2014
INTEGRATED
REPORT
CONTENTS
Salient features
About this report
Exxaro group
What affects Exxaro’s ability to create value
Exxaro’s operating environment
How we govern and manage the business
Shareholders and stakeholders
STRATEGY
Business philosophy
Our strategy and objectives
Business model and sustainability approach
STRATEGIC PERFORMANCE
Material issues
RISK, COMPLIANCE AND ASSURANCE
Risk and compliance management to ensure Exxaro’s
sustainability
Risk process
Board disclosure and 2014 achievements
Top 10 heat map
Top residual risks over the last three years
Risk matrix
Combined assurance
Issue tracking management tool
Snapshot of 2014
PERFORMANCE
Chairman’s message
Chief executive officer’s message
Finance director’s review
Our asset base
Operational performance
Outlook
MINERAL RESOURCES AND RESERVES
CORPORATE GOVERNANCE
Executive committee
Directorate
Governance overview
Audit committee report
Social and ethics committee report
Sustainability, risk and compliance committee report
Remuneration and nomination committee report
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, we have integrated all the
elements of our business and aligned this
report with the international integrated
reporting framework. 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 approved the content
of the integrated report and accompanying
statutory information (mailed to shareholders)
prior to publication.
Len Konar
Chairman
9 April 2015
Sipho Nkosi
Chief executive officer
CERTIFICATE BY GROUP
COMPANY SECRETARY
for the year ended 31 December 2014
In terms of section 88(2)(e) of the Companies
Act 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, for the year ended
31 December 2014, Exxaro Resources Limited
(Exxaro) has filed with the Companies and
Intellectual Property Commission all such
returns and notices as 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.
1
2
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9
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14
15
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27
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29
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31
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49
52
58
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65
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81
SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS 91
ADMINISTRATION
IBC
Carina Wessels
Group company secretary
Pretoria
9 April 2015
READ MORE>
Further details on noted page or a specific
report in the 2014 suite of reports.
SALIENT FEATURES
Regrettably one fatality, lost-time injury frequency rate
maintained at 0,19 – 27% below coal industry average
Coal production volumes of 39,1Mt up 1%
Coal exports of 5,3Mt up 19%
Headline earnings per share (HEPS) of 1 372 cents,
down 6%
Total dividend of 470 cents per share, down 15%
EXXARO INTEGRATED REPORT 2014
1
PERFORMANCE SNAPSHOT201420132012*20112010200920082007LTIFR (per 200 000 hours worked) – target in brackets0,19 (0,15)0,19 (0,15)0,29 (0,15)0,20 (0,21)0,22 (0,21)0,25 (0,21)0,39 (0,21)0,36 (0,21)Fatalities (number)10231345Coal production (Mt)39,138,941,042,045,845,344,841,3Revenue (Rbn)16,413,616,121,017,215,015,010,2Net operating profit/(loss) (Rbn)(3,3)3,67,64,12,60,32,51,4Total dividend received (Rbn)3,73,23,43,51,81,81,00,4Total post-tax equity accounted income (Rbn)2,53,63,64,73,71,91,70,7Exxaro dividend declared (cps)470550500800500200375160Headline earnings (cps)1 3721 4631 4012 0981 4957291 058425 Red figures (worst). Bold figures (best).* Divested mineral sands business. ABOUT THIS REPORT
This integrated report should
be read with the comprehensive
supplementary information and
mineral resources and reserves
statement on this website. In
addition, the notice of annual
general meeting, form of proxy
and summarised financial
statements were mailed to
shareholders as per statutory
requirements.
Exxaro produces an integrated
report each year, covering our
economic, governance, social and
environmental performance as well
as the challenges and opportunities
ahead for a group-wide
understanding. This report (only
available online) covers the financial
year to 31 December 2014, as well as
key subsequent developments, and
follows the 2013 report.
In line with our corporate value
of honest responsibility, this
report reflects our commitment
to sustainable development and
determination to entrench global
safety and sustainability best
practices in all operations. It also
reflects maturing processes in terms
of our reporting and confidence
in our ability to set and measure
progress towards targets, as
disclosed on page 22 (performance
dashboard). For the first time, we
disclose key performance indicators
across the five sustainability
capitals, with targets and actual
performance, for an informed
evaluation of our progress. The
sixth capital – intellectual – will be
included from 2015.
Content is guided by our strategic
objectives (page 17), legislative and
regulatory requirements, including
the Companies Act 71 of 2008, as
amended (Companies Act), and
the Listings Requirements of the
JSE Limited, as well as global best-
practice standards, including the
International Integrated Reporting
Committee’s framework for
integrated reporting, United Nations
Global Compact, Global Reporting
Initiative (GRI) and the King Report
on Governance for South Africa
2009 (King III).
2
Summarised (this report) and
complete (website) group annual
financial statements are prepared
according to International Financial
Reporting Standards.
Materiality is determined by careful
analysis of our risks, strategic
goals and ongoing consultation
with stakeholders. The top risks
facing our group are summarised on
page 22, quantified on page 32, and
detailed throughout the report.
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 year to 31 December 2014 post
the end-March 2015 deadline on its
website. Mining right performance
against the scorecard is disclosed in
this report.
This report, produced in English, has
been prepared in accordance with
the GRI’s ‘core’ application level,
and the detailed GRI G4 index is on
this website. The supplementary
report 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.
Each year, key indicators are
selected for external assurance.
Where possible, we present
comparable information for trend
analysis. Corporate activity since
Exxaro’s inception makes data
comparability challenging in some
areas; this is explained where it will
aid understanding.
This report includes data for our
Mayoko (Republic of the Congo)
project. It also includes limited
information on operations where we
do not have management control
but have a significant equity interest
or joint control, namely Cennergi
(energy), Sishen Iron Ore Company
(iron ore) and Tronox Limited
(titanium dioxide).
Disclaimer
Opinions expressed in this
report are, by nature, subject
to known and unknown risks
and uncertainties. Changing
information or circumstances
may cause Exxaro’s actual
results, plans and objectives
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.
The company and its affiliates,
advisors or representatives
accept no responsibility for
loss arising from the use of
any opinion, forecast or data
in this report. Forward-looking
statements apply only from
the date on which they are
made and the company does
not undertake any obligation
to publicly update or revise
its opinions or forward-
looking statements to reflect
new data or future events or
circumstances. The financial
information on which the
forward-looking statements
are based has not been audited
nor reported on by Exxaro’s
independent external auditors.
Ongoing feedback from a range
of stakeholders h elps us to
contextualise certain issues
better for more informed
understanding by readers.
We welcome your suggestions,
which should be directed to:
Hanno Olinger
Manager: Sustainability
Tel: +27 12 307 3359
Fax: +27 12 307 5327
Mobile: +27 83 609 1094
Email: hanno.olinger@exxaro.com
Web: www.exxaro.com
EXXARO INTEGRATED REPORT 2014 EXXARO GROUP
OUR HERITAGE AND TRACK RECORD
Iscor
1928
• Iscor
established
Eyesizwe
Kumba Resources
Exxaro Resources
1999
2001
2006
2014
• Eyesizwe
Holdings
founded and
successfully bid
for Anglo/Ingwe
“Newco” to
create Eyesizwe
Coal
• Iscor unbundled
• Iron ore, coal,
mineral sands,
base metals
and industrial
metals divisions
listed as Kumba
Resources
• Kumba
Resources
unbundled
• Kumba Iron Ore
lists separately
• Kumba’s coal
and other
assets merged
with Eyesizwe
Coal to create
Exxaro
• Exxaro
Resources
consisting of:
– Coal
operations
– Strategic
investments
(page 5)
• From state-owned to JSE-listed, broad-based black-owned and managed
• Developed and established based on principles of transformation in South Africa
• Evidence of sustainability (adaptation + growth) in a changing environment
AWARDS AND ACCOLADES
Ethical Boardroom magazine
Exxaro received the best corporate governance award in the mining category,
Africa region, for 2015.
Nkonki Top 100 Integrated Reporting
Awards 2014
Exxaro was the overall winner in 2014, first in the basic metals industry category
and received an excellence award.
EY Excellence in Integrated Reporting
2014
RobecoSAM 2015 Sustainability
Yearbook
Exxaro was among the top 10. These prestigious awards recognise companies
that are emerging as leaders in this area as well as trends and best practice in
integrated reporting. This award evaluates the top 100 JSE-listed companies by
market capitalisation.
Exxaro received a bronze medal (for companies whose score is within 5% to 10%
of the industry leader) and featured in the 2015 yearbook, one of only six South
African companies recognised in this foremost reference guide on the world’s
leading companies based on their financially material ESG (environmental,
social and governance) performance. RobecoSAM also publishes the globally
recognised Dow Jones Sustainability Indices (DJSI).
Top Employers Institute
Ranked as top employer in the South African mining industry 2014 by this
international group.
Universum IDEAL™ Employer Rankings
survey
Exxaro earned a top 10 placing in the sciences category of this annual survey of
South African students and young professionals. Over 33 000 students at South
Africa’s 23 accredited tertiary institutions and some 10 000 young professionals
were surveyed about their ideal employer in four categories: business,
engineering, sciences and humanities.
EXXARO INTEGRATED REPORT 2014
3
EXXARO GROUP
(continued)
Exxaro is one of the
largest South Africa-based
diversified resources
groups. It is listed on the
JSE Limited where it is a
constituent of the Socially
Responsible Investment
(SRI) index and for most
of 2014 was a constituent
of the Top 40 Index. The
group’s current business
interests span South Africa,
Botswana, Republic of the
Congo and Australia.
At present, Exxaro produces over
39 million tonnes of coal per annum
(Mtpa). Completed expansion at
our flagship Grootegeluk mine will
increase this significantly.
At 31 December 2014, Exxaro
had assets of R47,4 billion and a
market capitalisation of R37,1 billion
(US$3,2 billion). Although just eight
years old, Exxaro’s pedigree and
skills were built over decades as
a company rooted in South Africa
and respected by 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.
4
EXXARO INTEGRATED REPORT 2014
GROUP STRUCTURE
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 Kopane
Investments
Proprietary Limited1
11,22%
Main Street 333
Proprietary Limited
(BEE Holdco)
52,09%
Anglo American plc2
9,70%
Exxaro
Mpower
0,81%
Minorities
(free float)
35,37%
Other non-public
shareholders
2,03%
COAL
FERROUS
• Two tied and four
commercial operations
• Ramp-up of
Grootegeluk Medupi
expansion project
• Mayoko project
• FerroAlloys
NON-CONTROLLED
OPERATIONS
• Sishen Iron Ore Company
(19,98%)
• Tronox (43,98%)
• Black Mountain (26%)
• Joint ventures (50:50)
- Mafube (Anglo)
- Cennergi (Tata Power)
1 Special purpose vehicle for shareholders in Main Street 333 Proprietary Limited.
2 Held through Anglo South Africa Capital Proprietary Limited.
EXXARO INTEGRATED REPORT 2014
5
COAL
• Six managed coal mines
39Mtpa of power station, steam
and coking coal. Most power
station coal is supplied to the
national power utility, Eskom
• Semi-coke and related products
for the growing ferroalloys
industry
• Grootegeluk is one of the most
efficient mining operations in
the world, and runs 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
• Robust pipeline of greenfield and
expansion projects:
– By 2017, the R3,8 billion
Belfast mine is scheduled to be
commissioned. At full capacity
the mine will deliver around
2,2Mtpa of export steam coal
and 500ktpa of power station
coal
– Phase 1 of a bankable feasibility
study for the opencast
Thabametsi began in 2014
with construction planned for
2016. This will coincide with the
development of GDF SUEZ’s
power station project (see non-
controlled operations).
EXXARO GROUP
(continued)
Tshikondeni*
Grootegeluk
Limpopo
FerroAlloys
Corporate
office
North Block Complex
Inyanda*
Leeuwpan
New Clydesdale#
Matla
Arnot
Mpumalanga
North West
Gauteng
* In closure.
# Care-and-maintenance.
READ MORE>
Page 52
6
EXXARO INTEGRATED REPORT 2014 FERROUS
NON-CONTROLLED OPERATIONS
• Due to low iron ore prices, high
project development costs and
delays in concluding definitive
port and rail agreements for the
Mayoko project in the Republic of
the Congo (RoC), the investment
in this iron ore project – a total
impact of R5,8 billion – was
impaired (page 42). Exxaro is
actively liaising with the RoC
government to conclude these
agreements before deciding on
future prefeasibility studies
• Exxaro FerroAlloys produces gas-
atomised ferrosilicon for use in
dense medium separation plants.
Under an approved expansion
programme, commissioning of
the new ferrosilicon plant was
completed in November 2014.
• Mafube – 50/50% joint venture
with Anglo American
• We intend to divest from our
remaining base metals portfolio
(interests in Chifeng zinc refinery
in Inner Mongolia and Black
Mountain in South Africa). If we
divest from Black Mountain, we
will do so without disadvantaging
its empowerment status
• Exxaro has a coal supply and
offtake agreement for a 600MW
coal-fired power plant to be
developed in Limpopo with
France’s GDF SUEZ, a global
leader in independent power
production, and other partners
• Exxaro and Linc Energy Limited
were developing energy solutions
through underground coal
gasification in sub-Saharan Africa.
Due to the current economic
environment and expected
capital expenditure requirements,
Exxaro has decided not to develop
the project in 2015. This project
will be reviewed when markets
improve.
• Exxaro holds 20% of Sishen Iron
Ore Company in the listed Kumba
Iron Ore Limited group, a leading
supplier of high-quality iron ore to
the global steel industry
• In titanium dioxide, Exxaro holds
a 26% direct interest in each of
KZN Sands and Namakwa Sands,
as well as 43,98% of US-listed
Tronox Limited, the world’s
largest fully integrated producer
of titanium ore and titanium
dioxide. Tronox owns the balance
in KZN Sands and Namakwa Sands
as well as other titanium dioxide
interests outside South Africa
• By participating in renewable
energy initiatives, we ensure that
we contribute significantly to the
national energy supply and reduce
our carbon footprint. Cennergi
Proprietary Limited, our joint
venture with Tata Power, has two
wind projects under way in the
Eastern Cape. These are on track
and in line with budget:
– Amakhala Emoyeni near
Bedford (139MW) – completion
planned for mid-2016, with
commercial operation in the
third quarter of 2016
– Tsitsikamma Community wind
farm on Mfengu community
land (95MW) – construction
scheduled for completion
in the final quarter of 2015,
with commercial operation
beginning in 2016
– As part of each wind farm,
Cennergi and its partners
have developed detailed
and consultative plans for
community development
EXXARO INTEGRATED REPORT 2014
7
EXXARO GROUP
(continued)
ADDING BROAD-BASED STAKEHOLDER VALUE
R88m
Community
investment
VALUE
DISTRIBUTED IN
->2014 – R7,6bn
R1 387m
Payment to
shareholders
R57m
Community
investment
VALUE
DISTRIBUTED IN
->2013 – R6,4bn
R2 055m
Payment to
shareholders
R307m
Payments
to providers
of finance
R1 141m
Taxes and
royalties
R3 232m
Salaries,
wages and
benefits
R262m
Payments
to providers
of finance
R918m
Taxes and
royalties
R3 045m
Salaries, wages
and benefits
R803m
Employees’ tax
R706m
Employees’ tax
Mpower distribution
Mpower (2007-2011)
Mpower 2012 (2012-2014)
Rm
1831
49
Total distributions since inception
232
1
1 As a result of unwinding the first Mpower scheme,
this includes a capital distribution of R101 million to
beneficiary employees.
We are proud of exceeding
compliance targets for the mining
charter (supplementary report) and
remain committed to empowering
and developing our people. In
2014, Exxaro spent R221 million
on training and developing its
people to:
• Develop scarce technically skilled
people through our talent pipeline
and feeder scheme (business and
country benefit)
• Create an available stream of
core and key skills as well as
scarce skills to enable operations
to meet their business targets
in supporting our strategy
and growth, and to comply
with legislation (business and
employee benefit)
• Achieve our goal of filling 75% of
positions internally (business and
employee benefit)
• Satisfy operational and
compliance requirements by
ensuring competent job-related
operational and technical training
(business and employee benefit)
• Develop 700 employees in
management programmes,
leadership programmes and
postgraduate studies (business
and employee benefit).
8
8
EXXARO INTEGRATED REPORT 2014
VALUE ADDED TO STAKEHOLDERS
R13 billion in value was generated in
2014 and R7,6 billion distributed:
• R3,2 billion as salaries, wages,
up 6%
• R1,9 billion tax including value-
added tax (VAT) and royalty
payments, up 20%
• R2 billion returned to
shareholders, up 48%
• R88 million in corporate social
investment initiatives, up 54%
• Payments to providers of finance
of R307 million, up 17%
We also reinvested cash generated
into sustaining capex and the overall
development of our operations.
Mpower 2012 distributed R23 million
(2013: R16 million) to beneficiary
employees. Of this, R14 million
(2013: R11 million) was for dividends
and R9 million (2013: R5 million) was
for distributions to good leavers.
EXXARO INTEGRATED REPORT 2014
WHAT AFFECTS EXXARO’S ABILITY TO CREATE VALUE
EXXARO’S OPERATING ENVIRONMENT
Macro environment
In 2014, the world economy remained characterised by modest and uneven growth. While expansion in the US and UK
continued, China’s economy slowed further, euro-zone economic growth remained sluggish and Japan has again been
in recession. Significantly lower oil prices and more supportive initiatives from key central banks are expected to boost
global real GDP growth to the elusive 3% level in 2015, last achieved in 2009.
SA MINING MARKET
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• Subdued economic growth
• Slow eradication of poverty,
unemployment and inequality
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Exxaro’s sustainability and response to its operating environment are guided by its philosophy as shown above.
We pursue our strategic goals through leadership that creates shared value and alignment between the company’s
vision and values, its strategy as well as the needs and expectations of its stakeholders. See page 16 for more details.
EXXARO INTEGRATED REPORT 2014
EXXARO INTEGRATED REPORT 2014
9
9
WHAT AFFECTS EXXARO’S ABILITY TO CREATE VALUE
(continued)
US economic growth contracted
significantly in the first half of 2014,
mainly due to adverse weather
conditions; however, economic
activity bounced back in the second
half to an annual real growth rate
of 2,4%. The Federal Reserve’s
quantitative easing (QE) programme
ended on 28 October 2014 with the
much-anticipated normalisation of
interest rates expected to start in
2015. US dollar strength is projected
to continue into 2015, mainly on
expected US economic growth of
at least 3%, interest rate increases
and significantly lower commodity
prices.
Chinese economic growth
decelerated from 7,7% in 2013 to
7,4% in 2014 with the construction
sector one of the most affected.
In 2015, further deceleration is
expected in response to headwinds
from a debt bubble, excess industrial
capacity and unstable external
demand. The Chinese government
is in a balancing act of trying to
squeeze out some of the excesses of
debt-fuelled property and industrial
capacity expansion, without
precipitating any potential hard
landing. As a result, real GDP growth
is expected to slow to under 7% in
2015. Anything significantly lower
than 6,5% would probably trigger
additional monetary and fiscal
stimulus.
In 2014, Japan recorded its fourth
recession in six years. Consumption
tax was increased in April from
5% to 8%, contributing to some
volatility in the second and third
quarters of 2014. Weak capital
spending and a sharper-than-
expected inventory destocking
contributed to the setback during
the second consecutive quarter
of contraction. As a result,
implementation of the second
proposed consumption tax increase
from 8% to 10% has been postponed
from October 2015 to April 2017.
A modest recovery in economic
growth, very much dependent on the
Bank of Japan’s monetary easing
programme, is likely in 2015, from
0,2% in 2014 to about 1,0% in 2015.
Euro-zone economic growth of
0,9% in 2014 was disappointing
and anticipated to edge up slightly
10
to a lacklustre 1,5% in 2015. While
the euro zone still has serious
challenges, the beneficial impact
of sustained low oil prices, a
markedly weaker euro exchange
rate, increasingly accommodative
monetary policy and low inflation
should gradually support the
economic growth outlook in 2015.
In 2014, the economies of some
emerging markets deteriorated
further, mainly reflected in
downward pressure on their
respective currencies. The 2015
outlook for key emerging economies
remains divergent because of
underlying dynamics and differential
impacts of falling prices for
energy, food and other primary
commodities. The economic woes
of Russia and Brazil will continue
into 2015, while growth prospects
for India, Indonesia, the Philippines,
Kenya, Morocco and Poland are
positive. As a result, the aggregate
GDP for emerging markets is
expected to decelerate for the fifth
consecutive year to 4,0% in 2015
from 4,4% in 2014.
South Africa’s economic growth
outlook remains subject to a
number of headwinds – prolonged
strikes, frequent electricity supply
disruptions, low business and
consumer confidence, higher
consumer debt levels and a fragile
global economic backdrop. As a
result, real GDP contracted (-0,6%)
in the first quarter of 2014 before
turning slightly positive for the rest
of the year to record an annual
growth rate of about 1,4%. A slightly
better GDP growth rate of around
2,0% is expected for 2015.
South Africa’s average annual
consumer price index (CPI)
increased to 6,1% in 2014, from 5,7%
in 2013. The 2015 rate is expected to
be significantly lower at about 5%,
mainly reflecting the impact of the
much lower anticipated Brent crude
oil price.
In December 2014, the rand
exchange rate weakened to its low
for the year – ZAR11,70/US$1,00.
US dollar strength, combined with
a wide current-account deficit and
negative real interest rate levels,
added to the currency’s woes. In
turn, the steady accumulation of
reserves, underpinning foreign-
investor interest and any upward-
trending commodity prices (not the
anticipated base case this year) as
global growth gradually increases,
have the potential to strengthen
the rand. However, a sustained
strengthening of the rand remains
highly unlikely, given the challenging
global economic and political
environment which makes the local
economy vulnerable to capital flow
volatility. Against these ongoing
developments, an average of around
ZAR11,67 to the US dollar is forecast
for 2015.
Commodity review
Mineral commodity demand growth
remained lacklustre in 2014, with
supply growth recorded in most
commodity markets, and the net
result being trading deep into
respective cost curves. Towards the
end of 2014, US dollar strength and
falling oil prices lowered production
cost and market-clearing prices
across commodity producers. In an
attempt to rebalance fundamentals,
producers continue to cut both
growth and sustaining capital.
Against this background, unless
weather or geopolitical risk events
unfold, 2015 is highly unlikely to
show any fundamental improvement
over 2014 for most commodities.
Iron ore
Estimates are that global crude
steel production rose by about 1,2%
in 2014 to 1 662Mt. In China, crude
steel production expanded by only
0,9% from 2013 to some 823Mt.
China’s share of world production
declined marginally from 49,7% in
2013 to 49,5% in 2014. Output in
North America increased by 2,0%
while Europe declined by 0,1%.
Global crude steel production is
expected to continue edging up
in 2015, with output improving
by a projected 3%, in line with
anticipated consumption growth.
China, Europe and Japan are all
expected to record crude steel
production growth of between 2%
and 3% in 2015.
EXXARO INTEGRATED REPORT 2014 3
9
0
8
2
7
0
6
6
3
1
9
2
1
7
9
3
5
4
7
,
5
6
,
4
4
,
,
0
4
0
3
,
4
2
,
0
3
,
,
7
2
0
2
,
4
,
1
USA
China
Emerging
markets
South
Africa
World
2013
2014
2012
2013
2014
2015
2012
2013
2014
2015
GDP growth rates (%)
Iron ore prices (ave US$/t)
RBCT steam coal prices (ave US$/t)
The iron ore fine spot price declined
by 47,2% from January 2014 to
December 2014, reaching US$67/t
(cost and freight (CFR) China) in
December 2014 – levels last seen
in 2009. This was a direct result
of both strong supply growth and
weak demand growth. Despite weak
demand growth in 2014, the majors
(BHP Billiton, Rio Tinto, FMG and
Vale) forged ahead with their initial
plans and added a massive 134Mt to
the market. Iron ore fine spot prices
dropped to an average of US$74/t
CFR China in the last quarter of 2014,
frequently breaking through the
US$70/t level. Seasonal restocking
efforts have not materialised, given
the cautious mood and additional
supply pipeline for 2015. As a result,
the 2014 average CFR China fine
ore spot (62% Fe) price was US$97/
tonne. Further new low-cost iron ore
capacity – another 95Mt from majors
– is expected to enter the market in
2015, causing much lower average
prices compared to 2014, at around
US$53/t CFR China. The industry has
been very responsive to lower prices
(albeit with a lag), with production
displacements continuing,
fundamentally supporting the
expected rebalancing in the medium
to long term.
Coal
The global coal sector had a very
challenging 2014. Prices for both
thermal and metallurgical coal
declined steadily throughout
the year. Lower-than-anticipated
demand, particularly in China,
combined with stubborn supply
generated the weakest market
conditions since 2009. Many
producers in key producing
countries such as Australia and
Indonesia continued to operate at
a loss; others, primarily in North
America, took the difficult decision
to close assets.
In contrast, depreciating local
currencies against the US dollar
supported the competitiveness of
some key exporting operations, such
as in Russia. The benefits of lower
oil prices on mining, transport and
freight costs have already enabled
thermal coal prices to soften in early
2015. Combined with persistently
sluggish Chinese demand, from both
macro-economic conditions and
policy-specific cuts, 2015 promises
to be no different than 2014 –
another challenging year for the
coal trade.
In 2015, the metallurgical coal
contract price is expected to
average US$112/t free on board
(FOB) Australia and spot steam coal
(6 000kcal/kg) at around US$60/t
FOB Richards Bay.
Mineral sands
Calendar 2014 has been a mixed
bag for the titanium value
chain – titanium dioxide (TiO2)
pigment producers have reduced
inventories, demand has not
picked up to sustainable levels and
market conditions for feedstock
producers remain tough. In 2014,
prices for both feedstocks and
TiO2 pigment weakened further
from 2013 averages. Any hopes of
a price recovery in 2014 faded in
the third quarter, after it became
apparent that sufficient capacity
and inventory existed to supply
the market. Market conditions for
TiO2 pigment and feedstocks are
expected to be similar in 2015.
In 2014, the zircon market adjusted
to new lower levels of demand,
following a cycle of rapid price
increases from 2011 to mid-2012,
with current significant idled
capacity limiting any potential price
recovery in 2015. As a result, the
2015 outlook for zircon pricing and
demand remains flat, with limited
downside risk.
EXXARO INTEGRATED REPORT 2014
11
WHAT AFFECTS EXXARO’S ABILITY TO CREATE VALUE
(continued)
How we govern and manage
the business
The diagram presents a holistic view
of our governance structures and
processes and the value added by
each. The key filter applied to this
framework is materiality: the more
material the issue to our strategy,
the higher it is elevated up the
governance structure. Less material
or operational issues are handled
through business unit or commodity
structures.
Key governance-related
developments in 2014 included:
• An item that has been identified
as a deficiency in the past two
years (the board setting the
risk tolerance levels) was fully
addressed in 2014, culminating
in the integrated strategic
dashboard (a leading example of
integrated business practices)
• Significant changes in the
JSE Listings Requirements
had necessitated a review of
processes and policies: these
changes have generally been very
favourably received by business
as it aimed to simplify and
streamline many requirements
• During the year, it was announced
that the drafting process of
King IV has begun. We are
pleased that our chairman and
group company secretary will be
involved in the process
• Ethical Boardroom award –
recognising the impact and
success of the governance
strategy approved in 2011 and
implemented over the past three
years
• Implementing a bespoke anti-
bribery and corruption policy with
extensive training, and further
enhancing ethics management
processes.
12
12
EXXARO INTEGRATED REPORT 2014
EXXARO INTEGRATED REPORT 2014 SHAREHOLDERS AND STAKEHOLDERS
BOARD OF DIRECTORS
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
Independent oversight on matters in the remuneration and sustainability, risk and compliance 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.
AUDIT
COMMITTEE
REMUNERATION AND
NOMINATION COMMITTEE
SUSTAINABILITY, RISK AND
COMPLIANCE COMMITTEE
STRATEGIC
Assesses, questions and
ensures the company’s
financial sustainability,
and provides oversight
over IT governance.
Ensures optimal remuneration
structures to attract, retain and
motivate world-class employees
who will enable and support the
business strategy, and assists
the board to identify and source
appropriately skilled directors who
can individually and collectively add
value to the board.
Critically assesses all sustainability,
risk and compliance key
performance indicators, discipline
strategies and performance,
and reviews SHE incidents,
thus assisting the board and
management to enable safe,
sustainable and legally compliant
business practices.
EXECUTIVE/SENIOR MANAGEMENT
INFORMATION MANAGEMENT
STEERING COMMITTEE
Ensures IT is well governed,
and enables and supports the
company’s overall objectives at an
acceptable cost.
EXECUTIVE COMMITTEE
Assists the CEO in managing the
business to enable and ensure the
company achieves its strategies
and objectives.
ETHICS COMMITTEE
Investigates
all claims of unethical
behaviour and recommends
appropriate action.
PORTFOLIO REVIEW COMMITTEE
Tests new strategies and
initiatives against the company’s
mission and vision prior to further
action/changes in strategy being
recommended to the board.
INVESTMENT REVIEW COMMITTEE
Interrogates all capital projects
above the executive heads’
mandate against financial,
technical and strategic metrics
prior to action.
OFFSHORE REVIEW COMMITTEE
Ensures effective management
and tax efficiency, and ensures
local legislative compliance of the
company’s offshore and financing
structures.
Commodity, business unit, functional discipline, departmental and
project committees and forums
OPERATIONAL/TACTICAL
EXXARO INTEGRATED REPORT 2014
EXXARO INTEGRATED REPORT 2014
1313
WHAT AFFECTS EXXARO’S ABILITY TO CREATE VALUE
(continued)
Stakeholder engagement
Please refer to detailed disclosure in
our supplementary report
At Exxaro, building long-
term, stable and mutually
beneficial relationships
with our stakeholders is a
business imperative because it
establishes the context within
which we can conduct successful
business activities and create
value for stakeholders.
We have adopted the AccountAbility
AA1000SES stakeholder
engagement standard to guide
the development of associated
capabilities and activities in
the company. This provides the
basis for a generally applicable,
open-source framework for
designing, implementing, assessing
and communicating quality
of stakeholder engagement.
