2013
Integrated report
CONTENTS
Salient features
Exxaro group
About this report
Value created
STRATEGY
Business philosophy
Strategy
APPROACH TO SUSTAINABILITY
Assurance
RISK AND COMPLIANCE
Accolades and awards
STAKEHOLDERS
COMMENTARY
Chairman’s message
Chief executive officer’s message
Financial director’s review
PERFORMANCE
Mineral resources and reserves
GOVERNANCE AND REMUNERATION
Executive committee
Directorate
SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
Audited group statement of comprehensive income
Audited reconciliation of group headline earnings
Audited group statement of financial position
Audited group statement of cash flows
Audited group statement of changes in equity
Notes to the summarised group annual financial statements
ADDITIONAL INFORMATION
Mining charter scorecard
Notice of annual general meeting and form of proxy
Administration
BOARD RESPONSIBILITY
The board acknowledges its responsibility
for the integrity of Exxaro’s integrated
report and supplementary information.
Although the process of integrated
reporting is still evolving, Exxaro
has integrated all the elements of its
sustainability and financial disclosure
in this report. Continuous efforts are
made to incorporate best practice and
improve our level of reporting, including
an independent assessment of key
aspects of sustainability reporting and
disclosure by PricewaterhouseCoopers
Incorporated (PwC).
The board reviewed and finally approved
the content of the integrated report prior
to publication.
Len Konar
Chairman
31 March 2014
Sipho Nkosi
Chief executive officer
1
2
5
7
8
10
17
21
23
36
37
45
42
43
45
47
57
59
60
62
93
94
95
96
97
98
99
107
108
112
IBC
CERTIFICATE BY GROUP
COMPANY SECRETARY
for the year ended 31 December 2013
In terms of section 88(2)(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 2013, Exxaro Resources Limited
(Exxaro) 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.
Carina Wessels
Group company secretary
Pretoria
31 March 2014
THIS ICON REFERS TO FURTHER
READING AT WWW.EXXARO.COM
THIS ICON REFERS TO FURTHER
READING IN THIS REPORT
SALIENT FEATURES
ZERO
FATALITIES
record 14 months
without a fatality
Coal
production at
38,9Mt
down 3%
Lost-time injury
frequency rate at
0,19 down 34%
Coal exports of
4,5Mt
up 15%
Wetland plans
and ongoing
rehabilitation at
all business units
19 days of
industrial action
in first quarter
caused coal
production losses
of 2,2Mt
Headline earnings per share (HEPS)
of 1 463 cents, up 4%
Total dividend of 550 cents per
share, up 10%
Unique occupational risk exposure
profile implemented to further
reduce incidence of occupational
disease
Mayoko mining convention in Republic
of the Congo signed, Zincor refinery
sold, New Clydesdale Colliery sale
agreement signed
1
EXXARO Integrated report 2013 EXXARO GROUP
Exxaro is one of the
largest South Africa-based
diversified resources groups,
with interests in the coal,
titanium dioxide, ferrous and
energy markets and current
business interests in South
Africa, Botswana, Republic
of the Congo, Inner Mongolia
and Australia. The company
is the second-largest coal
producer in South Africa
with current production of
almost 40 million tonnes
per annum (Mtpa), and is
listed on the JSE Limited,
where it is a constituent of
both the Top 40 and Socially
Responsible Investment
(SRI) indices.
At 31 December 2013, Exxaro
had assets of R49,5 billion
and a market capitalisation of
R52 billion (US$5,02 billion).
Although our company is just
seven years old, our pedigree
and wealth of skills stretch back
over decades as a company
rooted in South Africa and
respected among its peers
for its innovation, ethics and
integrity.
Based on a well-executed
strategy, solid returns, access
to funds and quality resources,
Exxaro is a unique listed
investment opportunity into its
chosen commodities. Exxaro
was one of the top 10 mining
companies globally in terms
of total shareholder returns in
2012*, and remains on track
to add significant value to all
stakeholders in the longer term.
COAL
Through seven managed coal
mines, Exxaro produces almost
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. It is the only
producing mine in the coal-rich
Waterberg, adjacent to Eskom’s
existing Matimba and new Medupi
power stations.
A robust pipeline of greenfield and
expansion projects will keep Exxaro
among the top coal producers in
South Africa. Exxaro also produces
semi-coke and related products
for the rapidly growing ferroalloys
industry.
* Boston Consulting Group
MANAGED OPERATIONS
Tshikondeni
Grootegeluk
Limpopo
FerroAlloys
Corporate
office
North West
Gauteng
North Block Complex
New Clydesdale
Inyanda
Arnot
Matla
Mpumalanga
2
Mayoko — Republic of the Congo
FERROUS
TITANIUM DIOXIDE
Our 2012 acquisition of African
Iron Limited gave substance to
our strategy of expanding into
the ferrous metals sector. This
operation and related exploration
opportunities in the Republic of the
Congo, an iron ore development
frontier, are 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 in-
house expertise and experience
in mining bulk commodities to
unlock this potential. The board
made a strategic decision not to
commit further capital funds until
the mining convention and rail
and port agreements have been
finalised, which is expected to
occur by mid-2014.
Exxaro FerroAlloys produces
gas-atomised ferrosilicon for use
in dense medium separation plants.
An expansion programme has been
approved, with commissioning
expected late in 2014.
AlloyStreamTM, a proprietary
technology development in
cooperation with Assmang
to produce high-carbon
ferromanganese, is running a
second campaign to validate
demonstration facility
performance.
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 44,4%
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).
OTHER
Energy
In terms of our 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.
Cennergi Proprietary Limited,
our joint venture with Tata Power,
launched in 2012, achieved
financial closure on two wind
projects in the Eastern Cape with
commissioning planned for 2016:
• Amakhala Emoyeni wind farm
near Bedford (139MW)
• Tsitsikamma Community wind
farm on Mfengu community
land (95MW).
As part of each wind farm,
Cennergi and its partners
have developed detailed and
consultative plans for community
development.
During the review period, Exxaro
announced a coal supply and
offtake agreement for a 600MW
coal-fired power plant in Limpopo
with France’s GDF SUEZ, a global
leader in independent power
production. This marks Exxaro’s
entry to the independent power
producer market.
Exxaro has also partnered with
Linc Energy Limited to develop
energy solutions through
underground coal gasification
in sub-Saharan Africa, with a
prefeasibility study to begin
in 2015.
Construction of the co-generation
plant at Namakwa Sands, on
South Africa’s west coast, has
been completed and is managed
by Tronox Limited. We believe
co-generation is an important
alternative energy supply in
our country.
Base metals
Exxaro’s remaining base metals
portfolio includes only our
effective 11,7% and 26% interests
in Chifeng zinc refinery in Inner
Mongolia and Black Mountain in
South Africa, respectively. We will
maintain the investment in Black
Mountain, while considering
divesting from Chifeng in 2016,
when we reach the end of a 10-year
tax regime.
READ MORE>
Page 12
3
EXXARO Integrated report 2013 EXXARO GROUP
continued
EXXARO OWNERSHIP
Industrial
Development
Corporation
(IDC)
15,29%
Dreamvision
Investments
Proprietary Limited
(Eyesizwe1)
54,07%
Capital
Consortium
Proprietary Limited
(Eyabantu1)
9,71%
Morning Tide
Investments 168
Proprietary Limited
(KagisoTiso1)
9,71%
Basadi Ba Kopane1
Investments
Proprietary Limited
11,22%
Main Street 333
Proprietary Limited
(BEE Holdco)
52,09%
Anglo American
plc2
9,70%
Exxaro
Mpower
0,83%
Minorities
(free float)
35,38%
Other non-public
shareholders
2%
COAL
FERROUS
TiO2
5
OTHER
• Second-largest
coal producer
in RSA
• Tied operations
• Commercial
operations:
– Waterberg
– Mpumalanga
•
19,98% in SIOC3,
the fourth-
largest supplier
in international
iron ore
seaborne trade
• Operations:
– 90% Mayoko
project4,
– FerroAlloys
– AlloyStream™
• 44,4% in
Tronox, the
world’s largest
fully integrated
producer of
titanium ore
and titanium
dioxide, as well
as mineral sands
feedstock
• Clean energy:
– 50:50 JV with
Tata Power in
Cennergi
• Base metals:
– 26% in Black
Mountain
11,7% in
Chifeng
–
1 Special purpose vehicles for shareholders in Main Street 333 Proprietary Limited.
2 Held through Anglo South Africa Capital Proprietary Limited.
3 Sishen Iron Ore Company Limited.
4 Republic of the Congo government 10% free-carry.
5 Titanium dioxide.
4
ABOUT THIS REPORT
In addition to this printed
report, an electronic
copy and comprehensive
supplementary information
are available on our
website www.exxaro.com.
Each year, Exxaro produces
an integrated report detailing
its economic, social and
environmental performance for
a group-wide understanding, and
setting out the challenges and
opportunities ahead. This report
covers the financial year to
31 December 2013, as well as key
subsequent developments, and
follows the 2012 report.
Reporting on all aspects of our
business remains a cornerstone of
our commitment to sustainability
and our determination to entrench
global safety and sustainability
best practices in all operations.
Content is guided by our
strategic objectives (page 12
to 15), legislative and regulatory
requirements, including the
Companies Act No 71 of 2008,
as amended (Companies Act),
and the Listings Requirements
of the JSE Limited (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. Under the revised
reporting requirements of the
Department of Mineral Resources
for the mining charter scorecard,
Exxaro discloses its performance
per mining right for the period to
31 December 2013 post the end-
March 2014 deadline on its website.
Group performance is disclosed in
this report.
The content of this report, which
is only produced in English, has
again been prepared in line with
GRI intermediate application level
B+, with the expanded GRI index on
our website. The supplementary
information on our website
provides detailed disclosure on key
aspects of our operations. Methods
for determining specific indicators
are summarised in the text or
detailed in our GRI index.
Corporate activity since Exxaro’s
inception makes 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, namely
Sishen Iron Ore Company (iron
ore), Tronox Limited (mineral
sands) and Cennergi (energy).
In this report, we include lost-
time injuries and fatalities for
our Mayoko (Republic of the
Congo) project, and are expanding
sustainability indicators for this
operation.
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
5
EXXARO Integrated report 2013 VALUE CREATED
Unique investment
VALUE CREATED IN 2013
Exxaro’s value as a long-term
investment is demonstrated by:
• A track record of top-quartile
returns, innovation and growth
• Strong and well executed growth
strategy in industrial-application
energy (including renewables),
metal and mineral commodities
• Access to funds and good quality
resources
• Leadership in risk management,
energy and carbon management
• Integrated sustainability thinking
• Strong social, ethical and
governance structures and
processes
• Embracing the spirit of the South
African mining charter and being
an agent for change through
significant contribution to
sustainable social and economic
development.
R57m
R57m
R1 387 m
2013
Distribution
of R6,4 billion
Dividends (cents per share)
2007
2008
2009
2010
2011
2012
2013
60
100
100
100
175
200
200
300
300
350
500
150
235
315
Interim dividend
Final dividend
6
Strategy
Strategy
01
7
EXXARO Integrated report 2013 BUSINESS PHILOSOPHY
VISION,
MISSION AND
VALUES
VALUE
OF LIFE
S
H
A
R
E
D
V
A
L
U
E
A
N
D
V
A
L
U
E
S
R
U
AVIO
H
E
D B
N
E A
R
U
LT
U
R C
U
O
OUR
STRATEGY
RESOURCE
TO MARKET
GAME PLAN
MUTUALITY
CHANNELS
STAKEHOLDERS
ALIGNED COMMUNICATION
STAKEHOLDER
ENGAGEMENT
OUR STRATEGY
• Demonstrate responsibility
and accountability
VISION
To be a powerful source of endless
possibilities (reason for being).
BRAND
Sustainability means maintaining
our reputation.
STAKEHOLDER ENGAGEMENT
Harness the universal powers
of our stakeholders in favour
of our strategy and objectives
through principles of materiality,
completeness and responsiveness*.
* AccountAbility: AA1000SES.
• Develop leadership and people
• Optimise our portfolio
• Pursue operational and financial
MISSION
Create value for our stakeholders
through innovation and passion.
excellence.
RESOURCE-TO-MARKET
• Invest in energy, metal and
mineral resources commodities
that generate sustainable
economic returns of 1,5 times the
cost of capital
• Growth through industrial-
application energy, metal and
mineral commodities from
diverse geographies by using
our own capabilities and relevant
partnerships
• Develop market insights for
our products and innovate
throughout the value chain for
added value and competitive
market advantage.
VALUES
Our values that will guide us in our
mission are:
• Empower to grow and contribute: we
develop and use our knowledge and
ingenuity to achieve Exxaro’s vision
• Teamwork: we succeed together
through a climate of respect
and equality
• Honest responsibility: we speak
the truth and are accountable for
our actions
• Committed to excellence: we always
strive to achieve excellence for
ourselves, others and Exxaro.
8
RESOURCE-TO-MARKET BUSINESS MODEL
KEY
RESOURCES
KEY
ACTIVITIES
VALUE
PROPOSITIONS
CUSTOMER
SEGMENTS
NATURAL
• Land
• Water
• Wind
• Solar.
MINERAL RESOURCES
• Coal
• Titanium ore and
titanium dioxide
• Iron ore.
PHYSICAL
INFRASTRUCTURE
• Rail, port and roads.
HUMAN
INTELLECTUAL
• Skills and capacity.
• Security of supply
• Power generation
• Power utilities
• Steel industry
• Investment security and
• Domestic and international.
sustainability
• Co-creation.
CORE VALUE CHAIN
• Resource acquisition
• Optimised resource
management
• Beneficiation
• Joint venture investments
• Equity investments.
KEY
PARTNERSHIPS
• Joint ventures, associates
• Directly conveyed
• Indirect third-party logistics.
• Suppliers
• Mining contractors.
• Customers
• Shareholders
• Regulators
• Communities, media,
public, NGOs
• Employees and unions
• Investors
• Suppliers.
COST
STRUCTURES
REVENUE
STREAMS
COST-DRIVEN
Leverage off economies of scale
and scope.
VALUE-DRIVEN
PRODUCT SALES
AND INVESTMENTS
• Metallurgical coal
• Thermal coal
• Domestic and exports
• Investment income
• Equity income
• Technology innovations.
VISION,
MISSION AND
VALUES
VALUE
OF LIFE
R
U
AVIO
H
E
D B
N
E A
R
U
LT
U
R C
U
O
S
H
A
R
E
D
V
A
L
U
E
A
N
D
V
A
L
U
E
S
OUR
STRATEGY
RESOURCE
TO MARKET
GAME PLAN
MUTUALITY
STAKEHOLDER
ENGAGEMENT
ALIGNED COMMUNICATION
OUR STRATEGY
VISION
BRAND
To be a powerful source of endless
Sustainability means maintaining
possibilities (reason for being).
our reputation.
STAKEHOLDER ENGAGEMENT
Harness the universal powers
of our stakeholders in favour
of our strategy and objectives
through principles of materiality,
completeness and responsiveness*.
* AccountAbility: AA1000SES.
• Pursue operational and financial
through innovation and passion.
• Demonstrate responsibility
and accountability
• Develop leadership and people
• Optimise our portfolio
excellence.
RESOURCE-TO-MARKET
• Invest in energy, metal and
mineral resources commodities
that generate sustainable
economic returns of 1,5 times the
cost of capital
• Growth through industrial-
application energy, metal and
mineral commodities from
diverse geographies by using
our own capabilities and relevant
partnerships
• Develop market insights for
our products and innovate
throughout the value chain for
added value and competitive
market advantage.
MISSION
Create value for our stakeholders
VALUES
mission are:
Our values that will guide us in our
• Empower to grow and contribute: we
develop and use our knowledge and
ingenuity to achieve Exxaro’s vision
• Teamwork: we succeed together
through a climate of respect
and equality
• Honest responsibility: we speak
the truth and are accountable for
our actions
• Committed to excellence: we always
strive to achieve excellence for
ourselves, others and Exxaro.
RESOURCE-TO-MARKET BUSINESS MODEL
KEY
RESOURCES
KEY
ACTIVITIES
VALUE
PROPOSITIONS
CUSTOMER
SEGMENTS
NATURAL
• Land
• Water
• Wind
• Solar.
MINERAL RESOURCES
• Coal
• Titanium ore and
titanium dioxide
• Iron ore.
PHYSICAL
INFRASTRUCTURE
• Rail, port and roads.
HUMAN
INTELLECTUAL
• Skills and capacity.
CORE VALUE CHAIN
• Resource acquisition
• Optimised resource
management
• Beneficiation
• Joint venture investments
• Equity investments.
KEY
PARTNERSHIPS
• Security of supply
• Power generation
• Investment security and
sustainability
• Co-creation.
• Power utilities
• Steel industry
• Domestic and international.
CHANNELS
STAKEHOLDERS
• Joint ventures, associates
• Suppliers
• Mining contractors.
• Directly conveyed
• Indirect third-party logistics.
• Customers
• Shareholders
• Regulators
• Communities, media,
public, NGOs
• Employees and unions
• Investors
• Suppliers.
COST
STRUCTURES
REVENUE
STREAMS
COST-DRIVEN
Leverage off economies of scale
and scope.
VALUE-DRIVEN
PRODUCT SALES
AND INVESTMENTS
• Metallurgical coal
• Thermal coal
• Domestic and exports
• Investment income
• Equity income
• Technology innovations.
9
EXXARO Integrated report 2013
STRATEGY
DELIVERING ON OUR
STRATEGY
Our strategy is a key
part of our philosophy.
The strategy is
complemented by the
vision, mission and
values, and reinforced
by recognising the
significance of
stakeholder engagement
in creating an enabling
environment for our
business to succeed.
Exxaro’s business
philosophy describes
the linkages among our
beliefs of who we are
and why we exist, our
vision for the business
and how we will achieve
our mission through our
business strategy.
READ MORE>
Page 12 to 15
The strategy is based on a
resource-to-market business
model (page 9) with the intent
to invest (invest in energy,
metal and mineral resource
commodities that generate
sustainable economic returns
of 1,5 times the cost of capital),
develop (develop market insights
for our products and appropriate
technology throughout the
value chain for added value and
competitive market advantage),
and grow (extract energy, metal
and mineral commodities from
diverse geographies by using
our own capabilities and relevant
partnerships).
This strategic intent rests on four
strategic objectives:
• To demonstrate responsibility
and accountability to our
stakeholders
• To optimise our portfolio of
investments and operations
• To develop the capability of our
leadership and people
• To continuously seek
operational excellence and
outstanding financial results.
Sustainable development
Exxaro acknowledges the five
capitals (natural, human, social,
manufactured and financial)
model as a balanced approach to
sustainable growth to increase
our potential to invest and
develop. Equally, we believe
sustainability is an outcome of
our actions — it is not a separate
objective, but the foundation for
our commitment to our strategic
objectives which are, themselves,
aligned to the five capitals
(page 18).
Our growth over the next three to
five years will be driven by diverse
commodities in energy, metals
and minerals from the operations
and opportunities detailed on
page 12 to 13. Each commodity
strategy is supported by a vision,
description of growth prospects
and the related timeline and
estimate of capital.
Our strategy is dynamic —
anticipating and responding to
external elements — and we have
proven our ability to deliver on
this strategy as summarised from
page 12.
We believe in the
power of people and
their ability to explore
and shift boundaries
which lead to success.
10
HUMAN
ACHIEVE
OPERATIONAL &
FINANCIAL EXCELLENCE
S
O
C
I
A
L
L
A
R
U
T
A
N
IMPROVE
EXXARO’S
PORTFOLIO
DEMONSTRATE
RESPONSIBILITY &
ACCOUNTABILITY
F
I
N
A
N
CI
A
DEVELOP EXXARO’S
LEADERSHIP
AND PEOPLE
L M A N U F A
R E D
U
T
C
11
EXXARO Integrated report 2013
STRATEGY
continued
Strategic objective
Measures
Performance in 2013
Outlook or objective for 2014
Demonstrate
responsibility and
accountability to
protect our reputation
Protect and build Exxaro’s
reputation by being
responsible and
accountable to
stakeholders through
engagement, legislative
compliance, transparent
reporting, resource
management, and social
and environmental
stewardship
• Sound stakeholder engagement
• Refer to section on stakeholders on page 38
• Progress to introduction of AccountAbility
AA1000SES stakeholder engagement standard
• Compliance risk management plans in place
• Compiled compliance risk management plans supported by risk
• Compliance risk management plans to be
management enabler and focused on material compliance risks.
rolled out through control self-assessment
Refer page 24
questionnaires
• No reportable cases of environmental incidents
• No level 3 environmental incidents for the past three years
• No reportable environmental incidents above
• Valid and enforceable mining rights secured
• Current status:
R500 000, ie no level 3 environmental incidents
• All mining rights, whether old-order mining right
conversions or new mining rights, to be granted,
registered and executed
• Reputation through good governance
• Refer to governance and remuneration section on page 60
• Enhanced reputation through good governance.
• Commitment to environmental stewardship
– Grootegeluk, Mafube and Goni (Tshikondeni) – registered
– Magvanti (Gravelotte), Leeuwpan and Leeuwpan Ext, Arnot,
Glisa (NBC), Inyanda, New Clydesdale, Belfast and Mafube
– Matla, Tshikondeni and Strathrae (NBC) – granted but execution
Nooitgedacht – executed
by DMR in process
– Thabametsi, Glisa South (Paardeplaats), Eerstelingsfontein
(NBC – renewal) – submitted but approvals pending
Compliance and sound governance are non-
negotiable and driven through our governance
and risk management framework
• Selective performance:
• Additional IWULs approved
– 16 integrated water use licences (IWULs) approved and 10 applied for
• Mitigation of possible non-compliance to
– Environmental rehabilitation trust fund asset for final closure of
R685 million (including non-current assets held-for-sale) in place
– Wetland management and enhancement through rehabilitation
– Qualified for inclusion in JSE100 Carbon Disclosure Leadership Index
with a score of 97
– Maintained inclusion in the JSE SRI index
conditions of environmental authorisations post
an independent environmental legal audit
• Biodiversity: continued wetland management and
enhancement through rehabilitation
• Maintain inclusion in relevant socially and
environmentally responsible indices
• Brand perception as proxy for reputation confirmation
• Brand perception survey
• Stoppage directives (includes MHSA, MPRDA, NWA and NEMA)
• Three section 54 and six section 55 directives received
• No stoppage directives
• Compliance to:
– Mining charter and social and labour plan, per site and per element, but with ownership
for the overall group
– BBBEE level – group performance against targets in DTI codes
• Complied with:
– Mining charter requirements for all categories/elements at a
mining right level except employing people with disabilities
– Level 4 contributory status achieved for BBBEE
• Full compliance to the mining charter elements
and maintain level 4 contributory status revised
DTI BBBEE codes
OUTLOOK
Despite global economic risks
(mainly related to oil prices, United
States tapering of quantitative
easing and the fragile Euro zone,
volatile exchange rates and
commodity prices), the global
economy still points to a gradual
recovery for 2014. The South
African economic growth outlook
is expected to remain fragile
with a weakening exchange rate
which will dampen domestic
demand and increase inflation.
Labour discontent on the back of
unresolved socio-economic issues
and union rivalry are expected to
remain a challenge for the local
mining industry.
2014 coal export sales are
expected to be affected mostly
by commodity price volatility,
ZAR/US$ exchange rate
fluctuations and the availability
of trains from Transnet Freight
Rail (TFR). As Exxaro has ceased
production at the NCC export
mine in 2013, export performance
in 2014 will hinge largely on
TFR performance between the
Waterberg and Richards Bay. Both
thermal and coking coal seaborne
markets are expected to remain
soft given an oversupply of coal
globally. Developments on TFR’s
first-phase expansion of capacity,
on the line from Lephalale in
the Waterberg, from 4Mtpa to
23Mtpa by 2018 are expected to
have a positive long-term impact
on Exxaro’s bottom line. That
expansion is crucial to the group
meeting its commitments to
Eskom. Given that Mpumalanga
coal deposits will have largely been
exhausted in the medium term,
keeping the Mpumalanga power
stations going with coal from the
Waterberg has been designated a
national development priority.
In the domestic market, demand
for steam and metallurgical coal
is expected to be stable in 2014.
Demand for power station coal
from Eskom is, however, expected
to be weaker than in 2013 due to
12
Demonstrate
responsibility and
accountability to
Protect and build Exxaro’s
reputation by being
responsible and
accountable to
stakeholders through
engagement, legislative
compliance, transparent
reporting, resource
management, and social
and environmental
stewardship
Strategic objective
Measures
Performance in 2013
Outlook or objective for 2014
• Sound stakeholder engagement
• Refer to section on stakeholders on page 38
• Progress to introduction of AccountAbility
AA1000SES stakeholder engagement standard
protect our reputation
• Compliance risk management plans in place
• Compiled compliance risk management plans supported by risk
management enabler and focused on material compliance risks.
Refer page 24
• Compliance risk management plans to be
rolled out through control self-assessment
questionnaires
• No reportable cases of environmental incidents
• No level 3 environmental incidents for the past three years
• No reportable environmental incidents above
• Valid and enforceable mining rights secured
• Current status:
– Grootegeluk, Mafube and Goni (Tshikondeni) – registered
– Magvanti (Gravelotte), Leeuwpan and Leeuwpan Ext, Arnot,
Glisa (NBC), Inyanda, New Clydesdale, Belfast and Mafube
Nooitgedacht – executed
– Matla, Tshikondeni and Strathrae (NBC) – granted but execution
by DMR in process
– Thabametsi, Glisa South (Paardeplaats), Eerstelingsfontein
(NBC – renewal) – submitted but approvals pending
• Reputation through good governance
• Refer to governance and remuneration section on page 60
• Commitment to environmental stewardship
• Selective performance:
– 16 integrated water use licences (IWULs) approved and 10 applied for
– Environmental rehabilitation trust fund asset for final closure of
R685 million (including non-current assets held-for-sale) in place
– Wetland management and enhancement through rehabilitation
– Qualified for inclusion in JSE100 Carbon Disclosure Leadership Index
with a score of 97
– Maintained inclusion in the JSE SRI index
• Brand perception as proxy for reputation confirmation
R500 000, ie no level 3 environmental incidents
• All mining rights, whether old-order mining right
conversions or new mining rights, to be granted,
registered and executed
• Enhanced reputation through good governance.
Compliance and sound governance are non-
negotiable and driven through our governance
and risk management framework
• Additional IWULs approved
• Mitigation of possible non-compliance to
conditions of environmental authorisations post
an independent environmental legal audit
• Biodiversity: continued wetland management and
enhancement through rehabilitation
• Maintain inclusion in relevant socially and
environmentally responsible indices
• Brand perception survey
• Stoppage directives (includes MHSA, MPRDA, NWA and NEMA)
• Three section 54 and six section 55 directives received
• No stoppage directives
• Compliance to:
for the overall group
– Mining charter and social and labour plan, per site and per element, but with ownership
– BBBEE level – group performance against targets in DTI codes
• Complied with:
– Mining charter requirements for all categories/elements at a
mining right level except employing people with disabilities
– Level 4 contributory status achieved for BBBEE
• Full compliance to the mining charter elements
and maintain level 4 contributory status revised
DTI BBBEE codes
Continued review of costs is
expected to assist the group to
weather the next few years where
cost pressures, subdued global
demand and lower available
sources of finance are critical for
running a value-adding business.
the current high level of coal stock-
days at Eskom power stations.
study on phase 2 will be completed
in the fourth quarter of 2014.
Exxaro continues to engage
with Eskom following the recent
announcement of the delay in the
construction of the Medupi power
station and the impact this is
expected to have on the previously
revised volume off-take agreement
between the two parties.
The focus on the Mayoko project
in 2014 will be mainly on ensuring
the successful conclusion of the
detailed port and rail agreements.
This is expected to be completed
in the first half of 2014. It is also
expected that the prefeasibility
Stable offtake is expected in
the FerroAlloys business, with
full production targeted. Eskom
remains a threat to the ferroalloy
industry, but has announced that it
will not continue with its ‘electricity
buy-back’ scheme and will employ
other methods to reduce electricity
consumption.
For Exxaro to remain a resilient,
long-term, sustainable enterprise,
we must continuously shape
and adapt our business to
external market conditions and
geographical locations.
13
EXXARO Integrated report 2013 STRATEGY
continued
Strategic objective
Measures
Performance in 2013
Outlook or objective for 2014
Optimise our
commodity portfolio
Top-quartile financial
returns
Diversified yet
complementary portfolio
of assets aligned with
commodity strategy
Develop our leaders
and people
Developing strong
leadership and empowered
employees
Ensuring a safe, healthy
and skilled workforce
• Healthy financial metrics
• Refer to actual performance on page 112 of the web report
• Achieving financial metrics as approved as part
• Diversified yet complementary portfolio of assets
• Safety
– Fatalities
– LTIFR
• Health
– Accepted occupational disease rate
– People tested positive and enrolled in HIV management programme
• Cases of reported occupational diseases down 25%
• HIV/Aids: voluntary testing and counselling up 26% to 95%
• Target of 95%
• Capability development
– Talent pool
– Skills provision
– Skills retention
Achieve operational and
financial excellence
Low-cost and high-quality
product from efficient
operations
• Operating margin
• Solvency and liquidity metrics
• Return on equity
• Return on capital employed
14
of the risk appetite framework (due for approval
in April 2014)
Sale of Zincor refinery
Coal
• Grootegeluk Medupi expansion project (GMEP) 97% complete
• Continued ramp-up of GMEP
• Project with GDF Suez on 600MW baseload power station by 2014,
• Thabametsi phase 1 bankable feasibility study
with coal supplied by Thabametsi
• Disposal of New Clydesdale
• Joint venture with Linc Energy on underground coal gasification
• Prefeasibility to begin in 2015
• Belfast bankable feasibility study
• Mayoko: mining convention, port memorandum of understanding
• Develop Mayoko in a phased approach once all
and rail framework agreements signed. Additional resources
confirmed – total of 754Mt
components of the mining convention as well as
the port and rail agreements have been finalised
Coal
Ferrous
Energy
Ferrous
Energy
• Cennergi (joint venture with Tata Power) developing two wind farms
• Construction of two wind farms to start in 2014
– financial closure achieved in 2013
Titanium dioxide
• Assessment of investment in Tronox including
consideration of long-term fundamentals
• 2013 fatality-free
• Remain fatality free
• LTIFR improved by 34% to 0,19 with six business units LTI free
• Target of 0,15
• R200 million spent on training in 2013
• Targeted spend of 5% on payroll
– 370 employees in management development programmes
– Some 800 young people trained (80% historically disadvantaged)
• Mpower paid dividends of R16 million in respect of FY13, benefiting
7 240 employees
Refer to actual performance on page 112 of our supplemental
information on the web
• Achieving financial metrics as approved as part
of the risk appetite framework (due for approval
in April 2014)
Strategic objective
Measures
Performance in 2013
Outlook or objective for 2014
• Healthy financial metrics
• Refer to actual performance on page 112 of the web report
• Achieving financial metrics as approved as part
of the risk appetite framework (due for approval
in April 2014)
• Diversified yet complementary portfolio of assets
Sale of Zincor refinery
Coal
• Grootegeluk Medupi expansion project (GMEP) 97% complete
• Project with GDF Suez on 600MW baseload power station by 2014,
Coal
• Continued ramp-up of GMEP
• Thabametsi phase 1 bankable feasibility study
with coal supplied by Thabametsi
• Disposal of New Clydesdale
• Joint venture with Linc Energy on underground coal gasification
• Belfast bankable feasibility study
• Prefeasibility to begin in 2015
Ferrous
• Mayoko: mining convention, port memorandum of understanding
and rail framework agreements signed. Additional resources
confirmed – total of 754Mt
Ferrous
• Develop Mayoko in a phased approach once all
components of the mining convention as well as
the port and rail agreements have been finalised
Energy
• Cennergi (joint venture with Tata Power) developing two wind farms
Energy
• Construction of two wind farms to start in 2014
– financial closure achieved in 2013
Titanium dioxide
• Assessment of investment in Tronox including
consideration of long-term fundamentals
• 2013 fatality-free
• LTIFR improved by 34% to 0,19 with six business units LTI free
• Remain fatality free
• Target of 0,15
– Accepted occupational disease rate
– People tested positive and enrolled in HIV management programme
• Cases of reported occupational diseases down 25%
• HIV/Aids: voluntary testing and counselling up 26% to 95%
• Target of 95%
• R200 million spent on training in 2013
• Targeted spend of 5% on payroll
– 370 employees in management development programmes
– Some 800 young people trained (80% historically disadvantaged)
• Mpower paid dividends of R16 million in respect of FY13, benefiting
7 240 employees
Refer to actual performance on page 112 of our supplemental
information on the web
• Achieving financial metrics as approved as part
of the risk appetite framework (due for approval
in April 2014)
Optimise our
commodity portfolio
Top-quartile financial
returns
Diversified yet
complementary portfolio
of assets aligned with
commodity strategy
Develop our leaders
• Safety
and people
Developing strong
leadership and empowered
employees
• Health
– Fatalities
– LTIFR
Ensuring a safe, healthy
and skilled workforce
• Capability development
– Talent pool
– Skills provision
– Skills retention
Achieve operational and
• Operating margin
financial excellence
• Solvency and liquidity metrics
Low-cost and high-quality
product from efficient
operations
• Return on equity
• Return on capital employed
15
EXXARO Integrated report 2013 STRATEGY
continued
EXXARO’S STANCE
ON TECHNOLOGY
DEVELOPMENT
We believe technology is a key
enabler of new business and will
generate substantial operational
improvement through motivated
people and managing systematic
innovation processes.
