncertainty on execution losses) • Exxaro environmental rehabilitation fund of EMP • Temporary or permanent mine in place • Vague description in current closure • Agreement between Exxaro and Eskom to create EMP • Non-compliance to laws and regulations a rehabilitation trust for Matla and Arnot (approved by DMR) • Bank guarantees issued to Department of Mineral Resources (DMR) • Rehabilitation calculations and accounting provision created • Rehabilitation programmes in place KPIS Biodiversity • Total land disturbance • Total land rehabilitated • Land use in protected areas of high biodiversity value EXXARO INTEGRATED REPORT 2012 p 45 Risk 8 Ability to meet production demands (throughput) Risk description Production targets not met Risk category Root cause Production and quality Potential impact Mitigating controls • Geological constraints • Breach of contract • Accelerate business improvement (projects • Logistical constraints • Financial loss currently running) • Labour capacity • Encumbrance of Eskom’s power- • Condition-based budget model feeding from life-of-mine plan • Regular interaction with unions, Eskom and other stakeholders • Environmental factors generation capacity (compliance with legislation) • Reputational damage • Land-purchase issues • Labour and union relations KPIS • Production and sales tonnes • Operating proﬁt margins • ROCE Risk 9 Legal and regulatory compliance Risk description Not adhering to laws and regulations governing the business Risk category Root cause Legal and regulatory compliance Potential impact Mitigating controls • Changes in legislation • Production stoppages (Section • Areas of responsibility assigned to management • Lack of awareness/knowledge 54/55 of Mine Health and Safety and legal appointments in place • Non-compliance by employees Act) • Consequence management on non-compliance • External audits by authorities • Internal audits and inspections • Regular safety awareness campaigns • Scheduled safety meetings • Training on policies and procedures for all employees, visitors and contractors • Visible felt leadership • Daily and weekly area inspections • Human behaviour • Incidents and accidents • Fatalities • Financial loss • Reputational damage • Damage to property KPIS Compliance • Environmental ﬁnes • Non-compliance on permits • Licences or rights • Number of environmental prosecutions • Section 54s in terms of the Mine Health and Safety Act • Cost of non-compliance • Number of SLPs outside of or deviating from target p 46 RISK MANAGEMENT AND MATERIAL ISSUES Risk 10 Cost competitiveness of assets (cost/tonne) Risk description Cost competitiveness of mining/production, which provides market and customer Risk category Root cause conﬁdence Markets Potential impact Mitigating controls • Additional regional and service • Financial loss • Business improvement initiatives established level costs • Premature mine closure (including target setting and tracking) • Limited life of mine • Social impact • Little variability due to high • Reputational damage • Focus on business unit’s controllable efﬁciencies (cost of electricity, maintenance, production ﬁxed-cost component • Difﬁcult mining conditions • Operating margin squeeze • Affordability of capital projects tonnes vs production times) • Quarterly reviews • Increased awareness of cost management • Management accountants becoming business partners in the relevant areas (signiﬁcant resources to extract strained very low tonnages) • International coal price levels for business units to achieve good margins • Increased cost of mining due to excess overburden removed • End-to-end processes not optimal KPIS • Production tonnes (R) • Sales tonnes variance (R) • Unit cost (R/product) • Operating proﬁt margins • Return on capital employed EXXARO INTEGRATED REPORT 2012 p 47 Combined assurance Companies that operate in a very technical and highly regulated environment are usually accustomed to regular audits, reviews and assurance activities. However, Exxaro realised that these reviews were possibly not always adding value and that controls to mitigate potential high impacts did not always receive the necessary attention when assurance activities were planned. In 2012 Exxaro implemented a combined assurance framework and process, based on international best practice and the principles of King III, to ensure risk-based assurance activities and prevent audit fatigue. Through the combined assurance framework, critical processes, risks linked to these processes and the associated assurance providers, are identiﬁed. The combined assurance framework was approved by the audit committee in November 2012 (see 3.5 in King III Compliance report on page 230). To improve the process, the framework will be revised annually and updated accordingly. Process The combined assurance process followed in Exxaro is illustrated below. Risk mapping Analysis Combined assurance design Combined assurance reporting Opinion on risk and control Exxaro is following a phased approach to effectively implement this combined assurance process: • Phase 1: Management’s representation of assurance received • Phase 2A: Validation of management’s representations • Phase 2B: Evidence to support the written assessment • Phase 3: Embedding combined assurance. 2012 achievements The combined assurance process began in 2012 and was conducted in line with the approved combined assurance framework. Phase 1 has been completed for all business units. An assurance map of business units has been completed based on enterprise risk management (ERM) proﬁles developed for business units. The functional-area approach (covering the most signiﬁcant strategic risks based on the inherent score) has been adopted. The risk register as presented to the sustainability, risk and compliance committee was used for the combined assurance assessment. The risk register has been populated with management’s representation of assurance received for each risk in line with the combined assurance framework. The scope of work performed during phase 1 includes: • Identifying and specifying the sources of assurance over Exxaro’s top strategic (inherent) risks • Providing the audit committee with an assurance map based on a detailed assurance analysis • Providing a basis for identifying areas of potential over/under assurance or areas where no assurance exists. p 48 RISK MANAGEMENT AND MATERIAL ISSUES Outcome In total, 124 risks were included in phase 1 of the combined assurance review at Exxaro’s business units. The table illustrates an unvalidated assurance map of the risks and assessment of the adequacy of assurance provided. The validity of these assessments will be veriﬁed during phase 2. Risks Arnot strategic risks Grootegeluk strategic risks Inyanda strategic risks Leeuwpan strategic risks Matla strategic risks North Block Complex strategic risks New Clydesdale strategic risks Tshikondeni strategic risks Total Legend Level Number of risks No assurance Limited assurance Adequate assurance Over assurance 13 12 20 17 12 16 14 20 124 — — 1 — — 1 — — 2 6 4 6 9 4 8 4 10 51 4 6 11 6 4 4 6 10 51 3 2 2 2 4 3 4 — 20 What do we mean No assurance No assurance provided Limited assurance Some assurance provided (room for improvement) Adequate assurance Appropriate assurance regularly provided Over assurance Over-assured: cost and effort outweighs beneﬁt The table indicates the levels of assurance used by management to evaluate the quality of assurance provided. Looking forward • • • • • The combined assurance process review for phase 1 will be completed in 2013 at the regional ofﬁces and services functions Phases 2A, 2B and 3 will also be completed in 2013 at all business units, regional ofﬁces, service functions and corporate ofﬁce A governance, risk and compliance forum will be established in 2013 where assurance activities will be deliberated and coordinated The audit committee will provide oversight for combined assurance and provide the board with a written assessment on the state of risk management Current ineffective assurance activities will be replaced and coordinated by the chief audit executive to ensure activities are focused according to our biggest exposures. EXXARO INTEGRATED REPORT 2012 p 49 All assurance providers’ activities planned for the year will be mapped to the risk proﬁle and compared to the assurance map developed. From this, the governance, risk and compliance forum will be able to determine the actual assurance to be performed for the year. The governance, risk and compliance department will then be able to assess the appropriateness of assurance provided in forming its ongoing assessment of overall risk management and internal control effectiveness. Case study — managing risk proactively In 2012 Exxaro became the ﬁrst South African resources company to become an accredited member of the Road Transport Management System (RTMS). This is an industry-led, voluntary self-regulation scheme that could go a long way to addressing some of the current challenges in the logistics industry. By encouraging those involved in the road logistics value chain to implement its vehicle management system, the RTMS aims to preserve road infrastructure, improve road safety and increase general productivity. The system is based on three sets of standards (for consignors, hauliers and consignees) covering all aspects of vehicle and driver management. Exxaro has already put this system in place at Grootegeluk and North Block Complex, with a dedicated team going to great lengths to ensure that improved road safety and compliance with road transport regulations are incorporated into our operations. The RTMS team commented that Exxaro has set the benchmark for other forward-thinking organisations to self-regulate, to the beneﬁt of the entire South African road transport sector. The new vehicle management system will be rolled out to other business units over the next few months. Accredited operators will beneﬁt from • The opportunity to implement performance-based standards, which means a vehicle can be designed outside the current legal limits to carry heavier payloads while still complying with safety and other requirements. • Being exempt from having to stop when weighbridges are full (currently in KwaZulu-Natal only). Exxaro will beneﬁt from • Less risk: Proposed changes to the national road trafﬁc act will make consignees and consignors jointly responsible for third-party hauliers’ practices, such as overloading and vehicles not being roadworthy. • Greater social responsibility: Better road and vehicle maintenance, along with more carefully managed driver fatigue and health, could signiﬁcantly improve South Africa’s road safety record and lower logistical costs. • Productivity improvements: Those who comply with RTMS standards (based on a detailed audit of their transport management systems) will be given some leeway on current practices. This could mean cost savings, for example, as a result of shorter cycle times and using vehicles carrying bigger payloads. • Improved reputation: Exxaro recognises that it contributes to wear and tear on South African roads, and our RTMS membership demonstrates our commitment to addressing this. p 50 RISK MANAGEMENT AND MATERIAL ISSUES Maintain our regulatory and social licence to operate As a group, by FY12 Exxaro had been granted 19 mining rights (new or converted), and submitted applications for a further two operations. For ﬁve of the granted mining rights, execution is still under way. As for all South African mining companies, every mining right requires its own approved mining work programme, social and labour plan, and environmental management programme. A detailed annual report must be submitted to the Department of Mineral Resources covering ﬁnancial performance and compliance with both the mining charter and Mineral and Petroleum Resources Development Act. The intention of this varied legislation is to ensure an equitable distribution of beneﬁts among stakeholders — an aim we fully support. For each of these mining rights, developing the necessary plans requires in-depth analysis of the challenges, risks and opportunities presented by the operating environment, stakeholder groups and the natural environment. Clearly, where a group such as Exxaro has operations close to each other, the risk of duplicated effort cannot be overlooked. This risk is particularly acute in terms of socio-economic development initiatives and local economic development plans which involve multiple local authorities and sometimes transitory stakeholders but are often founded in common needs and concerns. Accordingly, we instituted a comprehensive year-long internal programme across our coal operations to audit the level of compliance, identify areas of duplication and make practical recommendations. The results of this audit were mixed, with pleasing progress at some mines being somewhat offset by delayed or shelved projects at others. The reasons range from changed stakeholder priorities, to delays in required approvals, to insufﬁcient project management skills and time constraints to make projects sustainable. We understand both the risk this poses to retaining our mining rights and our moral obligation to the communities where we operate and which provide the people who drive our operations. Management teams at each operation have committed to using the enterprise-wide project management system to drive project implementation and to engage with government and communities to ensure implementation. This progress will be monitored quarterly by the sustainability, risk and compliance committee of the board, with related targets incorporated into the key performance indicators of each operation. EXXARO INTEGRATED REPORT 2012 p 51 Compliance Status of converting mining rights and approving new-order mining rights To ensure sustainability, it is imperative that Exxaro secures mining rights for its existing mines and new mining opportunities. The status of conversions and new mining rights granted and executed by the Department of Mineral Resources (DMR) is shown below. Converted mining rights: granting and execution Business unit Grootegeluk Arnot North Block Complex Strathrae Mining right granted1 Mining right executed2 2 April 2009 30 March 2011 12 December 2011 6 December 2012 23 November 2009 Awaiting DMR North Block Complex Glisa 12 December 2011 6 December 2012 Matla Leeuwpan Gravelotte Tshikondeni 23 November 2009 Awaiting DMR 1 June 2009 2 April 2009 2 April 2009 24 March 2010 30 March 2011 Awaiting DMR New-order mining rights: granting and execution Business unit Mining right granted1 Mining right executed2 New Clydesdale 8 November 2007 6 December 2007 Inyanda 15 October 2006 6 November 2006 Leeuwpan Ext 1 June 2009 24 March 2010 Eerstelingsfontein3 28 November 2006 29 April 2009 Belfast Thabametsi 26 February 2013 Awaiting DMR Paardeplaats South Awaiting DMR 1 Granted: an administrative right granted prior to acceptance of terms and conditions 2 Executed: approval of the EMPR and commencement date 3 Renewal application submitted in March 2013 Execution and registration of all granted conversions as well as obtaining new-order rights for Thabametsi has been prioritised for 2013. In terms of the Mineral and Petroleum Resources Development Act 2002 (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. The compliance of our operations to mine works programmes, social and labour plans and environmental management programmes was audited by the DMR in 2011 on an ad hoc basis, and formal feedback received in 2012. With minor exceptions, the DMR found Exxaro to be compliant with the provisions. Section 28(2) of the MPRDA requires that all holders should annually submit ﬁnancial reports reﬂecting proﬁts and losses as well as a report on compliance with the mining charter and MPRDA. The 2012 report will be submitted as required. 05 sustainability Discard bunker in construction for Grootegeluk Medupi Expansion Project (GMEP) and backﬁll project in the pit to replace discard dumps in future p 54 SUSTAINABILITY Background There is a plethora of literature and research on the topics of sustainable development and sustainability, and each source has a different interpretation of the concepts. The terms are used almost interchangeably, and both have a relevant meaning but as Mervyn King, current chairman of the International Integrated Reporting Committee (IIRC) states, “Sustainability is a social and an economic imperative”. Many buzzwords are associated with sustainability, and they all address some aspect of sustainability, but when the whole picture has to be understood and crystallised, a broad-thinking approach has to be adopted. In Exxaro, the term sustainability denotes the collective factors and drivers that either threaten or help create our long-term survival, growth and contribution to society. What does sustainability mean for Exxaro? For Exxaro, sustainability is about securing the future. Our aim is to harmonise (or integrate) business, community and environmental needs and obligations to enable Exxaro to achieve its founding goal of being a company that makes a positive social and economic contribution to South Africa. The concept ﬁgures prominently in the way we do business: • Of our ﬁve strategic focus areas, ensuring Exxaro’s sustainability is in ﬁrst place • Of Exxaro’s nine aspirations, ﬁve are directly related to sustainability (relevance in the 22nd century, growth, mining charter, carbon neutral, and employer of choice) • Of Exxaro’s seven non-negotiable principles, three relate to sustainability (cause no harm, sound governance, leaving a legacy in communities). Since our formation in 2006, Exxaro has employed the triple bottom-line framework to address sustainable development. While adequate for many organisations and in its time, we believe an organisation of Exxaro’s size requires a more mature management model. In line with best practice, we have since adopted the capitals model. Triple bottom line The five capitals ECONOMY society Environment Environment Society Economy F O S T E S B U S E R A Manufactured Financial Social Human Natural Natural capital Social and human capital Manufactured and ﬁnancial capital EXXARO INTEGRATED REPORT 2012 p 55 The term ‘capital’ refers to anything (physical, intangible or virtual) from which you can extract revenue or a yield. Much in the same way as ﬁnancial investment generates income you can live off, certain types of ‘sustainability capital’ can be accumulated and maintained to create a steady ﬂow of beneﬁts for people and organisations. As its name suggests, the capitals model describes ﬁve types of sustainability ‘capital’ — natural, human, social, manufactured and ﬁnancial — and then organises each issue or challenge into one of these categories. Natural Human Social Manufactured Financial This creates a bird’s-eye view of all our sustainability priorities across the business, and enables Exxaro to manage them appropriately. For example, when considering compliance and standards, legislation such as the MPRDA would inﬂuence natural, human and social capital, whereas the BBBEE Codes of Good Practice inﬂuence human capital, and the Companies Act would guide elements under ﬁnancial capital. Being able to organise issues this way makes it easier for Exxaro to identify areas for improvement, establish programmes to address gaps, and clearly delineate the roles and responsibilities of certain functions to meet our sustainability objectives. Ultimately, it has enabled Exxaro to view sustainability as a place of balance and health, as opposed to the process by which you grow into that place — which is sustainable development. The IIRC even advocates an additional capital to be considered, the intellectual capital of an organisation. Within Exxaro’s sustainability framework, the intellectual capital aspects reside under human capital while intellectual property aspects reside under manufactured capital. Linking in compliance, risks and material issues Once the different capitals are understood, and the key components relevant to each sustainability capital determined, integrating views can be built in a methodical process: • The ﬁrst considerations affecting an organisation’s sustainability are the minimum compliance requirements, standards or best practices for each component in each sustainability capital. • Second, what are the major enterprise risks facing the organisation and where exactly do they lie in the sustainability capitals framework? The ERM framework, which covers all risks from strategic to operational level, categories risks in the respective sustainability capital. • Third, what are the material issues for the organisation and how do they affect the organisation’s ability to achieve its strategic objectives? • Stakeholder issues are also critical in determining where the focus should be to ensure the organisation’s sustainability. p 56 SUSTAINABILITY These views, which ﬂesh out the sustainability framework, drive the need to act proactively to address compliance requirements, risks and material issues. In addition, beneﬁcial opportunities for all stakeholders are factored in to give Exxaro a fuller understanding of the breadth and depth of the elements that need to be addressed to secure the future. Sustainability — the political context The prosperity of South Africa is inseparably linked to the sustainability of our world-class and dynamic mining sector. According to the Chamber of Mines’ latest fact sheet, the mining sector contributes almost one ﬁfth of the country’s GDP, but is unfortunately shrinking in economic size with a marginally negative growth rate. South Africa’s current GDP growth rate is too slow to tackle unemployment and poverty in any meaningful way. Using China’s 2011 growth rate of 9% as example, that country would double the size of its economy in just eight years. At a growth rate of 3%, South Africa will need more than 24 years to double its GDP. In other words, what South Africa needs to achieve in the next few years will realistically take a generation to accomplish. And that is time the country does not have, given the escalating incidence of civil protest about the lack of improvement in living conditions. South Africa cannot afford the social or ﬁnancial costs of the tragedy that was Marikana: over 40 lives, over R3 billion cost to the treasury and the follow-on threat to 10 000 jobs according to Congress of South African Trade Unions (Cosatu). These are the very costs the mining charter sought to prevent with its vision of facilitating sustainable transformation, growth and development of a mining industry already in decline. We believe sustainable transformation is achievable. In the past six years, Exxaro has reached several key milestones, including: • One of the largest black empowered groups on the JSE by direct shareholding (almost 53% in black hands) with a demographically representative executive committee responsible for day-to-day management • Over R21 billion spent with black suppliers since listing in 2006 • Cumulative expenditure on training since 2006 close to R1 billion • Since 2006, enrolled almost 2 900 young people in Exxaro learnerships • Over R142 million spent on socio-economic initiatives since 2006 • Our employee share scheme paid out over R1 billion to non-management participating employees when it vested after ﬁve years in December 2011. A new scheme was introduced in 2012. We believe that if we implement the capitals model of sustainability successfully, and manage the related issues correctly, we could create more employment for South Africans and uplift disadvantaged South Africans at the same time. Managing our social and labour plans through the social element of the model and our workplace skills plans through the human capital element will naturally lead to the transformation so needed in our country. Exxaro will be contributing to local economies while growing our business sustainably. And we will meet our obligations to the mining charter and contribute to the successful implementation of the national development plan. A developing trend proves that companies which focus on sustainability attract more investment opportunities, because investors and analysts look at each company’s long-term prospects — the very issues that sustainability addresses. Supporting this, Exxaro was recently named as one of the top ten mining companies worldwide in EXXARO INTEGRATED REPORT 2012 p 57 delivering the highest total shareholder returns over the period 2001 to 2011 by the Boston Consulting Group — despite the global economic crisis. For these reasons, sustainability is a crucial consideration for Exxaro. A comprehensive and successful sustainability strategy will enable us to manage the short, medium and long-term challenges facing our business, our industry and our country. Today, mining companies operate in a world facing more and more challenges, from environmental issues such as climate change and water, to stricter regulatory environments, ageing infrastructure and new technological advancements. In the African context — where bigger challenges combine with sometimes bigger potential — it is imperative that we take stock, and reassess the proverbial bigger picture. In any business or sector, short-term factors often grab the headlines. However, it is the long-term trends that will produce a different world in 2030 and beyond. It is the long-term considerations that should shape our thinking and are doing so at Exxaro. From a mining company perspective, it is critical we understand the contextual elements including: • Earth’s limited natural resources: diminishing mineral resources, water scarcity, strain on agricultural land • Changing demographics: signiﬁcant ageing world population — except in Africa where the populace is largely young and unemployed, and uneven population growth • Proliferating technology and knowledge: new technologies are developed quicker and new products have shorter life spans Increasing sustainability, regulatory and social demands • • New infrastructure in less developed places. As resources become scarcer, stakeholders more informed, and green pressures increase, governments across the world will play a more aggressive role to ensure strategic resources are mined in a responsible, safe and beneﬁcial manner — for both state and societies. This presents generic challenges to mining investors in Africa: • Political stability: openness to foreign direct investment, transparent legal and regulatory environment, monetary and ﬁscal discipline, security of tenure, resource nationalism • Infrastructure/logistical limitations: ageing road, water and electricity infrastructure, bottlenecks due to insufﬁcient capital allocation, inefﬁcient service delivery • Skills shortages: quality of secondary and tertiary education, scientiﬁc research, new patents, ageing workforce, productivity. African populations are mostly young and unemployed, which presents major challenges in terms of creating a positive and hope-ﬁlled future for these people. If not, we could see a repeat of recent events in North Africa in the rest of Africa. Holistic approach In short, only a holistic and inclusive approach to managing these myriad risks will yield best results. Governments, communities, employees and labour all need to be consulted to ensure a win-win partnership with investors. In Exxaro, we believe the capitals model for sustainability will provide the necessary support for delivering on our strategy. p 58 SUSTAINABILITY Natural capital is about energy, fuels, matter, resources, environment, ecosystem processes, climate change and eco-efﬁciency among many other elements. Knowing the applicable legislation — such as the MPRDA, National Water Act and National Environmental Management Act — dictates that businesses should have policies and programmes that enable the efﬁcient management of, for example, water extraction, water quality, waste, air quality, materials stewardships, material substitution, renewable energy, cyclical systems and emissions reduction strategies. An example of such a programme is Exxaro’s energy and carbon management framework. As a coal producer and intensive energy user, Exxaro plays a signiﬁcant role in the energy environment in South Africa. In 2007, Exxaro’s leaders recognised the group had to deal with energy in its broadest context (shortages, rising costs, climate change, environmental concerns) to remain competitive and sustainable for the beneﬁt of all stakeholders. Since then, Exxaro has been addressing three issues that have become central to the local energy environment: energy security, economic productivity and environmental impact, which includes climate change, land and water use and carbon emissions. Human capital incorporates health and hygiene, safety, knowledge, skills, intellectual output, employee wellness and well-being, human rights and equity, quality management, process innovation, values-led leadership, personal and professional development and volunteerism. Legislation such as the Mine Health and Safety Act, Occupational Health and Safety Act and various labour regulations and guidelines provide the framework to shape our management programmes for most of these issues. Some examples of human capital management in Exxaro are our HIV/Aids programme and our training and development initiatives. Two-thirds of the global HIV burden is in sub-Saharan Africa, despite the availability of effective treatment options for people infected with HIV. Mining is one of the industries bearing the brunt of the HIV/Aids pandemic. Exxaro devotes considerable time to educating employees about the pandemic and the results are encouraging: • Exxaro’s HIV/Aids prevalence rate is estimated at under 13%, compared to 25% across the industry • An HIV/Aids disclosure initiative was launched, supporting a marked increase in enrolment onto the treatment programme • Exxaro’s HIV/Aids programme includes peer educators, awareness campaigns and community education programmes, all aiming to foster lower-risk lifestyles, increased access to available anti-retroviral treatment programmes and a reduction in HIV/Aids-related stigma. Exxaro believes that empowering staff with the knowledge and skills they need to develop personally will also help grow the company and the nation: • Over 17% of Exxaro’s workforce comprises women, compared to the average of 11% in the broader South African mining sector • Sponsored adult basic education and training (ABET) programmes at all operations totalled R6 million • Exxaro accounts for a sizable portion of all engineering learnerships with the Mining Qualiﬁcations Authority EXXARO INTEGRATED REPORT 2012 p 59 • In 2012, Exxaro employees successfully completed more than 68 000 compliance-related and almost 25 500 development-related training sessions • Exxaro invested 5,5% of total payroll in 2012 on human resource development, an investment of R177 million. While employment equity is certainly a legal issue, with strict targets imposed by both the mining charter and BEE codes, for Exxaro it is also a moral imperative. When we created Exxaro, we stated our intention of being the best example of how South African companies should be run. At the heart of our employment equity strategy are detailed plans developed by each business unit in consultation with employees and unions. By following these plans, each unit ensures recruitment and skills development are conducted responsibly, encouraging transformation without affecting existing positions in the company. Social capital is about internal relationships, values and trust, networks and our operating model, as well as external relationships with suppliers and customers, trust and reputation and our licence to operate. Areas requiring attention and management plans, and shaped by the mining charter, the national development plan and other state-level imperatives, are community investment and development, proactive stakeholder engagement, human rights, ethical procurement, compliance and good governance systems. For Exxaro, socio-economic development initiatives and donations are focused on areas that are relevant and strategic to South Africa’s development: formal education, skills development and capacity building, enterprise development, health and welfare, environment, infrastructure development, agriculture, and sport and recreation. Examples include: • Our people development initiative ensures children from schools near our operations are recruited into the bridging programme • Our artisan skills development programme provides artisan training to community members • The Exxaro bursary programme provides engineering bursaries to historically disadvantaged South Africans (HDSAs) • Exxaro is playing a leading role in development of the Waterberg coalﬁelds and development of Lephalale in Limpopo province • Funding for university chairs, skills development and national and international bodies such as the National Business Initiative, WWF and Peace Parks Foundation. Artisan training remains a topical and sensitive issue for all industries requiring speciﬁc trades. The mining industry, one of the largest contributors of trained artisans in South Africa, is often also the one hardest hit by a shortage of artisans. Collectively, the mining industry and the Mining Qualiﬁcations Authority offer generous bursaries and scholarships to employees, matriculants and students to grow South Africa’s skills base each year — within the sector, but also for the beneﬁt of the broader economy. Local economic development is aimed at alleviating poverty and improving lives. An important element in Exxaro’s approach is generating new non- mining economic opportunities in identiﬁed local communities, particularly for local BEE companies and small and medium enterprises (SMEs) owned by disadvantaged groups. p 60 SUSTAINABILITY Manufactured capital refers to all the material goods, infrastructure, technology, networks, ICT or information and communication technology, business processes and systems that make up an organisation. This is about the way we mine, how we beneﬁciate, logistics, infrastructure, engineering, processes and innovation in all these areas. Management plans are aimed at promoting eco-efﬁciency, eco-innovation, reducing energy intensity, driving resource efﬁciency, zero waste, zero emissions and sustainable construction. Sustainability at Exxaro is also about innovation — innovation for sustainability. This is encapsulated in our vision: through our innovation and growth we will be a powerful source of endless possibilities. Exxaro’s founding aims included maintaining a research and development focus, which is now paying dividends in a number of innovations setting new standards: • Largest coal beneﬁciation complex in the world • UHDMS (ultra high dense medium separation) project • AlloyStreamTM • Increasing focus on natural capital, combined with our innovation initiative, has also resulted in a very promising constructed wetlands project. A new group-wide culture of innovation is driving the $20 billion by 2020 strategy. A systematic innovation framework incorporates management system for ideas and project pipeline management and is aimed at increasing the predictability of project success. Financial capital reﬂects the productive power of the other types of capital — currency, share price, ownership, governance, risk and growth. Performance measurement, transparency and accountability, best-practice corporate governance, green accounting, cost internalisation, new investment criteria and valuing intangible assets such as environment, costs, brand and reputation are the measures of this pillar. For each element, tools such as the GRI are used as guidance. Critics argue that transformation in the mining industry has made a handful of black people extremely wealthy. Yes, it has, but it has also beneﬁted millions more through shareholding, skills development, socio-economic development, preferential procurement and enterprise development. While we do believe the mining charter should go some way towards effecting the desired change, only a few ownership structures to date have beneﬁted neighbouring communities. That will require a far more innovative approach to ownership. We add value to our ﬁnancial capital by: • Managing costs (drivers, capital projects, energy, supply chain, investing in automation, transport/ﬂeet ownership) • Scenario planning to deal with commodity price volatility • Financial modelling (balancing social, economic and environmental imperatives) • Capital projects (demand and necessity dictate the spend, but talent gap, community negotiations, government intervention/legislation, funding and infrastructure are challenges). Management and governance are key, (as are supply chain, stafﬁng, relationships, geographic or product groupings, operating model redesign, automation) EXXARO INTEGRATED REPORT 2012 p 61 F I N O A P N E C I R A A L T I N A M U H E O A X N C C H A E L L I E L A V E N E D C E ENSURE EXXARO’S ABILITY SUSTAIN N NATURAL I M P R O V E E X X A R O ’ S P O R T F O L I O NCIAL A FIN S O C I A L PROTECT AND BUILD EXXARO’S REPUTATION M A N U F A C T U R E D A N D P E O P L E L E A D E R S H P I D E V E L O P E X X A R O S ’ • Non-traditional ﬁnancing in often unfamiliar markets (private equity, sovereign wealth funds, hedge funds, joint ventures, mergers, acquisitions, demand) where relationships are critical • Growth through vertical integration, foreign projects, acquisitions • Plan for the unforeseeable/worst-case scenario. View this as a risk and an opportunity • Adopting a phased development approach • Focus from board level, through all layers of management, on best-practice governance initiatives and processes that enable the business strategy. Supporting the Exxaro strategy Exxaro has ﬁve strategic focus areas shown below. The ﬁve capitals sustainability framework is a means to support Exxaro in reaching its strategic objectives and complements the ﬁve strategic focus areas. Strategic focus area Five capitals category Ensure Exxaro’s sustainability All ﬁve categories of sustainability capitals apply — from compliance to beneﬁts Protect and build Exxaro’s reputation All compliance, material issues, stakeholder issues, and risks of each of the ﬁve capitals apply Develop Exxaro’s leadership and people Primarily the opportunities and beneﬁts aspects of human capital and social capital apply Improve Exxaro’s portfolio Primarily the opportunities and beneﬁts aspects of manufactured capital and ﬁnancial capital apply Achieve operational excellence Primarily the opportunities and beneﬁts of human capital and manufactured capital apply Measuring sustainability across the organisation Sustainability is moving higher on the agenda in Exxaro and is being reported at the highest level – to the sustainability, risk and compliance committee of the board. Each quarter, speciﬁc sustainability indicators across the different capitals are measured and reported to this committee. These are aligned with the GRI and are also linked to Exxaro’s material issues, stakeholder issues, risks and compliance requirements. They also change as business conditions change. As far as possible, Exxaro seeks a form of assurance on these key performance indicators — from internal controls to external assurance. Reporting sustainability indicators (noted in the risk management section) is a journey that will improve and sustainability reporting will drive change in the business. Innovation for sustainability Sustainability at Exxaro is also about innovation — innovation for sustainability. This is encapsulated in our vision: through our innovation and growth we will be a powerful source of endless possibilities. To set the context — mines by nature have limited life spans. Companies are continuously competing for fewer mineral deposits of lower grades which are more difﬁcult to reach and more complex to mine. This, in addition to high operating costs, high shareholder expectations, uncertainty on mining rights and infrastructure constraints, means that the mining industry must constantly develop, acquire or adapt innovative technologies to ensure its sustainability. p 62 SUSTAINABILITY Developing innovative technologies has been a key strategy in the group’s history of identifying growth opportunities and adding value, and has inﬂuenced decisions to maintain a research and development division when others were reducing the scope and scale of their R&D. Over the last two years, Exxaro has been working on a programme to make blue-sky innovation part of the group’s culture. This will broaden the company’s technology strategy and innovation programme to functions as diverse as sustainability, services, human resources, supply chain, information management, and SHEC or safety, health, environment and community. Exxaro has developed a systematic process and supporting infrastructure that enables employees to log and evaluate ideas, develop a compelling business case and, if proven, add them to our project pipeline. This, in turn, is guided by our ten-step technology strategy development process that ensures projects support Exxaro’s business goals. Recent successes include: • The ultra high dense medium separation (UHDMS) processing technology provides a solution to the challenge of declining ore qualities and the limitations of existing technologies by improving resource utilisation and increasing life of mine. • Exxaro’s AlloyStream team is commercialising a new smelting process with a manganese partner using coal ﬁnes. This is the ﬁrst manganese smelting process innovation in the industry in nearly 80 years. Proving that innovation is not necessarily a quick process, it took 18 years of testing, but the beneﬁts are worthwhile, including a one-step steel smelting process, life-of-mine extensions and energy savings of up to half the costs of a traditional smelter. • Exxaro’s diversiﬁcation strategy has extended beyond the mining industry to cleaner energy. As a coal producer and thus intensive energy user, Exxaro plays a signiﬁcant role in the energy environment in South Africa. Over the last six years, Exxaro has addressed three issues that have become central to this environment: energy security, economic productivity and environmental impact, including climate change, land and water use and carbon emissions. A major achievement of the group’s energy strategy was the formation of a company aimed at generating power via a mix of renewable and cleaner energy sources. Cennergi was launched in April 2012 as a joint venture with Tata Power of India. • Exxaro also recently announced a transaction with USA pigment manufacturer, Tronox, to form the world’s ﬁrst vertically integrated mineral sands processing and pigment company. • The group’s future mine programme started in 2012 on the back of the innovation culture drive. Guided by senior functional coaches, a group of young professionals was tasked with deﬁning technology focus areas for Exxaro and aligning these to the group’s commodity strategy for 2020, 2030 and 2050 horizons. They conducted local and global research, made benchmarking visits to companies around the world and attended numerous conferences to identify innovative opportunities and development initiatives which Exxaro could pursue in future. All this focused activity will result in innovations that will keep Exxaro sustainable and position it to contribute to the nation’s economic growth from local to national level. EXXARO INTEGRATED REPORT 2012 p 63 Stakeholder engagement The need for listed companies to respond to stakeholder concerns about social, economic and environmental performance – the triple bottom line – has grown exponentially in recent years. This is also increasingly linked to investor interests in emerging risk-related aspects of ﬁnancial performance. Stakeholder engagement guidelines and standards (such as Global Reporting Initiative, AA1000SES, King III and others) have emerged to drive stakeholder engagement processes and the quality of those interactions. We believe engagement is fundamental to creating value for all our stakeholders: it assists in identifying issues that are material and may otherwise have an impact (negative or positive) on their wellbeing. We also believe that engaging with our stakeholders promotes the principles of balance, comparability, reliability, accuracy and transparency of our reporting, both internally and externally. Accountability and oversight of group-wide stakeholder engagement is managed centrally to coordinate and support activities performed by Exxaro employees who interact directly with stakeholders. Exxaro applies the AA1000SES standard and King III recommendations in a process that starts with identifying individuals or groups who affect or are affected by Exxaro and its operations’ current or future activities, classifying these as internal or external stakeholders, and then as direct or indirect stakeholders. To prioritise stakeholders, we identify those who inﬂuence or are inﬂuenced by Exxaro’s economic, social and environmental performance now, and in future. To ensure Exxaro successfully deals with all identiﬁed concerns, a risk matrix has been developed and implemented throughout the company. This includes a speciﬁc software enabler that records all issues and incidents to assist with comprehensive monitoring. We strive to engage openly and proactively with stakeholders, responding to their issues and requests as part of ongoing programmes implemented by stakeholder- facing teams across the group. The table identiﬁes key stakeholders, methods and frequency of engagement and key issues. p 64 SUSTAINABILITY Stakeholder Community stakeholders which include all authorities, affected and interested parties such as government, NGOs, etc Engagement method Community engagement forum Community development forum Purpose Frequency Formal socio-economic assessments (SEATs) assessment every three years, followed by quarterly engagement forums In 2013 Exxaro will conduct the next round of SEATs at all business units Quarterly Identify material issues affecting communities surrounding Exxaro operations Monitor progress on implementing local economic development projects and project spending Determine local economic development projects for social labour plan, and implement these in a collaborative way Engagement forums Provide feedback to surrounding communities on resolving material issues Quarterly Issues raised • Safety • Health • Environmental • Community • Local economic development procurement opportunities • Employment opportunities • Environmental concerns • Education and skills development needs • Job creation initiatives • Shareholding/ equity • Issues of mutual interest to operations and surrounding communities Customers Marketing Enable Exxaro to understand and meet customer speciﬁcations As required by each commodity business’ marketing department • Product quantities and qualities • Logistical issues Advertise Exxaro products EXXARO INTEGRATED REPORT 2012 p 65 Stakeholder Engagement method Purpose Update on group strategy and developments Promote ongoing discussions between worker representatives and mine management about the future of the mine Implement strategies on downscaling and retrenchment when required Provide feedback on progress made against social and labour plan commitments Scheduled engagement takes place with recognised trade unions at operational and employer level Ensure government and Exxaro management are aligned Update on group strategy and developments Comply with environmental impact assessment (EIA) authorisations’ requirements Engagement on mining rights, mining charter, social and labour plans and industry developments Ensure investors are informed of group strategy, performance and developments Employees Intranet portal Road shows Group newsletter Electronic communication Information briefs Caucus groups Future Forum Labour unions Government Government relations Investors Interested and affected parties’ authorisation process DMR Road shows Brieﬁngs and meetings Securities Exchange News Service (SENS) Financial reporting Site visits Frequency Ongoing Quarterly Ongoing Issues raised • Remuneration and incentive schemes • Beneﬁts • Corporate developments Quarterly at business unit and corporate centre • Mine closure issues • Human resource development • Local economic development Ongoing Ongoing • Issues relating to the employer/ employee relationship • Group support for government initiatives As required by EIA authorisation process • Compliance with legislation As required Biannually Ad hoc Ad hoc Biannually • Compliance • Industry developments • Group strategy and implementation • Corporate activity • Actual ﬁnancial and operational results, outlook p 66 SUSTAINABILITY Stakeholder Media and general public NGOs Suppliers Engagement method Site visits Interviews News releases Website Advertising Mine engagement Corporate engagement Green procurement Sustainable supplier engagement Preferential procurement Purpose Provide information for media to inform general public and other stakeholders Update on group strategy and developments Keep mine stakeholders informed on operational affairs Frequency Ad hoc As required by media Issues raised • Legislative compliance Ad hoc Ongoing Ad hoc Quarterly • Group strategy and implementation • Corporate activity Keep corporate stakeholders informed on Exxaro developments Ad hoc Maximise supply chain efﬁciency by buying environmentally friendly products and services and setting sustainability requirements in supplier agreements Collaborate with suppliers in addressing supply chain sustainability issues and enhance their capabilities to meet sustainability standards: • Supplier sustainability assessments (audits) • Supplier sustainability development • Supplier innovations To ensure Exxaro purchases goods and services from suppliers that meet BEE compliance requirements As opportunities for green initiatives occur and as initiatives are identiﬁed by the green procurement working group. • External stakeholders to be engaged in 2013 As required by supply chain management • External stakeholders to be engaged in 2013 Ongoing requirement on request-for-quotation or tender enquiry documents. Speciﬁed as a requirement for evaluating tenders. • Ongoing legislative compliance Broader industry participation As a stakeholder in the mining industry, Exxaro actively participates in shaping appropriate policies in South Africa through many channels, including: • The Chamber of Mines • National Energy Regulator of South Africa (NERSA) • Energy intensive users group (EIUG) • National electricity response team (NERT) • Energy efﬁciency accord through the technical committee facilitated by the National Business Institute (NBI) • Industry energy policy-inﬂuence workshops • World Wildlife Fund (WWF) round table event • South African Chamber of Commerce and Industry’s (SACCI) electricity dialogue • SANBI (South Africa National Biodiversity Institute). Exxaro is also involved in the initiatives of: • South African Independent Power Producers Association (SAIPPA) • Coaltech 2020 EXXARO INTEGRATED REPORT 2012 p 67 • Fossil Fuel Foundation • Peace Parks Foundation • SA Centre for Carbon Capture and Storage with international and local partners • Clinton Foundation. In terms of research and advocacy, Exxaro funds several university chairs, including: • Business and climate change (Unisa) — to promote and advance research, teaching and advocacy-orientated community engagements in this ﬁeld, especially in developing economies. • Energy efﬁciency (Pretoria) — to participate at the forefront of research activities in energy efﬁciency and deliver world-class research and educational outputs for the beneﬁt of Exxaro and South Africa. • Global change and sustainability (Wits) — to provide an enabling research platform of global signiﬁcance and local impact, fostering informed and innovative actions for adaptation and mitigation strategies for sustainability in the rapidly changing southern African region. • Business and biodiversity leadership (Pretoria) — focusing on thought leadership in the interface between the spheres of business and biodiversity. As a group, Exxaro strives to inﬂuence society to make the right decisions by carefully managing the way in which we mine. This programme is an opportunity for the group to be at the forefront of driving something that will not only beneﬁt South Africa, but also the world. 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 Exxaro chair in earth science at University of Pretoria University of Pretoria community-based project module Mineral Education Trust Fund National Business Initiative To create HIV awareness and encourage HIV testing in communities surrounding our business units. We aim to create an environment that has no stigma against people living with HIV/Aids Projects initiated at Arnot, Leeuwpan and North Block Complex in 2010, followed by Inyanda, Matla and New Clydesdale in 2011. In 2012, Grootegeluk, Reductants and Tshikondeni implemented this initiative Encourage research and dialogue Support initiated until 2013 Compulsory community module for second year engineering students Student support of community projects run by business units Pool industry resources to support 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 Annual contribution of over R2 million Corporate membership Exxaro participates in the Carbon Disclosure Project (CDP) programmes for energy and water to ensure responsible stewardship Annual funding of over R1 million People development initiative Bridging year to prepare students for tertiary education in mining-related studies as well as sponsorships in the ﬁelds of education, health and entrepreneurial studies p 68 SUSTAINABILITY Key sustainability performance indicators These sustainability indicators have been assured by PwC. Sustainability indicator Safety Fatalities Lost-time injuries (LTIs) Lost-time injury frequency rate (LTIFR) Occupational health Employees participating in HIV/Aids voluntary counselling and testing (VCT) Employees tested positive for HIV as a percentage of employees participating in VCT New cases of pneumoconiosis New cases of occupational tuberculosis New cases of noise induced hearing loss Energy Total diesel used Total Sasol gas used Total electricity used Greenhouse gases Indirect CO2 emissions — Scope 2 emissions Direct CO2 emissions from own operations — Scope 1 emissions Scope 3 Environmental compliance Status of integrated water user licence (IWUL) applications Level 2 and 3 environmental incidents Amendments made to approved EMPRs Water Total water withdrawal by source Unit Number Number Rate Number Rate Number Number Number GJ GJ GJ CO2 tonnes CO2 tonnes CO2 tonnes Approved Pending Level 2 Level 3 Number 2012 Level of assurance 2 Reasonable 66 Reasonable 0,29 Reasonable 3 616 Limited 13% Limited 24 Limited 66 Limited Limited 22 2 520 233 Reasonable 212 961 Reasonable 4 279 399 Reasonable 1 117 409 Reasonable 345 781 Limited 70 644 554 Limited 21 Reasonable Limited 3 11 0 11 Reasonable Cubic metres 12 308 604 Limited Dust Dust fallout rate Environmental fallout dust: Points monitored with single unit dust bucket Exceedances of residential limit Number Months Exceedances of industrial limit Months 73 Limited Coal average per operation — 3 Coal worst performer — 11 Coal average per operation — 2 Coal worst performer — 7 EXXARO INTEGRATED REPORT 2012 p 69 Sustainability indicator Land rehabilitation Disturbances versus land rehabilitation Waste Hazardous waste generated Unit Ha Tonnes Radioactive waste disposed of (tonnes) — compliance to NNR Number Mining Charter Ownership (% ownership by HDSAs) Employment equity (total number of employees per race, gender and grade) Procurement from historically disadvantaged South African (HDSA) suppliers % % Value Percentage conversion of hostels into family units % spend % 2012 Level of assurance Land disturbed — 8 944 ha Limited Land rehabilitated — 2 840 ha 1 484 tonnes Only for managed coal operations No breaches reported Limited Limited 52,7% Reasonable 40% Reasonable R7,9 billion Reasonable 59% All conversions completed prior to 2012 Reasonable Global Reporting Initiative Self-declaration of application level Level B+ Limited 06 performance in 2012 Discard conveyor carrying discard from all Grootegeluk plants to kidney stacker en route to the discard dump p 72 PERFORMANCE IN 2012 By corporate standards, Exxaro is a young company. However, in just six years, we have built on decades of experience and expertise to live up to our credo of powering possibility. Our progress is continually monitored at both ﬁnancial and non-ﬁnancial levels (see key sustainability performance indicators in the risk management section, page 41) and our intentions clearly set out in our strategy (page 20). Performance targets Exxaro’s business objectives are measurable indicators of progress. At every level, and in different ways, our teams are accountable for these objectives. All performance targets are measured at least annually, as part of the strategic review, and adjusted where required. Target Actual Assured 2013 2012 2012 2011 2010 2009 2008 2007 Financial targets1 Return on equity (ROE) – attributable earnings (%) 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 worked) Employment equity – management (%)2 Functional literacy – employees (%)3 HIV/Aids voluntary testing and counselling (%) (long-term target 95%) Human resources development (% spend of payroll) Learnerships4 Procurement from HDSA companies (%) (2014: 56) Community development (% of net profit after tax)5 Energy efficiency (%) BBBEE rating – minimum level7 HDSA ownership (%) >25 >20 >28 >4 >25 >20 >28 >4 19 20 27 11 36 18* 44* 22* 34 14* 38 10* 19 12 25 7 30 18 36 14 15 14 23 10 0 0 2 3 2 3 5 5 0,15 0,15 0,29 0,20 0,25 0,33 0,39 0,36 40 82 95 4,5 400 40 81 85 4,0 400 54 52 >1,0 N/A6 4 26 >1,0 6,2 4 26 40 81 75 5,5 437 59 1,8 4 52,7 41 82 82 5,7 397 59 1,4 3,8 5 52 50 79 70 3,8 379 48 70 58 5,0 691 42 36 64 30 5,2 678 6,5 408 50 45 39 35 2,5 1,8 52 52 56 56 * Restated 1 Actual ﬁnancial ratios disclosed exclude the impact of impairments and other non-recurring entries or the accounting for events that would make comparisons meaningless 2 Employment equity target is based on compliance with the mining charter 3 Above NQF level 1 (ABET 4, grade 9 and above) 4 Learnerships include all disciplines, eg mining, engineering, geology, etc. Average number in the system 5 Funds expended by business units for implementation of social and labour plan projects 6 Total cumulative target of 10% reduction from 2009 baseline by end 2012 achieved. Focus shifts to energy intensity improvements per business units 7 Revised DTI BBBEE codes currently being assessed by Exxaro EXXARO INTEGRATED REPORT 2012 p 73 Delivering on group strategy The 12 months to 31 December 2012 reﬂected solid progress on Exxaro’s ﬁve-point strategy: Improve Exxaro’s portfolio • Coal: Construction on the Grootegeluk Medupi expansion project to supply Eskom’s Medupi power station with 14,6Mtpa of coal is progressing well. Exxaro was able to meet its contractual commitments on time with ﬁrst coal delivered during 2012. • Mineral sands: Further to the interim results announcement, Exxaro has increased its shareholding in Tronox Limited, listed on the New York Stock Exchange, from the 39,2% held at date of transaction to 44,65% at 31 December 2012. This is in line with the group’s strategy to increase its exposure to the mineral sands and pigment businesses. • Ferrous: Following the previous announcement on the acquisition of the African Iron Limited group of companies, we continue with our strategy to develop an Exxaro-managed and controlled iron ore business. For most of 2012, we concentrated on activities to increase the resource, completing the bankable feasibility study for a 2Mtpa operation and negotiating a mining convention with the government of the Republic of Congo. • Energy: We continue to explore opportunities in the energy market, focusing on cleaner energy initiatives. Cennergi, our new joint venture with Tata Power, was awarded two wind energy projects in the Eastern Cape. We also recently concluded a term sheet with Linc Energy Limited to jointly pursue underground coal gasiﬁcation as a commercial business to develop energy solutions in sub-Saharan Africa. This is in line with our strategy to include clean energy technologies as part of our energy growth aspirations. • Base metals: In line with our strategy to exit this market, the sale of Rosh Pinah was completed in June, following the earlier end of production at Zincor. The group continues to hold 26% in Black Mountain mine. Exxaro’s growth initiatives continue to focus on diversifying the business with carbon, reductants, ferrous and energy projects, aligned with our approved commodity strategy. Coal Grootegeluk Medupi expansion project (GMEP) expenditure to date is R7,1 billion with the project 92% complete. Total project expenditure is estimated at R10,2 billion. The budget has been increased by R700 million due to a combination of factors, including escalations, labour unrest, steel shortages and additional scope. The ﬁrst coal based on a revised ramp-up schedule agreed with Eskom was delivered to the utility to commission the respective coal-handling systems. The coal supply ramp-up will begin in the ﬁrst half of 2013 and is expected to continue until the second half of 2016. The project will be implemented in three phases to provide for the delayed ramp–up of Eskom tonnages. Phase one includes the ﬁrst mining equipment, run-of-mine bunker, total plant complex and total dispatch facilities. We anticipate that coal will be produced through the plant in the ﬁrst half of 2013. Phase two, which is 75% complete, includes the conveyors and semi-mobile tip and crushers in the pit. This is forecast to be completed by the third quarter of 2013. Phase three includes the remaining mining equipment and the housing project of 740 units, forecast to be complete in the ﬁrst half of 2013. p 74 PERFORMANCE IN 2012 The backﬁll project at Grootegeluk is progressing well, with phase one forecast to be completed in the third quarter of 2013 and phase two by the end of 2014. Exxaro continues to engage with relevant stakeholders to conclude implementation plans for integrated infrastructure for the Waterberg coalﬁelds, including the supply of water, rail, road and housing. The upgrade of the Zeeland water treatment works plant, which supplies Lephalale municipality with potable water, was completed and commissioned in 2012, doubling capacity from 20Mℓ/ day to 40Mℓ/day. This integrated infrastructure is crucial to developing all projects in the Waterberg, geared to both domestic and export markets. Recent weak market conditions delayed the char phase II expansion project. The bankable feasibility study is still expected to be complete in the ﬁrst half of 2013. Exxaro is also evaluating a bankable feasibility study to produce market coke from semi-soft coking coal at Grootegeluk, which is expected to be completed in 2013. The bankable feasibility study on the Belfast project in Mpumalanga continues to progress and is expected to be complete in the ﬁrst half of 2013. Exxaro received the mining right for this project in the ﬁrst quarter of 2013. The Moranbah South project is a 50/50 joint venture with Anglo American in the Bowen Basin of Queensland, Australia. The prefeasibility study indicated high potential for a dual longwall mine to produce 10 to 12Mtpa of prime hard coking coal product. The joint value engineering between Exxaro and Anglo American is progressing as planned. This is expected to continue throughout the ﬁrst half of 2013, after which the prefeasibility study will be updated, before obtaining approval to begin the deﬁnitive feasibility study. Ferrous A review of the operations and technical aspects of the Mayoko project in Republic of Congo was completed in the second half of 2012. Implementation of phase I progressed rapidly after it was approved by the Exxaro board in 2012. The immediate priority is to produce initial tonnes by the second half of 2013 by focusing on transported ore that does not require much processing. The initial phase is also aimed at ensuring access to critical rail and port infrastructure and de-bottlenecking the entire production and logistics chain before ramping production up to a rate of 2Mtpa in 2014. The ultimate objective is to develop the project in phases to produce and export 10Mtpa