In addition, we are also guided
by the:
• King report on governance for
South Africa 2009 (King III)
• Global Reporting Initiative
guidelines
• Companies Act 71 of 2008
amended
• IIRC reporting framework.
A range of stakeholder engagement
interventions took place in 2014:
• Employees – CEO, executive
members and senior management
conducted roadshows to business
units to engage directly with
employees on issues arising
from the strike in the first half
of 2013. The sessions form part
of a programme that started in
2013 to provide a forum for frank
discussions. The result is that
Exxaro’s leaders and employees
reach mutual understanding
on key issues and expectations
relating to the company’s
responsibilities versus employee
responsibilities.
• Local and regional government –
senior management, led by the
CEO, engaged with provincial
and government leaders
about regulatory and local
developmental issues. Key to
these discussions was the role of
Exxaro as a mining company in
contributing to socio-economic
and environmental development
in the region.
• Government – management
interacts regularly with
government counterparts in
key areas including safety,
labour, health and hygiene,
environmental management and
authorisations. The content of
engagement includes legislative
compliance and inputs to local
and regional development plans.
• Engagements through industry
bodies, such as the Chamber of
Mines of South Africa, Business
Leadership South Africa and
Business Unity South Africa,
with government on sector and
general economic conditions
including industrial relations,
electricity supply and security,
legislation and other business
conditions in South Africa.
• Exxaro participated in various
forums established by the
Limpopo provincial government
as well as bilateral engagements
with the premier. Meetings with
the Mpumalanga government are
scheduled for 2015.
• There are a myriad of
interventions between the
company and communities
surrounding our operations.
These include rolling out social
and labour plans and initiatives
on education, small business
development and broader socio-
economic development.
• Emerging issues include
the increasing demand by
communities for an equity stake
in Exxaro, for more investments
to be made in community
development beyond current
budgeted amounts, and for
adequate service provisioning
from local authorities.
14
EXXARO INTEGRATED REPORT 2014 01 STRATEGY
EXXARO INTEGRATED REPORT 2014
15
STRATEGY (continued)
Our strategy is central to our philosophy, and complemented by our vision, mission and values.
Equally, our strategy is reinforced by recognising the significance of stakeholder engagement in
creating an enabling environment for our business to succeed.
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BUSINESS
PHILOSOPHY
Our business philosophy
acknowledges that we exist
within a particular context.
It describes the links between
our belief of who we are and
why we exist, our vision for
the business and society, and
how we will achieve our mission
through our business strategy.
Our sustainability is founded on
creative, mutually constructive
relationships and common
values with our stakeholders and
conducting our business activities
in a way that creates success for
Exxaro and society. By virtue of our
existence and prosperity, we strive
to make our society a better place
to live in.
READ MORE>
Page 22
16
16
EXXARO INTEGRATED REPORT 2014
EXXARO INTEGRATED REPORT 2014
OUR STRATEGY
AND OBJECTIVES
Vision
To be a powerful source of
endless possibilities (reason
for being).
Mission
Create value for our
stakeholders through innovation
and passion.
Values
The values that will guide us in
our mission are:
• Empowered 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.
Invest
• Our capital expenditure
programme was dominated by
the coal business, a trend we
foresee continuing over the next
three years. Sustaining capex
was up 36% compared to 2013
due primarily to a growing truck
replacement programme for the
Grootegeluk mine. Investment
in coal expansion programmes
included capex of R929 million for
additional export volumes from
Grootegeluk and completion of
a bankable feasibility study for
Belfast in Mpumalanga.
Develop
• The development of the
Grootegeluk Medupi expansion
project (GMEP) was concluded
during the year and the project
handed over to operations to
start delivering on its supply
agreement with Eskom’s Medupi
power station. Addendum 9 to
the supply agreement was also
concluded in the second half
of the year and a total of 3,1Mt
delivered in accordance with the
contract
• Further developments to the
Mayoko project were stopped
following the impairment of the
project in June 2014. Further
investment development will
depend on the iron ore market
conditions and development of
rail-port infrastructure by the
RoC government
• We are pleased with the
commencement of the two wind
farms for 239MW of renewable
energy through Cennergi, the
50/50 JV with Tata Power.
Grow
• The future growth of Exxaro will
be driven by the coal business as
determined by the capex programme
for the next three years. Firstly, we
anticipate growth from Grootegeluk
as we ramp up to meet the demand
from Medupi power station, which
will reach a steady state of 14,6Mt in
2018 based on addendum 9.
The Belfast project will provide
further growth tonnage (2,7Mtpa)
largely destined for export (2,2Mt).
The latter end of this three-year
outlook will see the beginning of
the development of Thabametsi to
supply the power station to be built in
terms of the Department of Energy’s
coal IPP programme.
H U MAN
ACHIEVE
OPERATIONAL &
FINANCIAL EXCELLENCE
S
O
C
I
A
L
L
A
R
U
T
A
N
IMPROVE
EXXARO’S
PORTFOLIO
DEMONSTRATE
RESPONSIBILITY &
ACCOUNTABILITY
D
U F A CTURE
N
A
M
DEVELOP EXXARO’S
LEADERSHIP
AND PEOPLE
FIN
A
NCIAL
Our aim is to provide sustainable returns to shareholders and the countries
in which we operate by being a world-class operator of a portfolio of assets,
primarily in Africa, that are underpinned by growing global infrastructure
and energy demand. This aspiration will be guided by our strategic objectives
detailed above.
Our strategy is dynamic – anticipating and responding to external and internal
elements – and we have proven our ability to deliver as summarised below
and detailed in the relevant sections.
In determining the path to our own strategic sustainability, we use a
structured, tiered approach to understand the components that drive our
sustainability and the cross-functional nature of the reporting process –
culminating in the integrated report.
EXXARO INTEGRATED REPORT 2014
EXXARO INTEGRATED REPORT 2014
17
17
STRATEGY (continued)
BUSINESS MODEL
The Exxaro business model is based
on a resource-to-market value
chain that involves the company
seeking investment opportunities
in energy, metals and minerals
resources for development into
products for designated markets
and customers. We seek sustainable
growth, through both organic and
acquisitive opportunities and in
strategically selected geographies,
by applying our own capabilities,
developing appropriate partnerships
and innovation to generate a return
equivalent or better than 1,5x WACC.
EXXARO BUSINESS MODEL
• Mineral resource to market • Licence to operate • Return to shareholders
Strategy
and
portfolio
Projects
Mineral
resource
Mining
Metallurgical
extraction
Market
Safety, health, environment
and community (SHEC),
physical asset management,
technology, projects
Strategy and stakeholder
engagement
Human resources
Information management
Finance
Supply chain management
blers
a
n
ore e
C
blers
a
n
ort e
p
p
u
S
nce
a
overn
d g
n
Executive
committee
CEO
Board
ership a
d
a
Le
SUSTAINABILITY
APPROACH
Exxaro acknowledges the five-
capitals model (natural, human,
social, manufactured and financial
capital) 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 21).
We add value to the capitals
during the lifetime of every mining
operation – with the intention of
leaving each area holistically richer
after mine closure, even though
some capitals might be negatively
perceived at points in the life cycle.
During each stage of the mining
value chain, which we refer to as the
resource-to-market business model,
the cumulative net effect is to leave
a positive impact. Each sustainability
capital that we affect will be
responsibly managed to maximise
the benefit to all stakeholders,
internally and externally.
Our growth over the next three
to five years will be driven by
investment, development and
growth in the current portfolio of
commodities in energy, metals and
minerals from the operations and
opportunities detailed on page 52.
Each commodity strategy is
supported by a vision, description
of growth prospects and the related
timeline and estimate of capital.
In graphically illustrating our
business model – or the chain of
creating value – we have subjectively
qualified our impacts as positive
(green) or negative (red). In time,
we aim to objectively quantify these
impacts.
18
EXXARO INTEGRATED REPORT 2014 Exxaro’s business model at activity level
PROJECTS
RESOURCE
RESOURCE
EXPLORATION
MINING
METALLURGICAL
EXTRACTION
MARKET
CLOSURE
Specific inputs
Resource
demands
Viable mineral
deposit
Funding
2030 vision
Resource
demands
Innovation ideas
Funding
Mine plan
Mineral resource
Own
infrastructure
Run-of-mine
Own
infrastructure
Transport and
logistics
Public and private
infrastructure
Market demand
Exhausted
mineral
resources
Uneconomic
life of mine
Common inputs Mineral resources, funding, knowledge, skills, natural resources, energy, water, safety
Activities
Common
activities
Outputs
Desktop studies
Prospecting
New innovative
projects
implemented
NXXT programme
developed
Feasibility studies
Impact
assessments
Stakeholder
engagement
– community and
regulator
Securing mining
rights
Training and skills
development
Mineral resource
safely extracted
Employee and
community
development
Run-of-mine
crushed
Responsible
production
Employee and
community
development
Logistics planning
and transport of
saleable product
Meeting market
demand for coal
Mine closure plan
executed
Sustainable
communities
established
Rehabilitation
Stakeholder engagement, mine and infrastructure development, people development
Mineral resource
estimate
Secured mining
rights
Resource growth
Mineral resource
exposed and
ready for
extraction
Resource
extraction
ROM
Greenhouse gas
(GHG) emissions
Waste
Saleable coal
GHG emissions
Waste
Cogeneration
Stockpiled coal at
correct grade
Transported coal
to market
Revenue and
profit
Sustainable
communities
Rehabilitated
environment
Common
outputs
GHG emissions
Safe working environment, improved employees skills, health and hygiene, equity opportunities
Sustainability outcomes of the business model
PROJECTS
RESOURCE
RESOURCE
EXPLORATION
MINING
METALLURGICAL
EXTRACTION
MARKET
CLOSURE
Natural
capital
Human
capital
Potential
Skills used
Social
capital
Stakeholder
relationship plan
Increased
economic value,
disturbed, altered
Skills used
Employment
Planned
community
development,
and reputation
enhanced
Depletion,
degradation
Depletion,
degradation
Increased skills
used
Employment
Increased skills
used
Employment
Increased value
of skills and
employment
maintained
Rehabilitation
Reduced
employment
Benefit to
communities and
reputation
Benefit to
communities and
reputation
Increasing value
to communities
and reputation
Benefit to
communities and
reputation
Manufactured
capital
Infrastructure built
Increased
infrastructure
Increased
infrastructure
Increased value
maintained
Financial
capital
Improving asset
base
Costs incurred
and balance sheet
assets increased
Costs incurred
and product value
increase
Costs incurred
and product value
increase
Revenue
increased, tax
paid
Community
infrastructure
maintained
Financial
rehabilitation
provisions
depleted
Key (Colour-coded bars not to scale)
Business activity or neutral impact.
Value added to sustainability capital.
Value destroyed on the sustainability capital.
EXXARO INTEGRATED REPORT 2014
19
02 STRATEGIC
PERFORMANCE
20
EXXARO INTEGRATED REPORT 2014
Creating shared value
Gaps and opportunities
Assurance
Reporting
Stakeholder engagement
Material issues
Risks
Compliance
Governance
• Gaps and opportunities:
Close any gaps and identify
opportunities – often via the
combined assurance forum
(ie audit findings)
• Creating shared value: Moving
into new territories for example,
our NXXT programme, which
sets out our roadmap for the
next 15 years.
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
Understanding the components
of specific tiers (from the bottom
up) guides the development of our
strategic performance dashboard:
• Governance: Our sustainability
is supported by appropriate
organisational structures,
reporting lines, roles,
responsibilities and the tone set
from the top
• Compliance: Mandatory, but
our aim is to always meet the
spirit and not just the letter of
legislation
• Risks: Using the enterprise
risk management and Global
Minerals Industry Risk
Management (GMIRM) platforms
consistently across Exxaro to
capture, record and action all
risks and material issues
• Stakeholder engagement: Using
the AA1000SES stakeholder
engagement standard (also
referred to as stakeholder
relationship management) at all
levels necessary
• Material issues: Distilling
the key inputs ranging from
risks, to stakeholder issues, to
performance KPIs to identify
the critical issues that will affect
Exxaro’s ability to create value
• Reporting: Relevant, transparent
and concise reporting on
compliance with legislation,
regulation and best practices as
well as stakeholder expectations
and key metrics
• Assurance: Aligning assurance
audits across governance,
compliance, findings, risks
and material issues
EXXARO INTEGRATED REPORT 2014 21
STRATEGIC PERFORMANCE (continued)
This table is an extract of our
strategic dashboard and describes
our framework for measuring
sustainability. It should be read
with the risk matrix on page 32.
The supplementary report
contains more information on the
dashboard. A critical principle for
Exxaro in pursuing our business
sustainability is balancing our
efforts across each strategic
objective, while focusing on
priority issues distilled into the five
material issues overleaf.
Our strategic performance reflects
a challenging environment in 2014,
where we underperformed against
some targets for each strategic
objective:
• On safety, we maintained our
performance from 2013 but
were below target. Initiatives to
get closer to target in 2015 are
detailed in our supplementary
report. This includes continuing
with visible felt leadership
and empowering SHE
representatives.
• Our financial performance,
measured by core operating
margin and ROCE, was adversely
impacted by the Mayoko project
impairment. However, the coal
business recorded above-target
margin performance despite
lower US$ coal prices, offset
by a weakening exchange rate.
Margins will continue to improve
in 2015 as GMEP ramps up,
subject to consistent volume
offtake from Medupi. Ongoing
investment in sustaining and
expansion capital should result
in similar ROCE performance
Extract from strategic dashboard
at current coal prices, but
increased focus on productivity
and cost efficiency should
enhance margin and ROCE
performance
• Resource efficiency like water
intensity improved, reflecting
less water use for the same
production. This was due in part
to water-conservation measures
and the impending closure of
Tshikondeni
• Our stakeholder relationship
management initiatives
produced a favourable operating
climate. Relations with
employees and unions improved,
while interaction with regional
government departments
facilitated authorisations to
further our projects.
Strategic
objective
Material
issue
Sustainability
capital
KPI/metric to
measure risk
Risk appetite 2014
Worst
Best Target
Achieved
Risk name
Portfolio and
financial
performance
Eskom
Financial
Core operating
margin
15%
20% >20%
17,52% Dependency on
Eskom as a key
customer
Risk
ranking
1
Annualised ROCE
18%
20% >20%
(2,20%)
Manufactured Productivity (total
manufactured
tonnes handled/
full-time equivalent –
TTH FTE)
7 171
7 860
8 223
7 593*
Eskom
Financial and
manufactured
Core operating
margin
15%
20% >20%
17,52% Unavailability
of electricity
Employees Human
Fatalities (months
without a fatality)
<12
>24 Indefinite
Licence to
operate
Natural
LTIFR
Stoppage directives
(including for MHSA,
MPRDA)
0,21
2
0,18
1
0,15
0
Safety
concerns
5
(fatality
in July
2014)
0,19
7
Operating
efficiencies
Financial
Core operating
margin
15%
20% >20%
17,52% Commodity
price volatility
Operating
efficiencies
Financial and
manufactured
People productivity
(TTH/FTE)
7 171
7 860
8 223
7 593* Unable to
meet
production
demands
Portfolio and
financial
performance
Operational
excellence
Developing
leadership
and people
Responsibility
and
accountability
Portfolio and
financial
performance
Portfolio and
financial
performance
People productivity
(production tonnes/
FTE)
Growth from coal
commodities –
percentage
deviation from
budget
Water intensity
(% improvement)
1 974
2 324
2 549
2 616*
10% or
more
deviation
Within
budget
Within
budget
(12,37%)
1,5% 2,5-5%
5%
32,30%
improvement
Unavailability
of water
Responsibility
and
accountability
Licence to
operate
Natural
* Average.
22
2
3
4
5
6
EXXARO INTEGRATED REPORT 2014
Extract from strategic dashboard
Strategic
objective
Material
issue
Sustainability
capital
KPI/metric to
measure risk
Operational
excellence
Capital
projects
Manufactured Growth from coal
commodities –
percentage
deviation from
budget
Project delivery
delays
Individual projects’
ROI, measured
by risk-adjusted
WACC (times)
Risk appetite 2014
Worst
Best Target
Achieved
Risk name
10% or
more
deviation
Within
budget
Within
budget
(12,37%)
Infrastructure
capital/access/
development/
funding
Risk
ranking
7
>10% 1-10%
0
>10%
1,35
1,5
>1,5
Not
measured
individually
Operational
excellence
Operating
efficiencies
Financial
Annualised ROCE
18%
20% >20%
(2,20%)
Manufactured People productivity
7 171
7 860
8 223
7 593* Cost
8
Financial
(TTH/FTE)
People productivity
(production tonnes/
FTE)
Services cost as %
of total operating
cost
Core operating
margin
Manufactured Growth from coal
competitiveness
of products
1 974
2 324
2 549
2 616*
11%
10%
9%
10,7%
15%
20% >20%
17,52%
10% or
more
deviation
Within
budget
Within
budget
(12,37%)
15%
20% >20%
17,52% State
9
intervention
in the mining
sector
Responsibility
and
accountability
Licence to
operate
Financial
commodities –
percentage
deviation from
budget
Core operating
margin
Capital
projects
Portfolio and
financial
performance
Operational
excellence
Annualised ROCE
18%
20% >20%
(2,20%)
Manufactured Growth from coal
commodities –
percentage
deviation from
budget
Project delivery
delays
Individual project
ROI, measured by
risk-adjusted WACC
(times)
Within
budget
Within
budget
(12,37%) Capital project
10
execution
10% or
more
deviation
from
budget
>10% 1-10%
0
>10%
1,35
1,5
>1,5
Not
measured
individually
Financial
Annualised ROCE
18%
20% >20%
15,50%
* Average.
Target: Risk appetite. Best: Best realistically achievable based on historical performance and/or prevailing conditions. Worst: Worst-tolerable performance.
EXXARO INTEGRATED REPORT 2014 23
STRATEGIC PERFORMANCE (continued)
MATERIAL ISSUES
In line with best practice, our
integrated report focuses on
the most material issues dealt
with by Exxaro (material from
the perspective of the company
and its stakeholders) in 2014. In
determining these issues, we follow
a logical sequence in distilling:
• Exxaro’s top risks
• Stakeholder issues raised,
particularly investors, the media
and suppliers
• Challenges facing our core coal
operations.
These are aligned with our risk
appetite framework, in turn based
on metrics linked to our top risks.
The result is a set of material
issues, thematically grouped and
detailed throughout this report.
24
Material issues are graphically depicted here and
quantified where possible in this integrated report
and detailed in the material issues section of our
supplementary information on this website.
ESKOM
OPERATING EFFICIENCIES
Material issue: Dependency on
Eskom as both client and reliable
supplier of electricity
Risk: High, with potential impacts on
operational and financial results, as
well as stakeholder relations
Stakeholders affected: Customers,
suppliers, providers of capital,
shareholders
Opportunity: Maintaining and
building stable annuity revenue by
participating in the direct and indirect
energy supply for the South African
economy
Material issue: Operating
efficiencies
Risk: High, with potential impacts on
operational and financial results, as
well as stakeholder relations
Stakeholders affected: Employees,
communities, customers, suppliers,
providers of capital, shareholders
Opportunity: Implementing
group-wide efficiency initiatives,
maintaining Grootegeluk among
the lowest-quartile cost producers
in the world, growing in the global
commodity downturn
Focus areas
• Broadening local and international
Focus areas
• People productivity – target
customer base
• Regular liaison with Eskom
• Renegotiating Medupi coal-supply
agreement – addendum 9 finalised.
2 549 production tonnes/full-
time employee, achieved 2 616
on average
• Costs
• Production
• Commodity prices
• Markets: competition and products.
RISKS AND ISSUES RAISED
Top 20
risks
+
Coal operations
issues
+
+
Stakeholder
issues
Media
issues
+
+
+
Board
agenda
+
Investor and
supplier issues
Key performance indicators (performance dashboard)
Material issues
EXXARO INTEGRATED REPORT 2014 LICENCE TO OPERATE
CAPITAL PROJECTS
EMPLOYEES
Material issue: Capital projects
Risk: High, with potential impacts on
operational and financial results, as
well as stakeholder relations
Stakeholders affected: Employees,
communities, customers, suppliers,
providers of capital, government,
shareholders
Opportunity: Capital projects
facilitate export agreements,
support community and enterprise
development initiatives, and advance
clean technology methods, creating
economic growth and contributing to
the virtuous cycle of growth
Focus areas
• Project pipeline – constant review
to accommodate market conditions
• Coal project portfolio Waterberg –
Thabametsi
• Coal project portfolio Mpumalanga –
Belfast approved
• Growth from coal commodities –
percentage deviation from budget
• Project delivery – on time, on
budget, and according to quality
specifications – GMEP on time and
within budget
• Project return on investment for
individual projects
• Return on capital employed target
of 20% – 2014 (2,20%) realised
due to impairment charges.
Material issue: Our people
Risk: High, with potential impacts
on compliance levels, operational
and financial results, as well as
stakeholder relations
Stakeholders affected: Employees,
customers, suppliers, providers of
capital, shareholders
Opportunity: Attract, develop and
retain skilled employees. Zero losses
to fraud and corruption, maintaining
business continuity, safety and
become a recognised employer of
choice
Focus areas
• Skills – shortages, training and
development as percentage of
payroll (2014: 6,8%), mining
charter targets (achieved except
for senior management and people
with disabilities)
• Fraud and corruption – cases
reported, investigated
• Labour unrest – number of actions,
production losses, union rivalry,
employee relations (2014: largely,
strong employee relations, zero
strikes)
• Safety – fatalities, LTIFR
(2014: 1 fatality, LTIFR of 0,19
against target of 0,15).
Material issue: Maintaining licence
Risk: High, with potential impact on
operational and financial results, as
well as stakeholder relations
Stakeholders affected: Employees,
communities, customers, suppliers,
providers of capital, shareholders
Opportunity: Exceeding compliance
standards supports community and
enterprise development initiatives,
in turn creating jobs; facilitates
alternative energy developments;
supports South Africa’s national
development plan and contributes
to transformation in mining.
The national development plan
(vision for 2030) articulates the
challenges South Africa faces: the
need to alleviate poverty, address
unemployment, uplift communities,
raise living standards, build
economic capabilities via skills and
infrastructure, and expand economic
opportunities to all. In other words,
creating a virtuous cycle of growth.
The need to address these issues
remains despite the global economic
downturn impacting South Africa.
Focus areas
• Mining charter compliance for
2012-2014 (achieved except for
senior management and people
with disabilities target)
• Empowerment (revised codes from
2015) – current and future status
• Government relationships
• Social return on investment (index
value) – successful implementation
of community projects
• Environmental compliance
• Carbon management
• Water intensity
• Biodiversity.
EXXARO INTEGRATED REPORT 2014 25
03 RISK, COMPLIANCE
AND ASSURANCE
26
EXXARO INTEGRATED REPORT 2014
RISK AND COMPLIANCE
MANAGEMENT TO
ENSURE EXXARO’S
SUSTAINABILITY
Exxaro’s philosophy on risk
management has always been
not to entrench a compliance-
driven approach but rather to view
risk management as a strategic
enabler to ensure that we think
and act proactively at every layer
(strategic, tactical and operational)
in pursuit of our objectives.
The group has made great strides
in the past three years in managing
risks, within its risk tolerance (risk-
appetite thresholds), consistently,
comprehensively and economically
through effective enterprise
risk management. Risks and risk
thresholds, which indicate the
appropriate level of risk for Exxaro
to achieve its strategic objectives,
as approved by the board, are
monitored quarterly.
Our risk management governance,
philosophy and process is set
out in the Exxaro enterprise risk
management (ERM) framework,
which was approved by the board
in November 2011. This framework
was reviewed in 2014 and
significant changes made to the
Exxaro impact scale to ensure that
consequence levels are aligned
to our risk tolerance levels. The
process of reporting risk at various
levels is set out below:
RISK-REPORTING PROCESS
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)
1 Executive committee.
2 Sustainability, risk and compliance committee.
• Exco notes operational
and tactical risk registers
and compiles strategic
risk profile
• Board approves strategic
risk register based on
recommendations from
SRC2 committee
• Risk profile reported to
stakeholders
• Reported monthly
to project steering
committee/region/
commodity to action
• Reported quarterly
to Exco
• Reported monthly to
business unit management
to action
• Reported quarterly to coal
Exco for noting
EXXARO INTEGRATED REPORT 2014 27
RISK, COMPLIANCE AND ASSURANCE
(continued)
RISK PROCESS
Enterprise risk management
is a systematic application
of management policies and
procedures to the activities of
communicating, consulting,
establishing context, and
identifying, analysing, evaluating,
treating, monitoring and reviewing
risk. At Exxaro we understand that
effective risk management can
only occur when a proactive risk
culture has been created, where
everybody understands they have
a role in managing risks in their
environment.
The ERM methodology is therefore
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.
Exxaro does not have a separate
risk methodology for every type of
impact or functional area, as this
would undermine true integration
and building a risk culture.
Risk owners are established
across all layers for every risk
and are accountable for ensuring
the appropriate risk strategy is
implemented. Control owners
are appointed for every control
and report to risk owners on the
maintenance of controls and
implementation of action plans.
Exxaro has reviewed its strategic
risks and changes made to risk
rankings mostly reflect changes
in the probability and proximity of
risks occurring.
The integrated Exxaro risk process
is illustrated below:
INTEGRATED PROCESS
Set Exxaro strategy and objectives on the
back of robust scenario planning
Environment
(internal and external)
Communicate
and consult
Set operational objectives
(linked to Exxaro strategy)
Establish context
(understand event, hazard and
environment)
t
n
e
m
s
s
e
s
s
a
k
s
i
R
Risk identification
(risk name and description)
Risk evaluation
(inherent risk before
treatments, residual risk after
treatments)
Risk treatment
Monitor and
review
Reporting
risks
28
EXXARO INTEGRATED REPORT 2014
BOARD DISCLOSURE
Please refer to section 4.1 of the King III compliance report in the supplementary report.
2014 ACHIEVEMENTS
Reflecting on 2014
Upgrade our risk management enabler
Implement the SHEC (safety, health, environment
and community) risk management enabler and roll
out to business units
Conduct risk review sessions
Roll out the risk appetite framework to
business units
Monitor and review risk thresholds to ensure
business units operate within the board-approved
framework
Review and update ERM framework
Link key performance indicators (KPIs*) and key risk
indicators (KRIs#) to management’s performance
contracts
Conduct a risk maturity self-assessment
Achieved
(Yes/No)
Comment
Y
N
Y
N
Y
Y
N
N
The system was upgraded successfully and users
are working actively in the system with its enhanced
functionality
SHEC risk management systems training is under way.
The system go-live date is 30 April 2015
Following quarterly reviews, updated risk reports were
submitted to Exco and the board
The strategic risk appetite framework was embedded
in Exxaro in 2014. The strategic risk appetite (or
performance) dashboard was compiled and submitted
to Exco and the board in the second half of 2014.
Refinement and entrenchment will take place in 2015.
The operational risk appetite framework will now only be
rolled out to business units in 2016
Risk thresholds were reviewed and the strategic
performance dashboard updated and monitored
biannually
The framework was reviewed and the updated version
approved by the board in October 2014
This has taken place, but further integration is required
Postponed. Internal auditors will conduct this
assessment in 2015
* Key performance indicator: unit of measure to monitor risks, eg carbon footprint.
# Key risk indicator: variance of the unit of measure to monitor the risk, eg target is to be carbon neutral and worst tolerable is an approved percentage of CO2e reduction
per annum.
LOOKING FORWARD 2015
The following activities are planned for 2015:
• Implementing the SHEC risk management enabler and rolling it out to business units
• Quarterly risk updates at business units
• Embed the combined assurance process as part of the risk management process
• Conducting a risk maturity self-assessment
• Linking hazards to current legislative requirements
• Monitoring and reviewing risk thresholds to ensure business units operate within the board-approved framework
• Reporting on the independent mining rights audit at all operations.
OUTCOME
The table on page 32 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.
EXXARO INTEGRATED REPORT 2014 29
RISK, COMPLIANCE AND ASSURANCE
(continued)
TOP 10 HEAT MAP
The Exxaro heat map below indicates high-impact/low-likelihood risks as red. This emphasises to management
that, should these risks materialise, they would have an extreme impact on Exxaro and therefore need to be
monitored and reviewed constantly. The same applies to high-likelihood/low-impact risks, indicated in yellow as
they occur frequently and need to be managed. Controls for these risks are considered critical and need to be
monitored and reviewed constantly in line with the combined assurance approach.
The heat map illustrates Exxaro’s top 10 strategic risks inherently (before any controls) as well as residually (after
controls), identified through our ERM process and approved by the board. The circled numbers represent the
quantum (not ranking) of risks.