Exxaro creates a competitive
advantage by developing and
applying superior technical
processes for existing and
emerging technology. We follow a
technology management process
— identifying, selecting, acquiring,
exploiting value and protecting
intellectual property. Our aim is
not to develop technology to sell or
licence, but to support current and
future businesses with appropriate
technology to be cost effective
and to add value through improved
throughput and product quality.
We form alliances with universities
and research institutions to gain
new scientific knowledge from
fundamental/basic research (only
focused on key technology areas)
to be leveraged in a creative and
cost-effective way. Exxaro will
therefore keep the competency
of applied research and process
development intact as well as
competencies in key technical
areas of its core processes.
In 2010, we initiated a programme
to embed innovation into Exxaro’s
DNA to realise our vision.
As part of this, the NEXT (new
Exxaro tomorrow) programme
is systematically preparing our
company to capitalise on this
envisaged future.
OUR VISION FOR THE MINE
OF THE FUTURE
1 Sustainable licence to
operate:
• Creating inclusive wealth
— all stakeholders
• Balanced and sustainable
partnership between
government, community
and resources industry
• Small footprint/limited
environmental impact
• Self-sustaining,
economically viable
community beyond life
of mine.
2 Smart exploration: accurate,
predictable, instant,
information and models
3
100% resource extraction
4 Zero waste
5 Zero harm — safety/health
6 Energy, carbon and water
neutral
7 Workforce equipped to
support the future business
8 Hybrid/renewable/
alternative energy solutions
9 Capitalise on trend of
advanced/light materials/
metals
10 Integrated, optimised and
redefined value chain.
Exxaro creates a competitive advantage by
developing and applying superior technical
processes for existing and emerging technology.
16
Approach to
sustainability
1702
EXXARO Integrated report 2013 APPROACH TO
SUSTAINABILITY
Value add
Opportunities
Gaps
Reporting
Stakeholders
Material issues
Risks
Compliance and
governance
L
A
R
U
T
A
N
N
A
M
U
H
L
A
I
C
O
S
D
E
R
U
T
C
A
F
U
N
A
M
L
A
I
C
N
A
N
I
F
For Exxaro, sustainability is both
a journey and the destination. We
recognise that sustainability is an
important element in ensuring the
future is secured for every one of
our stakeholders. The concept of
sustainability and implementation
of its constituent parts are integral
to both our strategy (page 10)
and the way we measure the
performance of our people.
In implementing our approach to
sustainability, Exxaro is guided
by the five-capitals model — a
well-documented sustainability
framework used globally. This
framework is tailored to the nature
of our business and the needs of
our stakeholders.
The model uses a tiered approach
where successive foundational
layers need to be put in place to
support Exxaro’s strategy and
ensure its sustainability. The figure
above illustrates this approach:
• Cross-functional integrated
and tiered
• The ultimate aim of the
framework is to add value
• Focus on the issues most
material to Exxaro across
the capitals.
COMPLIANCE AND
GOVERNANCE
In a tightly regulated industry
within a developing democracy,
our licence to operate is
multifaceted — extending from
corporate governance to social and
environmental performance. The
legal universe Exxaro operates in
has been mapped and over 2 700
legal requirements govern mining
across all economic, social and
governance domains.
Good governance, as detailed
on page 60, underpins our
sustainability.
RISKS AND MATERIAL
ISSUES
The next tier to address is risks
and material issues (detailed
on page 26). In practice, this
runs in parallel with compliance
requirements. Exxaro’s risks are
spread across the sustainability
spectrum, and in 2013 Exxaro has
successfully implemented a world-
class enterprise risk management
process across the entire
organisation.
STAKEHOLDERS
Besides internal and external
risks, it is important to consider
stakeholders’ perspectives of
our business and their issues.
Our approach to stakeholder
engagement is detailed on
page 38.
REPORTING
At all levels and across the
sustainability spectrum, Exxaro
reports on essential indicators to
ensure we reach our goals. Until
now, these have been guided
by GRI. In future, reported key
performance indicators may vary
annually but all are intended
to measure the most pertinent
operational matters, risks and
sustainability indicators.
GAPS
When gaps in Exxaro’s compliance
targets, risks and material issues,
and stakeholder issues have
been identified, it is imperative
to close those gaps. In Exxaro,
a comprehensive combined
assurance framework that
collates all issues emanating from
level 1, 2 and 3 audit findings was
implemented in 2013 (page 26).
18
OPPORTUNITIES
To ensure Exxaro’s future
economic sustainability, it is
important to identify opportunities
to anticipate and create the future
in innovative ways. To support
this drive Exxaro has a formalised
NEXT programme (page 16), among
many other initiatives.
VALUE ADDED THROUGH
THE SUSTAINABILITY
APPROACH
The value added to the business
and stakeholders differs across
the sustainability spectrum, and
is both quantitative as well as
qualitative. We add value because
our sustainability approach
extends beyond maintaining the
organisation to development
through growth, and playing a
responsible role in society.
Sustainability capital
Summary of value added
Natural
Human
Social
Manufactured
Financial
• Lowered costs
• Enhanced reputation
• Social and environmental security
• Health and safety
• Quality skills
• Intellectual capital
• Market advantage
• Improved quality of life
• Transformation
• Reduced cost of compliance
• Security of rights
• Stronger brand
• Community cohesion and support
• Customer preference
• Leveraged technology
• Innovation
• Material stewardship
• Shareholder returns
• Investor security
VALUE-ADDED
EMPOWERMENT
Compliance to both the
mining charter and DTI codes
enables Exxaro to add value,
using a bottom-up approach
to developing opportunities
for empowerment (below).
KEY SUSTAINABILITY
PERFORMANCE
INDICATORS
Exxaro’s key sustainability
performance indicators are
shown on page 20. These are
currently guided by best practice
as determined by GRI, but also
interface with measurable
indicators on key risks, compliance
requirements, and any action
or issue that will enhance the
reputation of our organisation.
Understanding that scientifically-
determined business risks will
not always dovetail neatly with
issues stakeholders consider
important, each year we select the
most appropriate combination of
indicators for external assurance
— based on materiality or as an
external verification of continual
improvement.
In 2013, the indicators shown
overleaf were assured by PwC.
VALUE-ADDED EMPOWERMENT
INTERNAL TO
ORGANISATION
EXTERNAL TO
ORGANISATION
Ownership
Management
control
Skills
development
Enterprise
and supplier
development
Socio-economic
development
Direct empowerment
HR empowerment
Indirect empowerment
19
EXXARO Integrated report 2013 APPROACH TO
SUSTAINABILITY
continued
KPIs assured by PwC
Mining charter
Procurement from BEE entities (R value and % of total procurement)
Capital
Services
Consumable goods
Employment equity2
Top management
Senior management
Middle management
Junior management
Safety
Fatalities
Lost-time injuries (LTIs) – employees and contractors
Lost-time injury frequency rate (LTIFR) – employees and contractors
Occupational health
Total number of people participating in HIV/Aids voluntary counselling
and testing (VCT)
Number of employees tested for HIV % (prevalence)
Number of reported (and accepted) cases of pneumoconiosis
Number of reported (and accepted) cases of occupational tuberculosis
Number of reported (and accepted) cases of noise-induced
hearing loss
Energy
Total diesel used (GJ)
Total electricity used (GJ)
Energy efficiency (kWh/tonne mined)
Greenhouse gases (t CO2e)
Direct CO2 emissions from own operations (scope 1)
Indirect CO2 emissions from electricity (scope 2)
Other indirect emissions (scope 3)
Environmental compliance
Number of integrated water use licences applications approved
Number of integrated water use licences applications pending
Number of level 2 and 3 environmental incidents
Water3
Total potable water use m3
Dust
Environmental fallout dust: number of sites (single bucket points)
Environmental fallout dust: number of months exceeding 600mg/m2/day
Environmental fallout dust: number of months exceeding 1 200mg/m2/day
Land rehabilitation
Land disturbed (hectares)
Land rehabilitated (hectares)
Waste
Hazardous waste to landfill (tonnes)
1 Total BEE procurement spend.
2 Figures for the eight operational mining rights with the exception of top management.
3 2011 and 2012 data refers to total water use while 2013 refers to total potable water use.
2012
2011
R7 944 881 1121 R4 861 010 0001
2013
Level of
assurance
Reasonable
R1 937 107 893
49%
R2 620 387 614
58%
R2 654 651 605
62%
Reasonable
60%
53%
55%
65%
0 Reasonable
41 Reasonable
0,19 Reasonable
–
–
60%
34%
54%
64%
2
66
0,29
5 853
Limited
3 616
8,35
37(3)
40(9)
8(0)
Limited
Limited
Limited
Limited
13
24
66
12
–
–
–
–
–
–
3
48
0,20
–
2
19
13
2 128 665 Reasonable
2 011 719 Reasonable
4,4 Reasonable
2 520 233
4 279 399
2 830 978
7 133 903
Limited
235 506
525 282 Reasonable
Limited
69 736 911
345 781
1 117 409
70 644 554
443 126
2 041 095
16 Reasonable
10 Reasonable
21
3
14
8
7-level 2
0-level 3
Limited
11-level 2
0-level 3
28-level 2
0-level 3
2 504 390
Limited
12 209 689
29 292 490
72
25
11
9 452
1 725
Limited
Limited
Limited
Limited
73
14
34
8 944
2 840
82
12
9
11 785
3 046
1 349
Limited
1 484
99 435
This table should be read in conjunction with the supplemental information on our website which includes the context and criteria (page 110) for each indicator.
READ MORE>
Page 44 to 56
20
ASSURANCE REPORT
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 Sustainability
Information reported in Exxaro’s
Integrated Report for the year
ended 31 December 2013 (the
“Report”). This report is produced
in accordance with the terms of our
contract with the Company dated
1 October 2013.
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 sustainable
development information in the
Report (page 20) was selected for an
expression of reasonable assurance:
• Number of fatalities
• Number of lost time injuries (LTIs)
— employees and contractors
• Lost time injury frequency
rate (LTIFR) — employees and
contractors
• Total diesel used (GJ)
• Total electricity used (GJ)
• Total electricity efficiency
(kWh/tonne)
• Scope 2 emissions (CO2 tonnes)
• Number of integrated water use
licences (IWUL) applications
approved
• Number of integrated water use
licences (IWUL) applications
pending
• Procurement from HDSA
suppliers (R-value and % spend of
total procurement)
• Employment Equity (total number
of employees per race, gender
and grade).
Limited assurance
The following identified sustainable
development information in the
Report (page 20) was selected for an
expression of limited assurance:
• Total number of people
participating in voluntary
counselling and testing (VCT)
• Number of employees tested
positive for HIV — prevalence (%)
• Number of reported and accepted
cases of Pneumoconiosis
• Number of reported and
accepted cases of Occupational
Tuberculosis
• Number of reported and
accepted cases of Noise Induced
Hearing Loss
• Scope 1 emissions (CO2 tonnes)
• Scope 3 emissions (CO2 tonnes)
• Number of level 2 and 3
environmental incidents
• Total potable water (cubic
meter m3)
• Environmental fallout dust:
Number of sites (single
bucket points)
• Environmental fallout dust:
Number of months exceeding
600mg/m2/day
• Environmental fallout dust:
Number of months exceeding
1 200mg/m2/day
• Disturbances versus land
rehabilitation (hectares)
• Total hazardous waste to legal
landfill (tonnes).
We refer to this information as the
Selected Sustainability Information.
We have not carried out any
work on data reported for prior
reporting periods, 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
Sustainability Information.
Respective responsibilities
of the directors and
PricewaterhouseCoopers Inc.
The directors of Exxaro are
responsible for selection,
preparation and presentation of the
Selected Sustainability Information
in accordance with the criteria set
out in Exxaro’s internal corporate
reporting policies and procedures
on page 110 of the supplemental
information 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 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
reasonable assurance procedures,
on whether the 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 Sustainability
Information Selected for Limited
Assurance is not stated, 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 sustainable development
performance and activities.
We permit the disclosure of this
report within the Report for the year
ended 31 December 2013, 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.
21
EXXARO Integrated report 2013 ASSURANCE REPORT
continued
Assurance work performed
We conducted our assurance
engagement in accordance with
International Standard on Assurance
Engagements 3000 (ISAE 3000) —
“Assurance Engagements other than
Audits and Reviews of Historical
Financial Information”, having
regard to International Standard
on Assurance Engagements
3410 (ISAE 3410) – “Assurance
Engagements on Greenhouse
Gas Statement”, issued by the
International Auditing and
Assurance Standards Board. These
standards require 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 Sustainability
Information as per the terms of our
engagement.
Our work included examination, on
a test basis, of evidence relevant
to the Sustainability Information
Selected for Reasonable Assurance.
It also included an assessment
of the significant estimates
and judgements made by the
directors in the preparation of the
Sustainability Information Selected
for Reasonable Assurance. 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
Sustainability Information Selected
for Reasonable Assurance.
Our work consisted of:
• Reviewing processes that Exxaro
have in place for determining
the Selected Sustainability
Information included in the
Report
• Obtaining an understanding of
the systems used to generate,
aggregate and report the
Selected 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 Selected
Sustainability Information
and related statements in
Exxaro’s 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.
The procedures selected depend
on our judgement, including the
assessment of the risk of material
misstatement of the Selected
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 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.
In particular, conversion factors
used to derive carbon emission
performance 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 Selected Sustainability
Information selected for
reasonable assurance for the
year ended 31 December 2013,
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 Selected
Sustainability Information selected
for limited assurance for the year
ended 31 December 2013, has not
been prepared, in all material
respects, in accordance with the
Reporting Criteria.
Other matters
The maintenance and integrity of
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
Exxaro’s website.
PricewaterhouseCoopers Inc.
Director: Marthie Crafford
Registered Auditor
Johannesburg
2 April 2014
22
Risk and
compliance
2303
EXXARO Integrated report 2013 RISK AND COMPLIANCE MANAGEMENT
TO ENSURE EXXARO’S SUSTAINABILITY
Exxaro understands that risk
and compliance run across our
five sustainability capitals and
that this needs to be managed
at a strategic, tactical and
operational level, using a
consistent standardised approach
to ensure we achieve our strategic
objectives.
Exxaro made great strides in 2013
to embed a risk culture, where
everybody in the organisation
understands that the risks in their
environment need to be managed
to ensure we remain proactive in
everything we do, whether we are
making an investment decision
or working at the coal face. This
ensures we are resilient and can
face the unique challenges of
mining companies operating in
an ever-changing economic and
regulatory landscape.
At Exxaro we manage compliance
risks as part of business risk.
This ensures the same diligence is
applied when designing controls
and action plans to ensure we
remain compliant. This also means
compliance controls are monitored
through our combined assurance
activities.
This enterprise risk management
(ERM) methodology is followed
across all functional areas and
considers all hazards/root causes
as well as all potential impacts
(financial, operational, stakeholder,
legal/compliance, safety, health
and environment) that the risk
event may trigger.
Risk owners are established
across all layers for every risk and
take accountability for ensuring
the appropriate risk strategy is
implemented. Control owners
are appointed for every control
and report to risk owners on
maintenance of controls and
implementation of action plans.
BOARD DISCLOSURE
Please refer to principle 2.7 in
the King III compliance report on
page 73, as well as chapter 4 in the
detailed King III report on the web.
• Exco notes operational
risk registers and compiles
strategic risk profile
• SRC2 committee approves
strategic risk register and
notifies the board
• Risk profile reported to
stakeholders.
• Reported monthly to project
steering committee/region/
commodity to action
• Reported quarterly to Exco
for noting.
• Reported monthly to business
unit management to action
• Reported quarterly to region
and Exco for noting.
STRATEGIC
• Exco1 and board risk
assessment, annually
TACTICAL
• Regional and commodity risk
assessment, quarterly
• Project risk assessment, monthly
OPERATIONAL AT
BUSINESS UNITS
• Baseline risk assessment, monthly
• Continuous risk assessment
• Mini hazard identification and risk assessment (HIRA)
Standardised integrated risk functions and layers
1 Executive committee.
2 Sustainability, risk and compliance.
24
2013 ACHIEVEMENTS
Reflecting on 2013
Achieved (yes/no) Comment
Rolling out the technology enabler to all
business units, regional offices, corporate
office and service functions throughout
the year
Risk review sessions
Establishing risk appetite levels per strategic
objective for the company and obtaining board
approval
Risk aggregation and risk escalation policy
established
Updating ERM framework
Linking key performance indicators (KPIs*) and
key risk indicators (KRIs**) to management
performance contracts
Yes
• Awarded first prize by the Institute of Risk
Management of Southern Africa for the best IT risk
implementation in 2013
• All users received customised face-to-face training at
corporate office and their business units
• Reports submitted to executive committee and SRC
directly from system to ensure transparency
• Quarterly risk review sessions conducted at all
business units and annual session conducted with
executive committee
• Refer to page 33. Risk appetite framework to be
approved in 2014
• Methodology established, but not documented
• Document reviewed and updated, risk terminology
aligned to technology enabler terminology
Yes
Yes
Yes
Yes
In progress
• Risk owners for all risks, augmented by KPIs at
Conducting a risk maturity assessment
Conducting compliance reviews on all activities
with an environmental impact
Compiling compliance risk management plans
enabled by new risk management enabler
No
Yes
Yes
strategic level, identified. This will now be linked to
individual performance contracts
• Risk appetite framework contains key risk indicators
for every material performance area, articulated as
risk thresholds
• Risk maturity assessment is scheduled for June 2014
• Environmental legal audit reports issued to business
units and corrective actions under way
• Compliance risk management plans compiled, and
will now be rolled out through control self-assessment
questionnaires
* Key performance indicator is the unit of measure to monitor both achievement of our strategic objectives and our material issues/risks, eg carbon footprint.
** Key risk indicator is the variance of the unit of measure to monitor the risk, eg target is to be carbon neutral and worst tolerable is 1% CO2e reduction per annum.
LOOKING FORWARD 2014
The following activities are planned for 2014
• The board to review and approve detailed risk tolerance levels
• Upgrading our risk management enabler to the newest version
• Implementing the SHEC risk management enabler and rolling it out to the
business units
• Conducting risk review sessions within the updated technology enabler
• Rolling out the risk appetite framework to business units
• Monitoring and reviewing risk thresholds to ensure operations function within the
board-approved framework
• Reviewing and updating the ERM framework
• Linking key performance indicators (KPIs) and key risk indicators (KRIs)
to management’s performance contracts
• Conducting a risk maturity self-assessment
• Conducting mining right audits for all operations.
OUTCOME
The detailed table overleaf illustrates Exxaro’s top strategic risks as considered by the board. We use a top-down
and bottom-up risk review approach where business unit risks, external risks as well as local and global risk survey
information become input for the strategic layer.
25
EXXARO Integrated report 2013 Residual
Sustainability
risk trend
capital
Key performance indicators (KPIs)*
Financial
• Core operating margin (%)
Combined
assurance (line*)
Line 3
• Compound annual growth rate, based on core HEPS
• Number of fatalities
• Lost-time injury frequency rate (months without a fatality)
Financial
• People productivity of current assets (production tonnes/full-time
Line 3
• People productivity of current assets (total tonnes handled/full-time
employee)
employee)
• Annualised return on capital employed (ROCE) (%)
• Core operating margin (%)
• Compound annual growth rate, based on core HEPS
• Lost-time injury frequency rate (months without a fatality)
• Stoppage directives (including MHSA, MPRDA, NWA and NEMA)
RISK AND COMPLIANCE
SUMMARY OF TOP RISKS
Strategic
focus area
Portfolio
and financial
performance
1
2
Portfolio
and financial
performance
Unable to meet
production
demands
Risk name
Potential impact
Critical controls
Key dependency
on customers
• Legal and
compliance
• Operations
• Safety
• Financial
• Operational
• Financial
• Stakeholder
relations
• Broadening local and international customer base
• Establishment of rehabilitation trust fund
• Regular liaison with Eskom
• Renegotiation of Medupi coal-supply agreement
• Accelerate business improvement projects currently
running
• Conduct more accurate geological studies
• Performance and consequence management
• Maintain the stockpile threshold
• Develop condition-based budget model feeding from
life-of-mine plan
• Improve maintenance and asset management
• Ongoing capital infrastructure planning aligned to strategy
3
Developing
leadership and
people
Safety concerns • Safety
• Analyse historical incident data to identify trends to get to
Human
• Number of fatalities
Line 3
• Operations
• Financial
• Stakeholder
relations
root causes
• Continuously report incidents
• Continuously review industry benchmark on safety
• Implement robust preventive maintenance processes
and systems
• Invest in education, training, communication and behaviour-
based safety programmes
• Use predictive modelling techniques to develop prevention
strategies
• Active and constant interaction with government to speed
Social
• Number of authorisations outstanding
Line 1
up approvals
• Build strong relationships with government
• Close communication with communities and other
affected parties
• Develop communication plan that quickly disseminates
changes to operations
• Improve speed of mine planning to match price volatility
• Match commodity prices to customer base
• Negotiate long-term, fixed-price contracts
• Establish public-private partnerships
• Liaise through Chamber of Mines with government
• Link water-intensity targets to performance targets
Financial
• Core HEPS (cps) – short-term target
N/A
• Annualised ROCE (%)
• Core operating margin (%)
• Compound annual growth rate, based on core HEPS
Natural
• Water intensity (% improvement)
4
5
6
Responsibility
and
accountability
Government
bureaucracy
• Strategic
• Financial
• Project delays
• Stakeholder
relations
• Legal and
compliance
• Human resources
Portfolio
and financial
performance
Commodity
price volatility
• Financial
• Stakeholder
relations
Responsibility
and
accountability
Unavailability
of water
• Strategic
• Financial
• Project delays
• Stakeholder
relations
• Legal and
compliance
Key
Description
Current residual risk rating increased.
Current residual risk rating decreased.
A new top 15 risk was identified.
26
SUMMARY OF TOP RISKS
Strategic
focus area
1
Portfolio
and financial
performance
Risk name
Potential impact
Critical controls
Key dependency
• Legal and
on customers
compliance
• Broadening local and international customer base
• Establishment of rehabilitation trust fund
• Regular liaison with Eskom
• Renegotiation of Medupi coal-supply agreement
and financial
performance
production
demands
• Operations
• Safety
• Financial
• Financial
• Stakeholder
relations
running
• Conduct more accurate geological studies
• Performance and consequence management
• Maintain the stockpile threshold
• Develop condition-based budget model feeding from
life-of-mine plan
• Improve maintenance and asset management
• Ongoing capital infrastructure planning aligned to strategy
leadership and
people
• Operations
• Financial
• Stakeholder
relations
root causes
• Continuously report incidents
• Continuously review industry benchmark on safety
• Implement robust preventive maintenance processes
• Invest in education, training, communication and behaviour-
based safety programmes
• Use predictive modelling techniques to develop prevention
and systems
strategies
up approvals
• Build strong relationships with government
• Close communication with communities and other
affected parties
5
Portfolio
and financial
performance
Commodity
price volatility
• Financial
• Stakeholder
relations
• Develop communication plan that quickly disseminates
changes to operations
• Improve speed of mine planning to match price volatility
• Match commodity prices to customer base
• Negotiate long-term, fixed-price contracts
6
Responsibility
Unavailability
• Establish public-private partnerships
and
accountability
of water
• Project delays
• Link water-intensity targets to performance targets
• Liaise through Chamber of Mines with government
• Project delays
• Stakeholder
relations
• Legal and
compliance
• Human resources
• Strategic
• Financial
• Stakeholder
relations
• Legal and
compliance
2
Portfolio
Unable to meet
• Operational
• Accelerate business improvement projects currently
Financial
• People productivity of current assets (production tonnes/full-time
Line 3
Residual
risk trend
Sustainability
capital
Financial
Key performance indicators (KPIs)*
• Core operating margin (%)
• Compound annual growth rate, based on core HEPS
• Number of fatalities
• Lost-time injury frequency rate (months without a fatality)
Combined
assurance (line*)
Line 3
3
Developing
Safety concerns • Safety
• Analyse historical incident data to identify trends to get to
Human
employee)
• People productivity of current assets (total tonnes handled/full-time
employee)
• Annualised return on capital employed (ROCE) (%)
• Core operating margin (%)
• Compound annual growth rate, based on core HEPS
• Number of fatalities
• Lost-time injury frequency rate (months without a fatality)
• Stoppage directives (including MHSA, MPRDA, NWA and NEMA)
Line 3
4
Responsibility
and
accountability
Government
bureaucracy
• Strategic
• Financial
• Active and constant interaction with government to speed
Social
• Number of authorisations outstanding
Line 1
Financial
• Core HEPS (cps) – short-term target
• Annualised ROCE (%)
• Core operating margin (%)
• Compound annual growth rate, based on core HEPS
N/A
Natural
• Water intensity (% improvement)
27
EXXARO Integrated report 2013 RISK AND COMPLIANCE
continued
Strategic
focus area
7 Operational
excellence
Risk name
Potential impact
Critical controls
Infrastructure
capacity,
access,
development
and funding
• Financial
• Stakeholder
relations
• Collaborate with government stakeholders to improve and
initiate new infrastructure
• Identify other stakeholders to co-develop a solution and
• Human resources
extend infrastructure
8
Portfolio
and financial
performance
Competitiveness
of assets (cost/
tonne)
• Financial
• Stakeholder
relations
• Operations
• Regular liaison with Transnet Freight Rail, Richards Bay
Coal Terminal and other stakeholders
• Understand return on infrastructure and consider
appropriate funding
• Assign management accountants as business partners in
relevant areas
• Create strategic joint ventures to optimise economies
of scale
• Focus on sustainable cost-reduction programmes/business
improvement initiatives
• Focus on business unit’s controllable efficiencies
• Increased awareness of cost management
• Investigate and divest non-core assets
• Rebalance product chains to better use infrastructure
(integrated logistics)
Residual
Sustainability
risk trend
capital
Key performance indicators (KPIs)*
Manufactured
• Growth from coal commodities (Mt)
Combined
assurance (line*)
• Project delivery measure (time and cost variance from plan)
• Country risk as per assessment criteria (key drivers physical security
and security of tenure)
• Growth from coal commodities (Mt)
• Annualised ROCE (%)
Financial
• Core operating margin (%)
• Services cost as % of total operating cost
• Annualised ROCE (%)
9
Responsibility
and
accountability
State
intervention in
mining sector
• Strategic
• Financial
• Human resources
• Legal and
compliance
• Be prepared to diversify (commodity mix and
geographical areas)
• Ensure effective stakeholder relations
• Increase transparency of payments to governments
• Participate in Chamber of Mines discussions and
give inputs
• Partner with state-owned enterprises
• Work with multilateral agencies and other stakeholders
(illustrate nationalism negatives)
Social
• Annualised return on equity based on core headline earnings (%)
• Financial impact modelling of regulatory changes
• Core operating margin
• Mining charter per site
• BBBEE level
10 Operational
excellence
Capital project
execution
• Financial
• Stakeholder
relations
• Disciplined execution of value engineering study review
• Asset portfolio review and management
• Encourage a culture to report both successes and failures
• Project delays
(lessons learnt)
Manufactured
• Project delivery measure (time and cost variance from plan)
Line 3
• Individual projects’ return on investment (ROI), measured by
risk-adjusted weighted average cost of capital (WACC)
• Country risk assessment
• Establish contingency plan (plan B)
• Implement advanced assurance frameworks (independent
review and oversight)
• Monitor and track progress of capital projects
• Ensure project and supply chain performance is monitored
and managed
• Establish a robust governance structure
• Improve capex forecast accuracy
• Compulsory inductions to all personnel and visitors
• Conduct environmental management programme (EMPr)
assessments
• Ensure internal incident reporting
• Liaise with authorities regularly
• Perform environmental legal audits regularly
(self-assessments)
• Communicate updates on legal changes
• Provide regular compliance awareness training
11 Responsibility
and
accountability
Compliance to
environmental
legislation
• Financial
• Environmental
• Reputational
• Operations
• Legal and
compliance
Key
Description
Current residual risk rating increased.
Current residual risk rating decreased.
A new top 15 risk was identified.