by 2016/2017. A legally binding memorandum of understanding detailing the principles of the ﬁnal Republic of Congo mining convention was concluded between Exxaro and the government of that country in December 2012. All efforts are now being directed at reaching agreement with the government for the mining convention to be enacted during the parliamentary session in the second half of 2013. Regular engagement with the relevant Republic of Congo government authorities continues at all levels to ensure the project is successfully implemented. The bankable feasibility study for the ferrosilicon expansion project will be conducted in 2013. Production is envisaged to increase from the third quarter of 2014, ramping up to almost double the existing capacity to meet growing customer demand. EXXARO INTEGRATED REPORT 2012 p 75 Energy Exxaro continues to explore opportunities in energy markets, with a focus on cleaner energy initiatives. Cennergi, a 50/50 joint venture with Tata Power, was granted preferred bidder status on two projects submitted in window 2 under the independent power producer procurement programme. The joint venture will continue to focus on obtaining ﬁnancial closure on the Amakhala and Tsitsikamma wind projects by the ﬁrst half of 2013. It is preparing to submit additional renewable energy projects in window 3 of the Department of Energy’s renewable energy independent power producer programme in the third quarter of 2013. The prefeasibility study on developing a 600MW coal-ﬁred base load independent power producer power station in the Waterberg continues. Following a selection process, Exxaro and an independent power producer developer concluded a project development agreement in November 2012. The agreement was approved by the Exxaro board and remains subject only to concluding a coal supply and offtake term sheet by the second quarter of 2013. The environmental impact assessment process and associated studies are under way, due for completion in 2013. The bankable feasibility study is conditional on establishing an appropriate enabling environment for such a development. Thabametsi is a prospective greenﬁelds mine adjacent to Grootegeluk mine in the Waterberg. Its development will coincide with the 600MW power station noted above. The mining right application is in process and ﬁrst coal production is expected by 2016/2017, although this depends on the 600MW Waterberg independent power producer and water supply development schedules. Exxaro and Linc Energy signed a term sheet to develop underground coal gasiﬁcation projects in sub-Saharan Africa in October 2012. Ensure Exxaro’s sustainability Safety and health Safety remains a top priority. The group continues to strive to achieve zero harm at our operations, with a focus on proactive risk identiﬁcation and assessment, as well as enhancing the effectiveness of control measures undertaken. Our safety performance for the year was mixed: after achieving the rare industry milestone of 12 months without a fatality in July, there were regrettably two fatalities in the second half. The biggest disappointment of our performance in 2012 was the signiﬁcant deterioration in our lost-time injury frequency rate or LTIFR. This reversed the positive trend of recent years to end at 0,29 — missing the target of 0,15 and well above the 0,21 in 2011. Management is aggressively addressing this trend reversal. Six business units achieved no lost-time injuries for the year ended 31 December 2012 compared to ﬁve in 2011. Health and hygiene focus areas in 2012 included a review of the health and hygiene programme, HIV/Aids and TB, system development and health awareness. These initiatives are detailed on page 103. p 76 PERFORMANCE IN 2012 Environment Exxaro’s operations have applied for all outstanding environmental authorisations required in terms of the Mineral and Petroleum Resources Development Act, the National Water Act and the National Environmental Management Act. We continue to strive to ﬁnd a balance between the environmental, social and economic impacts of mining, and aspire to more than mere compliance. Regrettably, Exxaro needed to resort to the courts during the year on certain integrated water use licences after North Block Complex (Glisa) and Leeuwpan mines were given directives for suspected non-compliance with the National Water Act. These directives were suspended by the High Court and the Minister of Water Affairs directed to reinstate the Water Tribunal, which had been placed in abeyance by the department pending the amendment of the National Water Act. Eerstelingsfontein mine’s water licence is being appealed by a stakeholder group. This appeal is pending at the High Court, with no hearing date set as yet. We believe the High Court is likely to refer the appeal back to the Water Tribunal, which is currently in abeyance. New mining rights applications in terms of the Mineral and Petroleum Resources Development Act of South Africa were submitted for the Paardeplaats and Thabametsi projects. Final environmental management plans were submitted in the ﬁrst quarter of 2013. A wetland strategy project was initiated in 2012 to assist operations to address the challenges of mining in ecologically sensitive environments. All 12 Exxaro-operated business units have retained their ISO 14000 and OHSAS 18001 certiﬁcations in 2012. Innovation To ensure the sustainability of the group, Exxaro has several breakthrough innovations that are expected to turn into commercial operations. If fully developed, they will contribute to the group’s strategic goal of achieving a US$20 billion market capitalisation by 2020, and to the economic development of South Africa. One such initiative is the ultra high dense medium separation processing technology which provides a solution to the challenge of declining iron ore qualities and the limitations of existing technologies by improving resource utilisation and increasing life of mine. Protect and build Exxaro’s reputation Understanding that an organisation is only as prosperous as the communities in which it operates, Exxaro has several community development projects under way. These projects are aimed at ensuring we are able to maximise beneﬁts by focusing on sustainable initiatives for surrounding communities. A good example is the R100 million upgrade of the Zeeland water treatment works plant which supplies potable water to over 21 000 residents in the Lephalale local municipality in Limpopo. Completed and commissioned in the second quarter of 2012, the water treatment works is operated by our Grootegeluk mine as part of its contribution to local infrastructure and has been awarded Blue Drop certiﬁcation by the Department of Water Affairs. EXXARO INTEGRATED REPORT 2012 p 77 As required by the MPRDA, new social and labour plans are being developed for all the Exxaro mining-right operations, covering 2013 to 2017. An extension to submit these plans was requested from the DMR. The intention is to more accurately determine exact local community issues and support municipal integrated development plans with better sustainable priorities before ﬁnalisation and submission. In drafting the social and labour plans, we will use greater ﬁnancial rigour to include feasibility studies (where necessary), cash ﬂow analysis, sustainability evaluations of projects, and economic value added for all respective stakeholders. A new community development policy, the Exxaro social compact, is being developed. This aims to provide a new paradigm for community development that further progresses the moving away from the remaining elements of a ‘paternalistic’ model to one focused on assisting communities in determining their own developmental path. The group’s contribution to the Exxaro Chairman’s Fund and Exxaro Foundation in 2012 earmarked for investments in social and labour plans was R50 million, from which R24 million was spent on community development initiatives in the year. An additional discretionary R10 million was also contributed from corporate departments. Develop Exxaro’s leadership and people An integral element of our long-term sustainability is empowering our employees. In May 2012, the board and shareholders approved the new employee share ownership plan, referred to as Mpower 2012, for employees below management level. The new scheme will run for ﬁve years, with each employee receiving 387 Exxaro shares at no cost to the employee. The economic cost of implementing the new scheme was around R584 million. Achieve operational and ﬁnancial excellence Performance on revenue net operating, earnings and cash ﬂow are comprehensively reported on under “Group ﬁnancial performance in brief” under the ﬁnancial capital section. Exxaro will continue to focus on creating and maintaining a safe and healthy environment for our people to work in p 78 PERFORMANCE IN 2012 Performance against targets What we said we would do Progress Target 2013 and beyond Aim for our target of: • Zero fatalities • LTIFR of 0,15 • 100% of business units to have implemented safety improvement plans • Fatality-free ﬁrst half and 12 months fatality-free by July 2012. This is rare in our industry and while we are grateful and delighted, we need to consistently guard against complacency. Regrettably, there were two fatalities in the second half. The LTIFR was 0,29 • 82% of safety improvement plans implemented • Eight business unit teams achieved their safe day target • Zero fatalities • LTIFR 0,15 (2013, zero long term) • Maintain OHSAS 18001 certiﬁcations and obtain certiﬁcation for Grootegeluk Medupi expansion project Comply with industry targets to: • Reduce noise-induced hearing loss (NIHL) to less than 10% (from baseline) per individual by 2013 • Maintain prevalence of HIV below industry norm: Internal targets: 80% VCT, >70% retention on treatment programme, reduce indirect costs by 5% from baseline • Raise awareness of health and hygiene programme. • Review system requirements to support health processes • • Introduce management standard for proﬁling occupational risk exposure Improve DTI BBBEE scorecard from level 5 to level 4 by 2012 and minimum level 4 by 2013, based on revised and more onerous DTI BBBEE codes • Meet mining charter scorecard targets for transformation • Employee shareholders — enhanced beneﬁts • Although fewer cases of NIHL were • Reduce NIHL to less than 10% from reported in 2012, the existing number of cases warrants continued focus baseline per individual • Train 20% of line managers on ways to support employees with HIV/Aids • HIV/Aids prevalence is estimated 13% (industry average 25%), with 92% of employees who attended HIV training electing to test for HIV. Since the successful launch of our HIV disclosure initiative in June 2012, more than 130 individuals have enrolled on the HIV management and treatment programme — Treatment retention 70%, total of 164 community peer educators trained at nine sites • Awareness is being raised by • Continue to raise employee awareness about chronic diseases • Level 4 rating for 2013, then progressively improve • Achieve outstanding 2014 targets developing and distributing health information to employees on NIHL, HIV/Aids, TB • System requirements were reviewed and preparations for implementation completed • Pilot project initiated in Pretoria region. The aim is to standardise implementation of risk-based medical surveillance at all sites • Level 4 achieved • Compliance reported per mining right for 2011, with no critical non- conformance; 2012 compliance being compiled and veriﬁed • New Mpower scheme introduced — qualifying employees receive units (equivalent to shares) at no cost to employee y t e f a S h t l a e H n o i t a m r o f s n a r T EXXARO INTEGRATED REPORT 2012 p 79 What we said we would do Progress Target 2013 and beyond • Conduct comprehensive skills • Pilot skills audit completed at North • Audits envisaged for additional audit Block Complex and skills audit initiated at Inyanda business units • Give all employees the opportunity to participate in home ownership by 2014 • 7,7% bought company property, 2,8% in family quarters, 153 participating in Exxaro’s subsidised ﬁrst-time homeowner scheme, 13,3% in single quarters e l p o e p r u O analysis at remaining business units t • Complete formal stakeholder n e m e g a g n e stakeholder engagement policy • Develop community • SEAT (socio-economic assessment tool) to be rolled out at all operations in 2013 • Policy and management standard to be approved and rolled out in 2013 r e d l o h e k a t S t n e m n o r i v n E • Improve on JSE SRI rating by continuously implementing innovative environmental solutions • Further improve compliance levels • Forum to develop clear policy and standards on mine- closure requirements given that Exxaro has two mines within ﬁve years of closure (Tshikondeni and Inyanda) • Implementing integrated business model to guide the lifecycle of our operations — from planning and feasibility to post-closure activities. Environmental specialists participating in project-planning forums • We have conducted environmental legal assessments at all operations and developed auditable action plans to close identiﬁed gaps. All senior and project managers attended relevant legal training. We are developing wetland, pans and sensitive eco-system databases and related strategies per operation • Forum established and standards developed based on a legal and risk approach. Rehabilitation standard updated in 2012, to strengthen ongoing rehabilitation procedures • All projects to have environmental specialist input at planning stage • Exxaro wetland strategy to be ﬁnalised in 2013 • All mines within ﬁve years of closure to initiate approval of closure plans p 80 PERFORMANCE IN 2012 Our future Our future will be deﬁned by several factors, some outside our control. However, Exxaro has a strong balance sheet, excellent project pipeline and a motivated workforce to ensure we reach our goal of building a company with a U$20 billion market capitalisation by 2020. Reaching our goals To realise our commodity growth aspirations, we are focused on effectively managing the key elements that underpin this success: Element Measure Target for 2013 and beyond Our people — keeping our workforce safe and healthy • Reducing loss-time injury frequency rate (LTIFR) by 30% pa • 0,15 (2013). 0,0 (longer term). Disappointingly, we missed our target in 2012 and appropriate measures are being taken • Reduce the incidence of life-threatening diseases • Wellness • The HIV/Aids prevalence is 13% compared to 25% in the mining industry. Ongoing campaigns encourage our people to know their status. In 2012, over 90% of those who attended HIV training chose to participate in voluntary counselling and testing. There was a marked increase in the number of employees who enrolled on the HIV/Aids management programme in 2012 compared to the prior two years, with 70% adhering to their treatment programmes • Given the resurgence of TB, continual education on signs and symptoms needs to be given to employees so they can access medical care in good time. Although infection rates have decreased over the past three years, a rate of 500 per 100 000 is still high. Community peer educators have been trained at nine sites in Mpumalanga and Limpopo • Community legacy • In 2012, we contributed R60 million on community projects (page 190) Our natural environment — managing our use of resources and minimising emissions • • Improved legal compliance, authorisation and certiﬁcation Integrating environmental management principles throughout life-of-mine planning • All operations have required ISO 14000 and OHSAS 18001 certiﬁcation • Biodiversity action plans • Achieved. Targets for business units being set developed for most business units • Hazardous waste • In progress. Targets for business units being set management — baseline assessment • Reduce potable water consumption by 5% • Air quality reduce emissions by 10% over three years to 2012 • Improving energy efﬁciency by 10% by 2012 • Achieved. New targets include discharge water, re-use, recycling • Long- and short-term goals qualiﬁed • Partially achieved. New energy intensity targets set per business unit EXXARO INTEGRATED REPORT 2012 p 81 Element Measure Target for 2013 and beyond Our sustainability — managing our manufactured, intellectual and ﬁnancial capital • • Improved infrastructure Innovation — group-wide campaign under way to capitalise on depth of intellectual capital in Exxaro • Future mine design — an integrated model guides the lifecycle of our operational activities from planning and feasibility stages of a mining project to post-closure In 2012, the ﬁrst AlloyStream™ ferromanganese furnace was commissioned — representing the ﬁrst new manganese production technology in 80 years and a proprietary innovation for Exxaro after 18 years of development and investment. The AlloyStream furnace uses cheaper reductants, less electricity and has a lower environmental impact than conventional technology. AlloyStream reduces steel smelting to a one-step process, doubles the life of a manganese mine and halves the electrical energy costs of a traditional smelter Our host communities • Create sustainable • Capacity building interventions in education, skills development, communities enterprise development and agriculture • Increase GDP of local communities • Leaving a sustainable legacy in our communities p 82 PERFORMANCE IN 2012 Case study — putting more energy into using less energy Getting metals and minerals from mine to market is an energy-intensive business, whichever way you look at it. Sponsoring related research is just one of the ways in which Exxaro is tackling this challenge. Electricity plays a critical part in extraction, processing and beneﬁciation and, as a business, Exxaro’s energy footprint is considerable. Managing our fossil fuel use has always been a priority, but given the cost and scarcity of power, coupled with our responsibility to the environment and society, we are becoming more innovative in how we address this issue. In 2012, we completed the ﬁrst of a three-year sponsorship of an energy efﬁciency research chair at the University of Pretoria’s Centre of New Energy Systems (CNES). This investment will provide the knowledge Exxaro needs to achieve our energy efﬁciency and energy intensity ambitions, and builds on three years of work aimed at realising our pledge to achieve an energy efﬁciency target of 10% by the end of 2012. In 2011 we achieved a 0,8% year-on-year auditable electricity saving — equivalent to about 17GWh of electricity and R8 million in Eskom charges. We reduced diesel and electricity consumption by 2,4% and 3,2% respectively, year-on-year, compared with the 2009 baseline for the coal, sands and base metals sectors. In 2012, we adopted a new approach, focusing on measuring energy efﬁciency improvements exclusively. Targets for 2013 are speciﬁc to individual business units and are in the region of 5%. Over the past three years, our understanding of energy efﬁciency has advanced signiﬁcantly. While recognising that it is a cross-discipline issue that affects all aspects of our organisation, we also understand that efﬁciency improvements must be balanced against the need to meet increasing production targets. The energy efﬁciency research chair at CNES is just one of many cross-cutting initiatives that will help us achieve this delicate balance. Ultimately, energy efﬁciency will enable Exxaro to continue ‘powering possibility’ — just more efﬁciently. Awards Boston Consulting Group One of the top ten mining companies worldwide measured by highest total shareholder returns over 2001 to 2011. See panel right Financial Mail Among the top ten in the Top South Africa Company survey for ﬁnancial excellence Deloitte Best Company to Work For Ernst & Young World Entrepreneur Awards 2012 Frost & Sullivan 2012 Growth Innovation Leadership Award Carbon Disclosure Project Corporate Research Foundation Best Employers Exxaro earned a Standard of Excellence Award in the 2012 survey. We are exceptionally proud of this achievement given that this was a target we set for 2016, and achieved four years early CEO Sipho Nkosi won the master category for southern Africa (page 89) Awarded to Exxaro CEO, Sipho Nkosi, for his commitment and dedication to building a greater sustainable mining industry, while continuing to drive and lead South Africa into the future Top score of 100 points on leadership index for carbon and energy management — a ﬁrst for South Africa and the company. Exxaro was rated in the top ten in the 2011/2012 survey Department of Water Affairs Exxaro’s Zeeland water treatment works, which supplies water to over 21 000 residents of Lephalale local municipality in Limpopo, was awarded the prestigious Blue Drop certiﬁcation by the Department of Water Affairs (DWA) Grootegeluk was second in the industry, mining and power sector category of the DWA’s water conservation and demand-side management award Green Excellence in Technology Innovation in Mining Best internal newsletter (fourth award) Frost & Sullivan Global Research Platform South Africa Publications Forum EXXARO INTEGRATED REPORT 2012 p 83 Top 10 in shareholder returns globally In January 2013, Exxaro was named as one of the top ten mining companies worldwide delivering the highest total shareholder returns (TSRs) over the period spanning 2001 to 2011. A report from the Boston Consulting Group (www.bcg.com) stated that excellent capital stewardship, robust organic growth and a strong, credible outlook for value creation helped the global mining industry achieve average TSRs of 18% between 2001 and 2011, 15% more than the S&P500. “Notably, the decade-long annual average TSR of the industry’s top ten was an impressive 39%,” says the report. “Unlike their industry peers, the top ten mining companies continued to earn high TSRs in the second half of the decade, the period encompassing the global ﬁnancial crisis.” The Boston Consulting Group noted, “The mining industry clearly beneﬁted from the continued economic expansion in emerging markets, which led to steadily rising commodity prices. Value creation was also fuelled by production growth, margin expansion, and cash returned to equity holders.” Exxaro was the only South African miner among the top 10 value creators. According to the study, factors behind the dramatic performance of the top ten include managing capital expenditures and consequent cash ﬂows well. The result was evident in their debt management, limited equity dilution and dividend policies. 07 human capital Mining activities being executed from mine plan p 86 HUMAN CAPITAL People — employees and stakeholders Our approach to our people is guided by a comprehensive suite of policies covering employment, labour/management relations, occupational health and safety, training and education, diversity and equal opportunity. South Africa is particularly challenged by the shortage of speciﬁc skills and a national plan is in place to address critical or scarce competencies. As such, 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. The group’s vision, mission, business strategy and culture drive a total remuneration philosophy and strategy in tandem with a total remuneration approach. The underlying components include guaranteed pay, short-term performance incentives and long- term incentives such as share-based 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 management and specialist categories. Six-monthly market surveys ensure total remuneration is market related. At all levels, minimum conditions of employment generally 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. EXXARO INTEGRATED REPORT 2012 p 87 Current and future skills requirements Skills development The shortage of skills in South Africa is well documented, and not unique to this country. For companies like Exxaro, the skills deﬁcit translates into issues surrounding leadership and culture, literacy and numeracy, and providing a pipeline of core and critical skills. The private sector cannot afford to wait for the public education system to produce the calibre of people it needs at every level. The sustainability of business collectively depends on rapidly developing the skills each company needs to run and develop its operations which, in turn, enable it to empower employees to develop their full potential and ultimately contribute to national economic growth. At Exxaro, we focus on empowering all staff with the knowledge and skills they need to develop personally and help us grow the company for the beneﬁt of all. Our policy is to invest an appropriate amount of total salaries and wages each year on human resource development. In 2012, this was 5,5% or an investment of R177 million (2011: 5,7% or R225 million). The lower monetary value in 2012 is primarily due to corporate activity and divestment in Exxaro’s mineral sands and base metals businesses respectively. We encourage our people to accept joint responsibility for managing their career growth. Financial assistance is provided to permanent employees with potential to continue their education through part-time studies of recognised, approved courses and programmes. Employees nominated by the company to attend courses or programmes are fully sponsored for tuition, examinations, travel, accommodation costs and study leave. In 2012, 49 employees enrolled for post-graduate studies and 489 for management development programmes sponsored by Exxaro. Speciﬁc strategies to ensure the accelerated learning and development of black people, women and people with disabilities include: • Fast-tracking employees with leadership and management potential • Accelerated development for occupation-based skills • Formal study assistance • Adult basic education • Life skills programmes • Learnerships. Skills development Total training spend Total training spend on HDSA Spent 2011 Rm 225 172 2012 Rm 177 134 2010 Rm 140 115 p 88 HUMAN CAPITAL Graduate programme Exxaro’s three-year professionals-in-training programme blends academic theory with the work environment. Each graduate has a mentor who supervises exposure to various commodities, leadership and management training. Mentors also assist with fulﬁlling registration requirements for relevant governing bodies and professional associations. In 2012, there were 80 professionals in training throughout Exxaro (2011: 88) in a R39,4 million programme. Of the 2012 intake, 43% are women. Over 90% of qualifying professionals-in-training were permanently appointed at Exxaro. Bursary programme There are currently 101 bursars studying at South African institutions at a cost of R9,2 million per annum. Over two-thirds are historically disadvantaged South Africans and 24% are women. As part of its bridging programme, Exxaro granted 12 bursaries in 2012 to school- leavers interested in technical disciplines such as engineering (metallurgical, chemical, mechanical, electrical, industrial, mining or civil), mine surveying and geology. Candidates must be grade 12 students from Exxaro communities who want to study for a technical degree or diploma. Six students secured Exxaro bursaries during the intake for 2013. The total cost of bursaries is R1,5 million per annum. Community education In 2012, 154 community members enrolled for adult basic education and training (ABET) at Exxaro. At North Block Complex almost R700 000 was spent on grade 12 learners in Saturday schools to improve science and mathematical knowledge and understanding. Sponsorships In 2012, Exxaro committed to offer scholarships to students in the ﬁelds of education, health sciences, entrepreneurial studies and in the areas of Exxaro’s research chairs. These individuals are expected to practise their crafts in communities where Exxaro operates for a speciﬁc period. Alternatively, their research should support the objectives of the chair and/or add value to Exxaro. During the year, four scholarships were awarded to two medical students and two education students. Talent management Retention 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. To preserve technical and engineering competence in the group, aggressive retention and succession-planning strategies are in place. These are supported by comprehensive training and growth opportunities that continually rotate and expose talented individuals to multidisciplinary teams. EXXARO INTEGRATED REPORT 2012 p 89 Leading by example Exxaro CEO, Sipho Nkosi, emerged victorious at the Southern Africa chapter of the Ernst & Young World Entrepreneur Awards after being named the winner in the master entrepreneur category. Now in their 15th year, the awards recognise entrepreneurs who demonstrate excellence in their respective ﬁelds of work and are described as a testament to the talent and potential that exist in Africa. Sipho will ﬂy the southern African ﬂag high alongside his West and East African counterparts in 2013 when he competes at the Ernst & Young World Entrepreneur of the Year event in Monte Carlo against winners from some 50 nations. The global programme celebrates the achievements of outstanding entrepreneurs and ensures their contribution to their country’s economic and social progress is widely recognised and honoured. This is considered one of the world’s premier business awards. Following the award, Sipho noted that it was in fact recognition for Exxaro and all its people in the way the group moves forward with R&D and new ideas for survival in the industry. “I am just the leader of a great team. I was very privileged to be afforded the opportunity to represent the organisation in this way.” “I believe this is a ﬁtting testimony to the commitment of our people to this company and to entrepreneurship. It is this spirit that will take us through to meet our 2020 vision.” Leadership development Understanding that leadership is vital in building a high-performance culture, Exxaro has developed a unique philosophy dedicated to strategic business objectives and personal leadership improvement on all levels. In addition to valuing change in promoting business growth and performance, leaders in Exxaro are developed according to the credo that leaders must be credible to be truly incredible: • Credible leaders — Competence: basic functional and managing competencies to lead — Self: value-centred, accountable and reﬂective characters — People orientated: relational skills including diversity, respect and constructive discipline — Communication: foundational communication attitudes such as openness, listening and positive attitude • Incredible leaders — Involved: create a context for meaningful participation of teams through diversity, trust and alignment — Inspire: connect people with the dream and maintain motivation to the vision — Invest: facilitate knowledge and understanding of people — Inﬂuence: inﬂuence achieving goals through respect, understanding and openness to change. Additional skills development takes place after employees have been declared competent in their current positions to ensure solid foundations. In most cases, further development concentrates on a career path in the discipline in which an employee is currently working. Additional skills development takes place after employees have been declared competent in their current positions to ensure solid foundations p 90 HUMAN CAPITAL People — towards a zero-harm culture Strategy Risk Opportunity Target To drive a zero-harm culture Safety incidents may affect company performance Align safety culture to the Exxaro high-performance culture and add value through good safety practices 2013: LTIFR of 0,15 Zero fatalities The safety of our people is fundamental to our business, and we will not rest until we achieve our safety goals through collective responsibility, commitment and ongoing focus. Our safety governance model begins with meeting legislative requirements as a minimum. Industry best practice risk management systems and processes are then modelled around key risks for implementation at operational level. This approach also informs the way human and ﬁnancial resources are allocated and used to ensure improvement beyond legal compliance. All 12 operational business units have international health and safety accreditation (OHSAS 18001). To ensure effective communication, Exxaro’s ofﬁcial medium of instruction (both written and spoken) 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 communication, training and development takes place in that language. Our ultimate target remains zero injuries and, therefore, zero fatalities. To reach this goal, we review our lost-time injury frequency rate (LTIFR) target annually based on prior performance. We will achieve this target by applying stringent management protocols, programmes and systems. Formal management health and safety committees are in place at all operations and meet regularly to discuss pertinent safety issues and risks observed during the previous shift, day, week and month. This allows operational teams to communicate effectively any safety issues and risks, while assessing their performance against corporate targets. Every lost-time injury is investigated by the relevant business unit manager, while all fatalities are investigated by a committee with the appropriate skills, headed by an independent chairman. Findings are reported to the executive committee and the sustainability, risk and compliance committee and escalated to the board if required. Each business unit tracks its adherence to standards and legislation through a programme of self-assessments and corporate audits. EXXARO INTEGRATED REPORT 2012 p 91 The key generic risks facing our group range from limited hazard awareness to varied safety competency and non-adherence to corporate safety standards. Collectively, these may result in Exxaro being perceived as an unsafe business — which poses material risk to our sustainability. Accordingly, we have developed a timeline to achieve the desirable state that includes: • Zero fatalities • Zero lost-time injuries • Effective hazard identiﬁcation and risk assessments (HIRA) • Visible felt leadership as a key driver of safety excellence • Zero repeat incidents. Safety highlights • In July 2012, Exxaro recorded a 12-month fatality-free period. This proves we can reach our target and is a powerful incentive to all our teams • Although the group missed its LTIFR target, commendable performances were recorded at Inyanda, Exxaro Reductants and North Block Complex. Research & development, Durnacol and Zincor also achieved their targets • Eight business units reached their safe-day targets (days without LTI). Lowlights • Regrettably, two fatalities between August and December • Disappointingly, the LTIFR was 0,29 against a target of 0,15, reﬂecting the increase in number of lost-time injuries (LTIs) to 66 in 2012, compared with 48 in 2011. Focus areas To maintain our OHSAS 18001 certiﬁcations, Exxaro committed R60 million over ﬁve years (2009 to 2013) to achieving its safety targets: • Zero fatalities in the longer term and a 12-month fatality-free period in the short term — Actual performance for 2012: 12 months without a fatality achieved in July 2012 but two fatalities to year end • Improvement target was set at 30% (LTIFR = 0,15) — Actual performance in 2012 was a deterioration of 45% (LTIFR = 0,29). Exxaro’s CEO Sustainability Summit is a biannual forum involving stakeholders from government (departments of mineral resources, water, health), labour, local communities, employees, media and any other interested and affected parties. At the inaugural summit four years ago, we identiﬁed ﬁve key areas that would enable us to make a tangible difference to safety performance: • Consequence management • Safety training • Culture (the Exxaro safety way of life) • Mini-HIRA (hazard identiﬁcation risk assessment) • Communication. p 92 HUMAN CAPITAL In 2012, Exxaro also introduced periodic SHEC summits with internal representation only and focused on addressing pressing SHEC challenges. With the support of government, the Chamber of Mines and Exxaro’s recognised unions, this focus is producing tangible results. By year end, six business units had worked for 12 months without a lost-time injury (Inyanda, North Block Complex, Ferroland, R&D, Durnacol and Zincor). Following the ﬁrst summit, we rolled out an Exxaro safety improvement plan to all business units, focusing on the areas noted above. Progress in implementing these plans is monitored quarterly in the safety and sustainable development forum, and reported to the social and ethics committee. In 2011, we added health, environment and related issues to these plans to enhance awareness and participation. By the end of 2012, 82% of safety improvement plans had been implemented. Exxaro set a target of zero fatalities, and an LTIFR (per 200 000 hours worked) of 0,15 for 2012. Disappointingly, actual LTIFR performance was 0,29 — a 45% deterioration on the LTIFR of 0,20 in 2011. Exxaro management is currently implementing several programmes to improve performance: • Safety awareness is being raised using industrial theatre. This was instituted in the last quarter of 2012 and is 80% complete • The mini-HIRA process is being reviewed to enhance the effectiveness of the hazard identiﬁcation and risk assessment process, which is expected to signiﬁcantly minimise or prevent injuries • Visibility of management in the plant is being increased by enhancing visible felt leadership (VFL) • Medical treatment incident target was set and will be monitored to ensure prevention starts from non-LTI incidents. The fatality frequency rate per 200 000 man hours worked in 2012 was 0,06 compared to 0,07 in 2011. Our target remains zero, as no death is acceptable. In risk-speciﬁc terms, the leading cause of injury was lifting and materials handling. Exxaro LTIFR 2008 to 2012 (per 200 000 hours worked) 0,40 0,35 0,30 0,25 0,20 0,15 0,10 0,05 0,00 2008 2009 2010 2011 2012 2013f EXXARO INTEGRATED REPORT 2012 p 93 Exxaro fatalities 2008 to 2012 5 4 3 2 1 0 2008 2009 2010 2011 2012 During the reporting period, no ﬁnes or sanctions for non-compliance with safety and health laws and regulations were imposed on any Exxaro operation. However, Tshikondeni and Grootegeluk mines were issued with section 54 and 55 non-conformance notices which resulted in work stoppages: • Grootegeluk: 2 x section 54, 1 x section 55 • Tshikondeni: 3 x section 54, 1 x section 55 • Inyanda: 1 x section 55 • Matla: 1 x section 54. In all instances, non-conformances were corrected and our corrective actions presented to the DMR authorities in Limpopo and Mpumalanga. The notices were subsequently lifted. Safety training While key risks differ by operation, our major challenges are vehicle incidents, energy and machinery isolation, and risk awareness and discipline at all levels. Because skills shortages exacerbate these challenges, the group concentrates on continuous on–the-job training to ensure sufﬁcient trained people are in place, applying safe working practices. Improving safety performance extends to contractors at all Exxaro operations as part of a formal programme: • Where appropriate, 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 • Contractors need to complete the relevant induction and medical examinations before starting work • Contractors participate in monthly SHEC meetings at operations. p 94 HUMAN CAPITAL Exxaro has also implemented a policy detailing the approach to identifying, preparing for and responding to emergency situations affecting employees and surrounding communities. This spans all known types of emergency including ﬁre, ﬂood and bomb threats. Emergency situations that have occurred in recent years have been well handled, demonstrating the effectiveness of policy, training and execution. Safety awareness In January 2011, Exxaro launched the safety recognition award (for teams reaching their safe-day targets). This award also recognises year-on-year safety improvements in LTIFR and reinforces safety behaviour. In 2012, team members at several business units achieved their safe-day targets (days without LTIs): • Inyanda (345) • Grootegeluk Medupi expansion project (93) • New Clydesdale (287) • Research and Development (255) • Reductants (335) • Matla (118) • Tshikondeni (195) • Zincor (202). These teams have qualiﬁed for the R1 300 safety recognition incentive per employee. Because achievements are recognised immediately, teams may qualify more than once in a year. In addition, for the past two years, each Exxaro operation has raised a ‘safe day’ ﬂag for each day without a lost-time injury. These visible ﬂagpoles keep safety awareness high and celebrate every day without injury. Paying tribute to our colleagues Regrettably, in 2012, we lost two colleagues (2011: three). Our aim is zero harm and we continue to do our utmost to ensure we reach and maintain this goal as soon as possible. • Matla — 5 August 2012: electrician Nonhlanhla Shabalala (34) died from secondary complications after surgery for an injury sustained in an underground vehicle accident on 14 July 2012 • Grootegeluk — 19 October 2012: Shadrack Moroka (57) sustained fatal injuries when a haulpak truck collided with an LDV bakkie in which he was an occupant. These cases were thoroughly investigated, and lessons incorporated into our safety programmes to create an injury-free work environment. EXXARO INTEGRATED REPORT 2012 p 95 People — attracting and retaining a skilled workforce For Exxaro’s management approach, see page 86. Since Exxaro’s formation six years ago, we have steadily been building a culture that reﬂects the values of our organisation and our philosophy by engaging our talent to unlock value for Exxaro and its stakeholders. Our aim is to develop a high- performance, enabling culture at every level using integrated and benchmarked practices to achieve strategic alignment and meet business targets. Exxaro progressively benchmarks itself as an employer of choice against several other organisations, nationally and internationally, on the key drivers of culture, talent and engagement. Speciﬁc strategic responses are identiﬁed from results in the prestigious Deloitte Best Company to Work For public survey in which Exxaro participates every second year. Our aim is to steadily improve our rating, reﬂecting the group-wide emphasis on performance in a healthy employee climate that proactively attracts and retains talent (see awards on page 83). Share ownership In 2011, employees participating in Exxaro’s Mpower (an empowerment scheme to broaden share participation among workers) shared a payout of over R1 billion. Since inception six years ago, each Mpower beneﬁciary has received over R9 200 in dividends. A new scheme was implemented in July 2012, known as Mpower 2012, and will run until end-May 2017. Participants received their ﬁrst dividend in the review period. In 2011, employees participating in Exxaro’s Mpower shared a payout of over R1 billion p 96 HUMAN CAPITAL Importantly, in Mpower 2012, the various employer companies in the Exxaro group contributed cash to the trust to purchase shares. This means there is no loan to repay ﬁrst, so Mpower 2012 participants will enjoy potential growth and proﬁt from the outset. Each of the 7 290 participants received 387 units worth R75 000 on 1 July, regardless of remuneration level or years of service. New qualifying employees will receive a pro-rated number of units. Employment equity When we created Exxaro — then 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 compliance issue, with strict targets imposed by both the mining charter and the government’s BEE 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 is conducted responsibly, encouraging transformation without affecting existing positions in the company. Each business unit has a dedicated senior manager for employment equity, and an employment equity forum responsible for ensuring appropriate plans are developed, executed, monitored and communicated to employees. Exxaro’s staff complement was 7 721 at 31 December 2012, split into employees in bargaining units (80%) and the management and specialist category (20%). The drop in numbers from 2011 to 2012 reﬂects the transfer of our mineral sands operations to Tronox and the sale of Rosh Pinah. 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 2011 to 31 July 2012, totals differ from year-end numbers, which may appear elsewhere in the report. Employee group gender key Bargaining unit Management and specialist category Male Female Total Male Female Total Grand total Mpumalanga 2 922 455 3 377 134 40 174 2 142 250 2 392 70 70 Region Gauteng Limpopo Foreigners Expatriates Local nationals Total 458 380 274 5 4 7 367 825 999 60 54 5 440 2 832 328 3 705 5 4 12 75 4 12 Table reﬂects the ﬁgures as submitted to the DOL on 31 January 2012 5 268 745 6 013 1 128 486 1 614 7 627 EXXARO INTEGRATED REPORT 2012 p 97 Female Foreigners A C I/A W 2 76 272 268 131 749 2 5 25 4 2 38 2 16 9 1 7 114 271 14 5 28 411 M 4 4 11 57 3 75 Grand Total 4 104 841 2 650 3 241 775 7 615 Employment equity by race and gender Level Top management Senior management Middle management Junior management Semi-skilled Unskilled Total A 2 13 209 1 085 2 803 598 4 710 3 14 14 3 4 38 Male C I/A W 2 71 378 955 85 31 4 25 8 6 1 44 1 522 A — African, I/A — Indian/Asians, C — coloured, W — white Table reﬂects the ﬁgures as submitted to the DOL on 31 January 2012 12 local nationals have been excluded because they do not qualify as EE For 2012, and excluding the mineral sands and Rosh Pinah operations, Exxaro’s average employee turnover rate was 11,7% (2011: 11%), primarily because of death, resignation, dismissal and disability. This rate reﬂects the closure of Zincor and voluntary separations as part of Exxaro’s restructuring process. The average turnover rate excluding voluntary retrenchments was 6% for 2012. The turnover rate by employee group is shown below: Breakdown of turnover statistics Top management Senior management Professional, specialist and middle management Skilled technical, academically qualified and junior management Semi-skilled and discretionary decision-making Unskilled staff Total Terminations January to December 2012 % of workforce Number – 0,14 1,14 4,10 4,24 2,13 11,75 – 12 97 350 362 182 1 003 p 98 HUMAN CAPITAL Breakdown of turnover statistics Turnover Gender Race Reasons for terminations l e a m e F l e a M n a c i r f A d e r u o o C l i n a d n I e t i h W d e d n o c s b A h t a e D y t i l i b a s D i l i a s s m s D i d e n g s e R i d e r i t e R r e h t O Number 113 890 748 7 9 239 31 83 44 35 212 85 513 % 11,3 88,7 74,6 0,7 0,9 23,8 3,1 8,3 4,4 3,5 21,1 8,5 51,2 * Included in other: 512 retrenchments and one breach of contract Turnover vs total workforce per age group % 25 20 15 10 5 0 21 — 30 31 — 40 41 — 50 51 — 57 58 — 65 Age groups Remuneration The Exxaro brand is built on a strong vision — everything we do and deliver today will allow others to realise their vision tomorrow. We believe in the power of people and their ability to explore and shift boundaries, which leads to success. As such, our people strategies have been developed to reinforce our brand values: • People-powered • Inspired leaders • Leading performance • Sustainable effort. We follow a total remuneration approach. This includes guaranteed and variable components which play a critical role in attracting, motivating and retaining the high- performing and talented individuals required to build a sustainable business. One of our competitive sources of value is our people. To meet our corporate goals and business objectives, we believe our reward policies and objectives must: • Be integral to an overall human resources strategy, geared to support business strategies • Be designed to motivate and reinforce superior performance, and continually demonstrate the company values • Encourage the development of organisational and individual performance • Encourage the development of competencies required to meet future business needs EXXARO INTEGRATED REPORT 2012 p 99 • Be based on the premise that employees should share are the success of the company • Be designed to attract and retain high-quality individuals with the optimum mix of competencies • Be aimed at securing our people’s commitment to goals via the optimum mix of ﬁnancial and non-ﬁnancial rewards. Training Across Exxaro, training and development are based on a comprehensive needs analysis, incorporating business strategy, identiﬁed skills gaps via the performance management process and training matrixes, succession-planning requirements, employee career progress and employment equity plans. A pilot skills audit was completed at North Block Complex to determine the gap in skills in the current position and, where applicable, the next higher position. A skills audit also started at Inyanda towards the end of 2012. The skills audit is a process for identifying current job and competency requirements, comparing these with what is needed currently and, more importantly, in future to achieve organisational goals and objectives. Exxaro offers sponsored training in engineering learnerships at the Grovos training centre in Lephalale, as well as engineering and mining learnerships at Colliery Training College (CTC, where Exxaro is a shareholder) in Mpumalanga. As part of the talent pipeline, Exxaro also provides sponsored on-the-job training in core skills programmes like maintenance operators and mobile equipment operators. Three Exxaro business units (Grootegeluk, Matla and Tshikondeni) are MQA-accredited training providers in selective mining and engineering disciplines. This enables our people to be trained in mining and engineering, declared competent and obtain their MQA certiﬁcation inhouse. In addition, all employees are trained in world-class quality management measures. One of our competitive sources of value is our people p 100 HUMAN CAPITAL Learnerships In 2012, 437 learners were receiving training and development across Exxaro at its own accredited training centres at Grovos and CTC. Monthly average number of learners in training 120 100 80 60 40 20 0 l a c i r t c e E l l a c i n a h c e M t h g i r w l l i M r e d e W l / r e t a P l i c n a h c e m s r e n M i s r e g g R i l e s e D i n o i t a t n e m u r t s n I Literacy and numeracy Exxaro provides all employees with qualiﬁcations below NQF level 1 the opportunity to become functionally literate. Less than 20% of Exxaro’s total workforce now falls into that category, which is important to ensure effective communication, particularly on safety issues. Exxaro offers voluntary adult basic education and training (ABET) programmes at all commodity businesses, paid for by the company. This initiative amounted to R6 million in 2012 (2011: R4,4 million). To ensure informed decisions, candidates are screened and counselled, and where employees complete training in their own time, an incentive scheme for each level completed is in place. In 2012, 70 employees and 164 non-employees completed various ABET levels successfully, while 156 employees and 154 non-employees enrolled on various ABET levels. More than 1 200 employees have passed one or more ABET levels since the inception of this programme. Exxaro has accredited ABET training centres at Grootegeluk (partnership with external provider), Tshikondeni and Matla. Accredited external providers are used by the other business units. EXXARO INTEGRATED REPORT 2012 p 101 Functional literacy and numeracy rates 2012 2011 2010 2009 Total staff count 8 873* 10 903* 10 510* 11 180 Employees below ABET level 3 Employees on ABET level 3 Employees above ABET level 3 1 155 501 7 217 1 177 595 9 131 1 683 511 8 316 2 236 345 8 599 * Number of full-time employees as per 2012, 2011 and 2010 workplace skill plans Managing work conditions Exxaro’s approach to our people is guided by a comprehensive suite of policies that covers employment, labour relations, occupational health and safety, training and education, diversity and equal opportunity. Our aim is to provide working conditions that are safe and healthy, opportunities that are enriching and an environment conducive to performance. We use several benchmarks to assess our standards and measure our progress. One of these is the Deloitte Best Company to Work For — a prestigious annual survey that identiﬁes the best companies to work for across the southern African region as rated by their employees. Exxaro participates every two years. In 2012, Exxaro earned a Standard of Excellence award in this survey. We are exceptionally proud of this achievement, given that this was a target we set for 2016, and achieved four years early. This is a challenging award — the result of concerted effort to achieve a clear goal to continually improve our people management capabilities and is, therefore, more prized as a result. We believe our people are our business. Our employees are the ones who will help realise our strategic vision of being a $20 billion business by 2020. We are now reviewing the detailed results of the survey to address gaps in the way we work, understanding that continual improvement is the only way to ensure we remain a great company to work for. Eliminating discrimination and resolving grievances As an employer, Exxaro is ﬁrmly committed to extending equal opportunity to all, irrespective of race, religion, gender, health status, sexual preference or nationality. Our corporate values guide the way we do business, and discrimination on any grounds is not acceptable. Programmes under way to eliminate discrimination, HIV awareness, training on the disciplinary and grievance process. Human rights policy Exxaro complies with labour legislation in South Africa and International Labour Organisation guidelines. As a signatory to the United Nations Global Compact, the group encourages freedom of association and collective bargaining, ensures child labour is not tolerated and that forced or compulsory labour is not practised. p 102 HUMAN CAPITAL Induction programmes educate employees about human rights. Policies on discrimination, harassment and racism are in place, as are structures to protect employees’ human rights in the workplace. Security personnel are fully trained after appointment on human rights aspects relevant to each operation. Refresher courses also cover human rights issues. Women in mining In Exxaro, 17% of the workforce comprises women, and we continue to focus on attracting women through our talent pipelines. Although this is a challenge, 43% of young professionals-in-training (PITs) are women, 24% of our full-time bursars in engineering and mining at universities are women and 26% of the intake to learnerships and skills programmes comprises women. In our people development initiative (bridging programme), 60% of participants are women. Housing Exxaro’s focus on home-ownership complies with both the mining charter and our own business needs, and is based on a long-term housing strategy developed ﬁve years ago. The goal is for all employees to have the opportunity to participate in home- ownership by 2014. Since introducing a ﬁve-year subsidy for ﬁrst-time homebuyers who are permanent employees in 2009 — a period characterised by the unprecedented scarcity of bank mortgage ﬁnance — 153 employees have beneﬁted from this plan 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 with accommodation. The value of these allowances in 2012 was some R228 million. The steady percentage rise in the number of home owners underscores the group’s commitment to facilitating affordable ownership. At all operations, except Tshikondeni due to the current life of mine, there is only one person per room in the hostels; at Tshikondeni some rooms have two occupants. Home owners (bought company property) Hostels Single quarters Family quarters/flats Rental and other* Total** 2012 606 6 1 038 740 5 418 7 808 Number of employees 2011 927 15 1 202 755 7 614 10 513 2010 948 40 1 505 8 017 10 510 2009 929 594 1 343 8 314 11 180 2008 822 389 1 336 7 588 10 135 Includes 153 employees using Exxaro’s ﬁrst-time homeowner scheme * ** Excludes Rosh Pinah, Zincor and mineral sands operations EXXARO INTEGRATED REPORT 2012 p 103 People — towards a healthier workforce Strategy Risk Opportunity Target Reduce the incidence of occupational diseases Noise, dust, HIV/Aids, TB, chronic diseases of lifestyle Increase the number of people enrolled on the HIV/Aids management programme Early detection and management of TB Implement programme to prevent and control chronic diseases of lifestyle Mine Occupational Safety and Health (MOSH) initiatives aimed at assisting industry to meet targets to reduce new occupational diseases Reduce noise-induced hearing loss (NIHL) to less than 10% (from baseline) per individual by 2013 Introduction of government-led HIV testing campaign aimed at encouraging more people to test 70% of HIV-positive people enrolled on management programme New regimen of anti-retroviral treatment, making it easier to comply New TB diagnostic test — enabling earlier conﬁrmation and start of treatment Audit of TB programme at three business units Exxaro survey on chronic diseases identiﬁed risks Case management of employees with chronic diseases Exxaro’s vision for health and hygiene is to create a workplace that has no adverse health effects on our employees and affected communities. According to the International Labour Organization, the mining sector makes up 1% of the global workforce and yet it contributes 8% of fatal accidents at work. The sector also contributes a signiﬁcant number of injuries, disabling occupational diseases such as pneumoconiosis and hearing loss. Occupational diseases, which often manifest after leaving the employer, have varied outcomes and may: • Affect productivity • Affect quality of life • Lead to early retirement • Lead to loss of potential income • Decrease sense of self-worth • Result in loss of breadwinner for families. According to data reported to the Department of Mineral Resources, seven times more occupational diseases are reported than fatalities. Therefore implementing proactive programmes to reduce new cases of occupational diseases is integral to creating a healthy workforce: • A healthy workforce is essential to enable Exxaro to deliver on its strategic focus areas employees have various opportunities to access healthcare including their medical aid schemes, occupational health services, HIV/Aids and tuberculosis (TB) programmes • Workplace risks that impact on the health of employees are identiﬁed and prioritised • Prevention programmes are implemented. p 104 HUMAN CAPITAL Reported cases of occupational disease NIHL — 22 Pneumoconiosis — 24 COAD — 7 TB — 66 Exxaro’s medical surveillance processes have been strengthened in recent years to ensure our employees remain healthy and productive. In 2012, a pilot for proﬁling occupational risk exposure was introduced and will be extended to other sites in 2013 to standardise risk-based medical surveillance. Key health and hygiene indicators are reported to the executive committee monthly, quarterly and annually. Regular reporting enables management to more effectively monitor the risk identiﬁcation and assessment process, comply with legislation and reporting requirements for listed companies, and track the implementation of programmes against set targets. Highlights • Championed by the CEO, we rolled out an Exxaro-wide HIV disclosure initiative • A system to track and monitor employees with early noise-induced hearing loss is being piloted at certain business units and will be expanded to the rest of the group in 2013. Progress During 2012 several major health-related projects were under way, including: • A review of our health and hygiene programme and factors inﬂuencing the prevalence of occupational diseases were highlighted. In 2013 and there will be additional focus on early detection, investigation and follow-up of occupational diseases • Initiated a review of our emergency medical standard • Conducted internal audits of our ventilation and occupational hygiene programme • Continued with the review and design of system requirements to support health processes • Conducted a survey on chronic diseases of lifestyle at some operations. The prevalence of chronic diseases and the contributing social factors were established (see panel) • Initiated a noise-awareness campaign during deaf awareness week, with messages reminding employees of the importance of protecting their hearing • A review of the current implementation of our TB programme was initiated. This will continue in 2013 to ensure early detection and compliance to treatment. Occupational diseases Reported occupational diseases Reported cases are those newly diagnosed and submitted to the compensation authorities to conﬁrm they are work-related and eligible for compensation as per the Compensation for Occupational Injuries and Diseases Act (COIDA) and Occupational Diseases in Mines and Works Act (ODMWA). In 2012, Exxaro reported 119 occupational diseases compared to 102 in 2011. Over 50% are TB (66). We reported cases of pneumoconiosis (24), chronic obstructive airways diseases (COAD) (7) and NIHL (22). EXXARO INTEGRATED REPORT 2012 p 105 Accepted occupational diseases These are cases where it can be demonstrated that the condition is work related and are thus accepted for compensation. In 2012, Exxaro had 40 occupational disease cases accepted for compensation: pneumoconiosis (6), occupational TB (33), NIHL (1) and chronic obstructive airway disease (1). There were no cases of silicosis. Accepted occupational diseases s e s a c f o r e b m u N 35 30 25 20 5 0 NIHL Pneumoconiosis COAD Occupational TB Dermatitis 2009 2010 2011 2012 Mining sector targets on noise and silicosis In 2003, the mining sector set targets to eliminate silicosis and noise-induced hearing loss: Noise • Reduce NIHL to less than 10% per individual by 2008 • Reduce noise from equipment to under 110dB(A) by 2013. Silicosis • By December 2008, 95% of all exposure measurement results <0,1mg/m3 for respirable crystalline silica • Eliminate silicosis by 2013. Current status (2012) In 2012, Exxaro has: • No cases of silicosis • 22 cases of employees with hearing loss were submitted to Rand Mutual Assurance (RMA) and two have been rejected and one accepted. We await feedback on the balance. Continued implementation of the hearing conservation and dust-control programmes is essential to reduce the number of new occupational diseases. p 106 HUMAN CAPITAL Chronic diseases of lifestyle According to the World Health Organization (WHO), 40% of deaths from non- communicable diseases occur in low- and medium-income countries. The impact on families with a member who has had a heart attack or stroke is the disproportionate spending on medical costs, as well as loss of income, driving the family to poverty. Experts predict that by 2030 the 10 leading causes of disease will no longer include infectious diseases and maternal and child health conditions but rather diabetes, heart disease and stroke, mental health conditions and respiratory infections. Poor nutrition during pregnancy and in the ﬁrst two years of life are predisposing factors to develop chronic vascular diseases (heart attacks and strokes) and diabetes later in life. As such, the prevention and control of chronic disease of lifestyle is important to preserve health gains made over the last century. In the mining industry, possible injuries as a result of side effects of treatment or complications from the condition could, in certain circumstances, be fatal. Controlling and managing chronic diseases is a proactive measure aimed at reducing deaths and ill health. Risk factors for chronic diseases of lifestyle Tobacco use Cardiovascular disease Harmful use of alcohol Diabetes Chronic respiratory disease Physical inactivity Cancers Unhealthy diets Diagram taken from WHO: Global study for the prevention and control of non-communicable diseases EXXARO INTEGRATED REPORT 2012 p 107 Exxaro survey of chronic diseases of lifestyle While legislation provides for employers to manage and report occupational diseases, chronic diseases of lifestyle (CDL) also have a major impact on the health of employees and may affect the ﬁtness to perform work. In the sample of Exxaro employees surveyed: • 36% who have CDL have a history of smoking • 66% of smokers have hypertension • 75% of those with hypertension were obese • 17% of those with diabetes were obese. This information will be used to integrate the prevention and control of chronic diseases in workplace health programmes. A standardised approach on collecting