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ENSURE EXXARO’S
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I M P R O V E E X X A R O ’ S
P O R T F O L I O
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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
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• 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
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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
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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
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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