28
Natural
• Reportable cases of environmental incidents
Line 3
• Stoppage directives (including MHSA, MPRDA, NWA and NEMA)
• Environmental authorisations
• Environmental liability provisions (in place and adequate)
• Environmental authorisations’ compliance to conditions
• Carbon footprint
Strategic
focus area
excellence
Risk name
Potential impact
Critical controls
7 Operational
Infrastructure
• Financial
• Collaborate with government stakeholders to improve and
capacity,
access,
development
and funding
• Stakeholder
relations
initiate new infrastructure
• Identify other stakeholders to co-develop a solution and
• Human resources
extend infrastructure
• Regular liaison with Transnet Freight Rail, Richards Bay
Coal Terminal and other stakeholders
• Understand return on infrastructure and consider
appropriate funding
and financial
performance
of assets (cost/
tonne)
• Stakeholder
relations
• Operations
relevant areas
of scale
• Create strategic joint ventures to optimise economies
• Focus on sustainable cost-reduction programmes/business
improvement initiatives
• Focus on business unit’s controllable efficiencies
• Increased awareness of cost management
• Investigate and divest non-core assets
• Rebalance product chains to better use infrastructure
(integrated logistics)
9
Responsibility
State
and
accountability
intervention in
mining sector
• Strategic
• Financial
• Be prepared to diversify (commodity mix and
geographical areas)
• Human resources
• Ensure effective stakeholder relations
• Legal and
compliance
• Increase transparency of payments to governments
• Participate in Chamber of Mines discussions and
give inputs
• Partner with state-owned enterprises
• Work with multilateral agencies and other stakeholders
(illustrate nationalism negatives)
• Establish contingency plan (plan B)
• Implement advanced assurance frameworks (independent
review and oversight)
• Monitor and track progress of capital projects
• Ensure project and supply chain performance is monitored
and managed
• Establish a robust governance structure
• Improve capex forecast accuracy
11 Responsibility
and
Compliance to
environmental
accountability
legislation
• Financial
• Compulsory inductions to all personnel and visitors
• Environmental
• Conduct environmental management programme (EMPr)
• Reputational
• Operations
• Legal and
compliance
assessments
• Ensure internal incident reporting
• Liaise with authorities regularly
• Perform environmental legal audits regularly
(self-assessments)
• Communicate updates on legal changes
• Provide regular compliance awareness training
8
Portfolio
Competitiveness
• Financial
• Assign management accountants as business partners in
Financial
• Core operating margin (%)
• Services cost as % of total operating cost
• Annualised ROCE (%)
Residual
risk trend
Sustainability
capital
Manufactured
Key performance indicators (KPIs)*
• Growth from coal commodities (Mt)
• Project delivery measure (time and cost variance from plan)
• Country risk as per assessment criteria (key drivers physical security
and security of tenure)
• Growth from coal commodities (Mt)
• Annualised ROCE (%)
Combined
assurance (line*)
10 Operational
Capital project
• Financial
• Disciplined execution of value engineering study review
excellence
execution
• Stakeholder
• Asset portfolio review and management
relations
• Encourage a culture to report both successes and failures
• Project delays
(lessons learnt)
Manufactured
• Project delivery measure (time and cost variance from plan)
• Individual projects’ return on investment (ROI), measured by
risk-adjusted weighted average cost of capital (WACC)
Line 3
• Country risk assessment
Social
• Annualised return on equity based on core headline earnings (%)
• Core operating margin
• Financial impact modelling of regulatory changes
• Mining charter per site
• BBBEE level
Natural
• Reportable cases of environmental incidents
• Stoppage directives (including MHSA, MPRDA, NWA and NEMA)
• Environmental authorisations
• Environmental liability provisions (in place and adequate)
• Environmental authorisations’ compliance to conditions
• Carbon footprint
Line 3
29
EXXARO Integrated report 2013 Residual
Sustainability
risk trend
capital
Key performance indicators (KPIs)*
Social
• Mining charter, per site
• BBBEE level
Combined
assurance (line*)
Line 3
Natural
• Compliance to conditions of environmental authorisations
Line 3
• Environmental liability provisions (in place and adequate)
Natural
• Environmental liability provision
Social
• Mining charter, per site
Line 3
• BBBEE level
• Organisational culture assessment
RISK AND COMPLIANCE
continued
Strategic
focus area
Risk name
Potential impact
Critical controls
12 Responsibility
and
accountability
Maintain social
licence to
operate
13 Developing
leadership and
people
Mine
rehabilitation
• Financial
• Reputational
• Stakeholder
relations
• Legal and
compliance
• Operations
• Financial
• Environmental
• Stakeholder
relations
• Legal and
compliance
• Operations
14 Responsibility
and
accountability
Inability to
accurately
determine
financial closure
obligations (cost
of closure)
• Financial
• Environmental
• Stakeholder
relations
• Legal and
compliance
• Conduct SLP audits
• Proactive involvement in sustainable socio-economic
development initiatives
• Adhere as a minimum to commitments in SLPs
• Pursue identified initiatives to progressively improve
Exxaro’s BBBEE rating
• Report on mining charter requirements (external
and internal)
• Report on SLP requirements (external and internal)
• Complete legacy projects
• Conduct awareness and training
• Manage rehabilitation trust jointly with Eskom
• Undertake rehabilitation calculations and create
accounting provision
• Ensure insurance covers are in place
• Establish rehabilitation programmes
• Issue appropriate guarantees to DMR
• Update EMPr to align with activities on the mine
• EMPr extension for mining footprint
• Independent consultants to conduct annual closure
cost assessments
• Ongoing consultation with authorities
15 Responsibility
Labour unrest
and
accountability
• Safety
• Operations
• Financial
• Stakeholder
relations
• Ensure proper leadership and high-performance culture
• Ensure emergency stockpile is maintained (business
continuity management plan)
• Establish strike emergency response plan and team
• Monitor execution of SLPs
• Participate in Chamber of Mines forum
• Regular communication to employees and communities
• Regular labour and union liaison
Key
MHSA = Mine Health and Safety Act No 29 of 1986.
MPRDA = Minerals and Petroleum Resources Development Act No 28 of 2002.
NWA = National Water Act No 36 of 1998.
NEMA = National Environmental Management Act No 107 of 1998.
Key
Description
Current residual risk rating increased.
Current residual risk rating decreased.
A new top 15 risk was identified.
* Line 1 — Management review.
Line 2 — Internal assurance such as review by corporate service department as subject matter expert over a risk at a business unit.
Line 3 — Independent assurance.
30
Strategic
focus area
Risk name
Potential impact
Critical controls
12 Responsibility
Maintain social
• Financial
• Conduct SLP audits
and
licence to
accountability
operate
• Reputational
• Stakeholder
relations
• Legal and
compliance
• Operations
• Proactive involvement in sustainable socio-economic
development initiatives
• Adhere as a minimum to commitments in SLPs
• Pursue identified initiatives to progressively improve
Exxaro’s BBBEE rating
• Report on mining charter requirements (external
and internal)
• Report on SLP requirements (external and internal)
13 Developing
Mine
• Financial
• Complete legacy projects
leadership and
rehabilitation
• Environmental
• Conduct awareness and training
people
• Stakeholder
• Manage rehabilitation trust jointly with Eskom
• Undertake rehabilitation calculations and create
relations
• Legal and
compliance
• Operations
accounting provision
• Ensure insurance covers are in place
• Establish rehabilitation programmes
• Issue appropriate guarantees to DMR
• Update EMPr to align with activities on the mine
14 Responsibility
and
accountability
Inability to
accurately
determine
• Financial
• EMPr extension for mining footprint
• Environmental
• Independent consultants to conduct annual closure
cost assessments
• Ongoing consultation with authorities
financial closure
obligations (cost
of closure)
• Stakeholder
relations
• Legal and
compliance
and
accountability
• Operations
• Financial
• Stakeholder
relations
• Ensure emergency stockpile is maintained (business
continuity management plan)
• Establish strike emergency response plan and team
• Monitor execution of SLPs
• Participate in Chamber of Mines forum
• Regular communication to employees and communities
• Regular labour and union liaison
Key
MHSA = Mine Health and Safety Act No 29 of 1986.
MPRDA = Minerals and Petroleum Resources Development Act No 28 of 2002.
NWA = National Water Act No 36 of 1998.
NEMA = National Environmental Management Act No 107 of 1998.
Key
Description
Current residual risk rating increased.
Current residual risk rating decreased.
A new top 15 risk was identified.
* Line 1 — Management review.
Line 3 — Independent assurance.
Line 2 — Internal assurance such as review by corporate service department as subject matter expert over a risk at a business unit.
Residual
risk trend
Sustainability
capital
Key performance indicators (KPIs)*
Social
• Mining charter, per site
• BBBEE level
Combined
assurance (line*)
Line 3
Natural
• Compliance to conditions of environmental authorisations
• Environmental liability provisions (in place and adequate)
Line 3
Natural
• Environmental liability provision
15 Responsibility
Labour unrest
• Safety
• Ensure proper leadership and high-performance culture
Social
• Mining charter, per site
• BBBEE level
• Organisational culture assessment
Line 3
RISKS
80%
have external root causes
60%
have people as root cause
27%
are compliance-related risks
BREAKDOWN PER
STRATEGIC THEME
• Responsibility and
accountability — 54%
• Developing leadership and
people — 13%
• Operational and financial
excellence — 13%
• Commodity portfolio — 20%.
SUSTAINABILITY CAPITALS: SPREAD OF RISKS
• Natural capital — 27%
• Human capital — 13%
• Social capital — 27%
• Manufactured capital — 13%
• Financial capital — 20%.
31
EXXARO Integrated report 2013
RISK AND COMPLIANCE
continued
Heat map
The Exxaro heat map is designed
to indicate high-impact/low-
probability risks as red to
emphasise that, should any
of these risks materialise, it
would have an extreme impact
on the organisation and need
to be monitored and reviewed
constantly. The same applies to
high-probability/low-impact risks
which are indicated in yellow as
they occur frequently and need to
be managed. The controls related
to these risks are considered
critical and need to be monitored
and reviewed constantly in line
with the combined assurance
approach.
The heat map below illustrates
Exxaro’s top strategic risks as
shown on page 26 inherently
(before any controls) as well as
residually (after controls) identified
through our ERM process as
approved by the board.
Figures in each heat map reflect
the number of risks in that
quadrant.
Inherent risk rating
Residual risk rating
t
s
o
m
A
l
n
i
a
t
r
e
c
%
0
0
1
-
1
8
y
l
e
k
i
L
%
0
8
-
1
6
e
l
b
i
s
s
o
P
%
0
6
-
6
3
e
k
i
l
n
U
%
5
3
-
1
1
e
r
a
R
%
0
1
-
1
2
5
5
3
t
s
o
m
A
l
n
i
a
t
r
e
c
%
0
0
1
-
1
8
y
l
e
k
i
L
%
0
8
-
1
6
e
l
b
i
s
s
o
P
%
0
6
-
6
3
e
k
i
l
n
U
%
5
3
-
1
1
e
r
a
R
%
0
1
-
1
3
5
3
4
Negligible
1-10
Moderate
11-35
High
36-60
High
61-80
Extreme
81-100
Negligible
1-10
Moderate
11-35
High
36-60
High
61-80
Extreme
81-100
Impact
Impact
Probability legend*
Impact legend*
Factor
> 80-100
> 61-80
> 36-60
> 10-35
< and = 10
Description
Almost certain
Likely
Possible
Unlikely
Rare
Factor
> 80-100
> 61-80
> 36-60
> 10-35
< and = 10
Description
Extreme
Major
High
Moderate
Negligible
* Colours will not correlate with the heat map, as the heat map assists in prioritisation of risks.
32
Risk appetite
Risk appetite answers the question
”how much risk do we take as a
group?” This will ensure decisions
are made after considering
quantifiable, impartial measures
in pursuit of strategic objectives,
and that we take calculated risk in
making decisions.
Exxaro’s philosophy on risk
management has always been
not to entrench a compliance-
driven approach but to view risk
management as a strategic enabler
to ensure that we think and act
proactively at every layer in pursuit
of our objectives.
In selecting the appropriate
methodology to determine our
approach in developing the risk
appetite framework, this was taken
into account. The purpose of the
methodology is to ensure that risk
appetite has an external proxy,
one that is objective — something
that can be seen and measured
impartially. This is more commonly
known as risk thresholds — external
expressions of our risk appetite.
Risk thresholds were set in 2013
for every strategic objective and,
in aggregate, they reflect the risk
appetite of Exxaro. The following
process was used:
• Interviews with the executive
committee and key information
owners in senior management,
based on strategic objectives
categorised according to our
five capitals
• The outcome was a set of
themes relating to Exxaro’s
biggest inherent risk exposures
which were linked to a specific
sustainability capital. These
themes were coupled with a
set of performance measures
indicating a target (the measure
that will lead us to achieving our
strategic objectives) with a best-
realistic (where are we now) and
worst-tolerable variance.
Extract of the risk appetite framework
Strategic theme
Sustainable capital Measure
Worst tolerable*
Best realistic*
Target*
Responsibility and
accountability
Natural
Responsibility and
accountability
Natural
Responsibility and
accountability
Human
Responsibility and
accountability
Social
Responsibility and
accountability
Social
Operational
excellence
Manufactured
Reportable cases
of environmental
incidents
Carbon footprint
Fatalities (months
without a fatality)
Ownership – group
Mining charter,
per site and
element indicating
compliance (%)
Country risk as per
assessment criteria
(key drivers are
physical security
and security of
tenure)
Any reportable
incident
>R500 000
No significant
reportable incident
(>R500 000 cost)
No reportable
incident
(R10 000-500 000)
1% CO2e reduction
per annum
5% CO2e reduction
per annum
Carbon neutral
by 2030
<12
26%
>24
52%
100%
100%
Indefinite
26%
100%
Go-countries
Go-countries
Go-countries
*
Target (the measure that will lead us to achieving our strategic objectives), best-realistic (where we aim to be) and a worst-tolerable variance (the worst we are prepared
to accept).
Materialised risks
Only one strategic risk materialised in 2013 with a concomitant impact on Exxaro:
Risk materialised
Financial impact
from damages
Financial impact
due to additional
services rendered
Financial impact
from tonnes lost Comments
Labour unrest
R384 703
R2 469 100
2 167kt Strategies were implemented to recover
lost tonnes. Responses to mitigate and
reduce the impact of this risk occurring
in future are in place (refer to risk 15:
labour unrest)
33
EXXARO Integrated report 2013 RISK AND COMPLIANCE
continued
COMBINED ASSURANCE
In 2013, Exxaro continued to embed combined assurance and ensure its activities are risk-based. A number of
initiatives were implemented to improve our combined assurance process to ensure key controls are monitored
and users understand the need to link assurance with their risk profiles.
Work to date has given Exxaro a holistic picture of material issues that need to be addressed to improve internal
control systems in the business.
Please refer to our website and principle 3.5 of the King III compliance report for more details.
Highlights – FY13
Challenges – FY13
Establishment of combined assurance forum to coordinate
assurance activities and monitor implementation of annual
coverage plan
Some combined assurance activities continued outside
the approved average plan which resulted in duplicated
resources
Completion of specific phases of the assurance review which
uncovered significant issues on assurance management in
the company
Embedding the combined assurance framework and
process, largely role clarity for assurance lines of defence*
Enhanced process of developing integrated audit assurance
coverage plan by sourcing information directly associated
with risk profiles of the company
Timely implementation of outcomes and recommendations
of assurance reviews and developing relevant actions to
address deficiencies
Rolling out issue tracking management tool to record,
manage and report on action plans
* Line 1 — Management review.
Line 2 — Internal assurance such as review by corporate service department as subject matter expert over a risk at a business unit.
Line 3 — Independent assurance.
Statistical report of SHEC assurance assessments: FY13
Risks
Arnot SHEC risks
Grootegeluk SHEC risks
Inyanda SHEC risks
Leeuwpan SHEC risk
NBC SHEC risks
Number
of risks
No
assurance
Limited
assurance
Adequate
assurance
Over-
assurance
5
3
2
1
3
14
2
0
0
0
0
2
2
2
0
0
2
6
1
1
2
0
1
5
0
0
0
1
0
1
No assurance provided.
Some assurance provided (but room for improvement).
Appropriate assurance provided regularly.
Over-assurance provided (cost and effort outweighs the benefit).
Total
Key
Status
No assurance
Limited assurance
Adequate assurance
Over-assurance
34
Major assurance assessment and results
As the combined assurance process gains momentum, Exxaro commissioned a third line of defence review on key
areas that link directly to our strategic focus. The intent was to assess the adequacy and effectiveness of systems
of internal control to comply with applicable rules and regulations.
Assurance
area
Assurance
providers
Mining charter E&Y
Focus
area
Results/
outcomes
Framework/standards
Exxaro complies with
Compliance to 2012 mining
charter targets
• Grootegeluk
mine
• Matla mine
• Leeuwpan
mine
DMR mining charter scorecard
aligned to the amendment of the
broad-based socio-economic
empowerment charter for
the South African mining and
minerals industry (September
2010). Section 100(2)(a) of the
MPRDA provides for a mining
charter to give effect to the
provisions of this act
Broad-Based Black Economic
Empowerment Act No 53 of
2003) Codes of good practice
• Risk management
• Material issues
• Combined assurance
framework
• Global Reporting Initiative
(GRI)
• United Nations Global
Compact (UNGC)
Framework was developed
by KPMG
• EMPr compiled in terms
of MPRDA
• National Water Act
• NEMA
BBBEE
SizweNtsalubaGobodo
Corporate office Level 4 contribution status
for FY12
Sustainability
KPIs
PwC
• Grootegeluk
mine
• Matla mine
Social return
on investment
(SROI) for
community
projects
Environmental
legal audit
KPMG
All business
units
EoH Legal Services
All business
units
Compliance and
performance against
selected sustainability KPIs
Assessment: Improvements
were noted where number
of findings/observations
have reduced from 2012.
There are still areas that
require some attention.
An average SROI index
>1,30 (all values over 1,00
have a positive return on
investment)
Legal audit conducted
in Q4 2013 with scope
covering compliance to
conditions stipulated in
environmental licences of
businesses. Assessment:
finalisation and sign-off of
reports took longer than
expected and, as a result,
the consolidated final report
will be presented to the
audit committee in 2014
Targets for FY14
• Engage business units, regions and corporate office to take ownership of the assurance process
• Process owners to address shortcomings identified in combined assurance review to date and integrate their
actions on issue tracking management tool
• Roll out initiatives to embed combined assurance across the company from business units to corporate office
• Strengthen combined assurance forum and continuously engage key stakeholders
• Continuously align the outcomes of combined assurance reviews with risk management efforts to redirect the
business to risks that require attention.
35
EXXARO Integrated report 2013 ACCOLADES AND AWARDS
Sustainability
Frost & Sullivan 2013 award for visionary
innovation
Leadership and people
Top Employers Institute
Corporate Secretaries International
Association
Deloitte Best Company To Work For
This is one of several best-practice accolades that Frost & Sullivan conveys
on companies demonstrating outstanding achievement and superior
performance in areas such as leadership, technological innovation, customer
service and strategic product development. Exxaro was the only company
in the mining and minerals industry to receive an award for its achievements
in four key areas when benchmarked against competitors:
• Understanding and leveraging mega trends
• Vision integration into strategy excellence
• Efficacy of innovation process
• Degree of impact on business and society
First place for a mining company
The Top Employers Institute certifies excellence in conditions employers
create for their people to grow and develop
Exxaro’s group company secretary appointed president
Second place for a mining company
Exxaro earned a Standard of Excellence Award in the 2012 survey. We are
exceptionally proud of this achievement, which was a 2016 target that we
reached four years early. Exxaro enters this survey every two years
Afrikaanse Handelsinstituut
Exxaro’s CEO received the MS Louw award for business leadership
Integrated reporting
EY Excellence in Integrated Reporting 2013
Nkonki Top 100 integrated reporting
awards 2013
Dow Jones sustainability index 2013
Carbon Disclosure Project (CDP) 2013
Top 10
Exxaro has featured consistently in this respected survey of integrated
reports by South Africa’s top 100 JSE-listed companies and top 10 state-
owned companies
Exxaro was first in the basic materials category, received an Excellence
award and ranked third overall in the Top 10 category. Reflecting steady
improvement in the quality of its integrated disclosure, Exxaro’s 2013 ranking
compares to 28th position in 2010
Exxaro was included on this prestigious index for the first time
Launched in 1999, these were the first global indices tracking the financial
performance of leading sustainability-driven companies worldwide. Inclusion
is determined by an integrated assessment of economic, environmental and
social criteria with a strong focus on long-term shareholder value
Exxaro continued to perform in the annual CDP:
• The carbon disclosure leadership index (CDLI) measures transparency and
data management for the emission of greenhouse gases. Exxaro achieved
a CDLI score of 100 in 2012 – the first such score for South Africa.
This year the group achieved a score of 97
• The carbon performance leadership index (CPLI) assesses how companies
incorporate emissions reductions into their strategies and meet their
emissions reduction targets. Exxaro scored a B in this category in 2012
and again in 2013, placing the company among global leaders
Risk management
South African Institute for Risk Management
(IRMSA) risk management awards
First place for best implementation of a risk management information system
(SAP GRC10.0)
36
Stakeholders
3704
EXXARO Integrated report 2013 STAKEHOLDERS
At Exxaro, we believe our
organisation’s success in achieving
our strategy depends on positive
relationships with those who have
a direct and indirect stake in our
business. Effective and mutually
beneficial relationships help in
building an enabling environment
for the business to succeed
while meeting the needs and
expectations of stakeholders.
This makes stakeholder
engagement a critical part of
executing our business strategy.
Good stakeholder engagement
makes Exxaro perform better.
It increases our knowledge
and contributes to our licence
to operate.
We strive to create the kind of
relationship where both parties
take each other’s best interests
to heart, and work to achieve
the best-possible outcome for
each other.
These relationships vary over time
and between different stakeholder
groups, but our aim is to build long-
term associations that are in line
with our long-term strategy.
When we engage with
stakeholders, our strategy is the
framework for communication. It
is through this communication that
we are able to establish what each
OUR STAKEHOLDERS
SET THE CONTEXT
WITHIN WHICH WE
OPERATE
38
stakeholder needs most and how we can meet those needs, how best to
promote our purpose as a business and solicit support, identify trade-offs
and create a shared vision and values.
Our stakeholders set the context within which we operate; without
stakeholder engagement, we cannot operate a sustainable business.
How stakeholder engagement fits into the business is best understood
by viewing it as one of three corners of a triangle (see our business
philosophy model on page 8.
WHO ARE STAKEHOLDERS?
Our stakeholders are clustered in the following categories:
Employees
Government and regulators
• Full-time and contractors
• Unions
• Management and board
• Various departments
• State-owned entities
• JSE
• South African Reserve Bank
Communities
• Near operations
Shareholders and debt providers
• Empowerment shareholders
• Investors
• Anglo American plc
Customers and suppliers
• Supply chain constituents
Interest groups, NGOs
• Federation for Sustainable Environment
Media
APPROACH
Exxaro strives to engage with stakeholders in a transparent and honest
manner, and in the context of the company’s values.
The intention is to promote two-way engagement so that the company and
stakeholders understand one another.
Exxaro’s priority for stakeholder engagement at this point is to focus on
engaging stakeholders on mutually material issues.
Since inception in 2006, Exxaro has developed a sound system of stakeholder
engagement performed by various managers. In pursuit of continuous
improvement, during the review period Exxaro appointed an executive head
for strategy and corporate affairs to focus and formalise our initiatives in
stakeholder engagement.
In 2014, we expect to progress towards the introduction of the
AccountAbility AA1000SES stakeholder engagement standard which
serves as a benchmark for quality engagement. It provides a basis for a
generally applicable, open-source framework for designing, implementing,
assessing and communicating the quality of stakeholder engagement.
AA1000SES requires Exxaro to integrate stakeholder engagement into
governance and relevant decision-making processes. It also requires that
stakeholder engagement is integrated into relevant policies and processes,
including strategy development and operations management.
The guiding principles of the AA1000SES as well as the principles of the
following documents shape our stakeholder engagement:
• King report on governance for South Africa 2009 (King III)
• Global Reporting Initiative guidelines
• Companies Act No 71 of 2008, as amended
• IIRC reporting framework.
Purpose
Frequency
Issues/response
Identify material issues
affecting communities
surrounding our operations
Formal socio-economic
assessments (SEATs)
every three years,
followed by quarterly
engagement forums.
Quarterly
• Safety
• Health
• Environmental
• Community
In 2013 Exxaro
repeated SEATs at
three operations
• Local economic
development
procurement
• Employment
• Environmental
concerns
• Education and skills
development needs
• Job creation
• Shareholding/equity
Our social and labour
plans are focused on
these areas (page 52)
Stakeholder
Community
stakeholders which
include all authorities
affected and
interested parties
such as government,
NGOs, etc
Engagement
method
Community
engagement forum
Community
development forum
Customers
Marketing
Employees
Road shows
Group newsletter
Electronic
communication
Information briefs
Caucus groups
Future forum
Labour unions
Monitor progress on
implementing local
economic development
projects and project
spending
Determine local economic
development projects for
social and labour plan,
and implement these
collaboratively
Enable Exxaro to
understand and meet
customer specifications
Advertise Exxaro products
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
with recognised trade
unions at operational and
employer level
As required by each
commodity business’
marketing department
• Product quantities
and qualities
• Logistical issues
Ongoing
Quarterly
Ongoing
Ongoing
Ongoing
• Remuneration and
incentive schemes
• Benefits
• Corporate
developments
Dialogue is ongoing
Quarterly at business
unit and corporate
centre
• Mine closure issues
• Human resource
development
• Local economic
development
Ongoing
• Issues in the
employer/employee
relationship
39
EXXARO Integrated report 2013 STAKEHOLDERS
continued
Stakeholder
Government
Engagement
method
Government
relations
Frequency
Ongoing
Purpose
Ensure government and
Exxaro management are
aligned
Update on group strategy
and developments
Issues/response
• Support for
government
initiatives
Report progress
against legislated
targets, build
partnerships with
government
Interested and
affected parties’
authorisation
process
DMR
Road shows
Briefings and
meetings
Stock Exchange
News Service
(SENS)
Financial reporting
Site visits
Site visits
Interviews
News releases
Website
Advertising
Investors
Media and general
public
NGOs
Mine engagement
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
Provide information for
media to inform public and
other stakeholders. Update
on group strategy and
developments
Keep mine stakeholders
informed on operational
affairs
Suppliers
Green procurement Maximise supply chain
Sustainable supplier
engagement
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
As required by EIA
authorisation process
• Compliance with
legislation; pollution
Transparent
communication
• Compliance
• Industry
developments
• Group strategy and
implementation
• Capital allocation
• Dividend payout
target
• BEE shareholding
structure
• Actual financial and
operational results,
outlook
• Legislative
compliance
• Group strategy and
implementation
• Corporate activity
• Corporate
citizenship
• Detailed green
criteria provided to
suppliers
As required
Quarterly
Ad hoc
Ad hoc
Biannually
Ad hoc
Ad hoc
As required by media
Ad hoc
Ongoing
Ad hoc
Quarterly
As opportunities for
green initiatives occur
and as initiatives are
identified by the green
procurement working
group
As required by supply
chain management
• Vendor engagement
portal to be
implemented in 2014
Preferential
procurement
To ensure Exxaro purchases
goods and services from
suppliers that meet BEE
compliance requirements
Ongoing requirement
on request-for-
quotation or tender
enquiry documents.
• Ongoing legislative
compliance
Specified as a
requirement for
evaluating tenders
40
Commentary
4105
EXXARO Integrated report 2013 CHAIRMAN’S MESSAGE
Following on a difficult
period for the South
African mining industry
in 2012, the year to
31 December 2013 was
another challenging
period but one in which
Exxaro again proved its
resilience.
Undoubtedly, the
highlight was a calendar
year without a fatality.
While the group had
recorded 12 months
without a fatality to June
2013, this was the first
fatality-free financial
year in our history and
convincing proof that,
with focus, discipline and
teamwork, it can be done.
As an industry, we have
made solid progress in
reducing fatalities, but we
know more needs to be
done — especially in terms
of entrenching behaviour
that says safety always,
all the way.
In terms of challenges during the
period, volatile commodity prices
will always be a risk for our industry.
In addition, South African mining
companies had to contend with a
rapidly deteriorating exchange rate,
partially in turn a product of labour
unrest. Although a weak rand
makes our exports more attractive,
it counters efforts to reduce costs
mostly incurred in US dollars.
Legislative issues continue to
impede the industry and we
are working with regulatory
stakeholders to achieve policy
certainty, as well as the mutual
flexibility and infrastructure, which
will encourage further investment
by the industry and foreign
investors alike.
Mining is a cyclical industry in
which losses turn into super
profits and then reverse in a year.
Understanding this, the industry
takes a long-term view on planning
to ensure returns for shareholders
and benefits for stakeholders.
42
Our critics accuse us of being
exploitative, which is neither
truthful nor sustainable. Mining is
about balance — ensuring the profits
of today support the business
of tomorrow when profit may be
harder to achieve. Equally, in South
Africa, business plays a greater
role in social responsibility — much
of this mandated by legislation.
While companies such as Exxaro
willingly accept this responsibility,
we believe that for the industry
to remain an important national
economic contributor, we need less
volatility and more flexibility — from
all stakeholders.
For our group, particular
challenges in 2013 included
ongoing delays in constructing new
power stations for South Africa’s
power utility, Eskom, as well as
the time required to finalise the
mining convention for our iron ore
project, Mayoko, in the Republic
of the Congo. Encouragingly, the
mining convention was signed in
January 2014, and the related
agreements are expected to be
finalised in the first half of 2014,
paving the way for mining to begin
at Mayoko under a revised project
schedule and within the capital
limits imposed by the board on
project expenditure. Developing
our iron ore portfolio is an
important element in our strategy
to diversify our customer base
and geographical footprint and
therefore reduce risk.
On page 12, we detail our progress
in fully developing our strategy.
Importantly, this progress is taking
place within a significantly more
mature and holistic understanding
of our risks at every level, itself
a key indicator of how integrated
thinking is being entrenched in the
group. On financial metrics, Exxaro
was ranked among the world’s best
on total return to shareholders for
2012 while our focus on conserving
our environment has kept the
group among the leaders in the
international Carbon Disclosure
Project. We also received
consecutive awards for innovation
and as a top employer, reinforcing
the integrated approach that
underpins our sustainability.
Exxaro’s governance standards
compare well with best practice,
guiding the group as we expand our
operating areas. For us, compliance
is the starting point — throughout
this report and on our website you
will find examples of how Exxaro
is exceeding compliance to set
new standards in our industry.
We welcome Dr Con Fauconnier
back to Exxaro as an independent
non-executive director and look
forward to his contribution, given
his wealth of applicable knowledge
and experience.
Jurie Geldenhuys will retire from
the board at the forthcoming annual
general meeting after serving as a
director of the company since its
inception. We thank him for his many
years of dedication and wisdom.
Following positive feedback from
stakeholders, we have continued
the approach taken in the prior
report with detailed discussions on
our performance drivers (page 12),
approach to sustainability
(page 18), top risks (page 24),
and operating environment and
performance (pages 48 to 58).
Supplemental information to this
concise integrated report appears
on our website www.exxaro.com.
We again welcome your feedback
which will aid in achieving our aim
of making our reporting meaningful,
comparable and accurate.
Exxaro operates in a challenging
industry, but is guided by decades
of experience and a number
of unique attributes that will
ensure it continues to grow.
Despite being a relatively young
company, the benefit of a skilled
board of directors and executive
management team — under the
capable leadership of Sipho Nkosi —
and the commitment of a
workforce of over 7 200 people are
solid cornerstones for continued
long-term growth.
Dr Len Konar
Chairman
31 March 2014
CHIEF EXECUTIVE OFFICER’S MESSAGE
ZERO
FATALITIES
A full year without
a fatality is
an exceptional
achievement
despite the
challenges of 2013
It has indeed been a
challenging year on
most fronts. However,
it was a period of
significant achievement
as well. One of the
highlights of my year was
authorising a payment
of R16 million to thank
over 7 000 employees
and contractors for
an Exxaro first and an
industry milestone —
a full reporting period
without a single fatality.
This extraordinary
achievement followed
a passionate plea
from myself and the
management team for our
people to remain vigilant
in ensuring no life was
lost in our operations,
and it could not have
happened without
their wholehearted
commitment and focus on
our vision of a fatality-
free organisation.