information on chronic diseases will be implemented to ensure information on chronic diseases is captured. This will be supported by case management and monitoring the progress of individuals with chronic diseases. HIV/Aids and TB Although the prevalence of HIV/Aids across Exxaro is currently estimated at 13%, compared to 25% across the industry, we continue to concentrate on educating our people about this pandemic, with encouraging results. With appropriate counselling and support, 91% of our workforce (excluding contractors) voluntarily tested between 2010 and 2012, and the numbers enrolling on treatment programmes are rising steadily. As part of our commitment to an HIV-free future, during the year Exxaro launched an initiative to encourage employees to disclose their HIV/Aids status. The reason was that, despite resources provided by the company, not enough employees were beneﬁting from the HIV/Aids programme. Following the launch of this initiative in June 2012, there was a marked increase in the number of people enrolling on the HIV/Aids management programme. The decrease in the number of enrolled people observed in 2011 was due to the separation with our zinc business which had two business units. During 2012, 3 616 employees under went voluntary counselling and testing (VCT). Exxaro is making headway in its ﬁght against the spread of HIV/Aids. Since January 2010: • 8 747 people have attended HIV training • 8 092 (92%) were counselled • 7 948 (91%) were tested and 7 646 (87%) know their status • 2 666 had never tested before (or not in the prior two years) • 1 054 tested HIV positive; and 428 (41%) were testing for the ﬁrst time • 6 894 tested HIV negative • 98 people are on anti-retroviral treatment. p 108 HUMAN CAPITAL Dealing with stigma In June 2012, a disclosure initiative was launched by Exxaro’s CEO, who emphasised that discriminating against HIV-positive employees is not acceptable. Most business units have rolled out this initiative, with some encouraging signs in the second half of 2012: • An increase in the number of employees openly living with HIV (from two to ﬁve individuals) • Over 130 employees enrolled onto the HIV management programme (from 322 to 454). In addition, we started training line managers in the required skills to support employees who disclose their status. This will be rolled out further in 2013. Community HIV programme After initiating community HIV programmes in areas surrounding six operations (in Mpumalanga) in 2010 and 2011, these programmes were established at another three business units in Limpopo in the review period. A total of 164 community peer educators have been trained as part of our HIV community awareness programme. Tuberculosis According to the World Health Organisation, in 2010, almost nine million people fell ill with TB globally and 1,4 million died as a result, making this one of the most prevalent of diseases and the biggest killer. Compounding the issue, people with compromised immune systems have a much higher risk of falling ill. The HIV/Aids prevalence rate in South Africa makes managing TB a particular challenge. Early diagnosis and proper treatment is key to tackling a disease that has reached crisis proportions in our country. Exxaro’s TB rates (per 100 000) remain similar to the general population. In 2012 we concentrated on reviewing the implementation of our TB management standard at three sites. In 2013, we will continue these reviews and implement corrective actions where required. Tuberculosis infection rates 1 200 960 720 480 240 0 2008 2009 2010 2011 2012 Number of cases Rate per 100 000 people EXXARO INTEGRATED REPORT 2012 p 109 Employee wellness An employee assistance programme provides access to an external counselling service to ensure support for any of our people facing difﬁculties. This is a preventive measure 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, managers, supervisors and various role players are trained to recognise and deal with personal issues that may affect a staff member’s work performance and provide guidance on how to use the employee assistance programme as a management tool. During the year, an increasing number of our people used this service for: • Financial problems • Personal and emotional difﬁculties • Family matters • Work-related challenges • Dependency on substances. Programmes are in place at all business units to manage social, psychological and mental health 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. Most business units again arranged wellness days in 2012. Service providers conduct different health-screening tests and advise participants on lifestyle issues. These days are open to employees, family members and the broader community. Although participation is voluntary, attendance is very good and contributes to the effectiveness of our wellness programme. Wellness programmes empower 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. p 110 HUMAN CAPITAL Remuneration report In 2012 Hay Group and 21st Century were engaged to benchmark Exxaro’s remuneration practices against best practice and governance requirements. A number of recommendations have been implemented, and this process will continue. Philosophy The Exxaro brand is built on a strong vision — everything we do and deliver today will allow others to realise their vision tomorrow. We believe in the power of people and their ability to explore and shift boundaries, which leads to success. As such, our people strategies have been developed to reinforce our brand values: • People-powered • Inspired leaders • Leading performance • Sustainable effort. The remuneration and nomination committee (Remco) sets and monitors non-executive and executive remuneration for the company. This committee is responsible for making recommendations to the board on remuneration policies and practices for executive directors, non-executive directors, senior management and all other employees. The committee comprises ﬁve non-executive directors of which the majority is independent. The CEO, ﬁnance director (FD) and executive head: human resources are invited to attend any meeting, but do not have any voting rights. For full details on the committee, refer to the governance review on page 214. At the annual general meeting on 24 May 2013, shareholders will be requested to approve the remuneration policy outlined in this report as a non-binding advisory vote and authorise the board of directors to undertake the necessary steps to implement this policy. Resolutions for consideration are included in the notice of meeting on page 332. Benchmarking External remuneration benchmarking for executives, non-executives, managers and other personnel positions is done continuously, with external comparisons reported to Remco every six months. The salary benchmark used for median performance of our management and specialist category staff is the 50th percentile (median) of the market’s guaranteed remuneration values. Exxaro allows for a 30% differentiation from median market values, depending on the performance rating of the individual. Policy A total remuneration approach has been adopted, which includes guaranteed and variable components, to attract, motivate and retain the calibre of individuals required to achieve Exxaro’s objectives. EXXARO INTEGRATED REPORT 2012 p 111 Exxaro remuneration: Overview Management and specialist category employees Remuneration elements Executive management Senior management Middle management Junior management F band E band DU and DM band CU and DL band Annual adjustments based on: Notional cost of employment or basic salary • Performance • External market • Internal parity • Affordability Bargaining category employees A-CM band Annual adjustments based on: • Wage negotiations • Mandate on affordability Guaranteed remuneration Beneﬁts • Retirement fund: employer and employee contributions • Medical aid: employer and employee contributions • Housing: company housing or allowances/subsidies applicable to speciﬁc business unit Circumstantial remuneration • Job-speciﬁc • Skills scarcity Short-term incentives Special performance: • Individual performance base Not applicable • Business unit stretch budget achievement Second and third tier above target improvement incentives: • Capped at 30% of Exxaro’s above-budget improvement Variable remuneration Long-term incentives • Annually set stretched targets Deferred bonus plan (EM as from 1 March 2013, previously from EU and above) • Share match Long-term incentive scheme (DM and above) • Performance conditions Share appreciation right scheme (being phased out, no new allocations since 1 April 1202) • Performance conditions Not applicable Not applicable Not applicable Not applicable On 22 May 2012, shareholders approved a new ﬁve-year employee share option scheme (Mpower 2012) effective from 1 July 2012 until 31 May 2017 p 112 HUMAN CAPITAL Guaranteed remuneration Management and specialist category Employees in the management and specialist category, including executives, are remunerated on a total-package approach. Guaranteed remuneration adjustments to employees are based on the following fundamental principles: • Remuneration is based on performance through individual performance contracting and assessment • External competitiveness: the market median for median performance per job family, per level as reference point is used to determine remuneration competitiveness • Internal equity: same job — same performance — same pay (except circumstantial) • Affordability: all salary account-related mandates are ﬁrst included in the Exxaro ﬁnancial forecasting model to determine affordability. Non-management category Employees in the non-management category are remunerated on a traditional menu package comprising basic salary, housing allowance, other site-speciﬁc allowances as well as employer contributions to retirement and medical funds. Annual adjustments are usually determined through wage negotiations where applicable. Beneﬁts Contributions to retirement funds and medical aids are made by both employees and employers. 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 this fund are reﬂected in note 36 of the annual ﬁnancial statements. All employees belong to one of the following retirement funds: Fund description Sentinel Funds Mine Employees Pension Funds Exxaro Selector Funds Iscor Employees Umbrella Provident Fund Mine Workers Provident Funds Employee % contribution range Employer % contribution range Total % contribution range 7,50 – 13,20 7,50 – 10,70 7,00 – 8,00 7,00 – 8,00 7,50 – 10,70 12,50 – 20,52 12,50 – 15,00 10,00 – 15,00 10,00 – 15,00 12,50 – 15,00 20,00 – 28,02 20,00 – 24,65 17,00 – 22,00 17,00 – 22,00 20,00 – 24,65 EXXARO INTEGRATED REPORT 2012 p 113 Exxaro-accredited retirement funds are deﬁned contribution funds. Any actuarially valued deﬁned beneﬁt fund obligation disclosed in the annual ﬁnancial statements merely recognises past practice with no new entrants allowed. Medical beneﬁt funds Employees may annually elect to belong to any of the following medical schemes: Business unit Fund names Exxaro Coal Mpumalanga Bonitas Discovery Sizwe WCMAS (ring fenced) Zincor Discovery Sizwe Exxaro other (including all management and specialist category of employees) Bonitas Discovery Sizwe Umvuzo Employee contributions 50% Employer contributions 50% 50% 50% 40% 60% capped Exxaro does not provide any post-retirement medical beneﬁts. The post-retirement beneﬁt obligation disclosed in the annual ﬁnancial statements merely recognises past practice that was discontinued with the creation of Exxaro in November 2006. Contributions to medical funds, charged against income, are also reﬂected in note 36 of the annual ﬁnancial statements. Short-term incentives 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. The following schemes — based on individual, business unit, and commodity and group- level performance — are in place: • Individual performance reward • A three-tier performance incentive: — On-target business unit incentive — Commodity business improvement incentive — Group improvement incentive. p 114 HUMAN CAPITAL Individual performance reward This scheme applies to employees in the middle, senior and executive management categories. A short-term incentive scheme focused on the individual is used to augment the performance management process and retention strategy. The basis for paying this incentive rests on achieving speciﬁc agreed individual targets. The three-tier performance incentive The three-tier performance incentive was created to reinforce a performance culture and applies to all full-time employees. First tier The ﬁrst tier is a line-of-sight incentive based on achieving the business unit’s net operating proﬁt target and is currently equal to 8,33% of annual gross remuneration for all full-time employees of every business unit, commodity, services and corporate ofﬁce department. Second tier The second tier is based on exceeding the commodity business unit budgeted consolidated net operating proﬁt. Third tier The third tier is based on exceeding the budgeted consolidated group net operating proﬁt target. Long-term incentives Exxaro makes general share offers to participants once a year under the following approved schemes: • Exxaro share appreciation right scheme (SAR) (This scheme is being phased out and no new allocations have been made since 1 April 2012) • Exxaro long-term incentive plan (LTIP) • Deferred bonus plan (DBP). The table summarises Exxaro’s long-term incentives and details of awards granted and cancelled between 31 December 2011 and 31 December 2012. Eligibility (employee Paterson band) Date implemented Rights/ shares on 31 Dec 2011 Maximum award per individual Plan Performance condition Vesting period Grants in 2012 Total grants from inception to 31 Dec 2012 Grants cancelled in 2012 Share appreciation rights DM — FU employee Paterson band Long-term incentive plan Deferred bonus plan DM — FU employee Paterson band EU — FU employee Paterson band * Headline earnings per share ** Total shareholder return *** Return on capital employed 01/03/2007 7 347 556 229 902 HEPS* 3 years 175 177 256 187 5 562 816 01/03/2007 1 478 880 152 515 50% TSR** 3 years 2 022 702 144 148 2 649 562 31/08/2007 108 500 50 % ROCE*** 15 190 Reached short- term incentive goal in order to qualify for a value to be matched 3 years 25 390 1 298 80 724 EXXARO INTEGRATED REPORT 2012 p 115 Share appreciation right scheme Participants are awarded a conditional right to receive shares equal to the value of the difference between the share price at the time the rights were granted and the share price when the rights are exercised (should the share appreciate in value). This scheme is being phased out and no new allocations have been made since 1 April 2012. Grant limits Vesting period Employees on Paterson band DM — FU Three years. If the performance condition is met, share appreciation rights vest and participants have to exercise their right within seven years from the date of original offer Performance conditions Headline earnings per share (HEPS) set by Remco Other SAR not exercised within a period of seven years lapse Long-term incentive plan (LTIP) The LTIP provides for the delivery of conditional awards in shares after three years from the date of grant provided certain conditions are met. Grant limits Vesting period Employees on Paterson DM — FU Three years, subject to achieving performance conditions over a three-year performance period. Performance conditions Equally weighted between return on capital employed (ROCE) and total shareholder return (TSR). • ROCE: Minimum and maximum ROCE targets are set annually. The ROCE portion of the award will vest linearly between 0% for achieving the minimum ROCE target and 100% for achieving or exceeding the maximum ROCE target. Accordingly, if Exxaro achieves a ROCE target that is lower than the maximum target, but higher than the minimum target, only a portion of the awards will vest. • TSR: Annually a peer group of companies is selected to compare TSR. The TSR portion of the award vests linearly between 0% for a TSR equal to the minimum TSR of the peer group and 100% for a TSR equal to the maximum TSR of the peer group. Thus, if Exxaro achieves a TSR target that is lower than the maximum target, but higher than the minimum target, only a portion of the awards will vest. Our peer group consists of Exxaro’s direct and indirect competitors, namely: Yanzhou Coal Mining Company Limited, African Rainbow Minerals Limited, Sasol Limited, Lonmin plc, Xstrata Limited, OZ Minerals Limited, Aquarius Platinum Limited, PPC Limited, Shenhua Group Corporation Limited, Arch Coal Incorporated, Gold Fields Limited, Iluka Resources Limited, Impala Platinum Holdings Limited, Boliden Limited, Tech Cominco Limited and Anglo American plc. Peer group for TSR evaluation Other • TSR performance is measured by PwC to conﬁrm achievement of target and ROCE achievement is audited by the internal auditors. • Participants receive a payment settled in equity on vesting. p 116 HUMAN CAPITAL Deferred bonus plan On receipt of a short-term incentive and special performance reward payments, participants are able to use part of their after-tax bonus to acquire shares (pledged shares) in Exxaro with a matching award on the vesting date. Grant limits Employees on Paterson EU and above Vesting period Three years Performance conditions In order to qualify for the deferred bonus plan, qualifying employees must have achieved their short-term incentive goal of which a portion (50% in respect of EM, 90% in respect of EU and above) can then be utilised towards this scheme. Retention conditions • Shares will be matched at the end of the three-year period. Other • If the pledged shares are held for the pledge period of three years and participants remain employed by the company for that period, the company will provide a matching award of free shares (matching shares). Pledged shares are held in escrow until the vesting date, but participants receive full dividends and may dispose of the shares, thereby sacriﬁcing the commensurate portion of future matching shares. Mpower 2012 (Exxaro employee share option scheme) The Mpower 2012 scheme was implemented on 1 July 2012, and will run for a ﬁve-year period until 31 May 2017. Only employees on Paterson D2 band and lower qualify to participate. Employer companies in the Exxaro group made capital contributions of R75 000 for each qualifying employee to enable the share subscription. Each qualifying employee on 1 July 2012 received 387 shares. Employees who join later will receive a pro-rated number of shares. On 31 December 2012, there were 7 290 beneﬁciaries participating in the scheme. In addition, in October 2012, Mpower 2012 paid R9 686 334 in dividends to beneﬁciaries of the scheme. EXXARO INTEGRATED REPORT 2012 p 117 Remuneration of executive directors, non-executive directors and prescribed ofﬁcers Directors Information on the remuneration of executive directors and non-executive directors appears in the directors’ and prescribed ofﬁcers’ remuneration report on page 257. The guaranteed versus variable remuneration of the executive directors (CEO and FD) are roughly split at 70% variable and 30% guaranteed. Prescribed ofﬁcers 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. In Exxaro, these individuals are also prescribed ofﬁcers, as deﬁned in the Companies Act No. 71 of 2008, as amended, and hence full disclosure of the remuneration of all prescribed ofﬁcers appears in the directors’ report on page 257. RP Mohring Chairman: Remuneration and nomination committee 08 natural capital Measurements are done to ensure compliance to the Environmental Management Plan of the mine p 120 Exxaro’s green timeline • • • 2012 • Carbon footprint signiﬁcantly reduced Cennergi is preferred bidder on two wind energy projects totalling 234MW — the Amakhala Emoyeni and Tsitsikamma wind farms 2011 • Launched biodiversity, waste and air programme Formed stand-alone energy company, Cennergi, with international energy partner R107 million spent on developing cleaner energy initiatives — a combination of co-generation, carbon credit trading, renewable energy, biodiesel, coal-bed methane development and coal base-load projects 2010 • Major water management programme introduced Developing renewable energy projects • 2009 Comprehensive response developed to energy, carbon and climate change management 2008 • Energy efﬁciency task team established, voluntary champions at each business unit Sponsors Unisa chair in business and climate change for three years • NATURAL CAPITAL Environment — investing in our natural world Sustainable development issues are central to Exxaro’s business, none more so than 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. Accordingly, Exxaro focuses 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 • Actively participating in all non-statutory environmental compliance requirements such as the global carbon and water disclosure projects, among others • 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). All EMPs are key indicators in ensuring Exxaro remains a sustainable business. Eleven amendments were made to EMPs during 2012. Exxaro also adopts the precautionary principle entrenched in NEMA in evaluating the environmental impacts of business opportunities. All South African operations have submitted applications for integrated water use licences, with 21 of 24 granted to date. In the outstanding areas, Exxaro’s water use is permitted under the old water act. Grootegeluk, char and GMEP share one integrated water use licence. In recent years, we have developed comprehensive group standards to enhance implementation of legal requirements and the sustainable use of natural resources. These include management standards for air quality, water, energy, rehabilitation and mine closure, and environmental incident management and reporting. We believe conservation is becoming increasingly important, given the enormous value of biodiversity and tourism to the South African economy. Accordingly, we intend 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. Various conservation measures are being implemented that underscore Exxaro’s commitment to entrench duty-of-care principles. 2007 Carbon emissions reported for the ﬁrst time (19 million tonnes of CO2e) 2006 Exxaro adopts Energy Efﬁciency Accord Highlights • Signiﬁcant reduction in carbon footprint • Cennergi selected as preferred bidder in two wind energy projects in the Eastern Cape: — Amakhala Emoyeni wind farm near Bedford (140MW) — Tsitsikamma Community wind farm in Mfengu community land (95MW) • Cennergi received the SAWEA industry award for its contribution to South Africa’s Most of these have at least a 12-month cycle wind industry. EXXARO INTEGRATED REPORT 2012 p 121 Focus areas After a strategic review of key environmental risks from Exxaro’s operations, the following challenges were identiﬁed: • Air quality management • Water quality management, security of supply (page 131) • Hazardous waste management (page 151) • Biodiversity management (page 136) • Ongoing rehabilitation (page 148) • Cost of, and provision for, environmental liabilities • Lead time for securing environmental authorisations • Increasing statutory and non-statutory environmental requirements. Air quality As a mining group, air quality is a material risk to Exxaro on several levels, particularly dust and other criteria pollutants (eg PM10 and PM2,5) from opencast operations. Accordingly, we focus on: • Minimising impact on the receiving environment • Full legislative compliance • Air quality management planning • Risk management • Monitoring, measurement and reporting. Progress on implementing new management standard Objectives Fully-compliant, sustainable air quality management system, managed and controlled by trained specialists at business units Ensure Exxaro’s air quality framework enables sustainable business growth Critical success factors Key outputs Progress What When Integrated air quality management planning in core operational processes Baseline air quality assessments Optimise air quality monitoring programme Third quarter 2012 Third quarter 2012 Develop air quality management plans Performance review First quarter 2013 Third quarter 2013 Baseline assessments under way in business units as part of air quality management Air quality management plans are available for some business units. Work in progress for balance p 122 NATURAL CAPITAL Exxaro’s long- and short- term goals for air quality management will include: • Initiating smaller particulate matter (PM10 and PM2,5) monitoring at some business units, particularly those close to sensitive receptor areas by 2016 • Redesigning dust fallout and PM10 monitoring networks in our business units, in line with mining schedules by 2015. This will ensure fair representation and accuracy of monitored data • Meteorological monitoring to ensure availability of surface data for temperature, wind direction, wind speed, etc by 2016. This data will be used for dispersion modelling, baseline characterisation, dust fallout monitoring and reporting, etc Ensuring compliance to air quality standards and guidelines in the country by 2015 • Aligned to the 2007 national framework, currently under review, Exxaro’s air quality management framework helps business units identify, quantify and determine the impacts of emissions, manage compliance and aim for continuous improvement. In applying this framework across our operations, particularly the emission inventory process, most of our ambient pollution impacts relate to emissions of particulate matter or dust deposition from mining activities. For the review period, Exxaro also operated smelting operations in its mineral sands and base metals commodity businesses, which are classiﬁ ed as listed activities (National Environmental Management: Air Quality Act, No. 39 of 2004). Emissions from smelters are regulated by an atmosphere emission licence issued by licensing ofﬁ cers of the metropolitan municipality, district municipality or provincial environmental departments. Emissions from mining operations Exxaro addresses the challenges of dust-generating activities (blasting, drilling, crushing and screening, vehicle entrainment, materials handling and wind erosion of exposed operational areas) through daily environmental management measures. These include applying dust-suppressant agents on haul roads, applying water to secondary unpaved operational roads, vegetating topsoil stockpiles and overburden material. All mining operations monitor daily dust fallout rates and results are assessed against South African national standards (SANS 1929:2005: Limits for common pollutants). Although Exxaro’s operations are classiﬁ ed under industrial targets, according to SANS limits, some operations are close to residential areas. As such, we track our compliance against the more stringent residential limit (600mg/m2/day) instead of the industrial limit (1 200mg/m2/day) to minimise the impact on residents. We are concentrating on improving our mitigation measures for operational activities that contribute signiﬁ cantly to dustfall. This will ensure fallout dust is reduced to the SANS residential limit. Comparing Exxaro’s dust fallout rate against the regulated industrial limit, our averaged coal operations exceeded the limit for three months in 2012. EXXARO INTEGRATED REPORT 2012 p 123 Results from Exxaro’s monitoring points Commodity Coal Long-term target 300mg/m2/day Average monthly fallout rate 2012 480 2011 393 Compliance target (not to be exceeded three times or two consecutive months) Number of points monitored with single bucket Industrial standard – months exceeded** Residential standard – months exceeded 1 200mg/m2/day (single monitoring)* 600mg/m2/day (single bucket monitoring)* Average per operation Worst-performing operation Average per operation Worst-performing operation Commodity Coal 600mg/ m2/day 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 73 65 2 1 7 3 3 5 11 8 * Table excludes Leeuwpan and Inyanda which both use a different four-bucket monitoring system for dust fallout ** Dust fallout becomes a level 2 environmental incident if: the number of reportable environmental incidents with reversible on-site and immediate surrounding impacts will involve more than 48 hours clean-up activities and a negative impact on shareholder value of R50 000 to R500 000 worth of damage has deﬁ nitely occurred Fallout dust analysis Compliance to industrial Compliance to residential 8 7 6 5 4 3 2 1 0 12 10 8 6 4 2 0 Matla Arnot Tshikondeni Grootegeluk Arnot NBC Grootegeluk NCC * Only single dust bucket results considered for compliance assessment purposes p 124 NATURAL CAPITAL Environmental accreditation All Exxaro’s business units have ISO 14001 accreditation, reﬂecting the global industry standards in place to minimise environmental impacts. Legal compliance South African mining companies are heavily regulated — and receiving, converting and retaining their mining licences centres on compliance. To ensure we continue to at least meet legal requirements, compliance across Exxaro is monitored by two board- mandated entities: the sustainability, risk and compliance committee as well as the social and ethics committee. Running all our operations with approved EMPs or environmental management plans is fundamental to our sustainability and legal compliance. Some EMPs are being updated to align to the MPRDA and to include new developments, for example Medupi conveyor and Medupi warehouse. Signiﬁcant ﬁnes and directives received during the year included: • North Block Complex: Glisa’s above-ground diesel tank was authorised after being ﬁned for non-compliance in February 2011. • Grootegeluk was instructed to clean up its industrial waste. An action plan was prepared and submitted to DMR, followed by a progress report with evidence. The plan was approved by DMR. • Leeuwpan received notices from DWA for mining activities close to a wetland area and constructing a river crossing. Exxaro responded to these notices promptly and, in December 2012, the High Court suspended them. See governance report for more detail. • North Block Complex’s Glisa received a directive from DWA’s compliance monitoring and enforcement section for not having a water use licence even though many of Glisa’s activities were authorised under the old water act. The directive was suspended in the High Court. • In April 2012, a directive was issued by the Mpumalanga DMR requesting Exxaro and other mines to provide information on rehabilitation activities and water management. After discussions with the DMR to clarify exact requirements, the mining companies responded to these directives, outlining environmental management practices implemented by various mines. • Tshikondeni received a notice from the DWA Limpopo on water licence compliance gaps. An action plan addressing these gaps was submitted to the department. Incident reporting Exxaro’s standardised reporting system ensures all business units manage incidents effectively, leading to a safer and more sustainable work environment. In 2012, 11 level 2 incidents occurred and were reported to the relevant authorities. Corrective actions to remedy the incidents and prevent recurrence were approved by authorities prior to implementation. There were no signiﬁcant (level 3) incidents in 2012. EXXARO INTEGRATED REPORT 2012 p 125 Environmental incidents — group Level 1 Level 2 Level 3 Commodity business 2012 2011 2012 2011 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 Rosh Pinah Corporate office AlloyStream FerroAlloys 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 * Mineral sands only to June 2012 357 55 4 – 129 – 17 73 32 46 – 1 54 – 54 – – – – – – 411 323 – – – 103 – 18 25 101 76 – – 280 113 167 – – – – – – 603 6 – – – 2 – 2 – – – – 2 5 5 – – – – – – – 11 19 – – – – – 13 1 – 1 4 – 9 8 1 – – – – – – 28 2012 None None None None None None None None None None None None None None None None None None None None None None 2011 None None None None None None None None None None None None None None None None None None None None None None p 126 NATURAL CAPITAL Environmental incidents — level 2 detail Business unit Description Receiving environment Response KZN Sands Overspray from mining activities Nearby manufacturing facility Affected building cleaned and repainted KZN Sands Inyanda KZN Sands Inyanda Baghouse 10 stack exceeded permit requirements Air pollution Bags replaced with better-quality items One dust bucket exceeded air quality standard of 1 200mg/m2/day Air pollution Dust suppression measures Smelter underﬂow spilled to Hillendale Mine Road, no damage to private property Road cleaned and tankers repaired to higher speciﬁcations Blackhill station 2 (all buckets) and station 5 (East bucket) exceeded air quality standard of 1 200mg/m2/day Air pollution Dust suppression measures KZN Sands Overﬂow of subsurface drainage uMhlatuze River Infrastructure improved, pump repaired and water samples analysed KZN Sands Smelter underﬂow spillage en route Road, no damage to private property Road cleaned and tankers repaired to higher speciﬁcations Tshikondeni Fire in scrap area Air pollution Grootegeluk Oil spill Plant area Tshikondeni Water ﬂowing into mini-pits Potential groundwater pollution Grootegeluk Water overﬂowing Veld at nearby dam Burned material disposed of as hazardous waste, contractor employee retrained Affected area and water professionally cleaned Spill cleaned, employees trained Necessary equipment modiﬁcations effected Climate change Because energy and climate challenges are broad and potential solutions complex, Exxaro is addressing three imperatives simultaneously: energy security, economic productivity and environmental impact. To remain competitive and sustainable, we are dealing with potential energy shortages, rising costs of energy, climate change and related environmental concerns as imperatives in our long-term business strategy, using a dual approach: • An energy and carbon management programme is addressing mitigation and adaptation issues • We are evaluating and developing a growth pipeline of environmentally friendly energy projects These programmes are linked by our drive to become carbon neutral and the need to thrive in a low-carbon economy. EXXARO INTEGRATED REPORT 2012 p 127 Risks and opportunities of climate change Three years ago, we commissioned an independent physical climate-risk assessment of Exxaro’s operations in southern Africa. This study highlighted key risks from climate change as ﬂoods, droughts, heat, disrupted transport infrastructure and increased vulnerability of local communities and workforces. The possible implications are outlined below: • Mine-speciﬁc risks such as physical impacts from weather damage and risks to health and safety (including availability of trains, slimes dam-handling capacity, evaporation, etc) • Flooding — infrastructure damage leading to production losses; ﬂooded pits and dams contaminating clean water and breaching operating licence conditions; and deterioration of product quality • Fatigue — from heat, humidity and dehydration leading to more accidents, in addition to skills retention and talent management in an unattractive environment • Community-speciﬁc risks such as water scarcity, disease, loss of infrastructure, and impact on nearby agricultural communities • Drought-concerns around water scarcity and increased cost of water for the whole region as well as higher cost of land management — fauna, ﬂora and rehabilitation, increased ﬁre hazards and greater demand for dust suppression • Group risks — not continuing to achieve the targets and deliverables set out in the carbon management programme • Carbon pricing and regulatory developments, such as carbon taxation especially for energy-intensive sectors. These risks, and related opportunities, were integrated into a climate change position statement that requires an internal and external approach to achieving our goal of being a clean (carbon-neutral) company. In the short term, our goal was to improve energy efﬁciency and reduce carbon emissions each by 10% by the end of 2012. We partially achieved both targets. As part of this strategy, we have established a stand-alone energy supply company, Cennergi, to feed the national grid and third-party customers. In a joint venture with Tata Power of India, Cennergi will focus on greener power production to contribute to lowering carbon emissions and position South Africa as proactively driving sustainability. Carbon footprint Exxaro’s data management and reporting continues to mature. In 2012, the carbon database was migrated to the main systems platform as the accepted base for reporting on carbon disclosure and carbon footprint statistics. Exxaro is focused on reducing its carbon footprint and, in 2010, committed to an absolute emissions reduction of 10% by 31 December 2012. By the end of the review period, we had achieved this target. In 2013, we have implemented a new target, premised on improving overall energy efﬁciency across the group, which is expected to yield further emissions reductions of around 5% by the end of 2013. Scope 3 emissions are reported for the ﬁrst time in the current ﬁnancial year. p 128 NATURAL CAPITAL Deﬁ nitions • Scope 1 emissions are direct greenhouse gases (GHG), measured in carbon dioxide equivalent tons (t CO2e) of emissions from sources owned or controlled by the company, eg emissions from diesel, petrol, gas and anthracite combusted in daily mining operations • Scope 2 accounts for GHG emissions from electricity bought from Eskom • Scope 3 emissions are deﬁ ned as being outside Exxaro’s control but occurring as a result of our products or activities, ie from the sale of coal, business travel, purchased goods and services, employee commuting and transportation. In 2012, scope 1 and scope 2 emissions reduced by 21,9% and 40,0% respectively and by 36,6% combined. Exxaro’s scope 3 sale of product CO2e emissions for the year (70 538kt) were in line with 2011’s reported emissions of 70 576kt CO2e. We have also identiﬁ ed opportunities to reduce lifestyle carbon footprints. The Exxaro projects that will reduce the carbon footprint are divided into conﬁ rmed, probable and possible projects and some examples include: • Conﬁ rmed projects (approved) — Energy efﬁ ciency — Co-generation • Probable projects (bankable) — Co-generation — Wind projects (Amakhala-Emoyeni and Tsitsikamma) • Possible projects (up to feasibility) — Wind power generation — Solar power generation — Biodiseal GHG emissions (kt CO2e) 2012 2012 % 2011 2011 % 2010 2010 % 2009 2009 % 78 10 58 2 346 187 11 Scope 1: Diesel Sasol gas Fugitive emissions Paraffi n Anthracite Other Scope 2: Electricity Total scope 1 1 463 and 2 70 645 Scope 3*: Product sales 70 538 Transmission losses 1 117 107 24 13 1 5 1 4 – 443 210 14 75 18 118 8 19 9 1 3 1 5 – 503 207 13 86 18 164 15 21 9 – 4 1 7 – 529 205 15 86 17 195 11 21 8 1 3 – 8 1 76 1 863 81 1 924 79 1 976 79 100 2 306 70 754 70 576 178 100 2 427 72 310 72 126 184 100 2 505 * * * 100 Total scope 1, 2 and 3 * Emissions from product sales and grid transmission losses contribute more than 99% to total scope 3 emissions. Scope 3 emissions were not quantiﬁ ed in 2009 Adjustments made to previously reported Scope 2 GHG emissions resulting from the amendment of the GEF are presented below: kt CO2e Previously reported Adjustments attributable to amendment of the GEF Restated 2011 2 041 (178) 1 863 2010 2 108 (184) 1 924 2009 2 165 (189) 1 976 EXXARO INTEGRATED REPORT 2012 p 129 There has until now been no general consensus on the methodology to be used in calculating the GEF for South Africa’s electricity grid, or on the actual number. In the current ﬁ nancial year, a group comprising Exxaro, the National Business Initiative (NBI), Carbon Disclosure Project (CDP) and an external consultant devised a methodology that adhered to the Greenhouse Protocol corporate accounting and reporting standard for emissions, and resulted in a GEF of 0,94t CO2e/MWh for South Africa for 2011. This is some 10% less than the 1,03t CO2e/MWh previously assumed. In the absence of an update for 2012, this factor has been implemented for the current ﬁ nancial year and has been applied retrospectively to the base and succeeding years. Carbon disclosure Carbon emission disclosure is vital for companies today — both from the perspective of environmental stewardship as a responsible corporate citizen and to develop an accurate energy and carbon database which will become compulsory and when proposed carbon taxation is promulgated. Exxaro has participated in the Carbon Disclosure Project (CDP) in South Africa since 2008. CDP is the only global climate-change reporting system, representing over 655 institutional investors with US$78 trillion of assets under management in 2012. Over 3 000 organisations in around 60 countries now measure and disclose their greenhouse gas emissions, water management and climate change strategies through CDP. This data is made available for use by a wide global audience and provides valuable insights into corporate strategies while driving investment towards those companies adhering to sustainable carbon and emissions management. In 2012, Exxaro again performed well on both CDP measures: • Carbon disclosure leadership index (measures only quality and completeness of response) — Exxaro achieved the top score of 100 points, a ﬁ rst for South Africa and the company, improving on its score of 94 in 2011 • Carbon performance score (measures the ambition and success of a company’s short- and long-term actions to mitigate climate change) — Exxaro scored B. According to CDP criteria, that places Exxaro among the top performers that have demonstrated integration of climate change recognised as a priority for strategy, with not all initiatives fully established. We acknowledge, however, that this is an on going process of improvement. As part of our focus on continuous improvement, in 2012 we enhanced both disclosure and performance by: • Integrating carbon and water risk management into the formal Exxaro risk management system • Aligning CDP supply chain management requirements with our green supply chain management initiatives. This will ensure we are well prepared for proposed mandatory reporting on issues such as carbon budgeting, emissions measurement, reporting and veriﬁ cation and carbon pricing. Energy management Exxaro has consolidated its approach to clean energy at corporate level in recent years, and integrated this into the group strategy. This has given us a clearer understanding of the risks and opportunities presented by energy in the broader sense, and enabled us to focus on improving capacity and capability in our business to manage climate change-related issues. p 130 NATURAL CAPITAL Externally, this has included funding Exxaro chairs at different universities in business and climate change, and energy efﬁciency, to support research, education and advocacy. This has also raised awareness of Exxaro’s corporate citizenship and environmental stewardship with government and external stakeholders. Internally, to remain competitive while dealing with climate change and related environmental concerns, Exxaro is improving its energy efﬁciency and has committed to several initiatives: In the past three years, we have concentrated on high energy-consumption areas, speciﬁcally electricity consumption. We have aligned our process of monitoring independent business units with Eskom’s power conservation programme. We are also developing a more accurate measure of total energy use from all sources across all business units, and how this relates to production measurements such as run-of-mine tonnes. This makes it easier to effectively compare and measure energy efﬁciency. The next step will be to critically evaluate current plant processes. Continuous improvement is embedded in Exxaro’s culture and we believe there is solid potential to increase energy efﬁciency and reduce emissions through operational and process improvements as each operation aims for its speciﬁc energy efﬁciency improvement target. For 2012, actual electricity consumed was 1 189GWh, 40% lower than 2011 (1 975GWh) and 49,0% lower than the reduced Eskom baseline of 2 330GWh. The improved performance is primarily a result of divested and discontinued operations. Electricity consumption trend (GWh) 2 500 2 000 1 500 1 000 500 0 Other Coal operations Base metals Mineral sands 2009 2010 2011 2012 Cleaner production To reach our goal of becoming a leading participant in the independent production of clean-energy in southern Africa, several research projects are under way to reduce Exxaro’s environmental footprint from waste production and water use, including: • Characterising and assessing coal discards company-wide for electricity generation • Raising awareness of the importance of water conservation throughout Exxaro. Speciﬁcally, investigating further implementation of dry processing technologies as well as water treatment technologies. In terms of waste management, a concept study is under way at Leeuwpan mine to use discard coal to generate electricity. For water conservation, a prefeasibility study is being done on acid mine water treatment at North Block Complex. Water-ﬂow meters were installed at all Exxaro mines. EXXARO INTEGRATED REPORT 2012 p 131 Various dry beneﬁciation technologies are being evaluated for speciﬁc implementation at Leeuwpan, with one of the principal advantages being elimination of process water. Encouraging initial results will be investigated further in the new ﬁnancial year. In line with the group’s zero-efﬂuent strategy for new projects, dry screening technology was incorporated in the ﬁnal design and implementation of our Grootegeluk Medupi expansion project to drastically reduce efﬂuent streams and the negative impact of slimes dams. Environment — responsible use Water management and efﬁciency By local and international deﬁnitions, South Africa is a water-stressed region. In 2012 Exxaro began monitoring and reporting according to JSE SRI reporting categories, which are aligned to the deﬁnitions and environmental categories from the GRI’s mining and metals sector guidelines. The accuracy of water measurement, monitoring and reporting has improved dramatically from 2011 to 2012; however Exxaro has only included water abstraction volumetric data in this report, with the exception of rainfall, abstraction from the sea and dewatering data. Consolidated dewatering volumetric data in some business units is still not at the required accuracy level to be included in the limited assurance in the 2012 integrated annual report. In 2013, Exxaro is developing a rainwater catchment measurement methodology and, since the second half of 2012, we have been replacing stolen and faulty water meters with analogue and telemetric metering, which will mitigate estimated data. For 2013, we intend to report on all water inﬂow categories. This will be aligned to the reporting format of Exxaro’s annual submission to the Water Carbon Disclosure Project. For Exxaro, conserving water starts with quantifying and qualifying water abstraction and relating these volumes to efﬁciency indicators. Responsible custodianship can also be determined by re-use and recycling. In addition to these reporting areas, Exxaro’s business units measure the use of water abstracted as well as the volumes of stored water. Storage reduces the risk of accidental discharge and enables water re-used and recycling. Grootegeluk adopted an integrated water management plan to utilise all surface rain water on the mine premises p 132 NATURAL CAPITAL Assurance level Water source Water (kilolitres) Production (kt) Water withdrawal intensity (kℓ/kt) Business unit Coal Arnot Limited assurance Other supplier: potable Char plant Water Durnacol management reporting Water management reporting Grootegeluk Limited assurance Hlobane Water management reporting Supplied by Grootegeluk Water abstraction: river Water abstraction: dam Municipal supply: potable Water abstraction: borehole Water abstraction: dam Other supplier: potable Municipal supply: potable 2012 2011 2012 2011 2012 2011 7 589 992 10 544 173 38 808 39 244 523 232 57 2107 2 081 2 291 251 250 53 121 152 210 43 142 1 235 1 072 33 768 31 785 No product No product No product No product 4 160 771 6 292 888 17 517 18 231 238 345 937 1 205 No product No product No product No product Inyanda Audit assurance Water abstraction: borehole 99 543 *123 011 1 845 1 918 54 64 Water abstraction: dam Water abstraction: borehole Other supply: potable Leeuwpan Water Matla management reporting Water management reporting New Clydesdale Audit assurance Water abstraction: river North Block Complex Water management reporting Municipal supply: potable Tshikondeni Audit assurance Water abstraction: river Mineral sands KZN Sands# Water management reporting Municipal supply: potable Municipal supply: raw 5 963 470 000 2 601 3 239 62 145 1 401 538 1 493 114 10 948 10 150 128 147 74 920 289 070 717 628 104 17 596 476 553 2 717 2 346 6 460 203 1 218 603 642 230 339 299 3 595 2 148 3 972 597 9 038 940 2 498 329 *6 199 120 794 335 1 549 509 7 458 12 179 EXXARO INTEGRATED REPORT 2012 p 133 Business unit Namakwa Sands# Assurance level Water source Water (kilolitres) Production (kt) Water withdrawal intensity (kℓ/kt) 2012 2011 2012 1 474 268 2 839 820 459 2011 1 040 2012 3 212 2011 2 731 Water management reporting Water abstraction: canal Municipal abstraction: potable Corporate ofﬁce AlloyStream Water management reporting FerroAlloys Water management reporting 112 975 68 685 Municipal: potable – invoiced 52 256 242 Product not disclosed Product not disclosed Municipal: potable – invoiced 9 728 5 077 Product not disclosed Product not disclosed Head office Invoice based Municipal: 46 166 52 083 No product No product R&D Total Notes potable – invoiced Municipal: potable – invoiced Water management reporting 4 825 11 283 No product No product 12 308 604 * Adjustments made to 2011 reported volumetric data # Six months data Water sourced from independent entities outside of municipal supply, ie water supply from regional water authorities and/or directly from Eskom Other suppliers of potable and raw water In 2011 Exxaro reported on volumes for water used. In 2012 Exxaro changed to the GRI EN water abstracted reporting category. This resulted in changes to Inyanda and KZN Sands 2011 reported volumetric data Audit process: Water management reporting categories are not subject to audit review p 134 NATURAL CAPITAL We are planning water treatment solutions to treat and recycle contaminated water to the fullest possible extent to minimise the water intensity of some mines. To date, all water sources have been qualiﬁed and quantiﬁed in the Exxaro water database. As a key resource, our concerns range from availability and security of supply, to efﬁcient and responsible use of scarce resources and regulatory compliance. In the past two years, we have focused on rolling out the Exxaro water management programme to entrench group policies and standards in each business unit. To be ecologically sustainable, our programme was aligned to best-practice guidelines from the Department of Water Affairs covering: • Integrated water and waste management planning • Stormwater management planning • Water and salt balances • Water monitoring systems • Water re-use and reclamation • Pollution control dams • Environmental performance indicators. A centralised water accounting process was implemented in 2011 to enable accurate quantitative reporting. This was extended in 2012 to qualitative reporting. The database is aligned to report accurately on all voluntary and statutory requirements (Carbon Disclosure Project, integrated annual report, JSE SRI, GRI and United Nations Global Compact). Exxaro regularly updates its operational water balances and has developed system changes to minimise raw-water consumption and prevent losses from the water reticulation system. Exxaro is committed to water efﬁciency targets. The ﬁrst of these was to reduce potable water by 5% by the end of 2012, off the 2010 baseline. With detailed standardised water accounting, the baseline was moved to 2011. A coal sector saving of 2,1% was achieved through efﬁciency and awareness, but as a group, a 46% saving was achieved, primarily attributable to the divestment of our mineral sands and base metals operations. Our water intensity has decreased from year to year. The proposed water treatment plant at Matla will reduce Exxaro’s external potable water consumption signiﬁcantly. Other water abstraction volume-reduction targets will be qualiﬁed in 2013. These will cover water re-use and water recycling. Exxaro, in partnership with leading water- treatment units of tertiary institutions, is developing a wetland mine water treatment pilot, which uses biomimicry to purify and re-use stored polluted mine water. We continue to search for technology solutions to clean water for re-use and recycling, as well as for release into the environment. We are implementing dry-processing technology in our mining operations to minimise the use of water. Other technology solutions being investigated include ion-exchange, reverse osmosis, ﬁltration, evaporation and leak detection. EXXARO INTEGRATED REPORT 2012 p 135 In addition, Exxaro’s long-term view on water issues means that proactive measures are being taken to mitigate anticipated impacts from climate change. Because our operations are now concentrated in the north-east of South Africa, these impacts largely relate to extreme storms with excessive rainfall and risk of ﬂooding. A growing proportion of our reported environmental incidents relate to extreme storm events. To improve water management expertise in the business, education and training is ongoing to ensure issues are understood and that there is a direct beneﬁt to all stakeholders. This is linked to creating green jobs in the business as these skills become more important in achieving sustainable water use and stewardship. Exxaro submitted its third report to the CDP water disclosure initiative. This voluntary, but detailed, participation on water-related data will provide valuable insight into the water strategies of many of the largest companies in the world. Water management initiatives Efﬁciency projects and goals by individual operations include: Grootegeluk opencast mine In-pit storage of stormwater Run-off for plant use Grootegeluk Medupi expansion project (GMEP) Dewatering of the Basalt aquifer and re-use as process water Beneﬁciation plant has been designed for zero-efﬂuent Leeuwpan mine Water recovery from pit storage and sewage treatment Stormwater run-off recycled and re-used via process water dams Tshikondeni mine Reclamation of sewage water for rehabilitation growth on dumps Inyanda mine New Clydesdale Colliery Recovery of slimes water and underground dewatering for process water, reducing demand from the river Process water sourced from pit dewatering and slimes water recovery. Only in emergency dry situations will the mine source from the Olifants River Abstraction from Olifants River for domestic use only with process water sourced from slimes recovery and underground dewatering North Block Complex Glisa mine Potable water sourced from Belfast municipality with all process water reclaimed from old underground workings Matla and Arnot Mafube Various initiatives and programmes in place to reduce intake of raw and potable water from Eskom. This includes the water treatment plant at Matla Process water used in coal washing is reclaimed from various opencast operations p 136 NATURAL CAPITAL Managing wetlands responsibly As one of South Africa’s leading diversiﬁ ed resources companies, we take pride in our reputation as a responsible operator of mines across the country. During the year, inaccurate media reports in a major daily newspaper and other media alleged that operations at our Leeuwpan mine had been halted by the Department of Water Affairs (DWA) and that the mine was operating illegally in a wetland area. One of the articles also used a misleading front page photograph. Exxaro refuted this information and responded by publishing correct information in the newspaper and on our website, and by issuing a statement to all media. Exxaro management also engaged with the newspaper editorial team to promote accurate reporting in future. The correct information was, as noted elsewhere in the environmental and governance sections of this report, that in terms of the National Water Act, Leeuwpan mine is licensed and fully compliant with all relevant legislation. The water use licence includes the wetland area. The pre-directives and a directive from DWA related to mining activities close to the wetland area and construction of a river crossing were challenged by Exxaro in the High Court, which ruled in the group’s favour and suspended the directives. The judgment means Exxaro may continue to mine in the area which DWA contended was not covered by the water licence. Despite permission received from court, Exxaro will employ the services of a wetland expert to conduct additional wetland sensitivity studies to determine the historical and potential impacts, if any. The court also ordered the DWA to reinstate the Water Tribunal which will impartially consider the parties’ views on the matter. Following engagement with the JSE’s SRI to communicate this situation, the JSE indicated it was satisﬁ ed with the information. Water use licensing While most Exxaro operations have their water use authorised under the old Water Act, we have been steadily migrating these authorisations to the new (1998) National Water Act: all operations have had their integrated water use licences (or IWULs) submitted to the Department of Water Affairs for approval. By January 2013, 21 IWULs had been granted with three pending. During the year, six were granted, making the migration process 98% complete. Exxaro reports on water issues against relevant GRI indicators as well as UN Global Compact principles, and the ICMM sustainable development framework. Standardised processes have further enhanced data accuracy and capture for this reporting period. Exxaro water issues in the media • Exxaro’s Zeeland water treatment works, which supplies water to over 21 000 residents of Lephalale local municipality in Limpopo, was awarded the prestigious Blue Drop certiﬁ cation by the Department of Water Affairs (DWA). This follows the completion of a full water quality assessment by DWA which started in 2011. Zeeland water treatment works achieved an impressive 100% for its drinking water quality and treatment process management • Managing wetlands responsibly (see panel). Responsible conservation of biodiversity Our vision is to conserve Exxaro’s biodiversity through the sustainable co-existence of our mining operations and the country’s natural resources for future generations. In addition to complying with legislation and non-statutory best practice, we are aiming to develop a competitive advantage through conservancy and re-establishing resilient ecosystems. We are making steady progress in implementing conservation measures that underscore Exxaro’s commitment to entrench duty-of-care principles. During the review period, we developed the strategy and framework to reach our goals, and compiled baseline reports and biodiversity action plans for most business units. Performance reviews against these action plans will begin in June 2013. Our detailed management standard guides business units in implementing group policy, aiming to: • Ensure a cost-effective integrated 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 invasive plants. Wetland baseline assessments for almost all business units were updated in recent years. Matla and Grootegeluk baseline assessments are currently being updated to ﬁ ll gaps and update wetland maps. Detailed inventories of wetlands types identiﬁ ed (pans, hill slope, valley bottom, etc) have been updated. The present ecological state (PES), ecological importance and sensitivity (EIS) and functionality (EcoService) of all wetlands in each business unit were updated. Wetland management plans will be considered for sections within mining right areas to add value to wetland ecosystems, diversity and functionality to improve PES, EIS and functionality. The wetland inventory and wetlands maps will be used to consider biodiversity- sensitive areas as part of business and mine-planning decisions. A wetland policy and management standard has been drafted and will go through the process of approval and implementation in 2013. EXXARO INTEGRATED REPORT 2012 p 137 Signiﬁ cant impact of activities While Exxaro is not yet able to quantify its impact in protected sites or areas of high- diversity value, new industry guidelines will be used in the year ahead to update all business units’ areas of high biodiversity value. This data will be presented in the next report to stakeholders. In the interim, we continue to act responsibly in mitigating our impact: • At Grootegeluk, relocation of two protected baboon spider species was initiated and monitored. Various scientiﬁ c papers will be submitted for publications at the end of the relocation and research project (see case study) • Marking protected trees and submitting permit applications for various developments at Grootegeluk and Tshikondeni (the only two business units where this was required to date). Existing permit renewals and permits for new developments were approved by the Department of Agriculture, Forestry and Fisheries • At Inyanda, relocation of the Red Data species Frithia humilis was completed and monitored until end 2012. A postgraduate research project with the North West University on the ecology of the relocated species began in January 2011, in conjunction with SA National Biodiversity Institute (SANBI) and the Mpumalanga Tourism and Parks Agency • We have prioritised rehabilitation of the affected wetland area at Arnot’s Mooifontein operation to improve biodiversity and ecological functionality. Offset mitigations are also being considered as recommended by the Department of Water Affairs. Measures include ongoing mitigation initiatives and offset areas in similar wetlands with the same ecosystem functionality. Stakeholders and interested and affected parties have been consulted on proposed measures. Once the wetland rehabilitation plan is approved, detailed rehabilitation will be conducted to compensate for loss. Approximately R30 million has been spent since 2010 and this is expected to increase as biodiversity action plans are fully implemented and declared alien invader species are eradicated. Exxaro’s long-term view on water issues means that proactive measures are being taken to mitigate anticipated impacts from climate change p 138 NATURAL CAPITAL Biodiversity across the Exxaro group 2012 Geographic location Arnot Biome Grassland Name of vegetation unit (Mucina & Rutherford 2006) Conservation status of vegetation units according to National Spatial Biodiversity Assessment Report — 2011 Eastern highveld grassland (GM12) Endangered with conservation target of 24% Type of operation(s) Mostly underground with limited opencast Grassland Eastern temperate freshwater wetlands (AZf3) Conservation target of 24% North Block Complex – Glisa Grassland Eastern highveld grassland (GM12) Endangered with conservation target of 24% Opencast and underground a g n a l a m u p M Grassland Eastern temperate freshwater wetlands (AZf3) Conservation target of 24% Grassland Lydenburg montane grassland (GM18) Vulnerable with conservation target of 27% NBC Strathrae Grassland Eastern highveld grassland (GM12) Endangered with conservation target of 24% Opencast and underground Grassland Eastern temperate freshwater wetlands (AZf3) Conservation target of 24% * Based on carbon footprint report calculations (2008) EXXARO INTEGRATED REPORT 2012 p 139 Land owned/leased/ managed by Exxaro Combination of owned, leased and managed by Exxaro – some farms in mining right area belonging to privately owned landowners/farmers. Mining activities take place only on land belonging to Exxaro/ Eskom Position relative to protected/high diversity area Size of operational site (ha) with dominant vegetation surface areas per vegetation type in brackets* Not close to any Ramsar or protected areas/nature reserves under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 18 668ha (8 116ha grassland, 931ha wetland, 435ha secondary/transformed grassland consisting of abandoned croplands/rehabilitated