Inherent risk rating
Residual risk rating
d
o
o
h
i
l
e
k
i
L
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
y
l
e
k
i
l
n
U
%
5
3
-
1
1
e
r
a
R
%
0
1
-
1
2
1
4
3
d
o
o
h
i
l
e
k
i
L
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
y
l
e
k
i
l
n
U
%
5
3
-
1
1
e
r
a
R
%
0
1
-
1
1
3
3
3
Insignificant
1-10
Minor
11-35
Moderate
36-60
Impact
Major
61-80
Catastrophic
81-100
Insignificant
1-10
Minor
11-35
Major
61-80
Catastrophic
81-100
Moderate
36-60
Impact
RISK
Risks related to the strategic themes
(percentages will not add to 100% as some
risks are linked to more than one strategic
objective):
Half of the top 10 risks
have internal sources
and the other half have
external sources
Responsibility
and accountability:
30%
Operational
excellence:
40%
Developing
leadership
and people:
10%
Portfolio and
financial
performance:
60%
Risks related to sustainability
capitals (percentages will not add to
100% as some risks are in more than
one capital):
Natural:
10%
Human:
10%
Manufactured:
30%
Social:
10%
30
EXXARO INTEGRATED REPORT 2014
TOP RESIDUAL RISKS OVER THE LAST THREE YEARS
2013
2014
2015
State intervention in the mining sector
Key dependency on customers (Eskom)
Dependency on Eskom as a key
customer
Government relationships
Unable to meet production demands
Unavailability of electricity
Infrastructure capacity, access,
development and funding
Inability to accurately determine
financial closure obligations
(cost of closure)
Compliance with environmental
legislation
Safety concerns
Safety concerns
Government bureaucracy
Commodity price volatility
Commodity price volatility
Inability to meet production demands
1
2
3
4
5
6 Maintain social licence to operate
Unavailability of water
Unavailability of water
7 Mine rehabilitation
Infrastructure capacity, access,
development and funding
Infrastructure capacity, access,
development and funding
8
9
Ability to meet production demands
(throughput)
Competitiveness of assets (cost/tonne)
Competitiveness of assets (cost/tonne)
Legal and regulatory compliance
State intervention in the mining sector
State intervention in the mining sector
10 Cost competitiveness of assets
Capital project execution
Capital project execution
(cost/tonne)
11
Inability of the information systems
to support business
Compliance to environmental legislation
Mine rehabilitation
12 Unavailability of water
Maintain a social licence to operate
Government bureacracy
13 Employee health and safety
Mine rehabilitation
Compliance to environmental legislation
14 Acid mine drainage
Inability to adequately calculate financial
provision for environmental closure
Maintain a social licence to operate
15 Currency and commodity price volatility
Labour unrest
Inability to accurately calculate financial
provision for environmental closure
16 Accuracy, reliability and integrity
Legal and regulatory compliance
Fraud and corruption
of information
17
Labour unrest
Acid mine drainage
Legal and regulatory compliance
18 Climate change concerns
Climate change concerns
Labour unrest
19 Geographical and commodity
concentration
Inability of IT systems to support
business
Competition and product substitution
20 Acquisition of land
Competition and product substitution
Climate change concerns
Looking at top risks over the past three years, not only for Exxaro but also risks facing the mining sector as a
whole, there have not been any major changes to the top 10-20 risks. The priorities or rankings of top risks have
changed due to certain external and internal environment changes that trigger these unwanted events.
EXXARO INTEGRATED REPORT 2014
31
RISK, COMPLIANCE AND ASSURANCE
(continued)
Risk matrix
Risk
ranking Risk name
Impact
Reporting comment
Critical controls
Dependency on
Eskom as a key
customer
• Legal and compliance – payment of penalties in terms
of captive mine contracts (production demands cannot
be met if capital approvals are outstanding)
• Legal and compliance – non-compliance to the
Eskom is experiencing a number of
challenges that include security of supply,
extensive plant maintenance issues and
cash-flow constraints
• Broadening local and international customer base
• Establishing rehabilitation trust fund
• Regular liaison with Eskom
• Renegotiating Medupi coal-supply agreement
1
2
rehabilitation requirements under MPRDA
• Operations – operational constraints following Eskom’s
delay with Medupi power station
• Safety – safety compromised as capital approvals for
safety initiatives rest with Eskom
• Operations – potential halting of production if land
purchases and capital expenditure are delayed
• Financial – cash-flow constraints on Eskom mean that
Exxaro may not be paid, or paid late
Unavailability of
electricity
• Financial – financial losses
• Operations – production impacts
• Legal and compliance – breach of contract
• Safety – only to the extent that mines experience
power cuts
3
Safety concerns
• Safety – serious safety incidents
• Safety – fatalities
• Operations – high frequency of machine breakdowns
• Financial – fines and penalties – section 54/55 (DMR)
• Stakeholder relations – reputational damage
A sharp increase in load shedding
due to pressure on the grid as a result
of challenges with both planned and
unplanned maintenance by Eskom. This
risk has an extreme impact on Exxaro
customers on the back of load shedding
and risk of a blackout. This in turn would
impact Exxaro in terms of lowering
production, pit liberation and profitability
The likelihood of the basket of risks in
relation to safety has increased after the
fatality at Arnot in 2014
• Ensure long-term contract and commercial agreement in place
Tier 1, 2
✶
65
• High-level engagements with Eskom and municipalities
• Invest in alternative energy
• Analyse historical incident data to identify trends to get to root causes
Tier 1, 2
64
Æ 64
Assurance
Residual risk
Residual risk
score 2014
Trend
score 2015
2014*
Tier 1
66
Æ 66
• Conduct compliance awareness training
• Continuously report incidents
• Continuously review industry benchmark on safety
• Establish compliance-based committees to manage, educate and
communicate safety programmes
• Implement robust preventive maintenance processes and systems
• Integrate reporting system (plant maintenance, safety, HR)
• Invest in education, training, communication and behaviour-based safety
programmes
• Review operational processes to advance on technology
• Use predictive modelling techniques to develop prevention strategies
operations
• Improve mine planning to match price volatility
• Match commodity prices to customer base
• Negotiate long-term fixed-price contracts
• Conduct more accurate geological studies
• Develop and implement a communication plan
• Develop condition-based budget model feeding from life-of-mine plan
• Implement performance management
• Implement initiatives to retain skills/staff
• Implement skills development programmes (professionals in training and
bursaries)
• Improve maintenance and asset management
• Maintain stockpile threshold
• Ongoing capital infrastructure planning aligned to strategy
• Regular interaction with unions, Eskom, Transnet Freight Rail (TFR),
Richards Bay Coal Terminal (RBCT) and government
• Establish public-private partnerships
• Introduce and measure water intensity targets
• Liaise through Chamber of Mines with government
• Link water intensity targets to performance targets
• Provide for water treatment
Commodity price
volatility
• Financial – financial losses
• Stakeholder relations – reputational damage
Significant decline in commodity prices
globally underpinned by global economic
uncertainty and lower demand
• Consider how changes to the above affect risk appetite
Tier 1, 2
47
Ç 59
• Develop a communication plan that quickly communicates changes to
Inability to meet
production
demands
• Stakeholder relations – reputational damage
• Operations – production targets missed
• Legal and compliance – breach of contract
• Stakeholder relations – pressure on the client (Eskom)
• Finance – financial losses
Improved resource optimisation coupled
with lower demand locally and globally
• Accelerate business improvement projects under way
Tier 1, 2
64
È 55
Unavailability of
water
• External: force majeure – drought
• External: other – delays in the building of water
infrastructure by government
• External: other – traditional areas of operation have
little water
• External: other – limited water resources in RSA
Water resources are under strain as the
community and business compete for
the current available water resources.
Infrastructure is also lagging both current
and anticipated future demand
Tier 1, 2, 3
45
Æ 45
4
5
6
32
EXXARO INTEGRATED REPORT 2014 Risk matrix
Risk
1
ranking Risk name
Impact
Reporting comment
Critical controls
Dependency on
Eskom as a key
customer
• Legal and compliance – payment of penalties in terms
Eskom is experiencing a number of
of captive mine contracts (production demands cannot
challenges that include security of supply,
be met if capital approvals are outstanding)
extensive plant maintenance issues and
• Legal and compliance – non-compliance to the
cash-flow constraints
• Broadening local and international customer base
• Establishing rehabilitation trust fund
• Regular liaison with Eskom
• Renegotiating Medupi coal-supply agreement
Assurance
2014*
Residual risk
score 2014
Residual risk
score 2015
Trend
Tier 1
66
Æ 66
rehabilitation requirements under MPRDA
• Operations – operational constraints following Eskom’s
delay with Medupi power station
• Safety – safety compromised as capital approvals for
safety initiatives rest with Eskom
• Operations – potential halting of production if land
purchases and capital expenditure are delayed
• Financial – cash-flow constraints on Eskom mean that
Exxaro may not be paid, or paid late
2
Unavailability of
• Financial – financial losses
electricity
• Operations – production impacts
• Legal and compliance – breach of contract
• Safety – only to the extent that mines experience
unplanned maintenance by Eskom. This
power cuts
A sharp increase in load shedding
due to pressure on the grid as a result
of challenges with both planned and
risk has an extreme impact on Exxaro
customers on the back of load shedding
and risk of a blackout. This in turn would
impact Exxaro in terms of lowering
production, pit liberation and profitability
The likelihood of the basket of risks in
relation to safety has increased after the
3
Safety concerns
• Safety – serious safety incidents
• Safety – fatalities
• Operations – high frequency of machine breakdowns
fatality at Arnot in 2014
• Financial – fines and penalties – section 54/55 (DMR)
• Stakeholder relations – reputational damage
4
5
Commodity price
• Financial – financial losses
volatility
• Stakeholder relations – reputational damage
Significant decline in commodity prices
globally underpinned by global economic
uncertainty and lower demand
Inability to meet
• Stakeholder relations – reputational damage
production
demands
• Operations – production targets missed
• Legal and compliance – breach of contract
Improved resource optimisation coupled
with lower demand locally and globally
• Stakeholder relations – pressure on the client (Eskom)
• Finance – financial losses
6
Unavailability of
• External: force majeure – drought
water
• External: other – delays in the building of water
infrastructure by government
Water resources are under strain as the
community and business compete for
the current available water resources.
• External: other – traditional areas of operation have
Infrastructure is also lagging both current
little water
and anticipated future demand
• External: other – limited water resources in RSA
• Ensure long-term contract and commercial agreement in place
• High-level engagements with Eskom and municipalities
• Invest in alternative energy
Tier 1, 2
✶
65
Tier 1, 2
64
Æ 64
• Analyse historical incident data to identify trends to get to root causes
• Conduct compliance awareness training
• Continuously report incidents
• Continuously review industry benchmark on safety
• Establish compliance-based committees to manage, educate and
communicate safety programmes
• Implement robust preventive maintenance processes and systems
• Integrate reporting system (plant maintenance, safety, HR)
• Invest in education, training, communication and behaviour-based safety
programmes
• Review operational processes to advance on technology
• Use predictive modelling techniques to develop prevention strategies
• Consider how changes to the above affect risk appetite
• Develop a communication plan that quickly communicates changes to
Tier 1, 2
47
Ç 59
operations
• Improve mine planning to match price volatility
• Match commodity prices to customer base
• Negotiate long-term fixed-price contracts
• Accelerate business improvement projects under way
• Conduct more accurate geological studies
• Develop and implement a communication plan
• Develop condition-based budget model feeding from life-of-mine plan
• Implement performance management
• Implement initiatives to retain skills/staff
• Implement skills development programmes (professionals in training and
bursaries)
• Improve maintenance and asset management
• Maintain stockpile threshold
• Ongoing capital infrastructure planning aligned to strategy
• Regular interaction with unions, Eskom, Transnet Freight Rail (TFR),
Richards Bay Coal Terminal (RBCT) and government
• Establish public-private partnerships
• Introduce and measure water intensity targets
• Liaise through Chamber of Mines with government
• Link water intensity targets to performance targets
• Provide for water treatment
Tier 1, 2
64
È 55
Tier 1, 2, 3
45
Æ 45
EXXARO INTEGRATED REPORT 2014 33
RISK, COMPLIANCE AND ASSURANCE
(continued)
Risk
ranking Risk name
Impact
Infrastructure cap/
access/develop/
fund
• Stakeholder relations – reputational impacts
• Human resources – opportunity losses for new
employment
• Financial – limitations on potential to expand
• Financial – financial losses
7
8
9
Reporting comment
Mines are often in remote areas and
prospective mines are often in undeveloped
areas. This means that little or no
infrastructure is available to ensure the mine
can deliver product to be transported and
exported. Access to funding at competitive
rates also remains a challenge
• Collaborate with government stakeholders to improve and initiate new
Tier 1, 2
45
Æ 45
Critical controls
infrastructure
• Identify other stakeholders to co-develop solution and extend infrastructure
• Regular liaison with TFR, RBCT and other stakeholders
• Understand return on infrastructure and consider appropriate funding
• External assurance of mega and major projects
Assurance
Residual risk
Residual risk
2014*
score 2014
Trend
score 2015
• Create strategic joint ventures to optimise economies of scale
Tier 1, 2
43
• Focus on sustainable cost reduction programmes/business improvement
Æ 43
initiatives
• Focus on business unit controllable efficiencies
• Increased awareness of cost management
• Investigate and divest non-core assets
• Quarterly reviews by operational executive committees
• Rebalancing product chains to better use infrastructure
(integrated logistics)
• Optimise capital fleet – mine-haul trucks, light vehicles, shovels etc
• Review and monitor performance of suppliers and service providers
and political initiatives)
• Conduct regular budget reviews (adjust to changes)
• Ensure effective stakeholder relations (recognised forums, DMR)
• Generate direct sustainable benefits for host communities – social and
community development programme
• Increase transparency of payments to governments
• Invest in transparent relationships with government to foster understanding
• Participate in Chamber of Mines discussions on government engagement
• Partner with state-owned enterprises
• Stay abreast of legislative changes
• Work with multilateral agencies and other stakeholders
• Asset portfolio review and management
• Disciplined execution of value engineering study review
• Encourage a culture to report both successes and failures (lessons learnt)
• Ensure project and supply chain performance is monitored and managed
• Ensure all project members understand value drivers and impacts
• Establish contingency plan
• Establish robust governance structure
• Implement advanced assurance frameworks (independent review
and oversight)
• Implement effective risk management process
• Improve capex forecast accuracy
• Monitor and track progress of capital projects
• Project role clarification and accountability
• Secure contractor’s commitment to assigning a strong and experienced
management team
• Standardise design and construction methodologies
Cost
competitiveness of
products
• Stakeholder relations – social impact
• Stakeholder relations – reputational damage
• Financial – financial losses and margin squeeze
• Operations – premature mine closure
Exxaro’s services cost as a percentage
of total operating cost is still beyond its
approved tolerance level despite sustainable
reduction initiatives to date
State intervention
in the mining
sector
• Human resources – loss of employment
• Stakeholder relations – labour and community unrest
• Legal and compliance – mining rights need to be
renegotiated in terms of new MPRDA bill, creating
uncertainty on a valid and enforceable mining right
Although the MPRD bill has been sent
back to test the constitutionality of certain
aspects, the mining industry is still regarded
as a source for equitable distribution of
resources
• Diversification (commodity mix and geographical areas)
Tier 1
43
• Become an invaluable part of infrastructure in host country (align economic
Æ 43
• Financial – Increase in taxes (carbon tax)
• Stakeholder relations – prolonged international criticism
of opaque regulatory framework in South Africa and
negative perception by current and potential investors
on interference by government in the affairs of private
and publicly owned companies
• Financial – decline in investment in the sector over the
long term
10
Capital project
execution
• Stakeholder relations – reputational damage
• Stakeholder relations – community unrest (business
and job opportunities)
• Financial – cost overruns
• Project – project delays
According to an independent study on
project time and cost, 69% of projects face
cost overruns, while 50% of projects are
reporting schedule delays
Tier 1, 2, 3
42
Æ 42
Report specification:
Legend
Ç
È
Æ
✶
The residual risk score increased from the previous period.
The residual risk score reduced from the previous period.
The residual risk score stayed unchanged from the previous period.
This is a new risk identified and did not exist in the previous period.
* Tier 1 and 2 – first- and second-line assurance; executive control.
Tier 3 – third-line assurance; non-executive control.
34
EXXARO INTEGRATED REPORT 2014
Risk
ranking Risk name
Impact
Reporting comment
Critical controls
Assurance
2014*
Residual risk
score 2014
Residual risk
score 2015
Trend
7
Infrastructure cap/
• Stakeholder relations – reputational impacts
Mines are often in remote areas and
• Collaborate with government stakeholders to improve and initiate new
Tier 1, 2
45
access/develop/
• Human resources – opportunity losses for new
prospective mines are often in undeveloped
infrastructure
Æ 45
fund
employment
• Financial – limitations on potential to expand
• Financial – financial losses
areas. This means that little or no
infrastructure is available to ensure the mine
can deliver product to be transported and
exported. Access to funding at competitive
rates also remains a challenge
• Identify other stakeholders to co-develop solution and extend infrastructure
• Regular liaison with TFR, RBCT and other stakeholders
• Understand return on infrastructure and consider appropriate funding
• External assurance of mega and major projects
8
Cost
• Stakeholder relations – social impact
competitiveness of
• Stakeholder relations – reputational damage
Exxaro’s services cost as a percentage
of total operating cost is still beyond its
• Create strategic joint ventures to optimise economies of scale
• Focus on sustainable cost reduction programmes/business improvement
Tier 1, 2
43
Æ 43
products
• Financial – financial losses and margin squeeze
approved tolerance level despite sustainable
initiatives
• Operations – premature mine closure
reduction initiatives to date
9
State intervention
• Human resources – loss of employment
Although the MPRD bill has been sent
in the mining
• Stakeholder relations – labour and community unrest
back to test the constitutionality of certain
sector
• Legal and compliance – mining rights need to be
aspects, the mining industry is still regarded
renegotiated in terms of new MPRDA bill, creating
as a source for equitable distribution of
uncertainty on a valid and enforceable mining right
resources
• Financial – Increase in taxes (carbon tax)
• Stakeholder relations – prolonged international criticism
of opaque regulatory framework in South Africa and
negative perception by current and potential investors
on interference by government in the affairs of private
and publicly owned companies
• Financial – decline in investment in the sector over the
long term
10
Capital project
• Stakeholder relations – reputational damage
According to an independent study on
execution
• Stakeholder relations – community unrest (business
project time and cost, 69% of projects face
and job opportunities)
• Financial – cost overruns
• Project – project delays
cost overruns, while 50% of projects are
reporting schedule delays
Report specification:
Legend
Ç
È
Æ
✶
The residual risk score increased from the previous period.
The residual risk score reduced from the previous period.
The residual risk score stayed unchanged from the previous period.
This is a new risk identified and did not exist in the previous period.
* Tier 1 and 2 – first- and second-line assurance; executive control.
Tier 3 – third-line assurance; non-executive control.
• Focus on business unit controllable efficiencies
• Increased awareness of cost management
• Investigate and divest non-core assets
• Quarterly reviews by operational executive committees
• Rebalancing product chains to better use infrastructure
(integrated logistics)
• Optimise capital fleet – mine-haul trucks, light vehicles, shovels etc
• Review and monitor performance of suppliers and service providers
• Diversification (commodity mix and geographical areas)
• Become an invaluable part of infrastructure in host country (align economic
Tier 1
43
Æ 43
and political initiatives)
• Conduct regular budget reviews (adjust to changes)
• Ensure effective stakeholder relations (recognised forums, DMR)
• Generate direct sustainable benefits for host communities – social and
community development programme
• Increase transparency of payments to governments
• Invest in transparent relationships with government to foster understanding
• Participate in Chamber of Mines discussions on government engagement
• Partner with state-owned enterprises
• Stay abreast of legislative changes
• Work with multilateral agencies and other stakeholders
• Asset portfolio review and management
• Disciplined execution of value engineering study review
• Encourage a culture to report both successes and failures (lessons learnt)
• Ensure project and supply chain performance is monitored and managed
• Ensure all project members understand value drivers and impacts
• Establish contingency plan
• Establish robust governance structure
• Implement advanced assurance frameworks (independent review
and oversight)
• Implement effective risk management process
• Improve capex forecast accuracy
• Monitor and track progress of capital projects
• Project role clarification and accountability
• Secure contractor’s commitment to assigning a strong and experienced
management team
• Standardise design and construction methodologies
Tier 1, 2, 3
42
Æ 42
EXXARO INTEGRATED REPORT 2014 35
Coordinating the combined
assurance (three lines of
defence) model:
The combined assurance model
aims to optimise the assurance
coverage obtained from
management, internal assurance
providers and external assurance
providers on risks facing the
organisation. The Exxaro group
has adopted an organisational
risk governance structure, which
reflects the concepts outlined
in the three lines of defence
model set out below. The diagram
illustrates how this model will be
applied in Exxaro, together with the
hierarchical reporting structure on
managing enterprise risks:
RISK, COMPLIANCE AND ASSURANCE
(continued)
Combined assurance
structure and reporting
lines
Providing assurance on
enterprise risk management
process (extract from ERM
framework):
One of the key requirements of
the board is to gain assurance that
the enterprise risk management
process is working effectively and
that the key risks identified are
being managed to an acceptable
level. Internal audit, as an
independent, objective assurance
and consulting activity, provide
the board with assurance that the
risk management framework is
operating effectively and that an
appropriate assessment of risk is
performed, that responsibility is
appropriately assigned and that
management actions are carried
out in a timely and effective
manner.
COMBINED ASSURANCE
In 2014, Exxaro continued to
embed combined assurance and
ensure its activities are risk-
based. A number of initiatives are
improving the combined assurance
process across the company 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.
The risk registers at business units
and commodity business level form
the basis of developing a combined
assurance coverage plan where
tests are conducted to assess and
provide assurance on the adequacy
and effectiveness of systems of
internal control to treat our top
risks. The assurance providers’
planned activities for the year were
linked to the top business risks
to limit duplication of work and
additional costs.
More on combined assurance in
3.5 of King III compliance report
(supplementary report).
MANAGING ENTERPRISE RISKS
Executive
Non-executive
First line
Second line
Third line
• Strategy
• Tone at the top
• Code of conduct
• Risk management
• Compliant and risk-aware
What it covers
• Clear and well-
• Independent assurance and
communicated risk policies
oversight
• Effective treatment/
control/response and
monitoring systems
operating practices
• Risk oversight
• Performance management
• Group CEO
• Executive committee
• Management
• All employees
Responsibility
• Internal audit
• External audit
• Board committees
• Line 2a – management
control, ie CEO, FD and
each level of management
• Line 2b – group risk, all risk
and compliance officers
and other specialist
functions
36
EXXARO INTEGRATED REPORT 2014 ISSUE TRACKING
MANAGEMENT TOOL
Background
Number of findings
A total of 957 findings have been raised by all assurance providers over
three years, as shown below.
All findings raised by
assurance provided are
logged and maintained in an
issue tracking management
(ITM) tool. This is a real-time,
secure, web-based application
that enables audit teams and
management to centrally
capture, monitor and report
on progress in implementing
management action plans.
It is administered by Exxaro
internal audit.
ITM was implemented at
Exxaro in the latter part
of 2012. Since then, it
has assisted in driving
accountability and
responsibility.
Audit source
Internal audit
Other assurance
providers
Total
2014
(Year 3)
2013
(Year 2)
2012
(Year 1)
97
14
111
247
92
339
307
200
507
Total
651
306
957
The improvement in the control environment is evident in the decreased
number of findings raised year on year.
Status of management
action plans
The status of findings raised is
shown below:
10%
1%
18%
3%
68%
Findings from sustainability
KPI reviews
A total of 142 findings related to
the review of sustainability KPIs
in the 2012 and 2013 financial
years. These KPIs were derived
from the top strategic risks of
the organisation, and the current
status of their reviews is shown
below:
3%
2%
3%
Open/
outstanding
Within
timelines
Ready for
audit
Follow-up
underway
Closed
The majority of findings have been
resolved. In addition, 204 findings
are reported to be ready for follow-
up audit.
Management has expedited
resolution of overdue action plans
and these are being monitored
by the respective governance
structures.
92%
Open/
outstanding
Within
timelines
Ready for
audit
Closed
Management has expedited
resolution of the majority of
overdue action plans for findings
raised from sustainability reviews.
EXXARO INTEGRATED REPORT 2014 37
RISK, COMPLIANCE AND ASSURANCE
(continued)
Snapshot of 2014
Highlights
Comments
Establishing the combined assurance forum to coordinate assurance activities
and monitor implementation of annual coverage plan
The forum was established and met four times
Enhanced process of developing an integrated audit assurance coverage plan
by sourcing information directly associated with risk profiles of the company
The strategic and operational risk profiles were used
as input to the annual internal audit plan
Rolling out issue tracking management (ITM) tool to record, manage and report
on findings and actions plans
The system is now actively used as the only platform
for tracking issue resolution to findings
Sizeable cost reduction on assurance activities across the company
Significant cost savings were achieved without
compromising risk coverage
Challenges
Comments
Some combined assurance activities proceeding outside the normal scope,
resulting in duplicated resources
There are challenges, however greater functional
representation will alleviate this issue
Embedding combined assurance framework and process, largely around role
clarity on assurance lines of defence
Optimisation of required assurance and the preferred
service providers still not at required level
Timely implementation of the outcomes and recommendations of assurance
reviews and developing relevant actions to address deficiencies
The ITM has now been accepted as the only
integrated platform, which will support the process
Reflection
Achieved (Yes/No)
Comments
Engage business units, regions and corporate office
to take ownership of the assurance process
Rolling out initiatives to embed combined assurance
across the company at business units, regions,
functional and 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
Yes
Yes
Yes
Yes
Structured engagements took place but with limited
success
The ITM is a standing agenda item at the audit
committee, Exco, coal executive committee and
business unit level meetings
The forum has been expanded to include more
business and functional representation
The risk platform is used as the main driver for
compiling the internal audit plan and other assurance
activities
Looking forward to 2015
• Provide a strategic view of the combined assurance plan to the audit committee
• Highlight third-tier assurance that has been conducted
• Link overall results of assurance work done to strategic risks
38
EXXARO INTEGRATED REPORT 2014 04 PERFORMANCE
EXXARO INTEGRATED REPORT 2014 39
PERFORMANCE (continued)
CHAIRMAN’S MESSAGE
Conditions in the South African
mining industry remained difficult in
the 12 months to 31 December 2014.
For Exxaro, this was exacerbated
by the first-half impairment of our
Mayoko investment (Republic of
the Congo) and the significant drop
in iron ore and coal prices in the
second half. These events combined
into the proverbial perfect storm,
obscuring the truth that Exxaro
is fundamentally a very strong
business – a pragmatic business
operating in a cyclical industry,
and well prepared for the upturn
by controlling what we can and
managing what we cannot control.
This fundamental strength was
reflected in the performance of
our coal business, which increased
revenue 21% in a weak coal market
while maintaining margins. Coal
production rose 1% year-on-year, a
commendable result given the loss
of production from two mines that
are ramping down ahead of life-
of-mine closure (Tshikondeni and
Inyanda), and one mine on care-and-
maintenance (New Clydesdale, which
has been sold).
Exxaro continues to explore
opportunities to diversify both
geographically and into commodities
within the parameters of its risk
appetite. Despite encountering
numerous challenges, some of
them unexpected, our Mayoko iron
ore project is one example of this
strategic diversification.
Long-term view
Mining is a cyclical industry in
which losses may turn to super
profits and then reverse in a year.
Understanding this, the company
takes a long-term view on planning
to ensure returns for shareholders
and benefits for stakeholders.
Volatile commodity prices are a
constant risk for our industry,
although the scale of recent
fluctuations caught many industry
observers off guard. South African
mining companies also had to
manage the continued deterioration
in the exchange rate – while a weak
rand makes our exports more
attractive, it counters efforts to
reduce costs incurred in US dollars.
40
Some critics accuse us of being
exploitative, which is neither true
nor sustainable. Mining is about
balance – ensuring the profits of
today support the business of
tomorrow when profit is harder
to achieve. Equally, in South
Africa, business plays a greater
role in social responsibility, with
a large portion of this mandated
by legislation. While companies
such as Exxaro willingly accept this
responsibility, we believe our role
as an important national economic
contributor depends on less
volatility and more flexibility – from
all stakeholders.
Limited progress was made in 2014
on clarifying legislative issues
impeding the industry. We continue
to work with regulatory stakeholders
to reach policy certainty, and
welcome the progress that has
been made during the year. While
the government has made it clear
that our industry is a key catalyst
in national economic development,
we believe only mutual flexibility,
regulatory certainty with consistent
application, and appropriate and
timely infrastructure will encourage
further investment by mining
companies and foreign investors
alike. We are committed to working
with the minister of mineral
resources and through industry
bodies to achieve a common goal to
benefit all South Africans.
Following positive feedback from
stakeholders, we continue to
provide detailed discussions on
our performance drivers (page 22),
approach to sustainability
(page 18), top risks (page 32) and
operating environment (page 9)
and performance (page 52).
Supplementary information to this
concise integrated report appears
on this website.
We have, however, improved
disclosure by publishing our
detailed strategic performance
dashboard for the top ten risks.
This is a very honest assessment
of our progress against specific
targets. We have also included
detailed discussion on our top
material issues. Our confidence in
inviting stakeholder scrutiny at this
level reflects a significantly more
mature and holistic understanding
of our strategic drivers, risks and
opportunities at every level, itself
a key indicator of how integrated
thinking is being entrenched in the
group.
In addition, we have taken
shareholder comments to heart
and provide significantly more
information on how remuneration
is linked to these metrics in our
remuneration and nomination
committee report (page 81).
We again welcome your feedback
which will aid in achieving our aim
to make our reporting meaningful,
comparable and accurate.
Corporate governance
Exxaro’s governance standards
compare well with best practice,
guiding the group as we expand
our operating areas. This was
recognised when we received
Ethical Boardroom magazine’s best
corporate governance award in the
mining category in the Africa region
for 2015.
The standard of our governance
is also evident in our combined
assurance approach, where the level
of sophistication achieved over the
past three years is notable in both
greatly reduced findings and level of
severity. We believe our audit results
reflect the stability of Exxaro,
reliability of our data, integrity,
discipline, sound internal controls
and robust governance structures
in place. However, despite all our
efforts and excellent practices,
decisions are inherently about
balancing risk and uncertainties with
potential growth and opportunities,
which will always be an imperfect
science.
For us, compliance is the starting
point — throughout this report and
in the supplementary information,
you will find examples of how
Exxaro aims to live up to the spirit of
legislation to set new standards in
our industry.
Last year, we welcomed Dr Con
Fauconnier back to Exxaro as
an independent non-executive
director and member of several
board committees. We are
already benefiting from his wealth
of applicable knowledge and
experience. Jurie Geldenhuys
retired at the 2014 annual general
meeting after serving as a director
of Exxaro since its inception, while
Nkululeko Sowazi resigned from
the board in June 2014. Our sincere
appreciation goes to both directors
EXXARO INTEGRATED REPORT 2014 for their contributions during their
respective tenures. We welcomed
Vuyisa Nkonyeni as an independent
non-executive director and audit
committee member in June 2014.