As the chairman noted, the Exxaro
group operated in a challenging
environment in 2013:
• Industrial action in the first
quarter continued into the
second
• In the USA, the tapering
of quantitative easing was
announced, with a negative
impact on currency and
commodity prices, particularly
for emerging markets
• Commodity price decline
continued:
— Average export coal prices
down 13% to US$82/t vs
US$94/t in 2012
— Iron ore prices peaked
at US$160/t in February,
dropped to a low of US$110/t
in May before stabilising
at around US$130/t in the
second half
— Pigment and zircon prices are
yet to recover, but volumes
improved towards year end
• Continuing engagement with
stakeholders on various issues:
— Government — DMR on social
and labour plans, through
Chamber of Mines on
MPRDA amendment bill, and
departments of environmental
affairs and water for
authorisations
— Communities — delivering
projects in terms of social and
labour plans
— Investors — increased demand
for response to changing
market conditions
— Employees — productivity and
workplace conditions
— Suppliers — supply chain cost
management.
What makes this achievement even
more commendable is that 2013
did not start auspiciously — with
unprotected industrial action in
the first quarter resulting in the
loss of 19 working days and 2Mt in
production. The way in which this
was resolved is testimony to the
strength of the overall relationship
between employers and employees
in our group and the innovative
processes used to ensure all
our people fully understood the
situation — from the underlying
issues and responses to the
way forward as a united group.
The back2work and back@work
programmes also provided a
valuable opportunity to discuss
other issues and incorporate these
into specific forums aimed at
entrenching a high-performance
culture in Exxaro — one with
commensurate and multi-faceted
rewards:
• It is an ongoing point of pride
that our commitment to
developing the full potential
of every employee in this
group means that, each year,
we train more people than
we need, which benefits the
industry. Equally, the calibre of
this training is independently
acknowledged as among
the best, which benefits the
individual, Exxaro, our industry
and South Africa.
• Numerous awards illustrate that
Exxaro is a preferred employer
In terms of employment equity,
43
EXXARO Integrated report 2013 CHIEF EXECUTIVE OFFICER’S MESSAGE
continued
we already comply with four
of six targets in the mining
charter (page 116), meaning that
everyone has the opportunity to
develop his or her full potential.
Competitive remuneration
levels are complemented by
shared rewards — from Mpower
2012 which paid employee
shareowners dividends of
R16 million in respect of FY13 in
addition to production bonuses,
gain-sharing schemes and other
employee benefits.
• Uniquely in our industry, Exxaro
is developing a strategy to
manage the so-called chronic
diseases of lifestyle (heart
disease, obesity, diabetes and
others). Apart from our moral
duty to protect the well-being
of our people, from a company
perspective these diseases
present safety risks and affect
productivity. From an individual
perspective, they affect quality
of life and security of income.
Using pilot projects at two of our
operations, we are also building
a database that will benefit
the industry in managing this
complex issue.
Mining is an industry with
complex and ever-changing risks.
It also presents opportunities
for companies prepared to look
beyond the obvious and invest for
a shared future, with shared value.
This requires a dynamic strategy,
one that offers the flexibility to
respond to changing markets but
with the strength that comes from
a true understanding of those
markets. The comprehensive risk
analysis on page 24 proves how
far we have come in viewing our
business and our future from an
integrated perspective, but always
focused on our strategic goals.
To illustrate this using the five-
capitals framework and our top
risks in each:
• Financial: expanding our
commodity portfolio and
geographic footprint reduces
the dependency on key
customers while improving
production through expansion
and productivity enhancements
ensures we meet demand
• Human: our safety results for
the year and initiatives on
occupational health and hygiene
underscore our commitment to
our people and determination
to reduce the cost — most
importantly, the human cost of
an untimely death or disability
• Social: active and constant
interaction with government
stakeholders accelerates the
approval process that enables
us to implement comprehensive
social and labour plans, with
far-reaching benefits for our
community stakeholders. Over
the next five years, we will spend
R300 million on these projects
• Manufactured: to ensure the
appropriate infrastructure is
in place, we are collaborating
with government and industry
stakeholders to improve existing
infrastructure and initiate new
developments. This participation
and investment has national
economic benefits
• Natural: complying with
environmental legislation
is a minimum standard for
Exxaro. We are making notable
progress on every aspect — from
energy, water and emissions to
biodiversity and rehabilitation
— underscoring our significant
investment in recent years to
ensure meaningful data for
measurable improvement.
While our strategy is detailed on
page 10, I believe it pertinent to
comment on the solid progress
being made in optimising our
commodity portfolio:
• Considered diversification: Our
actions support our strategy of
being a diversified commodity
business, currently with strong
positions in coal, clean energy,
titanium dioxide and ferrous.
Our strategic focus remains on
these commodities and building
a world-class portfolio in each
• Our optimisation strategy is
clear: We are focusing more
intensely on fewer projects.
We are determined to deliver
on the projects we embark on
while continuously evaluating all
assets in our portfolio
• Accordingly, during the review
period, we:
— Sold Zincor
— Stopped a number of projects,
ie Botswana Gas, Gravelotte
magnetite and a few others
— Signed on agreement to
dispose of New Clydesdale
Colliery (NCC) in our coal
portfolio
• In 2014, we will:
— Continue to develop the
Mayoko project as part of our
ferrous portfolio
— Close Tshikondeni mine
— Evaluate options for Inyanda
as it nears the end of its life
of mine
— Evaluate the Tronox option as
the standstill agreement will
lapse mid-2015
— Strive for operational and
financial excellence through
low-cost production, a skilled
workforce, improved safety
and secured long-term
commodity supply
— Continue to focus on lowering
our corporate office cost
— Embed our shared-service
operating model and improve
service delivery to operations.
Our outlook for the year ahead and
longer is on page 12. For Exxaro
to remain a resilient, long-term
and sustainable enterprise, we
must continuously shape and
adapt our business to external
market conditions and geographic
locations. A dynamic strategy and
focus on costs will assist this group
in weathering the challenges of
the next few years, characterised
by cost pressures, subdued global
demand and lower available
sources of finance that are critical
to running a value-adding business.
We are confident of meeting these
challenges through discipline,
focus and the commitment of all
our people.
Sipho Nkosi
Chief executive officer
31 March 2014
READ MORE>
Page 48
44
FINANCE DIRECTOR’S REVIEW
2013 saw Exxaro grow in
many aspects, including:
• Stable coal production
performance, despite
19 days of industrial
action
• Coal contribution to
group net operating
profit up 32%, close to
the record of 2011
• Stable contribution
from equity-accounted
investments, mainly
SIOC and Tronox,
underpinning a modest
increase of 4% in
headline earnings
per share (HEPS) to
1 463 cents
• 315 cents final
dividend, bringing total
dividend to 550 cents
per share, a strong
10% increase on 2012
• Strong balance sheet
and sufficient capacity
to fund our robust
but focused project
pipeline.
PORTFOLIO IMPROVEMENT
The review period was less active
(in terms of corporate activities)
than 2012. We ceased production
at NCC in the second half and
impaired the asset by R292 million
(pre-tax) and signed the sale
agreement in January 2014, leading
to an effective net impairment
of R143 million. With the sale of
Zincor in December 2013, we had
to partially reverse impairments
of R98 million and we effectively
sold all environmental liabilities
as part of the transaction with
Lebonix. We continue to hold a 26%
investment in Black Mountain and an
11,7% interest in Chifeng in China.
READ MORE>
More detail on the group’s operational and financial
performance is available on the web.
OPERATIONAL
EXCELLENCE
Coal production (excluding buy-ins
from Mafube and external parties)
was 1,2Mt (3%) lower than 2012,
reflecting the 2Mt lost during the
19 days unprotected strike in the
first quarter of 2013 and a gain
of around 1Mt through ramp-up
activities of Grootegeluk Medupi
Expansion Project (GMEP). The loss
in production was therefore most
visible in our tied operations.
Export thermal sales increased
by 14,5% or 564kt in 2013,
predominantly as a result of
changes made by Transnet Freight
Rail (TFR) on the Grootegeluk line
in the final quarter. Thermal coal
production was stable at 36,5Mt
with marginally lower sales at
higher prices. Metallurgical coal
sales were similar to 2012.
The ferroalloy market’s demand for
reductants (semi-coke) has recovered
materially since 2012, resulting in
Exxaro returning to full production at
its semi-coke coal production plant.
This led to 56% higher sales.
FINANCIAL EXCELLENCE
Group turnover decreased 16% and
net operating income 9%, mainly
due to the exclusion of the mineral
sands and Rosh Pinah businesses
in 2013 (included for six months
in 2012). For a better comparison,
an analysis of the coal business
in isolation for revenue and net
operating profit is recommended.
The increase of 32% in coal net
operating profit reflects 11%
higher revenue as well as higher
shortfall income (R1 242 million)
from Eskom (as a result of delays
in agreed production offtake
plans), higher export volumes
(R262 million) partly offset by
higher operating costs, net pre-tax
impairment of NCC (R143 million)
and inflationary pressures.
We reduced costs across the group
by R157 million, mainly through
direct initiatives to reduce consulting
fees. This continued review of costs
is expected to assist the group in
weathering the next few years where
cost pressures, subdued global
demand and lower available sources
of finance will provide challenges to
running a value-adding business.
Equity-accounted income
increased by 10%, with Sishen Iron
Ore Company (SIOC) remaining
the major contributor to group
HEPS (at some 80%) for 2013
compared to 69% in 2012. This
welcome performance was due
to higher export iron ore prices
and a weaker ZAR:US$ exchange
rate, partially offset by lower
production from the Sishen mine.
In 2013, these investments yielded
R3,5 billion in Exxaro’s share of
dividends declared and R4,1 billion
in equity income.
We have maintained our
shareholding in Tronox at around
44%. This investment contributed
a core equity-accounted loss of
R780 million (US$79 million) in
2013 (compared to 2012: loss of
R250 million (US$29 million)).
From the R3 241 million
dividends received (mainly
SIOC (R2 664 million), Tronox
(R507 million) and Black Mountain
(R58 million), we funded net
financing costs (R268 million),
tax (R158 million), dividends paid
(R1 387 million) and sustaining
capex (R1 257 million). Cash
preservation remains crucial for
the group as we consider our
capital commitments in terms
of GMEP, Grootegeluk backfill,
Mayoko and other capital projects
in the pipeline, as well as working
capital requirements.
CAPITAL EXPENDITURE
Project spend to date on GMEP is
R9,3 billion. We still expect overall
capital expenditure to remain at
R10,2 billion. Recent communication
from Eskom indicates that the first
offtake will only be in April 2014.
Construction of phase 1 of the
backfill project has been completed.
Capital costs in 2013 for Mayoko
total R1,6 billion, with the total
spent since acquisition at
R2 billion. No further capital funds
will be committed to the project
(except US$10 million to complete
the prefeasibility study on phase 2
and monthly operational costs of
US$2 million) until all agreements
are signed. For a detailed analysis
of the expected project pipeline,
please see our results presentation
on our website.
45
EXXARO Integrated report 2013 FINANCE DIRECTOR’S REVIEW
continued
FUNDING AND NET DEBT
We have drawn R3,6 billion to
finance mainly GMEP and the
Grootegeluk backfill, leaving
undrawn facilities of R4,4 billion.
As a result, the net debt to equity
ratio was 10% at 31 December 2013,
compared to 8% in 2012. We do not
expect this to change significantly
in 2014 despite the new timeline on
developing the Mayoko project.
The board carefully considered
the outlook for the 2014 capital
commitments, past practice
and growth aspirations before
declaring a healthy final dividend
of 315 cents per share at a cover
of 2,4 times core attributable
earnings. This brought the total
dividend for 2013 to 550 cents
per share at a core dividend
cover of 2,63 times, consistent
to past practice.
OUTLOOK
Most agencies expect coal prices
to trend sideways in the medium
term. Although export prices in
dollar terms decreased from their
highs in 2011, the rand equivalent
is different, and we anticipate that
trends in 2014 will follow suit. Coal
prices in the local metals market
are expected to follow international
trends and Eskom pricing will again
correlate with the producer price
index. Coal volumes should follow
past stable trends.
On exports, as a result of changes
effected by TFR on the Waterberg
line and its guidance that the coal
exports are predicted at around
75Mt to Richards Bay Coal Terminal
(RBCT), we are comfortable to
increase our past guidance of
4Mtpa to at least 4,5Mtpa in 2014.
Both thermal and coking coal
seaborne markets are expected to
remain soft given an oversupply of
coal globally.
In the domestic market,
2014 demand for steam and
metallurgical coal is expected
to be stable. Demand for power
station coal from Eskom is likely
to be weaker than 2013 due to the
current high level of coal stock-
days at its power stations. Refer
to macro-economic review on
page 48 for details.
Exxaro faces a challenging 2014.
However, the group is making solid
progress on key fronts.
Wim de Klerk
Finance Director
31 March 2014
Revenue (Rbn)
9,8
10,5
5,2
6,5
8,6
4,0
12,4
12,1
13,4
2009
2010
2011
2012
2013
0,2
Coal
Other
Headline earnings per share
(cents)
2009
2010
2011
2012
2013
429
300
506
989
573
392
1 009
571
892
Coal
Other
1 525
Dividend (cents per share)
200
2009
2010
2011
2012
2013
500
500
550
800
READ MORE>
Page 94 and website
46
Performance
4706
EXXARO Integrated report 2013 PERFORMANCE
MACRO-ECONOMIC REVIEW
GDPs: US + CHINA + EMERGING
ECONOMIES
IRON ORE
PRICES
ESKOM COAL
DEMAND
GDP growth (%)
USA
China
Emerging
markets
South
Africa
Iron ore prices
(US$), CFR, China
2013
2014
1,9
7,7
4,7
2,7
7,8
5,1
1,8
2,8
2013
135
2014 118
Mtpa
2013
2020
projected
250
370
After two years (2012 and 2013)
of weakness, with an annual real
gross domestic product (GDP)
growth rate of less than 3%, the
global economy appears to be
reaccelerating. In 2013, the euro
zone exited its long recession of
six consecutive quarters, economic
growth in China stabilised, stimulus
initiatives in Japan reduced
deflationary pressures and the
US labour market continued to
strengthen.
With an improving unemployment
rate, US economic growth is poised
to accelerate in 2014 to 2,7% from
1,9% in 2013, setting the stage
for acceleration to the Federal
Reserve’s tapering of quantitative
easing (QE). Despite the potential
negative impact of QE tapering,
especially on some emerging-
market economies, global growth
dynamics remain broadly positive,
with the developed world expected
to lead a modest rebound in global
real GDP growth from 2,5% in 2013
to 3,2% in 2014.
In China, a policy-driven modest
upturn in economic growth, from
7,7% in 2013 to 7,8% in 2014, is
expected. Continuously improving
consumer and business sentiment
surveys in the euro zone confirm
the positive outlook for this region
— real GDP growth is expected to
turn positive to 1,1% in 2014 from
a negative 0,4% in 2013. Japan is
projected to record a 1,4% growth
rate in 2014, marginally down from
1,6% in 2013.
In 2013, the economies of many
emerging markets deteriorated
somewhat, reflected in downward
pressure on their currencies at the
time. The 2014 outlook for some
emerging-market economies —
South Africa, Brazil, India and Turkey
— remains clouded by the need
to implement structural reforms
to ensure less reliance on foreign
capital inflows to fund domestic
demand. As a result, economic
growth in these markets is expected
to remain under pressure in 2014,
but aggregate GDP for emerging
economies is expected to accelerate
marginally to 5,1% (4,7% in 2013),
in line with the global economy’s
growth outlook.
South Africa’s GDP growth declined
from 2,5% in 2012 to 1,8% in
2013. The 2014 outlook remains
fragile — a weakening exchange
rate pressures inflation with a
current account deficit of around
6%. A high level of uncertainty on
the economic and political fronts
is expected to linger in the run-
up to the 2014 general election.
The real GDP growth prospect
for 2014 is about 2,8%, driven by
consumption expenditure, albeit
slowing. Labour discontent on the
back of unresolved socio-economic
issues and labour union rivalry
remains a challenge.
South Africa’s average annual
consumer price index (CPI)
increased to 5,7% in 2013, from
5,6% in 2012. The 2014 rate
is expected to be about 6,3%,
mainly as a result of the weak local
currency, above-inflation wage,
food and electricity tariff increases.
The chronic current account
deficits are expected to continue
in 2014. Current account
sustainability concerns remain,
however, as capital inflows are
increasingly of a short-term,
volatile nature on the back of on/
off investor sentiment. As global
growth accelerates and local
production recovers after supply
disruptions, the deficit is expected
to narrow somewhat into 2014.
However, the public-sector
infrastructure programme has
proven highly import-intensive,
despite policy attempts to increase
local content. As such, import
demand will remain elevated
despite moderating private-sector
consumption growth. Against these
anticipated developments, rand
volatility is expected to continue
in 2014 — an average of around
10,82 to the US dollar is forecast
for the year.
COMMODITY REVIEW
Mineral commodity demand growth
remained lacklustre in 2013, with
some commodity markets moving
into soft territory. As such, the
48
COAL
REAL PRICE GROWTH EXPECTED
IN THE LONGER TERM
timing and scale of the future
supply response becomes the
catalyst for an eventual recovery
in commodity prices. In addition,
unless weather or geopolitical
risk events unfold, 2014 is highly
unlikely to show much improvement
over 2013, let alone any V-shaped
recovery for most commodities.
Iron ore
Estimates are that global crude steel
production rose by about 3,9% in
2013 to 1 575Mt. In China, crude steel
production expanded by about 7%
from 2012 to some 750Mt. China’s
share of world production increased
from 46,2% in 2012 to 47,6% in
2013. Output in North America
declined by 2,6% while Europe
declined by 1,2%. Global crude steel
production is expected to continue
growing in 2014, with output
improving by a projected 4,6%.
China, Europe and North America
are all expected to record crude
steel production growth of between
3% and 4% in 2014.
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. However,
fundamentals turned quickly in
the first six months of 2013 and
iron ore prices held their ground
to average US$139/t (CFR China).
The key reason for this was that
demand for iron ore exceeded
expectations, with Chinese crude
steel production rising by 8%
year-on-year during the period.
Strong gains in Australian exports
throughout 2013 have kept a cap
on price increases, while in Brazil
and India, exports were curtailed
for various reasons. As a result, the
2013 average CFR China spot fine
ore (62% Fe) price was US$135/t.
Further new low-cost iron ore
capacity will continue to enter
the market in 2014, causing lower
average prices compared to 2013,
at around US$118/t, CFR China.
From 2014, ocean freight rates are
expected to improve somewhat
as vessel demolition rates are
forecast to remain high. From
2015, supply capacity growth
is anticipated to be in line with
demand, resulting in ocean freight
rate growth returning to a more
sustainable level around the rate
of inflation.
Coal
In 2013, the seaborne metallurgical
coal market remained
oversupplied as Australian
mines continued to increase
exports, Canadian producers
were shipping at historical rates
and the US (as swing producer)
maintained high levels of exports.
The anticipation that the euro
zone will record a positive annual
economic growth rate in 2014 will
manifest in additional resumption
of some idled blast furnace
capacity. In addition, new coke
oven capacity being commissioned
in India, South Korea, Vietnam and
Indonesia should have a discernible
impact on metallurgical coal
demand, in total 11,5Mtpa, from
2014. The coking coal contract
price is expected to average
US$136/t, free on board (FOB)
Australia, for calendar 2014.
Despite strong Asian demand,
persistent oversupply
characterised seaborne
thermal coal markets in 2013.
Rationalisation of supply was
delayed by the competitive
environment globally and by take-
or-pay infrastructure contract
obligations, especially in Australia,
which discourage any supply
reduction. These conditions are
expected to continue into 2014.
The average Richards Bay FOB
spot steam coal price for 2013, at
US$80,45/t, was some 13,6% lower
than 2012. No real price growth is
expected for thermal coal in 2014.
With the absence of any significant
supply rationalisation, the price
outlook remains flat for the short
to medium term. However, real
price growth is expected in the
longer term as sizeable new mine
and infrastructure development,
in addition to increased volume
from currently marginal suppliers,
is required.
Titanium dioxide
Calendar 2013 was another
challenging year for the titanium
value chain. Prices for both
feedstocks and titanium dioxide
(TiO2) pigment weakened further
from 2012 averages, after a period
of extended increases. In 2013, the
titanium value chain continued
working through a destocking
process, which started in mid-2012.
Significant producer capacity
remains in place with global
inventory levels yet to normalise.
Market conditions are expected
to stabilise in 2014. The zircon
market is adjusting to new lower
levels of demand, following a cycle
of rapid price increases from 2011
to mid-2012. As a result, the 2014
outlook for zircon pricing and
demand remains flat, with limited
downside risk.
49
EXXARO Integrated report 2013 PERFORMANCE
continued
MINING INDUSTRY IN
SOUTH AFRICA
The global outlook obviously has
an impact on the outlook for South
African mining companies:
While South Africa’s mining
industry is going through
significant changes in the way it
operates, for Exxaro the changing
face of the coal sector is at present
more important.
Historically, coal production
was concentrated in the
Mpumalanga coalfields and 80%
of the country’s saleable coal
was produced by five companies.
Export coal was moved on a
dedicated line to the 72Mtpa port
of Richards Bay, bound for Europe.
Today, production is shifting to the
Waterberg coalfields, home to 20%
of South Africa’s coal resources.
Around 30% of Eskom’s coal
purchases come from new entrants
to the market or so-called junior
miners (mostly black economic
empowerment companies); this
will rise to 50% by 2018 to meet
local demand which is expected to
grow from 250Mtpa to 370Mtpa
by 2020.
On the export side, RBCT capacity
has increased to 91Mtpa and will
rise again to 110Mtpa in the medium
term, mostly destined for Asia.
In 2012, coal producers exported
over 68Mt through RBCT to China
and India, a country forecast to
become the largest seaborne coal
importer by 2017 and second-largest
coal consumer. At the same time,
while demand in Europe is currently
rising, it is forecast to decline after
decarbonisation initiatives.
Exxaro’s strategy in this
fluid market is clear. We are
participating in recognised forums,
setting regular meetings with
government, and commenting on
proposed legislative changes. We
believe the progress being made
in unlocking the potential of the
Waterberg is a clear indication of
willing collaboration for the benefit
of all.
GROUP PERFORMANCE
Detailed disclosure on our
performance in the review period
appears on our website. In this
report, we concentrate on how
Exxaro is addressing its top risks
(page 26) and summarise our
performance by commodity.
The 16% drop in 2013 revenue
to R13,6 billion is largely due
to excluding the mineral sands
and Rosh Pinah operations,
which were included for almost
half of 2012. The solid increase
(11%) from our coal operations
reflects the benefits of numerous
initiatives under way — from cost
management to higher export
volumes as a result of improved
rail availability from Transnet
Freight Rail.
Importantly, we are addressing
two of our most material risks
simultaneously by broadening our
local and international customer
base, and nearing completion on
the Grootegeluk expansion project
HIGHLIGHTS — PERFORMANCE
ZERO
FATALITIES
6 sites
LTI free
LTIFR 0,19
80%
of youth in development
programmes come from
historically disadvantaged
backgrounds
370 people
on management
development programme
Percentage community spend per
focus area in 2013
7%
15%
12%
2%
1%
32%
7 240
employees now share owners
31%
14
social and labour
plans under way
Education
Infrastructure
Environment
Skills development
Health and welfare
Agriculture
Enterprise development
50
which will take run-of-mine output
to around 66Mtpa (from 38Mtpa)
and double its production of power
station coal to 30Mtpa. This, in
conjunction with a number of other
longer-term initiatives, will ensure
we continue to meet demand for
coal, productively and profitably.
The encouraging success in
addressing another top risk — the
safety of our people — has raised
the proverbial bar. While our goal
will always be zero fatalities, in
2013 six of our sites also proved
that they could operate without
a lost-time injury. The discipline
and safety awareness behind
preventing injuries is a cornerstone
of a fatality-free operation.
In terms of environmental risks,
we have made excellent progress
in managing our use of non-
renewable resources, chiefly
energy and water. Exxaro is an
acknowledged forerunner on
carbon disclosure, reflecting the
effort and investment in recent
years to standardise and enhance
systems for meaningful data in
tandem with initiatives to improve
the efficiency with which we use
these resources.
Not all risks are entirely within our
control. In these cases, such as
delays in government approvals,
we are actively and consistently
interacting with the authorities
to expedite the process, while
ensuring that our submissions
are accurate and our performance
compliant. We were, therefore,
encouraged by the positive
feedback after an independent
audit of our operations by a
government-appointed third party
in 2013.
Infrastructure has long been
an issue in the mining sector,
particularly the availability of rail
services for transporting product.
Again, we are collaborating
with government stakeholders
to improve and initiate new
infrastructure, while identifying
other stakeholders to co-develop
solutions. Transnet Freight Rail
is making encouraging progress
with its long-term infrastructure
expansion plan, which will have
significant benefits internally in
stabilising energy supply and,
externally, in accelerating the
exports that contribute to the
national economy.
SAFETY AND HEALTH
There were no fatalities for the
year ended 31 December 2013
and the group continues to strive
towards achieving zero harm at all
operations.
A 0,19 LTIFR per 200 000 man-
hours worked was recorded for the
period (2012: 0,29) against a target
of 0,15. Despite this, six operations
recorded no lost-time injuries. The
group recorded a 40% reduction
in the number of lost-time injuries
mainly due to improved awareness
as well as increased training across
all operations. Exxaro has initiated
multiple safety improvement
programmes, such as the Global
Mining Industry Risk Management
programme, to raise the awareness
of risks. We have also incorporated
the Mine Safety and Health Act as
a standard to proactively manage
health and safety practices across
the group.
The group’s health and hygiene
efforts show an overall 51%
improvement in the number of
employees enrolled in the HIV/
Aids programme compared to
2012. Although there was a 25%
reduction in the number of newly
diagnosed occupational diseases,
Exxaro still faces some challenges
with tuberculosis cases.
LEADERSHIP AND PEOPLE
The Exxaro group remains focused
on transformation, development
of people and rewarding top
performers. We have met our
targets on employment equity
for top, middle and junior
management, and women, and
expect to meet targets for the
senior management category
by 2014. Appointing people with
disabilities remains an industry-
wide challenge.
Exxaro spent R200 million (2012:
R177 million) on industry-related
training initiatives during the
year, ranging from ABET (adult
basic education and training)
to postgraduate studies. This
training involved some 800 youth
candidates, of which over 80%
were historically disadvantaged
South Africans (HDSAs) selected
for learnerships, internships,
bursaries and various skills
programmes. We also have over
370 South African employees
in management development
programmes at present. Our
training investment for the year
includes management programmes
and in-country skills development,
eg carpentry, brick-laying and
plumbing at our Mayoko project in
the Republic of the Congo.
Our employee share ownership
plan, Mpower 2012, received
dividends of R16 million in
respect of the 2013 financial year,
benefiting 7 240 employees.
HDSA statistics (%) — group
Top
Senior
Middle
Junior
40
40
27
32
60
57
55
64
23
18
Women
Disabled
1
1
2012
2013
Target
51
EXXARO Integrated report 2013 PERFORMANCE
continued
OUR COMMUNITIES
Most social and labour plan
projects are channelled through
the Exxaro Chairman’s Fund
(ECF) to which all our operations
contribute. The total fund
contribution to corporate
projects and business units’
social and labour plan projects
was R57 million in 2013 (2012:
R50 million). Of this, R50 million
was spent on social and labour
plans, compared to R24 million
in 2012.
Percentage community spend
per geographic area in 2013
4%
4%
17%
40%
35%
Limpopo
Mpumalanga
Gauteng
KwaZulu-Natal
Western Cape
With the new five-year cycle
of social and labour plans
(2013-2017) under way, we are
using the lessons learned in
the first cycle to ensure our
local economic development
projects are sustainable and
focused on addressing identified
stakeholder needs.
As part of a more quantitative
approach, we have finalised our
assessment of all South African
LED projects based on the social
return on investment. We are
also implementing a model for
effectively engaging with all
stakeholders, based on community
risk and managing issues.
52
In the Republic of the Congo,
a number of community
development initiatives were
finalised for Mayoko after
extensive consultation with
stakeholders. In addition, projects
to be rolled out over the next two
years were agreed. These are
detailed on our web site.
Supported by a proven track
record, public-private partnerships
remain an integral part of
Exxaro’s community development
initiatives. This is strengthened
by an approved volunteerism
policy to create socially
conscious employees. The Exxaro
volunteerism programme was
officially launched and rolled out in
the first quarter of 2013.
Over the 2013-2017 cycle, we plan
to invest around R300 million
in over 60 local economic
development and community
projects.
In each of these sectors, the focus
will be on:
• Infrastructure development:
community, housing and training
facilities
• Education: Saturday and holiday
school, teacher training, whole
school development
• Enterprise development,
business incubator hubs, SME
development
• Skills development
• Agriculture: farm development,
commercial.
Supply chain management
Our sustained commitment to
procuring from HDSA (including
black-owned, black-empowered,
black women-owned and black-
influenced) suppliers is reflected in
the steady progression from under
40% in 2007 to 59% (exceeding
the target of 52%) in 2012. In 2013,
we recorded actual procurement
of 62% from HDSA companies
against our target of 54%, or
R7,8 billion spent with HDSA-
owned companies.
In terms of mining charter
compliance, Exxaro exceeded
2013 targets set for capital and
consumables.
HDSA progression:
2007-2013 spend
2007
2008
2009
2010
2011
2012
2013
35%
39%
45%
50%
58%
59%
62%
2014 target (56%)
Actual performance
Preferential procurement from
BEE entities as per mining charter
targets for 2013 and 2014
49%
Capital
30%
Goods
Services
40%
62%
40%
50%
58%
60%
70%
2013 performance
2013 DMR target
2014 DMR target
OUR ENVIRONMENT
HIGHLIGHTS — ENVIRONMENT
ELECTRICITY
AND DIESEL
COST INTENSITY
TOTAL KT
CARBON EMISSIONS
(Scope 1 and 2)
Electricity
intensity* (scope 2)
R2,80/t
Diesel intensity*
(scope 1)
R5,40/t
* Based on total tonnes mined
Total emissions
from diesel:
Total emissions
from electricity:
158 kt CO2e
502 kt CO2e
Exxaro total*:
735,0kt CO2e
TOTAL
ENERGY COST
CARBON
INTENSITY
Diesel cost:
R693,8m
Electricity cost:
R357,6m
Tied mines ave:
18,2
tCO2e/kt sold*
Commercial mines ave:
21,6
tCO2e/kt sold*
Exxaro total:
R1 051,5m
Note: coal operations only.
Energy consumption and
carbon footprint
Greenhouse gas emissions
Following the notable reduction
in carbon and other greenhouse
gas (GHG) emissions from 2010 to
2012, Exxaro remained committed
to reducing its carbon footprint
in 2013. Specific energy-intensity
improvement targets were set
for each operation during the
reporting period. These will
form part of relevant managers’
remuneration-linked performance
contracts from 2014 and further
absolute emission reductions are
expected from these initiatives
during the year.
Exxaro continues to report its
carbon emissions through the
Carbon Disclosure Project South
Africa (CDP-SA). Our continued
leadership in the CDP underscores
our efforts on carbon efficiency,
thus reducing the potential impact
of carbon tax, among others.
Exxaro total*:
20,4 tCO2e/kt sold*
* Weighted average
Exxaro bases its accounting and
reporting for GHG emissions on
the Greenhouse Gas Protocol
— corporate accounting and
reporting standard. Exxaro has
also elected to use the operating
control accounting approach
for emissions. In light of our
divestment and discontinuation
activities (mineral sands and
Zincor operations) in prior periods
and in line with the guidelines of
the reporting standard, energy
consumption and GHG emissions
for 2011 and 2012 in this report
have been restated.