areas, 497ha plantations, woodstocks, shelterbelts, 6 909ha cultivated lands, 902ha mine tailings and mining-related infrastructures, 518ha open water, 33ha grassland scrub and 327ha buildings) Biodiversity value (nature of area, listing of protected status) Endangered Exxaro Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, however some plant communities listed as endangered by NSBAR 2004 1 014,43ha (246,60 ha natural grassland, 32,7ha wetland grassland, 7,00ha grassland scrub, 2,72ha buildings, 9,92ha cultivated fields, 292,75ha mine tailings and associated infrastructure, 49,22ha open water, 291,04ha plantations and 82,49ha secondary/transformed grassland) Combination of owned, leased and managed by Exxaro – some farms in mining right area belong to private landowners/farmers Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 6 166ha (3 206ha natural primary grassland, 358ha wetland grassland, 211ha secondary/ transformed grassland consisting of abandoned cropland and rehabilitated areas, 1 811ha cultivated fields, 296ha mine tailings, borrow pits etc, 240ha open water, 43ha plantations, woodlocks, shelterbelts) Least threatened Endangered Least threatened Vulnerable Least threatened Endangered p 140 NATURAL CAPITAL Biodiversity across the Exxaro group 2012 (continued) Geographic location Name of vegetation unit (Mucina & Rutherford 2006) Biome Conservation status of vegetation units according to National Spatial Biodiversity Assessment Report — 2011 Inyanda Grassland Rand highveld grassland (GM11) Endangered with conservation target of 24% Type of operation(s) Opencast Leeuwpan Grassland Eastern highveld grassland (GM12) Endangered with conservation target of 24% Opencast a g n a l a m u p M Grassland Grassland Matla Grassland Eastern temperate freshwater wetlands (AZf3) Soweto highveld grassland (GM8) Eastern highveld grassland (GM12) Conservation target of 24% Endangered with conservation target of 24% Endangered with conservation target of 24% Underground Grassland Eastern temperate freshwater wetlands (AZf3) Conservation target of 24% New Clydesdale Colliery Grassland Eastern highveld grassland (GM12) Endangered with conservation target of 24% Opencast and underground Grassland Eastern temperate freshwater wetlands (AZf3) Conservation target of 24% * Based on carbon footprint report calculations (2008) EXXARO INTEGRATED REPORT 2012 p 141 Position relative to protected/high diversity area Size of operational site (ha) with dominant vegetation surface areas per vegetation type in brackets* 1 747ha (1 372ha natural grassland, 18ha grassland scrub, 248ha cultivated fields – rest consist of open water, mine tailings, secondary grassland etc) Biodiversity value (nature of area, listing of protected status) Endangered 2 073ha (111ha grassland, 225ha wetland grassland, 1 061ha cultivated lands – rest consist of mine tailings, buildings, mining-related infrastructures, secondary grassland and open water) Endangered Land owned/leased/ managed by Exxaro Land owned by Exxaro Land owned by Exxaro Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 Combination of owned, leased and managed by Exxaro – some farms in mining right area belong to private landowners/ farmers. Mining activities only take place on land belonging to Exxaro/Eskom Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 26 162ha (7 329ha grassland, 3 446ha wetland grassland, 115ha stream vegetation (bushveld), 11 708ha cultivated fields; 1 654ha secondary grassland) Combination of owned, leased and managed by Exxaro – some farms in mining right area belong to privately owned landowners/farmers Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 5 383ha (1 479ha natural grassland, 174ha wetland grassland, 578ha secondary/ transformed grassland consisting of abounded cropfields, 256ha mine tailings, borrowpits, bare soils etc. Balance comprises plantations, open water, etc) Least threatened Endangered Endangered Least threatened Endangered Least threatened p 142 NATURAL CAPITAL Biodiversity across the Exxaro group 2012 (continued) Geographic location Name of vegetation unit (Mucina & Rutherford 2006) Biome Conservation status of vegetation units according to National Spatial Biodiversity Assessment Report — 2011 Type of operation(s) Durnacol Grassland Income sandy grassland (Gs7) Vulnerable with conservation target of 23% Historically underground l a t a N - u l u Z a w K o p o p m L i Hlobane Grassland Wakkerstroom montane grassland (GM14) Least threatened with conservation target of 27% Historically underground Tshikondeni Forest – azonal Lowveld riverine forest (FOa1) Critically endangered with a conservation target of 100% Largely underground with three small mini pits Forest – zonal and intrazonal Ironwood dry forest (FOz9) Conservation target of 100% Savanna Savanna – lowveld Savanna – central bushveld Musina mopane bushveld (SVmp1) Least threatened with conservation target of 19% Makuluke sandy bushveld (SVI1) Vulnerable with conservation target of 19% Limpopo sweet bushveld (SVcb19) Least threatened with conservation target of 19% Opencast Grootegeluk * Based on carbon footprint report calculations (2008) EXXARO INTEGRATED REPORT 2012 p 143 Position relative to protected/high diversity area Size of operational site (ha) with dominant vegetation surface areas per vegetation type in brackets* Land owned/leased/ managed by Exxaro Combination of owned, leased and managed by Exxaro – some farms in mining right area belong to private landowners/farmers Combination of owned, leased and managed by Exxaro – some farms in mining right area belong to private landowners/farmers Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 Surface rights belong to the state Adjacent to the Kruger National Park 20 102ha (11 113ha natural grassland vegetation, 4 041ha wetland grassland, 154ha stream vegetation (bushveld), 2 263ha secondary/transformed grassland consisting of abandoned cropfields and rehabilitated areas, 113ha retracted plantations, 423ha plantations, 698ha cultivated fields, 322ha grassland scrub, 97ha open water, 295ha mine tailings and related infrastructure, 582ha buildings) 5 780ha (1 070ha grassland scrub, 152ha mountain bushveld, 16ha open bushveld, 1 729ha grassland, 1 033ha plantations, 229ha wetland grassland, 63ha stream vegetation (bushveld), 291ha buildings, 328ha mine tailings and associated infrastructure, 39ha open water, 436ha retracted plantations, 33ha rocky outcrops, 305ha secondary/transformed grassland) 22 386ha (5 710ha mopani bushveld, 3 921ha mountain bushveld, 663ha open bushveld, 473ha riparian forest, 4 469ha thicket and encroached bushveld, 103ha woodland, 40ha wetland grassland, 412ha stream vegetation, 235ha inland forests and the rest consists of buildings (72ha), cultivated fields (709ha), floodplain bushveld (27ha) etc Exxaro Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 18 391ha (11 493ha bushveld vegetation, 2 016ha open bushveld, 960ha thicket and encroached bushveld, 36ha pans, 805ha woodlands, 0,4ha cultivated fields, 187ha floodplain bushveld, 11ha floodplain grassland, 2 257ha mine tailings and associated infrastructure, 178ha buildings, 431ha transformed/degraded bushveld and 17ha open water) Biodiversity value (nature of area, listing of protected status) Vulnerable Least threatened Critically endangered Least threatened Vulnerable Least threatened p 144 NATURAL CAPITAL Biodiversity across the Exxaro group 2012 (continued) Name of vegetation unit (Mucina & Rutherford 2006) Biome Conservation status of vegetation units according to National Spatial Biodiversity Assessment Report — 2011 Type of operation(s) FerroAlloys Grassland Soweto highveld grassland (GM8) Endangered with conservation target of 24% Industrial site – no mining Geographic location g n e t u a G * Based on carbon footprint report calculations (2008) EXXARO INTEGRATED REPORT 2012 p 145 Land owned/leased/ managed by Exxaro ArcelorMittal Position relative to protected/high diversity area Size of operational site (ha) with dominant vegetation surface areas per vegetation type in brackets* Biodiversity value (nature of area, listing of protected status) Disturbed area within an industrial area Endangered Not close to any Ramsar or protected areas/nature reserves protected under the Protected Areas Act, but some plant communities listed as endangered by NSBAR 2004 p 146 NATURAL CAPITAL Case study — Relocating the baboon spiders at Grootegeluk Two species of baboon spiders, namely the golden-brown baboon spider (Augacephalus junodi) and the burst horned baboon spider (Ceratogyrus darlingi), were recorded in March 2012 while clearing vegetation before upgrading roads as part of the Grootegeluk Medupi expansion project. During transect walks, Exxaro’s ecologist, people from the local community, Grootegeluk’s environmental specialist and rangers from Manketti Game Reserve recorded and marked some 175 baboon spider burrows, prompting a research project to capture, keep and relocate as many of these spiders as possible. The reason for this is that baboon spiders are long-living invertebrates protected under the National Environmental Management: Biodiversity Act. In the absence of any scientiﬁ c precedent on relocating these species, Exxaro collaborated with specialists in developing a dedicated research project that will address several key questions: • Can baboon spiders be relocated successfully after being removed from their burrows, held in captivity for a while and then relocated into the wild? • To what extent can the proposed method succeed and can this ensure successful relocation and survival of other species across development areas in South Africa? • Is there a difference in outcome based on the: — Time of the year — Relocation method — Demographics of the released population (age, sex, species, etc)? • What is the total cost of relocation? Adult female golden-brown baboon spider Adult female burst horned baboon spider Baboon spider burrows recorded along the Nelson Mandela Road EXXARO INTEGRATED REPORT 2012 p 147 To date, a total of 175 individual spiders have been removed by digging up the burrow and surrounding area, and kept in suitable containers for monitoring until being relocated in manmade burrows in the natural environment. Individuals collected in the same area were marked to relocate them together and minimise impacts on the population/community. The habitat of sub-populations was investigated to determine acceptable habitat conditions. Aspects considered included substrate structure and texture; soil moisture; vegetation type and density; food-source availability (invertebrates) and vegetation canopy cover. An 800ha portion in the south of the Manketti game reserve, some 5–10km from the capture site, was identiﬁ ed as a suitable habitat. The area was screened and a natural population of baboon spiders identiﬁ ed and used as a control. Artiﬁ cial burrows were built and tailored to the size of individual baboon spiders being released. A steel cage was ﬁ xed into the ground over each artiﬁ cial burrow to prevent spiders from escaping until they had adopted the burrow, and to keep natural predators out. Four relocation periods were planned: the ﬁ rst happened in the second half of August 2012, after the coldest part of winter. The second and third relocations were conducted in October and November 2012 after the ﬁ rst summer rains. A fourth relocation took place in March 2013. Each burrow for both the relocated and control populations was monitored weekly directly after release, and monthly after the ﬁ rst three months. Over 95% of the spiders survived in their artiﬁ cial burrows, underscoring the success of this research project and its potential application in relocating other species. Continuous monitoring is taking place. Steel cage protecting artiﬁ cial burrow p 148 NATURAL CAPITAL Land management 2012 Heritage and land management 10 000 8 000 s e r a t c e H 6 000 4 000 2 000 0 Total land disturbed Total land rehabilitated Exxaro operates on a cradle-to-grave mining lifecycle that integrates our operational activities from the planning and feasibility stages of a mining project to post closure. Environmental risks are monitored for up to ﬁ ve years after closure. Our goal is to budget for and schedule ongoing rehabilitation aligned with individual mining plans. Integral to this process is minimising any negative impacts on affected parties or the environment, and communicating rehabilitation actions via established forums. Business units report quarterly on set indicators, while screening-level environmental risk assessments are conducted ﬁ ve years before closure. The Exxaro Environmental Rehabilitation Fund (EERF) is the primary vehicle used to provide for liabilities, while additional bank guarantees are taken out to provide for new developments. In line with revised group standards, in the ﬁ rst quarter of each year, EERF trustees decide which business units’ cost estimates will be conducted externally or reviewed by a competent third party based on each business unit’s risk proﬁ le. EERF ﬁ gures are updated biannually and submitted annually to the DMR. Exxaro contributed R55,7 million to the Environmental Rehabilitation Fund in 2012 and had R553,5 million in its trust fund at 31 December 2012 for mine-closure activities (2011: R61,7 million and R606,6 million respectively). The reduction reﬂ ects the divestment of our mineral sands business to Tronox. In addition, the group had bank guarantees of R368,7 million in place. Updating these provisions annually highlights potential rehabilitation alternatives that could decrease the closure liabilities of mines in the long term. To address the environmental closure obligations for Matla and Arnot mines, a separate rehabilitation trust fund has been established and merely awaits approval from the Master’s Ofﬁ ce. Trustee representatives from Exxaro and Eskom will serve on the fund. External closure-cost reviews were completed at ﬁ ve operations during the year. Performance assessments against the objectives of environmental management plan reports were completed for eight operations and submitted to DMR. In line with the growing government focus on rehabilitation, all group business units are reviewing their rehabilitation plans (with appropriate schedules and budgets). Mine closure Exxaro has social and labour plans in place for all operations. To address the social aspects of mine closure, associated liabilities form part of operational costs during the life of mine while post-closure social liabilities are provided for as part of the closure cost. Environmentally, Exxaro proactively addresses any liability build-up by tracking rehabilitation progress, reducing closure cost by including concurrent rehabilitation where possible as part of operational cost, conducting environmental impact assessments as part of ISO 14001 certiﬁ cation at all stages of mining as required and tracking any changes during the life of mine. As part of the closure process, Exxaro also engages extensively with interested and affected parties to minimise the social impact of closure. Studies are undertaken to determine if existing infrastructure and machinery can be used by the local community as part of leaving a positive legacy. EXXARO INTEGRATED REPORT 2012 p 149 Exxaro has two mines at different stages of their closure plans — Tshikondeni, and Inyanda. In 2012, R399,2 million was budgeted to cover implementation of the relevant social plans and rehabilitate negative and latent environmental impacts. Zincor The Zincor plant was ramped down at the end of 2011, with last zinc product produced in December 2011. All voluntary retrenchments were completed in the ﬁrst quarter of 2012 after the plant was cleaned and decommissioned. More than 200 employees were appointed in alternative positions in the Exxaro group. A core team was appointed to oversee rehabilitation and planning of the possible closure of the Zincor site if no alternative use could be established. To date, rehabilitation planning has proceeded for both the plant and surrounding areas. Environmental monitoring is ongoing for water and associated legal requirements. At present Exxaro is considering alternative uses for the Zincor facility, and ﬁnal rehabilitation and closure plans will depend on a possible new business plan to be adopted. Cradle-to-grave mining lifecycle LEVEL OF CERTAINTY PLANNING AND FEASIBILITY OPERATIONAL DECOMMISSIONING AND CLOSURE POST-CLOSURE D N A G N I N N A L P E S A H P Y T I L I B I S A E F L A N O I T A R E P O E S A H P G N I N O I S S I M M O C E D E S A H P E R U S O L C D N A E R U S O L C - T S O P E S A H P Planning and feasibility studies Develop detailed operational plan including progressive rehabilitation plan Baseline studies Identify R&D needs for closure Compilation and approval of EMP Implementation and ongoing review of operational plan EMP performance assessment Progressive implementation of rehabilitation closure plan Implementation of monitoring programmes Implementation of R&D programmes Screening level environmental risk assessment (ERA) Deﬁne closure impacts Prepare conceptual closure plan, including ﬁrst order closure cost assessment Ongoing ERA and review of closure plan and closure cost assessment Quantitative ERA ﬁve years prior to closure Obtain approval and implement closure plan Implement veriﬁcation monitoring programme Regular performance assessment Compile ﬁnal closure risk assessment report Approval of closure certiﬁcate Deﬁne post-closure impact Deﬁne post-closure objectives including land-use objectives Ongoing review of post-closure impact Ongoing consultation with interested and affected parties on post-closure objectives Deﬁne monitoring and maintenance procedures Finalise ﬁnancial arrangements and contractual agreements Implement monitoring and maintenance programmes Third-party responsibility E S A H P E R U S O L C D N A G N I N O I S S I M M O C E D p 150 NATURAL CAPITAL Mine-closure planning process E V I T C E J B O E S A H P E S A H P T N E M S S E S S A K S I R T N E M E G A N A M E S A H P N O I T P O E S A H P E R U S O L C Develop initial closure objectives CONSULTATION Perform a Level 1 (screening level) ERA CONSULTATION POTENTIAL RISK UNCERTAIN RISK INSIGNIFICANT RISK Perform a Level 2 (quantitative) ERA Define and implement monitoring programme to define risk Document insignificant and acceptable risks Re-evaluate risk YES Design and implement confirmation monitoring programme Is risk acceptable without any further mitigation NO Identify alternative strategy Quantitative risk assessment of alternative strategies CONSULTATION Define and agree on acceptable level of impact Finalise management measures, implementation programme and financial provision PEER REVIEW CONSULTATION APPROVAL OF CLOSURE CERTIFICATE Final closure assessment report Prepare and submit closure assessment report C O N S U L T A T I O N P E E R R E V I E W Implement closure plan and verification monitoring CONSULTATION EXXARO INTEGRATED REPORT 2012 p 151 Tshikondeni At Tshikondeni, we have incorporated statutory requirements into our own initiatives to ensure an orderly and beneﬁ cial social closure process: • Forming a social closure committee (statutory future forum) as part of the mine closure committee • Drawing up a mine-closure stakeholder database and engagement plan • Commissioning a structured study to assess the needs and expectations of all relevant internal and external stakeholders, eg SEAT • Commissioning a socio-economic impact assessment study which will include a full assessment of the social impact of closure and mitigation plans • Drawing up a detailed mine closure communication plan • Finalising a social closure plan • Finalising an environmental closure plan • Obtaining buy-in from all relevant stakeholders and approval from the DMR. Current mining legislation presents a number of speciﬁ c risks in mine closure. These include possible pressure from affected communities to increase the corporate contribution to mine-closure social programmes which will escalate the longer-term ﬁ nancial requirement. An additional risk comes from third-party applications for continued mining at mines in closure (Hlobane and Durnacol). Continued mining at these old workings is exceptionally dangerous and any incidents will have an impact on Exxaro’s reputation. Future liability is likely to escalate as new and old mining impacts cannot be separated in terms of water quality, subsidence and crack formation. With any mine closure, there is also the risk that implementing the closure plan might not address all negative impacts. Exxaro has prepared as fully as possible for these contingencies in its existing closure plans. Hazardous waste management Given that hazardous waste is a material risk to Exxaro’s business, we are rolling out a more proactive approach based on accurate data and group-wide standards. This will address material issues, such as avoidance, minimisation, management and correct disposal of hazardous waste. The total hazardous waste generated at our managed coal operations during 2012 was 1 484 tonnes. We are developing the group policy and management standards for hazardous waste, and baseline waste assessments are under way for key operations. Once these are complete, project implementation plans will be ﬁ nalised and performance monitored regularly to enable the group to report more fully on this component. Radioactive materials remain a potential risk at KZN Sands and Namakwa Sands, for which responsibility now rests with Tronox. No breaches were reported in terms of the National Nuclear Regulator (NNR) for the reporting period. Hazardous waste s e n n o T 400 350 300 250 200 150 100 50 0 Grootegeluk Leeuwpan Arnot p 152 NATURAL CAPITAL Consumption 2012 GJ Coal Arnot Char plant/ Reductants Durnacol Grootegeluk Hlobane Inyanda Leeuwpan Matla Electricity Diesel Sasol gas LPG 2012 2011 2012 2011 1 897 646 1 923 201 2 221 489 2 162 868 2012 — 2011 — 186 447 177 988 19 570 52 383 – 22 610 3 081 2 369 354 349 2 533 4 465 2012 442 31 23 2011 341 174 950 991 966 374 830 549 731 913 196 132 15 16 1 275 1 682 27 747 26 437 166 070 196 857 88 927 90 946 605 280 606 766 459 302 447 659 69 087 63 970 New Clydesdale 59 599 55 862 23 947 81 457 North Block Complex 22 490 19 788 343 347 321 374 Tshikondeni 101 774 115 172 156 750 99 632 Mineral sands 2 195 894 3 733 636 270 845 529 024 141 985 275 221 KZN Sands 951 437 1 302 882 25 128 55 786 141 985 275 221 Namakwa Sands 1 244 457 2 430 754 245 717 473 238 Base metals Rosh Pinah2 Zincor 96 193 1 423 942 26 825 138 274 — — — 63 520 157 360 26 825 85 668 32 673 1 266 582 — 52 606 Corporate ofﬁce 89 666 53 124 1 074 812 70 976 1 126 — AlloyStream FerroAlloys Head ofﬁce R&D Total 38 205 3 366 21 362 18 169 24 922 24 434 5 177 7 155 347 294 155 278 – – 554 258 69 698 3 1 278 1 123 4 279 399 7 133 903 2 520 233 2 830 978 212 961 276 347 442 1 Total energy use comprises electricity and fossil fuel consumption. Exxaro operates and manages a central energy data repository to record business unit energy consumption intensity performance, carbon emissions measurement and cost performance. Data is sourced from invoices tendered by appointed suppliers. Data recorded on the energy database is subjected to annual external audit. Energy data captured for the 2012 ﬁnancial year has been audited by PwC 2 Divested to Glencore International AG during 2012 3 49 102 25 1 12 — 35 293 293 132 132 1 1 767 EXXARO INTEGRATED REPORT 2012 p 153 Paraffin Oil light fuel bulk Anthracite Petrol Total energy use1 2012 — 2011 — 2012 — 2011 — 2012 — 2011 — 2012 7 583 2 285 2011 2012 2011 9 129 4 127 160 4 095 539 2 837 208 333 233 207 3 104 25 153 160 257 3 047 5 071 2 251 2 900 1 783 987 1 701 319 64 134 1 354 1 832 193 820 223 294 694 256 697 712 2 823 3 002 531 314 514 666 83 571 137 319 365 838 341 162 – 258 536 214 804 130 792 239 816 1 230 3 441 029 903 939 3 121 4 603 3 184 896 5 686 534 130 792 239 816 1 230 6 6 31 31 — 54 54 — 3 — 441 029 903 939 3 121 4 499 2 066 346 4 052 541 — — — — 123 055 1 562 402 104 1 118 550 1 633 993 90 382 243 082 32 673 1 319 320 — — — — 3 022 2 683 164 738 57 747 63 30 42 28 108 313 3 411 22 964 19 320 2 838 2 487 27 915 27 475 91 126 5 546 7 540 130 823 239 870 1 236 3 441 029 903 939 13 726 16 415 7 599 849 11 402 221 p 154 NATURAL CAPITAL Consumption 2012 (continued) 000t Coal Arnot Char/plant/ reductants New Clydesdale North Block Complex CO2 from electricity purchased CO2 from diesel CO2 from Sasol gas CO2 from fugitive emissions 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 495,50 502,17 311,45 164,71 160,37 157,65 0,00 0,00 0,00 77,87 74,97 85,83 48,69 46,47 49,35 1,45 3,88 17,26 0,54 0,62 1,16 – 5,90 5,32 0,23 0,18 Durnacol 0,09 0,09 0,08 0,19 0,33 0,34 0,43 Grootegeluk 248,31 252,33 251,24 61,58 54,27 47,47 14,19 15,24 15,03 Hlobane Inyanda 0,00 0,00 0,01 0,10 0,12 0,10 7,25 6,90 6,79 12,31 14,60 10,38 Leeuwpan 23,22 23,75 23,07 44,88 44,99 41,39 Matla 119,93 116,89 128,41 5,12 4,74 5,09 0,94 1,00 0,91 2,48 2,96 2,34 47,35 43,90 53,15 15,56 14,58 13,95 1,78 6,04 9,28 7,09 6,13 8,88 5,87 5,17 2,38 25,46 23,83 23,28 Tshikondeni 26,58 30,07 38,94 11,62 7,39 2,63 1,36 1,25 1,42 3,92 3,87 2,94 Mineral sands 573,38 974,90 961,48 20,08 39,20 36,91 10,68 13,76 12,87 – – – KZN Sands 248,43 340,20 427,65 1,86 4,14 5,28 10,68 13,76 12,87 Namakwa Sands 324,94 634,70 533,83 18,22 35,06 31,63 Base metals 25,12 371,81 427,65 1,99 10,25 12,01 0,00 0,00 0,00 – – – Glen Douglas – – 9,34 – – Rosh Pinah 16,59 41,09 44,72 1,99 6,35 Zincor 8,53 330,72 387,15 – 3,90 4,29 4,72 3,00 Corporate ofﬁce 23,41 13,87 13,52 0,08 0,06 0,07 0,00 0,00 0,00 – – – AlloyStream 9,98 0,88 0,44 0,03 Ferroalloys 5,58 4,75 Head ofﬁce 6,51 6,38 1,35 1,87 R&D Total – – 0,02 0,01 0,04 0,02 0,02 0,00 0,02 0,03 0,02 4,62 6,35 2,11 1 117,41 1 862,75 1 923,75 186,86 209,88 206,64 10,68 13,76 12,87 77,87 74,97 85,83 EXXARO INTEGRATED REPORT 2012 p 155 CO2 from paraffin CO2 from anthracite CO2 from other energy sources Total CO2 emissions 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 – – – – – – 1,22 0,21 0,61 3,63 739,30 738,12 758,57 0,20 0,22 50,89 51,17 67,99 0,23 0,28 6,08 0,42 5,66 0,51 0,48 0,20 1,87 324,56 322,04 315,61 0,10 0,12 0,11 0,53 20,50 22,50 18,61 0,02 0,33 70,60 71,70 67,13 0,20 0,21 0,23 172,60 165,74 186,88 0,03 24,45 26,75 32,11 0,10 32,69 30,25 27,10 0,28 0,35 42,40 41,33 33,86 9,91 18,18 18,16 57,70 118,27 164,32 – 4,95 7,75 671,74 1 169,26 201,43 86,77 1,54 260,97 359,64 532,57 9,91 18,18 18,16 57,70 118,27 77,55 3,41 7,75 410,77 809,62 668,92 0,00 – – – – – 0,01 1,00 2,98 27,12 383,06 452,29 0,45 – – 14,08 0,00 0,01 0,09 0,10 18,59 47,53 45,63 0,91 2,43 8,53 335,53 392,58 – – – – – – – 1,51 0,41 24,65 15,44 14,00 0,88 0,06 0,19 0,01 10,90 5,66 1,51 0,41 6,71 1,38 0,88 4,75 7,93 1,89 0,44 4,64 6,80 2,12 9,92 18,18 18,16 57,70 118,27 164,32 1,14 8,07 14,77 1 462,81 2 305,88 2 406,34 p 156 NATURAL CAPITAL Review of mineral resources and reserves The mineral resources and ore reserves underpinning Exxaro’s current operations and growth projects are summarised in the tables on pages 160 to 187. Mineral resources are reported inclusive of those mineral resources which have been converted to ore reserves and at 100%, irrespective of the percentage attributable to Exxaro, except in the case of Gamsberg and Black Mountain, because ﬁgures received from Vedanta (JORC Code 2004) represent resources exclusive of reserves. Signiﬁcant changes in the resource or reserve ﬁgures are explained by relevant footnotes to each table. As a result of the Tronox transaction, which included KZN Sands, Namakwa Sands and Tiwest, Exxaro owns more than 44% of Tronox, but this has an impact on the mineral resources and reserves owned by Exxaro as shown in the attached tables. It is also important to note that Rosh Pinah mine has been excluded, because it was sold to Glencore in 2012. Resource estimations are based on resource models, which incorporate all new validated geological information, updated geological models 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 (mining, metallurgical, economic, marketing, legal, environmental, social and regulatory requirements). Mineral resources in which Exxaro held the controlling interest have been reviewed in 2012 to comply with “reasonable and realistic prospects for eventual economic extraction” (SAMREC Code 2007). Exxaro uses a systematic review process that measures the level of maturity of the exploration work done, the extent of the geological potential, the mineability and associated risks/opportunities to establish an eventual extraction outline (EEO). Mineral resources and ore reserves quoted fall within existing Exxaro Resources mine or prospecting rights. Mining rights are of sufﬁcient duration (or convey a legal right to convert or renew for sufﬁcient duration) to enable all reserves to be mined in accordance with current production schedules. Mineral resources and ore reserves were estimated by competent persons on an operational basis and in accordance with the SAMREC Code (2007) for South African properties and the JORC Code (2004) for Australian properties. Ore reserves in the context of this report have the same meaning as “mineral reserves”, as deﬁned by the SAMREC Code 2007. All the 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 competent persons have signed off their respective estimates in the original mineral resources and ore reserve statements for the various operations and consent to the inclusion of the information in this report in the form and context in which it appears. A list of Exxaro’s competent persons is available from the company secretary on written request. EXXARO INTEGRATED REPORT 2012 p 157 The processes and calculations associated with the estimate have been audited by internal competent persons and are audited by external consultants when deemed essential to establish transparency. In the case of mines or projects in which Exxaro does not hold the controlling interest, ﬁgures have been compiled by competent persons from the applicable companies and have not been audited by Exxaro. Resource and reserve estimation at Exxaro mines or projects outside Africa was done by competent persons as deﬁned by the JORC Code (2004). The person within Exxaro designated to take corporate responsibility for mineral resources and reserves, HJ van der Berg, the undersigned, has reviewed and endorsed the reported estimates. HJ van der Berg MSc (Geology), BSc (Hons) Pr Sci Nat (400099/01) Manager: Mineral Assets 4 March 2013 p 158 NATURAL CAPITAL Commentary Exxaro’s tenure over its mineral assets as listed in the tables was audited and is conﬁrmed. The mining rights for Arnot and for Glisa were executed in 2012. The mining right for Tshikondeni, as well as for Matla and Strathrae, still needs to be scheduled for execution, but Exxaro has written conﬁrmation from the DMR that the mining licence in all three instances has been converted to a mining right. The execution of these rights is expected to happen early in 2013. Conﬂicting applications over Exxaro’s mining and prospecting rights, which had been a constant concern over the past two years, have been addressed through the right channels. The DMR has introduced an electronic submission process, which although not perfect yet, identiﬁes existing prospecting and mining rights and automatically prevents overlapping applications for the same mineral. A bigger issue has arisen as a result of the lack of transparency between the Department of Mineral Resources and the Department of Energy, which results in exploration rights for natural gas being granted over existing coal mining and prospecting rights without any prior consultation. This matter is being addressed. It is critical for Exxaro management and investors to have a high level of conﬁdence in the company’s mineral assets and to have the assurance that these resources and reserves will deliver the expected value. Therefore, a mineral asset policy was drafted and approved by the Exxaro board in 2012. This policy is being implemented through procedures and governance measures designed to achieve this goal, while the drive to add additional good-quality mineral assets will continue. Exxaro is keenly aware of the importance of its mineral assets, both for the short- term proﬁtability of its operations and the sustainability of the company into the future. The optimisation of mineral assets beyond what is generally referred to as mineral resource management is being driven as a priority. Changes in the resources market, increased awareness of protecting the natural environment and changing legislation and statutory requirements demand a change in the utilisation strategy and execution of mining and prospecting operations. The mining industry in South Africa has to adhere to the Mineral and Petroleum Resources Development Act (MPRDA), the National Environmental Management Act (NEMA), the National Water Act (NWA) and the Mine Health and Safety Act (MHSA), which all have a direct impact on the utilisation of the mineral assets of the country. Although everybody agrees that the different legislations are necessary, the devil lies in implementation and sometimes conﬂicting objectives. The most signiﬁcant impact of, for example, NEMA is the sterilisation of high-quality mineral resources, which will be lost for future generations. As an example, the coal resources sterilised in existing mines as a result of environmental legislation shorten the life of the mine, which is a waste of invested capital and loss of jobs. The growing demand for electricity implies that the sterilised reserves must sooner than necessary be replaced by coal from new mines, with additional impact on the environment and agricultural land. Unfortunately, in most cases the sterilised coal is also lost for future generations and the concern should be how justiﬁable and responsible is the loss? To protect the environment and agriculture, but also manage mineral resources optimally, is going to require great insight and meaningful cooperation between government, mining, agriculture and environment sectors. EXXARO INTEGRATED REPORT 2012 p 159 A constructive way of growing and strengthening Exxaro is to expand into other strategically important mineral commodities. Hard coking coal and iron ore have been in Exxaro’s growth strategy from the beginning. Exxaro has a 50% share in the Moranbah South project, a hard coking coal deposit in Australia. This is regarded as a world-class resource and is at feasibility study stage. The iron ore market is expected to remain strong and grow extensively over the next 50 years, but high-grade iron ore in the major iron ore provinces such as the Northern Cape, the Pilbara (Australia) and even the huge Brazilian deposits is being depleted continuously and at an increasing rate. Good iron ore assets are therefore in high demand among large international mining houses and extremely expensive to acquire. As a result, Exxaro has targeted deposits, which can be upgraded through beneﬁciation to a high-grade product and smaller high-grade deposits, which were not favoured by the major direct shipping iron ore producers. Over the past four years, an extensive search programme was launched to identify and evaluate available deposits and to acquire a suitable iron ore project. This objective has been achieved by acquiring a major part of the Mayoko iron ore deposits in the Republic of Congo. The mineral resource is large enough to sustain a signiﬁcant annual production (10Mtpa) for 30 years and more. An enriched surface deposit overlying the main orebody provides an opportunity to begin production and enter the market quickly. Internationally, the appetite for these deposits is growing and within the next decade, the market value of these deposits will increase substantially. In conclusion, the company’s mineral resources and reserves value statement: Exxaro’s mineral resources and reserves represent the company’s fundamental value to be treated with responsibility and respect. Accountable mining is focused on achieving this goal through teamwork by people who are empowered to grow and participate and are committed to excellence and honest responsibility. p 160 NATURAL CAPITAL Coal Coal resources The table below details the total inclusive Coal Resources estimated as at 31 December 2012. % attributable to Exxaro2 Resource category 2012 Tonnes (million)3,5 Commodity Operation1 Arnot mine (UG/OC) (captive market) Matla mine (>18MJ/kg, 26% DAV)6 (UG) (captive market) Matla mine (Low CV 15- 18MJ/kg, 30% Ash)7 (UG) (captive market) 100 100 100 a g n a l a m u p M Inyanda mine8 (OC) 100 Leeuwpan mine (OC) 100 Mafube mine9 (OC) 50 NBC mine10 (OC) (North Block Complex) NCC mine (OC/UG) (New Clydesdale) 100 100 Glisa South project (OC) (prospecting) 100 Belfast project (UG/OC) (prospecting) 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 187,8 42,8 29,6 260,2 344,1 253,3 192,1 789,5 53,1 40,4 98,3 191,7 5,71 5,71 150,4 150,4 116,5 38,4 37,5 192,5 34,4 0,0 1,3 35,7 31,2 23,3 54,5 20,0 47,1 9,4 76,5 83,2 24,2 25,9 133,3 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 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 EXXARO INTEGRATED REPORT 2012 p 161 2011 Tonnes (million)3,5 161,2 46,3 51,5 259,1 107,3 523,7 179,7 810,7 32,8 111,0 39,1 182,9 7,8 7,8 153,7 2,7 156,4 107,6 7,4 51,4 166,4 31,2 4,7 4,2 40,1 30,8 23,3 54,1 20,0 47,1 9,4 76,5 83,2 24,2 25,9 133,3 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 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 % change 0,4 (2,6) 4,8 (26,8) (3,8) 15,7 (11,0) 0,8 — — p 162 NATURAL CAPITAL Coal Coal resources (continued) Commodity Operation1 % attributable to Exxaro2 Grootegeluk mine (OC) 100 Resource category Measured Indicated Inferred Total Grootegeluk West project (OC) (prospecting) Waterberg North project (OC) (prospecting) Waterberg South project (OC) (prospecting) 100 Measured Indicated Inferred Total 100 Measured Indicated Inferred Total 100 Measured Tshikondeni mine (UG/OC) (captive market) 100 Moranbah South project11 (prospecting) 50 Indicated Inferred Total Measured Indicated Inferred Total Measured Indicated Inferred Total o p o p m L i a i l a r t s u A 2012 Tonnes (million)3,5 2 476 1 585 735 4 795 2 579 2 249 4 828 2 253 2 253 895 895 5,3 25,1 30,4 349,6 302,3 50,8 702,6 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 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 3 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2012 only 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 7 The movement within the categories is primarily the result of an extensive drilling programme undertaken during the reporting period An amount of coal from Seam 4, which is below the cut-off used to deﬁne Matla’s coal Resources, is utilised at Matla mine 3 therefore it is reported separately The increase of 0,49Mt, drilling and update of geological model, is offset by mining (2,58Mt) resulting in a net decrease of 2,09Mt The ﬁgures were received from Anglo American Thermal Coal and were not audited by Exxaro. The increase is the result of additional drilling and the upgrade of Seam 4 due to the viability of a lower quality product 8 9 10 The decrease of 4,4Mt is the result of mining (4,2Mt) and a change in classiﬁcation methodology 11 Estimates are received from Anglo American Metallurgical Coal Proprietary Limited and not audited by Exxaro. The increase is the result of a revised classiﬁcation methodology EXXARO INTEGRATED REPORT 2012 p 163 2011 Tonnes (million)3,5 2 523 1 539 787 4 849 2 579 2 249 4 828 2 253 2 253 895 895 7,4 25,4 32,8 191,5 307,1 128,5 627,1 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 % change (1,1) — — — (7,3) 12,0 p 164 NATURAL CAPITAL Coal Coal resource qualities Table 1 Operation Arnot mine Matla mine Inyanda mine Leeuwpan mine Mafube mine NBC mine Seam/Layer/ Formation Seam 2 Seam 1 Seam 2 Seam 4 Low CV seam 4 Main reserve Pegasus reserve TC2 BC2 Seam 2 Seam 1 Seam 4 Glisa Stratrae east Eerstelingsfontein Glisa South project NCC mine Total seams Belfast project Seam 4 Seam 3 Seam 2 Grootegeluk mine Volksrust Formation Vryheid Formation Grootegeluk West project Volksrust Formation Vryheid Formation Waterberg North project Volksrust Formation Vryheid Formation Waterberg South project Volksrust Formation Vryheid Formation Tshikondeni mine Moranbah project Goonyella Middle Seam (GM) Tonnes (Mt)1 CV MJ/kg 183,5 7,3 87,6 256,6 53,1 4,66 1,05 87,6 62,8 100,4 16,1 30,1 0,5 3,7 20,0 31,2 2,2 6,3 74,7 1 774 702 23,78 25,12 23,52 19,78 17,05 25,32 22,28 16,60 23,90 22,74 20,45 19,00 24,70 24,34 19,03 24,27 15,93 21,47 24,77 12,35 22,88 Measured resource %VM 24,22 30,13 23,80 22,51 20,27 23,73 21,67 17,50 21,80 22,40 22,60 21,27 22,90 22,60 20,28 22,72 20,93 23,01 23,06 19,39 22,06 %Ash 20,85 19,21 20,93 30,30 36,00 20,90 24,00 40,10 22,10 23,68 30,91 32,02 19,00 18,26 31,96 23,10 40,21 27,85 18,26 55,46 28,19 %S 0,95 1,12 0,86 0,99 0,94 1,13 1,62 0,90 1,10 1,00 0,90 0,78 0,80 0,85 0,86 1,44 1,26 1,07 1,10 1,03 2,10 Tonnes (Mt)1 41,5 1,3 124,1 129,2 40,4 26,2 12,2 47,1 23,3 1,0 1,8 21,3 1318 267 2 150 430 5,3 349,6 30,59 26,28 21,86 18,80 24,55 24,60 0,70 0,57 25,1 302,3 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 1 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt 2 TC Top Coal, BC Bottom Coal EXXARO INTEGRATED REPORT 2012 p 165 Indicated resource Inferred resource 2012 CV MJ/kg 24,08 25,55 23,41 20,07 17,31 %VM 24,63 30,72 23,97 22,26 19,87 %Ash 19,80 17,79 20,50 28,67 38,51 %S 0,97 1,14 0,82 1,04 1,14 21,76 18,79 22,34 20,79 21,76 35,75 0,90 0,90 21,59 21,67 29,40 1,37 19,03 22,73 13,48 21,14 24,10 13,09 22,04 11,13 20,37 20,87 20,71 19,10 22,82 22,82 19,83 22,23 19,30 21,87 31,78 28,36 47,83 28,56 19,92 54,31 28,36 56,88 32,11 0,95 0,94 1,11 1,59 1,08 1,05 2,17 0,88 2,23 Tonnes (Mt)1 CV MJ/kg 29,0 0,6 114,0 78,1 98,3 7,3 10,5 19,7 1,3 24,63 25,24 21,72 20,08 17,23 21,60 17,39 15,73 19,34 %VM 24,60 29,61 22,64 22,51 20,00 22,70 19,67 19,50 21,37 %Ash 18,66 18,36 24,97 28,70 33,97 26,99 40,56 41,15 31,28 %S 0,88 1,84 1,23 0,90 0,92 0,90 0,90 0,91 0,69 9,4 20,96 21,55 27,63 1,04 2,3 1,1 22,5 560 174 1800 448 1468 785 354 541 12,78 20,74 22,90 13,03 23,10 10,09 19,48 10,83 18,05 14,14 17,12 19,21 22,79 21,91 19,08 21,23 18,73 21,61 19,01 21,69 23,18 21,58 50,06 29,32 22,70 55,30 29,06 58,81 34,16 56,80 36,19 44,93 36,11 0,88 1,16 1,06 1,22 1,97 0,88 2,12 0,87 1,75 1,08 2,12 30,80 27,28 22,00 21,80 24,00 21,80 0,70 0,55 50,8 27,83 17,40 20,00 0,54 p 166 NATURAL CAPITAL Coal Coal reserves The table below details the total coal reserves estimated as at 31 December 2012 Commodity Operation1 % attributable to Exxaro5 Reserve category ROM (Mt)2,3 Arnot mine7 (UG) 100 (captive market) Matla mine8 (UG) 100 (captive market) a g n a l a m u p M Inyanda mine9 (OC) 100 Leeuwpan mine (OC)10 100 Mafube mine11 (OC) 50 Proved Probable Total Inferred resources in LoMP6 Proved Probable Total Inferred resources in LoMP6 Proved Probable Total Inferred resources in LoMP6 Proved Probable Total Inferred resources in LoMP6 Proved Probable Total 17,0 24,9 41,9 0,5 145,3 96,7 242,0 39,8 4,29 0,96 5,25 — 65,7 76,7 142,4 — 12,1 70,7 82,8 2012 Saleable product (Mt)2,4 Coking Thermal Metallurgical N/A N/A N/A N/A N/A N/A 38,5 3,7 42,2 0,5 144,6 96,2 240,8 N/A N/A N/A N/A N/A N/A A-grade export steam coal 2,93 0,69 3,62 Export Thermal Metallurgical 3,0 2,0 5,0 19,4 21,4 40,8 12,4 20,3 32,7 Export Thermal Metallurgical 5,8 24,2 30,0 2,4 21,2 23,6 N/A N/A N/A EXXARO INTEGRATED REPORT 2012 p 167 Life of mine plan (LoMP) (years) % change (6,9) 12,0 (11,0) 26,0 (26,9) 2,3 2011 ROM (Mt)2,3 Saleable product (Mt)2,4 Coking Thermal Metallurgical N/A N/A N/A N/A N/A N/A 37,1 7,7 44,8 28,6 241,8 270,4 N/A N/A N/A N/A N/A N/A A-grade export steam coal 4,33 0,69 5,02 37,3 7,7 45,0 7,3 28,7 243,1 271,8 57,0 6,22 0,96 7,18 — 72,4 73,6 146,0 — 24,8 66,6 91,3 Export Thermal Metallurgical 3,7 — 3,7 24,1 21,4 45,5 11,6 20,3 31,9 (2,5) 17,0 Export Thermal Metallurgical 11,6 22,2 33,8 6,8 25,0 31,8 N/A N/A N/A (9,3) 13,8 p 168 NATURAL CAPITAL Coal Coal reserves (continued) Commodity Operation1 % attributable to Exxaro5 Reserve category ROM (Mt)2,3 NBC mine (OC) (North Block Complex) 100 Proved Probable Total Inferred resources in LoMP6 NCC mine12 (UG/ OC) (New Clydesdale) a g n a l a m u p M 100 Proved Probable Total Inferred resources in LoMP6 Belfast project13 (UG/OC) (prospecting) 100 Proved Probable Total Inferred resources in LoMP6 14,3 3,2 17,5 – 3,5 – 3,5 – – 67,3 67,3 0,8 2012 Saleable product (Mt)2,4 Coking Thermal Metallurgical N/A N/A N/A N/A N/A N/A – 35,4 35,4 8,6 3,2 11,8 2,2 2,2 – 21,6 21,6 N/A N/A N/A N/A N/A N/A N/A N/A N/A EXXARO INTEGRATED REPORT 2012 p 169 2011 Saleable product (Mt)2,4 Coking Thermal Metallurgical N/A N/A N/A N/A N/A N/A – 35,4 35,4 7,7 3,9 11,6 5,1 0,9 6,0 – 21,6 21,6 N/A N/A N/A N/A N/A N/A N/A N/A N/A Life of mine plan (LoMP) (years) % change 9,5 4,5 (59,2) 2,5 — 21,1 ROM (Mt)2,3 10,8 5,2 16,0 0,98 6,9 1,8 8,7 – – 67,3 67,3 0,8 p 170 NATURAL CAPITAL Coal Coal reserves (continued) Commodity Operation1 % attributable to Exxaro5 Reserve category ROM (Mt)2,3 Grootegeluk mine (OC) 100 Proved o p o p m L i Tshikondeni mine14 (UG/OC) (captive market) Probable Total Inferred resources in LoMP6 100 Proved Probable Total Inferred resources in LoMP6 2 083 999 3 082 390 1,2 — 1,2 2012 Saleable product (Mt)2,4 Coking Thermal Metallurgical 83 61 145 0,6 — 0,6 979 419 1 398 N/A N/A N/A 76 21 97 N/A N/A N/A 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 3 4 5 6 7 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt 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 Saleable reserve tonnage represents the product tonnes of coal available for sale on an applicable moisture basis. Qualities of Saleable Products are provided in Table 2 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2012 only Inferred Resources in Life of Mine Plan (LoMP) refer to Inferred Resources considered for the Life of Mine Plan The movement within the categories is the result of pending environmental authorisations at the Grootlaagte and Schoonoord reserve areas as well as structural complexities impacting on roof conditions at 8 Shaft. The Mooifontein OC has not been converted to reserves due to ongoing environmental and technical studies The changes are as a result of mining, update of mine layout and the exclusion due to environmental assessments The decrease is the result of mining (1,9Mt). Pegasus South has been classiﬁed as probable due to pending environmental authorisations 8 9 10 Reserve areas OL, OJ, OI and UB are reported as probable as the result of pending environmental studies 11 Figures were received from Anglo American Thermal Coal and were not audited by Exxaro. Changes are as a result of reclassiﬁcation of the Pan 2 area in Springboklaagte pending the granting of the environmental approvals and removal of the Rooipan area A decrease of 5,2Mt is the result of mining (1,4Mt) and the removal of Haasfontein (OC, 2,11Mt) and Diepspruit pillars based on current economical viability The Reserve is classiﬁed as probable due to the pending approval of the conversion of a prospecting right to a mining right and associated pending environmental authorisations. Exxaro Coal has a reasonable expectation that such conversion will not be withheld. 12 13 14 A decrease of 0,7Mt is the result of mining. Expected mine closure during 2014 EXXARO INTEGRATED REPORT 2012 p 171 2011 Saleable product (Mt)2,4 Coking Thermal Metallurgical 94 59 153 0,9 0,1 0,9 872 356 1 228 N/A N/A N/A 89 22 111 N/A N/A N/A Life of mine plan (LoMP) (years) % change 5,8 30+ (35,3) 2,0 ROM (Mt)2,3 2 006 907 2 913 302 1,8 0,1 1,9 p 172 NATURAL CAPITAL Coal reserve qualities Table 2 Operatable Arnot mine Matla mine Inyanda mine Leeuwpan mine Mafube mine NBC NCC mine Belfast project Grootegeluk mine Tshikondeni mine Seam/layer Thermal saleable (proved + probable) Tonnes (Mt)1 CV MJ/kg %VM %Ash Seam 4 Seam 2 TC2 BC2 Middlings Export Glisa Strathrae East Eerstelingsfontein Thermal Export Volksrust Formation Vryheid Formation 42,9 149,6 92,4 3,62 40,9 23,6 30,0 14,2 0,5 2,7 2,17 21,6 35,4 907 491 22,1 19,5 24,3 27,5 21,8 22,9 27,5 21,8 24,7 23,3 26,6 22,9 27,4 21,5 22,7 22,5 20,3 24,0 25,0 20,1 21,2 26,9 22,6 22,9 22,6 28,9 N/A 24,7 27,4 22,0 23,0 33,8 20,6 15,0 24,6 22,6 11,5 24,7 19,0 18,3 15,1 N/A 12,0 31,2 28,4 %S 0,9 0,9 1,0 0,7 0,4 0,7 0,4 0,7 0,8 0,7 0,6 N/A 0,4 0,9 2,0 Saleable reserve tonnage represents the product tonnes of coal available for sale on an 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 REPORT 2012 p 173 2012 Metallurgical saleable (proved + probable) Coking saleable (proved + probable) Tonnes (Mt)1 CV MJ/kg %VM %Ash %S Tonnes (Mt)1 CV MJ/kg %VM %Ash %S 37,8 26,1 20,9 15,5 0,5 97 22,1 23,0 14,4 0,6 145 29,5 35,9 9,9 1,1 0,55 30,8 22,0 13,0 0,7 p 174 NATURAL CAPITAL Base metals Base metal resources The table below details the total inclusive mineral base metal resources estimated as at 31 December 2012 Commodity Operation(1) % attributable to Exxaro2 Resource Category Tonnes (million)3 a i b i m a N e p a C n r e h t r o N Rosh Pinah mine4 (UG) (zinc and lead) Black Mountain Mining5 Deeps mine6 (UG) (zinc, lead, copper and silver) Swartberg mine7 (zinc, lead, copper and silver) (UG) Gamsberg North mine (OC) (zinc) Measured Indicated Inferred Total 26 Measured Indicated Inferred Total 26 Measured Indicated Inferred Total 26 Measured Gamsberg East8 26 (project) (zinc) Indicated Inferred Total Measured Indicated Inferred Total 2012 Grade Sold %Zn %Pb %Cu Ag g/t 3,6 3,4 2,3 3,2 — 3,0 2,8 2,9 0,3 0,4 0,7 0,4 — 0,6 0,7 0,7 40,4 46,0 20,6 37,1 — 35,9 32,2 33,5 7,2 6,2 4,8 18,2 0,0 15,5 30,1 45,7 43,2 57,5 53,3 154,0 0,0 0,0 32,3 32,3 2,7 2,1 2,1 2,3 — 0,7 0,7 0,7 7,1 6,5 5,4 6,3 — — 9,8 9,8 %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 3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt 4 Rosh Pinah mine has been sold 5 Estimates are received from Vendata Resources plc as at 30 September 2012 and not audited by Exxaro 6 Resources quoted are in addition to reported Ore Reserves 7 Resources will be updated in March 2013 with results of exploration programme conducted in 2012 8 Reserves will be declared once the feasibility study has been completed (in 2013) EXXARO INTEGRATED REPORT 2012 p 175 Tonnes (million)3 3,8 5,0 6,6 15,5 7,2 6,2 4,9 18,3 — 15,5 30,1 45,7 43,2 57,5 53,3 154,0 0,0 0,0 32,3 32,3 2011 Grade %Zn %Pb 8,9 6,8 8,2 7,9 2,1 2,3 1,0 1,7 %Zn %Pb Cu% Ag g/t 3,6 3,4 2,3 3,2 — 3,0 2,8 2,9 0,3 0,4 0,7 0,4 — 0,6 0,7 0,7 40,4 46,0 20,8 37,1 — 35,9 32,2 33,5 2,7 2,1 2,1 2,3 — 0,7 0,7 0,7 7,1 6,5 5,4 6,3 — — 9,8 9,8 % change N/A (0,4) 0 0 0 p 176 NATURAL CAPITAL Base metals Base metal reserves The table below details the total inclusive base metal reserves estimated as at 31 December 2012 2012 Commodity Operation1 % attributable to Exxaro2 Reserve category ROM (Mt)3 Grade Saleable product Rosh Pinah Mine5 (UG) Namibia Black Mountain Mining Deeps6 (UG) ) d a e l d n a c n i z ( ) r e v l i s d n a r e p p o c , d a e l , c n i z ( Proved Probable Total Sold %Zn %Pb %Cu Ag g/t Zinc metal (x 1,000t) Lead metal (x 1,000t) Copper metal (x 1,000t) 2,9 3,2 0,4 37,0 91,7 101,4 11,6 2,1 2,4 2,4 2,7 0,4 0,4 41,9 39,8 89,9 181,6 100,4 201,8 17,2 28,8 26 Proved Probable Total Inferred resources in LoMP4 3,2 4,2 7,4 4,8 %Zn — percent zinc, %Cu — percent copper, %Pb — percent lead, Ag g/t — grams per tonne silver, NA — 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 2012 only 3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt 4 5 Rosh Pinah has been sold 6 Figures received from Vendata Resources plc as at 30 September 2012 and not audited by Exxaro. The net decrease of 1,1Mt is the result of mining Inferred Resources in Life of Mine Plan (LoMP) refer to Inferred Resources considered for the Life of Mine Plan EXXARO INTEGRATED REPORT 2012 p 177 2011 Grade Saleable product %Zn %Pb 8,9 7,2 8,2 2,1 2,3 2,2 Zinc metal (x 1,000t) 232,2 Lead metal (x 1,000t) 53,3 159,3 391,5 51,3 104,6 %Zn %Pb %Cu Ag g/t Zinc metal (x 1,000t) Lead metal (x 1,000t) Copper metal (x 1,000t) Silver metal (x 1,000t) Life of mine plan (LoMP) (years) % change N/A % change Life of mine plan (LoMP) (years) 3,0 2,2 2,6 3,4 2,5 2,9 0,4 39,0 117,1 133,1 14,5 153,4 0,4 0,4 41,8 100,3 40,3 217,4 112,6 245,6 18,8 33,3 189,8 343,2 (12,7) 7 ROM (Mt)3 2,6 2,2 4,8 3,9 4,5 8,5 9,6 Silver metal (x 1,000t) 118,9 175,6 294,5 p 178 NATURAL CAPITAL Iron ore Iron ore resources The table below details the total inclusive iron ore resources estimated as at 31 December 2012 Commodity Operation1 % attributable to Exxaro2 Resource category Iron ore Republic of Congo (RoC) Mayoko mine (OC) 100 Measured Indicated Inferred Total %Fe refers to in-situ Fe content, %Fe — percent iron Rounding-off of ﬁgures may cause computational discrepancies All changes more than 10% (signiﬁcant) are explained 1 Mining method: OC, lithological boundary used, no cut off grade applied 2 Figures are reported at 100% irrespective of percentage attributable to Exxaro and refer to 2012 only 3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt EXXARO INTEGRATED REPORT 2012 p 179 2012 2011 Tonnes (million)3 Grade %Fe Tonnes (million)3 Grade %Fe % change 40,2 245,0 400,2 685,4 45,7 34,3 32,7 34,0 Not reported N/A p 180 NATURAL CAPITAL Mineral sands*** Mineral sands resources The table below details the total inclusive mineral sands resources estimated as at 31 December 2012 Commodity Operation1 % attributable to Exxaro2 Resource category Hillendale Mine + Braeburn + Breaburn Extension4 (OC) 59,04 l a t a N - u l u Z a w K n r e t s a E e p a C o p o p m L i Fairbreeze A+B+C+C Ext + D (OC) Block P (OC) (mining right) Port Durnford project (OC) (prospecting) Eastern Cape project (OC) (Nombanjana, Ngcizele, Sandy Point old and recent) Gravelotte sand5 (OC) (mining right) Gravelotte rock6 (OC) (mining right) Letsitele sand project (OC) (prospecting) Letsitele rock project (OC) (prospecting) 59,04 59,04 59,04 59,04 100 100 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 EXXARO INTEGRATED REPORT 2012 p 181 2012 2011 Tonnes (million)3 Grade Tonnes (million)3 Grade % change %Ilmenite %Ilmenite 2,90 2,90 4,29 2,56 1,92 3,76 3,05 3,05 3,04 2,75 2,52 2,68 4,62 3,30 3,92 4,51 9,90 9,90 23,10 18,20 18,60 14,6 – – 14,6 156,1 55,7 9,0 220,9 – 40,6 – 40,6 142,5 340,1 466,0 948,6 226,2 9,9 19,8 255,9 74,9 74,9 9,7 113,9 123,6 Divest Divest 24,2 – – 24,2 156,1 55,7 9,0 220,9 – 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 2,76 2,76 4,29 2,56 1,92 3,76 3,10 3,10 3,00 2,80 2,50 2,70 4,60 3,30 3,90 4,50 9,10 – 4,00 7,60 – 20,70 20,70 10,5 – – 10,5 – 25,9 – 25,9 (39,6) – – – – (29,6) 10,1 N/A N/A p 182 NATURAL CAPITAL Mineral sands*** Mineral sands resources (continued) l a t a N - u l u Z a w K a i l a r t s u A Tonnes (million)3 2012 Grade %Ilmenite %Zircon 0,79 0,62 0,61 0,72 Namakwa Sands mine (OC) 59,04 Tiwest Cooljarloo mine (OC) 44,65 Tiwest Cooljarloo west project7 (OC) (prospecting) Cooljarloo north west project7 (OC) (prospecting) 44,65 44,65 Jurien project (OC) (mining right) 44,65 Dongara project8 (OC) (prospecting) 44,65 Measured Indicated Inferred Total Measured Indicated Inferred Total Measured Indicated Inferred Total Measured Indicated Inferred Total Measured Indicated Inferred Total Measured Indicated Inferred Total 509,6 257,4 142,3 909,3 170,8 196,8 367,6 65,1 34,0 99,1 79,5 79,5 25,6 25,6 106,3 12,8 37,9 157,0 3,11 2,55 2,38 2,84 %THM 2,1 1,9 2,0 %THM 2,1 2,0 2,1 1,8 1,8 6,0 6,0 4,0 4,5 3,9 4,0 *** Estimates are received from Tronox and not audited by Exxaro %THM — percent Total Heavy Mineral Mineral Sands Resources are quoted Inclusive of Mineral Sands Resources that have been modiﬁed to Mineral Sands 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 2012 only 3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt 4 The decrease of ~9Mt is the result of mining depletion (3,2Mt) and the removal of low potential resources in the peripheral parts of the ore body (6Mt) EXXARO INTEGRATED REPORT 2012 p 183 Tonnes (million)3 2011 Grade %Ilmenite %Zircon % change 0,61 0,72 0,58 0,64 434,7 360,7 82,0 877,4 207,3 192,8 399,9 111,0 86,0 197,0 — — 25,6 25,6 55,2 12,0 15,9 83,1 2,90 2,72 2,59 2,79 %THM 2,1 1,9 2,1 %THM 1,8 1,8 1,8 6,0 6,0 4,5 4,8 4,0 4,5 3,6 (8,1) (49,7) N/A — 88,9 5 New resource classiﬁcation resulted in a movement of material from the measured to indicated category and the exclusion of 31,3Mt (pebble bed), previously in the inferred category 6 The increase is the result of additional drilling information obtained on farms Malati and Begin and an update of the geological model 7 The change is the result of a split into Cooljarloo West and North-west, because it makes geographical sense (occurrence of ore bodies in relation to Cooljarloo mine) as well as a change in economic parameters 8 The increase in resource is the result of new economical parameters used in ore deﬁnition p 184 NATURAL CAPITAL Mineral sands*** Mineral sands reserves The table below details the total mineral sands reserves estimated as at 31 December 2012 Commodity Operation1 % attributable to Exxaro2 Reserve category ROM (Mt)3 2012 Grade Total heavy mineral (THM) composition %THM %Ilmenite %Rutile %Zircon l a t a N - u l u Z a w K o p o p m L i e p a C n r e t s e W a i l a r t s u A Hillendale mine5 (OC) 59,04 2,9 – 2,9 – Proved Probable Total Inferred resources in LoMP4 Fairbreeze A+B+C+ C ext.