Succession
Post year end, we announced that
Exxaro’s chief executive officer
(CEO), Sipho Nkosi, will retire on
31 March 2016. Mxolisi Mgojo,
who currently heads our carbon
operations, has been appointed
CEO-designate in a transition period
from 1 May 2015 to 31 March 2016
when his appointment as CEO
will become effective. These
appointments are part of a carefully
considered succession plan
managed by the Exxaro board over
the past three years. Dr Nombasa
Tsengwa, currently general manager
of our Mpumalanga coal operations,
will be acting executive head: carbon
operations from 1 May 2015 until a
replacement is appointed.
Sipho was instrumental in
establishing Exxaro from the merger
of Kumba Resources’ coal, mineral
sands and base metals assets with
Eyesizwe Coal, a company he formed
with others. Under his leadership,
Exxaro has become one of the
largest and foremost black-owned,
South Africa-based diversified
resources companies, managed by
an experienced, capable and diverse
executive team well-placed to take
the group forward.
On behalf of the board, I thank Sipho
for his tenure during which the
group’s net asset value increased
by well over 200% to R96 per
share from R29 in 2007. In addition
to delivering significant value to
stakeholders, he spearheaded the
safety focus that has seen an 80%
reduction in fatalities and 50%
reduction in our lost-time injury
frequency rate. Today, the group has
a strong balance sheet, solid growth
potential and is poised to move to
the next level of growth.
Our CEO-designate, Mxolisi Mgojo
(54) has over 20 years’ experience
in the operational, financial,
logistics and marketing arenas,
predominantly in the investment
banking and resources sectors.
We look forward to the strategic
management, business acumen and
operational know-how he will bring
to bear in rolling out the corporate
strategy.
Appreciation
Exxaro is guided by decades of
experience and a number of unique
attributes that ensure it continues
to grow despite the challenges of
its industry. While still 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 7 800 people are
the cornerstones of our continued
long-term growth.
Outlook
Following the board strategy
process in the past year, a few key
conclusions were reached by the
board and executive committee.
Firstly, the operating environment
will remain challenging for our
business, reflecting subdued
growth in developing countries
and thus depressed demand for
our commodities. Secondly, coal
and pigment prices are likely to
remain flat, at best, while iron ore
prices will continue to decline, given
anticipated volumes to be delivered
by major producers over the next
two to three years. Locally, Eskom’s
circumstances remain concerning,
particularly its liquidity and rating
status. However, we maintain a
positive outlook based on the
addendum 9 agreement reached
in the second half of 2014. The
socio-political environment is likely
to remain uncertain amid rising
expectations for social delivery from
mining companies, higher wage
demands and changes in legislation.
Given this outlook, our strategy in
the short to medium term will focus
on consolidating growth in our
existing portfolio of commodities:
• We anticipate continued growth in
our coal portfolio after ramping
up Grootegeluk upgrades and
expansion to supply Eskom’s
Medupi power station
• Extracting synergies from
integrating the Total Coal SA
operations into our existing
portfolio, particularly the growth in
export volumes from Grootegeluk
and, in time, the Belfast project.
Further details on Total Coal will
be provided when the transaction
closes after all conditions
precedent have been fulfilled.
We have some major decisions
on the future of our investment
in Tronox and considerable effort
is being devoted to ensuring we
execute a value-adding transaction.
With the Mayoko project, we have
decided to withhold any further
capital expenditure to develop the
project while we engage with the
RoC government on the availability
of key logistics infrastructure,
conclude definitive agreements and
assess market conditions.
We are excited about the impending
delivery of electricity to the grid
from wind farms being developed by
our 50% joint venture, Cennergi, in
the Eastern Cape. Commissioning of
the first, Tsitsikamma Community
Development wind farm (95MW), will
take place in the second half of 2015,
contributing to alleviating electricity
constraints in the country.
We have developed a new five-year
programme of social and labour
plans and we will be working closely
with government at all levels,
community leaders and beneficiaries
to ensure successful delivery of
mutually agreed projects that will
have a positive impact on people’s
lives and well-being.
Finally, ahead of the termination
of our current empowerment
shareholding structure in 2016, we
are examining our options for a new
structure that will potentially aim to
empower Exxaro indefinitely. As a
proudly South African company,
and one that transacts significant
business with Eskom, empowerment
and transformation underpin our
continued growth.
Dr Len Konar
Chairman
9 April 2015
EXXARO INTEGRATED REPORT 2014 41
PERFORMANCE (continued)
CHIEF EXECUTIVE
OFFICER’S MESSAGE
The review period was another
tough one for Exxaro and all
resource companies. We started
the year focused on extending
the roll out of our strategy as a
diversified mining company by:
• Deepening our presence in coal/
carbon
• Identifying further opportunities
for exporting coal
• Continuing with the ferrous
business
• Continuing to develop our energy
business
• Reviewing our strategic
investments and project portfolio.
Our people and their welfare are
integral to our strategy. Accordingly,
we focused on developing
individual potential, enhancing
their participation and contribution.
We also deepened our relationships
with organised labour, reflected in
a stable operating environment and
improved employee engagement.
We continued to develop our strong
project pipeline while saving costs
internally. Our major project at
present is the Grootegeluk Medupi
expansion project, completed on
time and within budget. While
ongoing delays to the construction
and commissioning of Eskom’s
Medupi power station clearly affect
our own plans, we are ready to fulfil
our contractual commitments.
Overview of 2014
As detailed in our macro-economic
review on page 9, a combination
of South African and global
headwinds changed the picture
fairly dramatically during the
year. Markets turned sharply in
the wrong direction, leading to
an excess supply of commodities
and significant fall in prices, most
notably Brent crude.
42
Forecast
350
300
250
200
150
100
50
2012
2013
2014
2015
2016
RBCT steam
HCC
Chinese market coke
Coal and market coke prices (US$/t)
For Exxaro – although demand for
our commodities was stable – the
sharp drop in iron ore prices, and
then coal, had a twin impact: the
lower iron ore price affected our
dividend income from the Sishen
Iron Ore Company (SIOC) while
lower coal prices affected our export
revenue, which generates high
margins. As a result, and despite a
stable dividend from Tronox, group
income dropped sharply.
This required a more clinical
assessment of our business against
our strategic goals (page 17), and the
need to accelerate implementation
of project Turnkey – an 18-month
initiative to December 2014 focused
primarily on refining a more efficient
operating model and consequently
reducing some costs through, inter
alia, voluntary severances and
structure optimisation. In addition,
current market conditions dictated
a review of capital expenditure
early in 2015, with several major
projects delayed (principally,
Thabametsi phase II, Moranbah
South, Reductants retorts 7 and
8, underground coal gasification
and Mayoko). We also discontinued
further development of our
proprietary AlloyStream technology
from March 2015.
Of course, the headline news on
Exxaro in 2014 focused on the
R5,8 billion impairment of our iron
ore project in the Republic of the
Congo (RoC). After signing the
mining convention in January 2014,
we had expected government
authorisations and definitive
port and rail access agreements
to be finalised by March 2014,
but unfortunately these did not
materialise, contributing to the need
to impair. We continue to engage
with the RoC government on a
mutually beneficial solution: the
mining convention was extended by
a further two years and a second
amendment to this convention is
being prepared for submission to
the RoC government mid-2015.
This amendment addresses a revised
ramp-up and project schedule as
well as detailed conditions to be met
prior to considering implementation
of the schedule.
We also commissioned an
independent review of the Mayoko
project investment process, as
requested by our board. Most
notably, unanticipated and
significant delays in finalising the
agreements contributed to a gradual
erosion of projected returns over
time. This was a harsh lesson that
affected our excellent track record
on delivering complex, large-scale
projects on time and within budget.
Although we are confident there
are no fatal flaws in the project, the
lessons learned will be etched into
strengthened project management
and governance processes for
our group.
We have not yet made a final
decision on the long-term strategy
guiding our presence in the RoC.
As with any other project, we are
continuously evaluating its returns
EXXARO INTEGRATED REPORT 2014
versus the cost of investment.
Although current iron ore prices
are not attractive, we still believe in
the long-term fundamentals of iron
ore. Our teams continue to assess
the market conditions and future
commercial viability of this project
and we will keep stakeholders
informed of our progress.
Progress in 2014
Important progress was made in
our core business, coal, which for
the first time contributed more
headline earnings per share than the
ferrous business. This is detailed in
the performance review on page 52.
Summarised highlights include:
• The stable performance of our
coal business under difficult
market conditions – 1% growth
in production despite lower
production from three mines
as noted by the chairman. We
have a strong coal portfolio
that is on track for optimisation
and we retain access to quality
assets with growth potential.
Our portfolio is characterised
by a multi-product business for
domestic and export markets
• At our flagship Grootegeluk mine,
the Grootegeluk Medupi
expansion project or GMEP
was completed. Despite delays
at Eskom’s new Medupi power
station, the power utility has
honoured its agreements with our
group. While we are committed
to playing our part in alleviating
South Africa’s power situation by
providing technical assistance
to Eskom in certain areas, at the
same time we are concerned
about the impact of delayed
synchronisation of unit 6 at
Medupi (which finally began early
in 2015) on our own performance
• To maintain our world-class
Grootegeluk mine, infrastructure
and equipment upgrades are now
under way. These will be major
contributors in the next few years,
with capital expenditure of around
R250 million carefully phased
to match Eskom’s progress in
ramping up Medupi
• The bankable feasibility study
for the first phase of Thabametsi
North is under way, and some
of the required licences have
been granted, paving the way
to capitalise on this greenfield
operation’s synergies with
Grootegeluk. Thabametsi will
supply coal to a proposed 600MW
independent power plant built by
our partner GDF SUEZ/Marubeni,
which will tender this bid in
June 2015
• Our greenfields Belfast project
in Mpumalanga was approved by
the board, supporting our growth
and export targets. Several
licence appeals have, however,
been submitted and we will
keep stakeholders informed of
developments
• September 2014 marked the last
production at Tshikondeni, while
Inyanda’s life of mine will end in
the third quarter of 2015. We are
collaborating with the Peace
Parks Foundation on a post-mine
closure project to ensure socio-
economic development continues
at Tshikondeni. At Inyanda, a
disposal process is under way to
source a buyer for the assets and
liabilities of this mine – chiefly
infrastructure consisting of a
beneficiation plant and private
rail siding
• Good rail performance by
Transnet Freight Rail (TFR) in
2014, together with collaborative
initiatives on daily train
planning, reduced train handling,
turnaround and loading times.
The strike rate of 98% was
achieved and we expect it to be
maintained, improving future rail
operational performance. We also
achieved our 5Mtpa export target
after TFR expanded rail capacity
• We are acquiring Total Coal South
Africa (TCSA), which will add
4Mtpa to our export capacity. The
transaction has been approved by
the competition authorities, but
the transfer of the mining right
under section 11 of the MPRDA
from the current owner to Exxaro
was outstanding at the time of
finalising this report.
Much of this progress reflects a
stable political environment after
the 2014 elections, and tangible
progress in key areas, for example
the pace at which the regulator
grants mining licences. Recognising
that a delay in approving licences
can have an enormous (and often
negative) impact on projects,
government is looking at centralising
the process to expedite applications
and guarantee final consideration
and responses in under 300 days.
We have long stated that dialogue
with the regulators must happen
much earlier and more frequently
in the project lifecycle – given that
this is directly related to building
positive relationships between the
industry and respective government
regulators.
More is needed, however, to
clear backlogs, expedite appeals
against approved licences and
make South Africa attractive for
foreign investment. This includes
harmonising legislation and codes
regulating our industry, specifically
amendments to the Mineral and
Petroleum Resources Development
Act and codes of broad-based black
economic empowerment (BBBEE
– under the new codes, almost all
mining companies will drop several
scorecard levels, affecting their
ability to transact with government
departments).
Further delays in finalising
amendments to the Mineral and
Petroleum Resources Development
bill – specifically the agreed price
mechanism at which minerals could
be sold locally – have heightened
uncertainty and pose a potentially
crippling threat to the South African
mining industry.
As an industry, we are fully
committed to transformation and
we are working with government
through the Chamber of Mines and
other industry bodies to clarify
legislative inconsistencies as soon
as possible so that we can develop
appropriate and ideally longer-term
plans to comply with new targets.
At the same time, we caution that
ever-increasing compliance levels
are becoming prohibitive. The
collective impact of complying with
financial, legislative, regulatory and
listings requirements has become a
significant concern for all companies
– in time and cost – particularly in
our industry. This impact is only
compounded by the legislative
uncertainty currently hampering
South African mining companies.
EXXARO INTEGRATED REPORT 2014 43
PERFORMANCE (continued)
Managing the risks in mining
Mining has always been an industry
with complex and changing risks –
and 2014 again proved the point.
Arguably, apart from the legislative
uncertainty noted above, the
greatest emerging risk into the early
months of 2015 was electricity.
This is a particular paradox for
Exxaro as Eskom is both a key
customer (revenue) and key risk
(security of supply but only if the
grid collapses – as a key component
of the Eskom supply chain, Exxaro
mines are exempt from load-
shedding). For South Africa Inc,
the financial cost of load-shedding
or the worst-case scenario of
blackout is incalculable, and this
was immediately reflected in lower
growth forecasts off a low base.
For mining companies in particular,
the power crisis presents a social
issue as companies aim for energy
self-sufficiency while operating
among often impoverished rural
communities.
More positively, mining presents
opportunities for companies
prepared to invest for a shared
future, with shared value.
Capitalising on those opportunities
requires a dynamic strategy, with
the flexibility to respond to changing
markets and the strength that
comes from a deep understanding of
those markets. The comprehensive
risk analysis on page 32 illustrates
the progress in viewing our business
and our future from an integrated
perspective, but always focused on
our strategic goals.
To illustrate this using the 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 ongoing focus on
safety and occupational health
underscores our commitment to
our people and determination
to reduce the cost – most
importantly, the human cost of
an untimely death or disability.
44
However, globally, the impact
of non-communicable diseases
(so-called lifestyle diseases) is
fast becoming a much greater risk
than occupational health issues.
While Exxaro has a programme
in place to address lifestyle
diseases, at board level we are
analysing our approach to ensure
we are effectively managing the
risk at all levels. In terms of skills
development, we focus on our
own needs as well as those of
the country: over the past five
years, Exxaro has spent over
R760 million on training for
historically disadvantaged South
Africans, benefiting hundreds of
people. While the direct benefit
for Exxaro is arguably one of the
best qualified workforces in our
industry, all those who graduate
from our training centres are
equipped with skills that make
them employable. This addresses
one of South Africa’s most
pressing needs – qualified artisans
• Social: constant interaction
with government authorities
accelerates the approval process
that enables us to implement
comprehensive social and labour
plans, with far-reaching benefits
for our community stakeholders.
Between 2013 and 2017, we will
spend R300 million on these
projects (2014: R88 million)
• Manufactured: to ensure
appropriate infrastructure is
in place, we are collaborating
with government and industry
stakeholders to improve existing
facilities (from water treatment
works to roads) and initiate new
developments. This 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.
Sustainability
Our commitment to good
governance and the sustainability
of our business, with associated
benefits for all stakeholders, is
reflected in numerous awards
(page 3). While these are indeed
gratifying, recognition is not a goal
for our group.
At all times, our corporate values
(page 17) guide the way we do
business, how we select our partners
and how we interact with our
stakeholders. In addition to being
a signatory to the United Nations
Global Compact, we support the
UN guiding principles on business
and human rights, and other global
sustainability codes aimed at
ensuring beneficial relationships
between all stakeholders. These
are integrated into the way we
do business and our progress is
monitored by the social and ethics
committee of the board (page 78).
Outlook
Our outlook for the year ahead and
beyond is on page 58. Exxaro is in
good shape – to remain a resilient,
sustainable enterprise, we will
continuously shape and adapt our
business to market conditions and
geographic locations. A dynamic
strategy and focus on costs will
help us weather the challenges of
the next few years, which will be
characterised by cost pressures,
subdued global demand and lower
available sources of finance that are
critical to running a value-adding
business.
We remain confident of meeting
these challenges through discipline,
focus and the commitment of all our
people.
Sipho Nkosi
Chief executive officer
9 April 2015
EXXARO INTEGRATED REPORT 2014 FINANCE DIRECTOR’S REVIEW
Exxaro has delivered a solid
set of financial results for the
2014 year in a subdued bulk
commodity industry. Some of
the main features included:
• 14% increase in our coal business’
net operating profit
• 32% decrease in the equity-
accounted investment
contribution from SIOC
2
,
6
1
,
4
3
1
,
4
2
1
1
,
2
1
,
5
0
1
5
6
,
,
6
8
• 11% reduction in losses recorded
,
0
4
5
2
5
1
,
5
8
9
8
9
5
6
,
6
0
5
3
7
5
4
1
7
8
5
6
9
0
0
1
2
9
3
,
0
4
2
9
8
1
7
5
2
0
,
by Tronox
• A strong financial position with
a debt: equity ratio of 3%
• A final dividend of 210 cents
per share, bringing 2014 total
dividend declared to 470 cents
per share (cps).
Comparability of results
Several key events and transactions
in the past two years make financial
results for 2014 and 2013 not
comparable, mainly the impairment
of our Mayoko iron ore project in the
ferrous operating segment in 2014,
as well as profit on the sale of our
base metals subsidiaries in 2013.
Group performance
Group revenue increased by 21%
to R16,4 billion for 2014 compared
with R13,6 billion in 2013, mainly
due to higher revenue from
the coal business. The group’s
headline earnings declined by 6%
to R4,9 billion as Exxaro faced the
same challenges as experienced by
the industry, particularly iron ore
as evident in the 32% decrease in
the equity-accounted investment
contribution from SIOC. This was
partially offset by a 25% increase in
the coal business’s contribution to
R2,5 billion.
Coal business
We are proud of the performance of
our coal business, which achieved
overall production volumes
(excluding buy-ins and semi-coke)
that were 0,34Mt higher than 2013,
while sales volumes were 1,47Mt
higher. Grootegeluk achieved an
increase of 11% in metallurgical coal
production as a result of more trains
being available and an increase of
869kt (kilo tonnes) in power station
2
0
,
2
0
,
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Coal
Other
Coal
Other
Revenue (Rbn)
Headline earnings per share
(cents)
coal volumes as Medupi is ramping
up. Transnet Freight Rail (TFR)
performed on a stable platform of
around 72Mt. Exports increased
by 19% due to higher availability
of trains (Grootegeluk) and higher
third-party buy-ins (700kt) mainly
to balance export volumes, logistics
and commitments.
Exxaro recorded a 19% lower
average dollar price at US$65
(2013: US$80) but only an 8% lower
rand price of R709 (2013: R771)
due to lower average overall US$
commodity prices and lower quality
in export mix (67% vs 92%).
Coal’s net operating profit increased
by 19% to R3 297 million for review
period, mainly due to higher volumes
(R632 million), favourable exchange
rate as the local currency weakened
against the US$ (R561 million),
lower allocated corporate costs
(R91 million), the saving against
prior-year losses realised at NCC
after it was placed under care-and-
maintenance (R243 million), offset
by higher royalty tax provision
(R86 million); higher distribution
costs (R137 million); higher
depreciation costs (R141 million);
higher buy-ins from Mafube JV
(R181 million), weaker prices
(R54 million); inflationary pressures
recorded at a general inflation rate
of 7,5% (R400 million), as well as the
impact of changes in environmental
rehabilitation provision other than
the unwinding of the discount rate
(R768 million).
We have initiated a proactive
implementation of the DMR’s
requirements for probable future
liabilities provisions for affected
water treatment, governed by the
MPRDA and National Water Act
(NWA). Given the limited guidance on
determining liabilities in these pieces
of legislation, we have calculated
the probable future liabilities’ net
present values, which resulted in
an additional R370 million of water
treatment potential liabilities being
recorded in the second half of 2014.
EXXARO INTEGRATED REPORT 2014 45
Energy
The equity-accounted investment
in Cennergi contributed R92 million
in losses, an 11% decrease on losses
recorded in 2013 mainly due to lower
operating, business development
and project costs.
Other
It is pleasing to see our people’s
efforts to reduce costs come to
fruition. Support functions’ costs
(functions other than those directly
linked to mining activities) reduced
by R124 million on the prior year.
This resulted in a net lower recovery
from the coal and ferrous businesses
of R116 million. The cost reduction
was mainly due to savings on
salaries, bonuses and share scheme
payments.
PERFORMANCE (continued)
FINANCE DIRECTOR’S
REVIEW (continued)
The Medupi coal supply agreement
addendum 9 was successfully
finalised between Exxaro and Eskom
in the third quarter of 2014. This
followed on coal tonnages delivered
to Medupi power station in July
2014. In total, GMEP produced
2,7Mt of coal for Medupi in 2014
with deliveries of 3,1Mt as per
addendum 9. The total capital
expenditure for the project remains
within the forecast R10,2 billion.
In line with our capital allocation
discipline, we continue to review our
allocation programmes. Our group
capital expenditure at R3,2 billion
(of which coal-related capital
expenditure amounts to R2,2 billion)
was 33% less than 2013, with future
expansion capex significantly
reduced.
Ferrous business
In January 2014, the Mayoko
mining convention was signed by
the government of the RoC, along
with in-principle agreement on rail
and port infrastructure to develop
the 12Mtpa Mayoko mine. A concept
study on a revised 12Mtpa project
was concluded in June 2014. The
outcome of this study and delays
in concluding further definitive
agreements for rail and port
infrastructure resulted in Exxaro
impairing its investment in the
project.
The overall ferrous net operating
loss increased to R6 238 million
mainly due to the impairment
of the Mayoko iron ore project
(R5 803 million) and higher costs
incurred on the Mayoko project
which are no longer eligible for
capitalisation after the impairment
in 2014.
The reality of current market
conditions and their impact on our
equity-accounted investment SIOC
has meant that SIOC’s core post-tax
equity-accounted contribution to
Exxaro’s net profit after tax has
declined by 32% to R2,8 billion.
Combined with the 17% higher
dividend cover applied by SIOC,
our share of its dividend declared
decreased by 42%. However,
even at the bottom of the cycle,
SIOC remains a great investment
and significant contributor to our
bottom line of some 60% of group
HEPS, albeit at a lower level than in
the past.
Titanium dioxide
Although lower selling prices were
recorded in all regions, the core
equity-accounted loss contribution
from Tronox decreased by 11% to
R568 million, mainly on a significant
improvement in operating income
from the pigment segment due
to sales volume gains and lower
feedstock costs. Operating income
from the mineral sands segment
declined from 2013, driven mainly
by lower selling prices and sales
volumes. The US$ losses were
exacerbated by the impact of the
weak rand exchange rate.
As a major shareholder, we
are encouraged by Tronox’s
latest announcement of the
acquisition of Alkali Chemicals,
a division of FMC Corporation
Limited. Alkali Chemicals is
expected to add stability and
has a history of consistently
delivering strong operational and
financial performance. Exxaro will
continue to equity-account the
Tronox investment, including the
contribution made by the Alkali
Chemicals business.
46
EXXARO INTEGRATED REPORT 2014 Cash flow and funding
requirements
The group is reaping the
benefits of its diligent cash flow
management over the last five
years. This strategy has put us in a
strong position to deal with many
headwinds at the bottom of the
cycle. We realised strong cash flow
from operations which enabled us
to pay for sustaining and expansion
capital expenditure. Dividends from
our investments (mainly SIOC and
Tronox) were sufficient to pay our
own dividends, interest and tax while
the surplus was used to repay debt.
In the end, we decreased debt by
Net debt analysis (R million)
over R2 billion to end the year at just
above R1 billion. We are therefore
comfortably within the covenant
terms of our finance providers
as well as our board’s strategic
guidelines at 31 December 2014,
with a strong financial position;
sufficient undrawn facilities, and
a comfortable maturity profile.
We have also arranged for
sufficient facilities in preparation
for funding requirements on the
TCSA transaction. Once payment is
effected, we expect that we will still
be comfortably within our financial
covenants.
7
9
1
3
)
9
8
(
)
8
2
7
3
(
Shareholder return
We remain committed to returning
regular income through dividends
to our shareholders and ensuring
long-term capital growth on shares
held. After careful consideration
of the challenges that face Exxaro
and the industry, the budget for the
short to medium term, covenants
with our finance providers as well
as overall liquidity and the going-
concern position, the board declared
a final dividend of 210 cents per
share, bringing the total dividend
to 470 cents per share for 2014.
The board believes this dividend can
be safely declared without putting
the current and future business
under strain. The total dividend of
470 cents for 2014 represents a
dividend yield of 7% (2013: 4%).
7
7
3
3
)
3
8
0
4
(
5
5
0
2
)
6
2
(
1
7
0
1
8
4
2
0
2
1
Net debt
31 Dec
FY13
Cash
generated
Net
financing
costs
Tax Dividends
paid
Capital
expenditure
Investing
activities
Dividends
received
Other
Net debt
31 Dec
FY14
Net debt analysis
EXXARO INTEGRATED REPORT 2014 47
PERFORMANCE (continued)
FINANCE DIRECTOR’S
REVIEW (continued)
Outlook
We expect the challenging economic
conditions that faced commodity
markets in 2014 to continue in 2015.
Economic growth is expected to
remain constrained, and the rand
exchange rate against the US$
to remain weak for most of 2015.
We believe Exxaro will be able to
withstand the downturn in US$
export coal prices through our
exposure to the domestic Eskom
business.
Group-wide sustainable cost
management has become part
of our life. To protect margins in
future, ongoing focus is directed at
managing controllable costs across
the business.
0
0
8
0
0
5
7
4
5
,
0
5
5
0
0
5
0
3
,
5
7
2
,
0
7
4
8
1
,
3
,
3
0
)
5
0
(
,
2010
2011
2012
2013
2014
Cents
per share
Attributable earnings
per share cover (times)
Dividends (cps)
It is important to note that a change
in sourcing coal will be required
by the imminent Inyanda mine
closure. This will be facilitated
by the increase in exports from
Grootegeluk on the back of more
trains being allocated. As such,
export performance in 2015 will
hinge largely on TFR performance
between the Waterberg and RBCT.
Transnet is expected to maintain its
record 2014 performance levels in
2015 as well. We expect overall 2015
exports to be around 4,5Mt as we
plan to eliminate low-margin buy-ins.
Mayoko project expenditure for
2015 is expected to be limited to
the cost of maintaining the minimal
remaining footprint in the RoC, as
well as costs for the project team’s
interaction with the RoC government
until a final decision is made.
For more on the summarised group
annual financial statements, refer to
page 91.
Wim de Klerk
Finance director
9 April 2015
48
EXXARO INTEGRATED REPORT 2014 OUR ASSET BASE
Exxaro’s attributable coal resources
are estimated as 14 876Mt and
3 770Mt coal reserves, the bulk of
which lie in the coal-rich Waterberg
region, contributed by Grootegeluk.
Iron ore resources are estimated
at 795Mt, mineral sands at 1 852Mt
resources and 678Mt reserves, and
base metals (primarily zinc, lead,
copper) at 70,6Mt resources and
16,4Mt reserves.
As detailed on our website, Exxaro
includes all estimates directly under
its management control (100%
shareholding) but also includes
estimates of entities in which we
hold a 25% or larger interest.
Mineral resources and mineral
reserves are reported at 100%,
irrespective of the percentage
attributable to Exxaro. The mineral
resources and mineral reserves
underpinning Exxaro’s current
operations and growth projects are
summarised in the tables of the
consolidated mineral resources and
reserves report.
Main area of coal
operations*
* Refer to detailed spread overleaf.
EXXARO INTEGRATED REPORT 2014 49
PERFORMANCE (continued)
OUR ASSET BASE
WATERBERG NORTH
Location
West of Lephalale
Project stage
Concept phase
Product
Resources
(inclusive)
Thermal coal
2 253Mt
Reserve
Not yet declared
Mining method
Open-cut
BOTSWANA
Location
Product
Market
Resources
(inclusive)
Reserve
Mining method
Run of mine
Life of mine
GROOTEGELUK
West of Lephalale
Thermal, metallurgical and
coking coal
Domestic and export
4 719Mt
3 261Mt
Open-cut
37,9Mt
30+ years
• LEPHALALE
WATERBERG SOUTH
Location
West of Lephalale
Project stage
Concept phase
Product
Resources
(inclusive)
Thermal coal
895Mt
Reserve
Not yet declared
Mining method
Open-cut
LEEUWPAN
Location
Product
Market
Resources
(inclusive)
Reserve
Mining method
Run of mine
Life of mine
South-east of
Delmas
Thermal and
metallurgical coal
Domestic and
export
144,5Mt
109,1Mt
Open-cut
6,61Mt
15 years
NORTH WEST
â
N
• Currently under care-and-maintenance.
* Reached end of life in 2014.
