Exxaro Resources Limited Reviewed condensed group annual financial statements and unreviewed production and sales volumes information For the year ended 31 December 2019 CONTENTS 2 COMMENTARY 12 CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME 13 CONDENSED GROUP STATEMENT OF FINANCIAL POSITION 14 CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY 16 CONDENSED GROUP STATEMENT OF CASH FLOWS 17 RECONCILIATION OF GROUP HEADLINE EARNINGS 18 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS CORPORATE BACKGROUND 18 1 Corporate background COMPLIANCE 18 18 19 2 Basis of preparation 3 Accounting policies 4 Changes in accounting policies PERFORMANCE FOR THE YEAR 27 31 33 35 36 36 5 Segmental information 6 Discontinued operations 7 Revenue 8 Significant items included in operating expenses 9 Net financing costs 10 Share of income of equity-accounted investments DIVIDEND DISTRIBUTIONS 37 11 Dividend distributions ASSETS 37 38 39 39 40 12 Capital spend and capital commitments 13 Right-of-use assets 14 Equity-accounted investments 15 Other assets 16 Non-current assets and liabilities held-for-sale LIABILITIES 42 44 45 46 48 17 Interest-bearing borrowings 18 Lease liabilities 19 Provisions 20 Net debt 21 Other liabilities FINANCIAL INSTRUMENTS 49 22 Financial instruments OTHER INFORMATION 23 Contingent liabilities 24 Related party transactions 25 Going concern 26 Events after the reporting period 27 External auditor's review conclusion 28 Key measures 53 53 53 54 54 54 55 CORPORATE INFORMATION 56 ANNEXURE: ACRONYMS HIGHLIGHTS GROUP FINANCIAL PERFORMANCE R25.7 billion Revenue, up 1% R5.8 billion Core EBITDA, down 20% R23.54 per share Core headline earnings, up 9% R5.3 billion Cash generated by operations, down 25% R5.66 per share Final cash dividend, total dividend of R23.27 per share, for FY19 SUSTAINABLE OPERATIONS LTIFR of 0.12 COAL OPERATIONAL PERFORMANCE SIOC 45.3Mt Production volumes 44.5Mt Sales volumes 9.1Mt Record export volumes Value distribution (Rm) R4.4 billion post-tax equity-accounted income R4.1 billion Total dividend in FY19 80 95 1 391 87 77 247 2019 5 812 4 209 1 315 5 483 2018 3 379 1 163 1 690 558 1 664 518 • Salaries, wages and benefits • Employees’ tax • Payments to government: taxation contribution • Cost of finance • Cash dividend paid • Dividend paid to BEE Parties • Phantom employee scheme • Community investments and volunteerism 1 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY For the year ended 31 December 2019 Comments below are based on a comparison between the financial years ended 31 December 2019 and 2018 (FY19 and FY18) respectively. Safety Zero harm remains Exxaro’s key safety objective. The group recorded an LTIFR of 0.12 (FY18: 0.12), which is higher than the set target of 0.11. We have done better in previous years and remain confident that we will improve on this through our safety campaign, “khetha ukuphepha”, which we launched in November 2019. We are pleased to report zero fatalities for 33 consecutive months at 31 December 2019. Results overview Group revenue was up 1% to R25 726 million (FY18: R25 491 million), while group core EBITDA (after adjusting for non-core items) decreased 20% to R5 832 million (FY18: R7 281 million). The main contributors were the lower benchmark API4 export price negatively impacting revenue, as well as cost pressures which are further explained under financial and operational results. Core equity-accounted income from associates and joint ventures increased to R4 750 million (FY18: R3 271 million) mainly as a result of SIOC. Core headline earnings rose 3% to R7 402 million (FY18: R7 167 million), despite the lower core EBITDA, which was more than offset by the net increase in our core equity-accounted income. Comparability of results The key items (non-core adjustments) shown below should be considered for a better understanding of the comparability of the results between the different reporting periods. EBITDA is calculated by adjusting net operating profit before tax with depreciation, amortisation, impairment charges/reversals and net losses or gains on disposal of assets and investments (including translation differences recycled to profit or loss). This term is not defined under IFRS and may not be comparable with similarly titled measures reported by other companies. 