+D (OC) (mining right) Gravelotte sand6 (OC) (mining right) Namakwa sands Mine (OC) 59,04 Proved 114,3 Probable 25,4 139,6 3,0 Total Inferred resources in LoMP4 100 Proved Probable Total Inferred resources in LoMP4 – – – – 59,04 Proved 271,9 Probable 160,3 432,2 49,6 Total Inferred resources in LoMP4 Tiwest – Cooljarloo mine (OC)7 44,65 Proved Probable 170,8 57,9 Total 228,7 5,3 – 5,3 7,7 5,0 7,2 9,7 7,1 8,8 2,2 2,1 2,2 61,3 – 61,3 62,7 56,2 61,9 33,8 34,7 34,1 60,1 63,1 60,8 4,0 – 4,0 3,5 3,3 3,4 2,4 2,7 2,5 4,9 5,1 5,0 7,6 – 7,6 8,5 7,8 8,4 9,5 8,1 9,1 9,4 10,6 9,7 EXXARO INTEGRATED REPORT 2012 p 185 2011 ROM (Mt)(3) Grade Total heavy mineral (THM) composition %Leucoxene %THM %Ilmenite %Rutile %Zircon % Leucoxene 2,0 – 2,0 7,3 – 7,3 – 1,7 114,3 1,5 1,7 5,2 6,0 5,4 25,4 139,6 3,0 52,4 – 52,4 – 185,5 272,4 457,9 4,4 2,7 2,9 207,0 57,7 2,7 264,7 5,9 – 5,9 7,7 5,0 7,2 13,0 – 13,0 9,7 7,8 8,6 2,2 2,1 2,2 56,1 – 56,1 62,7 56,2 61,9 85,0 – 85,0 33,8 36,8 35,5 59,3 56,1 58,6 3,9 – 3,9 3,5 3,3 3,4 2,6 2,4 2,6 5,0 4,7 5,0 7,1 – 7,1 8,5 7,8 8,4 9,7 9,5 9,6 9,3 9,5 9,4 2,0 – 2,0 1,7 1,5 1,7 7,2 6,0 6,5 2,7 3,0 2,8 Life of mine plan (LoMP) (years) % change (60,4) 1 10 – – N/A (5,6) 31 (13,6) 11 p 186 NATURAL CAPITAL Mineral sands*** Mineral sands reserves (continued) Commodity Operation1 % attributable to Exxaro2 Reserve category ROM (Mt)3 – Jurien project (OC) (mining right) 44,65 a i l a r t s u A Inferred resources in LoMP4 Proved Probable Total Inferred resources in LoMP4 – Dongara project8 (OC) (prospecting) 44,65 Proved Probable Total Inferred resources in LoMP4 – – 15,7 15,7 – 64,6 – 64,6 – 2012 Grade Total heavy mineral (THM) composition %THM %Ilmenite %Rutile %Zircon – 7,9 7,9 5,1 – 5,1 – 53,6 53,6 48,9 – 48,9 – 6,8 6,8 6,1 – 6,1 – 10,4 10,4 11,2 – 11,2 *** Estimates are received from Tronox and not audited by Exxaro %THM — percent Total Heavy Minerals 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 2012 only 3 The tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt 4 5 The decrease is as a result of mining depletion (3,21Mt), model reﬁnement (1,2Mt) and the removal of low potential resources in the peripheral parts of the Inferred Resources in Life of Mine Plan (LoMP) refer to Inferred Resources considered for the Life of Mine Plan ore body 6 Reserves currently under review 7 The decrease in the reserve is the result of mining 8 The increase in mineral reserves (35,1Mt) is the result of new economical parameters used in ore deﬁnition EXXARO INTEGRATED REPORT 2012 p 187 2011 ROM (Mt)(3) Grade Total heavy mineral (THM) composition %Leucoxene %THM %Ilmenite %Rutile %Zircon % Leucoxene Life of mine plan (LoMP) (years) % change – – 15,7 15,7 29,5 – 29,5 – – 2,3 2,3 2,8 – 2,8 – 7,9 7,9 7,3 – 7,3 – 54,0 54,0 48,6 – 48,6 – 6,8 6,8 7,0 – 7,0 – 10,0 10,0 10,1 – 10,1 – 2,3 2,3 2,0 – 2,0 – 5 119,0 20 09 social capital The Ikageng Arts and Craft project at Grootegeluk provides business development for entrepreneurs p 190 SOCIAL CAPITAL People — partnering with communities Objective: To be a powerful source of value for Exxaro and surrounding communities, based on the principles of integrated sustainable development Strategy Risk Opportunity Target Community activism To produce and implement an Exxaro social compact framework that will ensure we go beyond compliance To manage community expectations Community activism To develop and roll out local economic development initiatives and sustainable related projects Social licence to operate breach Through the Exxaro social compact, we will develop a body of best-practice evidence of community and business development and growth Effective and transparent stakeholder engagement Implement against approved milestones Policy being ﬁnalised for implementation in 2013 Continuous As per milestones To optimise stakeholder engagement at operational level Community activism Effective and transparent stakeholder engagement Continuous To proactively manage SHEC risks Community activism Develop a risk model Completed in 2012 Roll out SEAT Local economic development Our community activities are directly linked to our strategy by ensuring Exxaro’s sustainability, and protecting and building its reputation by fostering mutually beneﬁcial relationships with local communities (deﬁned as one in the immediate area of Exxaro’s operations and from major 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 high level of unemployment and related development needs. Local economic development projects refer to deploying funds, goods and labour to provide sustainable services for the local community that can be owned, managed and maintained by that community. Unlike a donation, Exxaro’s role extends beyond funding to active involvement in how these funds are used, as well as a project management role. EXXARO INTEGRATED REPORT 2012 p 191 In South Africa, all mining groups are required to have social and labour plans supporting targets in 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 in identiﬁed local communities, particularly for local BEE companies and SMEs owned by disadvantaged groups. Our role is to ensure measures are in place to support the establishment and growth of SMEs and to develop effective links with funded, accredited training and development institutions. In terms of local 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 group as a caring corporate citizen in the community. In line with policy, we encourage volunteerism and participation in local economic development projects to create a culture of socially conscious employees. Exxaro’s sustainable development activities, including local economic initiatives and donations, are focused on areas that are relevant and strategic to South Africa’s socio- economic development. Accordingly, we are currently focusing on: • Formal education • Skills development and capacity building • Enterprise development • Health and welfare • Infrastructure (related to local economic projects) • Agriculture. In considering any project, our overarching objective is to alleviate poverty and improve the life of our communities p 192 SOCIAL CAPITAL All our social and labour plans for the period 2007 to 2012 were approved by the Department of Mineral Resources, with certain objectives still being implemented in 2013. Unfulﬁlled commitments, where still relevant and practical, will be included in the social and labour plans 2013–2017. These plans focus on communities close to our operations, as well as major labour-sending areas, to ensure they beneﬁt from the mine’s presence in multiple ways. As part of this process, existing plans for all mining operations were audited and results reported to the executive committee in October 2012. In addition, mining charter compliance reports per mining operation were ﬁnalised and presented to the executive committee. Contributions by Exxaro Chairman’s Fund and Exxaro Foundation — 2012 In 2012, Exxaro allocated R60 million to local economic development initiatives under way, including corporate projects and other initiatives (2011: R52 million). Because of unavoidable delays, we only spent R34,2 million of the allocated funds. The difference carries over to the new ﬁnancial year. Most of our initiatives stem from identiﬁed community needs and are considered against the local municipality’s integrated development plan. Exxaro’s ﬁve-year local economic development projects focus on enterprise development, infrastructure development, education and skills development. Education and skills development Education and skills development is a priority in South Africa, given the ongoing shortage of skills in critical sectors and poor quality of public education. Exxaro, like most of the private sector in the country, is contributing to the broader education ﬁeld to counter constrained government spending. From building individual classrooms to equipping laboratories or offering bridging courses, Saturday schools and bursaries, we believe the contributions of the private sector are playing a valuable role in educating learners and giving individuals the opportunity to reach their full potential. We fully acknowledge that more needs to be done and, where possible, are working closely with educational departments to make a real difference. Projects In terms of the group’s social and labour plans, Exxaro has 42 local economic development 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 235, indirectly beneﬁting over 1 175 people. Education — 24% Sustainable development — 3% Environment — 4% Health and welfare — 2% Enterprise development — 28% Infrastructure — 34% Skills development — 5% Total: R50 million EXXARO INTEGRATED REPORT 2012 p 193 Some of the projects under way across our group are summarised below. Siyathuthuka Butterﬁeld bakery project The Siyathuthuka Butterﬁeld bakery project in Belfast is a good example of a legacy project meeting its objectives. Since September 2011, Exxaro has invested over R2 million into the Butterﬁeld bakery franchise, now generating solid monthly turnover from a 100% black locally owned bakery outlet. The project beneﬁts 16 people directly — including six women and one disabled person — and 64 people indirectly. The project also adds economic beneﬁts for community members, schools and feeding programmes which now have access to fresh bread at affordable prices. Located roughly 5km from the Siyathuthuka community in Belfast, Mpumalanga, the bakery is easily accessible to local residents. Most importantly, the project complements the country-wide need for food security and enterprise development in communities affected by poverty and unemployment. The Siyathuthuka Butterﬁeld bakery project in Belfast beneﬁts 16 people directly, and 64 people indirectly p 194 SOCIAL CAPITAL The Saturday school project helps 315 learners each year to beneﬁt educationally and to receive one fresh healthy meal a day Saturday school project — Belfast The quality of South Africa’s maths and science education urgently needs to be addressed to support our national growth and development goals, and Exxaro has focused on addressing this challenge. The Waterval Boven circuit in Belfast, near our North Block Complex mine, had a poor performance history in grade 12 results. The Saturday school project helps 315 learners each year to beneﬁt educationally and to receive one fresh healthy meal a day. The project also directly beneﬁts three women employed as food handlers, 12 educators and six transport businesses, with 84 people and 315 households beneﬁting indirectly. Since inception, the project has improved results from 40% to 74% in 2011 and 72% in 2012. Exxaro is funding the project fully, spending about R900 000 a year for learners’ transport and catering, and paying a stipend to the teachers. Boitlhamo construction development The town of Lephalale is currently undergoing massive industrial development, especially in the energy sector with the construction of Medupi power station and Exxaro’s expanded mining activities at Grootegeluk to support the power station. This rapid development has increased demand for housing, in turn creating a business opportunity in the construction industry. Exxaro established and funded a brick-producing enterprise, investing over R1,3 million to produce a monthly turnover that currently beneﬁts 24 local residents. This is expected to increase to 52 people when the project reaches optimal production. The project is a 100% youth-owned enterprise and self-sustaining. Mohlasedi poultry farm Lephalale municipality comprises 38 villages, largely characterised by poverty and unemployment. At times, even the cost of transport to town is a challenge and residents are thus unable to get affordable and fresh food. To bring the food source closer to the villagers, Exxaro invested R1,5 million to establish a poultry enterprise. EXXARO INTEGRATED REPORT 2012 p 195 Exxaro invested R1,5 million to establish the Mohlasedi poultry enterprise With appropriate infrastructure, tools and training, broiler production started in 2010, and egg laying followed in 2011. Today the project is independent of Grootegeluk’s support as it generates enough monthly turnover to pay its operational costs. Ten local people beneﬁt directly and 40 indirectly. It also beneﬁts the local community as they no longer have to travel to town for poultry. Developing the body of knowledge In terms of corporate commitments, Exxaro contributed over R11,9 million in 2012 via corporate projects, including four university chairs, skills development initiatives, education and membership fees to national and international bodies such as the National Business Initiative, WWF and the Peace Parks Foundation. p 196 SOCIAL CAPITAL We are particularly committed to developing the body of knowledge at tertiary level by funding chairs in carefully selected disciplines. At present, Exxaro is funding four university chairs: • Exxaro chair in business and climate change (Unisa) — to promote and advance research, teaching and advocacy-orientated community engagements in this ﬁeld, especially in developing economies. Background and progress during the year Research themes for this chair include: — Carbon accounting and footprinting — Business response to climate change in key industry sectors in South Africa, including mining, ﬁnance and insurance, retail, agriculture and automotive — Integrated reporting — Climate change and corporate strategy — Green economies and green jobs — Climate change and water — focusing on the corporate level. Unisa will host at least one international conference during the tenure of the chair. The chair is also to develop national and international research collaborative partnerships. Progress — Incumbents for the chair being recruited — Work plan being deﬁned — Research under way — International conference conducted • Exxaro chair in global change and sustainability (Wits) — to provide an enabling research platform of global signiﬁcance and local impact, fostering informed and innovative actions for adaptation and mitigation strategies for sustainability in the rapidly changing southern African region. Background and progress during the year Research themes include: — Carbon accounting and footprinting — Business response to climate change in key industry sectors in South Africa, including mining, ﬁnance and insurance, retail, agriculture and automotive — Integrated reporting — Climate change and corporate strategy — Green economies and green jobs — Climate change and water — focusing on the corporate level The university must host at least one international conference during the tenure of the chair. The chair must also develop national and international research collaborative partnerships. Progress — Incumbents for the chair being recruited — Work plan being deﬁned EXXARO INTEGRATED REPORT 2012 p 197 • Exxaro chair in business and biodiversity leadership (University of Pretoria) — focusing on thought leadership in the interface between the spheres of business and biodiversity. As a group, Exxaro strives to inﬂuence society to make the right decisions by carefully managing the way in which we mine. This programme is an opportunity for the group to be at the forefront of driving something that will not only beneﬁt South Africa, but also the world. Background and progress during the year Research themes include: — Implementation of voluntary ecosystem valuation — Identiﬁcation and evaluation of current business responses to biodiversity in Exxaro and other industries — Integrated reporting — Legal framework within which business has to operate — Land rehabilitation — Green economies and green jobs — Linking biodiversity with environmental management and other issues such as climate change and water with special emphasis on wetlands. Researchers must attend conferences related to the research topics and develop national and international research collaborative partnerships. Progress — Incumbents for the chair being recruited — Work plan deﬁned — Literature review under way. • Exxaro chair in energy efﬁciency (University of Pretoria) — to participate at the forefront of research activities in energy efﬁciency and deliver world-class research and educational outputs for the beneﬁt of Exxaro and South Africa. Background and progress during the year Research themes include: — Mining system components: energy efﬁciency study (energy efﬁciency of conveyor belts, crushers, winders, pumps, etc) — Integrated mining operational process optimisation (system component optimal sizing and matching) — Analysis of process plant nameplate capacity, throughput and energy use, in relation to actual output and energy consumption — Design efﬁciency in capital projects (eg designing green- and brownﬁeld mining and processing projects from start using energy efﬁciency guiding principles) — Mine engineering for energy efﬁciency (eg above and underground distance, opencast vs underground mining method, HVAC or heating, ventilation and air- conditioning, material handling) — Co-generation, using waste heat generated in a process to produce electricity that could be used in the same or related processes in the same operations (ie smelters, process plants, ﬂares) p 198 SOCIAL CAPITAL — Smelter technology and smelter efﬁciency — Sustainable low-carbon transport in continuous mining applications — Inﬂuence and effect of monitoring systems (Scada) on energy efﬁciency and their optimisation relative to social behavioural change to energy efﬁciency improvement — Energy efﬁciency through energy consumption and energy data mining — Clean development mechanism (CDM) and carbon trading (carbon footprint and carbon neutral study), as well as the low-carbon economy from CDM to NAMAs (national appropriate mitigation actions) — Energy efﬁciency measurement, veriﬁcation, energy baseline determination and evaluation — Wind resource potential study (statistical study on wind energy distribution for site selection and power plant design) — Wind power plant and concentrated solar plant system optimisation. The university will actively participate in at least one international conference during the tenure of the chair. The chair is also to develop national and international research collaborative partnerships. Progress — Incumbents for chair being recruited — Work plan deﬁned — Literature review under way — University participated in international conference Sustainable procurement In implementing our philosophy on supply chain sustainability, we aim to ensure that when making procurement decisions we source, contract, lease, hire and procure goods and services from suppliers that demonstrate commitment to sustainable business practices and support Exxaro’s compliance efforts in terms of the mining charter. During the period, green procurement, HDSA procurement and sustainable supplier engagement were identiﬁed as key focus elements for Exxaro’s approach to sustainable procurement. The green procurement reporting framework developed in 2012 will enable us to track progress on green procurement and equip supply chain ofﬁcials with the required capability in designated improvement areas. Green procurement Exxaro is already acquiring some products with green attributes. The challenge has always been demonstrating progress towards speciﬁc green procurement milestones in terms of visibility and commodity targeting. The scope of the project concentrates on speciﬁc commodities that will translate successes in terms of energy efﬁcient procurement, environmentally preferable procurement, resource efﬁcient procurement and reverse logistics. Preferential procurement Our preferential procurement policy capitalises on the group’s purchasing power to ensure we contract with external suppliers with strong BEE credentials or are making a tangible effort to transform their business to be BEE compliant. In line with the revised mining charter of 2010, our policy and strategy enforce compliance to all categories of the preferential procurement and enterprise development elements. EXXARO INTEGRATED REPORT 2012 p 199 Our commitment to procuring from HDSA suppliers is reﬂected in the steady progression from under 40% in 2007 to 59% (above the target of 52%) or R7,9 billion in 2012. Procurement from HDSA suppliers 60 50 40 % 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 Preferential procurement targets 60 50 40 30% 20 10 0 2009 2010 2011 2012 2013f 2014f Sustainable supplier engagement In 2012, the executive committee approved a supplier code of conduct. This code will create a shared foundation for supply chain sustainability to enable supply chain ofﬁcials, suppliers and internal stakeholders to make informed decisions about: • Exxaro sustainability standards for compliance by all suppliers • Supply chain sustainability focus areas that, if appropriately addressed, should keep both Exxaro and suppliers well ahead of regulatory standards, creating impetus for innovation, continuous improvement, risk mitigation, learning and operational efﬁciency • Perspectives for developing criteria to be used when assessing and auditing supplier progress on compliance with sustainability issues being addressed in the codes • Basis from which collaborative development spheres of suppliers will be focusing. Contractor management Exxaro focuses on its core activities and subcontracts specialist tasks. At any point, hundreds of contractors are moving through Exxaro sites, presenting speciﬁc health, safety and environmental risks. We require contractors to adhere to group standards as part of our legal compliance process. As such, managing contractors is now a key compliance indicator in its own right. p 200 SOCIAL CAPITAL The induction and training centre at Marapong near Grootegeluk is proving valuable in reducing the time and cost incurred by new contractors before they start work at the mine. Contractors can now complete all their computer- or classroom-based induction at this centre in one process, from registration to issuing access cards, that takes about ﬁve days. All contractor employee data was captured on to Exxaro’s HR database in April 2012, enabling the group to monitor, control and enforce compliance. The system also provides accurate and timely business information, and effective forecasts of people- related statistics (from medical surveillance to e-learning). To date, Exxaro has invested over R35 million in HR system enhancements and data maintenance to comply with relevant legislation. Infrastructure development Partnering with government in developing infrastructure that beneﬁts our company and the people of South Africa simply makes business sense. Partnerships of these types are common in our social and labour plans where we work with national, provincial and regional authorities to achieve common goals, particularly in the ﬁelds of education and health. Exxaro is also actively involved in infrastructure development and longer-term projects, particularly in the energy ﬁeld, that will beneﬁt South Africa. These are summarised below. Energy • Energy efﬁciency — the innovative techniques in place at our new coal plants in South Africa’s Limpopo have industry-wide application • The 800 low energy-use houses we built for employees in Limpopo are proving that green building is also cost efﬁcient in the long run • Our new joint-venture energy company is focused on generating power for the company and country through a mix of renewable and cleaner energy sources. Less than two months after its launch, Cennergi was preferred bidder for two wind energy projects (Amakhala 139MW and Tsitsikamma 95MW), under the Department of Energy’s renewable energy independent power producers programme (REIPPP). • We are pursuing clean development mechanism (CDM) status and aim to achieve certiﬁed emission reduction registration with the UNFCCC for a number of our clean energy projects. Water Various initiatives are under way to increase the supply of water — technically referred to as watershed management: • In the Waterberg, several companies — most notably Exxaro — are gearing up to increase future coal production to support electricity generation through Eskom for the country. To supply water to this arid region, an extra pipeline is being constructed from Mokolo Dam to the Waterberg operations • Feasibility studies are under way between the Department of Water Affairs, Trans–Caledon Water Authority and Lephalale Municipality on a proposed inter- basin transfer from the Caledon River to the Crocodile River in the Waterberg. Studies are also under way to assess implementation of a water transfer from Lesotho Highlands to the Waterberg. EXXARO INTEGRATED REPORT 2012 p 201 • Maintained and operated by Exxaro, Zeeland water treatment works currently supplies water to over 21 000 Lephalale residents in Limpopo, purifying 40 megalitres of drinking water each day and supplying it directly to the Lephalale Local Municipality. In addition to Blue Drop certiﬁcation, the premier award for quality, Zeeland has been cited as “an example to other municipalities and potential partners of what is possible when proper planning, commitment and implementation come together”. • Exxaro’s Tshikondeni mine is in northern Limpopo, an area that is severely water stressed. The communities around the mine rely wholly on recycled water from the Tshikondeni treatment plant for quality potable water. Until 2011, water monitoring at this mine was manually captured and the community could not be alerted to potential water shortages in advance. At considerable cost, we installed telemetric monitoring systems and worked closely with stakeholders to sensitise them to the changes in water management that would result from accurately monitoring water ﬂow. This initiative improved the management and monitoring of recycled water, ensured a stable supply of water to the community and an accurate supply to the coal processing plant. The rapid development in Lephalale increased demand for housing, in turn creating a business opportunity in the construction industry 10 manufactured capital Haultruck at Grootegeluk on trolley system to save fuel, improve carbon footprint and ensure higher productivity p 204 MANUFACTURED CAPITAL Research and development Sustainability at Exxaro is also about innovation — innovation FOR sustainability. This is encapsulated in our vision: through our innovation and growth we will be a powerful source of endless possibilities. Over the last two years, Exxaro has been working on a programme to make blue-sky innovation part of the group’s culture. This will broaden the company’s technology strategy and innovation programme to functions as diverse as sustainability, services, human resources, supply chain, information management, and SHEC or safety, health, environment and community. Exxaro has developed a systematic process and supporting infrastructure that enables employees to log and evaluate ideas, develop a compelling business case and, if proven, add them to our project pipeline. This, in turn, is guided by our ten-step technology strategy development process that ensures projects support Exxaro’s business goals. Recent successes include: • The ultra high dense medium separation (UHDMS) processing technology provides a solution to the challenge of declining ore qualities and the limitations of existing technologies by improving resource utilisation and increasing life of mine. • Exxaro’s AlloyStream team is commercialising a new smelting process with a manganese partner using coal ﬁnes. This is the ﬁrst manganese smelting process innovation in the industry in nearly 80 years. Proving that innovation is not necessarily a quick process, it took 18 years of testing, but the beneﬁts are worthwhile, including a one-step steel smelting process, life-of-mine extensions and energy savings of up to half the costs of a traditional smelter. • Exxaro’s diversiﬁcation strategy has extended beyond the mining industry to cleaner energy. As a coal producer and thus intensive energy user, Exxaro plays a signiﬁcant role in the energy environment in South Africa. Over the last six years, Exxaro has addressed three issues that have become central to this environment: energy security, economic productivity and environmental impact, including climate change, land and water use and carbon emissions. A major achievement of the group’s energy strategy was the formation of a company aimed at generating power via a mix of renewable and cleaner energy sources. Cennergi was launched in April 2012 as a joint venture with Tata Power of India. • Exxaro also recently announced a deal with US pigment manufacturer, Tronox, to form the world’s ﬁrst vertically integrated mineral sands processing and pigment company. EXXARO INTEGRATED REPORT 2012 p 205 • The group’s future mine programme started in 2012 on the back of the innovation culture drive. Guided by senior functional coaches, a group of young professionals was tasked with deﬁning technology focus areas for Exxaro and aligning these to the group’s commodity strategy for 2020, 2030 and 2050 horizons. They conducted local and global research, made benchmarking visits to companies around the world and attended numerous conferences to identify innovative opportunities and development initiatives which Exxaro could pursue in future. All this focused activity will result in innovations that will keep Exxaro sustainable and position the group to contribute to the nation’s economic growth from local to national level. Through our innovation and growth we will be a powerful source of endless possibilities 11 ﬁnancial capital Belt attendant at Matla plant, checking coal and ensuring belt is in perfect working order p 208 EXECUTIVE COMMITTEE* 01 SA NKOSI — SIPHO (58) CHIEF EXECUTIVE OFFICER (EXECUTIVE DIRECTOR) 02 WA DE KLERK — WIM (49) FINANCE DIRECTOR (EXECUTIVE DIRECTOR) BCom (hons)(econ), MBA (Univ Mass, USA), Diploma in marketing management (Unisa), Advanced management leadership programme (Oxford) Experience: After 20 years in the industrial and mining sectors, Sipho was a founder of Eyesizwe Holdings and served as chief executive ofﬁ cer before its merger into Exxaro in 2006. He was appointed CEO of Exxaro in September 2007. Sipho is a director of a number of companies, including Sanlam Limited, and served as president of the Chamber of Mines from November 2007 to November 2010. BCom (hons) Acc CA(SA), Executive Management Programme (Darden), Strategic Marketing Diploma (Harvard) Experience: Wim joined Iscor in 1996, managing the group’s quarries and Grootegeluk coal mine. He became part of the executive team as group general manager for strategy and continuous improvement in 1999. After Kumba Resource’s inception in 2001, he headed the mineral sands commodity and once Exxaro was formed and listed in 2006, he became executive general manager for mineral sands and base metals until his appointment as ﬁ nance director in 2009. 03 MDM MGOJO — MXOLISI (52) EXECUTIVE HEAD: OPERATIONS BSc (hons) energy studies, MBA, Advanced management programme (Wharton) Experience: Previously at Eyesizwe Coal, Mxolisi was responsible for marketing. Before assuming his current position in August 2008, he was responsible for the base metals and industrial minerals commodity business. 04 M PIATER — RETHA (58) EXECUTIVE HEAD: HUMAN RESOURCES BCom (hons), MBA, Advanced management programme (Insead) Experience: Retha has 28 years of human resources experience across the various business units and commodities, speciﬁ cally in the area of remuneration. * Prescribed ofﬁ cers in terms of the Companies Act No. 71 of 2008, as amended 01 02 03 EXXARO INTEGRATED REPORT 2012 p 209 International Association. Carina spent nine years with De Beers in various operational and head-ofﬁ ce positions, including human resources, business improvement and corporate secretariat, as well as a period with Investec as corporate secretariat legal advisor. Carina assumed her current role in June 2011. 05 PE VENTER — ERNST (56) EXECUTIVE HEAD: GROWTH, TECHNOLOGY AND SERVICES BEng (hons), MBA, Advanced management programme (Insead) Experience: Ernst has headed a number of portfolios including base metals, Zincor, consulting services, mining technology, coal beneﬁ ciation, process development and plant metallurgy. From 2002 to 2008, he was responsible for the coal commodity business and then established Exxaro’s business growth division. 06 M VETI — MONGEZI (49) GENERAL MANAGER: SAFETY, HEALTH, ENVIRONMENT AND COMMUNITY DEVELOPMENT MBL (Unisa), national higher diploma in metalliferous mining (Technikon Witwatersrand), national diploma in coal mining (Technikon Witwatersrand), Advanced management programme (Wharton), mine overseer’s certiﬁ cate and mine manager’s certiﬁ cate of competency for ﬁ ery mines. Experience: In the early 1980s, Mongezi worked for Anglo Gold at Western Deep Levels and joined Sasol Mining in 1994. In 2002, he became mine manager at Arnot, and was appointed general manager Area 2 in Exxaro soon after the merger, before assuming his current role in February 2010. 07 CH WESSELS — CARINA (35) GROUP COMPANY SECRETARY LLB (Univ of Pretoria), Advanced labour law (Univ of Pretoria), LLM (Unisa), Programme for management development (GIBS), FCIS (CSSA). Experience: Carina is an admitted advocate of the High Court of South Africa, and a fellow and president of Chartered Secretaries Southern Africa. Carina also represents southern Africa as vice president of the global Corporate Secretaries 04 05 06 07 p 210 DIRECTORATE 01 SA NKOSI — SIPHO (58) positions on the gold, platinum and copper zinc mines of the Anglovaal CHIEF EXECUTIVE OFFICER (EXECUTIVE Group. From 1981 until retirement, 04 S DAKILE-HLONGWANE — SALUKAZI (62) DIRECTOR) he served in technical and executive NON-EXECUTIVE DIRECTOR AND Director since 28 November 2006 See page 208 02 WA DE KLERK — WIM (49) FINANCE DIRECTOR (EXECUTIVE DIRECTOR) Director since 1 March 2009 See page 208 03 JJ GELDENHUYS — JURIE (70) INDEPENDENT DIRECTOR, CHAIRMAN OF SUSTAINABILITY, RISK AND COMPLIANCE COMMITTEE, MEMBER OF REMUNERATION AND NOMINATION, AUDIT AND SOCIAL AND ETHICS COMMITTEES BSc (eng)(elec), BSc (eng)(min), MBA (Stanford), professional engineer Director since 28 November 2006 Experience: From 1965 to 1980, Jurie held production and managerial capacities involving gold, base metals, coal, ferrous metals and industrial minerals. He retired as managing director of Avgold Limited in 2000 and served the group in a consulting capacity until 2002. He has served on the boards of Anglovaal Limited, Avmin Limited, Freegold Consolidated Mines Limited, Hartebeestfontein Gold Mining Company Limited, Lorraine Gold Mines Limited, Eastern Transvaal Gold Mines Limited, Iscor Limited and Sallies Limited. He served as the Chamber of Mines’ president (1993 to 1994) and on the chamber’s executive council, gold producers’ committee and various other chamber-related board committees. He also served on the Atomic Energy Council and National Water Advisory Council. He is currently non-executive director and chairman of Astral Foods Limited (and a member of the human resources and remuneration and nomination committee and nomination committee). MEMBER OF SUSTAINABILITY, RISK AND COMPLIANCE COMMITTEE BA (economics and statistics), MA (development economics) Director since 21 February 2012 Experience: Salukazi is deputy- chairman of Nozala Investments, a company she co-founded in 1996. Her experience includes: 1977 to 1982 senior investment ofﬁ cer, Lesotho National Development Corporation; 1983 to 1995 African Development Bank (Abidjan/Côte d’Ivoire) as country programme ofﬁ cer and later principal corporation ofﬁ cer; senior manager, structured ﬁ nance division/FirstCorp Merchant Bank and assistant general manager, BOE Specialised Finance. Salukazi is a non-executive director of Nozala’s investee companies including Eqstra Holdings Limited, Enviroserv Holdings Limited, Woodlands Dairy Proprietary Limited, Afripack Proprietary Limited, Tsebo Outsourcing Group Proprietary Limited and Mutual Construction 01 02 03 EXXARO INTEGRATED REPORT 2012 p 211 combined with an improved safety performance. Under his leadership, the Zibulo mine in South Africa reached commercial operating levels ahead of schedule, and Thermal Coal has actively participated in the pursuit of cleaner coal solutions for the world’s energy needs. A chartered accountant by profession, Norman began his career with accounting roles at Zambia Consolidated Copper Mines, before spending 17 years with Deloitte & Touche, also in Zambia. He has extensive experience of the Anglo American group, after joining in 2001, serving as CEO of Scaw Metals, both ﬁ nance director and acting CEO of Anglo’s platinum business; CFO of the then Anglo Coal business and CFO of Konkola Copper mines. Company Proprietary Limited. She is also a non-executive director of MultiChoice South Africa Holdings Limited and a trustee of Nozala Trust and Chancellor House Trust. 05 (no picture) U KHUMALO — UFIKILE (47) NON-EXECUTIVE DIRECTOR Resigned with effect from 31 January 2013 06 DR D KONAR — LEN (59) INDEPENDENT DIRECTOR, CHAIRMAN OF THE BOARD AND MEMBER OF REMUNERATION AND NOMINATION COMMITTEE (CHAIRS NOMINATION MATTERS) BCom, CA(SA), MAS, DCom Director since 28 November 2006 Experience: After completing his articles of clerkship at Ernst & Young in Durban, Len began his career as an academic at the University of Durban- Westville. He then spent six years with the Independent Development Trust as head of investments and internal audit, prior to becoming a professional director of companies and consultant. Len is chairman of Steinhoff International and Mustek Limited and a member of the boards of Illovo Sugar, Sappi and JD Group. He is a past member of the ad hoc ethics panel of the United Nations, safeguards panel of the International Monetary Fund in Washington, co-chairman of the implementation oversight panel of the World Bank, and past chairman and member of the external audit committee of the International Monetary Fund. 07 NB MBAZIMA — NORMAN (54) NON-EXECUTIVE DIRECTOR AND MEMBER OF REMUNERATION AND NOMINATION COMMITTEE Fellow of the Association of Chartered Certiﬁ ed Accountants (FCCA), Fellow of the Zambia Institute of Chartered Accountants (FZICA) Director since 30 November 2012 Experience: Norman joined Kumba Iron Ore on 1 September 2012 as CEO. As CEO of Anglo American Thermal Coal from October 2009, he spearheaded the business unit’s record operating proﬁ t in 2011, 04 06 07 p 212 DIRECTORATE 08 VZ MNTAMBO — ZWELIBANZI (55) NON-EXECUTIVE DIRECTOR AND MEMBER OF REMUNERATION AND NOMINATION COMMITTEE BJuris, LLB (Univ North West), LLM (Yale) Director since 28 November 2006 Experience: Zwelibanzi is executive chairman of Xalam Performance. 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 Proprietary Limited and Mainstreet 333 Proprietary Limited. He also a director of SA Tourism Proprietary Limited and a trustee of the Paleo-Anthropologial Scientiﬁ c Trust. 09 RP MOHRING — RICK (66) INDEPENDENT DIRECTOR, CHAIRMAN OF REMUNERATION AND NOMINATION COMMITTEE, MEMBER OF AUDIT, SUSTAINABILITY, RISK AND COMPLIANCE AND SOCIAL AND ETHICS COMMITTEES BSc (eng)(mining), MDP, professional engineer Director since 28 November 2006 Experience: From 1972 to 1998, Rick held production, managerial and executive positions in the gold and coal divisions of the Rand Mines and Billiton groups. From 1998 until 2000, he was chief executive ofﬁ cer of NewCoal, a black empowerment initiative set up by Anglo Coal and Ingwe Coal Corporation. Eyesizwe Coal, the largest BEE coal company in South Africa, was formed in November 2000 through this process. From 2000 until 2003, Rick was deputy chief executive ofﬁ cer of Eyesizwe Coal. As such, he was responsible for the operational control of mines producing 25Mtpa of coal, new business development, technical services and health and safety. After 37 years in the mining industry, Rick retired from Eyesizwe Coal in December 2003 and set up a private consulting company, Mohring Mining Consulting. 10 DR MF RANDERA — FAZEL (64) NON-EXECUTIVE DIRECTOR AND CHAIRMAN OF SOCIAL AND ETHICS COMMITTEE MRCS, LRCP; DRCOG Director since 13 June 2012 Experience: Globally, Fazel has served as board and council member of the World Medical Association (1997 to 2000), participated in the World Health Organization international enquiry into the tobacco industry (1998 to 1999), chaired the global initiative on HIV/Aids reporting (2004). In South Africa, he sat on the Truth and Reconciliation Commission (1995 to 1998), founded the Ethics Institute, served as its chairman (1997 to 2000), and served on the Human Rights Commission (1997 to 1999). Working in hospitals and facilities in the UK and South Africa, he specialised in a range of medical disciplines, including occupational health and HIV/Aids. Fazel chaired the Private Healthcare Forum (2004 to 08 09 10 EXXARO INTEGRATED REPORT 2012 p 213 2007), and served as a member of the South African Centre for Survivors of Torture (2006 to 2011). He was inspector general for South Africa’s intelligence services (1999-2001); and served on a number of ministerial advisory bodies. He was the health advisor at the Chamber of Mines and is deputy chairman of Nehawu Investment Holdings. 11 NL SOWAZI — NKULULEKO (49) NON-EXECUTIVE DIRECTOR BA, MA (UCLA) Director since 28 November 2006 Experience: Nkululeko is chairman of Kagiso Tiso Holdings, a leading diversiﬁ ed investment holding company with interests in media, infrastructure, power, resources and ﬁ nancial services. He serves on the boards of Aveng Limited and Actom Holdings. He is also chairman of Idwala Industrial Holdings, Litha Healthcare Group and The Home Loan Guarantee Company. He was previously executive chairman and co-founder of Tiso Group, an executive director of African Bank Investments Limited and managing director of specialist insurance agency Mortgage Indemnity Fund. 12 J VAN ROOYEN — JEFF (63) INDEPENDENT DIRECTOR AND CHAIRMAN OF AUDIT COMMITTEE BCom, BCompt (hons), CA(SA) Director since 13 August 2008 Experience: Jeff is a director of various companies in the Uranus Group, non-executive director of MTN Group Limited, Pick ‘n Pay Stores Limited and Pick ‘n Pay Holdings Limited. He is chairman of the Financial Reporting Standards Council (FRSC), a former trustee of the International Accounting Standards (IFRS) Foundation and member of the University of Pretoria’s faculty of economic and management sciences’ oversight board. He was a partner in Deloitte & Touche, chairman of the Public Accountants and Auditors Board, CEO of the Financial Services Board and advisor to the former Minister of Public Enterprises. Jeff is a founder member and former president of the Association for the Advancement of Black Accountants of South Africa. 13 D ZIHLANGU — RAIN (46) NON-EXECUTIVE DIRECTOR AND MEMBER OF SUSTAINABILITY, RISK AND COMPLIANCE COMMITTEE BSc (min eng) (Wits), MDP (SBL, Unisa), MBA (WBS, Wits) Director since 28 November 2006 Experience: Rain is CEO of Eyabantu Capital Consortium. Between 1989 and 1994 he was a stoper/developer and shift boss at Vaal Reefs Gold Mining Company. From 1995 to 2002 he was a shift boss, mine overseer, operations manager and mine manager at Impala Platinum Limited. Rain was CEO of Alexkor Limited from 2002 until 2005. From 2006 to November 2012, he was an independent non-executive director of the South African National Oil and Gas Company (PetroSA) and served on its business performance monitoring committee. He also serves on the board and audit committee of Sentula Mining. 11 12 13 p 214 GOVERNANCE Integrating sustainability in our governance practices As a listed resources company, Exxaro operates in an extremely regulated environment, which naturally drives our compliance and governance initiatives. However, as an ethical, values-based, and proudly South African black-empowered resources company, our compliance and governance initiatives are driven by more than mere minimum requirements, but rather the ﬁrm belief that our licence to operate depends on us being a responsible corporate citizen. As a responsible corporate citizen, we take decisions that enable our strategy, ensure our proﬁtability and performance, but also consider the risks to which we are exposed, the legitimate interests and expectations of our stakeholders and ones that are socially and environmentally responsible. By balancing these imperatives, as a responsible corporate citizen, we entrench our sustainability and make a meaningful contribution to the South African economy. In 2011 we reported on governance matters in the form of a key objectives scorecard. These key objectives, namely: • governance supporting and enabling company strategic objectives; • regulatory and legislative performance: going beyond compliance; • fully embracing the principles of King III; and • integrated governance assurance are of a long-term and sustainable nature and therefore remained applicable during 2012. They will also remain the key overarching governance objectives in the medium term. In August 2012 the JSE Limited issued a guidance note requiring all listed companies to disclose their application of the King III principles in greater detail. The note requires companies to disclose, through a narrative statement, how each principle was applied or to explain why or to what extent it was not applied. As a result, we have not included a general governance scorecard again, but a detailed King III scorecard which encapsulates the key governance objectives noted above and their related activities, as well as the narrative information previously contained in the body of our governance report. Although the integrated report contains a number of examples on how the King III principles are applied in Exxaro, we hope this summary gives readers a comprehensive, but concise, picture of our application. In future, we will only provide a summary of the Chapter II application in our printed integrated report with the remainder of the detail being web-based. In the 2011 report we indicated that assurance on King III application would be provided in the 2012 report. Such assurance would, however, be a ﬁrst for South Africa and we are still in the process of ﬁnalising review and assurance parameters with our independent external auditors, PricewaterhouseCoopers. We are working towards providing such an assurance report for 2013. EXXARO INTEGRATED REPORT 2012 p 215 Application of King III Principle Indicator Comment Ethical leadership and corporate citizenship 1.1 The board should provide effective leadership based on an ethical foundation. 1.2 The board should ensure the company is and is seen to be a responsible corporate citizen. We are driven by our desire to always operate as a responsible corporate citizen and recognise that an ethical culture underpins corporate governance and contributes to our licence to operate. Exxaro and its board of directors are committed to ensuring ethical and sustainable business practices, guided by our values. The board and management subscribe to the philosophy that corporate governance, built on an ethical and values-based foundation, permeates all business activities and enables us to achieve our short- and medium-term strategic objectives while contributing to reaching Exxaro’s vision of becoming a US$20 billion company by market capitalisation by 2020. The board supports the group’s brand and communications strategy which strives to effectively communicate its corporate citizenship. In 2012 the following awards were received by the group as examples of, inter alia, our corporate citizenship: • A Standard of Excellence Award in the 2012 Deloitte Best Company to Work for survey • Exxaro’s internal newsletter has been ranked Best Internal Newsletter four times by the SA Publications Forum • The group was again included on the JSE’s SRI index following its annual review • Ranked among the top ten in Financial Mail’s Top Companies Awards • Top position in the Carbon Disclosure Project’s leadership index • 2011 integrated report ranked among the top ten in Ernst & Young’s Integrated Reporting 2012 Awards. You will ﬁnd many other examples in this report to emphasise Exxaro’s corporate citizenship, for example, the fact that Exxaro was ranked fourth in the BettaBeta Green Exchange Traded Fund, the primary investment product of Nedbank’s Green Index, an investment index developed by Nedbank Capital comprising a selection of stocks from the top 100 JSE-listed companies ranked by environmental credentials and liquidity. Another example, in 2012 Exxaro won the award for green excellence in technology innovation in mining presented by Frost & Sullivan’s Global Research Platform. Exxaro scored top marks for: • A technological platform characterised by long-term sustainability, and adaptable and responsive to changing environmental needs • Technological solutions that address climate change concerns • A clearly demonstrated responsibility to reducing environmental burden. p 216 GOVERNANCE Principle Indicator Comment 1.3 The board should ensure the company’s ethics are managed effectively. Exxaro remains committed to the highest standards of honesty, integrity and fairness. As indicated in the 2011 reports, as part of the governance strategy, early in the review period we assessed the maturity of our control systems for fraud, corruption and bribery risks, and how effectively the relationship between these risks, controls and performance is managed in relation to industry peers. Although overall scores indicated that required activities were established, speciﬁc improvement initiatives were implemented to enhance the maturity, which included: • Revising the ethics committee’s terms of reference • Revising the following key policies to incorporate best practice and legislative changes: — Code of ethics — Whistleblowing — Conﬂicts of interest — Fraud investigation — Fraud prevention — Fraud response — Gifts and beneﬁts from suppliers • Considering fraud-related risks during the annual risk assessment review • Planning an anti-fraud and corruption awareness campaign to be launched in 2013 • Evaluating and using a case management system • Minor use of data analytics and considering the future use of data analytics to proactively identify potential risks • Incorporating fraud-related surprise audits in the 2013 internal audit plan. The group’s ethics processes are managed by the ethics committee, which comprises executives, representatives of internal audit and the chief audit executive. Chaired by the chief audit executive, it meets either monthly or as required to consider issues of non-compliance to the group code of ethics or conﬂicts of interest policy, as well as matters reported on the ethics line or to management. Required investigations are conducted by a dedicated forensics team that reports their ﬁndings independently to the chief audit executive. This approach is reinforced by articles highlighting the importance of ethical behaviour in the quarterly internal newsletter. The ethics committee formally reports to the social and ethics committee of the board, ensuring the board has full oversight of ethics-related matters. EXXARO INTEGRATED REPORT 2012 p 217 Principle Indicator Comment Incidents of unethical behaviour At Exxaro, reports of alleged unethical behaviour are received through the anonymous reporting hotline and other mechanisms. All reports are periodically reviewed by the Exxaro ethics committee and referred either for forensic investigation or to the functional heads to be investigated. In 2012, 272 cases of alleged unethical behaviour (2011: 240) were reported for investigation, 43 of these via the ethics line (2011: 37). In total, 759 people were subjected to disciplinary hearings arising from the cases reported, with 60 arrests made by the South African Police Services (SAPS) for criminal prosecution based on the results of investigations referred to them (2011: 34). The direct monetary value of the cases reported and investigated was R8 632 026 (2011: R5 673 539) with R4 151 626 being recovered/saved due to the investigations. The types of fraud investigated included: • Fraudulently changing bank accounts • Tender fraud • Accepting bribes and favours for contracts • Misusing position • Conﬂicts of interest • • Unsafe working procedures. Irregularities with appointments of employees Cases reported Disciplinary hearings Reported to SAPS Impact/savings 2012 Other reports received Reporting line 25 6 247 753 43 R4 151 626 Employees and all stakeholders can report suspected incidents of fraud or corruption, or unethical behaviour, to our dedicated 24-hour ethics hotline (0800 203 579 or exxaro@tip-offs.com). This is an independent service operated at a cost of R48 000 per annum, and designed to help people report incidents while remaining anonymous for their protection. p 218 GOVERNANCE Principle Indicator Comment Boards and directors 2.1 The board should act as the focal point for and custodian of corporate governance. 2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable. The board charter speciﬁcally emphasises this responsibility and the board acts accordingly. The board is intimately involved in governance matters through ongoing development interventions and sessions — refer principle 2.20 for further details. The board, as custodian of corporate governance, has made the ofﬁce of the group company secretary responsible for implementing and monitoring compliance to associated best-practices across the group. Our group company secretary, Mrs CH Wessels, 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 compliance and risk management functions, chief audit executive and our outsourced legal advisers to promote a culture of good governance and compliance in the group. The board charter speciﬁcally emphasises the fact that the board acknowledges that strategy, risk, performance and sustainability are inseparable and gives effect to this by: • Contributing to and approving the strategy on an annual basis, at which point past performance, key risks and sustainability matters are also debated • Satisfying itself that strategy and business plans do not give rise to risks that have not been thoroughly assessed by management and captured through the comprehensive enterprise risk management process • Identifying key performance and risk areas • Ensuring that the strategy will result in sustainable outcomes • Considering sustainability as a business opportunity that guides strategy formulation. During the year, the board (speciﬁcally through the sustainability, risk and compliance committee to which it has delegated general oversight for sustainability, risk and compliance matters) approved the capitals framework as Exxaro’s holistic and integrated approach to sustainability. The board and committee fully support this framework and will ensure it is entrenched in Exxaro. The discussion of material issues is an attempt to further highlight the integration and importance of these areas to stakeholders. Material issues are those aspects that, if considered, managed and reviewed thoroughly, would result in Exxaro remaining sustainable for years to come and include ‘licence to operate’ issues. The board and committee also monitor key performance indicators for material issues as well as a broader range of sustainability, risk and compliance KPIs and interrogate the results of trend reporting. EXXARO INTEGRATED REPORT 2012 p 219 Principle Indicator Comment Refer principle 1.1 and 1.3 Refer principle 1.2 Refer principle 1.1 and 1.3 Refer principle 3.1 Refer principle 4.1 Refer principle 5.1 Refer principle 6.1 Refer principle 7.1 Refer principle 8.1 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 The board should provide effective leadership based on an ethical foundation. The board should ensure the company is and is seen to be a responsible corporate citizen. The board should ensure company ethics are managed effectively. The board should ensure the company has an effective and independent audit committee. The board should be responsible for the governance of risk. The board should be responsible for information technology (IT) governance. The board should ensure the company complies with all applicable laws and considers adherence to non-binding rules, codes and standards. The board should ensure there is an effective risk-based internal audit. The board should appreciate that stakeholders’ perceptions affect the company’s reputation. p 220 GOVERNANCE Principle Indicator Comment 2.12 2.13 2.14 2.15 2.16 2.17 The board should ensure the integrity of the company’s integrated report. The board should report on the effectiveness of the company’s system of internal controls. The board and its directors should act in the best interest of the company. The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is ﬁnancially distressed as deﬁned in the act. The board should elect a chairman who is an independent non-executive director. The CEO should not also fulﬁl the role of chairman of the board. The board should appoint the CEO and establish a framework for delegation of authority. Refer principle 9.1 Refer principle 7.3 Review and reporting is done through the audit committee and is disclosed on page 251 of this report. The board strictly adheres to the ﬁduciary duties and duty-of-care and skill codiﬁed in the Companies Act. This is mirrored in the conﬂicts of interest policy, which also applies to directors. This policy was reviewed and improved in 2012. Conﬂicts are declared at each meeting and conservatively interpreted: all conﬂicts (even those not within the deﬁnition of personal ﬁnancial interests) are treated in line with section 75 of the Companies Act. The audit committee reviews ﬁnancial information in detail and recommends any speciﬁc action to the board if required. The committee regularly reviews the solvency and liquidity of the group. In addition, when considering and reviewing the provision of ﬁnancial assistance to related and inter-related parties, the board as a whole also considers the solvency and liquidity of the group. During the year, the company met the solvency and liquidity test each time it was performed. The chairman, Dr D Konar, is an independent non-executive director and the CEO is Mr SA Nkosi. The board appointed Mr SA Nkosi as CEO on 1 September 2007. The role and responsibilities of the CEO are stipulated in the board charter. In addition, a detailed delegation of authority policy and framework indicate matters reserved for the board and those delegated to management. The board also approved a new division of responsibilities policy, clearly describing the division between the chairman and CEO on 4 March 2013. EXXARO INTEGRATED REPORT 2012 p 221 Principle Indicator Comment 2.18 The board should comprise a balance of power, with a majority of non- executive directors. The majority of non-executive directors should be independent. Sections 3.84(b), (f) and (g) of the Listings Requirements 2.19 Directors should be appointed through a formal process. Section 3.84(a) and (e) of the Listings Requirements In line with the recommendations of King III, Exxaro has a unitary board structure, currently comprising: • Four independent non-executive directors • Six non-executive directors • Two executive directors, being the CEO and full-time ﬁnance director. In assessing the status of directors, the principles of King III and the Listings Requirements of the JSE Limited were used. The policy dealing with the division of responsibilities between the chairman and CEO noted in principle 2.17 helps to ensure a balance of power and authority to guarantee that no director has unfettered powers. The board charter and memorandum of incorporation further ensure that proper voting principles and processes are employed to enable a balance of power. The external board assessment conducted in 2012 and discussed under principle 2.22 also reafﬁrmed that no director has unfettered powers. Shareholder agreements entered into on establishing Exxaro provided for the nomination of directors by speciﬁc shareholders: these conditions remain in force until 2016 and thus impact on the number of non-independent non-executive directors. Despite their classiﬁcation as non-independent, all directors apply independence of mind to matters under discussion, a contention which was also reafﬁrmed during the board assessment process. The company is currently considering appointing additional independent non- executive directors, but this will have to be weighed against the risk of having an unduly large board and detracting from board efﬁcacy and participation. In line with the board charter, the remuneration and nomination committee (Remco) is responsible for identifying suitable candidates as independent non- executive directors to be proposed to shareholders for approval. The nomination responsibilities of Remco are detailed in its terms of reference. The board also approved a new policy dealing with the nomination and appointment of directors on 4 March 2013, ensuring a formal and transparent process and conﬁrming that the appointment is a matter for the board as a whole, after assistance from Remco, which comprises only non-executive directors with the majority being independent. Brief résumés of directors standing for election and re-election appear in the notice of the annual general meeting. p 222 GOVERNANCE Principle Indicator Comment 2.20 The induction and ongoing training and development of directors should be conducted through a formal process. New directors are informed of their responsibilities through extensive induction material, discussions and visits to material business units. All have access to key management members for information on Exxaro’s operations. The formal ongoing directors’ development programme involves two full-day sessions during the year, visits to key business units, as well as the opportunity to attend outsourced training interventions as required. The 2012 full-day sessions dealt, inter alia, with: • Social media and networking and appropriate related items for the board’s agenda • IT governance • Tides of change — how global change impacts the board agenda • Introduction to doing business in the Republic of Congo, as well as details on its mining legislation • Refresher on the Mineral and Petroleum Resources Development Act and resource and reserve statements. Visits to operational businesses for all directors are part of the annual board programme. During the year, induction and other visits were made to the following business units: • Fairbreeze • AlloyStream • Matla • Grootegeluk. In addition to formal sessions, directors receive group and industry news articles daily, as well as regular analyst reports. During the year, in excess of R1,2 million (2011: R1 million) was spent on director development and support, information sharing and corporate governance initiatives. EXXARO INTEGRATED REPORT 2012 p 223 Principle Indicator Comment 2.21 The board should be assisted by a competent, suitably qualiﬁed and experienced company secretary. Section 3.84 (i) and (j) of the Listings Requirements The board selects and appoints the group 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 group company secretary. The board has an established procedure for directors to obtain independent professional advice at the group’s cost. The group company secretary assists directors, board committees and their members in obtaining professional advice. Mrs CH Wessels was appointed group company secretary on 1 July 2011. She is not a director of the company, although she is a director of a number of subsidiaries and associates. This relationship does not affect her arm’s length relationship with the Exxaro board. In line with the Listings Requirements, a detailed assessment was conducted by the board to satisfy itself of the competence, qualiﬁcations and experience of the group company secretary. This was performed through: • A review of qualiﬁcations and experience: Mrs Wessels holds LLB and LLM degrees, a certiﬁcate in advanced labour law, has completed a programme for management development, is an admitted advocate of the High Court of South Africa and is a fellow and president of Chartered Secretaries Southern Africa (CSSA). From 1 January 2013 she has also represented southern Africa as vice-president of the Corporate Secretaries International Association, a global federation of corporate secretaries, representing 70 000 members worldwide During the review period, she co-authored the CSSA corporate administration textbook and contributed to the corporate secretaryship textbook. She also delivered presentations at nine corporate governance conferences and exceeded her continued professional development requirements as prescribed by CSSA. • Completion of an assessment detailing all the legislative and King III requirements by each director. The assessment speciﬁcally included questions on how effectively she performs the role as gatekeeper of good governance in the company, the effectiveness of the arm’s length relationship (including her advisory role) and how she has performed the role and duties as group company secretary: an average score of 3.7 out of 4 was achieved; indicating directors mostly strongly agreed that all requirements had been met, including competence, qualiﬁcations and experience requirements. p 224 GOVERNANCE Principle Indicator Comment 2.22 The evaluation of the board, its committees and individual directors should be performed every year. As promised in the 2011 integrated report, in 2012 an external assessment was conducted, involving: • Completion of detailed questionnaires by directors, executive heads and the group company secretary • Individual interviews with directors, executive heads and the group company secretary • Attendance of a board and board committee meeting as observers. The following main ﬁndings were highlighted during the assessment: • The board is competent, but the structure could be improved by increasing the number of independent non-executive directors (refer principle 2.18 regarding current plans) • Core processes appear to be sound, but some areas for improvement have been identiﬁed • The board functions as an inclusive team, with contributions being quite varied • The board is well informed and attentive to key issues • The board comprises a highly diverse group of individuals. The service provider rated the board as transcending from a ‘developed board’ to an ‘advanced board’ in respect of overall maturity. Five priority areas for improvement have been identiﬁed and will be actioned during 2013. EXXARO INTEGRATED REPORT 2012 p 225 Principle Indicator Comment 2.23 The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities. Section 3.84(d) of the Listings Requirements The board committees assist the board in executing its duties, powers and authorities. The board delegates to each committee the required authority to enable it to fulﬁl its respective functions through formal board-approved terms of reference, which are reviewed annually. Each committee has a detailed annual workplan to ensure full oversight of all matters within their delegated mandate. Delegating authority to board committees or management, other than the speciﬁc matters for which the audit committee carries ultimate accountability in terms of the Companies Act, does not mitigate or discharge the board and its directors of their duties and responsibilities and the board fully acknowledges this fact. The committee chairmen report on committee deliberations and key issues at each board meeting and the minutes of all committee meetings are included in board meeting documentation. Apart from the social and ethics committee, which meets biannually, all other board committees meet quarterly. The board has established the following board committees: • Audit committee Apart from the statutory duties of the audit committee as set out in the Companies Act and the provisions of the Listings Requirements of the JSE and King III, the ambit of this committee has been expanded to include ﬁnancial risk management, ﬁnancial compliance and integrated reporting (assisted by the SRC committee). The purpose of the committee is to: — Examine and review the group’s ﬁnancial statements and report on interim and ﬁnal results, the accompanying message to stakeholders and any other announcements on the company’s results or other ﬁnancial information to be made public — Oversee cooperation between internal and external auditors, and serve as a link between the board and these functions — Oversee the external audit function — Approve the internal audit plan, fees and qualiﬁcations of the internal auditors — Evaluate the qualiﬁcation and independence of the external auditor — Approve external audit fees — Ensure effective internal ﬁnancial controls are in place — Review the integrity of ﬁnancial risk control systems and policies — Evaluate the scope and effectiveness of the internal audit function — Evaluate the competency level of the ﬁnance director and ﬁnance function — Appoint the chief audit executive — Comply with legal and regulatory requirements. More information appears in the audit committee report. p 226 GOVERNANCE Principle Indicator Comment • Remuneration and nomination committee (Remco) The purpose of this committee is to: — Make recommendations on remuneration policies and practices for the company’s executive directors, senior management and employees — Review compliance with all statutory and best-practice requirements on labour and industrial relations management in collaboration with the SRC committee. Although this is a combined committee, a process is in place to ensure the following responsibilities for the nomination element are carried out: — Provide recommendations on the composition of the board and board committees, and ensure the board comprises individuals equipped to fulﬁl their role as directors of the company, aligned with the policy detailing procedures for nomination and appointments to the board — Provide comments and suggestions on board committee structures, committee operations, member qualiﬁcations and member appointment. More information appears in the remuneration report. The board chairman takes the chair when dealing with nomination committee matters. • Sustainability, risk and compliance committee (SRC committee) The purpose of the committee is to: — Provide oversight on three important aspects inﬂuencing strategy and the long-term viability of the company: sustainability, risk and compliance — Oversee and coordinate all risk and compliance activities (although the audit committee remains accountable for ﬁnancial risk and compliance) — Review signiﬁcant related incidents, performance indicators and compliance — Report to the board on developments, trends or signiﬁcant legislation on sustainability, risk and compliance matters relevant to Exxaro’s operations, assets and employees — Identify issues and elements arising from national and international protocols applicable to Exxaro — Ensure the company reports annually on sustainability, risk and compliance issues affecting it. EXXARO INTEGRATED REPORT 2012 p 227 Principle Indicator Comment • Social and ethics committee The purpose of the committee is to monitor the group’s activities — taking account of relevant legislation, other legal requirements or prevailing codes of best-practice on: — Social and economic development — Good corporate citizenship — The environment, health and public safety, including the impact of the group’s activities and its products or services — Consumer relationships, including the group’s advertising, public relations and compliance with consumer protection laws — Labour and employment — Ensure the group’s ethics are managed effectively. The ethics committee (a management committee) reports to this committee. The following management committees support the board and CEO in the day- to-day management of the company: • Executive committee (Exco) The Exco is constituted to assist the CEO in managing the group. It assists the CEO in guiding and controlling the overall direction of the company and acts as a medium of communication and coordination between business units, corporate ofﬁce, subsidiary companies and the board. All Exco members are prescribed ofﬁcers in terms of the Companies Act. Its purpose is to: — Oversee the ﬁnancial, operational, safety, health and environmental performance of the group — Guide the group in its relations with shareholders and key stakeholders, including employees, regulators, interested and affected parties — Develop group strategies for board approval — Ensure coordination between business units, services and corporate ofﬁce — Regularly review the adequacy of reporting arrangements and effectiveness of internal control and risk management — Approve or recommend to the board expenditure and other ﬁnancial commitments as speciﬁed in the framework for the delegation of authority. The committee formally meets around nine times per annum and, informally, each week. p 228 GOVERNANCE Principle Indicator Comment • Management committee (Manco) This committee was established on 1 January 2013 and had its ﬁrst meeting on 17 January 2013. It assists the executive head: operations in the day-to-day management of the coal and ferrous businesses. Its purpose is to: — Increase the focus on the business of today or operational excellence — Support management and governance structures within the current strategic controller governance model, to strengthen accountability, governance and discipline — Interrogate operational decisions and performance — Optimise use of the company’s assets — Broaden the structure to bring in fresh ideas — Allow exposure with a view towards succession planning. The committee will meet around nine times per annum. Manco members are not prescribed ofﬁcers in terms of the Companies Act. • Portfolio review committee This committee is constituted as a strategy management body to assist the CEO with portfolio management. Its purpose is to: — Ensure new opportunities ﬁt the group’s portfolio and determine strategic priorities — Oversee strategic initiatives and investigations into the viability of potential investment projects throughout the group — Discuss and challenge the group’s portfolio performance and intended strategic initiatives and projects — Review initiatives aligned with the current strategy. The committee meets around nine times per annum. • Investment review committee This committee is constituted as a management committee to assist the CEO with investment and capital expenditure management processes of the group. Its purpose is to: — Oversee approval for investments and capital expenditure in line with the delegation of authority framework and approve expenditure within its mandate — Ensure investments and expenditure are aligned to the group’s agreed strategies and values — Identify and evaluate risks, ensure investments are fully optimised to produce the maximum shareholder value in an acceptable risk framework and that appropriate risk management strategies are pursued. The main purpose of the committee is to review investments in a structured, formal and transparent manner to ensure: — Each project meets the strategic, technical and investment requirements of the company, which includes identifying and managing all project-related risks — Critical decisions, project parameters, safety, health and environmental impacts and governance processes are followed and addressed prior to committing funds — Each project enhances the portfolio value of the group. The committee meets approximately nine times per annum. EXXARO INTEGRATED REPORT 2012 p 229 Principle Indicator Comment • Offshore review committee This committee assists the ﬁnance director in managing Exxaro’s portfolio of offshore investments and interests. Its purpose is to: — Ensure ﬁnancial control and governance of Exxaro’s offshore investments and multidisciplinary interests — Ensure efﬁcient ﬁnancial structuring — Provide for and facilitate efﬁcient funding of offshore investments and expenditure — Ensure ﬁnancial reporting, auditing, statutory and tax-related issues are properly managed for all offshore entities — Ensure the company’s offshore ofﬁces are effectively staffed, managed and utilised. The committee meets as required. All Exxaro subsidiaries have adopted and comply with the detailed delegation of authority framework and policy, which stipulates the governance framework. Most policies are groupwide policies, applicable to all subsidiaries. 