50
THABAMETSI
Location
West of Lephalale
Project stage
Prefeasibility phase
Product
Resources
(inclusive)
Thermal coal
4 828Mt
Reserve
Not yet declared
Mining method
Open-cut
Location
Product
Market
Resources
(inclusive)
Reserve
MATLA
West of Kriel
Thermal coal
Domestic (Eskom)
1 008Mt
224,3Mt
Mining method
Underground
Run of mine
Life of mine
10,37Mt
24 years
PRETORIA •
GAUTENG
NEW CLYDESDALE•
JOHANNESBURG •
Location
Product
Market
Resources
(inclusive)
Reserve
North of Kriel
Thermal coal
Domestic and export
53,9Mt
2,7Mt
Mining method
Underground
Run of mine
None – Divesting
process
FREE STATE
Life of mine
2,5 years
EXXARO INTEGRATED REPORT 2014 ZIMBABWE
MOZAMBIQUE
NORTH BLOCK COMPLEX
Location
Product
Market
Resources
(inclusive)
Reserve
West of Belfast
Thermal coal
Domestic
27,0Mt
11,5Mt
Mining method
Open-cut
Run of mine
Life of mine
3,61Mt
2,5 years
TSHIKONDENI*
Location
Product
Market
Resources
(inclusive)
East of Mutale
Coking coal
Domestic
(ArcelorMittal)
28,8Mt
Reserve
0 (mine closure)
Mining method
Underground
Run of mine
0,3Mt
MAFUBE (50%)
Location
Product
Market
Resources
(inclusive)
Reserve
Mining method
Run of mine
Life of mine
East of
Middelburg
Thermal coal
Domestic and
export
183,1Mt
118,7Mt
Open-cut
4,22Mt
16,7 years
LIMPOPO
• POLOKWANE
INYANDA
Location
Product
Market
Resources
(inclusive)
Reserve
Mining method
Run of mine
Life of mine
North of
eMalahleni
Thermal coal
Export
1,20Mt
1,17Mt
Open-cut
2,16Mt
0,5 year
PRETORIA •
MPUMALANGA
• EMALAHLENI
Location
Product
Market
Resources
(inclusive)
Reserve
ARNOT
South of Middelburg
Thermal coal
Domestic (Eskom)
250,3Mt
54,5Mt
Mining method
Underground
Run of mine
Life of mine
1,44Mt
19 years
GLISA SOUTH
Location
West of Belfast
Project stage
Prefeasibility phase
Product
Resources
(inclusive)
Reserve
Thermal coal
76,5Mt
Not yet declared
Mining method
Open-cut
SWAZILAND
BELFAST
Location
South of Belfast
Project stage
Feasibility concluded
Product
Resources
(inclusive)
Reserve
Mining method
Life of mine
Thermal coal
133,3Mt
45,7Mt
Open-cut
17 years
KWAZULU-NATAL
EXXARO INTEGRATED REPORT 2014 51
PERFORMANCE (continued)
OPERATIONAL
PERFORMANCE
Coal
General trading conditions in
the coal commodity remained
challenging in 2014, with average
coal export prices dropping from
US$83/t in January to a low of
US$63/t in November, closing the
year at US$66/t (20% lower). Export
volumes, however, increased from
4,5Mt to 5,3Mt. The group realised
an average export price of US$65/t
in 2014 compared to US$80/t in
2013, mainly on higher sales of
lower-value product. An average of
67% of export sales was on the RB1
product (a specific quality of coal),
compared with 92% in 2014.
Production and sales volumes
Overall coal production volumes
(excluding buy-ins and semi-coke)
were 0,34Mt higher (1%) than in
2013 and sales volumes were 1,47Mt
higher (4%).
EXXARO MINES
Open-pit
Inyanda
NBC
Mafube
Leeuwpan
Grootegeluk
Diagram not to scale.
Underground
Tshikondeni
Arnot
Matla
30
,
6
7
2
,
2
7
2
,
7
6
2
,
7
6
2
,
2
7
2
,
8
6
1
25
20
15
10
5
,
7
2
1
,
3
3
1
,
0
2
1
,
0
2
1
3
,
1
6
,
1
1
,
1
5
,
1
2
2
,
,
8
3
2
,
0
3
2
,
5
3
2
,
2
4
2
,
3
3
1
,
7
2
1
1
,
2
1
,
0
2
1
1
,
2
1
,
2
1
,
2
9
,
1
9
,
1
,
2
4
2
25
,
8
6
1
20
15
10
5
1
,
4
,
9
4
,
5
4
,
9
3
3
5
,
,
3
0
,
3
0
,
3
0
,
3
0
2
0
,
0
2010
2011
2012
2013
2014
0
2010
2011
2012
2012
2014
2010
2011
2012
2013
2014
Commercial
Tied
Buy-ins
Domestic
Tied
Export
Commercial
Tied
Total coal production (Mt)
Total coal sales (Mt)
Metallurgical coal production (Mt)
52
EXXARO INTEGRATED REPORT 2014 Metallurgical coal
Year on year, Grootegeluk’s
production was 212kt (11%) higher
and sales 357kt (19%) higher, mainly
reflecting increased TFR train
allocations to RBCT as well as higher
ArcelorMittal demand. Tshikondeni
production was 189kt (55%) lower
and sales were 102kt (30%) lower
than 2013 after the mine stopped
production in September 2014 as it
reached the end of its life.
Thermal coal
Power station coal production from
the tied mines was marginally higher
(48kt), mainly due to production
at Matla which was up 241kt (2%)
on improved cutting rates at the
short walls, offset by 193kt (12%)
lower production at Arnot due to
the fatality in July and difficult
geological conditions.
,
3
5
2
,
6
4
2
,
8
4
2
1
,
5
2
,
4
2
1
1
,
3
1
7
,
1
1
8
,
1
1
,
5
6
1
30
,
5
5
2
25
20
15
10
5
3
,
1
6
,
1
1
,
1
5
,
1
2
2
,
0
2010
2011
2012
2013
2014
Commercial
Tied
Buy-ins
Thermal coal production (Mt)
The commercial mines’ power
station coal production was 933kt
(5%) higher, mainly reflecting the
869kt increase at Grootegeluk due
to the Medupi power station supply
which started in the second half
of the year. Higher throughput at
Leeuwpan increased production
by 130kt (5%) while North Block
Complex production was 66kt lower
due to the limitation on Eskom
contractual volumes. Eskom demand
from Leeuwpan was impacted by the
Majuba silo collapse in the fourth
quarter of 2014, with Leeuwpan
production negatively affected by
approximately 200kt.
Domestic power station coal
sales from our commercial mines
were 658kt higher than 2013,
primarily due to higher demand
as Medupi offtake began, while
export sales increased by 515kt
due to the ongoing review and
balancing of export volumes, market
commitments and opportunities as
well as improving export logistics
capacity.
Portfolio improvement
Grootegeluk Medupi expansion
project (GMEP)
Construction on GMEP to supply
Medupi with 14,6Mtpa of coal has
progressed well and Exxaro met its
contractual commitments under
addendum 9 on time and within
budget. Total capital expenditure
for the project remains within the
budget R10,2 billion. The project has
achieved 34,6 million hours without
a fatality, and its LTIFR remained
at 0,17.
All plant modules have been
individually commissioned, tested
and the ramp-up to nameplate
capacity will continue in line with
the revised Eskom Medupi ramp-
up plan. While we are committed
to playing our part in alleviating
the power situation, we are also
concerned about the impact of
delayed synchronisation of unit 6
at Medupi on our own performance.
In the meantime, we continue to
deliver against the latest addendum
(finalised in August 2014) to the coal
supply agreement and we continue
to ramp-up the GMEP plant to
deliver agreed volumes.
Total Coal South Africa
Proprietary Limited (TCSA)
Exxaro entered into a binding
agreement in July 2014 with
Total Societé Anonyme, subject to
certain conditions precedent, to
acquire 100% of the issued share
capital of TCSA and its related
export marketing rights under a
primary RBCT allocation. Exxaro
will pay a total of US$472 million
(US$386,5 million to acquire
the issued share capital of TCSA
and US$85,5 million to settle
outstanding loan claims of Total
Finance against TCSA). While three
of the conditions precedent have
been fulfilled (approval by the
competition authorities, South
African Reserve Bank, and RBCT),
consent by the DMR under section 11
of the MPRDA is still outstanding.
Thabametsi
Thabametsi is a prospective
greenfields opencast coal mine
adjacent to Grootegeluk mine in the
Waterberg, Limpopo. Development
will be phased over a 10–15-year
period, as well as improved export
logistics capacity ramping up to a
20Mtpa mining complex. Through
its phase 1 development, the mine
will supply some 3,8Mtpa run-of-
mine coal to the 600MW Waterberg
independent power producer (IPP)
post ramp-up.
The prefeasibility study to develop
Thabametsi North phase 1 will be
completed in the second half of
2015 and the bankable feasibility
study will be completed by end-2015.
The environmental authorisation
was granted in December 2014 and
the mining right application process
is progressing.
Exxaro is also engaging with
relevant stakeholders to conclude
implementation plans on integrated
infrastructure such as bulk water
supply for the Waterberg coalfields,
which is crucial to developing all
projects in the region.
EXXARO INTEGRATED REPORT 2014 53
PERFORMANCE (continued)
Belfast
The board approved the R3,8 billion
Belfast project in 2014, subject to
required licences and regulatory
approvals being obtained. With
an estimated life of 16 years, this
greenfields mine is potentially
Exxaro’s last sizeable value-adding
project in Mpumalanga and supports
our strategy of increasing thermal
coal exports. Belfast will form part
of North Block Complex with an
anticipated primary product of
2,2Mtpa export coal and secondary
product of 0,5Mtpa of power station
coal to Eskom.
The integrated water use licence
(IWUL) was granted in September
2014, and rezoning appeals are
under way. Construction may begin
in 2015 after detailed engineering,
with commissioning scheduled for
the second half of 2017.
Moranbah South
We have obtained the environmental
impact study authorisation to
develop an underground dual
longwall mine on the Moranbah
South project (50% JV with Anglo
American plc), in the Bowen Basin
of Queensland, Australia. The mine
is expected to reach 18Mtpa run-
of-mine production of high-quality
hard coking coal. However, the
development schedule has been
postponed due to current market
conditions, and this position will be
reviewed in 2015.
Reductants
Semi-coke capacity expansion is
determined by the availability of
suitable feedstock and is being
executed in phases. The bankable
feasibility study for retorts 5 and
6 is on track for completion in the
first half of 2015. The concept study
on adding retorts 7 and 8 has been
postponed until market conditions
improve.
North Block Complex
During the year, the suspension of
the integrated water use licence
for Eerstelingsfontein was finally
lifted after a successful petition
to the minister of water and
sanitation. The coal resources at
Eerstelingsfontein will supplement
supply from North Block Complex
to Eskom.
Mines in closure
September marked the last
production at Tshikondeni.
Inyanda’s life-of-mine will end in
the third quarter of 2015 which is
expected to result in lower exports
in FY15. Exxaro will implement
and execute approved projects
in line with closure commitments
and the social and labour plans
for both mines.
Ferrous
Production and sales volumes
Changes in the product mix (adding
a blend product made from a
combination of buy-ins and own
product) at FerroAlloys in 2014
increased overall production 30%
or by 1 637 tonnes from 2013. Sales
volumes rose by 1 361 tonnes (19%)
mainly due to higher production and
commissioning the new ferrosilicon
plant in November 2014.
Portfolio improvement
Mayoko iron ore
As discussed in the CEO and FD’s
reviews, the RoC government
indicated that it will take
responsibility for the required
upgrades to public rail and port
infrastructure to enable Exxaro
to transport and export up to
12Mtpa of ron ore from the Mayoko
mine. Any further development
expenditure on this project will
be determined through a staged
approach after considering the
outcome of a prefeasibility study,
bankable feasibility study and
commodity market conditions.
FerroAlloys
During the year, we successfully
applied our ultra-high dense medium
separation technology at Sishen
Iron Ore Company. The ferrosilicon
expansion project was completed
and we are investigating the
potential for further application of
this ground-breaking technology.
We have, however, discontinued the
AlloyStream project.
Non-controlled operations
SIOC
Equity-accounted income from
Exxaro’s 19,98% interest in SIOC
in 2014 decreased by 32% to
R2 830 million, mainly due to a 47%
decrease in iron ore prices in 2014
compared to 2013’s closing price.
Titanium dioxide – Tronox
Equity-accounted losses from our
43,98% effective interest in Tronox,
together with the 26% equity
interest in Tronox South Africa
and Tronox UK, were R568 million,
mainly due to low sales prices across
most products.
As a major shareholder, we are
encouraged by Tronox’s acquisition
of Alkali Chemicals in 2014. This
U$$1,6 billion all-cash transaction
is expected to add stability and
diversification to the Tronox
business, and offer significant
annual synergies.
Energy – Cennergi
Together with Tata Power of India,
Exxaro is participating in renewable
energy projects through Cennergi.
Cennergi began constructing its two
wind projects in the second half of
2014, with completion expected in
the second half of 2016.
Base metals
Based on Exxaro’s strategic decision
to divest from the zinc business, we
will divest from our holdings in Black
Mountain (South Africa) and Chifeng
(Inner Mongolia).
54
EXXARO INTEGRATED REPORT 2014 Safety and health
The safety of our people is
fundamental to our business, and
we will not rest until we achieve
our safety goals through collective
responsibility, commitment and
ongoing focus. As part of this focus,
all operational business units have
international health and safety
accreditation (OHSAS 18001).
Our target for 2014 was zero fatalities
and a lost-time injury frequency rate
(LTIFR per 200 000 hours worked)
of 0,15. Regrettably we recorded one
fatality, and actual LTIFR performance
was 0,19 – while stable year on year,
it was above our target.
Exxaro is making steady progress in
managing occupational health risks,
with a 39% reduction in reported
occupational diseases in 2014.
In common with the mining industry,
we still face challenges with
tuberculosis cases. An integrated
HIV/Aids and tuberculosis policy was
approved during the year as part
of our efforts to manage this risk.
We recorded a 19% improvement in
the number of employees enrolled
on the HIV/Aids programme. We
are aggressively managing chronic
diseases of lifestyle – now the
second-highest cause of death
after HIV/Aids.
Leadership and people
As a group, we remain focused
on transformation, developing
our people and rewarding top
performers. We have met our
employment equity targets for top,
middle and junior management,
and women. We are nearing the
target for the senior management
category, while appointing people
with disabilities remains an industry-
wide challenge.
Exxaro invested 6,8% of total
salaries and wages or R221 million
(2013: 6,5% or R200 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 380 South African
employees enrolled in postgraduate
studies or management
development programmes.
Our employee share ownership
plan, Mpower 2012, paid dividends
of R14 million for the 2014 financial
year (2013: R11 million), benefiting
over 7 000 employees.
Our communities
Please refer to detailed disclosure in
our supplementary information on
this website.
Most social and labour plan projects
are channelled through the Exxaro
Chairman’s Fund (ECF) to which
all our operations contribute.
The group spent R88 million
(2013: R57 million) on social and
labour plans (SLPs) and other
community-related projects, mainly
on education for teacher and
learner development, enterprise
development and infrastructure
such as building roads and houses.
We have also aligned our focus
areas to those agreed between the
industry and the DMR in 2013.
%
8
% 6
4
6
%
8
5
%
7
5
80
70
%
0
6
%
0
6
60
50
40
30
20
10
%
5
% 3
2
3
48%
%
9
1
%
8
1
10%
%
2
,
1
%
3
,
1
2%
0
Top
Senior
Middle
Junior
Women
Disabled
2013
2014
Target
HDSA statistics (%)
22,5
8,2
33,7
15,8
5,0
1,2
1,5
Education
Health
and welfare
Environment
Enterprise
development
Infrastructure
Skills development
Other
donations
Community development –
2014 (R88 251 132) (Rm)
EXXARO INTEGRATED REPORT 2014 55
PERFORMANCE (continued)
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 73% (against a target of 56%)
in 2014. This represents R7,7 billion
spent with HDSA-owned companies
(2013: R7,9 billion).
Measured against mining charter
definitions, Exxaro spent R7,2 billion
in 2014 with qualifying BEE
entities, exceeding procurement
targets set for capital, services
and consumables for that year. In
summary, Exxaro therefore complies
with the preferential procurement
criteria of the DMR scorecard.
Our environment
Sustainable development issues –
particularly water, energy, air,
biodiversity and land – are central
to our business. We focus on
responsible use by conserving
natural resources and reducing
the burden of pollutants on the
environment by:
• Ensuring all activities are properly
authorised
• Complying with all statutory
environmental requirements as a
minimum
• Using energy and water efficiently
• Ensuring activities are conducted
responsibly from the twin
perspectives of compliance and
natural resource use
• Actively participating in voluntary
environmental benchmarks such
as the global carbon and water
disclosure projects, among others
• Developing innovative policies
and programmes for addressing
environmental impacts and use of
natural resources.
All Exxaro’s business units have
ISO 14001 accreditation, reflecting
the global industry standards in place
to minimise environmental impacts.
All our South African operations
have environmental management
programmes (EMPs) as required
under the MPRDA and National
Environmental Management Act
(NEMA). These are key indicators
56
%
3
7
%
2
% 6
9
5
%
8
5
%
0
% 5
5
4
%
9
% 3
5
3
,
3
0
,
3
0
2
0
,
%
7
5
%
0
4
%
5
7
%
1
7
%
0
7
%
0
5
,
3
0
2007
2008
2009
2010
2011
2012
2013
2014
Capital
Services
Goods
Actual
performance
2014 target
(56%)
2014 actual
2014 DRM targets
HDSA progression: 2007 to 2014
2014 preferential procurement
perfomance vs 2014 DMR
in ensuring Exxaro remains a
sustainable business. We also
adopt the precautionary principle
entrenched in NEMA in evaluating
the environmental impacts of
business opportunities.
All South African operations
have submitted applications for
integrated water use licences. In the
outstanding areas, Exxaro’s water
use is permitted under the Water Act
54 1956 (see supplementary report).
Focus areas
After a strategic review of key
environmental risks from Exxaro’s
operations, the following challenges
were identified:
• Air quality management
• Water quality management,
security of supply
• Hazardous waste management
• Biodiversity management
• Ongoing rehabilitation
• Cost of, and provision for,
environmental liabilities
• Lead time for securing
environmental authorisations
• Increasing statutory and
non-statutory environmental
requirements.
Our progress on the most important
of these is summarised below
and readers are referred to our
supplementary report on this
website.
Water management
Under a holistic strategy, we are
managing water-related risks,
minimising impacts, and operating
efficiently through reduction,
reuse and recycling. Most of our
operations have drafted water
conservation plans that support the
national strategy to ensure equitable
distribution of water resources that
allows for business growth and
protection (sustainable use).
We are also committed to protecting
and improving water quality by
ensuring the water we discharge is
of the same or better quality than
the original. Central to this are
the three water treatment plants
planned for our Mpumalanga region
as part of our long-term water
management strategy. These plants
will have total capacity to treat
17,5 mega litres per day. The plant at
Matla has been commissioned and
performance tests are under way.
The plant at North Block Complex’s
Glisa will be commissioned once the
water-use licence is approved and
EXXARO INTEGRATED REPORT 2014 5
7
1
1
)
%
4
1
(
8
6
0
7
2
%
1
10000
1
4
2
8
8000
6000
4000
2000
67,6
6,2
155,9
557,6
0
2013
Coal
Corporate
centre
2014
Electricity
Diesel
Fugitive
emissions
Other
sources
Water withdrawal performance – 2013
versus 2014 (mega litres)
Greenhouse gas emissions by source
(kt CO2e)
is expected to be fully operational
by 2016. The Arnot plant is at
feasibility stage.
Hazardous waste
In 2014, Exxaro reviewed existing
waste management contracts and
awarded new contracts to service
providers. The aim of this review was
to promote and enforce initiatives
such as reducing, reusing and
recycling. This will facilitate the
process of diverting all recyclable
wastes currently being sent to
landfill sites for potential and
practical reuse options that make
economic sense.
Exxaro participates in the
Department of Environmental
Affairs’ industry waste management
forum initiatives to address waste-
related issues. These issues are also
addressed through Business Unity
SA and the Chamber of Mines.
Rehabilitation and
environmental liabilities
At 31 December 2014, total land
disturbed was 9 311ha and total
rehabilitated 2 247ha. The Exxaro
Environmental Rehabilitation Fund
(EERF) provides for most liabilities,
while additional bank guarantees
are taken out to provide for new
developments and cover any
shortfalls in financial provisions.
Environmental rehabilitation
liabilities are updated biannually
for internal reporting at interim and
financial year end, and submitted
annually to the DMR.
Exxaro contributed R24 million to
the environmental trust fund in
2014 and had R753 million in its
trust fund at year end for mine-
closure activities (2013: R92 million
and R673 million respectively).
In addition, the group had bank
guarantees of R1 153 million in place
by December 2014. Updating these
provisions biannually highlights
potential rehabilitation alternatives
that could decrease the long-term
closure liabilities of mines.
Greenhouse gas emissions
(kt CO2e)
Scope 1
Scope 2
2014
2013
2012
2011
230
558
236
525
245
519
238
516
Total scope
1 and 2
Year-on-year
change (%)
788
761
764
754
3,4
(0,4)
1,4
Scope 3
74 768 69 737 70 581 70 471
Year-on-year
change (%)
7,2
(1,2)
0,2
GHG reduction targets per annum
Tolerable
Realistic
Final target
1%
5%
carbon neutral
Diesel and electricity remain the
primary sources of energy for
Exxaro. Total energy consumed
increased by 2,5% in 2014 to
4 318 894 giga joules (GJ), reflecting
mainly higher electricity use which
rose by 6,2%. The bulk of this
was due to expansion activities at
Grootegeluk. Energy sourced from
diesel consumption decreased 1,2 %
in 2014.
Electricity (MWh)
Production (kt)
Electricity intensity (MWh/kt)
2014
2013
2012
2011
2014
2013
2012
2011
Coal
566 521 534 363
527 125 534 232
37 203
37 332
38 808
39 244
Change %
6,0
1,4
(1,3)
(0,4)
(3,8)
(1,1)
2014
15,95
11,5
2013
14,3
5,2
2012
13,6
0,0
2011
13,6
EXXARO INTEGRATED REPORT 2014 57
• Regulatory uncertainty: ongoing
dialogue and collaboration
with key role players, such as
government and state-owned
enterprises
• Infrastructure: close collaboration
with Transnet Freight Rail on train
scheduling given that Grootegeluk
will now be the major supplier of
coal to the export market after
Inyanda’s closure.
PERFORMANCE (continued)
OUTLOOK
We expect that the challenging
conditions facing most commodity
markets in 2014 will continue into
2015. However, significantly lower
oil prices and more supportive
monetary policy from key central
banks are expected to boost global
real GDP growth to the 3% level in
2015, last achieved in 2009.
The average coal export price
expected for 2015 is around US$60/t
(free-on-board RBCT). The rand
exchange rate against the US$ is
expected to remain weak for most of
2015, mainly due to the combination
of lower commodity prices and the
overall strength of the US$.
The group will continue to exercise
caution and discipline in allocating
capital to projects in 2015. Like
many others in the industry, we
have reduced our expansion
capital expenditure in the short to
medium term. Continuing projects
such as Belfast and Thabametsi
will be characterised by the same
meticulous project management
evident in GMEP.
In the medium term, we will
continue to optimise our portfolio,
concentrating on specific
opportunities and challenges:
• Our focus on safety is resolute,
with ongoing intensified
awareness and training
campaigns to achieve our LTIFR
target of 0,15, despite current
initiatives to conserve costs
• Economic conditions: diligent
group-wide cost management and
business improvement initiatives
will run in tandem with spreading
our risk across coal, iron ore and
titanium dioxide. We are also
focusing on generating strong
internal cash flow to counter
lower dividends from Sishen
Iron Ore
• BEE structure: as we approach
the end of our successful 10-year
BEE structure in November 2016,
we will ensure we implement an
alternative structure that will
continue the legacy of sustainably
empowering our people
58
EXXARO INTEGRATED REPORT 2014 05 MINERAL RESOURCES
AND RESERVES
EXXARO INTEGRATED REPORT 2014 59
MINERAL RESOURCES AND RESERVES (continued)
Location of Exxaro Resources mineral and ore reserves declared
Tshikondeni
Australia
Project
Operating mine
Grootegeluk
Lephalale
Thabametsi
Waterberg
North
Waterberg
South
Polokwane
Main
map
Mafube
Inyanda
Emalahleni
North Block Complex
Glisa South
Belfast
Pretoria
Leeuwpan
Arnot
Johannesburg
New Clydesdale
Matla
Exxaro is committed to the
principles of transparency,
materiality and competence in
reporting its mineral resources and
ore reserves.
This summary is supported
by a consolidated Exxaro
mineral resources and reserves
report (CMRR) on this website.
The mineral resources and ore
reserves underpinning Exxaro’s
current operations and growth
projects are summarised in
the tables in the CMRR report.
The CMRR report is aligned
with JSE Listings Requirements
(section 12) and provides
information on reporting
governance, competence, tenure,
risk, liabilities and assurance as
well as auxiliary descriptions of
applicable projects, operations and
exploration activities.
Mineral resources and ore reserves
are reported as those remaining
on 31 December 2014 and mineral
resources are reported inclusive
of those resources that have
been converted to ore reserves
and at 100%, irrespective of the
percentage attributable to Exxaro.
An exception is our reporting for
60
Gamsberg and Black Mountain,
as figures received from Vedanta
Resources plc (JORC Code, 2012)
represent resources, exclusive of
those mineral resources converted
to reserves, and reported as on
31 March 2014. Significant changes
in the resource or reserve figures
are explained by footnotes to
each table.
Mineral resources and ore reserves
were estimated by competent
persons on an operational or project
basis and in accordance with the
SAMREC Code (2009) for African
properties, except for Vedanta’s
property, and the JORC Code (2012)
for Australian properties.
In addition, the annual estimation
and reporting process is managed
through the Exxaro geosciences
policy and associated mineral
resource and reserve reporting
and mineral resource estimation
procedures. Both the policy and
procedures are aligned with
the guidelines of the SAMREC
Code and, for South African
coal reporting, SANS (SANS
10320:2004). The policy and
procedures dictate technical
requirements for estimation and
reporting, and include guidelines
on methodologies, processes and
deliverables. Procedures are also
implemented for the geophysical,
rock engineering, geotechnical,
structural geology, tenure
management, hydro-geological
and mine planning disciplines
that prescribe methodologies and
minimum standards for compliance.
The mineral resource and ore
reserve tables are compiled from
comprehensive independent
statements received from appointed
resource and reserve competent
persons. Each statement is
supported by a project/operation
mineral resources and reserves
report in the format aligned with
table 1 of the SAMREC Code, which
encapsulates the systematic
and detailed estimation process
conducted or supervised by the
applicable competent person. The
content of each report is reviewed
and signed off by the applicable
competent persons, their supporting
technical teams and the operational
management team. Individual
mineral resources and reserves
reports are available from the
Exxaro group company secretary
on request.
EXXARO INTEGRATED REPORT 2014 Exxaro reporting governance framework
Regulatory
Governance
Deliverables
Assurance
JSE Listings Requirements
(section 12)
SAMREC Code (2009) table 1
SANS (SANS 10320:2004)
JORC Code (2012)
Geosciences policy
Geosciences, mineral asset
management and exploration
strategy
Exxaro mineral resource and
reserve reporting procedure
Exxaro mineral resource
estimation procedure
Exxaro mineral reserve
estimation procedure
Annual resource and reserve
estimation schedule
Annual review and update of
policy and procedures
Mineral resource and reserve
fact pacts
Competent person’s critical
skills update and review
Annual operation/project
competent person’s report (CPR)
Consolidated Exxaro mineral
resource and reserve report and
statement (CMRR)
Annual individual competent
person’s report review and lead
competent person sign off
Applicable competent person
and technical team sign off
Internal and external review/
audit process
Exxaro reports mineral
estimates that are directly
under its management control
(100% shareholding) but also
includes estimates for entities in
which Exxaro holds a 25% interest
or more. Mineral resource and ore
reserve estimates are stated in full
(as 100% shareholding). For Kumba
Iron Ore Limited, where Exxaro owns
19,98% of Kumba subsidiary Sishen
Iron Ore Company (SIOC) but which
accounts for a material percentage
of our net profit before tax, the
reader is referred to the Kumba
mineral resources and ore reserves
at www.kumbaironore.co.za/reports.
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 information in this report in
the form and context in which it
appears. The resource and reserve
competent persons are listed in
the consolidated Exxaro mineral
resource and reserve report (CMRR).
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 Exxaro operations and
projects, we use a systematic review
process that measures the level of
maturity of exploration work done,
the extent of geological potential,
current and future mineability,
security of tenure and associated
geological risks/opportunities to
establish an eventual extraction
outline (EEO). The outline reflects
the boundary within which mineral
occurrences are considered to have
reasonable and realistic prospects
for eventual economic extraction.
The various aspects of eventual
economic extraction are
continuously evaluated for individual
projects and operations to improve
their definition and application.
All mineral resources in which
Exxaro holds the controlling interest
have been reviewed in 2014 to
comply with reasonable and realistic
prospects for eventual economic
extraction.
The location, structure, continuity
of grade/quality and geology in
the EEO are known within varying
degrees of confidence and are
continuously tested by conducting
exploration activities such as
geophysical surveys, drilling and
bulk sampling. Information obtained
from drill core logging, core
sampling, down-hole geophysical
logging and surface mapping
are interpreted and combined
to generate two-dimensional or
three-dimensional geological
models. Validated assay data is
used in the geological models
to interpolate grades/qualities
and other parameters, including
relative density, using a number of
appropriate interpolation techniques
into predefined blocks or grids (coal)
throughout the deposit to create
and fill block models or stratified
interpolated seam models (coal).
The interpolated grades/qualities
and other parameters in the models
are used to estimate the grades/
qualities and tonnages of mineral
resources under consideration.
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 classifying
resources. For coal, the guidelines
of SANS (SANS 10320:2004) are
followed as a base-line approach,
where valid points of observation
(drill holes with thickness
measurements and applicable
quality analysis) are used for
distance gridding to adhere to
prescribed classification guidelines.
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).
EXXARO INTEGRATED REPORT 2014
61
MINERAL RESOURCES AND RESERVES (continued)
Modifying factors are signed off
before and after reserve estimation
by the responsible persons 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 independent
mineral resources and reserves
report. Exxaro’s life-of-mine
policy dictates the process and
deliverables for reserve estimation.
For reserves, geological data
received is extensively validated and
then converted into a mining model.
Firstly, an exploitation strategy
is created, incorporates resource
boundaries, infrastructure, social
and environmental and mining and
economic considerations. Secondly,
an operational methodology is
applied on material flow, equipment
strategy, position of infrastructure
and rehabilitation. The final phase is
delineation of the mining envelope
that forms the basis of the business
case, namely an optimised pit shell
or layout. The shell is converted
to a practical mine layout by
applying realistic designs (roads,
infrastructure, etc) based on the
most accurate information available
at that time. Yearly assurance audits
will challenge/change the physical
standards and norms.
Changes in the 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 continuously assesses
the various life-of-mine strategic
plans to consider the best way of
addressing these challenges.
It is critical for Exxaro management
and investors to have a high level of
confidence in the company’s mineral
assets and the assurance that these
resources and reserves will deliver
the expected value. Assurance is
implemented on a two–tier basis,
aligned with the guidelines of the
Exxaro mineral resource and reserve
62
reporting procedure. On tier 1, an
assurance is addressed concurrently
on each operation/project during
the resource and reserve estimation
process, which is executed under a
formal schedule.