In 2013, Exxaro reduced scope 1
emissions by 31,8% while scope 2
emissions were flat on 2012 in
absolute terms (ie no adjustments
are made for divestments
and discontinuations in the
reporting period). This equates
to a 47,5% reduction in scope 1
and 2 emissions combined over
the period.
WATER
WITHDRAWAL
Total*
8 025Mℓ
TOTAL
PRODUCTION
SOLD
Total*
35,95Mt
WATER
INTENSITY
Total*
223 ℓ/t sold
Scope 3 emissions, reported for
the first time in 2012, are defined
as being outside Exxaro’s control
as they occur when products we
sell are consumed by customers or
from other indirect activities.
In line with GHG reporting
guidelines, which require
adjusting for divestments and
discontinuations to baseline
periods, Exxaro reduced scope 1
emissions by 3,9% and slightly
increased scope 2 emissions by
1,2% in 2013 against 2012. This
resulted in a reduction of 0,4% for
combined scope 1 and 2 emissions.
53
EXXARO Integrated report 2013 PERFORMANCE
continued
Exxaro’s greenhouse gas emissions
(kt CO2e)
Scope 1
Scope 2
Total scope 1 and 2
Year-on-year change
Scope 3
Year-on-year change
2013
236
525
761
(0,4%)
69 737
(1,2%)
2012
245
519
764
1,4%
70 581
0,2%
2011
238
516
754
70 471
Scope 2 emissions: Electricity-based emissions are derived from the grid emission factor for South Africa
(0,94tCO2e/MWh).
Scope 3 emissions: Reported emissions are based on emissions from the use of product sold by Exxaro plus
transmission and distribution losses from the South African grid derived from Eskom’s
emissions factor for electricity sold (1,03tCO2e/MWh) and the grid emission factor for South
Africa (0,94tCO2e/MWh). Reported emissions represent over 99% of Exxaro’s scope 3
emissions.
Greenhouse gas emissions by source (kt CO2e)
71,8
5,9
77,9
2,4
75,0
2,1
2013
2012
2011
157,8
164,8
160,4
Greenhouse
gas emissions
by source
516,0
518,9
525,3
33%
REDUCTION
IN WATER
WITHDRAWALS
IN 2013.
ENVIRONMENTAL INCIDENTS
LEVEL 1
71%
DOWN SINCE 2011
LEVEL 2
75%
DOWN SINCE 2011
LEVEL 3
No incidents
FOR THREE YEARS
54
Energy consumption
Diesel and electricity remain
the primary sources of energy
for Exxaro. Total energy consumed
reduced by 2,1% in 2013 to
4,2 peta-joules. The bulk of savings
came from reductions in diesel use,
where energy consumed dropped
by over 4%. Energy sourced from
electricity increased by 1,2% in
2013, mostly due to expansion
activities at Grootegeluk.
In 2013, Exxaro’s coal operations
focused on reducing energy
consumption. Diesel was the most
significant energy source in these
operations, consuming 2,1 million
GJ of energy, notably ahead of
the 1,9 million GJ of energy from
electricity consumed in 2013.
Managing energy consumption
Diesel
Reflecting the focus on diesel
efficiency in our coal operations,
we reduced year-on-year diesel
consumption by over 2,5 million
litres in 2013, despite a 9%
increase at Grootegeluk (the
largest diesel consumer), due to
expansion activities. Although
Grootegeluk was not able to
maintain its diesel consumption
intensity, improvements in diesel
intensities at other business units
fully mitigated this increase.
A notable performance was North
Block Complex whose initiatives,
centred on its revised operating
model, led to an absolute reduction
in diesel consumption of over
2 million litres (-22%) in 2013.
The focus and effort in the coal
operations that reduced absolute
diesel consumption in 2013 also
improved diesel consumption
intensity, based on tonnes
produced, against 2012.
Electricity
The slightly lower production
levels across coal operations were
not mirrored by a decrease in
overall electricity use, which rose
marginally to 534,4GWh reported
against 527,1GWh in 2012 (+1,4%).
While Matla, Leeuwpan and Arnot
showed good improvement in
absolute electricity use, expanding
operations at Grootegeluk resulted
in a 6% increase in electricity use
(280GWh vs 264GWh in 2012).
Given Grootegeluk’s scale, its
electricity use intensity had a
notable effect on overall intensity
in coal operations. Consequently,
electricity intensity based on
production tonnages at coal
operations increased from
13,6MWh/t to 14,3MWh/t in 2013.
Noteworthy electricity optimising
initiatives at Grootegeluk in 2013
include implementing energy-
saving multi-drive (VSD) conveyors
in its discard system and the
Grootegeluk 2 plant. Expected
savings in these significant
electricity-consuming systems
are 20-25% in absolute electricity
use and 25-40% in operational
efficiency. We are reviewing this
approach for implementation at
other areas in Grootegeluk and
across our business units.
Water management
Exxaro understands that water is
a key strategic natural resource
for South Africa. We use a holistic
management strategy to conserve
water and manage related risks,
minimise impacts, and operate
efficiently through water-reduction
plans, reuse and recycling
methodologies. An aspirational
target of reducing the use of potable
water by 5% across all business
units remained in place in 2013.
Exxaro is also committed to
protecting and improving water
quality by ensuring the water
we discharge is of the same or
better quality than we withdraw.
Group-wide water conservation
plans aligned to the national
water management strategy are
expected to be finalised in the
first quarter of 2015. Supporting
our long-term water management
strategy are two water treatment
plants planned for Mpumalanga,
with total capacity to treat
11,5 mega-litres per day:
• Matla — scheduled for delivery in
the second quarter of 2014
• North Block Complex’s Glisa
mine — scheduled for the last
quarter of 2014.
Innovative passive water treatment
systems are being evaluated by our
R&D department in collaboration
with the University of the Free
State as a long-term solution to
water management, including
post-closure. Exxaro is also
collaborating with other mining
houses through local research
institutions on a project to develop
and implement appropriate
technology to deal with waste from
planned water treatment plants.
Water use monitoring and
measurement
Exxaro monitors and reports
according to JSE SRI reporting
categories, in turn aligned to
definitions and environmental
categories from the GRI’s mining
and minerals sector guidelines.
While the accuracy of water
measurement, monitoring
and reporting has improved
significantly since 2011, on-site
operational challenges remain.
In line with this, this report includes
water abstraction data excluding
rainfall captured, abstraction
from the sea and dewatering data.
Significant progress was made
in 2013 to improve metering and
measurement of dewatering and
rainwater catchment volumetric
data specifically (detailed on
our website).
Exxaro continues to report on
its water use and management
through the Carbon Disclosure
Project South Africa Water
Programme (CDP-Water), where
we are one of the leaders on
disclosure.
Exxaro reduced water withdrawals
by 33% in 2013, largely after
divesting of our mineral sands
operations in the prior year.
In our coal operations, ongoing
management initiatives reduced
water extraction significantly
55
EXXARO Integrated report 2013 PERFORMANCE
continued
Water use — performance 2013 vs 2012 (mega-litres)
12 309
435
6%
3 973
(100%)
41
36%
571
(90%)
8 241
(33%)
2012
Coal
Mineral sands
Corporate office
Other
2013
in 2012 and 2013 from previous
years. While this improving trend
is generally maintained compared
to the pre-2012 period, there was
a slight increase in overall water
extraction in 2013 versus 2012.
In 2013, coal operations accounted
for 98% of Exxaro’s water
withdrawals. Total withdrawals
in these operations increased by
6%, and the intensity of water
withdrawals relative to production
rose slightly. This means that
while Exxaro’s coal operations
were not able to increase, the
amount of water required to
achieve this increased. This was
largely a consequence of higher
withdrawals at Grootegeluk, driven
by expanded operations which in
turn led to higher water withdrawal
intensity. Given the relative scale of
Grootegeluk, this led to an overall
increase in water withdrawal
intensity in our coal operations.
While this is contrary to the trend
of recent years, the improved
management focus, technology
and enhanced monitoring and
Dust fallout 2013
measurement of water withdrawals
have had a notable positive effect
at most larger water-withdrawing
operations.
Grootegeluk accounts for more
than half of all water withdrawn by
Exxaro’s coal operations. In 2013,
water withdrawals at Grootegeluk
rose by 8%, mainly as a result
of the expansion project which
includes two new processing
plants. Despite this, there has been
a 24% reduction in withdrawal
volumes from 2011.
Most other significant water-
withdrawing business units
recorded reductions in absolute
water withdrawals and improved
water withdrawal intensity in 2013.
For example, Tshikondeni reduced
volumetric water withdrawals by
21%, reducing water intensity by
over 20%, while Matla achieved
a volumetric water withdrawal
reduction of 5% in 2013.
The focus in 2014 will be on
maintaining this progress at
the larger water-withdrawing
operations, while rolling out
initiatives at other operations.
In support, water-withdrawal
intensity targets across all sources
were introduced to business units
in 2013. Monitoring and reporting
performance against these targets
will continue in 2014 and we intend
to extend these targets into the
performance contracts of relevant
managers in 2015.
A detailed wetland inventory has
been developed to proactively
mitigate the impact of mining on
sensitive ecosystems and enable
responsible coal exploitation.
Air quality
Comparing Exxaro’s dust fallout
rate against the regulated
industrial limit (1 200mg/m2/day),
our averaged coal operations
exceeded the limit for three
months in 2013. This is lower than
both 2012 and 2011, reflecting
intensified dust management
activities and other factors.
Coal
300mg/m2/day
2013
351
2012
480
2011
393
Long-term target
Average monthly fallout rate
56
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 66 to 86 on
our website.
Mineral resources and ore reserves
were estimated by competent
persons on an operational basis
and in accordance with the
SAMREC Code (2007) for African
properties and the JORC Code for
Australian properties.
The tables are compiled from
comprehensive independent
statements received from the
appointed resource and reserve
competent persons at various
operations and projects. Each
statement forms part of a
competent person’s report which
encapsulates the systematic
and detailed estimation process
conducted by or supervised by
the applicable competent person.
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
the applicable codes at the time of
reporting. The competent persons
have signed off their respective
estimates 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 group company secretary
on written request.
Mineral resources and ore reserves
are reported as those remaining
on 31 December 2013 and mineral
resources are reported inclusive
of those resources, which have
been converted to ore reserves
and at 100%, irrespective of
the percentage attributable
to Exxaro. An exception is the
reporting of Gamsberg and Black
Mountain, because figures received
from Vedanta Resources plc
(JORC Code) represent resources
exclusive of reserves and reported
as on 31 March 2013. Significant
changes in the resource or reserve
figures are explained by relevant
footnotes to each table.
Resource estimations are based
on the latest available resource
models, which incorporate all new
validated geological information
and, if applicable, revised resource
definitions and classifications. The
resource models are compiled as
a rule between May and August
of the reporting year to align
with the subsequent reserve
estimation process. For the
Exxaro operations and projects,
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, security
of tenure and associated geological
risks/opportunities to establish
an eventual extraction outline.
The outline reflects the boundary
within which ore occurrences are
considered to have reasonable and
realistic prospects for eventual
economic extraction. All mineral
resources in which Exxaro holds
the controlling interest have
been reviewed in 2013 to comply
with the”reasonable and realistic
prospects for eventual economic
extraction” (SAMREC Code 2007).
The location, quantity, quality and
continuity of grade/quality and
geology within this outline are
known within varying degrees of
confidence and are continuously
tested by conducting exploration
activities such as geophysical
surveys, drilling and bulk sampling.
Mineral resources are classified
into inferred, indicated or measured
categories based on the degree of
geological confidence. Distribution
of points of observation (drilling
positions, trenches, etc), quality
assurance and quality control in
sample collection, evaluation of
structural complexities and, in the
case of operations, reconciliation
results are considered in the
classification of resources. A formal
annually compiled and signed-off
exploration strategy outlines the
activities planned to investigate
areas of low confidence and/or
geology or structural complexities
to ensure that resources with a high
level of geological confidence are
considered for mine planning.
Ore reserves have the same
meaning as mineral reserves as
defined in the applicable reporting
codes. Ore reserves are estimated
using the relevant modifying factors
at the time of reporting (mining,
metallurgical, economic, marketing,
legal environmental, social
and regulatory requirements).
Modifying factors are signed off
before and after reserve estimation
by the persons responsible to
ensure that all factors are timeously
and appropriately considered.
Comprehensive modifying factor
sign-off and reserve fact pacts
that record losses, recoveries/
yields and other factors applied
are documented in each of the
independent competent persons’
reports. 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.
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 operations.
Exxaro is continuously assessing
the various life-of-mine strategic
plans to consider the best way of
addressing these challenges.
57
EXXARO Integrated report 2013 MINERAL RESOURCES AND RESERVES
continued
The Belfast project mining right
was granted and executed.
An application for a mining right
over the Glisa South project area
was submitted during the reporting
period, depicting the successful
conclusion of various high-standard
technical studies. The Glisa South
project area is adjacent to the Glisa
(North Block Complex) reserve and
is an extension of this operation.
The mining right application for
the Grootegeluk West project
area, submitted in 2012, is
progressing well.
Comprehensive exploration
drilling programmes at the Matla,
Arnot and North Block Complex
coal operations contributed to a
better understanding of a number
of geological and structural
complexities and will enhance future
extraction of coal reserves. Drilling
and trenching at the Mayoko iron
ore project in the Republic of the
Congo increased the geological level
of confidence of both the hematite
and magnetite ore. Resource,
geotechnical and hydro-geological
drilling will proceed in 2014 to
further define the resource base.
Exxaro is currently divesting from
the New Clydesdale coal mine based
on a review which concluded that the
mine was not strategically aligned
to the group strategy. Tshikondeni is
in a process of mine closure and will,
during the next reporting period,
downscale its mining activities.
The person in Exxaro designated
to take corporate responsibility for
mineral resources, JH Lingenfelder,
the undersigned, has reviewed and
endorsed the reported estimates.
JH Lingenfelder
BSc Geology (hons)
Pr Sci Nat (400038/11)
Group manager geoscience
31 March 2014
The person in Exxaro designated
to take corporate responsibility
for ore reserves, J Hager, the
undersigned, has reviewed and
endorsed the reported estimates.
J Hager
B Mining (hons)
ECSA 20050209
Group manager mining processes
31 March 2014
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 was implemented in the
reporting year by introducing
procedures and governance
measures designed to achieve
this goal, while the drive to add
additional good-quality mineral
assets will continue. The process
will greatly support the principles
of competence, materiality and
transparency within Exxaro.
Mineral resources and ore reserves
quoted fall within existing Exxaro
mining 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.
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
were done by competent persons
as defined by the JORC Code.
58
Governance and
remuneration
5907
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
All executive committee members are prescribed officers in terms of the Companies Act No 71 of 2008, as amended.
EXECUTIVE COMMITTEE
SA Nkosi — Sipho (59)
Chief executive officer
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 officer
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 2007 to 2010.
WA de Klerk — Wim (50)
Finance director
BCom (hons)(acc), CA(SA), Executive management programme (Darden),
Strategic marketing diploma (Harvard)
Experience: Wim joined Iscor in 1996, managed Iscor Quarries and the
Grootegeluk Coal mine and became part of the executive team as group general
manager for strategy and continuous improvement in 1999. Following Kumba’s
inception in 2001, he headed the mineral sands operations and when Exxaro
listed in 2006, he became executive general manager for mineral sands and
base metals until his appointment as finance director in 2009.
MDM Mgojo — Mxolisi (53)
Executive head: coal
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.
MI Mthenjane — Mzila (44)
Executive head: strategy and corporate affairs
BSc (eng)(mining), Senior management development programme (GIMT)
Experience: Mzila has 20 years’ work experience, which includes seven years
in mining (at AngloGold and Gold Fields), six years in investment banking (at
RMB and Deutsche Bank) and the last six years at Royal Bafokeng Holdings
and Royal Bafokeng Platinum in the role of executive: business sustainability.
Mzila assumed his current role in May 2013.
60
M Piater — Retha (59)
Executive head: human resources
BCom (hons), MBA, Advanced management programme (Insead)
Experience: Retha has 30 years of human resources experience across
the various business units and commodities, specifically in the area of
remuneration.
PE Venter — Ernst (57)
Executive head: growth, technology, projects & services, and ferrous
BEng (hons), MBA, Advanced management programme (Insead)
Experience: Ernst has headed a number of portfolios including base metals,
Zincor, consulting services, mining technology, coal beneficiation, 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. His portfolio now includes growth, technology, projects and services
and the ferrous business of Exxaro.
M Veti — Mongezi (50)
General manager: safety, health, environment and community
National higher diplomas in metalliferous mining and coal mining (Technikon
Witwatersrand), MBL (Unisa), Advanced management programme (Wharton),
Mine overseer’s certificate and mine manager’s certificate of competency for
fiery mines
Experience: In the early 1980s, Mongezi worked for AngloGold 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.
CH Wessels — Carina (36)
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 past president of Chartered Secretaries Southern Africa. She
is currently president of the Corporate Secretaries International Association.
Carina spent nine years with De Beers in various operational and head-office
positions, including human resources, business improvement and corporate
secretariat, as well as a period with Investec as corporate secretariat legal
advisor. She assumed her current role in June 2011.
61
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
DIRECTORATE
SA Nkosi — Sipho (59)
Chief executive officer (executive director)
Director since 28 November 2006
See page 60
WA de Klerk — Wim (50)
Finance director (executive director)
Director since 1 March 2009
See page 60
Dr CJ Fauconnier — Con (66)
Independent non-executive director and member of audit and sustainability,
risk and compliance committees (will take over as chairman of the
sustainability, risk and compliance committee on 28 May 2014 and stand for
election as a member of the social and ethics committee on 27 May 2014)
Director since 1 November 2013
BSc (eng)(mining), BSc (hons)(eng), MSc (eng), DEng (Pretoria), professional
engineer, MBA (Oregon), DSc (honoris causa) (Free State), Strategic leadership
programme (Oxford), Senior executive finance programme (Oxford)
Experience: Between 1969 and 1974, Con worked for various mining companies in
the Anglo American group. For two years after that he was student and research
assistant at the College of Business Administration, University of Oregon.
From 1976 to 1995 he served in senior positions for various mining companies,
including Gencor Limited and JCI Limited. In 1995 Con joined Iscor Limited and
was later promoted to managing director of Iscor Mining. In June 2001, he was
appointed chief executive of Kumba Resources Limited and in November 2006
became chief executive officer of Exxaro Resources Limited. He also served on
the executive council of the Chamber of Mines of South Africa and was president
from 2003 to 2005. He is a registered international professional engineer and
a fellow of the South African Institute of Mining & Metallurgy as well as the
Institute of Directors of Southern Africa and the South African Academy of
Engineering. He has been an honorary professor in the department of mining
engineering at the University of Pretoria and a fellow at the Gordon Institute of
Business Science since 2007. He was an independent non-executive director at
Xstrata plc from 2010 until May 2013 and an independent mining industry and
management consultant from September 2007 to December 2010.
62
JJ Geldenhuys — Jurie (71)
Independent non-executive director, chairman of the sustainability risk and
compliance committee, member of the remuneration and nomination, audit
and social and ethics committees (will retire from the board and committees
with effect from 27 May 2014)
Director since 28 November 2006
BSc (eng)(elec), BSc (eng)(mining), 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 consulted to the group 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
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 nomination
committee).
S Dakile-Hlongwane — Salukazi (63)
Independent non-executive director and member of sustainability, risk and
compliance committee
Director since 21 February 2012
BA (economics and statistics), MA (development economics)
Experience: Salukazi is chairman of Nozala Investments, which she co-founded
in 1996. Her career experience includes: 1977-1982 senior investment officer,
Lesotho National Development Corporation; 1983-1995 African Development
Bank (Abidjan/Côte d’Ivoire) as country programme officer and later principal
corporation officer; senior manager, structured finance division/FirstCorp
Merchant Bank and assistant general manager, BOE Specialised Finance.
Salukazi is a non-executive director of some 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 Company Proprietary Limited. She
is also a non-executive director of MultiChoice South Africa Holdings Limited.
63
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Dr D Konar — Len (60)
Independent non-executive director, chairman of the board and member
of remuneration and nomination committee (chairs nomination matters)
Director since 28 November 2006
BCom, CA(SA), MAS, DCom, CRMA
Experience: After completing his articles 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.
NB Mbazima — Norman (55)
Non-executive director and member of remuneration and nomination
committee
Director since 30 November 2012
Fellow of the Association of Chartered Certified Accountants (FCCA), Fellow of
the Zambia Institute of Chartered Accountants (FZICA)
Experience: Norman joined Kumba Iron Ore in September 2012 as CEO. As
CEO of Anglo American Thermal Coal from October 2009, he spearheaded the
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 worked 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 finance director and acting CEO of Anglo’s
platinum business; CFO of the then Anglo Coal business and CFO of Konkola
Copper mines.
VZ Mntambo — Zwelibanzi (56)
Non-executive director and member of remuneration and nomination
committee
Director since 28 November 2006
BJuris, LLB (Univ North West), 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 Main Street 333
Proprietary Limited. He is also a director of SA Tourism Proprietary Limited and
a trustee of the Paleo-Anthropologial Scientific Trust.
64
RP Mohring — Rick (66)
Independent non-executive director, chairman of remuneration and
nomination committee, member of audit, sustainability, risk and compliance
and social and ethics committees
Director since 28 November 2006
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 chief executive officer 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, with Rick serving as deputy chief
executive officer until 2003. 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.
Dr MF Randera — Fazel (65)
Non-executive director and chairman of social and ethics committee
Director since 13 June 2012
MRCS, LRCP, DRCOG
Experience: Globally, Fazel has served as board and council member of the
World Medical Association (1997-2000), participated in the World Health
Organization international inquiry into the tobacco industry (1998-1999) and
chaired the global initiative on HIV/Aids reporting (2004). In South Africa, he
sat on the Truth and Reconciliation Commission (1995-1998), founded the Ethics
Institute and served as its chairman (1997-2000), and served on the Human
Rights Commission (1997-1999). 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
(2004-2007) and was a member of the South African Centre for Survivors of
Torture (2006-2011). 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 and MediTech South Africa.
65
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
NL Sowazi — Nkululeko (50)
Independent non-executive director
Director since 28 November 2006
BA, MA (UCLA)
Experience: Nkululeko is chairman of Kagiso Tiso Holdings, a leading diversified
investment holding company with interests in media, infrastructure, power,
resources and financial 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.
J van Rooyen — Jeff (64)
Independent non-executive director and chairman of audit committee
Director since 12 August 2008
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
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.
D Zihlangu — Rain (47)
Independent non-executive director and member of sustainability, risk and
compliance committee
Director since 28 November 2006
BSc (eng)(mining) (Wits), MDP (SBL, Unisa), MBA (WBS, Wits)
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 progressed to 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 of Sentula Mining.
66
Meeting attendance 2013
12 Feb 13
subcom
4 Mar 13
board
15 Apr 13
subcom
23 Apr 13
governance
30 May 13
board
20 Aug 13
board
4 Oct 13
governance
28 Nov 13
board
P
NR
P
P
NR
NR
P
P
NR
NR
P
NR
P
P
P
P
A
P
A
P
P
P
P
P
P
NR
P
P
P
P
Not yet appointed
NR
NR
T
NR
P
NR
NR
A
NR
P
P
P
A
P
P
A
A
P
P
P
P
P
T/PA
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
A
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Board
D Konar (chairman)
S Dakile-Hlongwane
WA de Klerk
CJ Fauconnier
JJ Geldenhuys
NB Mbazima
VZ Mntambo
RP Mohring
SA Nkosi
MF Randera
NL Sowazi
J van Rooyen
D Zihlangu
P = present.
A = apology.
T = telecon.
NR = not required.
PA = partial attendance.
Audit committee
J van Rooyen (chairman)
CJ Fauconnier
RP Mohring
JJ Geldenhuys
P = present.
28 Feb 13
4 Jun 13
15 Aug 13
20 Nov 13
P
P
P
P
Not yet appointed
P
P
P
P
P
P
P
P
67
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Remuneration and nomination committee
26 Feb 13
4 Jun 13*
14 Aug 13*
28 Nov 13*
RP Mohring (chairman)
JJ Geldenhuys
D Konar
NB Mbazima
VZ Mntambo
P = present.
A = apology.
T = telecon.
*
Including nomination committee matters.
P
P
T
P
A
P
P
P
A
P
P
P
P
P
P
P
P
P
P
P
Sustainability, risk and compliance committee
26 Feb 13
30 May 13
14 Aug 13
29 Oct 13
JJ Geldenhuys (chairman)
CJ Fauconnier
RP Mohring
S Dakile-Hlongwane
D Zihlangu
P = present.
Social and ethics committee
MF Randera (chairman)
JJ Geldenhuys
RP Mohring
P = present.
We firmly believe that our licence to
operate depends on being a responsible
corporate citizen.
68
P
P
P
P
P
Not yet appointed
P
P
P
P
P
P
P
P
P
P
P
3 Jul 13
11 Dec 13
P
P
P
P
P
P
GOVERNANCE
As a listed resources company, Exxaro operates
in an extremely regulated environment. This
naturally drives our governance, risk and
compliance initiatives. Equally, however, as an
ethical, values-based and proudly South African
black-empowered resources company, our
governance, risk and compliance initiatives are
driven by more than minimum requirements, but
rather the firm belief that our licence to operate
depends on being a responsible corporate citizen.
As such, we take decisions that enable
our strategy, ensure our profitability and
performance, and consider our risks, while
striving to meet the legitimate interests and
expectations of our stakeholders through actions
that are socially and environmentally responsible.
By balancing these imperatives, we entrench our
sustainability and make a meaningful contribution
to the South African economy.
Balancing these imperatives and ensuring a well
governed and ethical organisation is one of the
chief executive officer’s key performance areas:
this ensures that governance, aligned with King III
recommended practices, is always on the agenda.
The following diagrammatic overview presents a holistic view of our governance structures and processes:
SHAREHOLDERS AND STAKEHOLDERS
BOARD OF DIRECTORS
Adds value through strategic leadership and guidance, and ultimate oversight in ensuring a sustainable business that is
accountable to shareholders and responsible to other stakeholders.
SOCIAL AND ETHICS
COMMITTEE
Adds value by providing independent oversight on matters in the Remco and SRC committees’ mandates by reviewing actions
through a moral lens or based on a more holistic ethical view, as well as taking accountability for specific areas within
its mandate.
STRATEGIC
AUDIT
COMMITTEE
REMUNERATION AND
NOMINATION COMMITTEE
SUSTAINABILITY, RISK AND
COMPLIANCE COMMITTEE
Adds value by assessing, questioning
and ensuring the company’s
financial sustainability, and by
providing oversight over
IT governance.
Adds value by ensuring optimal remuneration
structures to attract, retain and motivate
world-class employees who will enable and
support the business strategy, as well as
assisting the board to identify and source
appropriately skilled directors who can
individually and collectively add value to
the board.
Adds value by critically assessing all
sustainability, risk and compliance
key performance indicators, discipline
strategies and performance, as well as
reviewing SHE incidents, thus assisting
the board and management to enable
safe, sustainable and legally compliant
business practices.
EXECUTIVE/SENIOR MANAGEMENT
EXECUTIVE COMMITTEE
PORTFOLIO REVIEW COMMITTEE
Adds value by assisting the CEO in managing the
business to enable and ensure the company
achieves its strategies and objectives.
Adds value by testing new strategies and initiatives against the
company’s mission and vision prior to further action/changes
in strategy being recommended to the board.
INFORMATION
MANAGEMENT STEERING
COMMITTEE
Adds value by ensuring IT is
well governed, and enables
and supports the company’s
overall objectives at an
acceptable cost.
INVESTMENT REVIEW
COMMITTEE
Adds value by interrogating
all capital projects above the
executive heads’ mandate
against financial, technical
and strategic metrics prior
to action.
OFFSHORE REVIEW
COMMITTEE
Adds value by ensuring
effective management and
tax efficiency, and ensuring
local legislative compliance of
the company’s offshore and
financing structures.
ETHICS
COMMITTEE
Adds value by investigating
all claims of unethical
behaviour and recommending
appropriate action.
Commodity, regional, business unit, discipline, departmental and project
committees and forums
OPERATIONAL/TACTICAL
The main filter applied to the governance structure/framework is that of materiality: the more material or risky the issue, the higher it is elevated up the governance
structure. Less material or operational issues are handled through business unit or commodity structures.
69
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
APPLICATION OF KING III
Exxaro is committed to applying
the principles and practices in the
King report on governance for
South Africa 2009 (King III). We
have significantly expanded our
King III application disclosure in
this report for a complete view
of our governance frameworks,
policies, activities and
performance.
As indicated in the 2012 integrated
report, this year’s report
contains only the information on
King III chapter 2 (boards and
directors), with the remainder
of the information available on
our website or cross referenced
elsewhere in this report.
King III assurance review
As promised in the 2012 report,
Exxaro had an independent
assurance review performed by
Ithemba Governance and Statutory
Solutions Proprietary Limited
on our King III application, based
on the Institute of Directors’
assessment tool. Our overall score
was AAA (the highest application).
We strive to meet the legitimate interests and
expectations of our stakeholders through actions
that are socially and environmentally responsible.
READ MORE>
Governance section
Status
Category
Board composition
Remuneration
Governance office bearers
Board role and duties
Accountability
Performance assessment
Board committees
Group boards
AAA — highest application.
AA — high application.
BB — notable application.
B — moderate application.
C — application to be improved.
L — low application.
70
Score
AAA
AAA
AAA
AAA
AAA
BB
AAA
AAA
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
2.3
The board should
provide effective
leadership based
on an ethical
foundation
Applied.
The board operates in accordance with a detailed charter, based on King III, and,
inter alia, deals specifically with the roles, responsibilities and accountabilities of the
board. It meets at least four times a year and corporate governance best practice,
trends and developments are standing items on the agenda. In addition, the board
is informed of governance matters through ongoing development interventions and
sessions – refer principle 2.20 for further details.
A detailed annual plan ensures the board executes all its responsibilities and
complies with its charter.
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,
Carina Wessels, is 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 the board
gives effect to this philosophy by:
• Contributing to and approving the strategy annually, at which point past
performance, key risks and sustainability matters are also debated
• Testing the strategy against the company’s long-term vision, values, business
principles, ie the capitals framework and stakeholder expectations
• Satisfying itself that strategy and business plans do not result in risks that have
not been thoroughly assessed and addressed by management and captured
through the comprehensive enterprise risk management process
• Identifying key performance and risk areas
• Ensuring the strategy will produce sustainable outcomes
• Considering sustainability as a business opportunity that guides
strategy formulation.
The discussion of our strategic objectives remains a method to further highlight
the integration and importance of strategy, risk, performance and sustainability
to stakeholders.
The board and SRC committee also monitor key performance indicators (KPIs) for
material issues, as well as a broader range of sustainability, risk and compliance
KPIs and interrogate the results of trend reporting.
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. Our values are captured in our ethics and related policies, which are
approved by the social and ethics committee on behalf of the board.
71
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Principle
Indicator
Comment
Boards and directors
2.4
The board should
ensure that the
company is and
is seen to be
a responsible
corporate citizen
2.5
The board should
ensure that the
company’s ethics
are managed
effectively
Applied.
72
The board and management subscribe to the philosophy that corporate governance
– built on an ethical and values-based foundation that considers the expectations
of all stakeholders – permeates all business activities and enables us to achieve
our short- and medium-term strategic objectives, while contributing to reaching
Exxaro’s vision.