2.24 A governance framework should be agreed between the group and its subsidiary boards. 2.25 Companies should Full details are disclosed in the remuneration report. remunerate directors and executives fairly and responsibly. 2.26 Companies should disclose the remuneration of each individual director and certain senior executives. 2.27 Shareholders should approve the company’s remuneration policy. The remuneration of each director and prescribed ofﬁcer is disclosed in the annual ﬁnancial statements. At the 2012 annual general meeting, 98,72% of shareholders voted in favour of the remuneration policy by means of a non-binding advisory vote. This resolution has again been incorporated into the notice for the 2013 annual general meeting. p 230 GOVERNANCE Principle Indicator Comment Audit committee 3.1 3.2 3.3 3.4 3.5 The board should ensure the company has an effective and independent audit committee. Section 3.84(d) of the Listings Requirements Audit committee members should be suitably skilled and experienced independent non- executive directors. The audit committee should be chaired by an independent non- executive director. The audit committee should oversee integrated reporting. The audit committee should ensure a combined assurance model is applied to provide a coordinated approach to all assurance activities. The audit committee consists of three independent non-executive directors and the chairman of the board is not a member of the audit committee. Also refer principle 2.23. As explained in the 2011 integrated report, for the period January to 13 June 2012 the committee consisted of two independent non-executive directors, as deﬁned in King III, and one non-executive director. All three members were, however, considered independent in terms of the Companies Act. The audit committee operates in accordance with the speciﬁc statutory duties imposed by the Companies Act, the JSE Listings Requirements, and in line with detailed terms of reference, which incorporate King III principles, as well as duties speciﬁcally delegated by the board of directors. Minutes of meetings are submitted to the board and the audit committee chairman reports on each of its four meetings at board meetings. All three current members are independent non-executive directors. The committee meets the academic qualiﬁcations and experience requirements stipulated in regulation 42 of the Companies Regulations, 2011. The chairman, Mr J van Rooyen, is a chartered accountant. The chairman, Mr J van Rooyen, is an independent non-executive director. As detailed in its terms of reference, the board has speciﬁcally assigned this responsibility to the committee, which reviews the report prior to submission to the board. The committee functions as a reporting oversight body in support of the SRC committee, which has a wider mandate to govern company performance on risk and sustainability in general. The detailed combined assurance framework with its underlying model was approved at the committee meeting of 27 November 2012. A combined assurance map linking assurance to risks has already been drawn up (a summary is included on page 34). EXXARO INTEGRATED REPORT 2012 p 231 Principle Indicator Comment 3.6 The audit committee should satisfy itself of the expertise, resources and experience of the company’s ﬁnance function. Section 3.84(h) of the Listings Requirements 3.7 3.8 3.9 The audit committee should be responsible for overseeing internal audit. The audit committee should be an integral component of the risk management process. The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process. During the period, and for the ﬁrst time, an external review was conducted in order to assist the committee in this process: this was done through an independent assessment of the ﬁnance function, including the ﬁnance director, using a widely circulated questionnaire that dealt with: • Leadership and strategic capabilities • Goal achievement • Managing operations • Customer service • Effective use of resources • People development • Managing talent • Relationships and team effectiveness • Roles and responsibilities • Managing risk, governance and controls • Compliance, legislation, policies and procedures • Technology • Technical competencies. On the basis of the report, the committee reviewed and satisﬁed itself of the expertise, resources and experience of the company’s ﬁnance function and the competence of the ﬁnance director at its meeting on 28 February 2013. The report had indicated the following comfort levels: • Resources and capacity — 81% • Experience — 84% • Expertise — 81%. As detailed in its terms of reference, the board has speciﬁcally assigned this responsibility to the committee. The independent internal auditor submits detailed reports to each meeting, the chairman meets independently with internal audit and biannually the committee meets with internal and external audit without management present. Although the coordination of enterprise risk management has been delegated to the SRC committee, the audit committee remains involved to be able to express a view on the system of internal control and risk management and speciﬁcally retains accountability for ﬁnancial risk. At the ﬁrst meeting of each year, the committee assesses the suitability of the independent external auditor for reappointment and makes such recommendation to shareholders at the annual general meeting. The external auditor submits detailed reports to each meeting, the chairman meets independently with external audit and biannually the committee meets with internal and external audit without management present. p 232 GOVERNANCE Principle Indicator Comment 3.10 The audit committee should report to the board and shareholders on how it has discharged its duties. Governance of risk 4.1 The board should be responsible for the governance of risk. 4.2 4.3 4.4 The board should determine the levels of risk tolerance. The risk committee or audit committee should assist the board in carrying out its risk responsibilities. The board should delegate to management the responsibility to design, implement and monitor the risk management plan. An audit committee report is included in the integrated report and the committee chairman is present at the annual general meeting to respond to questions. Although the board has delegated responsibility for risk governance and the enterprise risk management framework to the SRC committee, it retains accountability for risk governance. Because of the interrelationship of strategy, risk, performance and sustainability, the committee considers this regularly as part of its strategic deliberations. This is articulated in the enterprise risk management framework, which was approved by the board in November 2011. Although the board has been involved in implementation of the new enterprise risk management framework since late 2011 and has been party to a number of detailed discussions and informally expressed views on tolerance levels, deﬁnite ﬁnancial tolerance levels have not yet been determined and will receive attention in 2013. The SRC committee as well as the audit committee assist the board in this respect. See the section on risk management for further details of this process. Execution of risk management has been delegated to the governance, risk and compliance department. Risk champions at all operations and service functions oversee entrenchment of the process. This includes ensuring risk owners continuously identify, assess, mitigate and manage risks within the existing and ever-changing risk proﬁle of their operating environment. In addition, risk champions coordinate risk management forums at business units and service functions which, in turn, escalate risks against deﬁned parameters to similar forums at a consolidated commodity and group level. The risk manager is responsible for reporting to the SRC committee and the audit committee. Exxaro implemented a risk management enabler during 2012 and the system successfully went live on 30 November. This process will ensure full transparency and accountability in managing risks and reporting on the effectiveness of mitigation techniques to ensure Exxaro achieves its strategic objectives. See the section on risk management for further details of this process. EXXARO INTEGRATED REPORT 2012 p 233 Principle Indicator Comment Formal risk assessments are conducted at least biannually at all business units and service functions in line with the detailed enterprise risk management framework. The enterprise risk management framework, as far as reasonably possible, includes processes to prompt identiﬁcation of unpredictable risks, including events with high impacts and low probability that would cause severe business disruptions. Although the board has delegated the responsibility for risk management, it reviews the top enterprise risks and responses annually and also considers these in detail during the annual strategic planning session. Refer principle 4.4 The independent internal auditor provides assurance to the board on the effectiveness of the risk management process. The top enterprise risks are disclosed in this report. Signiﬁcant issues are disclosed in media reports and on the JSE Securities Exchange News Service (SENS) throughout the year as deemed appropriate. 4.5 4.6 4.7 4.8 4.9 4.10 The board should ensure risk assessments are performed continually. The board should ensure frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks. The board should ensure management considers and implements appropriate risk responses. The board should ensure continual risk monitoring by management. The board should receive assurance on the effectiveness of the risk management process. The board should ensure there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders. p 234 GOVERNANCE Principle Indicator Comment Governance of information technology 5.1 The board should be responsible for information technology (IT) governance. 5.2 5.3 5.4 5.5 5.6 5.7 IT should be aligned with the performance and sustainability objectives of the company. The board should delegate to management the responsibility for implementation of an IT governance framework. The board should monitor and evaluate signiﬁcant IT investments and expenditure. IT should form an integral part of the company’s risk management. The board should ensure information assets are managed effectively. A risk committee and audit committee should assist the board in carrying out its IT responsibilities. The board has not delegated this responsibility and will retain accountability for IT governance until the understanding at board level has matured. As reported last year, the board approved an information and communications technology (ICT) governance framework in November 2011; processes to entrench this framework are under way. The implementation of our new operating system and the time required to embed this system and the new operating model detracted from the focus to fully entrench the ICT governance framework in 2012. Signiﬁcant effort will be employed in this area in 2013 and beyond. Detailed information on IT governance was presented to the board at its meeting in June 2012. The IT strategy’s overarching objective is the alignment and integration of all underlying systems to support truly integrated strategy, governance, risk, compliance, performance and sustainability. In 2013, all possible aspects of non-alignment will receive attention. The implementation of the governance framework has been delegated to the corporate information management department. ICT acquisitions fall within the same capital approval parameters as other projects and would thus, based on value, be elevated to the board. Through the entrenchment of the ICT governance framework, the board will focus more on this in future. The enterprise risk management framework includes assessment and management of all ICT risks, and the risk impact matrix speciﬁcally refers to IT-related impacts, which form part of any risk assessment. Information technology enablers are used during the risk assessment process. A detailed IT asset portfolio has been compiled. Monthly reports clearly indicate how well information assets are managed. Reporting to and review by the board must, however, be entrenched in 2013. Refer principle 5.1 EXXARO INTEGRATED REPORT 2012 p 235 Principle Indicator Comment Compliance with laws, rules, codes and standards The board charter speciﬁcally refers to this duty and the board has adopted a compliance policy that sets out the compliance framework, which is in line with the standards of the Compliance Institute of South Africa. The SRC committee is charged, as per its terms of reference, to review all compliance risks as part of the enterprise risk management process. The risk impact matrix, adopted by the board, makes speciﬁc reference to compliance impacts that would prevent the group from achieving its strategic objectives. To ensure the best overall risk coverage, standardisation and discharging of the accountability of risk owners in this regard, implementation of all mitigation techniques is coordinated centrally. Signiﬁcant progress was made in 2012 to ensure our combined assurance process is risk based. Speciﬁc emphasis has been placed on assurance activities covering our most important compliance controls that relate to ‘licence to operate’ issues. The following compliance assurance activities have been concluded, and ﬁndings reported: • Social and labour plans audits — all operations • Mining charter audits — all operations • Integrated water use licence audits — technical audits at all operations and legal audits at Matla and Leeuwpan. In 2012, material compliance key performance indicators or KPIs were developed. These form part of the overall sustainability KPIs developed as part of the SRC committee reporting guidelines and will now be included in integrated reporting to all management committees, the executive committee, SRC committee and the board. Information on laws, rules, codes and standards are shared with directors regularly through documentation and governance sessions — refer principle 2.20. The regulatory universe of Exxaro was updated in 2012 and executive summaries and compliance risk management plans compiled on all material laws and regulations. Control self-assessment questionnaires were developed and will be rolled out in 2013. Refer principle 6.1 and 6.4. 6.1 The board should ensure the company complies with applicable laws and considers adherence to non-binding rules, codes and standards. 6.2 6.3 The board and each director should have a working understanding of the effect of applicable laws, rules, codes and standards on the company and its business. Compliance risk should form an integral part of the company’s risk management process. p 236 GOVERNANCE Principle Indicator Comment 6.4 The board should delegate to management the implementation of an effective compliance framework and processes. Internal audit 7.1 7.2 7.3 7.4 7.5 The board should ensure there is an effective risk-based internal audit. Internal audit should follow a risk-based approach to its plan. Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management. The audit committee should be responsible for overseeing internal audit. Internal audit should be strategically positioned to achieve its objectives. Implementation has been delegated to the governance, risk and compliance department. All management teams at our operations have received training on the enterprise risk management process, including compliance risk management. Compliance risks form part of the risk registers of all operations, including those of: • Regional management • Executive committee • The board. Combined assurance mapping has also been completed on all material compliance risks at every operation and results will now form part of their management action plans as well as the risk-based internal audit plan. Ernst & Young (E&Y) was appointed as the company’s independent internal auditor in 2012. E&Y works closely with the governance, risk and compliance department, speciﬁcally the chief audit executive, to ensure a risk-based approach to its plan. The internal auditor submitted such assessment for 2012 to the audit committee at its meeting on 28 February 2013. Refer to the audit committee report for further details. Refer principle 3.7 Internal audit reports to the chief audit executive, who is a standing invitee to meetings of the executive committee, audit committee, SRC committee and social and ethics committee. EXXARO INTEGRATED REPORT 2012 p 237 Principle Indicator Comment Governing stakeholder relationships 8.1 The board should appreciate that stakeholders’ perceptions affect a company’s reputation. 8.2 The board should delegate to management to proactively deal with stakeholder relationships. This is speciﬁcally acknowledged in the board charter and is one of our ﬁve key strategic thrusts: “protect and build Exxaro’s reputation”. In 2012, a number of negative press articles were published on Exxaro’s mining activities, speciﬁcally at Leeuwpan mine, alleging that Exxaro was mining without a valid water use licence. The SRC committee and the board were acutely aware of the risk to the group’s reputation and intimately involved in remedial actions taken to resolve the matter. Exxaro resultantly took urgent legal action against the Minister of Water Affairs (DWA) in the North Gauteng High Court and speciﬁcally requested a ruling on the following matters: • That directives issued by the DWA be suspended or, alternatively; • That the DWA be interdicted against taking any steps against Leeuwpan mine (ie executing the directives); and • That the DWA reinstate the Water Tribunal according to the provisions made in the National Water Act 36 of 1998 (NWA). On 7 December 2012, the court ruled in favour of Exxaro and, in brief, determined that: • The matter was urgent • The directives issued against Exxaro’s Leeuwpan mine by the DWA be suspended immediately • The minister had no executive powers of authority outside the legislation of the NWA by placing the Water Tribunal in abeyance • The NWA obligates the minister under section 146 of the act to reinstate the Water Tribunal • Exxaro should have recourse to have its appeals heard by the Water Tribunal. The DWA had initially decided to appeal against the decision, but the application for leave to appeal was withdrawn on 19 March 2013. There can be no further appeal, thus the order granted in favour of Exxaro remains in full force and effect. Although legal action against government departments could also hurt a company’s reputation, the board deemed it imperative to set the record straight and ensure Exxaro’s reputation as a responsible and legally compliant corporate citizen is maintained. A number of departments are accountable for dealing with various stakeholder groupings, including corporate affairs, investor relations, corporate secretariat, human resources and sustainability. The group strives to engage openly and proactively with stakeholders. Issues and requests from stakeholders are managed as part of ongoing engagement programmes implemented by dedicated teams across the group. p 238 GOVERNANCE Principle Indicator Comment 8.3 8.4 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interest of the company. Companies should ensure equitable treatment of shareholders. 8.5 Transparent and effective communication with stakeholders is essential for building and maintaining their trust and conﬁdence. 8.6 The board should ensure disputes are resolved as effectively, efﬁciently and expeditiously as possible. The group has identiﬁed its stakeholder groups and appropriate management from various functions in the group are assigned to manage relationships with stakeholders. The intention is to promote two-way engagement so that the group and stakeholders understand one another. A communication strategy provides appropriate support and offers opportunities for effective engagement. The group fully complies with the JSE Listings Requirements on disclosure of information to shareholders. A detailed securities dealing and information policy was approved by the board in November 2011 and sets out strict rules on material price-sensitive information and its disclosure. Any material price- sensitive information and other relevant information is published on SENS in accordance with the Listings Requirements. In addition, a Tronox Limited securities dealing and information policy was approved during 2012 to ensure full compliance with the United States of America federal and state securities laws in respect of our signiﬁcant equity interest in Tronox. All queries from shareholders are handled by the group company secretary or investor relations and only information available in the public domain is disclosed. The group’s communications strategy is guided by principles including being approachable, genuine and ethical. The group strives for honest and clear communication and uses various channels such as media relations, advertising, integrated reporting and its website to reach as many stakeholders as possible timeously. The group’s promotion of access to information manual is available on the website. One formal request (with related follow-up requests) for information in terms of the manual was received during the year and adhered to, except for the request to receive Leeuwpan mine’s mining right, which was refused in accordance with section 5.1 of the manual dealing with conﬁdential information. Dispute-resolution clauses are contained in all Exxaro’s general contract conditions and are based on the principle of internal resolution between the parties as a ﬁrst means of addressing disputes, after which arbitration would be used if the matter remained unresolved. The board considers serious disputes (as per the DWA court case referred to above) and considers the company’s position and best legal recourse. EXXARO INTEGRATED REPORT 2012 p 239 Principle Indicator Comment Integrated reporting and disclosure Both the audit committee and SRC committee review the integrated report and recommend approval of the report to the board. The board reviews and ﬁnally approves the content of the integrated report prior to publication. Although the process of integrated reporting is still maturing, the company has integrated its sustainability and ﬁnancial reporting. Continuous efforts will be made to incorporate reporting best practice and improve the level of integration. PwC completed an independent assessment of key aspects of the sustainability reporting and disclosure. Refer page 326 9.1 9.2 9.3 The board should ensure the integrity of the company’s integrated report. Sustainability reporting and disclosure should be integrated with the company’s ﬁnancial reporting. Sustainability reporting and disclosure should be independently assured. Applied Partial application p 240 GOVERNANCE 2012 meeting attendance The tables below reﬂect attendance at board, special board and board committee meetings for the review period. 16 Feb 12 (special) 21 Feb 12 18 Apr 12 (governance) 13 Jun 12 30 Jul 12 28 Sep 12 (special) 31 Oct 12 (governance) 29 Nov 12 12 Dec 12 (special) Board D Konar (chairman) WA de Klerk P P P P S Dakile- Hlongwane Not yet appointed Not yet appointed JJ Geldenhuys CI Grifﬁth U Khumalo VZ Mntambo RP Mohring SA Nkosi P T P P P P P P A P P P P P P P P P A P P P A P P A P A P P MF Randera Not yet appointed Not yet appointed Not yet appointed Not yet appointed P P P P T A A A P A P P NL Sowazi J van Rooyen D Zihlangu present P apology A T telecon NR not required P P P P T P P P P A P P P P P P P P Not present P P P Not present P P P P P P A A P P P A P P P A P A A A P P P P P P T NR T NR NR NR P P NR NR T Not present P A P NR Audit committee 16 Feb 12 23 May 12 26 Jul 12 27 Nov 12 J van Rooyen (chairman) P P JJ Geldenhuys RP Mohring NL Sowazi P present Not yet appointed Not yet appointed P P P P P P P P P P Non-member Non-member EXXARO INTEGRATED REPORT 2012 p 241 16 Feb 12* 23 May 12* 14 Jun 12 (special) 16 Aug 12 28 Sep 12 (special) 7 Nov 12* P P T P A P P P P Not yet appointed P P T P P P P P P P P P P Not present P P A P A T Remuneration and nomination committee RP Mohring (chairman) JJ Geldenhuys CI Grifﬁth VZ Mntambo D Konar (nomination) Including nomination committee matters * P present A apology T telecon Sustainability, risk and compliance committee 15 Feb 12 30 May 12 26 Jul 12 30 Oct 12 JJ Geldenhuys (chairman) RP Mohring D Zihlangu S Dakile-Hlongwane P present A apology Social and ethics committee J van Rooyen (chairman)* JJ Geldenhuys RP Mohring MF Randera P P P P P P Not yet appointed Not yet appointed P P A P P P P P 27 Mar 12 30 Oct 2 P P P Not yet appointed P P P P P present * Dr MF Randera replaced Mr J van Rooyen as chairman with effect from 4 March 2013 and Mr van Rooyen resigned as a member with effect from the same date p 242 GROUP FINANCIAL PERFORMANCE IN BRIEF Net debt: equity 8% Return on capital employed 45% — down 2% Return on equity 37% — down 8% TOTAL ASSETS OF R41,6bn 2ND LARGEST COAL PRODUCER IN SA 40Mtpa COMMODITY PORTFOLIO COAL TiO2 FERROUS ENERGY R60bn MARKET CAPITALISATION HEPS of 1 401 cents — down 33% AEPS of 2 734 cents — up 24% Final dividend of 150 cents per share — down 70% Total dividend of 500 cents per share — down 38% Revenue R16,1bn down 23% Core net operation proﬁt at R2,9bn down 16% NAV per share R80 up 19% LTIFR 0,29 against group target of 0,15 EXXARO INTEGRATED REPORT 2012 p 243 Comparability of results The comparability of the group’s results for the year ended 31 December 2012 and 2011 is impacted by proﬁts realised on the sale of mineral sands (R3 451 million), Rosh Pinah operations (R544 million) and other non-core assets (R42 million) in 2012, the partial impairment reversal of the carrying value of property, plant and equipment at KZN Sands of R103 million (2011: R869 million), as well as R516 million impairment of the carrying value of property, plant and equipment at the Zincor reﬁnery in 2011. The disposal of the mineral sands, operations and Rosh Pinah businesses’ ﬁnancial results effectively being included in the annual results for approximately ﬁve and half and ﬁve months respectively, compared to the full 12 months period in 2011. The group early adopted the revised suite of consolidation standards which included Internal Accounting Standards (IAS) 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures (revised) as well as International Financial Reporting Standards (IFRS) 10 Consolidated Financial Statements (as amended), IFRS 11 Joint Arrangements (as amended) and IFRS 12 Disclosure of Interests in Other Entities (as amended). As such the Mafube Coal Proprietary Limited and South Dunes Coal Terminal Company Proprietary Limited (SDCT) joint ventures, which were previously proportionately consolidated, are now equity accounted. This has resulted in the restatement of the 2011 ﬁnancial results to reﬂect the new accounting method treatment. The group’s statement of ﬁnancial position and key ﬁnancial metrics remain healthy and provide a solid platform for our growth aspirations. Revenue Group consolidated revenue decreased 23% to R16 122 million, mainly as a result of the inclusion of the mineral sands and Rosh Pinah businesses for, effectively, ﬁve and a half and ﬁve months, respectively, in the 2012 ﬁnancial year compared to 12 months in 2011 as well as challenging coal trading conditions. The combination of lower prices realised on domestic and export sales, coupled with lower volumes, translated into Coal revenue of R12 064 million being 3% lower than in 2011. This was partially offset by higher revenue from Eskom sales. Net operating proﬁt Group consolidated net operating proﬁt was R355 million lower at R3 417 million after exclusion of the R103 million (2011: R869 million) partial reversal of the impairment of property, plant and equipment at KZN Sands, the proﬁts recognised on the sale of mineral sands, Rosh Pinah operation and other non-core assets of R3 451 million, R544 million and R42 million respectively, as well as the R516 million impairment of property, plant and equipment at the Zincor reﬁnery in 2011. The cessation of production at Zincor at the end of 2011 and the inclusion of Rosh Pinah in 2012 for only ﬁve months resulted in cost savings of approximately R2 143 million in 2012. p 244 GROUP FINANCIAL PERFORMANCE IN BRIEF A 32% decrease in Coal’s net operating proﬁt to R2 105 million (at an operating margin of 17%) was recorded, mainly as a result of the decrease in export volumes (R213 million) and selling prices (R316 million), inﬂationary pressures (R365 million) and higher operating costs (R684 million). These were partially offset by the favourable impact of the ZAR weakness against the US$ in 2012 compared to 2011 (R486 million). Included in the cost increases were R207 million higher distribution costs, R223 million in price adjustments on the Mafube buy-ins as well as corporate service fee redirected to the coal business of R253 million, mainly as a result of the discontinuation of the mineral sands and Rosh Pinah operations. The estimated coal rehabilitation and decommissioning provisions were independently reviewed and standardised in 2012. This had a R102 million negative impact on the net operating proﬁt from recorded scope changes for the coal operations. Earnings Attributable earnings, inclusive of Exxaro’s equity-accounted investment in associates, amounted to R9 677 million or 2 734 cents per share, representing a 24% increase from 2011 mainly as a result of the proﬁts realised on sale of subsidiaries and other non-core assets. Headline earnings Headline earnings recorded, which exclude, inter alia, the impact of impairments and impairment reversals as well as proﬁts realised on the sale of subsidiaries, were R4 958 million or 1 401 cents per share. This represents a 33% decrease on the 2011 headline earnings per share. EXXARO INTEGRATED REPORT 2012 p 245 Segmental results Revenue (Rm) Coal operations Tied1 Commercial Mineral sands KZN Sands2 Namakwa Sands Australia Sands Base metals Rosh Pinah Zincor3 Inter-segmental Other Total external revenue Net operating profit (Rm) Coal Tied1 Commercial Mineral sands KZN Sands2 Namakwa Sands Australia Sands Base metals Rosh Pinah Zincor3 Other4 Other5 Total net operating profit Year ended 31 December 2012 2011 Restated 12 064 12 420 3 449 8 615 3 594 855 1 589 1 150 299 218 81 165 16 122 2 105 285 1 820 1 925 680 1 009 236 422 (7) (91) 520 3 105 7 557 3 140 9 280 6 587 1 196 2 904 2 487 1 847 698 1 550 (402) 108 20 962 3 083 309 2 774 2 678 753 987 938 (1 145) 102 (1 239) (8) (491) 4 125 1 Tied operations refer to mines that supply their entire production to either Eskom or ArcelorMittal South Africa (AMSA) in terms of contractual agreements Includes a partial impairment reversal of R103 million in 2012 (2011: R869 million) of the carrying value of property, plant and equipment at KZN Sands Includes an impairment of R516 million of the carrying value of property, plant and equipment at Zincor reﬁnery in 2011 Includes the proﬁt on sale of subsidiaries of R544 million on the sale of the Rosh Pinah operation Includes the proﬁt on sale of subsidiaries of R3 451 million on the sale of mineral sands operations 2 3 4 5 p 246 GROUP FINANCIAL PERFORMANCE IN BRIEF Coal Production (’000t) Power station coal Tied Commercial Coking coal Tied Commercial Steam coal Char Total production (excluding buy-ins) Buy-ins Total production (including buy-ins) Sales (’000t) Power station coal Tied Commercial Other domestic coal Tied Commercial Export Char Total sales Base metals Production (’000t) Zinc concentrate (Rosh Pinah) Zinc metal (Zincor) Lead concentrate (Rosh Pinah) Sales (’000t) Zinc concentrate (Rosh Pinah) Zinc metal (Zincor) Lead concentrate (Rosh Pinah) Year ended 31 December 2012 2011 Restated 32 042 13 029 19 013 2 367 339 2 028 5 599 43 40 051 1 111 41 162 31 367 13 022 18 345 4 994 283 4 711 3 894 62 31 765 12 441 19 324 2 161 299 1 862 5 966 142 40 034 1 636 41 670 31 681 12 443 19 238 4 841 325 4 516 4 898 129 40 317 41 549 33 6 37 4 89 73 16 86 18 EXXARO INTEGRATED REPORT 2012 p 247 Operational performance Production and sales Power station coal production from the tied mines was 588kt (5%) higher compared with 2011, mainly as a result of a 798kt increase at Matla, partially offset by the closure of the Mooifontein opencast mine and the ongoing difﬁcult geological conditions which resulted in lower production volumes at Arnot. The higher sales volumes from the tied mines were mainly due to higher production at Matla and increased demand from Eskom. The commercial mines’ power station coal production was lower by 311kt (2%) compared with 2011 due to 933kt lower production at Grootegeluk. The dispatch conveyor belt to Eskom Matimba power station broke down early in 2012, resulting in production cut-backs. This was partially offset by 452kt higher production at NBC due to improved yields achieved. Leeuwpan production increased by 170kt as a result of improved demand. Grootegeluk’s coking coal production was 166kt (9%) higher as a result of increased off-take from Eskom coupled with an improved logistics process. This resulted in 137kt (5%) higher sales, partially offset by lower off-take by AMSA. Steam coal production was 367kt (6%) lower mainly due to 355kt lower production at Leeuwpan as a result of lower yields achieved, coupled with lower demand from AMSA. The char plant production was 70% lower mainly due to the downturn in the ferrochrome industry, with production deliberately reduced to manage high stock levels. This industry downturn translated into decreased sales compared to 2011. Export sales were 21% lower mainly due to Transnet Freight Rail performing at a lower level compared to the previous year, lower exports via Maputo due to the lower average price realised, as well as production difﬁculties predominantly at Mafube. Some of the steam coal was successfully redirected to the domestic market mainly from Leeuwpan and NCC, albeit at lower prices. Income from equity-accounted investments — net of tax Equity-accounted investments in the post-tax proﬁts of associates consist of Exxaro’s interest in SIOC of R3 202 million, in Black Mountain Mining Proprietary Limited (Black Mountain) of R101 million and in Tronox’s effective losses of R250 million. After the completion of the purchase price allocation process, a total of R470 million was accounted for as the excess of fair value of the net asset value over the cost of the investment in Tronox. SIOC Tronox Black Mountain Mafube Cennergi Chifeng1 Year ended 31 December 2012 Rm 3 202 (250) 101 144 (65) 2011 Restated Rm 4 456 210 76 3 Total equity income 3 132 4 745 1 Exxaro’s effective shareholding in Chifeng Zinc reﬁnery has been diluted from 22% to 11,97%. Chifeng is no longer accounted for as an associate but rather as a ﬁnancial asset p 248 GROUP FINANCIAL PERFORMANCE IN BRIEF Dividends Total dividends paid in 2012 amounted to R3 012 million, made up of a dividend of R1 771 million that relates to the period to 31 December 2011, which was paid in April 2012, as well as an interim dividend of R1 241 million paid in September 2012. A ﬁ nal dividend for 2012 of 150 cents per share (2011: 500 cents per share) was approved by the board of directors on 6 March 2013. Since inception, Exxaro has declared dividends of R4,7 billion to its BEE HoldCo, Main Street 333 Proprietary Limited shareholders. Cash ﬂ ows Cash retained from operations was R3 969 million for the group. This was primarily used to fund net ﬁ nancing charges of R137 million, taxation payments of R277 million and dividends paid of R3 012 million. A total of R3 761 million of capital expenditure was invested in new capacity, with R1 572 million applied towards sustaining and environmental capital. A total of R3 154 million of the capital investment in new capacity was for the Grootegeluk Medupi Expansion Project. Net cash/(debt) variance (Rm) 3 969 (137) (277) 346 (3 012) 5 4 3 2 1 m 0R (1) (2) (3) (4) (5) (6) 213 4 023 (2 198) (5 333) Net cash 1 Jan 2012gege Net cash 1 Jan 2012 Cash generate Cash generated Net financing Net costs fi nancing costs Tax Tax Dividends paid Dividends paid Capex Capex Dividends received Dividends received Other Other Net debt 31 Dec 2012 Net debt 31 Dec 2012 (1 990) Investing activities Investing and activities non-controlling and non- intereset acquired controlling interest acquired EXXARO INTEGRATED REPORT 2012 p 249 Debt structure and ﬁnancial covenants Ratios Net financing cost cover (times): EBITDA Return on equity: attributable income (%) Return on capital employed (%) The group’s debt structure at 31 December 2012 2012 11 37 45 2011 22 37 46 Facilities available Interest-bearing borrowings Capitalised transaction cost Total interest-bearing borrowings Cash and cash equivalents Net debt Net debt/equity ratio (%) Maturity profile of debt (Rm) Repayment year 2015 2016 After 2016 Capital expenditure Sustaining and environmental – Coal – Mineral sands – Base metals – Other Expansion – Coal – GMEP – Mineral sands – Ferrous – Other Undrawn Rm 5 749 Drawn Rm 2 800 (49) 2 751 (553) 2 198 8 333 333 2 134 2 800 Estimate Actual 2014 Rm 1 978 1 863 115 4 582 1 170 516 2 613 283 2013 Rm 2 386 1 971 415 4 602 509 1 939 2 087 67 2012 Rm 1 572 1 009 335 33 195 3 761 203 3 013 80 422 43 2011 Rm 1 591 566 621 109 295 3 267 151 3 070 44 2 Total capital expenditure 6 560 6 988 5 333 4 858 Exxaro’s growth initiatives continue to focus on diversifying the business with carbon, reductants, ferrous and energy projects, aligned with the group’s approved commodity strategy. p 250 DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING To the shareholders 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 group as well as to develop and maintain a sound system of internal controls to safeguard shareholders’ investments and group and company’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 controls 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 committee, which consists only of independent non-executive directors, meet periodically with the external and internal auditors, as well as executive management to evaluate matters concerning accounting policies, internal controls, auditing, ﬁnancial reporting and risk management. The group’s internal auditors independently evaluate the internal controls and coordinate their audit coverage with the independent external auditors. The independent external auditors are responsible for reporting on the company and consolidated group ﬁnancial statements. The external and internal auditors have unrestricted access to all records, property and personnel as well as to the audit committee. The directors have reviewed the company and consolidated group ﬁnancial budgets along with the underlying business plans for the period to 31 December 2013. In light of the current company and consolidated ﬁnancial position and existing borrowing facilities, they consider it appropriate that the company and consolidated group annual ﬁnancial statements be prepared on the going-concern basis. The independent external auditors are responsible for reporting on whether the company and consolidated group annual ﬁnancial statements are fairly represented in accordance with International Financial Reporting Standards. The independent external auditors have audited the annual ﬁnancial statements of the company and group and their unmodiﬁed report appears on page 252. Against this background, the directors of the company accept responsibility for the company and consolidated group annual ﬁnancial statements, which were approved by the board of directors on 28 March 2013 and are signed on its behalf by: SA Nkosi Chief executive ofﬁcer WA de Klerk Finance director CERTIFICATE BY GROUP COMPANY SECRETARY In terms of section 88(e) of the Companies Act No. 71 of 2008, as amended (Companies Act), I, CH Wessels, in my capacity as group company secretary, conﬁrm that, to the best of my knowledge and belief, for the year ended 31 December 2012, Exxaro Resources Limited has ﬁled with the Companies and Intellectual Property Commission all such returns and notices as are required of a public company in terms of the Companies Act and that all such returns and notices appear to be true, correct and up to date. CH Wessels Group company secretary 28 March 2013 AUDIT COMMITTEE REPORT EXXARO INTEGRATED REPORT 2012 p 251 The company’s audit committee is established as a statutory committee in terms of section 94(2) of the Companies Act No 71 of 2008, as amended (Companies Act) and oversees audit committee matters for all of the South African subsidiaries within the Exxaro group, as permitted by section 94(2)(a) of the Companies Act. The audit committee operates in accordance with the speciﬁc statutory duties imposed by the Companies Act, the JSE Listings Requirements, as well as in accordance with detailed terms of reference, which has incorporated the principles contained in the King report on governance for South Africa 2009, as well as duties speciﬁcally delegated by the company’s board of directors. The committee consists of three independent non-executive directors and the chairman of the board is not a member of the audit committee. It meets four times a year and details of attendance are contained in the Governance Report. The group’s independent external auditors are PricewaterhouseCoopers Incorporated (PwC). Fees paid to the auditors are disclosed in note 5 to the annual ﬁnancial statements. Exxaro has an approved board policy to regulate the use of non-audit services by the group’s 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, fees paid to PwC amounted to R75 million in total, which included R46 million for the 2012 statutory audit and related activities and R29 million for non-audit services. Non-audit services rendered by the independent external auditors during the period comprised tax advisory and tax compliance services, due-diligence reviews, accounting opinions and other advisory services. As reported in 2011, the higher than ideal value of non-audit services rendered was mostly as a result of consulting work completed as part of the Tronox Limited transaction, which had started and was approved prior to appointing PwC as independent external auditors. The audit committee is satisﬁed with the level and extent of non-audit services rendered during the year by PwC as well as their continued independence. The committee annually assesses the independence of the external auditors and again completed such assessment at its meeting on 28 February 2013. PwC were required to conﬁrm that: • They are not precluded from re-appointment due to any impediment in section 90(b) of the Companies Act; • In compliance with section 91(5) of the Companies Act, by comparison with the membership of the ﬁrm at the time of its re-appointment in 2012, more than one half of the members remain in 2013; and • They remain independent, as required by section 94(7)(a) of the Companies Act and the JSE Listings Requirements. Based on the above assessment, the committee re-nominated PwC as independent external auditors for the 2013 ﬁnancial year. Shareholders will therefore be requested to re-elect PwC as independent auditors for the 2013 ﬁnancial year at the annual general meeting of 24 May 2013. The committee reviewed the company and consolidated group annual ﬁnancial statements and accounting practices in detail and is satisﬁed that the information contained in the ﬁnancial statements, as well as the application of accounting practices applied are reasonable. The committee, with input and reports from the internal and external auditors, reviewed the company’s system of internal ﬁnancial control during the year under review. As a result of the implementation of a new operating model and associated technological enabler, certain deﬁciencies in the system of internal control have been identiﬁed. These deﬁciencies are being adequately addressed by management. In the interim, manual veriﬁcation processes have been implemented, where relevant, and the independent external auditors have applied appropriate substantive procedures in order to mitigate potential risks. The chief audit executive and the committee will continue monitoring progress and maturity improvement in the internal control environment on a regular basis. Further information on the activities of the committee is contained in the Governance Report. J van Rooyen Audit committee chairman Pretoria 28 March 2013 p 252 INDEPENDENT AUDITOR’S REPORT ON THE ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS To the shareholders of Exxaro Resources Limited The abridged consolidated ﬁnancial statements, which comprise the abridged consolidated statement of ﬁnancial position as at 31 December 2012 and the abridged consolidated statement of comprehensive income, changes in equity and cash ﬂows for the year then ended, and related notes, as set out on pages 290 to 310, are derived from the audited consolidated ﬁnancial statements of Exxaro Resources Limited for the year ended 31 December 2012 . We expressed an unmodiﬁed audit opinion on those consolidated ﬁnancial statements in our report dated 5 April 2013. Our auditor’s report on the audited consolidated ﬁnancial statements contained an other matter paragraph (refer below). The abridged consolidated ﬁnancial statements do not contain all the disclosures required by International Financial Reporting Standards and the requirements of the Companies Act of South Africa as applicable to annual ﬁnancial statements. Reading the abridged consolidated ﬁnancial statements, therefore, is not a substitute for reading the audited consolidated ﬁnancial statements of Exxaro Resources Limited. Directors’ responsibility for the abridged consolidated ﬁnancial statements The company’s directors are responsible for the preparation of an abridged version of the audited consolidated ﬁnancial statements in accordance with the requirements of the JSE Limited Listings Requirements for abridged reports, set out in note 1 to the abridged consolidated ﬁnancial statements, and the requirements of the Companies Act of South Africa as applicable to summary ﬁnancial statements. Auditor’s responsibility Our responsibility is to express an opinion on the abridged consolidated ﬁnancial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810, “Engagements to Report on Summary Financial Statements.” Opinion In our opinion, the abridged consolidated ﬁnancial statements derived from the audited consolidated ﬁnancial statements of Exxaro Resources Limited for the year ended 31 December 2012 are consistent, in all material respects, with those consolidated ﬁnancial statements, in accordance with the requirements of the JSE Limited Listings Requirements for abridged reports, set out in note 1 to the abridged consolidated ﬁnancial statements, and the requirements of the Companies Act of South Africa as applicable to summary ﬁnancial statements. The other matter paragraph in our audit report dated 5 April 2013 states that as part of our audit of the consolidated ﬁnancial statements for the year ended 31 December 2012 , we have read the Directors’ report, the Audit Committee’s report and the Company Secretary’s Certiﬁcate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated ﬁnancial statements. These reports are the responsibility of the respective preparers. The other matter paragraph states that, based on reading these reports, we have not identiﬁed material inconsistencies between these reports and the audited consolidated ﬁnancial statements. The paragraph furthermore states that we have not audited these reports and accordingly do not express an opinion on these reports. The other matter paragraph does not have an effect on the abridged consolidated ﬁnancial statements or our opinion thereon. PricewaterhouseCoopers Inc. Director: TD Shango Registered Auditor Johannesburg 5 April 2013 DIRECTORS’ REPORT EXXARO INTEGRATED REPORT 2012 p 253 The directors have pleasure in presenting the annual ﬁnancial statements of Exxaro Resources Limited (Exxaro) and the group for the year ended 31 December 2012. Nature of business Exxaro, a public company incorporated in South Africa, is one of the largest South African-based diversiﬁed resources groups, with interests in the coal (controlled and non-controlled), mineral sands/titanium dioxide (non-controlled), iron ore (controlled and non-controlled) and energy (controlled and non-controlled) markets. Exxaro is listed on the JSE Limited and is a constituent of the JSE’s Top 40 index. Exxaro’s assets vary between controlled and operated assets and equity investments. The major controlled assets include its coal operations and its iron ore prospecting operations in the Republic of the Congo, whereas the major equity investments include its 44,65% interest in Tronox Limited, the world’s largest fully integrated producer of titanium ore and titanium dioxide, the third-largest titanium feedstock producer and the second-largest producer of zircon, its 26% interest in Tronox’s SA mineral sands operations and UK Limited Liability Partnership entity, its 19,98% interest in Sishen Iron Ore Company Proprietary Limited, which extracts and processes iron ore and its 50% interest in Cennergi Proprietary Limited, an energy company which aims to be the leading cleaner energy independent power producer in South Africa. Integrated report Summarised information on the activities and performance of the group and the various divisions of the group is contained in pages 73 to 75 of this report as well as in the group performance in brief on pages 242 to 249 of the integrated report (printed version). These reports are unaudited. The board of directors acknowledges its responsibility to ensure the integrity of the integrated report. The board has accordingly applied its mind to the integrated report and in the opinion of the board the integrated report addresses all material issues, and presents fairly the integrated performance, sustainability of the organisation and its impacts. The integrated report has been prepared in line with corporate governance best practice. Corporate governance The board of directors endorses the principles contained in the King report on governance for South Africa 2009 (King III). Full details on how these principles were applied in Exxaro are set out in the Corporate Governance report on page 214. Change in accounting policies The accounting policies applied during the year ended 31 December 2012 are consistent, in all material respects, with those applied in the annual ﬁnancial statements for the year ended 31 December 2011, except for the early adoption of the revised consolidating standards as well as IAS 19 Employee beneﬁts (revised) as detailed in note 36 of the group annual ﬁnancial statements 2012. This early adoption of the new suite of consolidation standards has resulted in the restatement of prior year numbers as presented in the remainder of the report. Registration details 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 The company and group ﬁnancial results for the year ended 31 December 2012 and 2011 are not comparable due to the proﬁts realised on the sale of the mineral sands, Rosh Pinah and other assets of R4 127 million in 2012, the partial impairment reversal of the carrying value of property, plant and equipment at KZN Sands of R103 million in 2012 (2011: R869 million), as well as R516 million impairment of the carrying value of property, plant and equipment at the Zincor reﬁnery in 2011. The conclusion of these two sales transactions resulted in the mineral sands and Rosh Pinah businesses’ ﬁnancial results effectively being included in these ﬁnancial results for approximately ﬁve and ﬁve and a half months, respectively, compared to the full 12-month period in 2011. Capital management The board of directors is ultimately responsible to monitor debt levels, return on capital, total shareholders’ return as well as compliance with contractually agreed loan covenants. These key metrics are detailed on page 72 of the integrated report. The group aims to cover its annual net funding requirements through long-term loan facilities with maturities spread evenly over time. p 254 DIRECTORS’ REPORT During the year, the group complied with all its contractually agreed loan covenants. Neither the company nor any of its subsidiaries are subject to externally imposed regulatory capital requirements. There were no signiﬁcant 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 the capital structure remains robust to withstand any economic downturn. Property, plant and equipment Although the intention is to progress to distributing 50% of attributable earnings to shareholders, adequate provision is made for future capital commitments and working capital requirements in determining the level of interim and ﬁnal dividends to shareholders. Capital expenditure for the period amounted to R5 333 million (2011: R4 858 million). Share buy-back 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 based on speciﬁc transaction requirements. The group does not, however, have a deﬁned share buy-back plan. Shareholders’ resolutions At the eleventh annual general meeting of shareholders, held on Tuesday, 22 May 2012, the following resolutions were passed: • Approval of group ﬁnancial statements; • Re-election of directors; • Appointment of group audit committee members; • Appointment of group social and ethics committee members; • Approval of the company’s remuneration policy and its implementation; • Appointment of group independent auditors and noting TD Shango as designated audit partner; • Renewal of the authority that unissued shares be placed under the control of the directors; • General authority to issue shares for cash; • Authorisation of directors and/or secretary to implement the above resolutions; • Special resolution to approve directors’ fees for 2012; • Special resolution to authorise directors to repurchase the company’s shares; and • Special resolution to approve ﬁnancial assistance for the subscription of securities. At a general meeting of shareholders held on Tuesday, 22 May 2012, the following resolutions were passed: • Approval of a speciﬁc issue of initial subscription shares for cash; • Approval of a speciﬁc issue of further subscription shares for cash; • Authorisation of directors and/or secretary to implement the above resolutions; and • Special resolution to approve a new memorandum of incorporation. Other than various resolutions by subsidiary companies in relation to the implementation of the Tronox transaction, whereby Exxaro sold its mineral sands operations in exchange for a 39,2% (31 December 2012: 44,65%) interest in Tronox Limited, Exxaro and its subsidiaries have passed no other special or ordinary shareholders’ resolutions of material interest or of a substantive nature. Share capital Authorised 500 000 000 ordinary shares of R0,01 each. Issued 357 787 785 (2011: 354 234 548) ordinary shares of R0,01 each. EXXARO INTEGRATED REPORT 2012 p 255 The increase can be summarised as follows: Date of issue Number of shares Opening balance Issued in terms of the Kumba Management Share Option Scheme due to options offered at prices ranging from R18,38 to R47,73. Mpower 2012 issue offered at R193,37 24 February 2012 to 13 December 2012 28 June 2012 Closing balance Shareholders An analysis of shareholders and shareholdings appears in Annexure 5 of the annual report. 