On tier 2, Exxaro’s mining and
exploration operations are internally
reviewed on a three-year cycle.
Reviews are conducted by the
lead competent persons, technical
specialists from the central
geological and mining consulting
services and competent persons
(peers) from other operations and
projects. Calculations associated
with the mineral resource estimates
have been audited by internal
competent persons and are audited
by external consultants when
deemed essential to establish
transparency. Findings are
prioritised and corrective measures
are implemented if required and
tracked. For mines or projects where
Exxaro does not hold the controlling
interest, figures have been compiled
by competent persons from those
companies and have not been
audited by Exxaro.
MINERAL RIGHTS
The status of prospecting and
mining rights is tabled in the
CMRR report.
The converted mining right for
Arnot coal mine, a dedicated coal
supplier to Eskom, is executed. This
mine, which traditionally consisted
of underground workings and
extracting coal seam 2, also includes
open-cut developments on the
farms Mooifontein and Grootlaagte,
targeting coal seams 1, 2, 4 and 5.
Ongoing technical studies, surface
acquisition and environmental
authorisations (eg Mooifontein Re,
1, 7 and Grootlaagte) for the various
farms’ portions in the open-cut
areas are progressing well and at
varying levels of finalisation.
The converted mining right of Matla
mine, a dedicated coal supplier
to Eskom, has been granted.
Execution of the right is expected
to be concluded in the first quarter
of 2015.
The converted mining right and
adjacent new mining right at
Leeuwpan mine have both been
executed. The approval of a
ministerial consent (section 102)
submitted to amalgamate
the two rights is pending. All
environmental approvals for the
strategic Leeuwpan OI reserve were
submitted timeously and Exxaro
has a reasonable expectation that
approvals will not be withheld.
Exxaro owns all surface rights for
phase 1 and 2 of the OI reserve and
negotiations for the surface rights
for phase 3 are under way.
North Block Complex includes the
traditional mining areas of Glisa
(converted mining right), Strathrae
(converted mining right) and
Eerstelingsfontein, an executed
new mining right. Environmental
approvals for Eerstelingsfontein
have been granted and approval
for the renewal of the mining right,
timeously submitted in March 2013,
is pending. In addition, a renewal
for a prospecting right and a new
mining right for the Glisa South
project area, immediately adjacent
to Glisa, was timeously submitted in
November 2013.
In 2013, Exxaro initiated a process
to disinvest from New Clydesdale
Colliery. A ministerial consent
(section 11) was submitted in
April 2014 to cede the mining
right. All requests for additional
information by the DMR have been
timeously addressed and Exxaro has
a reasonable expectation that the
approval will not be withheld.
The Belfast mining right was
received in October 2013
and subsequently executed.
All environmental authorisations
have been received and operational
implementation will proceed.
A new mining right was submitted
in April 2012 for the Thabametsi
project area, a resource adjacent
to the Grootegeluk coal mine.
Environmental approvals have been
received (pending water use licence)
as on 31 December 2014 and Exxaro
has a reasonable expectation that
EXXARO INTEGRATED REPORT 2014 The person in Exxaro designated
to take corporate responsibility for
mineral resources, JH Lingenfelder,
the undersigned, has reviewed and
endorsed the reported estimates.
Mr Lingenfelder is a member of the
Geological Society of South Africa
and registered (400038/11) with the
South African Council for Natural
Scientific Professions. He has a BSc
(hons) in geology and 19 years of
experience as an exploration and
mining geologist in coal, iron ore
and industrial minerals, of which
six are specific to coal and iron ore
estimation.
JH Lingenfelder
BSc Geology (hons)
Pr Sci Nat (400038/11)
Manager geosciences
Roger Dyason Road
Pretoria West
0183
the mining right will be granted
in 2015.
The Moranbah South project area
in Australia includes two mineral
development licences (MDL) and
two exploration permits for coal
(EPC). Both mineral development
licences expired between July and
September 2013, but renewals for
both MDL 277 and MDL 377 were
timeously submitted in January
2013 and March 2013 respectively.
Exxaro has a reasonable expectation
that approvals for both licences will
not be withheld. EPC 548 expires
in February 2017 and EPC 602
in December 2018. Exploration
activities comply with all licence
requirements.
In the Republic of the Congo (RoC),
the Mayoko-Lekoumou exploitation
permit for iron was granted in
August 2013 for 25 years and will be
renewable in line with the provisions
of the mining code of the RoC.
The Mayoko mining exploitation
convention was concluded between
the RoC government and Exxaro
Mayoko SA on 29 January 2014. This
convention is still subject to fulfilling
certain conditions precedent,
such as concluding all agreements
related to access to rail and port
infrastructure.
Immediately north of the Lekoumou
exploitation permit, the Ngongo
exploration permit for iron
was granted in April 2014. This
exploration permit was granted for
three years and will be renewable
twice for periods of two years in
line with the provisions of the RoC
mining code. In addition, to the
far north, the Ngoubou-Ngoubou
exploration permit for iron was
granted in December 2012 for a
period of three years and may be
renewed twice for periods of two
years in line with the provisions of
the RoC mining code.
EXXARO INTEGRATED REPORT 2014 63
MINERAL RESOURCES AND RESERVES (continued)
The person in Exxaro designated to
take corporate responsibility for ore
reserves, J Hager, the undersigned,
has reviewed and endorsed the
reported estimates. Mr Hager
is a mining engineer registered
(20050209) with the Engineering
Council of South Africa. He has
25 years of experience as a mining
engineer in iron ore, base metals
and coal in various technical and
management roles, of which 15 are
specific to coal, base metals and iron
ore estimation.
J Hager
MEng Mining
ECSA 20050209
Group manager mining processes
Roger Dyason Road
Pretoria West
0183
64
EXXARO INTEGRATED REPORT 2014
06 CORPORATE
GOVERNANCE
EXXARO INTEGRATED REPORT 2014 65
CORPORATE GOVERNANCE (continued)
EXECUTIVE
COMMITTEE
All executive committee members
are prescribed officers in terms of
the Companies Act 71 of 2008,
as amended.
SA Nkosi — Sipho (60)
Chief executive officer
MDM Mgojo — Mxolisi (54)
Executive head: carbon operations
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.
BSc (hons)(energy studies), MBA,
advanced management programme
(Wharton)
Experience: Previously at Eyesizwe
Coal, Mxolisi was responsible for
marketing and logistics. Before
assuming his current position in
August 2008, he was responsible
for the base metals and industrial
minerals commodity business.
Mxolisi has been appointed as
CEO – Designate with effect from
1 May 2015.
WA de Klerk – Wim (51)
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.
MI Mthenjane — Mzila (45)
Executive head: strategy and
corporate affairs
BSc (eng)(mining), senior
management development
programme (GIMT)
Experience: Mzila is a mining
engineer with combined experience
in mining and investment banking
of 20 years. This includes seven
years in deep-level gold mining at
AngloGold Ashanti and Gold Fields
Limited in senior mine management
and corporate development roles,
respectively; and six years in
investment banking at RMB and
Deutsche Bank. His knowledge of
business sustainability was honed
over six years as executive: business
sustainability at Royal Bafokeng
Holdings and Royal Bafokeng
Platinum. He assumed his current
role in May 2013.
66
EXXARO INTEGRATED REPORT 2014 M Piater — Retha (60)
Executive head: human resources
M Veti – Mongezi (51)
General manager: sustainability
CH Wessels — Carina (37)
Group company secretary
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.
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 also
immediate past president of the
Corporate Secretaries International
Association and remains on that
executive committee. 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.
BCom (hons), MBA, advanced
management programme (Insead)
Experience: Retha has 31 years of
human resources experience across
the various business units and
commodities.
PE Venter – Ernst (58)
Executive head: growth,
technology, projects and 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
included growth, technology,
projects and services and the
ferrous business of Exxaro.
Ernst retired from Exxaro in
February 2015.
EXXARO INTEGRATED REPORT 2014 67
CORPORATE GOVERNANCE (continued)
DIRECTORATE
S Dakile-Hlongwane — Salukazi (64)
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: five years as
senior investment officer, Lesotho
National Development Corporation;
12 years with 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. She is a trustee
of Nozala Trust and Chancellor
House Trust.
SA Nkosi — Sipho (60)
Chief executive officer
(executive director)
Director since 28 November 2006
See page 66
WA de Klerk — Wim (51)
Finance director
(executive director)
Director since 1 March 2009
See page 66
68
Dr CJ Fauconnier — Con (67)
Independent non-executive
director, chairman of
sustainability, risk and compliance
committee and member of audit,
remuneration and nomination and
social and ethics committees
Director since 1 November 2013
BSc (eng)(mining), BSc (hons)
(eng), MSc (eng), DEng (Pretoria),
MBA (Oregon), DSc (honoris causa)
(Free State), strategic leadership
programme (Oxford), senior
executive finance programme
(Oxford), registered international
professional engineer
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 in Gencor
Limited and JCI Limited. In 1995
Con joined Iscor Limited and was
later promoted to managing director
of Iscor Mining. In 2001, he was
appointed chief executive of Kumba
Resources Limited and, in 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 fellow of the
South African Institute of Mining &
Metallurgy, Institute of Directors of
Southern Africa and 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 mining industry
and management consultant from
2007 to 2010, and an independent
non-executive director at Xstrata plc
from 2010 until 2013.
EXXARO INTEGRATED REPORT 2014 NB Mbazima — Norman (56)
Non-executive director and
member of remuneration and
nomination committee
VZ Mntambo – Zwelibanzi (58)
Non-executive director and
member of remuneration and
nomination committee
Director since 30 November 2012
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.
Fellow of the Association of
Chartered Certified Accountants
(FCCA), fellow of the Zambia
Institute of Chartered Accountants
(FZICA)
Experience: Norman has been CEO
of Kumba Iron Ore since September
2012. Previously, he was CEO of
the thermal coal business unit of
the Anglo American Group from
2009. 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.
Dr D Konar — Len (61)
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, 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 Alexander
Forbes. 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 risk
implementation oversight panel of
the World Bank, and past chairman
and member of the external audit
committee of the International
Monetary Fund.
JJ Geldenhuys – Jurie (72)
Independent non-executive
director, chairman of the
sustainability, risk and compliance
committee, member of the
remuneration and nomination,
audit and social and ethics
committees
As noted in the 2013 integrated
report, he retired for personal
reasons on 27 May 2014.
EXXARO INTEGRATED REPORT 2014 69
CORPORATE GOVERNANCE (continued)
DIRECTORATE (continued)
RP Mohring — Rick (67)
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 to 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. After 37 years
in the mining industry, Rick retired
from Eyesizwe Coal in December
2003, but remained on the board of
Eyesizwe Coal, 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
J van Rooyen — Jeff (65)
Independent non-executive
director and chairman of audit
committee
Director since 13 June 2012
Director since 13 August 2008
MRCS, LRCP, DRCOG
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 a former
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 at 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.
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 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 several
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.
NL Sowazi – Nkululeko (51)
Independent non-executive
director
Resigned from 3 June 2014 due to
an increase in other commitments.
70
EXXARO INTEGRATED REPORT 2014 V Nkonyeni — Vuyisa (46)
Independent non-executive
director
Director since 3 June 2014
BSc (inf proc), BSc (hons),
postgraduate diploma in accounting,
CA(SA)
Experience: Vuyisa has over
15 years’ experience in investment
banking and private equity. He
served his training contract as
a chartered accountant with
PricewaterhouseCoopers and then
joined Deutsche Bank in 1997, where
he gained investment banking
experience primarily in corporate
and project finance advisory work
over four years. He serves on the
boards of Emira Property Fund
and Idwala Industrial Holdings
Proprietary Limited. He has served
as financial director of Worldwide
African Investment Holdings
Proprietary Limited and director
at Actis llp in their black economic
empowerment funding unit.
He was appointed chief executive
officer of Kagiso Tiso Holdings in
January 2012.
D Zihlangu – Rain (49)
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, and served
as CEO of Alexkor Limited from 2002
to 2005. From 2006 to 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, audit,
remuneration, nominations and
investment committees of Sentula
Mining Limited.
EXXARO INTEGRATED REPORT 2014
71
CORPORATE GOVERNANCE (continued)
GOVERNANCE OVERVIEW
This section provides legally
required and material
information only, with full details
of all governance activities on
our website: www.exxaro.com.
Creating value through
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 and sustainability
depends on being a responsible
corporate citizen. As such, we take
integrated decisions that enable our
strategy (based on our resource-to-
market business model), 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. In this
way, we entrench our sustainability
and make a meaningful contribution
to the South African economy: true
value creation.
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 board, however, remains fully
accountable for the efficacy of the
governance framework and Exxaro’s
ethical foundation.
The review period was truly a year
of highlights in the governance
arena. In addition to being placed
first in the Nkonki Integrated
Reporting Awards where the top 100
companies’ integrated reports were
assessed, Exxaro also received the
Ethical Boardroom’s Best corporate
governance – Mining – Africa – 2015
award. Although we do not direct
72
our activities at recognition, it is
always encouraging to receive
confirmation that the excellence
and added value we aspire to are
visible and tangible to independent
evaluators.
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). In 2014 we
continued to apply the principles
(externally and independently
assessed as AAA (highest
application) early in 2014) and
improved those few areas indicated
in the 2013 report as requiring
attention, namely:
• Principle 4.2 (the board
determining risk tolerance) – refer
the risk section for the detail
of how this principle has been
fully adopted and integrated into
our risk management process,
material issues, key performance
indicators and application of the
five-capitals model
• Principle 5.2 (aligning the
information management
strategy with the performance
and sustainability objectives
of the company). Refer the
supplementary report for more
information
• Principle 5.6 (effective
management of information
management assets). Refer the
supplementary report for more
information.
These are now fully applied.
Full application of King III and
compliance with the Listings
Requirements is also one of the
strategic key performance indicators
on our strategic dashboard.
In previous years, we detailed our
application of all principles in the
integrated report, but this is now
included in the supplementary
report.
The board
The company has a unitary board
structure, comprising executive,
non-executive and independent
non-executive directors (classified
in accordance with the JSE Listings
Requirements and King III).
16%
59%
25%
Executive
Non-executive
Independent
non-executive
Director classification
25%
75%
HDSA
Non-HDSA
Director equity status
41%
17%
25%
17%
<2 years
>2<5 years
>5<7 years
1H13
<2 years
>2<5 years
1H14
1H13
>5<7 years
1H14
>7 years
>7 years
Director tenure
EXXARO INTEGRATED REPORT 2014 All directors clearly display sufficient dedication to Exxaro and their other directorships do not affect their ability to
exercise due care, skill and diligence towards the company’s affairs.
Board meetings 2014
Board
4 Mar 14
Governance
24 Apr 14
Board
3 Jun 14
Special
23 Jun 14
Subco
26 Jun 14
Subco
23 Jul 14
Board
19 Aug 14
Governance
2 Oct 14
Special
27 Oct 14
Board
26 Nov 14
PA
P
P
P
P
P
P
P
NA
P
P
P
PA
P
P
P
P
P
P
A
P
A
NA
P
P
A
P
P
P
P
P
P
R
P
P
P
NA
P
P
R
P
P
P
P
P
P
R
A
P
P
A
P
P
R
P
P
P
NR
P
P
R
NR
NR
P
NR
A
A
R
P
P
P
NR
P
A
R
NR
NR
P
P
P
A
R
P
P
P
P
P
P
R
A
P
P
P
P
P
R
P
P
P
P
P
P
R
A
A
A
P
P
P
R
A
P
A
P
P
P
R
A
P
P
P
P
P
R
PA
A
P
P
P
P
R
P
P
P
P
P
A
R
P
P
D Konar (chairman)
S Dakile-Hlongwane
WA de Klerk
CJ Fauconnier
JJ Geldenhuys
NB Mbazima
VZ Mntambo
RP Mohring
V Nkonyeni
SA Nkosi
MF Randera
NL Sowazi
J van Rooyen
D Zihlangu
P = present
A = apology
NR = not required
PA = partial attendance
NA = not yet appointed
R = resigned/retired
The board retains full and effective
control over the Exxaro group
and gives strategic direction
and guidance to management.
The collective responsibility of
management vests in the chief
executive officer, who regularly
reports to the board on progress
towards the group’s objectives
and strategy.
The board operates in accordance
with a detailed charter, based on
King III, which specifically includes
its roles, responsibilities and
accountabilities. It meets at least
four times a year and corporate
governance best practice, trends
and developments are standing
items on the agenda. In addition to
the charter, a detailed delegation-
of-authority policy and framework
indicate matters reserved for the
board and those delegated to
management, which policy and
framework apply to all controlled
subsidiaries.
In line with the board charter, the
remuneration and nomination
committee (Remco) is responsible
for vetting shareholder nominee
directors and identifying suitable
candidates to be proposed to
the board for consideration and,
on its support, to shareholders
for election. In line with the
memorandum of incorporation, one
third of non-executive directors
retire by rotation annually.
Board and committee performance
is evaluated annually and, for
the 2014 financial year, an
internally facilitated evaluation
was completed, which confirmed
that all deficiencies identified
in the 2013 evaluation had been
effectively addressed, and showed
a marked improvement in overall
scores (out of four, thus rated as
‘good/meeting best practice’) and
no item on any of the evaluations
scored below a three (thus all as a
minimum, being ‘satisfactory’):
• Board: 3,88 (2013: 3,54)
• Audit committee: 3,72 (2013: 3,57)
• Remuneration and nomination
committee: 3,69 (2013: 3,39)
• Social and ethics committee: 3,59
(2013: 3,34)
• Sustainability, risk and compliance
committee: 3,47 (2013: 3,4).
EXXARO INTEGRATED REPORT 2014 73
CORPORATE GOVERNANCE (continued)
A summary of key skills areas and total experience is shown below:
2
8
e
c
n
a
n
i
F
7
4
I
n
t
e
r
n
a
t
i
o
n
a
l
6
s 8
e
c
r
u
o
s
e
n r
a
m
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H
7
0
4
A
f
8
r
i
c
a
o
t
h
e
r
t
h
a
n
o
l
o
W
a
t
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r
t
e
c
h
n
a
ble e
n
e
r
g
y
g
y
S
A
o r p
C
o r a t e g
Law 67
o v e r n a n c e 9
8
o m i c
n
o
c
E
s 8 4
5
1
R
e
n
e
w
51 Furnace
64 Mineral sands
46 Pigment
Z i n c
5 9
5 P l a
6
5
u m
t i n
3 C o p p e r
66 Iron ore
U
n
d
e
r
g
r
o
u
n
d
m
i
n
i
n
g
7
1
g
n
i
n
i
m
t
s
a
c
n
e
p
O
9
6
al
o
4 C
7
H e a l t h a n d s a f e t y 8 2
Information technology 66
Project management 82
r
v
e
e
n
m
G
o
tio
n
s 8
5
n
t r
ela
T
e
c
h
n
E
n
g
i
n
e
e
o
l
o
g
y
R
&
D
r
i
n
g
6
3
6
1
Accumulated years of experience per skills area – 1 160 years
1
0
I
n
t
e
r
n
a
t
i
o
n
a
l
9
A
f
r
i
c
a
W
a
t
e
r
t
e
o
t
h
e
r
0
1
e
c
n
a
n
i
F
9
9
R
e
n
e
9 F
urn
a
c
e
w
a
b
l
e
c
h
n
o
l
o
t
h
a
n
S
A
e
n
g
y
e
r
g
s 10
e
urc
o
s
n re
a
m
u
H
La w 10
9 Mineral sands
8 Pigment
9 Zinc
i n u m
P l a t
1 0
9 C
r
e
p
p
o
10 Iro n ore
10 Coal
y
G
o
v
e 1 0
c
n
a
n
e r
v
o
E c o n o m i c s
1 0
r a t e g
o
p
r
o
C
Health and safety 10
Information technology 10
r
oje
t
c
m
P
g
n
i
n
i
m
d
n
u
o
r
g
r
e
d
n
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g
t minin
s
a
c
n
e
p
10 O
e
r
n
a
n
a
g
e
T
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c
h
n
E
n
g
i
n
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e
r
i
n
g
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l
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g
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R
&
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m
m
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n
t 1
0
e
n
t
r
e
l
a
t
i
o
n
s
1
0
0
1
9
1
0
Number of non-executive directors per skills area
Differing levels (from a minimum of five years to over 10 years)
74
EXXARO INTEGRATED REPORT 2014
These evaluations form the basis of
the board’s assessment of directors’
and committee members’ suitability
for election and re-election:
summarised résumés for these
directors and committee members
are included in this report.
The memorandum of incorporation
does not restrict the board’s ability
to remove a director without
shareholder approval.
To support Remco in its nomination
process, the group company
secretary maintains a matrix
(see left) to ensure the board’s
breadth and depth of skills and
experience support and enable the
company’s vision and strategy: new
board nominations are assessed
against gaps identified in the matrix.
Chairman and chief executive
The roles of the CEO and chairman
are separate. Dr Len Konar is an
independent non-executive director
and the CEO is Sipho Nkosi. The
roles and responsibilities of the
chairman and CEO are articulated
in the board charter and further
entrenched in the division-of-
responsibilities policy.
The chairman is a member of Remco
and chairs nomination matters, but
is not a member of any other board
committees. He however attends all
committee meetings as a standing
invitee.
Based on an evaluation of their
performance and ability to add
value, the chairman and respective
chairman of each board committee
are re-elected by the board annually.
Group company secretary
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
and the board has an established
procedure for directors to obtain
independent professional advice at
the group’s cost, facilitated through
the group company secretary.
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 group
company secretary for 2014. 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 2014 she was
president of the Corporate
Secretaries International
Association, a global federation
of membership bodies
representing 100 000 members
worldwide, and remains on
their executive committee since
concluding her term as president
on 31 December 2014. 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,
published articles and exceeded
her continuing professional
development requirements
stipulated by CSSA
• Completing a performance
assessment detailing all
the legislative and King III
requirements by each director:
this indicated that directors
agreed all expectations had been
regularly exceeded (average score
of 4,4 out of 5). She does not
serve as a director of the board
and the assessment confirmed
her independence and arm’s-
length relationship with the board
based on displayed behaviours
and her confirmation that she has
not been restricted or constrained
in any way in her role as the
company’s gatekeeper of good
governance and that she has a
direct channel of communication
to the chairman and other
directors.
Board and statutory
committees
Board and statutory committees
assist the board in executing its
duties, powers and authorities.
The board delegates the required
authority to each committee to
enable it to fulfil its 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 following committees have been
established and a report from each
follows:
• Audit committee
• Social and ethics committee
• Sustainability, risk and compliance
committee
• Remuneration and nomination
committee.
Additional management committees
assist the board and its committees
in fulfilling their mandates:
• Ethics committee
• Executive committee
• Information management steering
committee (a subcommittee of the
audit committee)
• Investment review committee
• Offshore review committee
• Portfolio review committee.
Refer to page 13 for a visual
representation of the committee
structures and value added by each.
EXXARO INTEGRATED REPORT 2014 75
CORPORATE GOVERNANCE (continued)
AUDIT COMMITTEE REPORT
The company’s audit committee
is established as a statutory
committee in terms of section 94(2)
of the Companies Act 71 of 2008,
as amended (Companies Act)
and oversees audit committee
matters for all the South African
subsidiaries in the Exxaro group,
as permitted by section 94(2)(a) of
the Companies Act, as well as all
offshore subsidiaries and controlled
trusts. In accordance with an
exemption granted by the Financial
Services Board, it also oversees audit
committee matters for the company’s
wholly owned insurance captive,
Exxaro Insurance Company Limited.
The audit committee operates
in accordance with the specific
statutory duties imposed by the
Companies Act, the JSE Listings
Requirements, and in accordance
with detailed terms of reference,
which incorporate the principles
contained in King III and duties
specifically delegated by the
company’s board of directors.
Objective and scope
Apart from the statutory duties of
an 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, combined assurance
and aspects of integrated reporting
(in collaboration with the company’s
sustainability, risk and compliance
committee).
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
76
• Evaluate the qualification,
appropriateness, eligibility and
independence of the external
auditor
• Approve the appointment of the
internal auditors, 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
outcomes.
The committee performed its
functions as stipulated in the terms
of reference and detailed annual
plan during the 2014 financial year.
Membership
Shareholders elect members of
the audit committee annually.
The committee consisted of four
independent non-executive directors
for most of the review period:
Member
Attendance
J van Rooyen (chairman):
entire period
Dr CJ Fauconnier:
from 29 January 2014
JJ Geldenhuys:
1 January to 27 May 2014
RP Mohring: entire period
V Nkonyeni:
from 3 June 2014
4/4
4/4
2/2
4/4
2/2
The chairman of the board is not
a member of the audit committee,
although he attends all meetings
as permanent invitee. In addition,
the chief executive officer, finance
director, chief audit executive, as
well as the internal and external
auditors are also permanent
invitees to committee meetings.
The committee, however, debates
matters without the permanent
invitees present when required.
The committee meets four times
a year. Two meetings were held
with both the external auditors
and internal auditors, respectively,
where management was not present.
External auditors
The group’s independent
external auditors are
PricewaterhouseCoopers
Incorporated (PwC). Fees paid to the
auditors are disclosed in note 7.1.3
to the group annual financial
statements 2014. The group has an
approved policy to regulate the use
of non-audit services by the external
auditors. This differentiates between
permitted and prohibited non-audit
services, and specifies a monetary
threshold against which approvals
are considered. During the year, fees
paid to PwC totalled R36 million,
which included R25 million for the
2014 statutory audit and related
activities as well as R11 million for
non-audit services. The committee is
satisfied with the level and extent of
non-audit services rendered during
the year by PwC and its continued
independence.
The committee annually assesses
the independence of the group’s
external auditors and again
completed such assessment at its
meeting on 2 March 2015. PwC was
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 2014, more than
one half of the members remain
in 2015
• They remain independent, as
required by section 94(7)(a)
of the Companies Act and the
JSE Listings Requirements.
Based on this assessment, the
committee again nominated
PwC as independent external
auditors for the 2015 financial
EXXARO INTEGRATED REPORT 2014 year. Shareholders will therefore
be requested to re-elect PwC as
independent external auditors for
the 2015 financial year at the annual
general meeting on 26 May 2015.
As part of the external audit
assignment, PwC is required to give
a small empowered auditing firm
exposure to the Exxaro assignment,
thereby developing their skills
and experience and contributing
to the prominence of upcoming
black empowered audit firms in
South Africa.
Internal auditors
The internal audit function
is outsourced to EY and its
responsibilities are detailed in
a charter approved by the audit
committee and reviewed annually.
Its main function remains to express
an opinion on the effectiveness of
risk management and the internal
control environment.
As part of the internal audit
assignment, EY is required to
contribute 5% of the contract
value towards a mutually beneficial
investment project: agreement
has been reached that this will
be a community project and the
specific initiative will be approved
by a committee established for this
purpose.
Finance function review
As required by the JSE Listings
Requirements 3.84(h), the audit
committee has satisfied itself
through a formal process of the
finance function’s resources,
experience and expertise, and the
appropriateness of the expertise and
experience of the FD.
Annual financial statements
The committee reviewed the
company and group annual financial
statements and accounting practices
in detail and is satisfied that the
information contained in these and
the accounting practices applied are
reasonable.
Statement on effectiveness
of internal financial controls
The audit committee, with input
and reports from the independent
internal and external auditors,
reviewed the company’s system
of internal financial control,
as underpinned by the risk
management philosophy, during
the year. The internal auditors
specifically noted the marked
improvement in the overall control
environment and confirmed that
the system of internal controls
was satisfactory. On this basis, the
committee confirmed there were no
material areas of concern that would
render internal financial controls
ineffective.
Key issues
One of the most significant matters
the audit committee was required to
debate in 2014 was the impairment-
trigger analysis as well as the
impairment-testing assessment of
the company’s investment in the
Mayoko project in the Republic
of the Congo. Extensive advice
and guidance were obtained from
management and the company’s
external auditors. We acknowledge
the negative impact such an
event has on shareholders and
the company and hence all efforts
have been employed to learn from
this experience. Most notably, and
as previously communicated, an
independent review of the Mayoko
project investment process was
completed by KPMG Services
Proprietary Limited and the findings
are being implemented to further
improve our governance processes.
J van Rooyen
Chairman of the audit committee
Pretoria
9 April 2015
EXXARO INTEGRATED REPORT 2014 77
CORPORATE GOVERNANCE (continued)
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 with
regulation 43 of the Companies
Regulations 2011), and as a
board committee for 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 Remco
and SRC are required to report
matters within the mandates of their
respective committees to the social
and ethics committee.
Membership
Shareholders elect members of
the social and ethics committee
annually. The committee consisted
of two independent non-executive
directors and one non-executive
director during the review period:
Member
Attendance
2/2
2/2
0/0
2/2
Dr MF Randera
(chairman): entire
period
Dr CJ Fauconnier:
from 27 May 2014
JJ Geldenhuys:
1 January to
27 May 2014
RP Mohring:
entire period
78
Other attendees include subject-
matter experts on each of the
disciplines or areas falling
within the committee’s mandate
specified in regulation 43(5) of the
Companies Act. It meets twice a
year and carried out its duties and
responsibilities as stipulated in the
regulations and terms of reference.
Objective and scope
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 committee adds value to the
group by interrogating and providing
independent oversight over Remco
and SRC’s ambit (ie discussing the
moral imperative associated with
certain operational issues as dealt
with at the Remco or SRC), as well
as by discussing and taking action
in areas where the committee itself
is accountable.
Key issues
Key issues receiving attention
during the year included:
• As in all we do, safety came first:
there were detailed discussions
on the possible holistic causes of
safety incidents and how these
could be avoided (the regular
management of safety falls within
the SRC committee’s scope).