The board provides strategic guidance to Exxaro and ensures that all decisions
consider the immediate and long-term impact these have on the environment, the
communities in which we operate, internal and external stakeholders and business
sustainability in general.
Individual directors are very aware of their duties and adherence to these, as well as
to the principles of responsibility, accountability, fairness and transparency, which
are tested through the annual board evaluation process – refer principle 2.22 under
boards and directors for more information.
The board supports the group’s brand and communications strategy which strives
to effectively communicate its corporate citizenship.
During the reporting period, R57 million (2012: R50 million) was spent through the
chairman’s fund and foundation on social and labour plans, uplifting and supporting
the communities in which we operate, as well as charitable projects and initiatives.
Refer principle 2.11 for more information on stakeholder engagement.
In 2013, the group received several awards, detailed on page 36.
Exxaro has a board-approved political donations policy, which acknowledges that
the primary purpose of these donations is to strengthen and consolidate democracy
by ensuring political parties are able to function effectively. Sustaining a number of
political parties that reflect a variety of political views and opinions is necessary to
consolidate democratic transformation in South Africa. The company believes the
principle of multiparty democracy, as contained in the founding provisions of the
Constitution of the Republic of South Africa 1996, deserves support by corporate
South Africa.
In support of the 2014 elections, the company made the following political
donations:
• African National Congress: R10 million
• Democratic Alliance: R2,6 million
• The Congress of the People: R1 million
• Inkatha Freedom Party: R1 million
• Freedom Front Plus: R500 000
• United Democratic Movement: R500 000.
Exxaro remains committed to the highest standards of honesty, integrity
and fairness.
Ethics processes and policies are managed either by the general manager:
governance, risk and compliance or the group company secretary.
Established policies, on which employees are regularly trained and which are
frequently reviewed, include:
• Code of ethics
• Whistleblowing
• Conflicts of interest
• Fraud investigation
• Fraud prevention
• Fraud response
• Gifts and benefits from suppliers.
Refer the social and ethics committee report for more information.
Principle
Indicator
Comment
Boards and directors
2.6
The board
should ensure
the company has
an effective and
independent audit
committee
Section 3.84(d)
of the Listings
Requirements
Shareholders elect members of the audit committee, which consists only of
independent non-executive directors, annually.
The committee operates under detailed terms of reference, reviewed and approved
by the board annually.
The committee meets at least four times a year and meets with internal and
external auditors independently of management at the first and third meetings of
the year, to align with the review of the annual and interim financial statements.
Refer the audit committee report and chapter 3 on audit committees for more
information (web).
2.7
The board should
be responsible for
the governance
of risk
Although the board has delegated responsibility for the enterprise risk management
framework and executing risk management initiatives and interventions to the
SRC committee and management respectively, it retains accountability for risk
governance, as expressly indicated in the board charter.
The enterprise risk management framework, which considers the interrelationship
between strategy, risk, performance and sustainability, guides the approach and
was approved by the board in November 2011.
Refer the risk management section for more information on the framework and
operational process.
Detailed risk reporting is presented to the SRC committee at least bi-annually
and the committee reports verbally and via committee minutes to the board at
each meeting. Risks are also discussed in detail during the annual board strategy
session. Based on this information, as well as the annual internal audit review of the
effectiveness of the risk management process, the board is comfortable with the
efficacy and effectiveness of the enterprise risk management system and process.
Refer chapter 4 on the governance of risk for more information (web).
As reported in 2012, the board initially retained accountability for IT governance.
An information management steering committee was established to assist the
board in discharging its responsibilities on the effective and efficient management
of IT resources and the integrity of information to achieve corporate objectives.
In August 2013, detailed information was again presented to the board, when it
was decided to delegate this responsibility to the audit committee. The board-
approved information and communications technology governance framework
remains in force and future reporting to the audit committee will occur in terms of
this framework.
The independent external auditors, as part of their annual audit, provide assurance
on, inter alia, the effectiveness of IT internal controls. In addition, assurance
activities performed by our independent internal auditors showed significant
improvement in IT governance and controls from 2012 to 2013.
Refer chapter 5 on the governance of IT for more information (web).
2.8
The board should
be responsible
for information
technology (IT)
governance
Applied.
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EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Principle
Indicator
Comment
Boards and directors
2.9
The board should
ensure the
company complies
with all applicable
laws and considers
adherence to
non-binding
rules, codes and
standards
2.10
The board should
ensure there is an
effective risk-based
internal audit
Applied.
74
The board has adopted a compliance policy that sets out our compliance
framework, which is in line with the standards of the Compliance Institute of South
Africa. The compliance process is fully integrated in the enterprise risk management
process. This ensures compliance risks are addressed with the same rigour as
other categories of risk.
The SRC committee is charged, under its terms of reference, to review the
compliance framework, process and all compliance risks as part of the enterprise
risk management process.
The risk impact matrix, adopted by the board, specifically refers to compliance
impacts that would prevent Exxaro from achieving its strategic objectives. To ensure
the best overall risk coverage, standardisation and discharging the accountability of
risk owners, the implementation of all mitigation techniques is coordinated centrally.
Our combined assurance process is risk-based and, in 2013, specific emphasis
was placed on assurance activities covering our most important compliance
controls relating to ’licence to operate’.
The following compliance assurance activities have been concluded and findings
reported:
• Compliance to mining charter, issued in terms of the Mineral and Petroleum
Resources Development Act 28 of 2002 (MPRDA)
• Compliance to social and labour plans, which form part of every mining right
• Compliance to environmental legislation including MPRDA, National Water Act 36
of 1998 and National Environmental Management Act 107 of 1998.
Compliance KPIs, and the overall efficacy of the process, are reported to the SRC
committee which, in turn, reports to the board verbally and by submitting minutes
at each of its meetings.
Extensive compliance training was conducted at strategic, tactical and operational
level during the year, covering the following topics:
• MPRDA Amendment Bill 2013
• Protection of Personal Information Act 4 of 2013
• Compliance reporting requirements in terms of all licence-to-operate conditions.
In addition to management training, the board receives legislative and best-practice
updates at each meeting, as well as during the bi-annual governance session –
refer principle 2.20 under boards and directors for more information.
Compliance is not only a legal imperative, but a moral and ethical imperative.
Therefore we have specifically decided to implement many of the best practices
(based on legislation and non-binding rules, codes and standards) applicable in
South Africa to our project in the Republic of the Congo, where such legislation
does not necessarily exist and where we do not have a legal obligation to do so.
The company received no material fines or penalties for non-compliance in 2013.
Refer chapter 6 on compliance with laws, rules, codes and standards for more
information (web).
The internal audit function is outsourced to Ernst & Young (EY).
Its responsibilities are set out in an internal audit charter approved by the audit
committee and reviewed annually. The charter, inter alia, entrenches the risk-based
audit approach, reporting lines to the chief audit executive, unrestricted access to
the information and resources of the company, chairmen of the audit committee
and board, as well as adherence to the standards for the professional practice of
internal auditing and the code of ethics of the Institute of Internal Auditors.
EY liaises regularly with the general manager: governance, risk and compliance,
who is also the chief audit executive, and discusses the risk profile of the group
and those of its business units to ensure a link between internal audit activities and
risk profiles.
Refer chapter 7 on internal audit for more information (web).
Principle
Indicator
Comment
Boards and directors
2.11
The board should
appreciate that
stakeholders’
perceptions affect
the company’s
reputation
2.12
The board should
ensure the integrity
of the company’s
integrated report
2.13
The board should
report on the
effectiveness of the
company’s system
of internal controls
The board keenly understands the link between stakeholder perceptions and
Exxaro’s reputation. Stakeholder engagement is therefore a critical part of our
business as it influences both stakeholder perceptions and our reputation.
Stakeholder relations can be affected by several of Exxaro’s identified top risks.
Our stakeholders set the context within which we operate and we therefore strive
for effective stakeholder engagement to operate a sustainable business. The aim
is to promote two-way engagement so that Exxaro and stakeholders understand
one another.
From 2013, the company has focused more closely on stakeholder engagement,
including the appointment of an executive responsible for coordinating this function.
To date, Exxaro has engaged with its full range of stakeholders. To ensure best
practice and consistency, in 2014, we intend to adopt the AccountAbility 1000SES
stakeholder engagement standard – the acknowledged benchmark for quality
engagement – which will guide the process of mapping stakeholders, linking
material issues to relevant stakeholders, and more.
Refer the section on stakeholders and chapter 8 on governing stakeholder
relationships for more information (web).
Functional owners are accountable to ensure the integrity of data and general
information in the integrated report under the guidance and coordination of an
editorial committee.
PricewaterhouseCoopers Incorporated (PwC) assures key performance indicators
and summarised financial information disclosed in the integrated report.
The board reviews and finally approves the content of the integrated report prior to
publication and circulation.
Refer chapter 9 on integrated reporting and disclosure for more information (web).
As noted in the audit committee report, there has been a marked improvement in
the pervasive control environment since 2012 after challenges with implementing
a new operating model and associated technological enabler. The independent
external auditors were able to rely on a number of processes due to the improved
control environment while still applying appropriate substantive procedures in
instances where control reliance was not justified to mitigate potential risks.
The chief audit executive and audit committee continue to regularly monitor
progress and maturity improvement in the internal control environment.
The board is satisfied with progress to date and mitigating actions, and will continue
to receive feedback on progress from the audit committee.
2.14
The board and its
directors should act
in the best interests
of the company
The board strictly adheres to its fiduciary duties and duty of care and skill codified
in the Companies Act. These are mirrored in the conflicts of interest policy, which
also applies to directors. Directors are permitted to obtain independent advice in
connection with their duties and liabilities.
Conflicts are declared at each board meeting and conservatively interpreted:
all conflicts (even those broader than the definition of personal financial interests)
are treated in line with section 75 of the Companies Act.
The securities dealing and information policy, which includes the process required
for dealing in securities by directors, was updated in 2013.
Applied.
75
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Principle
Indicator
Comment
Boards and directors
The audit committee reviews financial information in detail and recommends
specific action to the board if required. The committee regularly reviews the
solvency and liquidity of the group, as well as the going-concern statement.
In addition, when considering and reviewing the provision of financial assistance
to related and inter-related parties, as well as considering dividends payable,
the board 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 roles of the CEO and chairman are separate; Dr Len Konar is an independent
non-executive director and the CEO is Sipho Nkosi.
Based on an evaluation of his performance and ability to add value, the chairman
is re-elected by the board annually.
The role and responsibilities of the chairman are articulated in the board charter
and further entrenched in the division of responsibilities policy.
The board appointed Sipho Nkosi as CEO on 1 September 2007.
His role and responsibilities are articulated in the board charter and further
entrenched in the division of responsibilities policy.
A detailed delegation of authority policy and framework indicate matters reserved
for the board and those delegated to management.
Remco provides input on senior management succession planning.
In line with the recommendations of King III, Exxaro has a unitary board structure,
comprising:
• Eight independent non-executive directors
• Three non-executive directors
• Two executive directors.
A new process was introduced in 2013 to assess the status of directors who were
accordingly reclassified: all directors (other than those nominated by a shareholder
with the clear and unambiguous ability to control or significantly influence
management or the board, namely Messrs NB Mbazima, VZ Mntambo and
Dr MF Randera) were required to complete a questionnaire based on the principles
contained in King III and the Listings Requirements to assist Remco in assessing
their independence.
The group company secretary maintains a board skills and experience matrix
to ensure breadth and depth of skills and experience to support and enable the
company’s vision and strategy: new board nominations are assessed against gaps
identified in the matrix.
One third of non-executive directors retire by rotation annually.
The memorandum of incorporation does not restrict the board’s ability to remove
a director without shareholder approval.
In line with the board charter, Remco is responsible for identifying suitable
candidates and vetting nominee directors to be proposed to shareholders for
approval. Summarised résumés are included in the integrated report to assist
shareholders in the election process.
New directors receive a detailed letter of appointment and undergo induction as
discussed in principle 2.20.
2.15
2.16
2.17
2.18
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 chief
executive officer
and establish a
framework for
delegation of
authority
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.
Sections 3.84(a) and
(e) of the Listings
Requirements
Applied.
76
Principle
Indicator
Comment
Boards and directors
2.20
The induction and
ongoing training
and development of
directors should be
conducted through
formal processes
2.21
The board should
be assisted by
a competent,
suitably qualified
and experienced
company secretary
Sections 3.84(i) and
(j) of the Listings
Requirements
The formal board induction programme is managed by the group company
secretary: new directors are informed of their duties and responsibilities, and
information on the company is provided 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, and the opportunity to attend
outsourced training interventions as required.
Topics for the 2013 full-day sessions included:
• An overview of the governance, risk and compliance journey, implementation
status and successes, including a discussion on risk tolerance levels
• Information and required action in terms of the Protection of Personal Information
Bill 9 of 2009
• Feedback from an information management security assessment
• Legal context and status of the mining charter and social and labour plans
• Investor relations processes and principles
• The failings of Barings Bank and related risk control lessons
• Global trends in the mining industry
• Transnet freight and rail operational plan
• Amendments to the MPRDA
• Directors’ and officers’ liability insurance overview.
In addition to formal sessions, directors receive group and industry news articles
daily, as well as regular analyst reports. During the year, R780 000 (2012:
R1,2 million) was spent on director development and support activities, information
sharing and corporate governance initiatives. The primary reason for the reduction
related to the 2013 board assessment process being handled internally.
Visits to operational businesses for all directors are part of the annual board
programme and, due to its strategic importance, the 2013 visit was to the Mayoko
project in the Republic of the Congo.
The board selects and appoints the group company secretary and recognises this
person’s pivotal role 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.
Carina Wessels was appointed group company secretary on 1 July 2011.
As stipulated by the Listings Requirements, a detailed assessment was conducted
by the board to consider and satisfy itself of the competence, qualifications and
experience of the company secretary. This was performed by:
• A review of her qualifications and experience: Carina holds LLB and LLM
degrees, a certificate in advanced labour law, is an admitted advocate of the
High Court of South Africa, has completed a programme for management
development and is a fellow and past president of Chartered Secretaries
Southern Africa (CSSA). In 2013 she was vice-president of the Corporate
Secretaries International Association, a global federation of corporate secretaries
representing 70 000 members worldwide, and on 1 January 2014 succeeded as
president. She is a member of the Computershare issuer forum board, as well as
the JSE company secretary forum. During the year, she delivered presentations
at a number of local and international corporate governance conferences and
exceeded her continuing professional development requirements stipulated
by CSSA.
• Completing an assessment detailing all the legislative and King III requirements
by each director. This indicated that directors mostly strongly agreed that all
requirements had been met, including competence, qualifications and experience
requirements.
She does not serve as a director of the board and the assessment confirmed her
arm’s-length relationship with the board.
Applied.
77
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Principle
Indicator
Comment
Boards and directors
2.22
The evaluation
of the board, its
committees and
the individual
directors should
be performed
every year
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
Applied.
78
Independent board evaluations are conducted every third year, with evaluations
performed by the group company secretary during the other years.
In 2013, evaluations of the board and committees were conducted by the group
company secretary. Results achieved and areas requiring some improvement
(average score of below 2,5) were:
Board: 3,54 out of 4
• Mentorship programmes for inexperienced directors
Audit committee: 3,57 out of 4
Remuneration and nomination committee: 3,39 out of 4
• Consideration of committee budget and business plan, key performance
indicators and other factors determining its performance
• Non-executive director fees not comprising a base fee and attendance fee per meeting
• Lack of detailed long-term succession plan for directors – especially the risk to
board composition from possible changes in 2016.
Social and ethics committee: 3,34 out of 4
SRC committee: 3,4 out of 4
• Committee members are given and take the opportunity to meet separately
without executives being present.
Action will be taken in 2014 to address these areas of improvement.
Our external auditors have performed certain agreed-upon procedures on our
annual board evaluation process, and have reported their findings to the company.
Board committees assist the board in executing its duties, powers and authorities.
The board delegates to each committee the required authority to enable them to
fulfil their respective functions through formal board-approved terms of reference,
which are reviewed annually.
Delegating authority to board committees or management does not mitigate or
discharge the board and its directors of their duties and responsibilities.
All committees consist of a majority of independent non-executive directors.
The board has established the following 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 and King III, the ambit of this
committee has been expanded to include financial risk management, financial
compliance and aspects of integrated reporting.
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 and approve audit fees
• Evaluate the qualification, appropriateness, eligibility and independence of the
external auditor
• Approve the appointment of the internal auditors, the internal audit plan, charter
and fees
• Evaluate the scope and effectiveness of the internal audit function
• Ensure effective internal financial controls are in place
• Review the integrity of financial risk control systems and policies
• Evaluate the competency of the finance director and finance function
• Appoint the chief audit executive
• Oversee the effectiveness of the combined assurance plan and outcome.
More information appears in the audit committee report.
Principle
Indicator
Comment
Boards and directors
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
Applied.
Remuneration and nomination committee (Remco)
The purpose of this committee is to:
• Make recommendations on remuneration policies and practices, including
the company’s employee share schemes, for 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
appointments to the board
• Provide comments and suggestions on committee structures of the board,
committee operations, member qualifications and member appointment.
More information appears in the remuneration report.
The board chairman chairs the meeting when discussing nomination matters.
Sustainability, risk and compliance (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, being 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 SRC incidents, performance indicators and compliance
• Ensure the company reports annually through an integrated report on relevant
SRC issues.
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
• The effective management of the group’s ethics processes.
More information appears in the social and ethics committee report.
Apart from the social and ethics committee which meets bi-annually, all other board
committees meet quarterly.
79
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Principle
Indicator
Comment
Boards and directors
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
2.24
A governance
framework should
be agreed between
the group and its
subsidiary boards
The following key management committees support the board and chief executive
officer (CEO) in the day-to-day management of the company (more details appear
on the web):
Executive committee (Exco)
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.
The committee formally meets around nine times each year and, informally,
each week.
Information management (IM) steering committee
The IM steering committee is constituted as a management committee to assist the
audit committee in executing its responsibility for IT governance.
The committee meets four times a year.
Investment review committee
The investment review committee is constituted as a management committee to
assist the CEO with the investment and capital expenditure management processes
of the group.
The committee meets around nine times a year.
Offshore review committee
The offshore review committee is constituted as a management committee to assist
the CEO and finance director in managing Exxaro’s portfolio of offshore investments
and interests.
The committee meets at least twice a year.
Portfolio review committee
The portfolio review committee is constituted as a strategy management committee
to assist the CEO with portfolio management.
The committee meets around nine times a year.
All Exxaro subsidiaries adopt and comply with the detailed delegation of authority
framework and policy, which stipulates the governance framework.
2.25 Companies
Refer the extensive remuneration report for full details.
should remunerate
directors and
executives fairly
and responsibly
2.26 Companies
Refer the extensive remuneration report for full details.
should disclose
the remuneration
of each individual
director and certain
senior executives
Shareholders
should approve
the company’s
remuneration policy
2.27
Applied.
80
At the 2013 annual general meeting, 93% 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 2014 annual general meeting.
SOCIAL AND ETHICS
COMMITTEE REPORT
The social and ethics committee
is constituted as a statutory
committee under section 72(4)
of the Companies Act (read in
conjunction with Regulation 43
of the Companies Regulations,
2011), and as a board committee in
respect of any specific functions
delegated by the board. The
committee additionally fulfils
the role of a group committee
and therefore no other Exxaro
subsidiaries have established social
and ethics committees.
The committee operates under
approved terms of reference, as
well as a detailed annual plan,
which includes both its statutory
duties and those assigned by the
board. It acts both as an oversight
committee for areas where the
remuneration and nomination
(Remco) and sustainability, risk and
compliance (SRC) committees have
accountability, and is accountable
for certain areas that do not fall
within the mandate of another
committee. The chairmen of the
Remco and SRC committees are
required to report matters within
the mandates of their respective
committees to the social and ethics
committee.
The social and ethics committee
adds value to the group by
interrogating and providing
independent oversight over the
Remco and SRC committees ambit
(ie discussing the moral imperative
associated with certain operational
discussions as dealt with at the
Remco or SRC committee), as well
as by discussing and taking action
in areas where the committee itself
is accountable.
The committee consists of two
independent non-executive
directors and one non-executive
director. Other attendees include
subject-matter experts on each
of the disciplines or areas falling
within its mandate specified
in regulation 43(5) of the
Companies Act. It meets twice a
year and details of attendance
are disclosed on page 68 in the
governance report.
With the exclusion of two areas, the
committee carried out its duties
and responsibilities as stipulated
in the regulations and terms of
reference. The areas not dealt with
during the review period were the
philosophy of charitable giving and
consumer relationships, which will
receive attention in 2014.
The committee received and
considered the following reports
during the reporting period:
• Chairman’s fund and foundation:
a report on charitable donations,
initiatives and social and labour
plan investments as part of
Exxaro’s broader socio-economic
responsibilities. A total of
R57 million was spent in 2013
and includes the company’s
contribution to communities in
which it operates
• Principles of the United Nations
Global Compact: The company
complies with each of the
ten principles: some in the
form of compliance with the
South African constitution and
legislation in general, through
group-wide policies and others
in the form of specific initiatives,
which might change from year
to year
• Employment relationships
and key challenges, skills
development and Employment
Equity Act 55 of 1998
compliance: refer to the people
section for more information
• Preferential procurement and
broad-based black economic
empowerment: current status
and future requirements in
terms of both the MPRDA and
DTI codes
• International Labour
Organization (ILO) protocol
on decent work and working
conditions: confirmed that the
company adheres to South
African legislation aligned with
this protocol
• Promotion of equality
and prevention of unfair
discrimination: the adequacy
of policies and processes was
confirmed. Allegations of unfair
discrimination are reported
through the reporting hotline,
and investigated and managed
through the ethics process
discussed below
• Global anti-corruption trends,
information and legislation:
specifically risks relating to
Exxaro’s project in the Republic
of the Congo were discussed in
detail and processes agreed to
ensure all actions were aligned
with global best practice
• Report on Exxaro’s contribution
to communities in which
it operates via social and
labour plans
• Environmental, health and safety
performance
• Ethics management and
performance, detailed below.
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 hotline or to management.
The following items from the
anti-fraud, corruption and bribery
risk management strategy, as
initially reported at the annual
general meeting in 2013 and in
the governance report of the
2012 integrated report, are still in
process and will receive attention
in 2014:
• Improving detection capabilities
and surprise audits by
implementing process control
• An anti-fraud and corruption
awareness campaign: certain
steps were taken, but this will
continue in 2014
• Fraud and corruption risk
assessments: although such
risks form part of the holistic
risk assessment process, a
specific fraud and corruption risk
assessment process is still under
investigation.
81
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
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 functional heads to be
investigated.
In 2013, 400 cases of alleged
unethical behaviour (2012: 272)
were reported for investigation,
45 of these via the ethics line
(2012: 43). In total, 393 people were
subjected to disciplinary hearings
arising from the cases reported,
with 132 arrests made by the South
African Police Services (SAPS) for
criminal prosecution based on the
results of investigations referred
to them (2012: 60). The direct
monetary value of cases reported
and investigated was R11 497 926
(2012: R8 632 026) with R8 861 563
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
• Irregularities with appointments
of employees
• Unsafe working procedure or
failure to report safety incidents.
2013
Other reports
received
Reporting line
355
376
128
45
17
4
Total
400
393
132
Cases reported
Disciplinary hearings
Reported to SAPS
Dr MF Randera
Social and ethics committee chairman
Pretoria
31 March 2014
REMUNERATION
COMMITTEE REPORT
• Leading performance
• Sustainable effort.
The purpose of this report is
to provide information on the
company’s remuneration policy for
non-executive directors, executive
directors and prescribed officers.
The remuneration policy and
practices in Exxaro are reviewed
regularly 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
The remuneration and nomination
committee (Remco) 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, with the
majority being independent. The
CEO, finance director (FD) and
executive head: human resources
are standing invitees, but do not
have any voting rights. For full
details on the committee, refer to
the governance review on page 79.
At each annual general meeting,
shareholders are 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.
Benchmarking
External remuneration
benchmarking for executives,
non-executives, managers
and other personnel positions
is continuous, with external
comparisons reported to Remco
every six months.
The salary benchmark 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
Exxaro follows a holistic
remuneration approach. This
includes a guaranteed (base
pay plus benefits) and variable
component (separated into long-
term and short-term incentives).
All elements play a role in
attracting and retaining our people.
82
Exxaro remuneration: overview
Remuneration elements
Executive
management
Senior
management
Middle
management
Junior
management
Management and specialist category employees
Guaranteed
remuneration
Notional cost of
employment or
basic salary
F band
E band
Annual adjustments based on:
• Performance
• External market
• Internal parity
• Affordability
DU and DM
band
CU and DL
band
Bargaining category
employees
A-CM band
Annual adjustments
based on:
• Wage negotiations
• Industry
benchmarking
• Mandate on
affordability
Benefits
• Retirement fund: employer and employee contributions
• Medical aid: employer and employee contributions
• Housing: company housing or allowances/subsidies applicable to specific business
units
Circumstantial
remuneration
• Job-specific
• Skills scarcity
Variable
remuneration
Short-term
incentives
Special performance:
• Individual performance base
• Business unit stretch budget achievement
Not applicable
Above-target improvement incentives:
• Capped at 30% of Exxaro’s above-budget improvement
• 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
Long-term
incentives
Share appreciation right scheme (being
phased out, no new allocations since
1 April 2012)
• 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
83
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Guaranteed remuneration
• Affordability: all salary account-
Other benefits
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)
Exxaro retirement funds
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.
In terms of family-friendly benefits
Exxaro provides four months’ paid
maternity leave, among others.
Exxaro also provides other benefits
in terms of the Basic Conditions of
Employment Act, eg annual leave,
sick leave, study leave, paternity
leave, as well as a range of
circumstantial allowances such as
shift allowances, acting allowances,
inconvenience allowances and
group personal accident insurance,
etc. All bargaining unit employees
receive a housing or living-out
allowance as well as a commuting
allowance.
Retirement funds
Retirement fund contributions are
aligned to the specific conditions
of employment and fund rules for
different levels and categories
of employees. Employer and
employee contributions to this
fund are reflected in note 17 of the
annual financial statements.
All employees belong to one of the retirement funds shown below:
Fund description
Employee % contribution range Employer % contribution range
Total % contribution range
Sentinel Fund
Mine Employees Pension
Fund
Exxaro Selector Funds
Iscor Employees
Umbrella Provident Fund
Mine Workers Provident
Fund
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-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
Employee contributions
Employer contributions
Exxaro Coal
Mpumalanga
Bonitas
Discovery
Sizwe
WCMAS
(ringfenced)
50%
50%
Exxaro
Coal
Bonitas
Discovery
Sizwe
Umvuzo
40%
60% capped
(until 30/6/13)
50% (from 1/7/13)
Exxaro other
(including all
management and
specialist category
of employees)
Bonitas
Discovery
Sizwe
Umvuzo
Zincor
Discovery
Sizwe
50%
50%
40%
60% capped
*
Non-management category is a broader term that includes employees in formal bargaining units and those employed by smaller group companies where collective
agreements with trade unions are not in place.
84
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 17 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 two-tier performance
incentive:
— On-target business unit
incentive
— Commodity and group
improvement incentive (an
improvement of 101-110% in
coal net operating profit, and
a 10% in Tronox EBIDTA).
Individual performance reward
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 2012 and
31 December 2013.
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.
Two-tier performance incentive
The two-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 budgeted
consolidated group net operating
profit target.
85
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Share appreciation right scheme (refer note 32 in group annual financial statements)
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) (refer note 32 in group annual financial statements)
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 band DM – FU
Three years, subject to achieving performance conditions over a three-year
performance period.
Performance conditions
Headline earnings per share (HEPS) set by Remco
Deferred bonus plan (refer note 32 in group annual financial statements)
On receiving short-term incentive and special performance reward payments, participants can use part of their after-tax bonus
to acquire shares (pledged shares) in Exxaro with a matching award on the vesting date.
Grant limits
Vesting period
Performance conditions
Retention conditions
Other
Employees on Paterson EM and above
Three years
To qualify for the deferred bonus plan, employees must have achieved their
short-term incentive goal of which a portion (50% for EM, 50% or 90% for EU and
above) can then be used towards this scheme.
If 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 (employee
share option scheme)
The Mpower 2012 scheme was
implemented on 1 July 2012, and
will run for five years until 31 May
2017. Only employees on Paterson
D Lower band and below 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 rata number
of shares. On 31 December 2013,
there were 7 240 beneficiaries
participating in the scheme.
In addition, Mpower 2012 paid
R16 million in dividends to
beneficiaries of the scheme in
respect of the 2013 financial year.
Challenges
Macro environment
In the aftermath of the Marikana
saga in 2012, a number of concerns
and perceptions were raised in the
media, government and society
about the mining industry.
Expectations are that the mining
industry, as one of the largest
sectors in the economy, should
be responsible for providing
more than basic amenities such
as housing, medical facilities,
educational facilities and more job
opportunities in the areas where
mining companies operate.
Company environment
Attracting and retaining the
right employees is becoming
increasingly more difficult from
an employer perspective. Globally,
employers are continually looking
for ways to ensure their employees
remain satisfied. As such,
employee benefits (one component
of an employer’s total rewards
offering) have been found to play
a pivotal role in ensuring employee
satisfaction.
86
Exxaro is continually looking
for ways to ensure we attract
and retain employees. Although
there are concerns that the high
turnover rate among artisans and
underground miners may impact
on operations, we believe Exxaro’s
employee value proposition
(EVP) will assist in attracting and
retaining employees.
The EVP offers a total reward
package consisting of market-
related guaranteed remuneration,
benefits, competitive short-term
incentive schemes and excellent
long-term incentive schemes.
It also offers opportunities for
employees to develop and grow.
Through individual developmental
plans, all employees are involved
in improving themselves.
REMUNERATION REVIEW
Developmental plans include
equipment training, learnerships to
qualify as miners or artisans, first-
line management programmes,
management development
programmes, company assistance
with master degrees, leadership-
development programmes and
targeted interpersonal skills
training.
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 below.
The guaranteed versus variable
remuneration of executive
directors (CEO and FD) is 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’ and prescribed officers’
remuneration report below.
Summary of remuneration received or receivable
Year ended
31 December 2013
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-Hlongwane
Dr CJ Fauconnier3
JJ Geldenhuys
U Khumalo4,5
Dr D Konar (chairman)
NB Mbazima
VZ Mntambo
RP Mohring
Dr MF Randera
NL Sowazi5
J van Rooyen
D Zihlangu
Total remuneration
paid by Exxaro
Basic
salary
R
Fees for
services
R
Performance
bonuses1
R
Benefits
and
allowances2
R
Retirement
fund
contributions
R
Gains on
management
share
schemes
R
Total
R
6 780 615
4 252 911
11 033 526
3 977 050
2 878 942
86 980
167 364
670 610
414 654
11 980 202
10 504 741
23 495 457
18 218 612
6 855 992
254 344
1 085 264
22 484 943
41 714 069
336 607
42 753
692 883
20 910
1 167 820
266 737
345 317
690 173
313 897
240 067
528 846
336 607
4 982 617
8 258
389
50 482
240
14 017
3 849
3 900
81 135
(22 484 943)
17 950 027
37 452 680
344 865
43 142
743 365
20 910
1 167 820
266 737
345 557
704 190
317 746
240 067
528 846
340 507
5 063 752
87
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
REMUNERATION REVIEW (CONTINUED)
Summary of remuneration received or receivable (continued)
Year ended
31 December 2013
Prescribed officers
MDM Mgojo
MI Mthenjane6
M Piater
PE Venter
M Veti
CH Wessels
Less: gains on share
scheme
Add: share-based
payment expense
Total remuneration
paid by Exxaro
Basic
salary
R
3 861 539
1 731 044
3 011 227
3 984 132
2 588 593
1 661 950
Performance
bonuses1
R
Benefits
and
allowances2
R
Retirement
fund
contributions
R
Gains on
management
share
schemes
R
Total
R
2 182 983
830 367
1 485 547
2 071 787
1 172 820
502 125
139 895
147 014
118 651
247 218
33 202
62 015
335 907
159 221
297 813
350 769
255 685
129 713
4 704 242
2 612 094
2 940 547
2 723 349
11 224 566
2 867 646
7 525 332
9 594 453
6 773 649
2 355 803
16 838 485
8 245 629
747 995
1 529 108
12 980 232
40 341 449
(12 980 232)
15 424 152
42 785 369
All incentive schemes are performance related and were approved by the board. The two-tier short-term incentive scheme applies to all employees throughout the group.