354 234 548 532 720 3 020 517 357 787 785 Dividend payments Dividend number 19 Interim dividend number 19 of 350 cents per share was declared in South African currency in respect of the period ended 30 June 2012. The dividend was paid in South African currency on Tuesday, 25 September 2012 to shareholders recorded in the register of the company at close of business on Friday, 21 September 2012. In order to comply with the requirements of STRATE, the last day to trade cum dividend was Friday, 14 September 2012. The shares commenced trading ex dividend on Monday, 17 September 2012 and the record date was Friday, 21 September 2012. Dividend number 20 Final dividend number 20 of 150 cents per share was approved by the board on 6 March 2013 and declared in South African currency in respect of the period ended 31 December 2012. The dividend payment date is Monday, 15 April 2013 to shareholders recorded in the register of the company at close of business on Friday, 12 April 2013. To comply with the requirements of STRATE, the last day to trade cum dividend is Friday, 5 April 2013. The shares will commence trading ex dividend on Monday, 8 April 2013 and the record date is Friday, 12 April 2013. The total STC credits available for offsetting against the new dividend tax (effective 1 April 2012) amount to R2 024 million. The number of ordinary shares in issue at the date of this declaration is 357 787 785. Although the local dividend tax rate is 15%, no dividends tax will be due as a result of the STC credits utilised (150 cents per share). Exxaro Resources Limited’s tax reference number is 9218/098/14/4. Investments and subsidiaries The ﬁnancial information in respect of investments and interests in subsidiaries of the company is disclosed in Annexures 2 and 3 to the ﬁnancial statements. Events after the reporting period The directors are not aware of any matter or circumstance that has arisen since the end of the ﬁnancial period not dealt with in this report or in the company and consolidated group ﬁnancial statements that would signiﬁcantly affect the operations or the results of the group. Directorate and shareholdings The names of the directors in ofﬁce at the date of this report are set out on pages 210 to 213. Details of directors’ shareholding are contained on pages 262 and 263 of this report. Mr CI Grifﬁth resigned as non-executive director effective 29 November 2012. Mr NB Mbazima was subsequently appointed to succeed Mr Grifﬁth as non-executive director of the board with effect 30 November 2012. Mr U Khumalo resigned as non-executive director effective 31 January 2013. The board expressed its sincere appreciation to Mr Grifﬁth and Mr Khumalo, for their contributions during their respective terms of ofﬁce. p 256 DIRECTORS’ REPORT The following directors are required to retire by rotation in terms of clauses 6.2 (1) and (2) of the memorandum of incorporation of the company, and being eligible for re-election, offer themselves for re-election at the forthcoming annual general meeting: • Mr JJ Geldenhuys; • Mr NB Mbazima; • Mr VZ Mntambo; and • Dr MF Randera. Group company secretary The group company secretary is Ms CH Wessels and details of the registered ofﬁce and postal address appear on the administration sheet included in the integrated report. Independent external auditors PwC was re-elected as independent external auditors on 22 May 2012 in accordance with section 90 of the Companies Act. Audit committee The audit committee report appears on page 251. Borrowing powers and ﬁnancial assistance Borrowing capacity is determined by the directors in terms of the memorandum of incorporation, from time to time: Amount approved (per memorandum of incorporation) Total borrowings Unutilised borrowing capacity Group 2 012 Rm 36 008 2 751 33 257 2 011 Restated Rm 29 510 3 772 25 738 The borrowing powers of the company and the group were set at 125% of shareholders’ funds for both the 2012 and 2011 ﬁnancial years. Pursuant to the authorisation granted at the general meeting of the company held on 29 November 2011, the board of directors of the company, at its meeting held on 21 February 2012, had approved, in accordance with section 45 of the Companies Act and the JSE Limited Listings Requirements, the giving of ﬁnancial assistance to related and inter-related companies of the company up to an amount not exceeding R40 billion, at any time and from time to time during the period 21 February 2012 to 31 December 2012. The company had satisﬁed the solvency and liquidity test, as contemplated in section 45 of the Companies Act and detailed in section 4 of the Companies Act post such assistance and the terms under which such assistance was provided were fair and reasonable to the company. Going concern The board of directors believes that 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 of directors is not aware of any new material changes that may adversely impact the group or any material non-compliance with statutory or regulatory requirements. Employee incentive schemes Details of the group’s employee incentive schemes are set out in note 36 of the group annual ﬁnancial statements 2012. Annual general meeting The 12th annual general meeting of shareholders of Exxaro will be held at the Corporate Ofﬁce, Roger Dyason Road, Pretoria West, Republic of South Africa, at 10:00 on Friday, 24 May 2013. Refer to pages 336 to 338 of this report for further details of the ordinary and special business for consideration at this meeting. DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION EXXARO INTEGRATED REPORT 2012 p 257 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 remuneration and nomination committee (Remco). Remuneration policy The Remco has a clearly deﬁned mandate from the board aimed at: • • ensuring that the company’s chairman, directors and senior executives are fairly rewarded for their individual contributions to the company’s overall performance; ensuring that the company’s remuneration strategies and packages, including the incentive schemes, are related to performance, are suitably competitive and give due regard to the interests of the shareholders and the ﬁnancial and commercial health of the company. Directors’ service contracts All executive directors’ normal contracts are subject to six calendar months’ notice. Non-executive directors are not bound by service contracts. There are no restraints of trade associated with the contracts of executive directors. Related party transactions Details of the group’s related party transactions are set out in note 34 of the group annual ﬁnancial statements 2012. p 258 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Summary of remuneration paid or payable to directors and prescribed ofﬁcers Year ended 31 December 2012 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 S Dakile-Hlongwane3 JJ Geldenhuys CI Griffith4 U Khumalo5 Dr D Konar (chairman) N Langeni6 NB Mbazima7 VZ Mntambo RP Mohring MF Randera8 NL Sowazi5 J van Rooyen D Zihlangu Total remuneration paid by Exxaro Prescribed officers PT Arran9 MDM Mgojo M Piater WH van Niekerk9 PE Venter M Veti CH Wessels Less: gains on share scheme Add: share-based payment expense Total remuneration paid by Exxaro Basic salary R Fees for services R 6 859 647 4 217 225 11 076 872 Performance bonuses1 R 2 517 124 1 054 030 3 571 154 246 310 634 733 346 283 255 971 1 060 666 327 293 683 001 153 173 303 864 577 748 327 293 4 916 335 2 155 841 3 843 865 2 637 818 2 310 253 3 985 326 2 159 470 1 236 864 18 329 437 813 255 1 097 830 998 345 809 289 1 544 291 768 333 397 176 6 428 519 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 Include travel allowances 2 3 Appointed on 21 February 2012 4 Resigned on 29 November 2012 5 Fees paid to the respective employer and not the individual 6 Resigned on 18 January 2012 7 Appointed on 30 November 2012 8 Appointed on 13 June 2012 9 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited Retirement amounts paid to or received by executive directors are paid or received under defined contribution retirement funds. EXXARO INTEGRATED REPORT 2012 p 259 Benefits and allowances2 R Retirement fund contributions R Gains on management share option scheme R 81 401 163 515 244 916 595 683 346 373 942 056 15 187 718 8 448 242 23 635 960 Other R 32 513 26 756 59 269 88 594 112 558 78 056 163 182 41 374 44 030 527 794 116 939 295 323 261 812 151 367 297 142 214 909 100 286 3 003 003 6 123 824 3 794 997 5 951 570 10 336 711 4 327 759 574 1 437 778 33 537 864 574 Total R 25 241 573 14 229 385 39 470 958 (23 635 960) 7 645 042 23 480 040 246 310 667 246 346 283 255 971 1 060 666 327 293 709 757 153 173 303 864 577 748 327 293 4 975 604 6 089 038 11 449 436 7 806 104 9 300 535 16 326 652 7 511 845 1 778 356 60 261 966 (33 537 864) 9 277 994 36 002 096 p 260 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Summary of remuneration paid or payable to directors and prescribed ofﬁcers (continued) Year ended 31 December 2011 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 Griffith U Khumalo3 Dr D Konar (chairman) N Langeni VZ Mntambo RP Mohring NL Sowazi3 J van Rooyen D Zihlangu Total remuneration paid by Exxaro Prescribed officers PT Arran MDM Mgojo M Piater WH van Niekerk PE Venter M Veti MS Viljoen4 CH Wessels5 Less: gains on share scheme Add: share-based payment expense Total remuneration paid by Exxaro Basic salary R Fees for services R 5 653 180 3 527 231 9 180 411 Performance bonuses1 R 3 424 467 1 943 798 5 368 265 489 120 330 200 236 130 849 347 311 797 324 297 567 580 331 590 460 300 311 797 4 212 158 2 944 806 3 061 375 2 460 818 3 018 432 2 799 181 1 911 358 939 012 674 029 17 809 011 1 664 321 1 600 575 1 267 868 1 793 080 1 739 462 971 499 335 823 418 044 9 790 672 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 Include travel allowances 2 3 Fees paid to the respective employer and not the individual 4 Retired effective 31 August 2011 (as group company secretary effective 30 June 2011) 5 Appointed effective 1 June 2011 (as group company secretary effective 1 July 2011) Retirement amounts paid to or received by executive directors are paid or received under deﬁned contribution retirement funds. EXXARO INTEGRATED REPORT 2012 p 261 Total R 17 064 525 13 589 541 30 654 066 (14 986 218) 11 267 550 26 935 398 515 081 330 200 236 130 858 062 317 518 324 297 584 405 331 590 460 300 311 797 4 269 380 6 435 681 7 749 854 6 786 913 9 539 488 13 471 220 4 358 991 2 043 649 1 465 766 51 851 562 (21 668 219) 13 048 438 43 231 781 Benefits and allowances2 R Retirement fund contributions R Gains on management share option scheme R 526 376 303 286 829 662 7 372 141 7 614 078 14 986 219 Other R 7 669 5 352 13 021 80 692 195 796 276 488 25 961 8 715 5 721 16 825 57 222 45 000 75 350 118 208 145 642 215 411 76 185 9 750 317 255 223 788 250 471 232 592 283 919 252 831 182 611 65 932 54 785 1 552 934 2 757 243 2 699 785 4 293 509 8 459 835 1 213 700 691 213 4 832 4 840 7 642 4 906 4 500 3 638 1 919 1 653 1 002 801 1 546 929 21 668 219 33 930 p 262 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Beneﬁcial interest Directors’ beneficial interest in Exxaro shares Director SA Nkosi1 WA de Klerk1 S Dakile-Hlongwane JJ Geldenhuys U Khumalo Dr D Konar (chairman) NB Mbazima VZ Mntambo RP Mohring MF Randera NL Sowazi J van Rooyen D Zihlangu Directors’ non-beneficial interest in Exxaro shares Director SA Nkosi WA de Klerk S Dakile-Hlongwane JJ Geldenhuys U Khumalo Dr D Konar (chairman) NB Mbazima VZ Mntambo RP Mohring MF Randera NL Sowazi J van Rooyen D Zihlangu At 31 December 2012 Direct Indirect 37 362 1 462 9 852 845 8 932 6 168 1 000 5 529 881 3 038 387 2 818 552 61 082 1 The indirect beneﬁcial interest includes shares held in terms of the company’s deferred bonus plan disclosed on page 257 EXXARO INTEGRATED REPORT 2012 p 263 At 31 December 2011 Direct 19 776 33 695 168 Indirect 9 837 655 5 529 881 3 038 387 2 818 552 54 950 Directors’ beneficial interest in Exxaro shares 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 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 There has been no change to the interest of directors in share capital since 31 December 2012 to the date of this report. On 31 December 2012 Mr SA Nkosi held 2,8% (2011: 2,8%), Mr VZ Mntambo held 1,5% (2011: 1,6%), Mr NL Sowazi held 0,8% (2011: 0,9%) and Mr D Zihlangu held 0,8% (2011: 0,8%) directly or indirectly in the share capital of the company. p 264 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards The following options and rights to shares in the company were exercised or outstanding in favour of directors and prescribed ofﬁcers of the company under the company’s share option schemes: Management share option scheme Options held at 31 December 2012 Exercise price Exercisable period Proceeds if exercisable at 31 December 2012 Pre-tax gain if exercisable at 31 December 2012 R R R Year ended 31 December 2012 Executive director WA de Klerk Prescribed officer M Piater WH van Niekerk1 1 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited EXXARO INTEGRATED REPORT 2012 p 265 Options exercised during the year Exercise price Sale price/ market price Pre-tax gain Date exercised R R R 19,62 212,80 1 690 325 17/04/2012 19,62 213,00 19,62 19,62 19,62 19,62 19,62 19,62 19,62 19,62 19,62 199,53 199,51 199,50 199,79 199,85 199,86 199,87 199,91 200,25 1 690 325 872 144 872 144 239 280 104 876 535 323 50 448 45 598 74 439 45 603 21 455 45 699 1 162 721 13/04/2012 22/03/2012 22/03/2012 22/03/2012 22/03/2012 22/03/2012 22/03/2012 22/03/2012 22/03/2012 22/03/2012 8 750 8 750 4 510 4 510 1 330 583 2 976 280 253 413 253 119 253 6 460 p 266 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share option scheme (continued) Options held at 31 December 2011 Exercise price Exercisable period Proceeds if exercisable at 31 December 2011 Pre-tax gain if exercisable at 31 December 20111 R R R Year ended 31 December 2011 Executive director WA de Klerk Prescribed officer M Piater WH van Niekerk 8 750 8 750 4 510 4 510 6 460 6 460 19,62 22/04/2012 1 470 000 1 470 000 1 298 325 1 298 325 19,62 22/04/2011 757 680 757 680 669 194 669 194 19,62 22/04/2011 1 085 280 1 085 280 958 535 958 535 1 Based on a share price of R168,00 which prevailed on 31 December 2011 EXXARO INTEGRATED REPORT 2012 p 267 Options exercised during the year Exercise price Sale price/ market price Pre-tax gain Date exercised R 13,62 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 12,90 3 230 5 445 3 726 134 1 120 631 24 1 202 1 083 800 1 099 1 318 2 365 412 360 3 437 462 148 385 315 1 281 299 904 265 731 832 352 32 360 193 3 766 500 3 081 7 540 5 693 12 657 1 091 179 19 620 R R 155,00 155,00 155,01 155,02 154,70 154,72 154,86 154,87 154,88 155,20 155,22 155,23 155,07 155,29 155,41 155,60 155,62 155,63 155,77 155,84 156,00 156,01 156,02 156,13 156,19 156,22 156,23 144,01 144,00 144,02 143,80 155,10 155,60 156,00 156,01 456 657 773 735 529 502 19 044 158 816 89 488 3 407 170 648 153 764 113 840 156 410 187 591 336 232 58 665 51 304 490 460 65 937 21 124 55 005 45 026 183 311 42 790 129 380 37 956 104 745 119 242 50 452 4 604 531 25 304 493 723 65 560 403 303 987 890 809 545 1 806 154 156 122 25 617 2 797 438 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 08/03/2011 16/03/2011 16/03/2011 16/03/2011 16/03/2011 07/03/2011 07/03/2011 07/03/2011 07/03/2011 p 268 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share option scheme (continued) Options held at 31 December 2011 Exercise price Exercisable period Proceeds if exercisable at 31 December 2011 Pre-tax gain if exercisable at 31 December 2011 R R R Year ended 31 December 2011 Prescribed officer PE Venter Management share appreciation right scheme Rights held at 31 December 2012 Exercise price Exercisable period Proceeds if exercisable at 31 December 2012 Pre-tax gain if exercisable at 31 December 20121 Year ended 31 December 2012 Executive director SA Nkosi WA de Klerk Prescribed officer PT Arran2 R 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 R R 6 536 920 7 060 820 11 395 670 7 685 106 6 174 922 4 192 912 2 366 837 6 873 140 1 920 367 184 517 38 853 438 15 537 773 3 266 770 2 773 290 6 381 440 3 629 782 3 087 292 19 138 574 1 722 110 1 600 430 2 568 800 2 764 502 2 380 196 11 036 038 2 095 372 929 627 3 848 877 907 016 92 253 7 873 145 1 104 596 536 476 1 549 336 690 798 71 124 3 952 330 38 680 41 780 67 430 45 474 36 538 229 902 19 330 16 410 37 760 21 478 18 268 113 246 10 190 9 470 15 200 16 358 14 084 65 302 1 Based on a share price of R169,00 which prevailed on 31 December 2012 2 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited EXXARO INTEGRATED REPORT 2012 p 269 Options exercised during the year Exercise price Sale price/ market price Pre-tax gain Date exercised R 12,90 12,90 12,90 12,90 19,62 19,62 19,62 19,62 19,62 19,62 19,62 19,62 19,62 1 393 318 4 129 400 1 722 2 000 1 207 341 1 866 101 493 866 674 15 510 R R 149,88 149,89 149,95 149,95 169,25 169,31 170,00 170,01 169,50 169,99 170,08 170,50 170,51 190 813 43 563 565 879 54 820 257 663 299 380 181 509 51 283 279 676 15 187 74 177 130 662 101 700 2 246 312 28/02/2011 28/02/2011 28/02/2011 28/02/2011 05/04/2011 05/04/2011 05/04/2011 05/04/2011 05/04/2011 05/04/2011 05/04/2011 05/04/2011 05/04/2011 Options exercised during the year Exercise price Sale price/ market price Pre-tax gain Date exercised R R R p 270 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share appreciation right scheme (continued) Rights held at 31 December 2012 Exercise price Exercisable period Proceeds if exercisable at 31 December 2012 Pre-tax gain if exercisable at 31 December 20121 Year ended 31 December 2012 Prescribed officer MDM Mgojo M Piater WH van Niekerk2 PE Venter M Veti CH Wessels R 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 63,45 126,77 163,95 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 04/05/2016 01/04/2017 01/04/2018 126,77 163,95 01/04/2017 01/04/2018 67,07 126,77 163,95 01/04/2016 01/04/2017 01/04/2018 163,95 01/04/2018 18 340 15 720 27 530 16 358 14 084 92 032 9 840 9 420 16 330 9 380 8 542 53 512 7 980 8 990 14 080 12 190 16 358 14 084 73 682 17 376 14 104 31 480 11 590 7 624 6 168 25 382 2 936 R R 3 099 460 2 656 680 4 652 570 2 764 502 2 380 196 15 553 408 1 662 960 1 591 980 2 759 770 1 585 220 1 443 598 9 043 528 1 348 620 1 519 310 2 379 520 2 060 110 2 764 502 2 380 196 12 452 258 2 936 544 2 383 576 5 320 120 1 958 710 1 288 456 1 042 392 4 289 558 496 184 1 988 056 890 538 2 806 133 690 798 71 124 6 446 649 1 066 656 533 643 1 664 517 396 117 43 137 3 704 070 865 032 509 284 1 435 174 1 286 655 690 798 71 124 4 858 067 733 788 71 225 805 013 1 181 369 321 962 31 148 1 534 479 14 827 1 Based on a share price of R169,00 which prevailed on 31 December 2012 2 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited EXXARO INTEGRATED REPORT 2012 p 271 Options exercised during the year Exercise price Sale price/ market price Pre-tax gain Date exercised R R R 30 540 67,07 207,93 4 301 864 02/05/2012 30 540 7 100 7 020 14 120 60,60 112,35 199,97 199,97 4 301 864 989 527 615 092 1 604 619 28/02/2012 28/02/2012 p 272 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share appreciation right scheme (continued) Year ended 31 December 2011 Rights held at 31 December 2011 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2011 R Pre-tax gain if exercisable at 31 December 20111 R Executive director SA Nkosi WA de Klerk Prescribed officer PT Arran MDM Mgojo M Piater WH van Niekerk 38 680 41 780 67 430 45 474 36 538 229 902 19 330 16 410 37 760 21 478 18 268 113 246 10 190 9 470 15 200 16 358 14 084 65 302 18 340 15 720 27 530 16 358 14 084 92 032 9 840 9 420 16 330 9 380 8 542 53 512 7 980 8 990 14 080 12 190 16 358 14 084 73 682 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 126,77 163,95 60,60 112,35 67,07 63,45 126,77 163,95 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 01/03/2014 01/04/2015 01/04/2016 04/05/2016 01/04/2017 01/04/2018 6 498 240 7 019 040 11 328 240 7 639 632 6 138 384 4 154 232 2 325 057 6 805 710 1 874 893 147 979 38 623 536 15 307 871 3 247 440 2 756 880 6 343 680 3 608 304 3 069 024 19 025 328 1 711 920 1 590 960 2 553 600 2 748 144 2 366 112 10 970 736 3 081 120 2 640 960 4 625 040 2 748 144 2 366 112 15 461 376 1 653 120 1 582 560 2 743 440 1 575 840 1 435 056 8 990 016 1 340 640 1 510 320 2 365 440 2 047 920 2 748 144 2 366 112 12 378 576 2 076 042 913 217 3 811 117 885 538 73 985 7 759 899 1 094 406 527 006 1 534 136 674 440 57 040 3 887 028 1 969 716 874 818 2 778 603 674 440 57 040 6 354 617 1 056 816 524 223 1 648 187 386 737 34 595 3 650 558 857 052 500 294 1 421 094 1 274 465 674 440 57 040 4 784 385 1 Based on a share price of R168,00 which prevailed on 31 December 2011 EXXARO INTEGRATED REPORT 2012 p 273 Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised p 274 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share appreciation right scheme (continued) Year ended 31 December 2011 Rights held at 31 December 2011 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2011 R Pre-tax gain if exercisable at 31 December 20111 R Prescribed officer PE Venter M Veti CH Wessels2 30 540 17 376 14 104 62 020 7 100 7 020 11 590 7 624 6 168 39 502 2 936 67,07 126,77 163,95 01/04/2016 01/04/2017 01/04/2018 60,60 112,35 67,07 126,77 163,95 01/03/2014 01/04/2015 01/04/2016 01/04/2017 01/04/2018 163,95 01/04/2018 5 130 720 2 919 168 2 369 472 10 419 360 1 192 800 1 179 360 1 947 120 1 280 832 1 036 224 6 636 336 493 248 3 082 402 716 412 57 121 3 855 935 762 540 390 663 1 169 779 314 338 24 980 2 662 300 11 891 1 Based on a share price of R168,00 which prevailed on 31 December 2011 2 Appointed effective 1 June 2011 (as group company secretary effective 1 July 2011) EXXARO INTEGRATED REPORT 2012 p 275 Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 19 330 18 110 60,60 112,35 172,27 172,27 2 158 581 1 085 151 06/04/2011 06/04/2011 37 440 3 243 732 p 276 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme — long-term incentive plan Year ended 31 December 2012 Rights held at 31 December 2012 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2012 R Executive director SA Nkosi WA de Klerk Prescribed officer PT Arran2 MDM Mgojo 47 412 36 538 68 565 152 515 21 478 18 268 34 689 74 435 16 358 14 084 28 255 58 697 16 358 14 084 27 812 58 254 01/04/2013 01/04/2014 01/04/2015 01/04/2013 01/04/2014 01/04/2015 01/04/2013 01/04/2014 01/04/2015 01/04/2013 01/04/2014 01/04/2015 8 012 628 6 174 922 11 587 485 25 775 035 3 629 782 3 087 292 5 862 441 12 579 515 2 764 502 2 380 196 4 775 095 9 919 793 2 764 502 2 380 196 4 700 228 9 844 926 1 Based on a share price of R169,00 which prevailed on 31 December 2012 2 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited EXXARO INTEGRATED REPORT 2012 p 277 Pre-tax gain if exercisable at 31 December 20121 R Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 67 438 197,54 13 321 703 13/04/2012 8 012 628 6 174 922 11 587 485 25 775 035 3 629 782 3 087 292 5 862 441 12 579 515 2 764 502 2 380 196 4 775 095 9 919 793 2 764 502 2 380 196 4 700 228 9 844 926 67 438 37 764 37 764 15 202 15 202 27 536 27 536 13 321 703 197,54 7 459 901 03/04/2012 7 459 901 197,54 3 003 003 13/04/2012 3 003 003 197,54 5 439 461 05/04/2012 5 439 461 p 278 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme — long-term incentive plan (continued) Year ended 31 December 2012 Rights held at 31 December 2012 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2012 R Prescribed officer M Piater WH van Niekerk2 PE Venter M Veti CH Wessels 9 380 8 542 15 632 8 606 42 160 16 358 14 084 28 283 58 725 17 376 14 104 28 318 59 798 7 624 6 168 12 424 26 216 2 936 5 345 8 281 01/04/2013 01/04/2014 01/04/2015 01/11/2015 01/04/2013 01/04/2014 01/04/2015 01/04/2013 01/04/2014 01/04/2015 01/04/2013 01/04/2014 01/04/2015 01/06/2014 01/04/2015 1 585 220 1 443 598 2 641 808 1 454 414 7 125 040 2 764 502 2 380 196 4 779 827 9 924 525 2 936 544 2 383 576 4 785 742 10 105 862 1 288 456 1 042 392 2 099 656 4 430 504 496 184 903 305 1 399 489 1 Based on a share price of R169,00 which prevailed on 31 December 2012 2 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited Year ended 31 December 2011 Rights held at 31 December 2011 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2011 R Executive director SA Nkosi 67 438 47 412 36 538 151 388 01/04/2012 01/04/2013 01/04/2014 11 329 584 7 965 216 6 138 384 25 433 184 1 Based on a share price of R168,00 which prevailed on 31 December 2011 EXXARO INTEGRATED REPORT 2012 p 279 Pre-tax gain if exercisable at 31 December 20121 R Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 16 340 197,54 3 227 804 13/04/2012 1 585 220 1 443 598 2 641 808 1 454 414 7 125 040 2 764 502 2 380 196 4 779 827 9 924 525 2 936 544 2 383 576 4 785 742 10 105 862 1 288 456 1 042 392 2 099 656 4 430 504 496 184 903 305 1 399 489 Pre-tax gain if exercisable at 31 December 20111 R 11 329 584 7 965 216 6 138 384 25 433 184 16 340 14 090 12 112 26 202 30 550 30 550 11 596 11 596 197,54 212,65 3 227 804 2 783 339 2 575 617 13/04/2012 17/05/2012 5 358 956 197,54 6 034 847 03/04/2012 6 034 847 197,54 2 290 674 13/04/2012 2 290 674 Options exercised during the year Exercise price R Sale price/market price R Pre-tax gain R Date exercised 41 782 163,95 6 850 159 07/04/2011 41 782 6 850 159 p 280 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme — long-term incentive plan (continued) Year ended 31 December 2011 Rights held at 31 December 2011 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2011 R Executive director WA de Klerk Prescribed officer PT Arran MDM Mgojo M Piater WH van Niekerk PE Venter M Veti MS Viljoen2 CH Wessels3 37 764 21 478 18 268 77 510 15 202 16 358 14 084 45 644 27 536 16 358 14 084 57 978 16 340 9 380 8 542 34 262 14 090 12 112 16 358 14 084 56 644 30 550 17 376 14 104 62 030 11 596 7 624 6 168 25 388 2 936 1 Based on a share price of R168,00 which prevailed on 31 December 2011 2 Retired effective 31 August 2011 3 Appointed effective 1 June 2011 01/04/2012 01/04/2013 01/04/2014 01/04/2012 01/04/2013 01/04/2014 01/04/2012 01/04/2013 01/04/2014 01/04/2012 01/04/2013 01/04/2014 01/04/2012 04/05/2012 01/04/2013 01/04/2014 01/04/2012 01/04/2013 01/04/2014 01/04/2012 01/04/2013 01/04/2014 6 344 352 3 608 304 3 069 024 13 021 680 2 553 936 2 748 144 2 366 112 7 668 192 4 626 048 2 748 144 2 366 112 9 740 304 2 745 120 1 575 840 1 435 056 5 756 016 2 367 120 2 034 816 2 748 144 2 366 112 9 516 192 5 132 400 2 919 168 2 369 472 10 421 040 1 948 128 1 280 832 1 036 224 4 265 184 01/04/2014 493 248 EXXARO INTEGRATED REPORT 2012 p 281 Pre-tax gain if exercisable at 31 December 20111 R 6 344 352 3 608 304 3 069 024 Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 16 418 163,95 2 691 731 01/04/2011 13 021 680 16 418 2 691 731 2 553 936 2 748 144 2 366 112 7 668 192 4 626 048 2 748 144 2 366 112 9 740 304 2 745 120 1 575 840 1 435 056 5 756 016 2 367 120 2 034 816 2 748 144 2 366 112 9 516 192 5 132 400 2 919 168 2 369 472 10 421 040 1 948 128 1 280 832 1 036 224 4 265 184 493 248 9 472 9 472 15 724 15 724 9 422 9 422 8 994 8 994 18 114 18 114 7 022 7 022 4 216 163,95 1 552 934 08/04/2011 1 552 934 163,95 2 577 950 06/04/2011 2 577 950 163,95 1 544 737 08/04/2011 1 544 737 163,95 1 474 566 08/04/2011 1 474 566 163,95 2 969 790 06/04/2011 2 969 790 163,95 1 151 257 08/04/2011 1 151 257 163,95 691 213 05/04/2011 p 282 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme – deferred bonus plan Year ended 31 December 2012 Rights held at 31 December 2012 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2012 R Executive director SA Nkosi WA de Klerk Prescribed officer PT Arran2 MDM Mgojo 1 433 3 527 420 1 492 2 934 569 1 346 3 099 370 15 190 1 003 2 083 262 932 1 542 355 842 1 679 234 8 932 247 832 1 530 223 600 1 186 252 558 1 455 104 6 740 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 28/02/2015 31/03/2015 31/08/2015 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 28/02/2015 31/03/2015 31/08/2015 242 177 596 063 70 980 252 148 495 846 96 161 227 474 523 731 62 530 2 567 110 169 507 352 027 44 278 157 508 260 598 59 995 142 298 283 751 39 546 1 509 508 31/08/2012 41 743 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 28/02/2015 31/03/2015 31/08/2015 140 608 258 570 37 687 101 400 200 434 42 588 94 302 245 895 17 576 1 139 060 1 Based on a share price of R169,00 which prevailed on 31 December 2012 2 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited EXXARO INTEGRATED REPORT 2012 p 283 Pre-tax gain if exercisable at 31 December 20121 R Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 210,29 197,54 153,39 486 821 1 307 715 71 480 12/03/2012 13/03/2012 12/09/2012 210,29 197,54 153,39 1 866 016 345 717 592 620 50 005 09/03/2012 04/04/2012 06/09/2012 2 315 6 620 466 9 401 1 644 3 000 326 242 177 596 063 70 980 252 148 495 846 96 161 227 474 523 731 62 530 2 567 110 169 507 352 027 44 278 157 508 260 598 59 995 142 298 283 751 39 546 1 509 508 4 970 988 342 645 2 586 247 210,29 197,54 153,39 135 637 510 838 37 887 12/03/2012 05/04/2012 12/09/2012 41 743 140 608 258 570 37 687 101 400 200 434 42 588 94 302 245 895 17 576 1 139 060 3 478 684 362 p 284 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme — deferred bonus plan (continued) Year ended 31 December 2012 Rights held at 31 December 2012 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2012 R Prescribed officer M Piater WH van Niekerk2 PE Venter M Veti 688 1 058 181 644 794 250 609 947 167 5 338 247 761 1 357 223 794 1 319 304 749 1 483 7 237 908 213 1 121 498 675 147 510 637 197 134 2 798 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 28/02/2015 31/03/2015 31/08/2015 31/08/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 28/02/2015 31/03/2015 01/03/2013 31/08/2015 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 31/08/2015 116 272 178 802 30 589 108 836 134 186 42 250 102 921 160 043 28 223 902 122 41 743 128 609 229 333 37 687 134 186 222 911 51 376 126 581 250 627 1 223 053 153 452 35 997 189 449 84 162 114 075 24 843 86 190 107 653 33 293 22 646 472 862 1 Based on a share price of R169,00 which prevailed on 31 December 2012 2 Services terminated effective 15 June 2012 as part of the sale of the mineral sands business to Tronox Limited EXXARO INTEGRATED REPORT 2012 p 285 Pre-tax gain if exercisable at 31 December 20121 R Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 210,29 197,54 153,39 199 145 333 843 34 206 12/03/2012 13/04/2012 10/09/2012 210,29 197,54 567 194 273 587 319 027 09/03/2012 10/04/2012 947 1 690 223 2 860 1 301 1 615 116 272 178 802 30 589 108 836 134 186 42 250 102 921 160 043 28 223 902 122 41 743 128 609 229 333 37 687 134 186 222 911 51 376 126 581 250 627 1 223 053 2 916 592 614 153 452 35 997 189 449 84 162 114 075 24 843 86 190 107 653 33 293 22 646 472 862 766 1 262 144 210,29 197,54 153,39 161 082 249 295 22 088 12/03/2012 13/04/2012 12/09/2012 2 172 432 465 p 286 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme — deferred bonus plan (continued) Year ended 31 December 2011 Rights held at 31 December 2011 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2011 R Executive director SA Nkosi WA de Klerk Prescribed officer PT Arran MDM Mgojo 2 315 6 620 466 1 433 3 527 420 1 492 2 934 569 19 776 1 644 3 000 326 1 003 2 083 262 932 1 542 355 11 147 247 645 2 586 247 832 1 530 223 600 1 186 252 8 101 02/03/2012 31/03/2012 31/08/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 02/03/2012 31/03/2012 31/08/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 388 920 1 112 160 78 288 240 744 592 536 70 560 250 656 492 912 95 592 3 322 368 276 192 504 000 54 768 168 504 349 944 44 016 156 576 259 056 59 640 1 872 696 31/08/2012 41 496 02/03/2012 31/03/2012 31/08/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 108 360 434 448 41 496 139 776 257 040 37 464 100 800 199 248 42 336 1 360 968 1 Based on a share price of R168,00 which prevailed on 31 December 2011 EXXARO INTEGRATED REPORT 2012 p 287 Pre-tax gain R 105 553 378 257 38 172 Date exercised 04/03/2011 04/03/2011 16/11/2011 147 147 179 147,01 147,01 179,21 521 982 79 679 205 520 32 616 08/03/2011 08/03/2011 16/11/2011 Pre-tax gain if exercisable at 31 December 20111 R Options exercised during the year Exercise price R Sale price/ market price R 718 2 573 213 3 504 542 1 398 182 388 920 1 112 160 78 288 240 744 592 536 70 560 250 656 492 912 95 592 3 322 368 276 192 504 000 54 768 168 504 349 944 44 016 156 576 259 056 59 640 1 872 696 2 122 317 815 1 194 21 147,01 179,21 175 530 3 763 02/03/2011 21/11/2011 41 496 108 360 434 448 41 496 139 776 257 040 37 464 100 800 199 248 42 336 1 360 968 1 215 179 293 p 288 DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION Directors’ and prescribed ofﬁcers’ share options and restricted share awards (continued) Management share scheme — deferred bonus plan (continued) Year ended 31 December 2011 Rights held at 31 December 2011 Exercise price R Exercisable period Proceeds if exercisable at 31 December 2011 R Prescribed officer M Piater WH van Niekerk PE Venter M Veti 947 1 690 223 688 1 058 181 644 794 250 6 475 1 301 1 615 247 761 1 357 223 794 1 319 304 7 921 908 766 1 262 144 498 675 147 510 637 197 4 836 02/03/2012 31/03/2012 31/08/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 02/03/2012 31/03/2 012 31/08/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 01/03/2013 02/03/2012 31/03/2012 31/03/2012 01/03/2013 31/03/2013 31/08/2013 28/02/2014 31/03/2014 11/11/2014 159 096 283 920 37 464 115 584 177 744 30 408 108 192 133 392 42 000 1 087 800 218 568 271 320 41 496 127 848 227 976 37 464 133 392 221 592 51 072 1 330 728 152 544 128 688 212 016 24 192 83 664 113 400 24 696 85 680 107 016 33 096 812 448 1 Based on a share price of R168,00 which prevailed on 31 December 2011 EXXARO INTEGRATED REPORT 2012 p 289 Pre-tax gain if exercisable at 31 December 20111 R Options exercised during the year Exercise price R Sale price/ market price R Pre-tax gain R Date exercised 1 031 87 147,01 179,21 151 567 15 591 08/03/2011 21/11/2011 159 096 283 920 37 464 115 584 177 744 30 408 108 192 133 392 42 000 1 087 800 218 568 271 320 41 496 127 848 227 976 37 464 133 392 221 592 51 072 1 330 728 152 544 128 688 212 016 24 192 83 664 113 400 24 696 85 680 107 016 33 096 812 448 1 118 120 120 287 113 167 158 179,21 21 505 21/11/2011 21 505 147,01 179,21 42 192 20 251 08/03/2011 21/11/2011 400 62 443 p 290 ABRIDGED GROUP ANNUAL FINANCIAL STATEMENTS Audited condensed group statement of comprehensive income for the year ended 31 December Revenue Operating expenses Operating profit Gains on disposal of non-core assets Net operating profit Interest income Interest expense Income from investments Share of income from equity-accounted investments Profit before tax Income tax expense Profit for the year from continuing operations Profit for the year from discontinued operations Profit for the year Gain/(loss) recognised in other comprehensive income for the year, net of tax Exchange differences on translating foreign operations Cash flow hedges Share of comprehensive income/(loss) of associates Share of comprehensive income of non-controlling interests Notes 9 5 7 7 8 2012 Rm 12 229 (10 533) 1 696 42 1 738 138 (325) 3 3 602 5 156 (537) 4 619 5 028 9 647 68 (33) (21) 122 2011 Restated Rm 12 126 (9 575) 2 551 1 2 552 261 (628) 4 4 745 6 934 (871) 6 063 1 594 7 657 541 800 (40) (254) 35 Total comprehensive income for the year 9 715 8 198 Profit attributable to: Owners of the parent – continuing operations – discontinued operations Non-controlling interests – continuing operations – discontinued operations Profit for the year 9 677 4 634 5 043 (30) (15) (15) 7 653 6 073 1 580 4 (10) 14 9 647 7 657 EXXARO INTEGRATED REPORT 2012 p 291 2012 Rm 9 745 5 706 4 039 (30) (15) (15) 2011 Restated Rm 8 159 6 641 1 518 39 (6) 45 Total comprehensive income attributable to: Owners of the parent – continuing operations – discontinued operations Non-controlling interests – continuing operations – discontinued operations Total comprehensive income for the year 9 715 8 198 Attributable earnings per share: aggregate (cents) – basic – diluted Attributable earnings per share: continuing operations (cents) – basic – diluted Attributable earnings per share: discontinued operations (cents) – basic – diluted Refer to note 11 for details regarding the number of shares. 2 734 2 726 1 309 1 305 1 425 1 421 2 199 2 168 1 745 1 720 454 448 p 292 FINANCIAL CAPITAL Audited reconciliation of headline earnings for the year ended 31 December 2012 Profit for the year attributable to owners of the parent Adjusted for: – IAS 36 Reversal of Impairment of Property, Plant and Equipment – IAS 16 Gains or Losses on Disposal of Property, Plant and Equipment – IFRS 10 Gains on Disposal of Subsidiaries and Other Assets – IAS 28 Excess of Fair Value Over Cost of Investment in Associates – IAS 38 Gains on Disposal of Intangible Assets – IAS 28 Share of Associates’ Gains or Losses on Disposal of Property, Plant and Equipment Headline earnings – continuing operations – discontinued operations 2011 Profit for the year attributable to owners of the parent Adjusted for: – IAS 36 Impairment of Property, Plant and Equipment – IAS 36 Reversal of Impairment of Property, Plant and Equipment – IFRS 10 Gains on Disposal of Subsidiaries – IAS 16 Losses on Disposal of Property, Plant and Equipment – IAS 28 Share of Associates’ Gains or Losses on Disposal of Property, Plant and Equipment Headline earnings – continuing operations – discontinued operations Gross Rm (103) (65) (4 034) (470) (77) (4) (4 753) 516 (869) (1) 3 2 (349) Headline earnings per share: aggregate (cents) – basic – diluted Headline earnings per share: continuing operations (cents) – basic – diluted Headline earnings per share: discontinued operations (cents) – basic – diluted Tax Rm 29 4 1 34 (2) (2) 2012 1 401 1 397 1 130 1 127 271 270 Net Rm 9 677 (74) (61) (4 034) (470) (77) (3) 4 958 3 999 959 7 653 516 (869) (1) 1 2 7 302 6 048 1 254 2011 Restated 2 098 2 069 1 738 1 714 360 355 EXXARO INTEGRATED REPORT 2012 p 293 Audited condensed group statement of ﬁnancial position as at 31 December and 1 January At 31 December 1 January 2012 Rm 2011 Restated Rm 2011 Restated Rm Notes Assets Non-current assets Property, plant and equipment Biological assets Intangible assets Investments in unlisted associates Investments in joint ventures Deferred tax Financial assets Current assets Inventories Trade and other receivables Current tax receivable Cash and cash equivalents Non-current assets classified as held-for-sale 12 Total assets Equity and liabilities Capital and reserves Equity attributable to owners of the parent Non-controlling interests Total equity Non-current liabilities Interest-bearing borrowings Non-current provisions Post-retirement employee obligations Finance lease Deferred tax Current liabilities Trade and other payables Interest-bearing borrowings Current tax payable Current provisions Overdraft Non-current liabilities classified as held-for-sale 12 15 881 55 962 17 154 425 241 2 727 37 445 776 2 642 190 1 364 4 972 42 417 28 794 12 28 806 2 761 2 842 142 106 2 566 8 417 4 099 (9) 172 121 811 5 194 9 584 66 128 4 545 243 227 2 360 17 153 560 2 624 105 1 018 4 307 14 979 36 439 23 588 20 23 608 2 102 2 111 133 1 702 6 048 3 181 836 50 151 4 218 2 565 12 194 46 75 3 662 168 724 2 390 19 259 3 081 3 505 105 2 077 8 768 85 28 112 17 437 (23) 17 414 3 504 2 065 96 1 323 6 988 2 796 688 144 30 3 658 52 Total equity and liabilities 42 417 36 439 28 112 p 294 FINANCIAL CAPITAL Audited group statement of changes in equity Opening balance at 1 January 2011 Profit for the year Other comprehensive income Share of comprehensive income of associates Issue of share capital1 Mpower vesting shares Share-based payments movements Non-controlling interests additional contributions Dividends paid Disposal of subsidiaries Other components of equity Share capital and premium Rm 2 170 15 174 Foreign currency translations Rm Financial instruments revaluation Rm 216 (40) 20 716 800 72 (3) Equity- settled reserve Rm 1 389 23 Balance at 31 December 2011 2 359 1 585 196 1 412 Profit for the year Other comprehensive income Share of comprehensive income of associates Issue of share capital1 Share-based payments movement Dividends paid Acquisition of subsidiaries Disposal of subsidiaries Acquisition of non-controlling interest Balance at 31 December 2012 (33) 118 (21) (17) 15 94 (183) (459) (137) (23) 2 374 1 211 21 1 300 1 Issued to the Kumba Resources Management Share Trust due to options exercised Final dividend paid per share (cents) in respect of the 2011 financial year Dividend paid per share (cents) in respect of the 2012 interim period Final dividend payable per share (cents) in respect of 2012 financial year 500 350 150 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 REPORT 2012 p 295 Retirement benefit obligation reserves Rm Other reserves Rm Retained income Rm 12 946 7 653 1 8 (355) Attributable to owners of the parent Rm Non- controlling interests Rm 17 437 7 653 760 (254) 15 174 23 (2 217) (3) 23 588 9 677 (54) 122 15 (183) (3 012) (619) (740) (2 217) 18 027 9 677 92 (3 012) 1 (164) (163) 8 (1) (740) 733 24 784 28 794 Total equity Rm 17 414 7 657 795 (254) 15 174 25 8 (2 223) (3) 23 608 9 647 (54) 122 15 (183) (3 012) 468 (624) (1 181) 28 806 (23) 4 35 2 8 (6) 20 (30) 468 (5) (441) 12 p 296 FINANCIAL CAPITAL Audited condensed group statement of cash ﬂows for the year ended 31 December Cash flows from operating activities Cash generated by/(utilised in) operations Interest paid Interest received Tax paid Dividends paid Cash flows from investing activities Property, plant and equipment to maintain operations Property, plant and equipment to expand operations Investment in intangible assets Proceeds from disposal of intangible assets Proceeds from disposal of property, plant and equipment Increase in investments in other non-current assets Proceeds from disposal of subsidiaries Increase in joint ventures and associates Acquisition of subsidiaries Proceeds from disposal of financial assets designated through profit or loss Income from equity-accounted investments Income from investments Other investing activities Cash flows from financing activities Interest-bearing borrowings raised Interest-bearing borrowings repaid Consideration paid to non-controlling interests Proceeds from issuance of share capital Increase in loans from non-controlling interests Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year – Cash and cash equivalents before restatement – IFRS 11 early adoption restatement Translation difference on movement in cash and cash equivalents Cash and cash equivalents at end of the year Cash and cash equivalents classified as held-for-sale at end of the period Cash and cash equivalents per statement of financial position Cash and cash equivalents at end of the period Group 2012 Rm 3 969 (345) 208 (277) (3 012) 543 (1 571) (3 762) (36) 77 77 (16) 81 (396) (1 421) 5 4 019 3 (2 940) 5 800 (5 925) (1 181) 15 (1 291) (3 688) 4 118 4 118 123 553 553 553 2011 Restated Rm 6 189 (566) 532 (499) (2 123) 3 533 (1 591) (3 267) (119) 483 (110) 50 3 516 9 (13) (1 042) 338 (953) 15 11 (589) 1 902 2 077 2 140 (63) 139 4 118 3 100 1 018 4 118 EXXARO INTEGRATED REPORT 2012 p 297 NOTES TO THE CONDENSED GROUP ANNUAL FINANCIAL RESULTS (Audited) for the year ended 31 December 1. Basis of preparation The audited condensed group annual ﬁnancial results for the year ended 31 December 2012 have been prepared under the supervision of WA de Klerk CA(SA), reg no: 00133273, in accordance with International Standard on Review Engagements (ISRE) 2410, International Accounting Standard (IAS) 34 Interim Financial Reporting, the requirements of the South African Companies Act No. 71 of 2008, as amended, the AC 500 standards issued by the Accounting Practices Board or its successor and the South African Institute of Charted Accountants (SAICA), Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and in compliance with the Listings Requirements of the JSE Limited (JSE). These condensed group annual ﬁnancial statements have also been prepared in accordance with the framework concepts, measurement and recognition requirements of the International Financial Reporting Standards (IFRS) as required by the JSE. The condensed group annual ﬁnancial statements have been prepared on the historical cost basis, excluding ﬁnancial instruments and biological assets, which are fairly valued, and conform to IFRS as issued by the International Accounting Standards Board (IASB). During 2012 the following accounting pronouncements became effective: • Amendment to IFRS 7 Financial Instruments: Disclosure • Amendment to IFRS 1 First Time Adoption • Amendment to IAS 12 Income Taxes Effective date 1 July 2011 1 July 2011 1 January 2012 These pronouncements had no material impact on the accounting of transactions or the disclosure thereof. During 2012, Exxaro early adopted the suite of consolidation standards issued in 2011, effective 1 January 2013. The early adoption incorporated the following standards: • IFRS 10 Consolidated Financial Statements (as amended) • IFRS 11 Joint Arrangements (as amended) • • IAS 27 Separate Financial Statements (revised) • IAS 28 Investments in Associates and Joint Ventures (revised) IFRS 12 Disclosures of Interest in Other Entities (as amended) The impact of the early adoption of these standards is disclosed in the notes of these condensed group annual ﬁnancial results (refer to note 3). The group has early adopted IAS 19 Employee Beneﬁts (revised) in 2012. The impact of the early adoption on the prior year was considered by management to be immaterial. The accounting standards and amendments issued to accounting standards and interpretations, other than those early adopted, which are relevant to the group, but not yet effective at 31 December 2012, have not been adopted. It is expected that where applicable, these standards and amendments will be adopted on each respective effective date, except where speciﬁcally identiﬁed. There has been no impact on the group by applying IFRS 10 retrospectively. p 298 FINANCIAL CAPITAL 2. Accounting policies The accounting policies, methods of computation and presentation adopted are consistent with those applied in the annual ﬁnancial statements for the year ended 31 December 2011, except as described below in note 3, where joint ventures previously proportionately consolidated are now equity accounted. The group has early adopted the following standards, together with the consequential amendments to other IFRS, for the ﬁnancial year ended 31 December 2012: IFRS 10 Consolidated Financial Statements (as amended) IFRS 10 was issued in May 2011 (and subsequently amended) and replaces all the guidance on control and consolidation in IAS 27 Consolidated and Separate Financial Statements, and SIC-12 Consolidation — Special Purpose Entities. Under IFRS 10, subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The group has applied IFRS 10 retrospectively in accordance with the transition provisions of IFRS 10. IFRS 11 Joint Arrangements (as amended) IFRS 11 was issued in May 2011 (and subsequently amended) and supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities — Non-monetary Contributions by Ventures. On transition, adjustments in accordance with the transition provisions of the standard are recorded at the beginning of the earliest period presented. Before 1 January 2012, the group’s interest in its jointly controlled entities was accounted for using the proportional consolidation method. The investments affected by the early adoption of this IFRS are Mafube Coal Mining Proprietary Limited and South Dunes Coal Terminal Company Proprietary Limited. IAS 19 Employee Beneﬁts (revised) These amendments eliminate the corridor approach and calculate ﬁnance cost based on net funding basis. There was no impact on the prior year as a result of the early adoption of IAS 19 (revised). Changes in accounting policy The group early adopted IFRS 11 Joint Arrangements (as amended), on 1 January 2012. This resulted in the group changing its accounting policy for its interests in the jointly controlled entities. Under IFRS 11, investments in joint arrangements are classiﬁed either as joint operations or joint ventures, depending on the contractual rights and obligations each investor has rather than just the legal structure of the joint arrangement. Under IFRS 11, the above- mentioned jointly controlled arrangements have been assessed and classiﬁed to be joint ventures. Refer to note 3 for further details. In respect of its interest in the joint operation, the group recognises its share of assets, liabilities, revenues and expenses. The group accounts for the assets, liabilities, revenues and expenses in accordance with the IFRS applicable to the pa ticular assets, liabilities, revenues and expenses. EXXARO INTEGRATED REPORT 2012 p 299 The ﬁnancial effects of the change in accounting policies at 1 January 2011 and 31 December 2011 are shown in note 3 below. 3. Early adoption of IFRS 11 Joint arrangements The group had several interests in joint arrangements established as limited liability companies. Under IAS 31, these were assessed as jointly controlled entities and were proportionately consolidated in terms of IAS 31. The group has reassessed the classiﬁcation of its joint arrangements under IFRS 11. Exxaro shareholding interest (%) Previous treatment Revised treatment Mafube Coal Proprietary Limited – joint venture with Anglo Operations Limited South Dunes Coal Terminal Company Proprietary Limited – joint venture with Eskom Enterprises Proprietary Limited and Golang Coal Proprietary Limited Moranbah joint arrangement – joint operation with Anglo American Cennergi Proprietary Limited (note 14) Impact of change in accounting policy on the statement of comprehensive income Revenues Operating expenses Net financing cost Income from investments Share of income from equity accounted investments Profit before tax Tax expense Profit after tax For the period ended 31 December 2011 as previously presented Rm 21 305 (16 924) (291) 9 4 668 8 767 (1 110) 7 657 50 33 50 50 Proportionately consolidated Proportionately consolidated Equity accounted Equity accounted Share of net income, assets and liabilities Acquired in 2012 Share of net income, assets and liabilities Equity accounted For the period ended 31 December 2011 Restated Impact of change in accounting policy Rm 20 962 (16 838) (226) 9 4 745 8 652 (995) 7 657 Rm (343) 86 65 77 (115) 115 p 300 FINANCIAL CAPITAL 3. Early adoption of IFRS 11 (continued) Impact of change in accounting policy on the statement of financial position Assets – Property, plant and equipment – Financial assets – Deferred tax – Investments in joint ventures* – Trade and other receivables – Cash and cash equivalents – Inventories Liabilities – Interest-bearing borrowings – Non-current provisions – Deferred tax – Trade and other payables – Current interest-bearing borrowings For the period ended 31 December 2011 as previously presented Rm 10 695 1 757 228 2 763 1 065 589 2 202 2 166 1 845 3 334 866 For the period ended 31 December 2011 Restated Impact of change in accounting policy Rm 9 584 2 360 227 243 2 624 1 018 560 2 102 2 111 1 702 3 181 836 Rm (1 111) 603 (1) 243 (139) (47) (29) (481) (100) (55) (143) (153) (30) (481) * Relates to investments in joint arrangement classiﬁed as joint ventures in terms of IFRS 11 (as amended) Impact of change in accounting policy on the statement of financial position Assets – Property, plant and equipment – Financial assets – Deferred tax – Investments in joint ventures* – Trade and other receivables – Cash and cash equivalents – Inventories Liabilities – Interest-bearing borrowings – Non-current provisions – Deferred tax – Trade and other payables – Current provisions – Current interest-bearing borrowings For the period ended 1 January 2011 as previously presented Rm For the period ended 1 January 2011 Restated Impact of change in accounting policy Rm Rm 13 305 1 589 726 3 752 2 140 3 120 3 644 2 097 1 352 3 057 33 716 12 194 2 390 724 168 3 505 2 077 3 080 3 504 2 065 1 323 2 796 30 688 (1 111) 801 (2) 168 (247) (63) (39) (493) (140) (32) (29) (261) (3) (28) (493) * Relates to investments in joint arrangement classiﬁed as joint ventures in terms of IFRS 11 (as amended) EXXARO INTEGRATED REPORT 2012 p 301 Impact on statement of cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net increase in cash and cash equivalents For the period ended 31 December 2011 as previously presented Rm 3 802 (1 313) (603) 1 886 For the period ended 31 December 2011 Restated Impact of change in accounting policy Rm 3 533 (1 042) (589) 1 902 Rm (269) 271 14 16 4. Restatement of comparative periods The early adoption of the new suite of consolidation standards has resulted in the restatement of comparative periods. Prior periods have also been represented for discontinued operations. 5. Net operating proﬁt is arrived at after Continuing operations Depreciation, and amortisation of intangible assets Net realised foreign currency exchange gains Net unrealised foreign exchange losses Losses on derivative instruments held for trading Impairment reversals of trade and other receivables Royalties Gains on disposal of non-core assets Profit on disposal of property, plant and equipment Year ended 31 December 2012 Rm (700) 60 (79) (1) 6 (124) 42 139 2011 Restated Rm (665) 177 (20) (154) 228 (33) 1 35 p 302 FINANCIAL CAPITAL 6. Segmental information Reported segments are based on the group’s different products and operations as well as the physical location of these operations and associated products. The numbers below include both the continuing and discontinued operations. Revenue Coal Tied Commercial Mineral sands KZN Sands Namakwa Sands Australia Sands Base metals Rosh Pinah Zincor Inter-segmental Other Total external revenue Continuing operations Discontinued operations Net operating proﬁt/(loss) Coal Tied Commercial Mineral sands KZN Sands1 Namakwa Sands Australia Sands Base metals Rosh Pinah Zincor2 Other3 Other Total net operating profit Continuing operations Discontinued operations Year ended 31 December 2012 Rm 2011 Restated Rm 12 064 12 420 3 449 8 615 3 594 855 1 589 1 150 299 218 81 165 16 122 12 229 3 893 2 105 285 1 820 1 925 680 1 009 236 422 (7) (91) 520 3 105 7 557 1 738 5 819 3 140 9 280 6 587 1 196 2 904 2 487 1 847 698 1 551 (402) 108 20 962 12 126 8 836 3 083 309 2 774 2 678 753 987 938 (1 145) 102 (1 239) (8) (491) 4 125 2 552 1 573 1 2 3 Includes a partial impairment reversal of R103 million (2011: R869 million) of the carrying value of property, plant and equipment at KZN Sands, of which the impairment was initially accounted for in 2009 Includes an impairment of R516 million of the carrying value of property, plant and equipment at Zincor reﬁnery in 2011 Includes proﬁt on sale of R544 million in 2012 EXXARO INTEGRATED REPORT 2012 p 303 7. Net ﬁnancing costs Continuing operations Total interest income Interest income Interest received from joint ventures Finance leases Total interest expense Interest expense and loan costs Interest adjustment on non-current provisions and post-retirement obligations Other Borrowing costs capitalised Net financing costs 8. Discontinued operations Rosh Pinah sale Year ended 31 December 2012 Rm 138 81 42 15 (325) (249) (404) (2) 330 (187) 2011 Restated Rm 261 203 58 (628) (281) (347) (367) On 1 June 2012, the conditions precedent to the sale of Exxaro’s 50,04% shareholding in Rosh Pinah mine operations to a subsidiary of Glencore International plc, were met. Proceeds of the sale transaction (R931 million) were received on 16 June 2012. Mineral sands operations Further regulatory and other approvals related to the transaction between Exxaro and Tronox Incorporated were obtained and the transaction became effective on 15 June 2012. The transaction entailed the combination of Exxaro’s mineral sands operations with the businesses of Tronox under a new Australian holding company, Tronox Limited, which listed on the New York Stock Exchange on 18 June 2012 under the ticker symbol TROX. As part of the Tronox transaction, 74% of the South African mineral sands operations and Exxaro’s 50% interest in the Tiwest joint venture in Australia. Financial information relating to the discontinued operations for the period to the date of disposal is set out below. Year ended 31 December The financial performance and cash flow information Revenue Operating expenses Profit on sale of subsidiaries (note 9) Net operating profit Interest income Interest expense Income from investments Profit before tax Income tax expense Profit for the period from discontinued operations Cash flow attributable to operating activities Cash flow attributable to investing activities Cash flow attributable to financing activities Cash flow attributable to discontinued operations 2012 Rm 3 893 (2 069) 3 995 5 819 64 (230) 5 653 (625) 5 028 1 036 (1 358) (2 778) (3 100) 2011 Restated Rm 8 836 (7 263) 1 573 64 76 5 1 718 (124) 1 594 927 (286) 1 979 2 620 p 304 FINANCIAL CAPITAL 9. Gains on the disposal of investments and non-core assets 9.1 Discontinued operations Year ended 31 December 2012 Consideration received or receivable Cash1 39,2% shares in Tronox Limited at fair value 26% shares in SA mineral sands operations at fair value 26% members’ interest in Tronox Sands LLP at fair value Total disposal consideration Foreign currency translation reserve realised Hedging reserves realised Carrying amount of net assets sold Gain on sale2 1 After net working capital adjustments 2 After tax of Rnil 9.2 Other non-core assets Consideration received or receivable: Cash Total disposal consideration Carrying amount of net assets sold Gain on sale1 1 After tax of Rnil Consideration received or receivable: Cash Total disposal consideration Carrying amount of net assets sold Gain/(loss) on sale1 1 After tax of Rnil Mineral sands Rm 202 10 605 1 181 1 091 13 079 459 137 (10 224) 3 451 Rosh Pinah Rm 931 931 (387) 544 Year ended 31 December 2012 Ndzalama Rm Northfield Rm 5 5 (3) 2 40 40 Year ended 31 December 2011 Turkey Rm Glen Douglas Rm 17 17 (12) 5 33 33 (37) (4) Total Rm 1 133 10 605 1 181 1 091 14 010 459 137 (10 611) 3 995 Total Rm 5 5 37 42 Total Rm 50 50 (49) 1 10. Dividends Total dividends paid in 2012 amounted to R3 012 million, made up of a dividend of R1 771 million that relates to the period to 31 December 2011, which was paid in April 2012, as well as an interim dividend of R1 241 million paid in September 2012. A ﬁnal dividend for 2012 of 150 cents per share (2011: 500 cents per share) was approved by the board of directors on 6 March 2013. The dividend is payable on 15 April 2013 to shareholders who were on the register at 12 April 2013. This ﬁnal dividend, amounting to approximately R537 million (2011: R1 771 million), has not been recognised as a liability in this year-end ﬁnancial information. It will be recognised in shareholders’ equity in the year ending 31 December 2013. EXXARO INTEGRATED REPORT 2012 p 305 Dividend tax of 15% (effective 1 April 2012) is payable by shareholders on the dividends paid during the year. As a result of the STC credits available to the company, the shareholders will not have to pay the dividend tax on the dividends. Issued share capital as at declaration date (number) Company tax reference number 357 787 785 9218/098/14/4 Year ended 31 December 2012 2011 Audited 11. Share capital Ordinary shares (million) – in issue – weighted average number of shares – diluted weighted average number of shares 12. Non-current assets classiﬁed as held-for-sale The major classes of assets and liabilities classified as held-for-sale Assets Property, plant and equipment Intangible assets Deferred tax Financial assets Inventories Trade and other receivables Current tax receivable Cash and cash equivalents Liabilities Interest-bearing borrowings Non-current provisions Current provisions Deferred tax Trade and other payables Current tax payable Total at end of the year 358 354 355 Year ended 31 December 2012 Rm 354 348 353 2011 Rm 6 771 132 465 158 2 404 1 931 18 3 100 14 979 (834) (682) (10) (69) (967) (3) (2 565) 12 414 Included in 2011 were the assets and liabilities of Rosh Pinah, the Australian and South African mineral sands operations which were effectively sold in 2012. p 306 FINANCIAL CAPITAL 13. Business combinations On 14 February 2012, the group acquired a controlling interest of 67% of the share capital of African Iron Ore Limited (AKI), for AU$190 million (R1 562 million), which is included in the “other” business segment. The acquisition is classiﬁed as an acquisition of a business. AKI is a junior mining, exploration and development company previously listed on the Australian Stock Exchange, working on the development and exploration of the Mayoko Iron Ore Ngoubou-Ngoubou Projects in the Republic of Congo in Central West Africa. The acquired business is still in development state, and thus has not contributed any revenues to the group results. It has also contributed R9 million losses to the group’s operating proﬁt for the period from 14 February 2012 to 31 December 2012. If the date of acquisition was 1 January 2012, revenue contribution from this business would have been Rnil, while the net operating loss would have been R21,8 million. The goodwill of AU$102 million (R827 million) at acquisition, arising from the acquisition relates to the future potential upside of the business and deferred tax on the mineral asset. The following summarises the consideration paid for the AKI group, the fair value of the assets acquired, liabilities assumed and the non-controlling interest at the acquisition date. Details of the acquired assets Purchase consideration: Cash consideration at 14 February 2012 Total consideration transferred Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents Property, plant and equipment Trade and other receivables Trade and other payables Deferred tax liabilities Total identifiable net assets Non-controlling interest Goodwill Total Total purchase consideration Less: cash and cash equivalents in subsidiary acquired Cash outflow on acquisition of subsidiary Year ended 31 December 2012 Rm 1 562 1 562 141 1 537 6 (25) (456) 1 203 (468) 827 1 562 1 562 (141) 1 421 EXXARO INTEGRATED REPORT 2012 p 307 As part of the acquisition, Exxaro acquired AKI’s duty to pay a deferred consideration in the form of a production royalty of AU$1/tonne of iron ore shipped. Acquisition-related costs of R41 million have been charged to operating expenses in the consolidated statement of comprehensive income for the period ended 31 December 2012. Non-controlling interest has been measured using the proportionate share of the acquiree’s net identiﬁable assets. At acquisition, non-controlling interests were identiﬁed as the remaining 33% in AKI and 8% in DMC Iron Congo SA. There are no contingent consideration arrangements with the former owners of AKI. The fair value of trade and other receivables is R6 million and includes no trade receivables as the business is still in exploration and development phase. The gross contractual amount for other receivables due is R6 million, all of which is expected to be collectible. Transactions with non-controlling interests During March 2012, the group acquired the remaining 33% of the issued shares of the AKI for a purchase consideration of AU$123 million (R1 049 million). The group now holds 100% of the equity share capital of AKI. The carrying amount of the 33% non-controlling interests in AKI on the date of acquisition was R397 million. During June 2012, the group acquired an additional 5% of the issued share capital of DMC Iron Congo SA for a purchase consideration of AU$16,5 million (R133 million). The carrying amount of the 5% non-controlling interests of DMC Iron Congo SA on the date of acquisition was R44 million. The group now holds 97% of the equity share capital of DMC Iron Congo SA. The group derecognised non-controlling interests of R441 million and recorded a decrease in equity attributable to owners of the parent of R740 million. The effect of changes in the ownership interest of AKI and DMC Iron Congo SA on the equity attributable to owners of the company during the year is summarised as follows: Carrying amount of non-controlling interests acquired Excess of consideration paid recognised in parent’s equity Consideration paid for non-controlling interest 14. Investments Market value of listed investments Fair value of unlisted investments in associates and joint ventures Market value of listed investments in associates Fair value of unlisted investments included in other financial assets Fair value of unlisted investments in non-current assets held-for-sale Year ended 31 December 2012 Rm (441) (740) (1 181) Year ended 31 December 2012 Rm 52 29 963 7 911 716 2011 Restated Rm 44 23 698 389 4 p 308 FINANCIAL CAPITAL 14. Investments (continued) On 2 March 2012, Exxaro Resources Limited and The Tata Power Company Limited (Tata Power), through its subsidiary Khopoli Investments, announced the formation of a 50:50 joint venture to create a new energy company, Cennergi Proprietary Limited. Cennergi, which will be based in South Africa and will focus on the investigation of feasibility, development, ownership, operation, maintenance, acquisition and management of electricity generation projects in South Africa, Botswana and Namibia. The initial project pipeline focuses on renewable energy projects in South Africa and Cennergi’s strategy is to create a balanced portfolio of generation assets. On 15 June 2012, Exxaro Resources Limited acquired 39,2% of the shares in Tronox Limited (an Australian holding company) and a 26% members interest in Tronox Sands LLP. The consideration comprised the transfer of the following to Tronox Limited and Tronox Sands LLP: • 74% of the shares and intercompany debt in Exxaro’s South African mineral sands operations (Namakwa Sands and KZN Sands mines and smelters); and • Exxaro’s 50% interest in the Tiwest joint venture in Australia. Exxaro retained a direct 26% shareholding in each of the South African operations. In addition to the initial investment, Exxaro has since increased its shareholding to 44,65% as at 31 December 2012. The investments in Tronox Limited and Tronox Sands LLP have been accounted for as an investment in an associate using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures. 15. Net (debt)/cash1 Calculation of movement in net debt: Net cash (outflow)/inflow – shares issued – loans from non-controlling interests – share-based payments – consideration paid to non-controlling interests – net debt of subsidiaries disposed – 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 – cash flow changes relating to change in accounting policy (Increase)/decrease in net debt 1 Non-IFRS information Year ended 31 December 2012 Rm (2 397) 15 (1 181) 820 (70) 268 2011 Restated Rm 2 491 15 11 (2) 125 (8) (151) 64 (2 545) 2 546 Net (debt)/cash is calculated as being interest-bearing borrowings, less cash and cash equivalents, including those classiﬁed as non-current assets held-for-sale. EXXARO INTEGRATED REPORT 2012 p 309 16. Contingent liabilities Contingent liabilities Year ended 31 December 2012 Rm 1 055 2011 Restated Rm 1 197 Contingent liabilities include guarantees in the normal course of business from which it is anticipated that no material liabilities will arise. This includes guarantees to banks and other institutions. The decrease in possible claims from ongoing litigation as well as operational guarantees in 2012 is mainly attributable to the sale of the mineral sands operations and Rosh Pinah, partially offset by the increase in the group’s share of contingent liabilities of associates and joint ventures. This includes the group’s share of contingent liabilities of associates and joint ventures of R276 million (2011: R198 million). These contingent liabilities have no tax impact. The timing and occurrence of any possible outﬂows are uncertain. 17. Contingent assets Contingent assets Year ended 31 December 2012 Rm 85 2011 Restated Rm 82 A surrender fee of R85 million (2011: R82 million) in exchange for the exclusive right to prospect, explore, investigate and mine for coal within a designated area in Central Queensland and Moranbah, Australia, conditional on the grant of a mining lease. 18. Related party transactions During the period 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 were subject to terms that are no less favourable than those arranged with third parties. 19. Financial instruments No reclassiﬁcation of ﬁnancial instruments occurred during the period under review. 20. Going concern Taking into account the global economy, the group’s liquidity position as well as internal budgets for the short to medium term, it is expected that the group will continue to trade as a going concern within the next 12 months. 