Although the risk of Ebola in
the Republic of the Congo was
minimal, efficacy of preventative
actions was discussed to ensure
the continued safety of employees
• Continued discussion (also
reported last year) on anti-bribery
and corruption risks. The board,
management and key employees
received bespoke anti-bribery and
corruption training, in addition
to mandatory computer-based
training for all management
employees. A bespoke anti-
bribery and corruption policy was
also implemented. While human
behaviour plays a role it will be
difficult to completely eradicate
this risk, but the committee
is confident that all possible
reasonable steps have been taken
to mitigate it as much as possible
• R88 million was spent in 2014
on charitable donations and
initiatives (including donor
membership of the Ethics Institute
of South Africa) and includes
the company’s contribution to
communities in which it operates
• Employment and labour
discussions in 2014 were
overshadowed by industrial
action, including demands for
better salaries and conditions
of employment in the mining
sector and how such events
could potentially impact the
company and its labour relations:
fortunately no significant
industrial action took place at our
business units. The committee
spent considerable time to
understand how Exxaro compares
to others on salaries and benefits
and was comfortable with this
comparison
• The new codes of good practice
to measure broad-based black
economic empowerment (BBBEE)
and the company’s anticipated
future score were deliberated
and the planned remedial steps
to improve the score will continue
to receive focus in coming years
• For the first time in 2014, the
committee considered consumer
relationships and compliance with
consumer protection laws, as well
as public relations and advertising
(brand identity)
• Resulting from postponements to
the Mayoko project and concerns
raised by the committee on the
level of continued community
support in Mayoko, a detailed
report provided assurance that
key activities and commitments
EXXARO INTEGRATED REPORT 2014 to the community were still under
way: in 2014, over 2 900m3 of
purified water were provided to
Sieba village, accounting for 30%
of total water production of the
Mayoko camp
• As always, matters of ethics
received significant focus, as
detailed here.
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. The ethics
committee comprises executives,
senior management 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.
In 2014, 448 cases of alleged
unethical behaviour (2013: 400)
were reported for investigation,
49 of these via the ethics line
(2013: 45). In total, 156 people
were subjected to disciplinary
hearings, with 164 arrests made
by the South African Police Service
(SAPS) for criminal prosecution
based on the results of referred
investigations (2013: 132). The direct
monetary value of cases reported
and investigated was R16 619 805
(2013: R11 497 926) with R10 491 166
being recovered/saved due to the
investigations.
2014
Other reports
received Reporting line
399
137
149
49
19
15
Total
448
156
164
2013
Total
400
393
132
Cases reported
Disciplinary hearings
Reported to SAPS
Dr MF Randera
Social and ethics committee chairman
Pretoria
9 April 2015
EXXARO INTEGRATED REPORT 2014 79
CORPORATE GOVERNANCE (continued)
• Mine-closure strategies in
general, but specifically actions
and plans for Tshikondeni’s
planned closure in the last quarter
of 2014
• Preferential procurement
performance and strategies
• Compliance and processes in
managing the company’s mineral
resources and reserves
• Improvements to the enterprise
risk management framework
• Feedback on environmental legal
audits.
The committee embraces its
role to guide the company on its
sustainability, risk and compliance
journey, and to ensure that Exxaro
remains a responsible corporate
citizen. The committee views its
role as an imperative delegated by
the board, and as an opportunity to
make a meaningful contribution to
South Africa by helping to ensure
that the future is secured for every
one of our stakeholders.
Dr CJ Fauconnier
Chairman of the SRC committee
Pretoria
9 April 2015
Key issues
Key issues receiving attention
during the year included:
• After 20 months of zero fatalities,
the regrettable fatal incident
at Arnot on 5 July 2014, where
Mr Solomon Latebotse Mashigo,
a continuous miner operator,
passed away. Any fatality and
other high potential impact
incidents are presented and
discussed in detail to ensure root
causes have been accurately
identified and appropriate
remedial and preventive actions
fully implemented. While any
fatal incident is intolerable,
the committee is pleased to
report that our lost-time injury
frequency rate was stable at 0,19
for the year. Safety continues to
be a focus area throughout the
group: safety always, all the way!
• Sustainability, risk and
compliance key performance
indicators (KPIs) are discussed
at every meeting: these KPIs
deal with material items in
each of the capitals, including
energy consumption, water
withdrawal and discharge, air
quality, occupational diseases and
exposure, lost-time injuries, social
and labour plan performance,
preferential procurement and
enterprise development, top risks
and licence-to-operate legislative
compliance.
Specialist and business unit reports
are presented to the committee
on a rotational basis. During the
reporting period, the following
matters were discussed in detail:
• Business unit reports on
safety, health, environment
and community strategies and
performance: Matla mine, Mayoko,
North Block Complex
SUSTAINABILITY, RISK AND
COMPLIANCE COMMITTEE
REPORT
The SRC committee is constituted
to oversee the Exxaro group’s
consideration of and performance
on all material non-financial issues,
including social, risk, compliance
and environmental issues and to
ensure these are integrated into our
strategy and economic performance.
Objective and scope
The committee’s objectives are to:
• Provide oversight on three
important aspects influencing
strategy and the long-term
viability of the company –
sustainability, risk and compliance
• Oversee and coordinate all
risk and compliance activities
(although the audit committee
remains accountable for financial
risk and compliance)
• Ensure the company reports
annually through an integrated
report on relevant SRC issues
• Provide oversight over the
integrated report.
Membership
The committee consisted of at least
four independent non-executive
directors during the review period:
Member
Attendance
JJ Geldenhuys (chairman):
1 January to 27 May 2014
Dr CJ Fauconnier
(chairman):
from 27 May 2014
S Dakile-Hlongwane:
entire period
RP Mohring: entire period
D Zihlangu: entire period
1/1
4/4
3/4
3/4
4/4
Other attendees include subject-
matter and discipline experts, as
well as the chairman of the board.
The committee meets four times a
year and carried out its duties and
responsibilities as stipulated in the
terms of reference and detailed
annual plan during the review
period.
80
EXXARO INTEGRATED REPORT 2014 REMUNERATION AND
NOMINATION COMMITTEE
REPORT
The remuneration and nomination
committee (Remco) is a combined
committee, overseeing remuneration
matters for all controlled subsidiaries
and nomination matters for Exxaro
Resources Limited only (the
executive committee has been
mandated to consider nomination
matters for all subsidiaries and
investments). It operates under
approved terms of reference, as
well as a detailed annual plan,
which incorporate the principles of
King III as well as duties assigned by
the board.
Objective and scope
The committee’s objectives are to:
• Make recommendations on
remuneration policies and
practices, including Exxaro’s
employee share schemes, for all
controlled companies
• Ensure effective executive and
board succession planning
• Review medical aid, retirement
fund performance
• Review compliance with all
statutory and best-practice
requirements on labour and
industrial relations management
in collaboration with the SRC
committee.
As 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.
Membership
The committee consisted of a majority
of independent non-executive
directors for the full review period.
The board chairman is a member of
the committee and chairs the meeting
when discussing nomination matters.
Member
Attendance
RP Mohring (chairman):
entire period
JJ Geldenhuys:
1 January to 27 May 2014
CJ Fauconnier:
from 3 June 2014
D Konar: entire period
6/6
1/1
4/4
5/6
Other attendees include the CEO,
FD and executive head: human
resources. The committee meets
four times a year and carried out
its duties and responsibilities as
stipulated in the terms of reference
and detailed annual plan during the
review period.
Key issues
Key issues receiving attention
during the year included:
• Retrenchments due to mine
closures, project postponements
and restructuring initiatives and
the subsequent social impact and
reduction in jobs in the mining
industry as a whole
• Continued focus to improve
labour productivity to balance the
higher-than-CPI labour inflation
driven by union demands
• Higher expectations from
employees for employers to get
involved in non-service delivery
in the communities where
they reside and the potential
associated costs
• Wage negotiations in 2015,
especially in the context of
increased industry industrial
action since 2013 and the global
commodity outlook in the
short term.
Remuneration philosophy
This report elaborates on
Exxaro’s remuneration policy
for non-executive and executive
directors, prescribed officers,
senior management and all other
employees.
The remuneration policy and
practices in Exxaro are reviewed
regularly against best practice and
governance requirements.
The Exxaro brand is built on a
strong vision — everything we do
and deliver today will allow others
to realise their vision tomorrow.
We believe in the power of people
and their ability to explore and shift
boundaries, which leads to success.
As such, our people strategies have
been developed to reinforce our
brand values:
• People-powered
• Inspired leaders
• Leading performance
• Sustainable effort.
At the annual general meeting
in 2014, shareholders were
again requested to approve the
remuneration policy outlined in this
report as a non-binding advisory
vote, which received 74,23% support.
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 used
for median performance of our
management and specialist
category staff is the 50th percentile
(median) of the market’s guaranteed
remuneration values. Exxaro allows
for a 30% differentiation from
median market values, depending
on the performance rating of the
individual.
Industry benchmarking takes place
ahead of wage negotiations for
bargaining unit employees and
remuneration policies for this group
reflect this benchmarking.
Policy
Exxaro follows a holistic
remuneration approach that
includes a guaranteed (base
pay and benefits) and variable
component (separated into long-
and short-term incentives). All
elements play a role in attracting
and retaining our people.
EXXARO INTEGRATED REPORT 2014 81
CORPORATE GOVERNANCE (continued)
Exxaro remuneration: overview
Employee categories
Management and specialist category employees
Bargaining category
employees
Remuneration elements
Executive
management
Senior
management
Middle
management
Junior
management
A-CM band
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
Annual adjustments
based on:
• Wage negotiations
• Mandate on
affordability
• Industry benchmarking
Benefits
• Retirement fund: employer and employee contributions
• Medical aid: employer and employee contributions
• Housing: company housing or allowances/subsidies applicable to specific business unit
Circumstantial
remuneration
• Job-specific
• Skills scarcity
Variable
remuneration
Short-term
incentives
Special performance:
• Individual performance base
• Strategic business targets
Not applicable
Long-term
incentives
First tier on budgeted achievement
Second tier above target improvement incentives:
• Capped at 30% of Exxaro’s above-budget improvement
Deferred bonus plan
(EM and above)
• Share match
Long-term incentive scheme (DM and above)
• Performance conditions
Share appreciation right scheme (being phased
out, no new allocations since 1 April 2012)
• Performance conditions
Not applicable
Not applicable
Not applicable
Mpower
Not applicable
On 22 May 2012, shareholders approved
a new five-year employee share option
scheme (Mpower 2012) effective from
1 July 2012 to 31 May 2017
82
EXXARO INTEGRATED REPORT 2014 33%
43%
4%
1%
19%
Basic salary
Retirement
fund
contributions
Performance
bonuses
Benefits and
allowances
Gains on
management share
schemes
Chief executive officer’s remuneration mix 2014
28%
4%
2%
20%
46%
Basic salary
Retirement
fund
contributions
Performance
bonuses
Benefits and
allowances
Gains on
management share
schemes
Finance director’s remuneration mix 2014
19%
5%
2%
19%
Basic salary
Retirement
fund
contributions
Performance
bonuses
Benefits and
allowances
Gains on
management share
schemes
Prescribed officer’s remuneration mix 2014
Guaranteed remuneration
Management and specialist
category
Employees in the management
and specialist category, including
executives, are remunerated on a
total-package approach. Guaranteed
remuneration adjustments
to employees are based on
fundamental principles:
• Remuneration is based on
performance through individual
performance contracting and
assessment
• External competitiveness: the
market median is the reference
point for performance per job
family, per level in determining
remuneration competitiveness
• Internal equity: same job — same
performance — same pay (except
circumstantial)
• Affordability: all salary account-
related mandates are first
included in the Exxaro financial
forecasting model to determine
affordability.
The table below indicates key
performance areas for executives
which informs annual guaranteed
remuneration adjustments.
Executive key
performance areas
Vision and strategy
Portfolio improvement
(ROCE, value release,
NPV)
Sustainability (safety,
health, environment,
licence to operate, risk)
Stakeholder
engagement and
reputation
Leadership and people
Operational excellence
Fit for purpose service
CEO
(%)
30
10
15
10
15
15
5
FD
(%)
30
15
10
15
15
5
10
Executive
head
operations
(%)
Other
executives*
(%)
20
10
10
10
15
30
5
30
10
10-15
10-15
15
10
10-15
100
* Depending on their functional responsibilities.
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 and employer
contributions to retirement and
medical funds. Annual adjustments
are usually determined through
wage negotiations where applicable.
Key benefits
Contributions to retirement funds
and medical aids are made by both
employees and employers.
For family-friendly benefits,
Exxaro provides four months’
paid maternity leave and all
employees qualify for 24/7 group
personal accident cover.
EXXARO INTEGRATED REPORT 2014 83
55%
100
100
100
CORPORATE GOVERNANCE (continued)
Retirement funds
Retirement fund contributions are made according to 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 14.2.1 of
the annual financial statements.
All employees belong to one of the following retirement funds:
Fund description
Sentinel Fund
Mine Employees Pension Fund
Exxaro Selector Funds
Employee
% contribution range
Employer
% contribution range
Total
% contribution range
7,50 – 13,20
12,50 – 20,52
20,00 – 28,02
8,00 – 10,70
12,50 – 15,00
20,50 – 24,65
7,00 – 8,00
10,00 – 15,00
17,00 – 23,00
Iscor Employees Umbrella Provident Fund
7,00 – 8,00
10,00 – 15,00
17,00 – 23,00
Mine Workers Provident Fund
8,00 – 10,70
12,50 – 15,00
20,50 – 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
Exxaro
Coal Mpumalanga
Bonitas
Discovery
Sizwe
WCMAS (ring-fenced)
Employee contributions
Employee contributions
50%
50%
Exxaro
(including all
management and
specialist category
employees in
subsidiary companies)
Exxaro
(other non-management
and specialist category
employees)
Bonitas
Discovery
Sizwe
Umvuzo
40-50%
Bonitas
Discovery
Sizwe
Umvuzo
40%
(included in package)
60% capped
Exxaro
Coal
Bonitas
Discovery
Sizwe
Umvuzo
50%
50%
A short-term incentive scheme
focused on the individual is used
to augment the performance
management process and retention
strategy. The threshold for this
scheme is 90% achievement of the
objective and it only pays out zero,
90% or 100%.
The basis for paying this incentive
rests on achieving agreed individual
measures.
Exxaro no longer offers any new
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 14.2.2 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 Exxaro’s strategic
objectives.
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
— Group improvement incentive.
Individual performance reward
This scheme applies to employees
in the middle, senior and executive
management categories.
84
EXXARO INTEGRATED REPORT 2014 Individual agreed measures for the CEO and FD for 2014 were:
Position
CEO
Performance objective
% of SPR Awarded 2014
Signing mining convention in the Republic of the Congo
Engagement with Department of Mineral Resources and
Department of Water and Sanitation
FD
Secure successful bond raising
Implementation of cost-saving initiatives
50
50
50
50
Full
Full
Full
Full
The two-tier performance incentive
The two-tier performance incentive was created to reinforce a performance culture and applies to all full-time employees.
Payment of this incentive is determined by on-target business unit performance and group improvement targets.
Two-tier performance incentive payment 2014
First tier
Second tier
First tier
The first tier is a line-of-sight
incentive based on achieving the
business unit’s net operating profit
target or production target. This 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 or commodity
net operating profit target.
For this purpose, net operating
profit is defined as revenue less cost
Potential % of guaranteed pay
Average payment
8,33%
10%
5%
3%
of sales less selling and distribution
costs and excludes income from
Tronox, Mafube, Cennergi, Sishen
and Black Mountain.
Long-term incentives
Exxaro makes general share offers
to participants once a year under
the following approved schemes:
• Exxaro share appreciation right
scheme (SAR) (being phased out,
with no new allocations since
1 April 2012)
• Exxaro long-term incentive plan
(LTIP)
• Deferred bonus plan (DBP).
The aggregate number of shares
that may be allocated under all
the managerial share schemes
cannot exceed 30 000 000. These
allocations are, however, not new
share issues, but are settled on
market.
The table summarises Exxaro’s
long-term incentives and details
of awards granted and cancelled
between 31 December 2013 and
31 December 2014. The grant price
was based on the volume-weighted
average price of the previous month.
Qualification
(employees
Paterson
band)
Date
imple-
mented
Rights/
shares on
31 Dec
2013
Maximum
award per
individual
2014
performance
condition
Vesting
period
Grants
in 2014
Grants
cancelled
in 2014
Total
grants
from
inception
to 31 Dec
2014
DM — FU*
1/3/2007
4 240 116
154 684
HEPS
Three
years
–
1 403 414 9 987 282
DM — FU*
1/3/2007
4 484 833
298 184
HEPS 70%
Retention 30%
Three
years
2 815 834
220 126 9 739 138
EM — FU* 31/8/2007
104 074
11 327
Achieving
short-term
incentive goal
Three
years
98 488
310 680
310 680
Plan
Share
appreciation
rights
Long-term
incentive
plan
Deferred
bonus plan
*
Includes executive directors.
EXXARO INTEGRATED REPORT 2014 85
CORPORATE GOVERNANCE (continued)
Share appreciation right scheme
Participants are awarded a conditional right to receive shares equal to the value of the difference between the share
price at the time rights were granted and the share price when rights are exercised (should the share appreciate in
value). This scheme is being phased out, with no new allocations 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) target set by Remco
Other
SAR not exercised within a period of seven years lapse
Number of participants
285
The last awards made for the period 1 April 2011 to 31 March 2012 were tested, but no vesting took place and
participants did not receive any benefit.
Long-term incentive plan (LTIP)
Participants receive a conditional award of shares, which vests after three years 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 (2014)
Headline earnings per share (HEPS) target set by Remco – 70%
Retention – 30%
Number of participants
572
The annual grant of LTIP awards to qualifying participants with an agreed face value as a factor of the participant’s
notional cost of employment is indicated below:
Job grade/position
Benchmarked LTIP face value factors of participant’s
notional cost of employment (%)
CEO
FD
F-lower
E-upper
E-middle
E-lower
D-upper
D-middle
229
217
143
101
76
38
38
38
Awards made for the period 1 April 2011 to 31 March 2012 were subject to 50% total shareholder return (TSR) and 50%
return on capital employed (ROCE) performance conditions: 90,49% of the 50% TSR performance condition vested,
while 0% of the 50% ROCE condition vested.
86
EXXARO INTEGRATED REPORT 2014 Deferred bonus plan
On receipt of short-term incentive and special performance reward payments, participants are able to use part of their
after-tax bonus to acquire shares (pledged shares) in Exxaro with a matching award on the vesting date.
Grant limits
Vesting period
Performance conditions
Retention condition
Other
Employees on Paterson EM and above
Three years
To qualify for the deferred bonus plan, qualifying employees must have achieved their
short-term incentive goal of which a portion (50% for EM, 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
Number of participants
59
Mpower 2012 (Exxaro
employee share option
scheme)
The Mpower 2012 scheme was
implemented on 1 July 2012,
and will run 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-rated number
of shares. On 31 December 2014,
there were 7 781 beneficiaries
participating in the scheme.
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 71 of 2008, as amended,
and hence full disclosure of the
remuneration of all prescribed
officers appears overleaf.
RP Mohring
Chairman: Remuneration and
nomination committee
In addition, in 2014 Mpower 2012
paid R14 million in dividends to
beneficiaries of the scheme.
Pretoria
9 April 2015
Remuneration of executive
directors, non-executive
directors and prescribed
officers
Directors
Summarised information on the
remuneration of executive directors
and non-executive directors appears
overleaf. For detailed disclosure,
refer to page 105 of the annual
financial statements.
EXXARO INTEGRATED REPORT 2014 87
CORPORATE GOVERNANCE (continued)
Summary of remuneration received or receivable
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
7 323 305
4 574 666
11 897 971
3 196 069
1 946 148
93 941
180 255
724 283
452 439
5 509 697
2 792 914
16 847 295
9 946 422
5 142 217
274 196
1 176 722
8 302 611
26 793 717
413 707
684 700
317 115
1 395 873
398 036
423 114
823 781
225 083
427 540
123 368
599 734
410 575
6 242 626
28 692
9 389
20 832
2 106
61 019
161 484
110 930
126 613
199 045
36 394
68 818
2 031 253
1 490 613
1 250 408
1 733 633
79 324
501 048
357 182
248 683
317 797
377 156
280 598
143 943
2 135 162
1 347 297
1 881 695
988 532
415 262
(8 302 611)
(3 159 229)
15 331 877
413 707
713 392
326 504
1 395 873
398 036
423 114
844 613
225 083
429 646
123 368
599 734
410 575
6 303 645
8 951 688
5 194 690
6 306 447
8 550 222
4 222 008
2 904 374
7 086 279
703 284
1 725 359
6 767 948
36 129 429
(6 767 948)
(3 977 830)
25 383 651
4 266 607
3 344 464
3 264 332
4 358 693
2 837 160
1 775 303
19 846 559
2014
Executive directors
SA Nkosi
WA de Klerk
Less: gains on
management share
schemes
Less: reversal of
share-based payment
expense3
Total remuneration
paid by Exxaro
Non-executive
directors
S Dakile-Hlongwane
Dr CJ Fauconnier
JJ Geldenhuys4
Dr D Konar (chairman)
NB Mbazima
VZ Mntambo
RP Mohring
V Nkonyeni5,6
MF Randera
NL Sowazi6,7
J van Rooyen
D Zihlangu
Total remuneration
paid by Exxaro
Prescribed officers
MDM Mgojo
MI Mthenjane
M Piater
PE Venter8
M Veti
CH Wessels
Less: gains on
management share
schemes
Less: reversal of
share-based payment
expense3
Total remuneration
paid by Exxaro
Include travel allowances.
1 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.
2
3 Reversal of share-based payment expense as a result of non-market conditions not being achieved.
4 Retired on 27 May 2014.
5 Appointed on 3 June 2014.
6 Fees paid to the respective employer and not the individual.
7 Resigned on 3 June 2014.
8 Retired on 28 February 2015.
Retirement amounts paid or received by executive directors are paid or received under defined contribution
retirement funds.
88
EXXARO INTEGRATED REPORT 2014
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
(22 484 943)
17 950 027
37 179 153
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
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
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
3 861 539
1 731 044
3 011 227
3 984 132
2 588 593
1 661 950
2 182 983
830 367
1 485 547
2 071 787
1 172 820
502 125
8 258
389
50 482
240
14 017
3 849
3 900
81 135
139 895
147 014
118 651
247 218
33 202
62 015
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
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
MF Randera
NL Sowazi5
J van Rooyen
D Zihlangu
Total remuneration
paid by Exxaro
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
1 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.
2
Include travel allowances.
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.
EXXARO INTEGRATED REPORT 2014 89
CORPORATE GOVERNANCE (continued)
Directors’ interest 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
J van Rooyen
D Zihlangu
Non-beneficial interest
WA de Klerk
Dr CJ Fauconnier
Percentages (direct and indirect)
S Dakile-Hlongwane
VZ Mntambo
SA Nkosi
NL Sowazi
D Zihlangu
At 31 December
2014
2013
Direct
Indirect
Direct
Indirect
1 462
47 500
6 168
1 000
61 113
488 763
19 011
5 529 881
9 644 427
1 124 906
1 500
2 818 552
66 363
1 000
1 462
47 500
6 168
1 000
70 144
488 763
11 371
5 794 393
9 645 240
1 124 906
2 817 773
62 347
1 000
2014
0,14
1,54
2,71
0,31
0,79
2013
0,14
1,62
2,71
0,31
0,79
There have been no changes in the directors’ interests in Exxaro shares between the end of the financial year 2014 and
the date on which the annual financial statements were approved.
90
EXXARO INTEGRATED REPORT 2014 0607 SUMMARISED GROUP ANNUAL
FINANCIAL STATEMENTS
91
EXXARO INTEGRATED REPORT 2014 91
EXXARO INTEGRATED REPORT 2014 AUDITED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
Revenue
Operating expenses
Operating profit
Other income
Impairment charges of non-current assets
Net operating (loss)/profit
Finance income
Finance costs
Income from financial assets
Share of income from equity-accounted investments
(Loss)/profit before tax
Income tax expense
(Loss)/profit for the year from continuing operations
Profit for the year from discontinued operations
(Loss)/profit for the year
Other comprehensive income (OCI), net of tax
Items that will not be reclassified to profit or loss:
Share of comprehensive (loss)/income of equity-accounted investments
Items that may be subsequently reclassified to profit or loss:
Unrealised gains on translating foreign operations
Revaluation of available-for-sale financial assets
Share of comprehensive income of equity-accounted investments
Total comprehensive income for the year
(Loss)/profit attributable to:
Owners of the parent
– Continuing operations
– Discontinued operations
Non-controlling interests (continuing operations)
(Loss)/profit for the year
Total comprehensive income/(loss) attributable to:
Owners of the parent
– Continuing operations
– Discontinued operations
Non-controlling interests (continuing operations)
Total comprehensive income for the year
Attributable (losses)/earnings per share: aggregate
– Basic
– Diluted
Attributable (losses)/earnings per share: continuing operations
– Basic
– Diluted
Attributable earnings per share: discontinued operations
– Basic
– Diluted
92
Notes
4
5
6
2014
Rm
16 401
(15 197)
1 204
1 466
(5 962)
(3 292)
80
(183)
9
2 515
(871)
(13)
(884)
(884)
1 190
(316)
(316)
1 506
224
345
937
306
(883)
(883)
(1)
(884)
307
307
(1)
306
(249)
(249)
(249)
(249)
2013
Rm
13 568
(12 576)
992
1 594
(143)
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)
6 204
8 854
7 805
1 049
(10)
8 844
1 751
1 746
1 456
1 452
295
294
EXXARO INTEGRATED REPORT 2014 AUDITED RECONCILIATION OF GROUP HEADLINE EARNINGS
for the year ended 31 December
2014
Loss attributable to owners of the parent
Adjusted for:
– IFRS 10 Loss on Disposal of Subsidiary
– IAS 16 Net Losses on Disposal of Property, Plant and Equipment
– IAS 2 Gains on Translation Differences Recycled to Profit or Loss on the
Liquidation of a Foreign Subsidiary
– 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 Impairment of Intangible Asset
– IAS 36 Impairment of Goodwill Acquired in a Business Combination
in terms of IFRS 3
– IAS 38 Loss on the Write-off of Intangible Assets
Headline earnings (continuing operations)
2013
Profit attributable to owners of the parent
Adjusted for:
– IFRS 10 Gain on Disposal of Subsidiary
– IAS 16 Net Losses 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 Write-off of Intangible Assets
Headline earnings
– Continuing operations
– Discontinued operations
Headline earnings per share: aggregate
– Basic
– Diluted
Headline earnings per share: continuing operations
– Basic
– Diluted
Headline losses per share: discontinued operations
– Basic
– Diluted
Issued share capital as at 31 December
Ordinary shares (million)
– Weighted average number of shares
– Diluted weighted average number of shares
Gross
Rm
Tax
Rm
6 328
(576)
28
27
(47)
58
296
4 740
202
1 020
4
(1 010)
(964)
9
12
(114)
292
(247)
2
(6)
(18)
(552)
(13)
(4)
2
(11)
2014
cents
1 372
1 372
1 372
1 372
Net
Rm
(883)
5 752
28
21
(47)
58
278
4 188
202
1 020
4
4 869
6 217
(1 023)
(964)
5
12
(112)
281
(247)
2
5 194
5 218
(24)
2013
cents
1 463
1 459
1 470
1 466
(7)
(7)
2014
number
2013
number
358 115 505
358 115 505
355
355
355
356
EXXARO INTEGRATED REPORT 2014 93
AUDITED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December
Notes
8
2014
Rm
41 408
18 344
84
34
18 588
966
2 853
539
5 693
998
2 611
78
2 006
328
2013
Rm
44 681
20 342
72
1 176
19 207
861
2 657
366
4 483
938
2 434
82
1 029
342
47 429
49 506
2 409
6 031
25 985
34 425
34 425
9 182
2 976
2 219
167
88
3 732
3 590
3 208
34
27
254
67
232
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
47 429
49 506
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates
Investments in joint ventures
Financial assets
Deferred tax
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 liabilities
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
94
EXXARO INTEGRATED REPORT 2014 AUDITED GROUP STATEMENT OF CHANGES IN EQUITY
at 31 December
Other components of equity
Share
capital
Rm
Foreign
currency
translations
Rm
Financial
instruments
revaluations
Rm
Equity-
settled
Rm
Retirement
benefit
obligation
Rm
Available-
for-sale
revaluations
Rm
Retained
earnings
Rm
Other
Rm
Attributable to
owners of
the parent
Rm
Non-
controlling
interests
Rm
Total
equity
Rm
At 1 January 2013
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/(losses) of
equity-accounted
investments
Issue of share capital1
22
Share-based payments
movement
Dividends paid
Acquisition of
non-controlling interest
534
100
634
3
637
6 217
6 217
(13)
6 204
1 401
289
110
150
(1)
54
2 003
83
22
83
(1 387)
(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
Loss for the year
Other comprehensive
income
Share of comprehensive
income/(loss) of
equity-accounted
investments
Issue of share capital1
13
Share-based payments
movement
Dividends paid
Reclassification
of equity2
Disposal and liquidation
of subsidiaries3
224
345
569
569
(883)
(883)
(1)
(884)
827
(194)
310
(316)
(63)
(6)
63
(108)
(2 055)
808
(808)
621
13
(108)
(2 055)
621
13
(108)
(2 055)
(30)
(30)
27
(3)
At 31 December 2014
2 409
4 167
116
1 695
(329)
382
25 985
34 425
34 425
1 Vesting of Mpower 2012 treasury shares to good leavers amounted to R13 million (2013: R8 million). A good leaver is a participant to a share-based payment scheme whose
employment has been terminated due to retrenchment, retirement, death, serious disability, serious incapacity or promotion out of the relevant qualification category as
defined internally by the remuneration and nomination committee. An amount of R14 million in 2013 relates to shares issued to the Kumba Resources Management Share
Trust due to options exercised.
2 Reclassification of reserves created for transactions with non-controlling interests.
3
Included in foreign currency translations is R17 million in respect of loss on translation difference on disposal of subsidiary and R47 million gain on translation difference on
the liquidation of a foreign subsidiary.
Final dividend paid per share (cents) in respect of the 2013 financial year
Dividend paid per share (cents) in respect of the 2014 interim period
Final dividend payable per share (cents) in respect of the 2014 financial year
315
260
210
Foreign currency translations
Arise from the translation of the financial statements of foreign operations within the group.