Include travel allowances.
1
2
3 Appointed on 1 November 2013.
4 Resigned on 31 January 2013.
5 Fees paid to the respective employer and not the individual.
6 Appointed as an Executive committee member on 1 May 2013.
Retirement amounts paid or received by executive directors are paid or received under defined contribution
retirement funds.
29%
23%
36%
51%
Chief
executive
officer
57%
Finance
director
39%
Prescribed
officers’
average
17%
3%
17%
1%
2%
4%
2%
19%
Basic salary
Basic salary
Basic salary
Performance bonuses
Performance bonuses
Performance bonuses
Retirement fund contributions
Benefits and allowances
Benefits and allowances
Gains on management share schemes
Retirement fund contributions
Retirement fund contributions
Gains on management share schemes
Gains on management share schemes
88
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
Dr MF Randera8
NL Sowazi5
J van Rooyen
D Zihlangu
Total remuneration
paid by Exxaro
Prescribed officers
PT Arran9
MDM Mgojo
M Piater
Dr 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
Performance
bonuses1
R
Benefits and
allowances2
R
Retirement
fund
contributions
R
Gains on
management
share
schemes
R
Other
R
Total
R
6 859 647
4 217 225
11 076 872
2 517 124
1 054 030
81 401
163 515
595 683
346 373
15 187 718
8 448 242
25 241 574
14 229 385
3 571 154
244 917
942 056
23 635 961
39 470 959
246 310
634 733
346 283
255 971
1 060 666
327 293
683 001
153 173
303 864
577 748
327 293
32 513
26 756
4 916 336
59 269
2 155 841
3 843 865
2 637 818
2 310 253
3 985 326
2 159 470
1 236 864
813 255
1 097 830
998 345
809 289
1 544 291
768 333
397 176
88 594
112 558
78 056
163 182
41 374
44 030
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
(23 635 961)
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
4 975 605
6 089 038
11 449 436
7 806 104
9 300 535
16 326 652
7 511 845
1 778 356
18 329 439
6 428 519
527 793
1 437 778
33 537 864
574 60 261 966
(33 537 864)
9 277 994
36 002 096
1 All incentive schemes are performance related and were approved by the board. The three-tier short-term incentive scheme applies to all employees throughout the group.
2
Include travel allowances.
3 Appointed on 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 or received by executive directors are paid or received under defined contribution
retirement funds.
89
EXXARO Integrated report 2013
GOVERNANCE AND REMUNERATION
continued
REMUNERATION REVIEW (CONTINUED)
Summary of remuneration received or receivable (continued)
27%
23%
28%
60%
Chief
executive
officer
59%
Finance
director
Prescribed
officers’
average
10%
3%
36%
7%
1%
3%
10%
1%
2%
Basic salary
Basic salary
Basic salary
Performance bonuses
Performance bonuses
Performance bonuses
Retirement fund contributions
Benefits and allowances
Benefits and allowances
Gains on management share schemes
Retirement fund contributions
Retirement fund contributions
Gains on management share schemes
Gains on management share schemes
DIRECTORS’ INTERESTS IN EXXARO SHARES
Director
Beneficial interest
S Dakile-Hlongwane
WA de Klerk
Dr CJ Fauconnier
Dr D Konar (chairman)
VZ Mntambo
RP Mohring
SA Nkosi
NL Sowazi
D Zihlangu
Non-beneficial interest
WA de Klerk
Dr CJ Fauconnier
At 31 December
2013
Direct
1 462
47 500
6 168
1 000
70 144
Indirect
488 763
11 371
5 794 393
9 645 240
3 411 100
2 817 773
62 347
1 000
2012
Direct
Indirect
1 462
8 932
6 168
1 000
37 362
5 529 881
9 852 845
3 038 387
2 818 552
61 082
On 31 December 2013, Mrs S Dakile-Hlongwane held 0,1%, Mr VZ Mntambo held 1,6% (2012: 1,5%), Mr SA Nkosi held
2,7% (2012: 2,8%), Mr NL Sowazi held 0,31% (2012: 0,8%) and Mr D Zihlangu held 0,8% (2012: 0,8%) directly or
indirectly in the share capital of the company.
RP Mohring
Chairman: Remuneration and nomination committee
31 March 2014
90
AUDIT COMMITTEE REPORT
Background
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 (King III), as well as duties
specifically delegated by the company’s board of directors.
Objective and scope
Apart from the statutory duties of the audit committee as set out in the Companies Act, the provisions of the
Listings Requirements and King III, the ambit of the audit committee has been expanded to include financial risk
management, financial compliance and aspects of integrated reporting. The audit committee’s objectives are to:
• Examine and review the group’s annual 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 and approve audit fees
• Evaluate the qualification, appropriateness, eligibility and independence of the external auditor
• Approve the appointment of the internal auditors, the internal audit plan, charter and fees
• Evaluate the scope and effectiveness of the internal audit function
• Ensure effective internal financial controls are in place
• Review the integrity of financial risk control systems and policies
• Evaluate the competency of the finance director and finance function
• Appoint the chief audit executive
• Comply with legal and regulatory requirements
• Oversee the effectiveness of the combined assurance plan and outcome.
The committee performed its functions as stipulated in the terms of reference and detailed annual plan.
Membership
The audit committee consisted of three independent non-executive directors during 2013, with an additional
independent non-executive director having been appointed on 29 January 2014. The chairman of the board is
not a member of the audit committee. In addition, the chief executive officer, the finance director, chief audit
executive, as well as the internal and external auditors are permanent invitees to the audit committee meetings.
The audit committee meets four times a year and details of attendance are contained in the governance report.
External auditors
The group’s independent external auditors are PricewaterhouseCoopers Incorporated (PwC). Fees paid to the
auditors are disclosed in note 5 to the group annual financial statements 2013. Exxaro has an approved policy
to regulate the use of non-audit services by the group’s independent external 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 R39 million, which included R23 million
for the 2013 statutory audit and related activities as well as R16 million for non-audit services. Non-audit services
rendered by the group’s independent external auditors during the period comprised tax advisory and compliance
services, due-diligence reviews, enterprise risk management and combined assurance assistance, accounting
opinions, risk management, sustainability assurance and other advisory services. 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.
91
EXXARO Integrated report 2013 GOVERNANCE AND REMUNERATION
continued
Two meetings were held with the external auditor where management was not present.
The audit committee annually assesses the independence of the group’s external auditors and again completed
such assessment at its meeting on 3 March 2014. PwC were required to confirm that:
• They are not precluded from reappointment 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 reappointment in 2012, more than one half of the members remain in 2013
• 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 audit committee renominated PwC as independent external auditors for the
2014 financial year. Shareholders will therefore be requested to re-elect PwC as independent external auditors for
the 2014 financial year at the annual general meeting on 27 May 2014.
Finance function review
As required by the JSE Listings Requirements 3.84(h), the audit committee, through a formal process, has satisfied
itself of the finance function’s resources, experience and expertise and the appropriateness of the expertise and
experience of the Finance Director.
Annual financial statements
The audit committee reviewed the company and group annual financial statements and accounting practices in
detail and is satisfied that the information contained in the annual financial statements, as well as the application
of accounting practices applied are reasonable.
Internal financial control (statement on effectiveness of internal controls)
The audit committee, with input and reports from the independent internal and external auditors, reviewed the
company’s system of internal financial control during the year under review. Deficiencies in the system of internal
control identified in the year ended 31 December 2012 have improved significantly. The committee confirmed that
there were no material areas of concern that would render the internal financial controls ineffective.
Further information on the activities of the committee is contained in the governance report.
J van Rooyen
Chairman of the audit committee
Pretoria
31 March 2014
92
Summarised group annual
financial statements
9308
EXXARO Integrated report 2013 AUDITED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
Revenue
Operating expenses
Other income
Gains on disposal of non-core assets
Net operating profit (note 3)
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 (note 4)
Profit for the year
Other comprehensive income/(loss), net of tax
Items that will not be reclassified to profit or loss:
– Share of comprehensive income/(loss) of equity-accounted associates
and joint ventures
Items that may be subsequently reclassified to profit or loss:
– Unrealised foreign exchange gains/(losses) on translating foreign operations
– Revaluation of available-for-sale financial assets
– Cash flow hedges
– Share of comprehensive income of equity-accounted associates and joint ventures
Total comprehensive income for the year
Profit/(loss) attributable to:
Owners of the parent
– continuing operations
– discontinued operations
Non-controlling interests
– continuing operations
– discontinued operations
Profit for the year
Total comprehensive income/(loss) attributable to:
Owners of the parent
– continuing operations
– discontinued operations
Non-controlling interests
– continuing operations
– discontinued operations
2013
Rm
13 568
(12 719)
1 594
2 443
81
(367)
12
3 631
5 800
(645)
5 155
1 049
6 204
2 640
150
150
2 490
537
100
1 853
8 844
6 217
5 168
1 049
(13)
(13)
2012
Rm
12 229
(10 885)
352
42
1 738
138
(325)
3
3 602
5 156
(537)
4 619
5 028
9 647
68
(181)
(181)
249
(33)
(21)
303
9 715
9 677
4 634
5 043
(30)
(15)
(15)
6 204
9 647
8 854
7 805
1 049
(10)
(10)
9 745
5 706
4 039
(30)
(15)
(15)
Total comprehensive income for the year
8 844
9 715
Aggregate 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
94
1 751
1 746
1 456
1 452
295
294
2 734
2 726
1 309
1 305
1 425
1 421
AUDITED RECONCILIATION OF GROUP HEADLINE EARNINGS
for the year ended 31 December
2013
Profit attributable to owners of the parent
Adjusted for:
– IFRS 10 Gains on Disposal of Subsidiary
– IAS 16 Net Losses or Gains on Disposal of Property,
Plant and Equipment
– IAS 28 Loss on Dilution of Investment in Associates
– IAS 28 Share of Associates’ Separate Identifiable Remeasurements
– IAS 36 Impairment of Property, Plant and Equipment
– IAS 36 Reversal of Impairment of Property, Plant and Equipment
– IAS 38 Loss on the Scrapping of Intangible Assets
Headline earnings
– continuing operations
– discontinued operations
2012
Profit attributable to owners of the parent
Adjusted for:
– IFRS 10 Gains on Disposal of Subsidiaries and Non-core Assets
– IAS 16 Net Gains and Losses on Disposal of Property, Plant and
Equipment
– IAS 28 Excess of Fair Value Over Cost of Investment in Associate
– IAS 28 Share of Associates’ Gains or Losses on Disposal of Property,
Plant and Equipment
– IAS 36 Reversal of Impairment of Property, Plant and Equipment
– IAS 38 Gains on Disposal of Intangible Assets
Headline earnings
– continuing operations
– discontinued operations
Headline earnings per share: aggregate (cents)
– basic
– diluted
Headline earnings per share: continuing operations (cents)
– basic
– diluted
Headline (loss)/earnings per share: discontinued operations (cents)
– basic
– diluted
Gross
Rm
Tax
Rm
(964)
9
12
(114)
292
(247)
2
(4)
2
(11)
(1 010)
(13)
(4 034)
(65)
(470)
(4)
(103)
(77)
(4 753)
4
1
29
34
Net
Rm
6 217
(964)
5
12
(112)
281
(247)
2
5 194
5 218
(24)
9 677
(4 034)
(61)
(470)
(3)
(74)
(77)
4 958
3 999
959
2013
2012
1 463
1 459
1 470
1 466
(7)
(7)
1 401
1 397
1 130
1 127
271
270
95
EXXARO Integrated report 2013
AUDITED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December
2013
Rm
2012
Rm
44 681
20 342
72
1 176
19 207
861
366
2 657
4 483
938
2 434
82
1 029
342
37 445
15 881
55
962
17 154
425
241
2 727
4 972
776
2 642
190
1 364
49 506
42 417
2 396
4 234
29 668
36 298
(26)
36 272
9 157
3 569
1 863
149
95
3 481
3 852
2 867
31
131
17
806
225
2 374
1 636
24 784
28 794
12
28 806
8 417
2 761
2 842
142
106
2 566
5 194
4 099
(9)
172
121
811
49 506
42 417
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in 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 held-for-sale
Total assets
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital
Other components of equity
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current provisions
Post-retirement employee obligations
Financial liability
Deferred tax
Current liabilities
Trade and other payables
Interest-bearing borrowings
Current tax payable
Current provisions
Overdraft
Non-current liabilities held-for-sale
Total equity and liabilities
96
AUDITED GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December
Cash flows from operating activities
Cash generated by 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
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of subsidiaries
Proceeds from disposal of intangible assets
Proceeds from disposal of financial assets designated at fair value through profit or loss
Investment in intangible assets
Dividends from equity-accounted investments
Decrease/(increase) in other non-current assets
Acquisition of subsidiaries
Investment in associates and joint ventures
Income from investments
Cash flows from financing activities
Proceeds from issuance of share capital
Consideration paid to non-controlling interests
Interest-bearing borrowings raised
Interest-bearing borrowings repaid
Other financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Translation difference on movement in cash and cash equivalents
Cash and cash equivalents end of the year
– Cash and cash equivalents
– Overdraft
2013
Rm
422
2 159
(262)
70
(158)
(1 387)
(1 480)
(1 257)
(3 507)
17
87
(201)
3 229
222
(82)
12
715
14
(96)
800
(3)
(343)
553
13
223
1 029
(806)
2012
Rm
543
3 969
(345)
208
(277)
(3 012)
(2 940)
(1 571)
(3 762)
77
81
77
5
(36)
4 019
(16)
(1 421)
(396)
3
(1 291)
15
(1 181)
5 800
(5 925)
(3 688)
4 118
123
553
1 364
(811)
97
EXXARO Integrated report 2013
AUDITED GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December
Other components of equity
Share
capital
Rm
Foreign
currency
translations
Rm
Financial
instruments
revaluation
Rm
Equity-
settled
Rm
Retirement
benefit
obligation
Rm
Available-
for-sale
revaluations
Rm
At 1 January 2012
2 359
1 585
196
1 412
1
(33)
(21)
Other
Rm
8
Retained
earnings
Rm
18 027
9 677
Attributable
to owners
of the
parent
Rm
Non-
controlling
interests
Rm
23 588
9 677
(54)
20
(30)
Profit/(loss) for the year
Other comprehensive loss
Share of comprehensive
income/(loss) of
equity-accounted
investments1
Issue of share capital2
Share-based payments
movements
Acquisition of subsidiaries
Acquisition of
non-controlling interest
Dividends paid
Disposal of subsidiaries
15
118
(17)
94
(164)
(1)
92
(183)
(459)
(137)
(23)
(740)
(3 012)
122
15
(183)
(740)
(3 012)
(619)
468
(441)
(5)
Total
equity
Rm
23 608
9 647
(54)
122
15
(183)
468
(1 181)
(3 012)
(624)
At 31 December 2012
2 374
1 211
21
1 300
(163)
(733)
24 784
28 794
12
28 806
Profit/(loss) for the year
Other comprehensive
income
Share of comprehensive
income/(loss)
of equity-accounted
investments1
Issue of share capital3
Share-based payments
movement
Dividends paid
Acquisition of
non-controlling interest
22
534
100
634
3
637
6 217
6 217
(13)
6 204
1 401
289
110
150
(1)
54
83
(1 387)
2 003
22
83
(1 387)
2 003
22
83
(1 387)
(68)
(68)
(28)
(96)
At 31 December 2013
2 396
3 146
310
1 493
(13)
100
(802)
29 668
36 298
(26)
36 272
1
2
3
Included in the foreign currency translation amount is R1 287 million (2012: R79 million) relating to the tronox investments.
Issued to the Kumba Resources Management Share Trust due to options exercised (R15 million).
Issued to the Kumba Resources Management Share Trust due to options exercised (R14 million) and vesting of Mpower 2012 shares to good leavers (R8 million).
Final dividend paid per share (cents) in respect of the 2012 financial year
Dividend paid per share (cents) in respect of the 2013 interim period
Final dividend payable per share (cents) in respect of 2013 financial year
150
235
315
Foreign currency translation
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of
the financial statements of foreign entities within the group.
Financial instruments revaluation
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
The equity-settled reserve represents the fair value of services received and settled by equity instruments
granted.
Post-retirement benefit obligation
Comprises mainly remeasurements on the post-retirement obligation.
Available-for-sale revaluations
Comprises of the fair value adjustments based on latest fair value calculations performed, on the investments in
Richards Bay Coal Terminal (RBCT) (R54 million) and Chifeng Kumba Hongye Zinc Corporation Limited (Chifeng)
(R46 million).
Other
Comprises transactions with non-controlling interests.
98
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL
STATEMENTS
for the year ended 31 December
1. BASIS OF PREPARATION
The summarised group annual financial statements for the year ended 31 December 2013 have been derived from
the audited group annual financial statements of Exxaro Resources Limited, which are available on Exxaro’s website
at www.exxaro.com. These summarised group annual financial statements do not contain sufficient information
to allow for a complete understanding of the financial results and state of affairs of the group, which is provided
by the detailed audited group annual financial statements. The summarised group annual financial statements do
not include all the disclosure required for a complete set of annual financial statements prepared in accordance
with International Financial Reporting Standards (IFRS). Selected summarised notes have been included in this
integrated report for a better understanding of the significant transactions during the year.
The summarised group annual financial statements for the year ended 31 December 2013 have been prepared
under the supervision of the Finance Director, WA de Klerk (CA)SA, in accordance with the JSE Limited Listings
Requirements for abridged reports and the requirements of the Companies Act No 71 of 2008, as amended. The
Listings Requirements require abridged reports to be prepared in accordance with the conceptual framework and
the measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The summarised group annual financial statements have been prepared on the historical cost basis, excluding
financial instruments and biological assets, which are fairly valued, and conform, in this regard, to IFRS as
issued by the International Accounting Standards Board (IASB).
The preparation and presentation of the summarised group annual financial statements included in this
integrated report is the responsibility of Exxaro’s directors. The directors take full responsibility that the
financial information has been correctly extracted from the underlying audited group annual financial
statements.
The integrated report does not include the directors’ report, which forms part of the full group annual
financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in the preparation of the summarised group annual financial statements are in
terms of IFRS and are consistent with those applied in the previous group annual financial statements, except as
disclosed below.
During the 2013 the following pronouncements became effective:
• IAS 1 Financial Statement Presentation (as amended)
• IAS 19 Employee Benefits (revised)
• IAS 27 Separate Financial Statements (revised)
• IAS 28 Investments in Associates and Joint Ventures (revised)
• IFRS 10 Consolidated Financial Statements (as amended)
• IFRS 11 Joint Arrangements (as amended)
• IFRS 12 Disclosure of Interest in Other Entities (as amended)
• IFRS 13 Fair Value Measurement
• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
• Annual Improvements to IFRS 2009 – 2011 cycle
* Early adopted in 2012.
Effective date
1 July 2012
1 July 2012*
1 January 2013*
1 January 2013*
1 January 2013*
1 January 2013*
1 January 2013*
1 January 2013
1 January 2013
1 January 2013
The accounting standards and amendments issued to accounting standards and interpretations which are
relevant to the group, but not yet effective at 31 December 2013, 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. The group continuously evaluates the impact of these standards and amendments.
During 2012, Exxaro early adopted the suite of consolidation standards, including IFRS 10, 11 and 12 and IAS 27
and 28, effective 1 January 2013 as well as IAS 19. The impact of this early adoption has been disclosed in the
group annual financial statements at 31 December 2012.
99
EXXARO Integrated report 2013 NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL
STATEMENTS (continued)
for the year ended 31 December
3. SIGNIFICANT ITEMS INCLUDED IN NET OPERATING PROFIT
Year ended 31 December
Depreciation and amortisation
Net realised foreign currency exchange gains
Net unrealised foreign currency exchange losses
Losses on derivative instruments held-for-trading
Impairment (charges)/reversals of trade and other receivables
Royalties1
(Loss)/profit on disposal of property, plant and equipment
Loss on dilution of investment in associate
Other income2
2013
Rm
(856)
56
(20)
(81)
(25)
(8)
(23)
(12)
1 594
2012
Rm
(701)
60
(79)
(1)
6
(124)
139
352
1
The amount paid for royalties includes an adjustment to the prior year based on final calculations done for returns filed to South African Revenue Services (SARS)
(R41 million).
2 Other income relates to shortfall income received from customers (mainly Eskom) as a result of delays in agreed upon production offtake plans.
4. DISCONTINUED OPERATIONS
All the conditions precedent to the sale of Exxaro’s 100% shareholding in Exxaro Base Metals Proprietary
Limited to Lebonix Proprietary Limited were met on 2 December 2013. The subsidiary, which included the
Zincor operations, was disposed for a total consideration of R183 million. This process completes the Zincor
divestment process, which commenced with the cessation of the production of zinc metal at Zincor in 2011
and follow on the sale of the Rosh Pinah mine during 2012.
During 2012 the mineral sands and Rosh Pinah operations were sold.
Financial information relating to the discontinued operations for the year to the date of disposal is set out below:
Year ended 31 December
The financial performance and cash flow information
Revenue
Operating income/(expenses)
Net operating profit
Profit on sale of subsidiaries
Interest income
Interest expense
Profit before tax
Income tax expense
Profit for the year from discontinued operations
Cash flows attributable to operating activities
Cash flows attributable to investing activities
Cash flows attributable to financing activities
Cash flow attributable to discontinued operations
5. SEGMENT REPORT
2013
Rm
159
159
964
(74)
1 049
1 049
26
98
(37)
87
2012
Rm
3 893
(2 069)
1 824
3 995
75
(241)
5 653
(625)
5 028
1 036
(1 358)
(2 778)
(3 100)
The corporate transactions during 2012 necessitated a change in the operating segment reporting structures
and the manner in which operating results are reported to the chief operating decision maker. Reported
operating segments are based on the group’s different products and operations.
5.1 Changes/amendments to reported operating segments
The following operating segments were impacted as a result of the changes in the organisational structure:
Base metals
Up to and including 31 December 2012, the reportable operating segments included an operating segment
for base metals, which consisted of Zincor, Rosh Pinah and other base metals.
Exxaro’s 50,04% interest in the Rosh Pinah operations was sold to a subsidiary of Glencore International
plc on 1 June 2012. This sale formed part of Exxaro’s strategic plan to divest from the group’s zinc assets.
100
The remaining Base metals entities no longer met the quantitative or qualitative thresholds described
in IFRS 8 Operating Segments. These were aggregated in the remaining Base metals entities within the
“Other” reportable operating segment.
Mineral sands/titanium dioxide
The previously reported Mineral sands operating segment included KZN Sands, Namakwa Sands and
Australia Sands.
The Mineral sands operations sale and acquisition of a shareholding in Tronox Limited in 2012 resulted in
Exxaro holding 44,40% (2012: 44,65%) of the shares in Tronox Limited and 26% directly in each of the
South African-based KZN Sands and Namakwa Sands operations. Exxaro currently equity-accounts for the
interest in Tronox Limited and the South African Mineral sands operations. The investment value in these
associated companies is seen as significant and will be reported as a separate operating segment.
The Mineral sands operating segment was restructured to include both Mineral sands and Titanium dioxide
(TiO2) which is in line with the core business of the Tronox operations and renamed TiO2.
Ferrous
In line with the group’s strategy to establish an Exxaro controlled ferrous business, Exxaro acquired
African Iron Limited (AKI) in February 2012. AKI is an iron ore development company involved in the
exploration and evaluation of the Mayoko Iron Ore and Ngoubou-Ngoubou projects, located in the Republic
of the Congo in Central West Africa.
The AlloyStreamTM and FerroAlloys operations as well as Exxaro’s 19,98% interest in Sishen Iron Ore
Company (SIOC) Proprietary Limited were previously reported within the “Other” operating segment of
Exxaro. These investments are now reported within the Ferrous operating segment, based on the similar
commodity suite of these operations.
Following the change in the composition of the group’s reportable operating segments, the prior years’
reportable operating segment information has been re-presented (restated) to reflect these changes.
No changes were incurred in the coal operating segment.
5.2 Reportable operating segment performance
The group’s reportable operating segments for the year ended 31 December 2013 were therefore coal,
ferrous, titanium dioxide and other.
Profit or loss (Rm)
Year ended 31 December
Coal
– Tied1
– Commercial2
Ferrous
– Iron ore
– Alloys
– Other3
4
TiO2
Other
– Base metals5
– Other6
Revenue
Net operating profit (NOP)
2013
13 362
3 917
9 445
120
120
86
86
2012
Restated
12 064
3 449
8 615
107
107
3 594
357
299
58
2013
2 769
215
2 554
(141)
(27)
(61)
(53)
938
145
793
2012
Restated
2 105
285
1 820
(31)
(9)
(25)
3
1 925
3 558
422
3 136
Total external revenue and net
operating profit
13 568
16 122
3 566
7 557
1 Tied operations refer to mines that supply their entire production to either Eskom or ArcelorMittal South Africa (AMSA) in terms of contractual agreements.
2 NOP includes the net impairment on NCC of R143 million in 2013.
3
Mainly made up of Ferrous head office costs not directly attributable to the operation at Mayoko and as such could not be capitalised with the development of
the project.
Includes a partial impairment reversal of R103 million in 2012 of the carrying value of property, plant and equipment at KZN Sands.
Includes the profit on sale of the Rosh Pinah operation of R544 million in 2012 and R98 million impairment reversal of Zincor in 2013. This business was
previously reported as a separate base metals segment prior to the Rosh Pinah sale transaction in 2012.
Includes the profit on sale of the mineral sands operations of R3 451 million in 2012.
4
5
6
101
EXXARO Integrated report 2013 NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL
STATEMENTS (continued)
for the year ended 31 December
5. SEGMENT REPORT (CONTINUED)
5.2 Reportable operating segment performance (continued)
Assets and liabilities (Rm)
At 31 December
Coal
Tied
Commercial
Ferrous
Iron ore
Alloys
Other
TiO2
Other
Base metals
Other
Total
Assets
2013
2012
Restated
22 386
1 543
20 843
11 095
5 114
189
5 792
13 325
2 700
611
2 089
49 506
19 717
1 719
17 998
7 015
3 045
158
3 812
13 037
2 648
552
2 096
42 417
Liabilities
2013
7 552
1 391
6 161
814
729
33
52
4 868
4 868
2012
Restated
8 001
1 596
6 405
615
572
43
4 995
867
4 128
13 234
13 611
The numbers above include both the continuing and discontinued operations.
6. FINANCIAL INSTRUMENTS
(a) Carrying amounts and fair values
The fair values of financial assets and financial liabilities, together with the carrying amounts in the
condensed group statement of financial position, are as follows:
At 31 December 2013
ASSETS
Non-current assets
Financial assets, consisting of1:
– Exxaro Environmental Rehabilitation Trust asset
– Loans to associates and joint ventures
– Richards Bay Coal Terminal (RBCT)
– Kumba Iron Ore Limited
– New Age Exploration Limited
– Chifeng
– Non-current receivables
Current assets2
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Non-current assets held-for-sale
Total assets
LIABILITIES
Non-current liabilities
Interest-bearing borrowings1
Current liabilities2
Trade and other payables
Derivative financial instruments
Interest-bearing borrowings
Overdraft
Non-current liabilities held-for-sale
Total liabilities
Carrying
amount
Rm
Fair
value
Rm
2 657
2 657
618
255
551
40
1
253
939
2 875
1 845
1
1 029
67
5 599
3 569
3 569
2 907
2 056
14
31
806
36
6 512
618
254
551
40
1
253
940
2 875
1 845
1
1 029
67
5 599
3 569
3 569
2 907
2 056
14
31
806
36
6 512
1 Carried at fair value in terms of IAS 39 Financial Instruments: Recognition and Measurement.
2 Carrying amounts approximate the fair values due to the short-term maturities of these financial assets and liabilities.
102
(b) Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and financial liabilities.
These fair value measurements are categorised into different levels in the fair value hierarchy based on
the inputs used in the valuation techniques. The different levels are defined as follows:
Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the group can
access at the measurement date.
Level 2 — inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3 — unobservable inputs for the asset and liability.
At 31 December 2013
Financial assets held-for-trading at fair value through profit or loss
– Current derivatives financial assets
Financial assets designated at fair value through profit or loss
– Exxaro Environmental Rehabilitation Trust
– Exxaro Environmental Rehabilitation Trust held-for-sale
– Kumba Iron Ore Limited
Available-for-sale financial assets
– Chifeng
– New Age Exploration Limited
– RBCT
Financial liabilities held-for-trading at fair value through profit or loss
– Current derivatives financial liabilities
– Current derivatives financial liabilities held-for-sale
Net financial assets/(liabilities) carried at fair value
Level 1
Rm
Level 2
Rm
Level 3
Rm
1
(14)
(9)
(22)
618
67
40
1
726
253
551
804
Level 2 fair values for over-the-counter derivative financial instruments are based on market quotes.
These quotes are tested for reasonability by discounting estimated future cash flows using the market rate
for similar instruments at measurement date.
The fair value computations of the investments are performed by the group’s corporate finance
department, reporting to the Finance Director, on a six-monthly basis. The valuation reports are discussed
with the audit committee in accordance with the group’s reporting governance.
The group recognises transfers between levels of the fair value hierarchy as at the end of the reporting
period during which the transfer has occurred. There were no transfers between level 1 and level 2 of the
fair value hierarchy for the year ended 31 December 2013.
There were no transfers between level 2 and level 3.
(c) Level 3 fair values
At 1 January 2013
Movement during the year
Total gains recognised in other comprehensive income
Settlements
Exchange gains or losses for the period recognised in other
comprehensive income
At 31 December 2013
Chifeng
Chifeng
Rm
174
46
33
253
RBCT
Rm
467
82
2
551
Chifeng is classified within a level 3 as there is no quoted market price or observable price available for
this investment. This unlisted investment is valued as the present value of the estimated future cash flows,
using a discounted cash flow model.
The significant observable and unobservable inputs used in the fair value measurement of the
investment in Chifeng are rand/Chinese renminbi (RMB) exchange rate, RMB/US$ exchange rate, Zinc
London Metal Exchange price, production volumes, operational costs and the discount rate. Significant
increases/(decreases) in any of those inputs in isolation would result in a significantly lower/(higher)
fair value measurement.