21. JSE Limited Listings Requirements The ﬁnancial year-end results announcement has been prepared in accordance with the Listings Requirements of the JSE Limited. 22. Corporate governance During 2012, the company again reviewed its application of the principles contained in the King Report on Governance for South Africa 2009 (King III), which application and explanation has been disclosed in detail in this Integrated Report. Other than the board of directors not consisting of a majority of independent directors, which will be fully explained in the Integrated Report, and some improvements required in respect of full application of the principles dealing with the Governance of Information Technology, the company applies the King III principles. p 310 FINANCIAL CAPITAL 23. Mineral resources and mineral reserves The annual revision of Exxaro’s mineral resources and mineral reserves is in process. This includes the compilation of updated geological models as well as audits done on information, estimation methods, modifying factors resources and the modelling. The revised estimated mineral resources and mineral reserves has been published in the annual report. 24. Events after the reporting period Subsequent to the reporting date of 31 December 2012, Mr U Khumalo resigned as non-executive director effective 31 January 2013. The directors are not aware of any signiﬁcant matter or circumstance arising after the statement of ﬁnancial position date up to the date of this report, not otherwise dealt with in this report. 25. Independent external auditor opinion The abridged consolidated ﬁnancial statements derived from the audited consolidated ﬁnancial statements of Exxaro Resources Limited for the year ended 31 December 2012 as set out page 290 to 311, are consistent, in all material respects, with those consolidated ﬁnancial statements, in accordance with the requirements of the JSE Limited Listings Requirements for abridged reports, set out in note 1 to the abridged consolidated ﬁnancial statements, and the requirements of the Companies Act of South Africa as applicable to summary ﬁnancial statements. The independent external auditors, PricewaterhouseCoopers, have audited the abridged consolidated ﬁnancial statements as set out on page 290 to 311 in accordance with International Standards on Auditing 810 — “Engagements to report on summary ﬁnancial statements”. Their unqualiﬁed audit report is available for inspection at the company’s registered ofﬁce. EXXARO INTEGRATED REPORT 2012 p 311 26. Salient features1 Net asset value per share (Rand) Capital expenditure – incurred – contracted – authorised, but not contracted Capital expenditure contracted relating to captive mines, Tshikondeni, Arnot and Matla, which will be financed by ArcelorMittal SA Limited and Eskom, respectively Operating lease commitments Operating sublease rentals receivable 1 Non-IFRS numbers Year ended 31 December 2012 Rm 80 5 333 6 283 4 208 116 18 1 2011 Restated Rm 67 4 858 7 614 2 413 90 59 4 12 additional information Secondary crusher for the Dense Medium Separation plant at Leeuwpan p 314 MINING CHARTER SCORECARD Element Reporting Ownership Description Measure Has the company reported the level of compliance with the charter for the calendar year Documentary proof of receipt from the department Minimum target for effective HDSA ownership Meaningful economic participation Full shareholder rights Housing and living conditions Conversion and upgrading of hostels to attain the occupancy rate of one person per room Percentage reduction of occupancy rate towards 2014 target Conversion and upgrading of hostels into family units Percentage conversion of hostels into family units Procurement and enterprise development Procurement spent on BEE entity Capital goods Services Consumable goods Multinational suppliers contribution to the social fund Annual spend on procurement from multinational suppliers Employment equity 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 mining, beneﬁciation as well as environmental conservation Top management (board) Senior management Middle management Junior management HRD expenditure as percentage of total annual payroll (excluding mandatory skills development levy) EXXARO INTEGRATED REPORT 2012 p 315 Compliance target for 2011 Progress Annually Reports submitted annually per mining right to the DMR 15% 15% 52,14% 52,14% Occupancy rate of one person per room by 2014 Family units established by 2014 Accommodation • Exxaro provides accommodation to 22% of its employees • Number of people in hostel rooms — 6 • Number of employees accommodated in single quarters (one person per room) — 1 038 • Number of employees staying in family units — 740 • Number of company houses sold to employees — 606 Housing allowance 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% 3% 59% 37% 47% 60% 34% 54% 64% 5,5% p 316 MINING CHARTER SCORECARD Element Description Measure Mine community development Conduct ethnographic community consultative and collaborative processes to delineate community needs analysis Implement approved community projects Sustainable development and growth Improvement of the industry’s environmental management Implement approved environmental management programmes (EMPs) Improvement of the industry’s mine health and safety performance Implementation of tripartite action plan on health and safety Utilisation of South Africa-based research facilities for analysis of samples across the mining value Percentage of samples in South African facilities EXXARO INTEGRATED REPORT 2012 p 317 Compliance target for 2011 Progress Up-to-date project implementation by 2014 100% by 2014 100% by 2014 100% by 2014 • Continual engagement with all stakeholders (ie authorities, interested and affected parties) ensures a collaborative approach in implementing Exxaro’s community projects • Total spend on socio-economic development in 2012 was 1,79% of adjusted net proﬁt after tax Implementation of approved EMPs: Exxaro assesses progress towards achieving objectives, monitors environmental changes and updates EMPs, performs audits, and assesses ﬁnancial provision. All operations with EMPs are committed to concurrent rehabilitation and closure planning. Programmes are in place to achieve the compliance target by 2014. Culture transformation • Leadership strategies (programmes implemented) • Risk management (programmes implemented) • Bonuses and performance incentives (programmes implemented) • Leading practices (programmes implemented) • Elimination of discrimination (programmes developed). MOSH leading practices adopted at Exxaro • Dust suppression (adoption and rollout) • Hearing protective devices (setting up an adoption site) • Fall of ground (adopted) • Collision avoidance system (adopted). In 2012, Exxaro started investigating adoption of a dust and noise audit tool (MHSC). Health: 100% of mandatory reports submitted. HIV/Aids: ongoing testing, provision of treatment or access to treatment. TB: implementing a management standard aligned with the departments of mineral resources and health. Exxaro’s operations, its research and development department and its projects generate large volumes of samples for analyses. These were predominantly analysed in South Africa at in-house or contracted off-site South Africa-based laboratories during 2012. Exxaro funds four tertiary chairs as part of its research-support initiatives: • Exxaro chair in global change and sustainability at University of the Witwatersrand (Wits) • Exxaro chair in business and climate change at the University of South Africa (Unisa) • Exxaro chair in biodiversity and business at University of Pretoria • Exxaro chair in energy efﬁciency at the University of Pretoria. p 318 MINING CHARTER SCORECARD Element Description Measure Beneﬁciation Contribution towards beneﬁciation (effective from 2012) Added production volume contributory to local value addition beyond the baseline EXXARO INTEGRATED REPORT 2012 p 319 Compliance target for 2011 Progress Section 26 of MRPDA (% above baseline) Exxaro is in the business of mining and beneﬁciating minerals. Most of its coal is sold as ﬁnal product for use by customers to generate electricity and as reagent in metallurgical processes. Exxaro does not beneﬁt from incentives in the mining charter for beneﬁciation as the group cannot offset ownership with beneﬁciation initiatives; it is black-owned. Exxaro is a founder member of South African Minerals to Metals Research Institute (SAMMRI) which is an industry- and government-supported academic institution. The partnership with SAMMRI is to conduct medium- to long-term research on beneﬁciation to develop value-adding technologies and internal skills (HDSA) in South Africa. A coal downstream project is our market coke initiative, where we are investigating the production of market coke as a reductant for the chrome industry. The ﬁrst full production year for the Exxaro char plant was 2008. Grootegeluk beneﬁciates its coal in the char plant and the product is sold locally to ferroalloy smelters as 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 tar. In 2012, char production was reduced due to electricity buy-backs by Eskom from the ferroalloy industry, reducing demand for char by Exxaro’s ferroalloy customers. Tronox (in which Exxaro has a large shareholding) 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 medium to long term and ongoing. Exxaro has been developing the AlloyStreamTM process and associated technology as reported on page 204. p 320 ASSURANCE STATEMENT Independent assurance report to the Directors of Exxaro Resources Limited We have been engaged by the directors of Exxaro Resources Limited (“Exxaro” or the “Company”) to perform an assurance engagement in respect of Selected Identiﬁed Sustainability Information reported in Exxaro’s Integrated Annual Report for the year ended 31 December 2012 (the “Report”). This report is produced in accordance with the terms of our contract with the Company dated 27 September 2012. Independence and expertise We have complied with the International Federation of Accountants’ Code of Ethics for Professional Accountants, which includes comprehensive independence and other requirements founded on fundamental principles of integrity, objectivity, and professional competence and due care, conﬁdentiality and professional behaviour. Our engagement was conducted by a multidisciplinary team of health, safety, environmental and assurance specialists with extensive experience in sustainability reporting. Scope and subject matter The subject matter of our engagement and the related levels of assurance that we are required to provide are as follows: Reasonable assurance The following identiﬁed sustainability information in the report was selected for an expression of reasonable assurance: (a) Number of fatalities (pages 72, 75, 78, 90, 91, 92) (b) Number of lost-time injuries (LTIs) — employees (page 92) (c) Number of lost-time injuries (LTIs) — employees and contractors (page 89) (d) Lost-time injury frequency rate (LTIFR) — employees (pages 72, 75, 78, 90, 91, 92) (e) Lost-time injury frequency rate (LTIFR) — employees and contractors (pages 72, 75, 78, 90, 91, 92) (f) Total diesel used (GJ) (page 152) (g) Total Sasol gas used (GJ) (page 152) (h) Total electricity used (GJ) (page 152) (i) Scope 2 emissions (CO2 tonnes) (pages 128, 154) (j) Status of integrated water user license (IWUL) applications (pages 120, 132) (k) Number of amendments made to the approved environmental management programme reports (EMPRs) (page 120) (l) Ownership (% ownership by historically disadvantaged South Africans (HDSAs) (page 72) (m) Procurement from HDSA suppliers (R-value and % spend of total procurement) (pages 72, 198) (n) Employment equity (total number of employees per race, gender and grade) (page 96) (o) Percentage conversion of hostels into family units (page 102) Limited assurance The following identiﬁed sustainable development information in the report was selected for an expression of limited assurance: (a) Total number of people participating in voluntary counselling and testing (VCT) (page 107) EXXARO INTEGRATED REPORT 2012 p 321 (b) Number of employees tested positive for HIV — prevalence (%) (pages 58, 78, 107) (c) Number of reported cases of pneumoconiosis (page 105) (d) Number of reported cases of occupational TB (page 105) (e) Number of reported cases of noise induced hearing loss (NIHL) (page 105) (f) Scope 1 emissions (CO2 tonnes) (page 128) (g) Scope 3 emissions (CO2 tonnes) (page 128) (h) Number of level 2 and 3 environmental incidents (page 125) (i) Total water withdrawal by source (m3) (page 132) (j) Environmental fallout dust: Number of sites (single bucket points) (page 123) (k) Environmental fallout dust: Number of months exceeding 600mg/m2/day (page 123) (l) Environmental fallout dust: Number of months exceeding 1200mg/m2/day (page 123) (m) Disturbances versus land rehabilitation (hectares) (page 148) (n) Hazardous waste generated from managed coal operations (tonnes) (page 151) (o) Radioactive waste (compliance to National Nuclear Regulator) (page 151) The self declared B+ GRI application level (page 01) was also selected for an expression of limited assurance. We refer to information described above as the Selected Identiﬁed Sustainability Information. We have not carried out any work on data reported for prior reporting periods except for data that was included in the prior year’s assurance scope, nor have we performed work in respect of future projections and targets. We have not conducted any work outside of the agreed scope and therefore restrict our opinion to the Selected Identiﬁed Sustainability Information. Respective responsibilities of the directors and PricewaterhouseCoopers Inc. The directors of Exxaro are responsible for selection, preparation and presentation of the Selected Identiﬁed Sustainability Information in accordance with the criteria set out in Exxaro’s internal corporate reporting policies and procedures and the Global Reporting Initiative’s (GRI) G3 guidelines, collectively referred to as the “Reporting Criteria”. The directors of Exxaro are also responsible for such internal control as the directors determine is necessary to enable the preparation of the Selected Identiﬁed Sustainability Information that are free from material misstatements, whether due to fraud or error. Our responsibility is to form an independent conclusion, based on our assurance procedures, on whether the Selected Identiﬁed Sustainability Information selected for reasonable assurance has been prepared, in all material respects, in accordance with the Reporting Criteria. We further have a responsibility to form an independent conclusion, based on our limited assurance procedures, on whether anything has come to our attention to indicate that the Selected Identiﬁed Sustainability Information selected for limited assurance has not been prepared, in all material respects, in accordance with the Reporting Criteria. This report, including the conclusions, has been prepared solely for the directors of the Company as a body, to assist the directors in reporting on the Company’s sustainability p 322 ASSURANCE performance and activities. We permit the disclosure of this report within the Report for the year ended 31 December 2012, to enable the directors to demonstrate they have discharged their governance responsibilities by commissioning an independent assurance report in connection with the report. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the directors as a body and the Company for our work or this report save where terms are expressly agreed and with our prior consent in writing. Assurance work performed We conduct assurance engagements in accordance with International Standard on Assurance Engagements 3000 — ‘Assurance Engagements other than Audits and Reviews of Historical Financial Information’ issued by the International Auditing and Assurance Standards Board (“ISAE 3000”). This standard requires that we comply with ethical requirements and that we plan and perform the assurance engagement to obtain either reasonable or limited assurance on the Selected Identiﬁed Sustainability Information as per the terms of our engagement. Our work included examination, on a test basis, of evidence relevant to the Selected Identiﬁed Sustainability Information. It also included an assessment of the signiﬁcant estimates and judgements made by the directors in the preparation of the Selected Identiﬁed Sustainability Information. We planned and performed our work so as to obtain all the information and explanations that we considered necessary in order to provide us with sufﬁcient evidence on which to base our conclusion in respect of the Selected Identiﬁed Sustainability Information. Our work consisted of: • reviewing processes that Exxaro have in place for determining the identiﬁed sustainability information included in the report; • obtaining an understanding of the systems used to generate, aggregate and report the Selected Identiﬁed Sustainability Information; • conducting interviews with management at the sampled operations and at head ofﬁce; • applying the assurance criteria in evaluating the data generation and reporting processes; • performing control walkthroughs; • testing the accuracy of data reported on a sample basis for limited and reasonable assurance; • reviewing the consolidation of the data at head ofﬁce to obtain an understanding of the consistency of the reporting processes compared with prior years and to obtain explanations for deviations in performance trends; • reviewing the consistency between the identiﬁed sustainability information and related statements in Exxaro’s Report; and • reviewing the accuracy of Exxaro’s self-declaration of the GRI (G3) application level in the Report. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement under ISAE 3000. Consequently, the nature, timing and extent of procedures for gathering sufﬁcient appropriate evidence are deliberately limited relative to a reasonable assurance engagement, and therefore less assurance is obtained with a limited assurance engagement than for a reasonable assurance engagement. EXXARO INTEGRATED REPORT 2012 p 323 The procedures selected depend on our judgement, including the assessment of the risk of material misstatement of the Selected Identiﬁed Sustainability Information, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of the Selected Identiﬁed Sustainability Information in order to design procedures that are appropriate in the circumstances. We believe that the evidence we have obtained is sufﬁcient and appropriate to provide a basis for our conclusions. Inherent limitations Non-ﬁnancial performance information is subject to more inherent limitations than ﬁnancial information, given the characteristics of the subject matter and the methods used for determining, calculating, sampling and estimating such information. The absence of a signiﬁcant body of established practice on which to draw allows for the selection of different but acceptable measurement techniques, which can result in materially different measurements and can impact comparability. Qualitative interpretations of relevance, materiality and the accuracy of data are subject to individual assumptions and judgements. The precision of different measurement techniques may also vary. Furthermore, the nature and methods used to determine such information, as well as the measurement criteria and the precision thereof, may change over time. It is important to read the report in the context of the Reporting Criteria referred to where Selected Identiﬁed Sustainability Information appears in the Report. In particular, conversion factors used to calculate carbon emission information are based upon information and factors derived by independent third parties. Conclusions Reasonable assurance Based on the results of our procedures, in our opinion, the identiﬁed sustainability information selected for reasonable assurance for the year ended 31 December 2012, has been prepared, in all material respects, in accordance with the Reporting Criteria. Limited assurance Based on the results of our procedures nothing has come to our attention that causes us to believe that the identiﬁed sustainability information selected for limited assurance for the year ended 31 December 2012, has not been prepared, in all material respects, in accordance with the Reporting Criteria. Other matters The maintenance and integrity of the Exxaro’s website is the responsibility of Exxaro’s management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the report or our independent assurance report that may have occurred since the initial date of presentation on the Exxaro website. PricewaterhouseCoopers Inc. Director: Marthie Crafford Registered Auditor Johannesburg 28 March 2013 p 324 SHAREHOLDERS ANALYSIS Registered shareholder spread as at 31 December 2012 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 Number of holders % of total shareholders Number of shares % of issued capital 36 341 4 456 643 131 21 87,37 10,72 1,55 0,32 0,04 9 021 687 12 734 653 19 627 552 33 137 074 283 266 819 2,52 3,56 5,49 9,26 79,17 41 5921 100,00 357 787 785 100,00 1 The large increase in number of holders (2011: 23 853) is due to some nominee holdings having previously been consolidated, whereas disclosure is now based on beneﬁcial holders Public and non-public shareholdings Shareholder Non-public shareholders Main Street 333 Proprietary Limited Anglo South Africa Capital Proprietary Limited Kumba Management Share Trust Exxaro Employee Empowerment Share Trust Konar L Mohring RP De Klerk WA Nkosi SA2 Mntambo VZ3 Sowazi NL3 Zihlangu R3 Subsidiary directors Public shareholders Total Number of holders % of total shareholders Number of shares % of issued capital 25 1 1 1 1 1 1 1 1 1 1 1 14 41,567 41,592 0,06 231 534 911 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,03 186 550 873 34 730 282 159 038 3 020 517 6 168 1 000 71 476 9 890 207 5 529 881 3 038 387 2 818 552 6 958 195 99,94 126 252 874 64,7 52,14 9,71 0,04 0,85 0,00 0,00 0,024 0,015 1,94 35,30 100,00 357 787 785 100,00 Includes 9 837 655 indirectly through Main Street 333 Proprietary Limited and 15 190 indirectly through the Kumba Management Share Trust 2 3 Shares held indirectly through Main Street 333 Proprietary Limited 4 5 Excludes 9 837 655 held indirectly through Main Street 333 Proprietary Limited Includes direct and indirect holding Substantial investment management and beneficial interests above 3% Beneficial shareholdings Main Street 333 Proprietary Limited Anglo American South Africa Limited Government Employees Pension Fund (PIC) Total Total shareholding 186 550 873 34 730 282 26 099 964 247 381 119 % 52,14 9,71 7,29 69,14 EXXARO INTEGRATED REPORT 2012 p 325 Total shareholding % of issued capital 186 550 873 38 750 015 39 385 094 35 038 500 17 093 603 14 092 693 9 356 021 6 785 290 3 020 517 1 412 229 923 395 581 899 437 300 407 292 380 857 92 901 89 336 47 660 3 342 310 52,14 10,83 11,01 9,79 4,78 3,94 2,61 1,90 0,84 0,39 0,26 0,16 0,12 0,11 0,11 0,03 0,02 0,01 0,95 357 787 785 100,00 Beneficial shareholder categories Category Black economic empowerment Pension funds Unit trusts/mutual fund Corporate holding Private investors Other managed funds Insurance companies Sovereign wealth Employees Custodians American depository receipts Exchange-traded fund Investment trust Local authority Hedge fund Stock brokers University Charity Remainder Total p 326 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 12th annual general meeting of shareholders of Exxaro will be held at the Exxaro Corporate Centre, Roger Dyason Road, Pretoria West, South Africa, at 10:00 on Friday, 24 May 2013 to consider, and if deemed ﬁt, pass with or without modiﬁcation, the following resolutions as set out in this notice. The board of directors of the company has determined, in accordance with section 59 of the Companies Act No. 71 of 2008, as amended (Companies Act), that the record date for shareholders to receive the notice of annual general meeting (the posting record date) is Friday, 12 April 2013 and the record date for shareholders to be recorded as such in the shareholders’ register, maintained by the transfer secretaries of the company, to be able to attend, participate in and vote at the annual general meeting (the voting record date) is Friday, 17 May 2013. Therefore the last day to trade in the company’s shares on the JSE to be recorded in the share register on the voting record date is Friday, 10 May 2013. 1 Presentation of audited annual ﬁnancial statements The annual ﬁnancial statements of the company and the consolidated group, including the reports of the directors, group audit committee and independent auditors for the year ended 31 December 2012 will be presented to shareholders as required in terms of section 30(3)(d) of the Companies Act. 2 Presentation of group social and ethics committee report A report of the members of the group social and ethics committee for the year ended 31 December 2012 will be presented to shareholders as required in terms of regulation 43 of the Companies Regulations, 2011. 3 Ordinary resolution number 1: election of directors To elect by separate resolutions the following directors: Messrs JJ Geldenhuys, NB Mbazima, VZ Mntambo and Dr MF Randera. Brief résumés for these directors appear on page 343 of this report. The board of directors has assessed the performance of the directors standing for re-election and has found them suitable for reappointment. Mr NB Mbazima and Dr MF Randera, having been appointed since the last annual general meeting of the company, are, in accordance with the provisions of clause 6.2(2) of the company’s memorandum of incorporation, obliged to retire at this annual general meeting and, being eligible, offer themselves for re-election. Ordinary resolution number 1.1 “RESOLVED that Mr NB Mbazima be and is hereby re-elected as a director of the company with effect from 24 May 2013.” Ordinary resolution number 1.2 “RESOLVED that Dr MF Randera be and is hereby re-elected as a director of the company with effect from 24 May 2013.” EXXARO INTEGRATED REPORT 2012 p 327 Messrs JJ Geldenhuys and VZ Mntambo are obliged to retire by rotation at this annual general meeting in accordance with the provisions of clause 6.2(1) of the company’s memorandum of incorporation. Having so retired and being eligible, they offer themselves for re-election. Ordinary resolution number 1.3 “RESOLVED that Mr JJ Geldenhuys be and is hereby re-elected as a director of the company with effect from 24 May 2013.” Ordinary resolution number 1.4 “RESOLVED that Mr VZ Mntambo be and is hereby re-elected as a director of the company with effect from 24 May 2013.” For the above resolutions to be passed, votes in favour must represent at least 50% +1 of all votes cast and/or exercised at the meeting. 4 Ordinary resolution number 2: election of group audit committee members To elect by separate resolutions a group audit committee comprising independent, non-executive directors, as provided in section 94(4) of the Companies Act and appointed in terms of section 94(2) of the Companies Act to hold ofﬁce until the next annual general meeting to perform the duties and responsibilities stipulated in section 94(7) of the Companies Act and the King III Report on Governance for South Africa 2009 and to perform such other duties and responsibilities as may from time to time be delegated by the board of directors for the company and all subsidiary companies. The board of directors has assessed the performance of the group audit committee members standing for re-election and has found them suitable for reappointment. Brief résumés for these directors appear on page 208 of this report. Ordinary resolution number 2.1 “RESOLVED that Mr JJ Geldenhuys be and is hereby re-elected as a member of the group audit committee with effect from 24 May 2013.” Ordinary resolution number 2.2 “RESOLVED that Mr RP Mohring be and is hereby re-elected as a member of the group audit committee with effect from 24 May 2013.” Ordinary resolution number 2.3 “RESOLVED that Mr J van Rooyen be and is hereby re-elected as a member and chairman of the group audit committee with effect from 24 May 2013.” For the above resolutions to be passed, votes in favour must represent at least 50% +1 of all votes cast and/or exercised at the meeting. 5 Ordinary resolution number 3: election of group social and ethics committee members To elect by separate resolutions a group social and ethics committee, as provided in section 72(4) of the Companies Act and regulation 43 of the Companies Regulations, 2011 (Regulations), appointed in terms of regulation 43(2) of the Regulations to hold ofﬁce until the next annual general meeting and to perform the duties and responsibilities stipulated in regulation 43(5) of the Regulations and to perform such other duties and responsibilities as may from time to time be delegated by the board of directors for the company and all subsidiary companies. p 328 NOTICE OF THE ANNUAL GENERAL MEETING The board of directors has assessed the performance of the group social and ethics committee members standing for re-election and has found them suitable for reappointment. Brief résumés for these directors appear on page 208 of this report. Ordinary resolution number 3.1 “RESOLVED that Mr JJ Geldenhuys be and is hereby re-elected as a member of the group social and ethics committee with effect from 24 May 2013.” Ordinary resolution number 3.2 “RESOLVED that Mr RP Mohring be and is hereby re-elected as a member of the group social and ethics committee with effect from 24 May 2013.” Ordinary resolution number 3.3 “RESOLVED that Dr MF Randera be and is hereby re-elected as a member of the group social and ethics committee with effect from 24 May 2013.” For the above resolutions to be passed, votes in favour must represent at least 50% +1 of all votes cast and/or exercised at the meeting. 6 Ordinary resolution number 4: approval of the remuneration policy “RESOLVED, through a non-binding advisory vote, that the company’s remuneration policy and its implementation for the year ended 31 December 2012, as set out in the remuneration report on page 110, be and is hereby approved.” This ordinary resolution is of an advisory nature only and although the board will take the outcome of the vote into consideration when determining the remuneration policy, failure to pass this resolution will not legally preclude the company from implementing the remuneration policy as contained in the integrated report. 7 Ordinary resolution number 5: reappointment of independent external auditors As set out in the group audit committee report on page 251, the group audit committee has assessed PricewaterhouseCoopers Incorporated’s performance, independence and suitability and has nominated them for reappointment as independent external auditors of the group, to hold ofﬁce until the next annual general meeting. “RESOLVED that PricewaterhouseCoopers Incorporated, with the designated audit partner being Mr TD Shango, be and is hereby reappointed as independent external auditors of the group for the ensuing year.” For this resolution to be passed, votes in favour must represent at least 50% +1 of all votes cast and/or exercised at the meeting. 8 Ordinary resolution number 6: 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. 71 of 2008, as amended, clause 3.1(3) EXXARO INTEGRATED REPORT 2012 p 329 of the memorandum of incorporation of the company and the JSE Listings Requirements. The number of shares issued in terms of this authority will not in the aggregate in the current ﬁnancial year exceed 5% (ﬁve percent) of the company’s issued share capital of ordinary shares. 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 as many shares as may be required, to be allotted and issued by the company pursuant to the company’s approved employee share incentive schemes.” At present, the directors have no speciﬁc intention to use this authority, other than for issues pursuant to the company’s approved employee share incentive schemes and will thus only be used if circumstances are appropriate. For this resolution to be passed, votes in favour must represent at least 50% +1 of all votes cast and/or exercised at the meeting. 9 Ordinary resolution number 7: 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 clause 3.1(3) of the memorandum of incorporation of the company, the Companies Act No. 71 of 2008, as amended, and the JSE Listings Requirements, when applicable and with the following limitations, 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 will not in the aggregate in the current ﬁnancial year exceed 5% (ﬁve percent) of the company’s issued share capital of ordinary shares (for purposes of determining securities comprising the 5% (ﬁve percent) 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 will 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, 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 percent) or more of the number of shares in issue prior to the issue; and p 330 NOTICE OF THE ANNUAL GENERAL MEETING • the maximum discount permitted at which equity securities may be issued is 10% (ten percent) 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.” At present, the directors have no speciﬁc intention to use this authority, other than for issues pursuant to the company’s approved employee share incentive schemes and will thus only be used if circumstances are appropriate. This ordinary resolution is required, under the JSE Listings Requirements, to be passed by achieving a 75% majority of the votes cast in favour by all shareholders present or represented by proxy and entitled to vote, at the annual general meeting. 10 Ordinary resolution number 8: authorise directors and/or group company secretary “RESOLVED that any one director and/or group company secretary of the company or equivalent be and are hereby authorised to do all such things and sign all such documents deemed necessary to implement the resolutions set out in the notice convening the annual general meeting at which these resolutions will be considered.” For this resolution to be passed, votes in favour must represent at least 50% +1 of all votes cast and/or exercised at the meeting. 11 Special resolution number 1: non-executive directors’ fees Approval in terms of section 66 of the Companies Act is required to authorise the company to remunerate non-executive directors for services as directors. Furthermore, in terms of King III and as read with the JSE Listings Requirements, remuneration payable to non-executive directors should be approved by shareholders in advance or within the previous two years. “RESOLVED as a special resolution in terms of the Companies Act No. 71 of 2008, as amended, that the remuneration of non-executive directors for the period 1 January 2013* until the next annual general meeting, be and is hereby approved on the basis set out as follows: Chairman of the board Members of the board Audit committee chairman Audit committee members Other board committees chairman Other board committees members Social and ethics committee chairman Social and ethics committee member Ad hoc meeting fees Board meeting Committee meeting Current R 900 000 234 502 216 642 114 425 167 828 80 084 83 914 40 042 10 850 8 140 Proposed R 1 062 000 250 917 231 807 122 435 179 576 85 690 89 788 42 845 11 610 8 710 * If the proposed resolution is approved, directors will receive back pay based on the increased fee with effect from 1 January 2013 The proposed directors’ fees equate to a 7% increase. The chairman’s proposed fee reﬂects a larger percentage increase than the directors at 18%. The higher proposed increase is based on his performance, level of involvement and participation in strategic matters, including large corporate transactions, support and guidance provided to management, his attendance of board committees as invitee (without receiving member fees), as well as benchmarking of his fees against comparable peers. Post the proposed increase, the chairman’s fee will equate to 70% of the comparable market average, whereas the directors’ fee will equate to 90% of the same average. EXXARO INTEGRATED REPORT 2012 p 331 For this resolution to be passed, votes in favour must represent at least 75% of all votes cast and/or exercised at the meeting. 12 Special resolution number 2: general authority to repurchase shares “RESOLVED as a special resolution in terms of the Companies Act No. 71 of 2008, as amended, (Companies Act) that, subject to compliance with the JSE Listings Requirements, the Companies Act, and clause 3.1(12) of the memorandum of incorporation of the company, the directors be and are hereby authorised at their discretion to instruct 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 will not exceed 5% (ﬁve percent) 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 will 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; and • the price paid per ordinary share may not be greater than 10% (ten percent) above the weighted average of the market value of the ordinary shares for the 5 (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 instruct 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 to use this authority which will only be used if circumstances are appropriate. The directors undertake that they will not implement the repurchase as contemplated in this special resolution while this general authority is valid, unless: • after such repurchases the company passes the solvency and liquidity test as contained in section 4 of the Companies Act and that from the time the solvency and liquidity test is done, there will be no material changes to the ﬁnancial position of the group; • the consolidated assets of the company and the group, fairly valued in accordance with International Financial Reporting Standards and in accordance with the accounting policies used in the company and the group annual ﬁnancial statements for the year ended 31 December 2012, will be in excess of the consolidated liabilities of the company and the group immediately following such purchase or 12 months after the date of the notice of annual general meeting, whichever is the later; • the company and the group will be able to pay their debts as they become due in the ordinary course of business for a period of 12 months after the date of the notice of the annual general meeting or a period of 12 months after the date on which the board considers that the purchase will satisfy the immediately preceding requirement and this requirement, whichever is the later; p 332 NOTICE OF THE ANNUAL GENERAL MEETING • the issued share 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 the notice of the annual general meeting of the company; • the company and the group will have adequate working capital for ordinary business purposes for a period of 12 months after the date of this notice; • a resolution is passed by the board of directors that it has authorised the repurchase, that the company and its subsidiaries have passed the solvency and liquidity test and that, since the test was performed, there have been no material changes to the ﬁnancial position of the group; • the requirements contained in schedule 25 of the JSE Listings Requirements are complied with; • 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 percent) of the initial number of the relevant class of securities, and for each 3% (three percent) 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 undertakes that it will not enter the market to repurchase its own securities until the company’s sponsor has provided written conﬁrmation to the JSE in accordance with schedule 25 of the JSE Listings Requirements. For this resolution to be passed, votes in favour must represent at least 75% of all votes cast and/or exercised at the meeting. 13 Special resolution number 3: ﬁnancial assistance for subscription of securities “RESOLVED as a special resolution in terms of the Companies Act No. 71 of 2008, as amended, (Companies Act), that the provision by the company of any direct or indirect ﬁnancial assistance as contemplated in section 44 of the Companies Act to any 1 (one) or more related or inter-related companies of the company for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, be and is hereby approved, provided that: 1. (i) the speciﬁc recipient/s of such ﬁnancial assistance; (ii) the form, nature and extent of such ﬁnancial assistance; (iii) the terms and conditions under which such ﬁnancial assistance is provided, are determined by the board of directors of the company from time to time; 2. the board has satisﬁed the requirements of section 44 of the Companies Act in relation to the provision of any ﬁnancial assistance; EXXARO INTEGRATED REPORT 2012 p 333 3. such ﬁnancial assistance to a recipient is in the opinion of the board of directors of the company, required for a purpose, which in the opinion of the board of directors of the company, is directly or indirectly in the interest of the company; and 4. the authority granted in terms of this special resolution will remain valid for 2 (two) years or until the next annual general meeting.” For this resolution to be passed, votes in favour must represent at least 75% of all votes cast and/or exercised at the meeting. 14 Special resolution number 4: ﬁnancial assistance to a related or inter-related company or companies “RESOLVED as a special resolution in terms of the Companies Act No. 71 of 2008, as amended, (Companies Act), that the provision by the company of any direct or indirect ﬁnancial assistance as contemplated in section 45 of the Companies Act to any 1 (one) or more related or inter-related companies of the company, be and is hereby approved, provided that: 1. (i) the speciﬁc recipient/s of such ﬁnancial assistance; (ii) the form, nature and extent of such ﬁnancial assistance; (iii) the terms and conditions under which such ﬁnancial assistance is provided, are determined by the board of directors of the company from time to time; 2. the board has satisﬁed the requirements of section 45 of the Companies Act in relation to the provision of any ﬁnancial assistance; 3. such ﬁnancial assistance to a recipient is in the opinion of the board of directors of the company, required for a purpose which, in the opinion of the board of directors of the company, is directly or indirectly in the interest of the company; and 4. the authority granted in terms of this special resolution will remain valid for 2 (two) years or until the next annual general meeting.” For this resolution to be passed, votes in favour must represent at least 75% of all votes cast and/or exercised at the meeting. 15 Special resolution number 5: amendments to the memorandum of incorporation Resulting from changes to schedule 10 of the JSE Listings Requirements relating to requirements for listed companies’ memorandums of incorporation, as well as other minor changes to be made, the company wishes to amend the memorandum of incorporation slightly as approved at the general meeting held on 22 May 2012. “RESOLVED as a special resolution in terms of the Companies Act No. 71 of 2008, as amended, that the following amendments to the company’s memorandum of incorporation be and are hereby approved: • deletion of clause 5.5(4); • deletion of clause 5.11(4)(b) and subsequent renumbering of remaining subsections; and • deletion of clause 6.2(3).” p 334 NOTICE OF THE ANNUAL GENERAL MEETING Clause 5.5(4): Deletion of section 10.6(h) from the JSE Listings Requirements has resulted in this clause no longer being required: “(4) In addition to clause 5.5(1) to (3): (a) the Company may deliver a notice to Shareholders inviting written nominations for Directors prior to any meeting at which an election of Directors is to occur (Nomination Notice); (b) the minimum number of days for the Company to deliver a Nomination Notice to Shareholders is 30 days before the date on which the notice of such meeting is delivered to Shareholders in terms of clause 5.5(1) (or such lesser period as the Directors may determine in relation to any particular meeting); and (c) the written nominations by Shareholders must be delivered to the Company at its registered address or any branch ofﬁce located in the Republic not less than 15 days after the Nomination Notice is delivered (or such lesser period as the Directors may determine in relation to any particular meeting) or the nomination shall not be treated as valid.” Clause 5.11(4)(b): Deletion of section 10.11(g) from the JSE Listings Requirements has resulted in this clause no longer being required: “(b) declaration or sanctioning of dividends.” Clause 6.2(3): Although the company fully subscribes to the principles contained in the King III Report and therefore will take the recommendation, that directors having served on the board for nine years should be subject to a particularly rigorous review by the board, into consideration, the board does not regard it necessary to entrench the requirement of forced retirement after nine years into the memorandum of incorporation. Until November 2016 very speciﬁc requirements in respect of the board composition and nomination prevail in order to protect the company’s initial founding shareholders’ black empowerment credentials, as well as the company’s black empowerment status. A large portion of the directors have been involved since the company’s inception and it would not be in the company’s best interests, especially in respect of continuity and corporate knowledge, to force this group of directors to simultaneously retire in 2015 when the restrictive directorate requirements would terminate in 2016. “(c) Retiring Directors are eligible for re-election, provided that any Director who on previous occasion has been re-elected and as a result has held ofﬁce for three consecutive periods of three years, is not eligible for re-election before the expiry of at least three years from the expiry of the last three-year period of holding ofﬁce.” For this resolution to be passed, votes in favour must represent at least 75% of all votes cast and/or exercised at the meeting. 16 To transact such other business as may be transacted at an annual general meeting EXXARO INTEGRATED REPORT 2012 p 335 Disclosure 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 2. Litigation statement Other than disclosed or accounted for in the annual ﬁnancial statements, the directors of the company, whose names appear on page 210 of the integrated report, 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 appear on page 210 of the integrated report, collectively and individually accept full responsibility for the accuracy of the information given in special resolution number 2, 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 contain all information required by law and the JSE Listings Requirements. Material changes Other than the facts and developments reported in the annual ﬁnancial statements, there have been no material changes in the affairs, ﬁnancial or trading position of the group since the signature date of the annual report and the posting date. Further disclosure required in terms of the JSE Listings Requirements are set out in accordance with the reference pages in the annual ﬁnancial statements of which this notice forms part: • directors and management — refer to pages 208 to 213 of the integrated report; • major shareholders of the company — refer to page 02 of the integrated report; • directors’ interest in the company’s shares — refer page 262 of the integrated report; and • share capital of the company — refer page 254 of the integrated report. Identiﬁcation, voting and proxies In terms of section 63(1) of the Companies Act, any person attending or participating in the annual general meeting must present reasonable satisfactory identiﬁcation and the person presiding at the annual general meeting must be reasonably satisﬁed that the right of any person to participate in and vote (whether as shareholder or as proxy for a shareholder) has been reasonably veriﬁed. Suitable forms of identiﬁcation will include the presentation of valid identity documentation, driver’s licences and passports. The votes of shares held by share trusts classiﬁed as schedule 14 trusts in terms of the JSE Listings Requirements will not be taken into account at the annual general meeting for approval of any resolution proposed in terms of the JSE Listings Requirements. p 336 NOTICE OF THE ANNUAL GENERAL MEETING A form of proxy is attached for the convenience of any certiﬁcated or dematerialised Exxaro shareholders with own-name registrations who cannot attend the annual general meeting, but who wish to be represented. To be valid, completed forms of proxy must be received by the transfer secretaries of the company, Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 10:00 on Wednesday, 22 May 2013. All beneﬁcial owners of Exxaro shares who have dematerialised their shares through a central securities depository participant (CSDP) or broker, other than those with own name registration, and all beneﬁcial owners of shares who hold certiﬁcated shares through a nominee, must provide their CSDP, broker or nominee with their voting instructions, in accordance with the agreement between the beneﬁcial owner and the CSDP, broker or nominee as the case may be. Should such beneﬁcial owners wish to attend the meeting in person, they must request their CSDP, broker or nominee to issue them with the appropriate letter of representation. Exxaro does not accept responsibility and will not be held liable for any failure on the part of a CSDP or broker to notify such Exxaro shareholder of the annual general meeting. Electronic participation by shareholders Should any shareholder (or representative or proxy for a shareholder) wish to participate in the annual general meeting by way of electronic participation, that shareholder should apply in writing (including details on how the shareholder or representative (including proxy) can be contacted) to so participate, to the transfer secretaries, at their address above, to be received by the transfer secretaries at least seven business days prior to the annual general meeting (thus Tuesday, 15 May 2013) for the transfer secretaries to arrange for the shareholder (or representative or proxy) to provide reasonably satisfactory identiﬁcation to the transfer secretaries for the purposes of section 63(1) of the Companies Act and for the transfer secretaries to provide the shareholder (or representative or proxy) with details on how to access the annual general meeting by means of electronic participation. The company reserves the right not to provide for electronic participation at the annual general meeting in the event that it determines that it is not practical to do so, or an insufﬁcient number of shareholders (or their representatives or proxies) request to so participate. By order of the board CH Wessels Group company secretary Pretoria 22 April 2013 EXXARO INTEGRATED REPORT 2012 p 337 Short biographies of directors seeking re-election Mr JJ Geldenhuys — Jurie (70) BSc (Eng)(Elec), BSc (Eng)(Min), MBA (Stanford), professional engineer Experience: From 1965 to 1980, Jurie held production and managerial positions on the gold, platinum and copper zinc mines of the Anglovaal Group. From 1981 until retirement, he served in technical and executive capacities involving gold, base metals, coal, ferrous metals and industrial minerals. He retired as managing director of Avgold Limited in 2000 and served the group in a consulting capacity until 2002. He has served on the boards of Anglovaal Limited, Avmin Limited, Freegold Consolidated Mines Limited, Hartebeestfontein Gold Mining Company Limited, Lorraine Gold Mines Limited, Eastern Transvaal Gold Mines Limited, Iscor Limited and Sallies Limited. He served as the Chamber of Mines’ president (1993 to 1994) and on the chamber’s executive council, gold producers’ committee and various other chamber-related board committees. He also served on the Atomic Energy Council and National Water Advisory Council. He is currently non-executive director and chairman of Astral Foods Limited (chairing the human resources and remuneration committee and nomination committee). Dr MF Randera — Fazel (64) MRCS, LRCP; DRCOG Experience: Fazel was appointed as non-executive director of Exxaro Resources Limited on 13 June 2012. He served on the board and was a council member of the World Medical Association from 1997 to 2000. He participated on the WHO, international enquiry into the tobacco industry between 1998 and 1999. He served as the chairman of the global initiative on reporting on HIV/Aids during 2004. He specialised in medicine and held positions in various hospitals and facilities in the UK and South Africa and specialised in a broad range of medical disciplines, including occupational health and HIV/Aids. He was appointed as a commissioner of the Truth and Reconciliation Commission (TRC) during 1995 to 1998. He is the founding member of the Ethics Institute of South Africa and served as the chairman from 1997 to 2000. He served on the Human Rights Commission of South Africa from 1997 to 1999. He was Chairman of the Private Healthcare Forum from 2004 to 2007. He was appointed as a member of the South African Centre for Survivors of Torture from 2006 to 2011. He was Inspector General for Intelligence Services from 1999 to 2001; and served on a number of Ministerial advisory committees eg, the Empowerment Evaluation Committee, the Health Charter committee, the Ministerial Sanitation Task Team, the Nomination Committee (Defence Force) and the National Council for Correctional Services. He was the Health Advisor at the Chamber of Mines and is the present Deputy Chairman of Nehawu Investment Holdings. p 338 NOTICE OF THE ANNUAL GENERAL MEETING Mr NB Mbazima — Norman (54) Fellow of the Association of Chartered Certiﬁed Accountants (FCCA), Fellow of the Zambia Institute of Chartered Accountants (FZICA) Experience: Norman joined Kumba Iron Ore as CEO from 1 September 2012. As CEO of Thermal Coal since October 2009, he oversaw this business unit’s record operating proﬁt in 2011, combined with an improved safety performance. Under his leadership, the Zibulo mine in South Africa reached commercial operating levels ahead of schedule, and Thermal Coal has actively participated in the pursuit of cleaner coal solutions for the world’s energy needs. A chartered accountant by profession, Norman began his career with accounting roles at Zambia Consolidated Copper Mines, before spending 17 years with Deloitte & Touche, also in Zambia. He has extensive experience of the Anglo American Group, having joined in 2001 and been CEO of Scaw Metals, both ﬁnance director and acting CEO of its platinum business; CFO of Anglo Coal and CFO of Konkola Copper mines. Mr VZ Mntambo — Zwelibanzi (55) BJuris, LLB (UNW), LLM (Yale) Experience: Zwelibanzi is executive chairman of Xalam Performance. 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 Proprietary Limited and Mainstreet 333 Proprietary Limited. He is also a director of SA Tourism Proprietary Limited and a trustee of the Paleo-Anthropologial Scientiﬁc Trust. Short biographies of audit committee and social and ethics committee members seeking re-election and not included above. RP Mohring — Rick (66) BSc (Eng)(Mining), MDP, professional engineer Experience: From 1972 to 1998, Rick held production, managerial and executive positions in the gold and coal divisions of the Rand Mines and Billiton groups. From 1998 until 2000, he was CEO of NewCoal, a black empowerment initiative set up by Anglo Coal and Ingwe Coal Corporation. Eyesizwe Coal, the largest BEE coal company in South Africa, was formed in November 2000 through this process. From 2000 until 2003, Rick was deputy CEO of Eyesizwe Coal, responsible for the operational control of mines producing 25Mtpa of coal, new business development, technical services and health and safety. After 37 years in the mining industry, Rick retired from Eyesizwe Coal in December 2003 and set up a private consulting company, Mohring Mining Consulting. J van Rooyen — Jeff (63) BCom, BCompt (Hons), CA(SA) Experience: Jeff is a director of various companies in the Uranus Group, non-executive director of MTN Group Limited, Pick ‘n Pay Stores Limited and Pick ‘n Pay Holdings Limited. He is chairman of the Financial Reporting Standards Council (FRSC), a former trustee of the International Accounting Standards (IFRS) Foundation and member of the University of Pretoria’s faculty of economic and management sciences’ oversight board. He was a partner in Deloitte & Touche, chairman of the Public Accountants and Auditors Board, CEO of the Financial Services Board and advisor to a former Minister of Public Enterprises. Jeff is a founder member and former president of the Association for the Advancement of Black Accountants of South Africa. EXXARO INTEGRATED REPORT 2012 p 339 FORM OF PROXY 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) To be completed by certiﬁcated shareholders and dematerialised shareholders with ‘own-name’ registration only For completion by registered shareholders of Exxaro unable to attend the twelfth annual general meeting of shareholders of the company to be held at 10:00 on Friday, 24 May 2013, 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 need to be a shareholder of the company) to attend, participate in, speak and vote or abstain from voting in the place of that shareholder at the annual general meeting. I/We (please print names in full) 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, participate in, speak and, on a poll, vote on my/our behalf at the annual general meeting of shareholders to be held at 10:00 on Friday, 24 May 2013 at the Exxaro Corporate Centre, Roger Dyason Road, Pretoria West, South Africa 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 resolutions 1 Resolution to re-elect directors 1.1 Re-election of Mr NB Mbazima as a director 1.2 Re-election of Dr MF Randera as a director 1.3 Re-election of Mr JJ Geldenhuys as a director 1.4 Re-election of Mr VZ Mntambo as a director 2 Resolution to re-elect group audit committee members 2.1 Re-election of Mr JJ Geldenhuys as a member of the group audit committee 2.2 Re-election of Mr RP Mohring as a member of the group audit committee 2.3 Re-election of Mr J van Rooyen as a member of the group audit committee For Against Abstain p 340 FORM OF PROXY 3 Resolution to re-elect group social and ethics committee members 3.1 Re-election of Mr JJ Geldenhuys as a member of the group social and ethics committee 3.2 Re-election of Mr RP Mohring as a member of the group social and ethics committee 3.3 Re-election of Dr MF Randera as a member of the group social and ethics committee 4 Resolution to approve, through a non-binding advisory vote, the company’s remuneration policy 5 Resolution to reappoint PricewaterhouseCoopers Incorporated as independent external auditors 6 Resolution to place authorised but unissued shares under the control of the directors 7 Resolution to authorise directors to issue shares for cash 8 Resolution to authorise directors and/or group company secretary to implement the resolutions set out in the notice convening the annual general meeting Special resolutions 1 Special resolution to approve non-executive directors’ fees for the period 1 January 2013 to the next annual general meeting 2 Special resolution to authorise directors to repurchase company shares 3 Special resolution to authorise ﬁnancial assistance for the subscription of securities 4 Special resolution to authorise ﬁnancial assistance to related or inter- related companies 5 Special resolution to approve amendments to the memorandum of incorporation 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. day of 2013 Signed at this Signature Assisted by me, where applicable (name and signature) Please read the notes that follow. NOTES TO THE FORM OF PROXY EXXARO INTEGRATED REPORT 2012 p 341 Notes to the form of proxy (which include, inter alia, a summary of the rights established by section 58 of the Companies Act, No. 71 of 2008, as amended (Companies Act)) 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 subregister electronic form in ‘own name’. 2 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. 3 A shareholder may insert the name of a proxy or the names of two or more persons as alternative or concurrent proxies 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. A proxy may not delegate his/her authority to act on behalf of the shareholder to another person. 4 A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the instrument appointing the proxy provides otherwise. 5 On a show of hands, a shareholder 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 shareholders he/she represents, have only one vote. On a poll, a shareholder 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. 6 A shareholder’s instructions to the proxy must be indicated by inserting the relevant numbers of votes exercisable by the shareholder 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 shareholder’s exercisable votes. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholder 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 shareholder or by the proxy. 7 The proxy appointment is: • suspended at any time and to the extent that the shareholder chooses to act directly and in person in exercising any rights as a shareholder; and • revocable unless the proxy appointment expressly states otherwise, and if the appointment is revocable, a shareholder may revoke the proxy appointment by: — cancelling it in writing, or making a later inconsistent appointment of a proxy; and — delivering a copy of the revocation instrument to the proxy, and to the transfer secretaries of the company. 8 The revocation of a proxy appointment constitutes a complete and ﬁnal cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of: • the date stated in the revocation instrument, if any; or • the date on which the revocation instrument was delivered. 9 If the instrument appointing a proxy or proxies has been delivered, as long as that appointment remains in effect, any notice that is required by the Companies Act or the company’s memorandum of incorporation to be delivered by the company to the shareholder must be delivered to: • the shareholder; or • the proxy or proxies, if the shareholder has directed the company to do so, in writing, and paid any reasonable fee charged by the company for doing so. p 342 NOTES TO THE FORM OF PROXY 10 The proxy appointment remains valid only until the end of the annual general meeting or any adjournment of the meeting, unless it is revoked in accordance with paragraph 7 above prior to the meeting. 11 Forms of proxy must be lodged at or posted to Computershare Investor Services Proprietary Limited, to be received not later than 48 hours before the time ﬁxed for the meeting (excluding Saturdays, Sundays and public holidays), thus by 10:00 on 22 May 2013. For shareholders on the South African register Computershare Investor Services Proprietary 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 depositary 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 Depositary 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 12 Completing and lodging this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person to the exclusion of any appointed proxy. 13 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. 14 Any alteration or correction made to this form of proxy must be initialled by the signatory/ies. 15 Notwithstanding the aforegoing, the chairman of the annual general meeting may, if deemed reasonable, waive any formalities that would otherwise be a prerequisite for a valid proxy. 16 If any shares are jointly held, all joint shareholders must sign this form of proxy. If more than one of those shareholders are present at the annual general meeting, either in person or by proxy, the person whose name ﬁrst appears in the register will be entitled to vote. ADMINISTRATION Group company secretary and registered ofﬁce CH Wessels 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 PricewaterhouseCoopers Incorporated 2 Eglin Road Sunninghill, 2157 Commercial Bankers Absa Bank Limited Corporate Law advisers CLS Consulting Services Proprietary 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) Propriety Limited 3 Exchange Square 87 Maude Street Sandton, 2196 Registrars Computershare Investor Services Proprietary 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 March April August March April August September/October

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