Financial instruments revaluations
Comprise 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
Represents the fair value of services received and settled by equity instruments granted.
Retirement benefit obligation
Comprise remeasurements on the post-retirement obligation.
Available-for-sale revaluations
Comprise the fair value adjustments net of tax on the investments in Richards Bay Coal Terminal (RBCT) R344 million (2013: R54 million) and
Chifeng Kumba Hongye Corporation Limited (Chifeng) R1 million (2013: R46 million) (refer to note 8).
EXXARO INTEGRATED REPORT 2014 95
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
Increase in investment in intangible assets
Proceeds from disposal of property, plant and equipment
Decrease in investment in other non-current assets
Proceeds from disposal of subsidiaries
Increase in investment in joint ventures
Income from investments in associates
Dividend income from financial assets
Cash flows from financing activities
Interest-bearing borrowings raised
Interest-bearing borrowings repaid
Consideration paid to non-controlling interests
Proceeds from issuance of share capital
Other financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Translation differences on movement in cash and cash equivalents
Cash and cash equivalents at end of year
Cash and cash equivalents
Overdraft
2014
Rm
1 660
4 083
(307)
59
(120)
(2 055)
620
(1 460)
(1 737)
(25)
8
214
(108)
3 719
9
(604)
1 000
(1 604)
1 676
223
40
1 939
2 006
(67)
20131
Rm
436
2 173
(262)
70
(158)
(1 387)
(1 480)
(1 257)
(3 507)
(201)
17
222
87
(82)
3 229
12
715
800
(96)
14
(3)
(329)
553
(1)
223
1 029
(806)
1 Represented between cash generated by operations and translation differences on movement in cash and cash equivalents due to a reclassification of foreign currency
differences not related to cash and cash equivalents.
96
EXXARO INTEGRATED REPORT 2014 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 2014 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 2014 have been prepared
under the supervision of the finance director, WA de Klerk (CA)SA, in accordance with the JSE Limited Listings
Requirements (Listings Requirements) for abridged reports and the requirements of the Companies Act. 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 South African Institute of Chartered
Accountants (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 summarised group annual financial statements do not include the directors’ report, which forms part of the
full group annual financial statements.
2.
Significant accounting policies
The accounting policies adopted in the preparation of the summarised group annual financial statements
are in line with IFRS and are consistent with those followed in the preparation of the group’s annual financial
statements for the year ended 31 December 2013, except for the adoption of new standards and interpretations
effective 1 January 2014 (where applicable).
The accounting standards and amendments issued to accounting standards and interpretations which are
relevant to the group, but not yet effective at 31 December 2014, 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.
The nature and the impact of each new standard or amendment, effective on 31 December 2014, are described below:
Investment entities (amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of
Interest in Other Entities and IAS 27 Separate Financial Statements)
These amendments provide an exception to the consolidation requirement for entities that meet the definition
of an investment entity under IFRS 10. The exception requires investment entities to account for subsidiaries at
fair value through profit or loss. These amendments have no impact on the group, since none of the entities in
the group qualify to be classified as investment entities under IFRS 10.
Offsetting financial assets and financial liabilities (amendments to IAS 32 Financial instruments: Presentation)
These amendments clarify the meaning of “currently has a legally enforceable right to offset” as well as
the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These
amendments have no impact on the group as the group does not offset financial assets and financial liabilities.
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39 Financial instruments:
Recognition and Measurement)
These amendments provide relief from discontinuing hedge accounting when novation of a derivative
designated as a hedging instrument meets certain criteria. These amendments have no impact on the group as
the group has not novated its derivatives during the current or prior periods.
Recoverable amount disclosures for non-financial assets (amendments to IAS 36 Impairment of Assets)
These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosure
required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the
assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the
period. The group adopted these disclosure requirements on 1 January 2014.
EXXARO INTEGRATED REPORT 2014 97
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
3.
Segmental information
Operating segments are reported on in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources
and assessing performance of the reportable operating segments, has been identified as the group executive
committee. Operating segments reported are based on the group’s different products and operations.
Total operating segment revenue, which excludes value added tax (VAT), represents the gross value of goods
and services invoiced and includes operating revenues directly and reasonably allocable to the segments.
Export revenue is recorded according to the relevant sales terms, when the risks and rewards of ownership are
transferred.
Segment revenue includes sales made between segments. These sales are made on a commercial basis.
Segment operating expenses, assets and liabilities represent direct or reasonably allocable net
operating profit/(loss), assets and liabilities.
Segment net operating profit equals segment revenue less operating segment expenses, less impairment
charges, plus impairment reversals.
The group has four reportable operating segments, as described below, based on the group’s strategic divisions.
The strategic divisions offer different products and services and are managed separately. For each of the
strategic divisions, the group executive committee reviews internal management reports on a monthly basis.
The summary below describes the activities and location of each of the group’s reportable operating segments:
Coal
The coal operations are mainly situated in the Waterberg and Mpumalanga regions and are split between
commercial and tied coal operations as well as a 50% joint venture interest in Mafube Coal Proprietary Limited
(Mafube), a joint venture with Anglo South Africa Capital Proprietary Limited. The operations produce thermal
and metallurgical coal, as well as other small scale products.
Ferrous
The ferrous operations include the Mayoko iron ore project in the Republic of the Congo (Iron ore reportable
operating segment), a 19,98% equity interest in Sishen Iron Ore Company Proprietary Limited (SIOC) reported
within the other ferrous reportable operating segment as well as the FerroAlloys and AlloystreamTM operations
(collectively referred to as Alloys).
TiO2
Exxaro holds a 43,98% (2013: 44,40%) equity interest in Tronox Limited (Tronox), a 26% equity interest in
each of the South African-based operations, Tronox KZN Sands Proprietary Limited and Tronox Mineral Sands
Proprietary Limited (collectively referred to as Tronox SA) as well as a 26% members’ interest in Tronox Sands
Limited Liability Partnership in the United Kingdom (Tronox UK).
Other
The other operating segment includes the 50% investment in Cennergi Proprietary Limited (Cennergi) (a joint
venture with Tata Power), a 26% equity interest in Black Mountain Mining Proprietary Limited (Black Mountain),
an effective investment of 11,7% in the Chifeng operations as well as the results of Exxaro Base Metals which was
sold during 2013, as well as the corporate office which renders services to external parties as well.
98
EXXARO INTEGRATED REPORT 2014 For the year ended 31 December
At 31 December
Revenue
Net operating
profit/(loss)
Assets
Liabilities
2014
Rm
2013
Rm
2014
Rm
2013
Rm
2014
Rm
2013
Rm
2014
Rm
2013
Rm
16 176
13 362
3 297
2 769
25 124
22 386
9 140
7 552
4 577
11 599
3 917
9 445
319
2 978
215
2 554
1 887
23 237
1 543
20 843
1 462
7 678
1 391
6 161
159
120
(6 238)
(141)
5 951
11 095
159
120
66
66
86
86
(6 100)
(97)
(41)
(351)
(1)
(350)
(27)
(61)
(53)
938
145
793
138
247
5 566
12 809
3 545
624
2 921
5 114
189
5 792
13 325
2 700
611
2 089
328
201
54
73
814
729
33
52
3 536
4 868
3 536
4 868
16 401
13 568
(3 292)
3 566
47 429
49 506
13 004
13 234
Coal
– Tied1
– Commercial2
Ferrous
– Iron ore3
– Alloys
– Other
TiO2
Other
– Base metals4
– Other5
Total
1 Mines that are managed on behalf of and supply their entire production to either Eskom or ArcelorMittal South Africa Limited (AMSA) in terms of contractual
agreements.
2 Net operating profit includes the New Clydesdale Colliery (NCC) net pre-tax impairment of R143 million in 2013.
3 Net operating loss includes the pre-tax impairment of the original investment including goodwill, carrying value of property, plant and equipment and qualifying
project costs capitalised to the Mayoko iron ore project of R5 760 million as well as the impairment and write-off of financial assets totalling R43 million recorded
in 2014.
4 Net operating profit includes a Zincor refinery partial impairment reversal of R98 million recorded in 2013.
5 Net operating (loss)/profit includes a pre-tax impairment loss of other non-core assets of R202 million in 2014 as well as profit on the sale of subsidiaries of
R964 million on the sale of Exxaro Base Metals (which held the Zincor refinery) recorded in 2013.
4.
Significant items included in operating expenses
Depreciation and amortisation
Net realised foreign currency exchange gains
Net unrealised foreign currency exchange (gains)/losses
Net (gains)/losses on derivative instruments held-for-trading
Write-offs and impairment of trade and other receivables1
Royalties2
Net loss on disposal of property, plant and equipment
Loss on dilution of investment in associate
Impairment charges of non-current financial assets3
Loss on disposal of subsidiary
Termination benefits4
Include trade and other receivables relating to the Mayoko iron ore project (R22 million).
1
2 The amount paid in 2013 for royalties includes an adjustment for the prior period calculations based on final
SARS assessments.
3 Non-current financial assets relating to the Mayoko iron ore project.
Include voluntary severance package costs incurred and accrued for.
4
Year ended 31 December
2014
Rm
2013
Rm
889
(97)
(7)
(28)
40
125
27
58
21
28
138
856
(56)
20
81
25
8
21
12
19
5.
Other income
Other income
1 466
1 594
Other income relates to shortfall income received from Eskom as a result of delays in
agreed upon production offtake plans.
EXXARO INTEGRATED REPORT 2014 99
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
Year ended 31 December
6.
Impairment charges/(reversals) of non-current assets
Mayoko iron ore project
Impairment charges
– Property, plant and equipment
– Goodwill
Net tax effect
Intellectual property
Impairment of intangible asset (pre- and post-tax)
New Clydesdale Colliery (NCC) operation
Net impairment charges
– Impairment of property, plant and equipment
– Reversal of impairment of property, plant and equipment
Net tax effect
Zincor
Reversal of impairment of property, plant and equipment
Net impairment charges per statement of comprehensive income (including
discontinued operations)
Net tax effect
Net effect on attributable earnings
– Continuing operations
– Discontinued operations
6.1 Mayoko iron ore project
2014
Rm
5 208
5 760
4 740
1 020
(552)
202
202
5 962
(552)
5 410
5 410
2013
Rm
132
143
292
(149)
(11)
(98)
(98)
45
(11)
34
132
(98)
The Mayoko iron ore project is located in the Republic of the Congo (RoC) and was acquired in February 2012
through the acquisition of AKI. The project is reported within the iron ore operating segment which forms
part of the ferrous reporting segment.
After the acquisition, Exxaro aimed to secure a mining convention agreement, as well as port and rail access
agreements (project agreements). This included a company mining tax regime with the government of the
RoC. These negotiations were done simultaneously with ongoing work for:
• Confirmation of inferred and proven resources
• Clearing and construction of the infrastructure required to mine the resource.
Based on the conceptual positive business case, a decision was taken to start the project in phases (ramping
up to 2 million tonnes per annum (Mtpa)) as soon as the mining convention and project agreements had
been finalised.
Based on the assumption that project agreements would be finalised in a reasonable timeframe, Exxaro
began acquiring assets (such as rolling stock, beneficiation plant, harbour cranes, etc.) and appointing
people to permit fast-track initiation. However, the mining convention was not signed until January 2014
(effectively 10 months after the original submission) and there has since been slow progress on other
required project agreements, which are still outstanding.
With the time lapse, the financial models (on a 12 million tonnes concept study level) were updated with the
latest assumptions on capital, operational costs, resources and long-term iron ore prices which indicated
that the project may not achieve Exxaro’s required hurdle rates. The major driver of the change in the
returns since acquisition was attributed to higher capital expenditure. At the time of finalising the revised
concept study, Exxaro had not yet been successful in concluding the definitive project agreements.
100
EXXARO INTEGRATED REPORT 2014 As a result of the delays in finalising these agreements, as well as higher future project development costs
following the outcome of the concept study, a pre-tax impairment loss of R5 803 million (R5 760 million
excluding the impairment of financial assets and write off of trade and other receivables), was raised
consisting of an impairment of goodwill acquired in the business combination with AKI in 2012 of
R1 020 million, impairment of property, plant and equipment of R4 740 million (including the mineral
resource of R1 877 million recognised on acquisition of the project and project-related costs capitalised
of R1 696 million) as well as impairment and write-off of financial assets amounting to R43 million in terms
of IAS 39 Financial Instruments: Recognition and Measurement.
The recoverable amount, being the fair value less costs of disposal (level 3 as per IFRS 13 Fair Value
Measurement), was considered to be immaterial and the project was impaired to a recoverable amount
of Rnil. This was derived using a discounted cash flow valuation technique (consistent with the valuation
technique used on 31 December 2013) where cash flow projections and a post-tax discount rate of
17% (31 December 2013: 14%) were used. The increase in the discount rate is as a result of the market
assumptions on risk inherent in the implementation of the project.
Key assumptions made in the valuation included the following:
LoM: estimated at
Iron ore price: range per tonne
Post-tax discount rate
31 December
2014
2013
25 years
35 years
US$78
and
US$117
17,0%
US$88
and
US$169
14,0%
The values assigned to the key assumptions represented management’s best estimates with respect to its
LoM and operating projections, as well as pricing forecasts. The iron ore price ranges were based on the
current known industry trends and analysis.
The discount rate was a post-tax US-based weighted average cost of capital adjusted for various risk
factors, based on historical data from both external and internal sources.
The decrease in the LoM to 25 years (31 December 2013: 35 years) is mainly due to the increase in annual
production costs, acceleration in ramp-up, lower plant yield and different ore mix, based on the most
recent information available.
Management has identified that a reasonably possible change in two key assumptions could cause the
carrying amount to exceed the recoverable amount.
The following table shows the amounts by which these two assumptions would need to change individually
for the estimated recoverable amount to be equal to the carrying amount prior to the impairment:
Key assumptions
Post-tax discount rate
Iron ore price: range
6.2 Intellectual property
Unit
%
US$/tonne
Change
required
(8)
17 and 26
Exxaro has taken the decision not to develop the underground coal gasification project in 2015. The
decision is based on the current economic environment and the expected capital expenditure required
for the project. The licence relating to this technology is not transferable and non-income generating.
The licence (intangible asset) has been fully impaired with a value of R202 million following the revised
management intention.
6.3 NCC operation
The carrying value of property, plant and equipment of the NCC coal operation, reported within the
commercial operating segment contained in the coal reporting segment, was impaired with R292 million
to the recoverable amount based on impairment tests performed in June 2013. The recoverable amount
was revised following the classification of the NCC operation as held-for-sale at 31 December 2013
due to the signing of the sales agreement of the NCC operation, which was concluded with Universal
Coal Development VII Proprietary Limited (Universal) in January 2014. As a result of the revision to
the recoverable amount, a partial impairment reversal to the amount of R149 million was recorded on
31 December 2013, bringing the net pre-tax impairment loss recorded to R143 million.
EXXARO INTEGRATED REPORT 2014 101
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
6.
Impairment charges/(reversals) of non-current assets
6.4 Zincor
The impairment reversal of the carrying value of property, plant and equipment at the Zincor operation
was based on the revised recoverable amount of the operation. The recoverable amount was revised
following the sale of Exxaro Base Metals Proprietary Limited (Exxaro Base Metals), which included the
Zincor assets.
7.
Net debt
Net debt is presented by the following items on the face of the statement of financial
position (excluding assets and liabilities held-for-sale):
– Cash and cash equivalents
– Non-current interest-bearing borrowings
– Current interest-bearing borrowings
– Overdraft
Calculation of movement in net debt:
Cash inflow/(outflow) from operating and investing activities:
Add:
– Shares issued
– Share-based payments
– Non-cash flow movement for interest accrued not yet paid
– Non-cash flow amortisation of transaction costs
– Consideration paid to non-controlling interests
– Translation differences on movements in cash and cash equivalents
At 31 December
2014
Rm
20131
Rm
(1 071)
2 006
(2 976)
(34)
(67)
(3 377)
1 029
(3 569)
(31)
(806)
2 280
(1 044)
(4)
(10)
40
14
(2)
(40)
(9)
(96)
(1)
Decrease/(increase) in net debt
2 306
(1 178)
1 Represented between cash generated from operations and translation differences on movements in cash and cash equivalents due to a reclassification of foreign
currency difference not related to cash and cash equivalents.
102
EXXARO INTEGRATED REPORT 2014 8.
Financial instruments
(a) Carrying amounts and fair values
The carrying amounts and fair values of financial assets and financial liabilities in the condensed group
statement of financial position are as follows:
At 31 December
2014
Carrying
amount
Rm
Fair
value
Rm
2013
Carrying
amount
Rm
Fair
value
Rm
ASSETS
Non-current assets
Financial assets, consisting of:
2 693
2 693
2 469
2 469
– Environmental rehabilitation funds
– Loans to joint ventures
– Kumba Iron Ore Limited
– Chifeng
– RBCT
– New Age Exploration Limited
– Non-current receivables
Current assets1
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Non-current assets held-for-sale
826
83
22
267
973
522
4 104
2 090
8
2 006
76
826
83
22
267
973
522
4 104
2 090
8
2 006
76
Total financial instrument assets
6 873
6 873
LIABILITIES
Non-current liabilities
Interest-bearing borrowings2
Current liabilities1
Trade and other payables
Derivative financial liabilities
Interest-bearing borrowings2
Overdraft
Non-current liabilities held-for-sale
2 976
2 976
2 603
2 502
34
67
14
2 976
2 976
2 603
2 502
34
67
14
Total financial instrument liabilities
5 593
5 593
618
255
40
253
551
1
751
2 875
1 845
1
1 029
67
5 411
3 569
3 569
2 907
2 056
14
31
806
36
6 512
618
255
40
253
551
1
751
2 875
1 845
1
1 029
67
5 411
3 569
3 569
2 907
2 056
14
31
806
36
6 512
1 Carrying amounts approximate the fair values due to the short-term nature of the maturities of these financial assets and liabilities.
2 Carried at amortised cost representing fair value in terms of IAS 39 Financial Instruments: Recognition and Measurement.
EXXARO INTEGRATED REPORT 2014 103
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
8.
Financial instruments (continued)
(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 to the valuation techniques used. 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.
Level 1
Rm
Level 2
Rm
Level 3
Rm
Total
Rm
8
826
73
22
267
973
2 169
1
618
67
40
253
1
551
(14)
(9)
8
8
1
(14)
(9)
(22)
267
973
1 240
253
551
804
1 508
At 31 December 2014
Financial assets held-for-trading at fair
value through profit or loss
– Current derivative financial assets
Financial assets designated at fair value
through profit or loss
– Environmental rehabilitation funds
– Environmental rehabilitation fund held-
for-sale
– Kumba Iron Ore Limited
Available-for-sale financial assets
– Chifeng
– RBCT
826
73
22
Net financial assets carried at fair value
921
At 31 December 2013
Financial assets held-for-trading at fair
value through profit or loss
– Current derivative financial assets
Financial assets designated at fair value
through profit or loss
– Environmental rehabilitation funds
– Environmental rehabilitation fund 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 derivative financial liabilities
– Current derivative financial liabilities
held-for-sale
618
67
40
1
Net financial assets/(liabilities) carried
at fair value
726
104
EXXARO INTEGRATED REPORT 2014 (c) Level 3 fair values
Reconciliation of assets within Level 3
of the hierarchy:
At 1 January 2013
Movement during the year
Gains recognised for the period in OCI (pre-tax effect)
Settlements
Exchange gains for the period recognised in OCI
At 31 December 2013
Movement during the year
Gains recognised for the period in OCI (pre-tax effect)
Exchange gains for the period recognised in OCI
At 31 December 2014
Chifeng
Rm
174
46
33
253
1
13
267
RBCT
Rm
467
82
2
551
422
973
Transfers
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 during the years ended
31 December 2014 and 31 December 2013.
There were no transfers between Level 2 and Level 3, as shown in the reconciliations above.
Valuation process applied by the group
The fair value computations of the investments are performed by the group’s corporate finance
department, reporting to the financial director, on a six-monthly basis.
The valuation reports are discussed with the audit committee in accordance with the group’s reporting
governance.
Current derivative financial instruments
Level 2 fair values for simple over-the-counter derivative financial instruments are based on market quotes.
These quotes are tested for reasonableness by discounting estimated future cash flows using the market rate
for similar instruments at measurement date.
Valuation techniques used in the determination of fair values within Level 3 of the
hierarchy, as well as significant inputs used in the valuation models
Chifeng
Chifeng is classified within Level 3 of the fair value hierarchy 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 valuation technique is consistent to that used in
previous reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in
Chifeng are rand/renmimbi (RMB) exchange rate, RMB/US$ exchange rate, Zinc London Metal Exchange (LME)
price, production volumes, operational costs and the discount rate.
EXXARO INTEGRATED REPORT 2014 105
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
8.
Financial instruments (continued)
(c) Level 3 fair values (continued)
At 31 December 2014
Observable inputs
Rand/RMB exchange rate
RMB/US$ exchange rate
Zinc LME price (US$ per tonne in real terms)
Unobservable inputs
Production volumes (tonnes)
Operational costs (US$ million per annum in
real terms)
Discount rate (%)
At 31 December 2013
Observable inputs
Rand/RMB exchange rate
RMB/US$ exchange rate
Zinc LME price (US$ per tonne in real terms)
Unobservable inputs
Production volumes (tonnes)
Operational costs (US$ million per annum in
real terms)
Discount rate (%)
Sensitivity of inputs
and fair value
measurement1
Inputs
R1,86/RMB1
Strengthening of the
rand to the RMB
RMB6,13 to
RMB6,75/US$1
Strengthening of the
RMB to the US$
US$2 311 to
US$2 226
Increase in price of
zinc concentrate
85 000 tonnes
Increase in
production volumes
US$63 to
US$76
9,94%
Decrease in
operations costs
Decrease in
the discount rate
R1,72/RMB1
Strengthening of the
rand to the RMB
RMB6,02 to
RMB5,95/US$1
Strengthening of the
RMB to the US$
US$2 039 to
US$2 027
Increase in price of
zinc concentrate
208 750 tonnes
US$74 to
US$88
10%
Increase in
production volumes
Decrease in
operations costs
Decrease in
the discount rate
Sensitivity analysis
of a 10% increase
in the inputs is
demonstrated
below2
Rm
26
152
152
37
(133)
(20)
25
161
161
177
(143)
(21)
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all other variables remain constant.
Interrelationships
Any interrelationships between unobservable inputs is not considered to have a significant impact within
the range of reasonably possible alternative assumptions for both reporting periods.
RBCT
RBCT is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable
price available for this investment. This unlisted investment is valued as the present value of the estimated
future cash flows, using a discounted cash flow model. It is not anticipated that the RBCT investment
will be disposed of in the near future. The valuation technique is consistent to that used in previous
reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in
RBCT are rand/US$ exchange rate, API4 export price, Transnet market demand strategy, discount rate and
annual utilisation factor.
106
EXXARO INTEGRATED REPORT 2014 At 31 December 2014
Observable inputs
Rand/US$ exchange rate
API4 export price
(US$ steam coal A-grade price per tonne
in real terms)
Unobservable inputs
Transnet Market Demand Strategy
for the terminal
Discount rate (%)
Annual utilisation factor (safety and rail
delay factor) (%)
Sensitivity of inputs
and fair value
measurement1
Inputs
R10,94 to
R18,80/US$1
Strengthening of the
rand to the US$
US$62 to
US$93
Increase in API4
export price
per tonne
74Mtpa to
81Mtpa
13% to
17%
90%
Acceleration
of Transnet
Freight Rail (TFR)
performance,
ie: reach full
capacity sooner
Decrease in
the discount rate
Increase in annual
utilisation factor
Sensitivity analysis
of a 10% increase
in the inputs is
demonstrated
below2
Rm
257
154
97
(120)
123
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease or increase in the respective inputs would have an equal but opposite effect on the above, on the basis that all other variables
remain constant.
At 31 December 2013
Observable inputs
Rand/US$ exchange rate
API4 export price
(US$ steam coal A-grade price per tonne
in real terms)
Unobservable inputs
Transnet Market Demand Strategy
for the terminal
Discount rate (%)
Annual utilisation factor (safety and rail
delay factor) (%)
Sensitivity of inputs
and fair value
measurement1
Inputs
R9,85 to
R10,15/US$1
Strengthening of the
rand to the US$
US$75,50 to
US$97
Increase in API4
export price
per tonne
77Mtpa to
81Mtpa
13% to
17%
90%
Acceleration of TFR
performance,
ie: reach full
capacity sooner
Decrease in
the discount rate
Increase in annual
utilisation factor
Sensitivity analysis
of a 10% increase
in the inputs is
demonstrated
below2
Rm
119
119
127
(109)
119
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all other variables remain constant.
Interrelationships
Any interrelationships between unobservable inputs is not considered to have a significant impact within
the range of reasonably possible alternative assumptions for both reporting periods.
EXXARO INTEGRATED REPORT 2014 107
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
9.
Contingent liabilities
Total contingent liabilities
– DMC Iron Congo South Africa
– Pending litigation claims1
– Operational guarantees
– Group’s share of contingent liabilities of equity-accounted investments2
At 31 December
2014
Rm
2013
Rm
2 609
2 066
445
1 263
901
84
328
977
677
1 Pending litigation claims consist of legal cases with Exxaro as defendant. The outcome of these claims is uncertain and the amount of possible legal obligations that
may be incurred can only be estimated at this stage.
2 Mainly relates to rehabilitation guarantees.
Operational guarantees include 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.
10. Contingent assets
Total contingent assets
– Surrender fee on prospecting rights, exploration rights and mining rights1
– Guarantee on sale of NCC2
– Group’s share of contingent assets of equity-accounted investments3
At 31 December
2014
Rm
256
170
86
2013
Rm
108
81
27
1
In 2013 a surrender fee in exchange for the exclusive right to prospect, explore, investigate and mine for coal within a designated area of central Queensland and
Moranbah, Australia, conditional to the grant of a mining lease, was included as contingent asset. However, in 2014, circumstances changed to the extent that the
possibility for this surrender fee does not exist anymore, hence no amount relating to this matter is included in the current year.
2 Exxaro has received a guarantee from Universal as part of the sales transaction of NCC.
3 Bank guarantees in favour of SIOC relating to environmental rehabilitation.
11. Related party transactions
During the year the group, 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.
12. 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.
13. JSE Limited Listings Requirements
The summarised group annual financial results have been prepared in accordance with the Listings
Requirements of the JSE Limited.
108
EXXARO INTEGRATED REPORT 2014 14. Events after the reporting period
Details of the final dividend proposed are given in note 16.
The following non-adjusting events occurred after the reporting date and are disclosed for information purposes:
• On 28 January 2015, the Pegasus South Environmental Management Programme amended licence was
approved
• On 30 January 2015, the financial guarantees provided by Universal for the sale of NCC were extended to
31 July 2015
• During February 2015, R2,3 billion on the revolving facility, as well as R2 billion on the term loan, was
drawn down.
• Exxaro entered into a binding sale and purchase agreement on 25 July 2014 with Total S.A. (Total), subject to
certain conditions precedent, whereby Exxaro will acquire 100% of the issued share capital of TCSA and its
related export marketing rights under primary RBCT allocation. Exxaro will pay a total purchase consideration
of US$472 million (US$386,5 million to acquire 100% of the issued share capital of TCSA and US$85,5 million
to settle outstanding loan claims of Total Finance against TCSA). Three of the conditions precedent have been
fulfilled. The condition precedent regarding the consent by the DMR of South Africa for the acquisition being
granted in terms of section 11 of the MPRDA, is still outstanding.
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.
15.
Independent external audit conclusion
These summarised group annual financial statements for the year ended 31 December 2014 (from page 1
to page 20) 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.
16. Final dividend
Exxaro remains committed to returning regular income through dividends to its shareholders, as well as
ensuring long-term capital growth on shares held.
Notice was given that a gross final cash dividend, number 24 of 210 cents (2013: 315 cents) per share, for the
year ended 31 December 2014 had been declared, payable to shareholders of ordinary shares. No secondary
tax on companies (STC) credits are available for offsetting against the dividend withholding tax, while total STC
credits available for final dividend number 22 amounted to R195 million, representing 54,51893 cents per share.
The gross local dividend is 210 cents per share for shareholders exempt from dividend withholding tax. The
dividend declared is subject to a dividend withholding tax of 15% for all shareholders who are not exempt from
or do not qualify for a reduced rate of dividend withholding tax. The net local dividend payable to shareholders
who are subject to dividend withholding tax at a rate of 15% is 178,50000 cents per share. The dividend
withholding tax amounts to 31,50000 cents per share (2013: zero cents per share). The number of ordinary
shares in issue at the date of this declaration is 358 115 505 (2013: 358 115 505). Exxaro’s tax reference number
is 9218/098/14/4.
The salient dates of payment of the annual dividend are:
Last day to trade cum dividend on the JSE
First trading day ex dividend on the JSE
Record date
Payment date
Friday, 10 April 2015
Monday, 13 April 2015
Friday, 17 April 2015
Monday, 20 April 2015
No share certificates may be dematerialised or rematerialised between Monday, 13 April 2015 and Friday,
17 April 2015, 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, 20 April 2015.
EXXARO INTEGRATED REPORT 2014 109
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
(continued)
for the year ended 31 December
17. Other*
Net asset value per share (rand/share)
Capital expenditure contracted relating to tied mines, Tshikondeni, Arnot and Matla,
which will be financed by ArcelorMittal SA Limited and Eskom (Rm)
Operating lease commitments (Rm)
Closing share price (rand/share)
Market capitalisation (Rb)
Average rand/US$ exchange rate (spot rate)
Closing rand/US$ exchange rate (spot rate)
* Non-IFRS numbers.
At 31 December
2014
2013
96
101
159
135
103,50
37,06
10,83
11,56
317
212
146,46
52,45
9,62
10,44
110
EXXARO INTEGRATED REPORT 2014 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: ZAE000084992
Independent external 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
Integrated report and other statutory reports
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
March
April
August
March
April
August
September/October
6 0 2 4
www.exxaro.com