103
EXXARO Integrated report 2013
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL
STATEMENTS (continued)
for the year ended 31 December
6. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Level 3 fair values (continued)
Observable inputs
Rand/RMB exchange rate
RMB/US$ exchange rate
Zinc LME price (US$ per tonne in real terms)
Unobservable inputs
Production volumes
Operational costs (US$ million per annum in
real terms)
Range of inputs
Sensitivity of inputs and fair value measurement1
R1,72
RMB1
RMB6,02 to
RMB5,95/US$1
2 039 – 2 027
US$/tonne
208 750 tonne
74 – 88
Strengthening of the rand to the RMB
Strengthening of the RMB to the US$
Increase in price of zinc concentrate
Increase in production volumes
Decrease in operational costs
Discount rate
10%
Decrease in discount rate
1 Change in observable/unobservable input, which will result in an increase in the fair value measurement.
Inter-relationships
Any inter-relationships between unobservable inputs is not considered to have a significant impact within the
range of reasonably possible alternative assumptions.
RBCT
RBCT is classified within a level 3 as there is no quoted market price or observable price available for this investment.
This unlisted investment is valued as the present value of the estimated future cash flows, using a discounted cash
flow model. It is not anticipated that the RBCT investment will be disposed of in the near future.
The significant observable and unobservable inputs used in the fair value measurement of the investment in
RBCT are rand/US$ exchange rate, API4 export price, Transnet Market Demand Strategy, annual utilisation
factor and the discount rate. Significant increases/(decreases) in any of those inputs in isolation would result
in a significantly lower/(higher) fair value measurement.
Observable inputs
Rand/US$ exchange rate
Range of inputs
R9,85 to
R10,15/US$1
Sensitivity of inputs and
fair value measurement1
Strengthening of the rand to the US$
API4 export price per tonne (steam coal A-grade
price in real terms)
US$75,50 to
US$97 per tonne
Increase in API4 export price per tonne
Unobservable inputs
Transnet Market Demand Strategy for the terminal
(million tonnes per annum – Mtpa)
70Mtpa to 91Mtpa
Acceleration of Transnet Freight Rail
performance, ie reach full capacity sooner
Discount rate
13% – 17%
Decrease in discount rate
Annual utilisation factor (safety and rail delay factor)
90%
Increase in annual utilisation factor
1 Change in observable/unobservable input, which will result in an increase in the fair value measurement.
Inter-relationships
Any inter-relationships between unobservable inputs is not considered to have a significant impact within the
range of reasonably possible alternative assumptions.
7. SHARE CAPITAL
Authorised
500 000 000 ordinary shares of R0,01 each.
Issued
358 115 505 (2012: 357 787 785) ordinary shares of R0,01 each. The increase can be summarised as follows:
Date of issue
Number of shares
Opening balance
Issued in terms of the Kumba Resources Management Share Option
Scheme due to options exercised at prices ranging from R138,53 to R166,00
19 March 2013 to
3 September 2013
Closing balance
104
357 787 785
327 720
358 115 505
8. NET DEBT
Net debt
Presented by the following items on the face of the statement of financial position:
– cash and cash equivalents
– non-current interest-bearing borrowings
– current interest-bearing borrowings
– overdraft
Calculation of movement in net debt
Cash outflow
Add:
– shares issued
– share-based payments
– non-cash flow movement for interest accrued not yet paid
– non-cash flow for amortisation of transaction costs
– net debt of subsidiaries disposed
– consideration paid to non-controlling interests
– non-cash flow movements in net debt applicable to currency translation differences
of transactions denominated in foreign currency
– non-cash flow movements in net debt applicable to currency translation differences
of net debt items of foreign entities
Increase in net debt
9. CONTINGENT LIABILITIES
Contingent liabilities
– Grootegeluk Medupi Expansion Project
– DMC Iron Congo SA
– pending litigation claims1
– other contingent liabilities2
– share of contingent liabilities of associates and joint ventures
1 Pending litigation claims consist of legal cases where Exxaro is the defendant. These claims are at the stage
where the outcome is uncertain and the amount of possible legal obligations is estimated at this stage.
2 Other contingent liabilities include operational guarantees to banks and other institutions in the normal course
of business from which it is anticipated that no material liabilities will arise.
The timing and occurrence of any possible outflows of the contingent liabilities above
are uncertain. Due to the Mineral and Petroleum Resources Development Act of 2002,
currently not specifying how to financially provide for water liabilities and water
treatment at post mine closure, Exxaro is currently developing a specific policy around
such provisions. An estimate of this amount is currently not available, however, a
liability may arise in the future.
10. RELATED PARTY TRANSACTIONS
Year ended 31 December
2013
Rm
2012
Rm
(3 377)
(2 199)
1 029
(3 569)
(31)
(806)
1 364
(2 761)
9
(811)
(1 058)
(2 397)
14
(3)
(40)
(9)
(96)
(669)
683
15
820
(1 181)
(70)
268
(1 178)
(2 545)
2 066
1 055
50
84
328
927
677
243
536
276
During the year the company and its subsidiaries, in the ordinary course of business, entered into various sale and
purchase transactions with associates and joint ventures. These transactions were subject to terms that are no
less, nor more favourable than those arranged with third parties.
11. GOING CONCERN
Taking into account 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.
105
EXXARO Integrated report 2013
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL
STATEMENTS (continued)
for the year ended 31 December
12. EVENTS AFTER THE REPORTING PERIOD
Details of the final dividend proposed are given in note 14.
The following non-adjusting events occurred after the reporting date and are disclosed for information
purposes:
• On 31 January 2014, Exxaro concluded a sale of asset agreement relating to its NCC operation with
Universal Coal Development VIII Proprietary Limited. Once all conditions precedent to the transaction have
been fulfilled, an agreed cash amount will be paid to Exxaro. Exxaro has subsequently placed the mine on
care and maintenance until fulfilment of all conditions precedent makes the transaction unconditional and
the operation is handed over to the new owners
• The mining convention, Port Autonome de Pointe Noire (PAPN) memorandum of understanding as well as
the rail framework agreements with Chemin de fer Congo-Ocean (CFCO) relating to the Mayoko project in
the Republic of the Congo, were signed in Brazzaville on 29 January 2014.
The directors are not aware of any other significant matter or circumstance arising after the reporting period
up to the date of this report, not otherwise dealt with in this report.
13. INDEPENDENT EXTERNAL AUDIT CONCLUSION
These summarised group annual financial statements for the year ended 31 December 2013 (from page 93 to 106)
have been audited by the external auditors, PricewaterhouseCoopers Inc, who expressed an unmodified audit
opinion thereon. The auditor also expressed an unmodified opinion on the group annual financial statements
from which these summarised group annual financial statements were derived. The individual auditor assigned
to the audit is Mr TD Shango.
The full auditors’ report is included in the group annual financial statements on the website www.exxaro.com.
Both copies of the auditor’s audit reports are available for inspection at the company’s registered office,
together with the audited group annual financial statements which have been summarised in this report.
14. FINAL DIVIDEND
Notice is given that a gross final cash dividend, number 22 of 315 cents per share, for the 2013 financial
year has been declared, payable to shareholders of ordinary shares. Total secondary tax on companies
(STC) credits available for offsetting against the dividend tax amount to R195 million (54,51893 cents per
share). The gross local dividend amount is 315 cents per share for shareholders exempt from Dividend Tax.
The dividend declared will be subject to a dividend withholding tax of 15% for all shareholders who are
not exempt from or do not quality for a reduced rate of withholding tax. The net local dividend payable to
shareholders subject to withholding tax at a rate of 15% amounts to 275,92784 cents per share. The number
of ordinary shares in issue at the date of this declaration is 358 115 505. Exxaro’s tax reference number is
9218/098/14/4.
The salient dates relating to payment of the dividend are:
Last day to trade cum dividend on the JSE
First trading day ex dividend on the JSE
Record date
Payment date
Friday, 4 April 2014
Monday, 7 April 2014
Friday, 11 April 2014
Monday, 14 April 2014
No share certificates may be dematerialised or rematerialised between Monday, 7 April 2014 and Friday,
11 April 2014, both days inclusive. Dividends for certificated shareholders will be transferred electronically to
their bank accounts on payment date. Shareholders who hold dematerialised shares will have their accounts at
their central securities depository participant (CSDP) or broker credited on Monday, 14 April 2014.
106
Additional
information
10709
EXXARO Integrated report 2013 MINING CHARTER SCORECARD 2013
Element
Reporting
Ownership
Description
Measure
Compliance target
2013
Has the company reported the level
of compliance with the charter for
the calendar year
Documentary proof of receipt from
the department
Annually
Minimum target for effective
HDSA ownership
Meaningful economic participation
Full shareholder rights
26% by 2014
26% by 2014
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
Occupancy rate of one
person per room by
2014
Conversion and upgrading of
hostels into family units
Percentage conversion of hostels
into family units
Family units
established by 2014
Progress
Reports submitted annually per mining right to the DMR
52,09%
52,09%
Accommodation
Housing allowance
• Exxaro provides accommodation to 37% of its mine employees
• The number of people sharing accommodation – 0
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
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
Top management (board)
Senior management
Middle management
Junior management
Core skills
HRD expenditure as percentage
of total annual payroll (excluding
mandatory skills development levy)
30%
60%
40%
0,5%
35%
35%
40%
40%
35%
4,5%
49%
58%
62%
0,5%
60%
53%
55%
65%
96%
5,34%
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
Conduct ethnographic community
consultative and collaborative
processes to delineate community
needs analysis
Implement approved community
projects
Up-to-date project
implementation
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 2013 was 0,9% of net profit after tax
Improvement of the industry’s
environmental management
Implement approved environmental
management programmes (EMPs)
100% by 2014
Implementation of approved EMPs: Exxaro assesses performance towards achieving EMPs, monitors environmental
changes and updates EMPs, performs audits, and assesses financial provision. All operations with EMPs are committed to
concurrent rehabilitation, and to closure planning. Programmes are in place to achieve the compliance target by 2014
Human resources
development
Mine community
development
Sustainable
development and
growth
108
Element
Reporting
Description
Measure
Has the company reported the level
Documentary proof of receipt from
Annually
of compliance with the charter for
the department
the calendar year
Ownership
Minimum target for effective
Meaningful economic participation
HDSA ownership
Full shareholder rights
26% by 2014
26% by 2014
Housing and living
Conversion and upgrading of
Percentage reduction of occupancy
Occupancy rate of one
conditions
hostels to attain the occupancy
rate towards 2014 target
person per room by
rate of one person per room
Conversion and upgrading of
Percentage conversion of hostels
Family units
hostels into family units
into family units
established by 2014
Compliance target
2013
2014
30%
60%
40%
35%
35%
40%
40%
35%
4,5%
Procurement and
Procurement spent on BEE entity
Capital goods
enterprise
development
Services
Consumable goods
Multinational suppliers contribution
Annual spend on procurement from
0,5%
to the social fund
multinational suppliers
Employment equity
Diversification of the workplace to
Top management (board)
reflect the country’s demographics
Senior management
to attain competitiveness
Middle management
Junior management
Core skills
HRD expenditure as percentage
of total annual payroll (excluding
mandatory skills development levy)
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
development
consultative and collaborative
projects
processes to delineate community
needs analysis
Progress
Reports submitted annually per mining right to the DMR
52,09%
52,09%
Accommodation
• Exxaro provides accommodation to 37% of its mine employees
• The number of people sharing accommodation – 0
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
49%
58%
62%
0,5%
60%
53%
55%
65%
96%
5,34%
Mine community
Conduct ethnographic community
Implement approved community
Up-to-date project
• Continual engagement with all stakeholders (ie authorities, interested and affected parties) ensures a collaborative
implementation
by 2014
approach in implementing Exxaro’s community projects
• Total spend on socio-economic development in 2013 was 0,9% of net profit after tax
Sustainable
Improvement of the industry’s
Implement approved environmental
100% by 2014
development and
environmental management
management programmes (EMPs)
growth
Implementation of approved EMPs: Exxaro assesses performance towards achieving EMPs, monitors environmental
changes and updates EMPs, performs audits, and assesses financial provision. All operations with EMPs are committed to
concurrent rehabilitation, and to closure planning. Programmes are in place to achieve the compliance target by 2014
109
EXXARO Integrated report 2013 MINING CHARTER SCORECARD 2013
continued
Element
Description
Measure
Sustainable
development and
growth
Improvement of the industry’s mine
health and safety performance
Implementation of tripartite action
plan on health and safety
Compliance target
2013
100% by 2014
Utilisation of South Africa-based
research facilities for analysis
of samples across the mining
value chain
Percentage of samples in South
African facilities
100% by 2014
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
Beneficiation
Contribution towards beneficiation
(effective from 2013)
Added production volume
contributory to local value addition
beyond the baseline
Section 26 of MRPDA
(% above baseline)
110
Progress
Culture transformation:
1 Leadership strategies (programmes implemented)
and evaluated in February 2013
2 Risk management (programmes implemented)
Exxaro has developed safety improvement plans per operation in consultation with stakeholder groups: employees,
unions, Exco, directors and authorities. These plans have five focus areas: leadership, zero tolerance, training for life,
identifying risks and communication. Through collaborative engagement, the implementation of these plans was reviewed
Exxaro rolled out the Global Mining Industry Risk Management Programme training in April 2012. The purpose is to
enhance the way safety risks are identified and managed at operational level. This is aligned with the group-wide enterprise
risk management (ERM) process
3 Bonuses and performance incentives (programmes implemented)
Exxaro has an incentive scheme for operations that meet or maintain their LTIFR against the group target, with annual
payments to employees and contractors
During the business review and budgeting process each year, union leadership is given an opportunity at operational level
to make inputs on how the safety performance incentive can be improved. This policy is currently being reviewed to include
safety leading indicators
4 Leading practices for mining industry (programmes implemented)
To date, two Exxaro operations are 100% compliant with a leading practice standard: Arnot has implemented the netting
and bolting (fall of ground) initiative and Grootegeluk is piloting the proximity detection system initiative.
In addition, the group decided to adopt the Mine Occupational Safety and Health (MOSH) hearing protection device (HPD)
leading practice, with an induction workshop in April 2013. Subsequently, each regional hygiene specialist was tasked with
initiating adoption at their business unit, with the support of the MOSH adoption team
15% of employees, including contractors, completed OHS representative training – a total of 1 245 out of 8 500
Exxaro workforce
Health: 100% of mandatory reports submitted
HIV/Aids: ongoing testing, providing treatment or access to treatment
TB: implementing a management standard aligned with the DMR and Department of Health
laboratories during 2013
Exxaro also funds four tertiary chairs as part of its research-support initiatives
Exxaro embarked on the following initiatives:
1 Established a semi-coke production operation at Lephalale
2 Established a fine coal pelletisation facility at its jointly-owned Mafube coal mine
3 Developing the AlloyStream technology for the production of ferroalloys
4 Performed a feasibility study to evaluate the expansion of the char-based reductant operations at Lephalale
5 Performed a feasibility study to evaluate establishing a coke making operation at Lephalale
6 Performing a feasibility study to develop the Thabametsi mine to supply coal to an independent power producer
7 Investigating and evaluating the potential to beneficiate fine coal at its operations
Element
Description
Measure
Compliance target
2013
Sustainable
Improvement of the industry’s mine
Implementation of tripartite action
100% by 2014
development and
health and safety performance
plan on health and safety
growth
Utilisation of South Africa-based
Percentage of samples in South
100% by 2014
research facilities for analysis
of samples across the mining
value chain
African facilities
Beneficiation
Contribution towards beneficiation
Added production volume
Section 26 of MRPDA
(effective from 2013)
contributory to local value addition
(% above baseline)
beyond the baseline
Progress
Culture transformation:
1 Leadership strategies (programmes implemented)
Exxaro has developed safety improvement plans per operation in consultation with stakeholder groups: employees,
unions, Exco, directors and authorities. These plans have five focus areas: leadership, zero tolerance, training for life,
identifying risks and communication. Through collaborative engagement, the implementation of these plans was reviewed
and evaluated in February 2013
2 Risk management (programmes implemented)
Exxaro rolled out the Global Mining Industry Risk Management Programme training in April 2012. The purpose is to
enhance the way safety risks are identified and managed at operational level. This is aligned with the group-wide enterprise
risk management (ERM) process
3 Bonuses and performance incentives (programmes implemented)
Exxaro has an incentive scheme for operations that meet or maintain their LTIFR against the group target, with annual
payments to employees and contractors
During the business review and budgeting process each year, union leadership is given an opportunity at operational level
to make inputs on how the safety performance incentive can be improved. This policy is currently being reviewed to include
safety leading indicators
4 Leading practices for mining industry (programmes implemented)
To date, two Exxaro operations are 100% compliant with a leading practice standard: Arnot has implemented the netting
and bolting (fall of ground) initiative and Grootegeluk is piloting the proximity detection system initiative.
In addition, the group decided to adopt the Mine Occupational Safety and Health (MOSH) hearing protection device (HPD)
leading practice, with an induction workshop in April 2013. Subsequently, each regional hygiene specialist was tasked with
initiating adoption at their business unit, with the support of the MOSH adoption team
15% of employees, including contractors, completed OHS representative training – a total of 1 245 out of 8 500
Exxaro workforce
Health: 100% of mandatory reports submitted
HIV/Aids: ongoing testing, providing treatment or access to treatment
TB: implementing a management standard aligned with the DMR and Department of 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 2013
Exxaro also funds four tertiary chairs as part of its research-support initiatives
Exxaro embarked on the following initiatives:
1 Established a semi-coke production operation at Lephalale
2 Established a fine coal pelletisation facility at its jointly-owned Mafube coal mine
3 Developing the AlloyStream technology for the production of ferroalloys
4 Performed a feasibility study to evaluate the expansion of the char-based reductant operations at Lephalale
5 Performed a feasibility study to evaluate establishing a coke making operation at Lephalale
6 Performing a feasibility study to develop the Thabametsi mine to supply coal to an independent power producer
7 Investigating and evaluating the potential to beneficiate fine coal at its operations
111
EXXARO Integrated report 2013
NOTICE OF THE 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 13th annual general meeting of shareholders of Exxaro will be held (subject to
any adjournment, postponement or cancellation thereof) at the Exxaro Corporate Centre, Roger Dyason Road,
Pretoria West, South Africa, at 10:00 on Tuesday, 27 May 2014 to consider, and if deemed fit, pass with or without
modification, the resolutions as set out in this notice.
The board of directors of the company has determined, in accordance with section 59(1)(a) and (b) of the
Companies Act No 71 of 2008, as amended (Companies Act), that the record date for shareholders to receive the
notice of the annual general meeting (the notice record date) is Thursday, 17 April 2014 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, 16 May 2014. 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, 9 May 2014.
PRESENTATION OF AUDITED ANNUAL FINANCIAL STATEMENTS
The annual financial statements of the company and the group, including the reports of the directors, group audit
committee and the independent auditors, for the year ended 31 December 2013, will be presented to shareholders
as required in terms of section 30(3)(d) of the Companies Act (abbreviated versions have been included in the
integrated report, with the full annual financial statements available on our website).
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 2013, as
included in the integrated report, will be presented to shareholders as required in terms of regulation 43 of the
Companies Regulations, 2011.
RESOLUTIONS FOR CONSIDERATION AND ADOPTION
1
Ordinary resolution number 1: election and re-election of directors
To elect or re-elect, as the case may be, by separate resolutions the following directors: Dr CJ Fauconnier,
and Messrs NL Sowazi and D Zihlangu. Brief résumés for these directors appear on page 62 to 66 of the
integrated report.
The board of directors has assessed the performance of the directors standing for election and re-election,
as the case may be, and has found them suitable for appointment and reappointment.
Dr CJ Fauconnier, having been appointed by the board of directors since the last annual general meeting
of the company, is, in accordance with the provisions of clause 6.2 of the company’s memorandum of
incorporation, obliged to retire at this annual general meeting and, being eligible, offer himself for election.
Ordinary resolution number 1.1
“ RESOLVED that Dr CJ Fauconnier be and is hereby elected as a director of the company with effect from
27 May 2014.”
Messrs JJ Geldenhuys, NL Sowazi and D Zihlangu are obliged to retire by rotation at this annual general
meeting in accordance with the provisions of clause 6.2 of the company’s memorandum of incorporation.
Having so retired and being eligible, Messrs Sowazi and Zihlangu offer themselves for re-election.
Mr Geldenhuys has not offered himself for re-election.
Ordinary resolution number 1.2
“ RESOLVED that Mr NL Sowazi be and is hereby re-elected as a director of the company with effect from
27 May 2014.”
Ordinary resolution number 1.3
“ RESOLVED that Mr D Zihlangu be and is hereby re-elected as a director of the company with effect from
27 May 2014.”
For each of 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 in respect of each of these resolutions.
112
2 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
election and has found them suitable for appointment. Brief résumés for these directors appear on page 62 to
66 of the integrated report.
Ordinary resolution number 2.1
“ RESOLVED that Dr CJ Fauconnier be and is hereby elected as a member of the group audit committee with
effect from 27 May 2014.”
Ordinary resolution number 2.2
“ RESOLVED that Mr RP Mohring be and is hereby elected as a member of the group audit committee with
effect from 27 May 2014.”
Ordinary resolution number 2.3
“ RESOLVED that Mr J van Rooyen be and is hereby elected as a member of the group audit committee with
effect from 27 May 2014.”
The election of Dr CJ Fauconnier is subject to his election as a director.
For each of 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 in respect of each of these resolutions.
3
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.
The board of directors has assessed the performance of the group social and ethics committee members
standing for election and has found them suitable for appointment. Brief résumés for these directors appear
on page 62 to 66 of this report.
Ordinary resolution number 3.1
“ RESOLVED that Dr CJ Fauconnier be and is hereby elected as a member of the group social and ethics
committee with effect from 27 May 2014.”
Ordinary resolution number 3.2
“ RESOLVED that Mr RP Mohring be and is hereby elected as a member of the group social and ethics
committee with effect from 27 May 2014.”
Ordinary resolution number 3.3
“ RESOLVED that Dr MF Randera be and is hereby elected as a member of the group social and ethics
committee with effect from 27 May 2014.”
The election of Dr CJ Fauconnier is subject to his election as a director.
For each of 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 in respect of each of these resolutions.
113
EXXARO Integrated report 2013
NOTICE OF THE ANNUAL GENERAL MEETING
continued
RESOLUTIONS FOR CONSIDERATION AND ADOPTION (CONTINUED)
4
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, as set out in the remuneration report on page 82 of the integrated report, 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.
5
Ordinary resolution number 5: reappointment of independent external auditors
As set out in the group audit committee report on page 91 of the integrated report, 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 in respect of this resolution.
6
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 (Companies Act), clause 3.1(3) 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 the discretion of the directors until the next annual general meeting of the company.”
At present, the directors have no specific intention to use this authority and the authority 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 in respect of this resolution.
7
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 (Companies Act), and the JSE Listings Requirements, when applicable and with the
following limitations, namely that:
• This authority is valid until the company’s next annual general meeting, provided that it will not extend
beyond 15 (fifteen) months from the date that this authority is given
• 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 aggregate exceed 5% (five percent) of the company’s listed
equity securities as at the date of the notice of annual general meeting, such number being 17 905 775
ordinary shares in the company’s issued share capital (excluding treasury shares)
• Any equity securities issued under the authority during the period contemplated in the first bullet above
must be deducted from such number in the preceding bullet
114
• In the event of a sub-division or consolidation of issued equity securities during the period contemplated
in the first bullet above, the existing authority must be adjusted accordingly to represent the same
allocation ratio
• 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
• 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, and the authority will thus only be
used if circumstances are appropriate.
For this ordinary resolution to be passed, under the JSE Listings Requirements, votes in favour of the
resolution must represent at least 75% of all votes cast and/or exercised at the meeting.
8 Ordinary resolution number 8: authorise director 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 of the resolution must represent at least 50% +1 of all votes
cast and/or exercised at the meeting in respect of this resolution.
9 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 the King Report on Governance for
South Africa 2009 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 (Companies
Act), that the remuneration of non-executive directors for the period 1 January 2014 to 31 December 2014*
and the period 1 January 2015 until the next annual general meeting**, be and is hereby approved on the
basis set out below:
Chairman of the board
Members of the board
Audit committee chairman
Audit committee members
Chairmen of other board committees
Members of other board committees
Social and ethics committee chairman
Social and ethics committee member
Ad hoc meeting fees
Board meeting
Committee meeting
Jan – Dec 2014
Proposed
R
1 253 160
296 083
250 352
132 230
193 943
92 546
96 972
46 273
Jan 2015 – 2015
AGM
Proposed
R
1 353 413
319 770
270 380
142 808
209 458
99 950
104 729
49 975
Current
R
1 062 000
250 917
231 807
122 435
179 576
85 690
89 788
42 845
11 610
8 710
12 539
9 407
13 542
10 160
If this proposed fee is approved, directors will receive back pay on the basis of the increased fee with effect from 1 January 2014.
*
** The rationale for the additional period increase is to align the increase period with the annual general meeting period, instead of the financial year, to eliminate
the need for back pay in future. This will be a once-off adjustment, after which the increase period will align with the AGM period.
115
EXXARO Integrated report 2013
NOTICE OF THE ANNUAL GENERAL MEETING
continued
RESOLUTIONS FOR CONSIDERATION AND ADOPTION (CONTINUED)
9 Special resolution number 1: non-executive directors’ fees (continued)
The proposed 2014 directors’ fees equate to an 18% increase, while committee fees equate to an 8%
increase. The higher-than-normal increase is based on market benchmarking and the company’s overall
remuneration philosophy: post the Jan — Dec 2014 increase, non-executive director fees will equate to 87% of
the comparative market average.
Three years ago it was determined that the chairman’s fees were significantly below the market. Instead of
providing for a material increase in one year, the required increase, to bring him more on par with the market,
has been made over the past three years (including this year). An 18% increase in the 2014 chairman’s fee is
therefore also proposed. The proposed increase is based on market comparison against suitable peers, his
performance, level of involvement and participation in strategic matters, support and guidance provided to
management and his attendance at board committees as an invitee (without receiving member fees).
Post the Jan — Dec 2014 increase, the chairman’s fee will equate to 67% of the comparative market average.
The Jan 2015-2015 AGM increase equates to an 8% increase.
For this resolution to be passed, votes in favour must represent at least 75% of all votes cast and/or exercised
at the meeting in respect of this resolution.
10 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
• 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.
116
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 accounting policies used in the company and group
annual financial statements for the year ended 31 December 2013, will exceed the consolidated liabilities of
the company and the group immediately following such purchase or 12 (twelve) 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 (twelve) months after the date of the notice of the annual general meeting or a
period of 12 (twelve) 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
• The issued share capital and reserves of the company and group will be adequate for the purposes of the
business of the company and group for a period of 12 (twelve) months after the date of the notice of the
annual general meeting of the company
• The company and group will have adequate working capital for ordinary business purposes for a period of
12 (twelve) 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
• 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 in respect of this resolution.
117
EXXARO Integrated report 2013
NOTICE OF THE ANNUAL GENERAL MEETING
continued
RESOLUTIONS FOR CONSIDERATION AND ADOPTION (CONTINUED)
11 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 persons 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
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, is directly or indirectly in the interest of the company
4 The authority granted in terms of this special resolution will remain valid 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 in respect of this resolution.
12 Special resolution number 4: financial assistance to related or inter-related 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
and/or to any 1 (one) or more juristic persons who are members of, or are related to, any such related or
inter-related company, be and is hereby approved, provided that:
The specific recipient/s of such financial assistance
1 (i)
(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, is directly or indirectly in the interests of the company
4 The authority granted in terms of this special resolution will remain valid 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 in respect of this resolution.
118
13 To transact such other business as may be transacted at an annual general meeting
Disclosures required in terms of the JSE Listings Requirements
The following information is provided in accordance with paragraph 11.26 of the JSE Listings Requirements
and relates to special resolution number 2:
Litigation statement
Other than disclosed or accounted for in the annual financial statements, the directors of the company,
whose names appear on page 62 to 66 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 (twelve) months preceding the date of this notice of annual general
meeting.
Directors’ responsibility statement
The directors, whose names appear on page 62 to 66 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 no facts have been omitted that 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, and integrated report,
there have been no material changes in the affairs, financial or trading position of the group since the
signature date of the integrated report.
Further disclosures required in terms of the JSE Listings Requirements are set out in accordance with the
reference pages in the integrated report of which this notice forms part:
• Directors and management — refer to pages 60 to 66
• Major shareholders of the company — refer to page 4
• Directors’ interest in the company’s shares — refer to page 90
• Share capital of the company — refer to page 104.
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 (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.
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 Friday, 23 May 2014.
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.
119
EXXARO Integrated report 2013
NOTICE OF THE ANNUAL GENERAL MEETING
continued
Electronic participation by shareholders
Should any shareholder (or representative or proxy for a shareholder) wish to participate in the annual general
meeting electronically, that shareholder should apply in writing (including details on how the shareholder or
representative (including proxy) can be contacted) to the transfer secretaries, at the address above, to be
received by the transfer secretaries at least seven business days prior to the annual general meeting (thus
Friday, 16 May 2014) 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 if it determines that it is not
practical to do so, or an insufficient number of shareholders (or their representatives or proxies) request to
participate in this manner.
By order of the board
CH Wessels
Group company secretary
Pretoria
31 March 2014
120
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 13th annual general meeting of
shareholders of the company to be held at 10:00 on Tuesday, 27 May 2014, at the Exxaro Corporate Centre, Roger
Dyason Road, Pretoria West, South Africa or at any adjournment or postponement 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 Tuesday, 27 May 2014 at the
Exxaro Corporate Centre, Roger Dyason Road, Pretoria West, South Africa or at any adjournment or postponement
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 elect and re-elect directors
1.1 Election of Dr CJ Fauconnier as a director
1.2 Re-election of Mr NL Sowazi as a director
1.3 Re-election of Mr D Zihlangu as a director
2 Resolution to elect group audit committee members
2.1 Election of Dr CJ Fauconnier as a member of the group
audit committee
2.2 Election of Mr RP Mohring as a member of the group
audit committee
2.3 Election of Mr J van Rooyen as a member of the group
audit committee
121
EXXARO Integrated report 2013
For
Against
Abstain
FORM OF PROXY
continued
3 Resolution to elect group social and ethics committee members
3.1 Election of Dr CJ Fauconnier as a member of the group social
and ethics committee
3.2 Election of Mr RP Mohring as a member of the group social
and ethics committee
3.3 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 by way of a general authority to
issue shares for cash
8 Resolution to authorise director 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
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
Please indicate with an ‘X’ in the appropriate spaces provided above how you wish your vote to be cast. If no
indication is given, the proxy may vote or abstain as he/she sees fit.
Signed at this
day of
2014
Signature
Assisted by me, where applicable (name and signature)
Please read the notes that follow.
122
NOTES OF THE FORM OF PROXY
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:
• Holding ordinary shares in certificated form, or
• Recorded on the subregister in 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 will, 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 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 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.
10 The proxy appointment remains valid only until the end of the annual general meeting or any adjournment
or postponement of the meeting, unless it is revoked in accordance with paragraph 7 prior to the meeting.
123
EXXARO Integrated report 2013 NOTES OF THE FORM OF PROXY
continued
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 Friday, 23 May 2014.
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 Despite 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.
124
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
EOH Legal Services Proprietary Limited
Roger Dyason Road
Pretoria West
0183
SHAREHOLDER DIARY
Financial year-end
Annual general meeting
Reports and accounts published
Announcement of annual results
Annual report
Interim report for the half-year ending 30 June
Distributions
Final dividend declaration
Payment
Interim dividend declaration
Payment
United States ADR Depository
The Bank of New York
101 Barclay Street
New York NY 10286
United States of America
Sponsor
Deutsche Securities (SA) Proprietary
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)
31 December
May
Published
March
April
August
March
April
August
September/October
5 6 2 2
www.exxaro.com