2 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 Key items impacting on comparability of results (non-core adjustments) Segment Coal Ferrous TiO2 Other Group Coal Description – Insurance claim recovery from external parties – Targeted voluntary packages1 – Targeted voluntary packages1 – Indemnification asset movement relating to the tax implications of the partial Tronox Holdings plc divestment – Fair value adjustment on debt – Fair value adjustment on the ECC contingent consideration Total EBITDA impact – Insurance claim recovery from external parties2 – Gain on disposal of non-core investments2,3 – Loss on loss of control of Tumelo2 – Net gains on disposal of property, plant and equipment2, 4 – Impairment reversal of property, plant and equipment2 – Tax on non-core adjustments2 Ferrous – Post-tax share of SIOC’s loss on disposal of property, plant and equipment2 TiO2 Energy Other – Net gains on partial disposal of investment in Tronox, including net gain on translation differences recycled to profit and loss2, 5 – Tax on partial disposal of investment in Tronox Holdings plc2 – Impairment of associate (GAM)2 – Net gain on translation differences recycled to profit or loss on foreign subsidiaries2 – Net loss on disposal of property, plant and equipment2 – Losses on dilution of investments in associates2 – Post-tax share of Insect Technology’s loss on disposal of intangible assets and impairment of goodwill2 Various – Other items individually less than R10 million2 Net financing cost – Eyesizwe preference dividend accrued (consolidation impact) Non-controlling interest – Non-controlling interests on non-core adjustments Group Total attributable earnings impact FY19 Rm FY18 Rm (99) 393 3 (65) (58) (296) (122) (49) (76) 35 (18) (23) 11 10 (2 336) 65 58 (7) 18 42 42 4 25 (86) (2 407) 357 357 (57) (171) (121) 29 13 (14) 1 100 137 1 Exxaro is committed to comply with the employment equity targets prescribed by the Mining Charter and DTI codes and as such approved various mechanisms that will support the achievement of the 2022 targets. 2 Excluded from headline earnings. 3 Relates to a gain on disposal of Paardeplaats mining right; FY18 comprises a gain on disposal of Manyeka (R69 million) and a gain on disposal of NBC (R102 million). 4 FY18 includes R115 million gain on disposal of mineral properties by Matla. 5 Includes a gain of R1 234 million on the partial disposal of Tronox Holdings plc, a gain of R832 million on translation differences recycled to profit or loss on partial disposal of Tronox Holdings plc and a gain of R270 million on the redemption of the Tronox UK membership interest. 2 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 3 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 COMMODITY PRICE PERFORMANCE AND GROUP SEGMENT RESULTS The movement in the main commodity prices impacting on Exxaro’s performance are summarised in the table below. Change in commodity prices Commodity price API4 coal Iron ore fines 62% Fe (CFR China) FINANCIAL AND OPERATIONAL RESULTS Group financial results Group segment results (Rm) Coal Ferrous Other Total Average US$ per tonne FY19 FY18 72 94 98 70 % change -27 +34 Revenue Core EBITDA1 FY19 25 582 130 14 FY18 25 302 169 20 FY19 5 902 3 (73) 25 726 25 491 5 832 FY18 7 617 15 (351) 7 281 1 Core EBITDA is calculated after adjusting for non-core adjustments. Revenue and core EBITDA Group revenue was up 1% to R25 726 million (FY18: R25 491 million). While coal export volumes increased by 14%, there was a significant decline in the API4 price resulting in a 30% lower average price per tonne achieved of US$54 (FY18: US$77). This negative impact was cushioned somewhat by a weaker average spot exchange rate of R14.44 to the US dollar (FY18: R13.24). On the domestic front, while higher prices from commercial mines had a positive revenue impact, this was offset by lower production volumes when compared to the previous year. Group core EBITDA decreased by 20% to R5 832 million (FY18: R7 281 million), mostly due to lower export prices, inflationary pressure on costs, higher selling and distribution costs directly attributed to our higher export volumes and higher rehabilitation costs at our closed operations resulting from revised cost estimates in line with the latest NEMA regulations. Earnings Headline earnings were 13% higher at R7 599 million (FY18: R6 707 million) or 3 027 cents per share (FY18: 2 672 cents per share). This was mainly driven by an increase of R1 434 million in Exxaro’s share of income of equity-accounted investments to R4 693 million (FY18: R3 259 million) which more than offset the drop in coal earnings. After adjusting for non-core items, core headline earnings rose 3% to R7 402 million (FY18: R7 167 million) or 2 3541 cents per share (FY18: 2 1591 cents per share). 1 Based on a core WANOS of 332 million shares from January to October 2019 and core WANOS of 251 million shares for November and December 2019 (FY18: 332 million shares). 4 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 FINANCIAL AND OPERATIONAL RESULTS continued Group financial results continued Earnings continued Core equity-accounted income (Rm) Coal: Mafube Coal: RBCT Ferrous: SIOC TiO2: Tronox SA Tronox UK1 Tronox Holdings plc2 Energy3 Other: Other4 Total Core equity-accounted income/(loss) FY19 127 3 4 423 236 17 (56) FY18 113 (34) 2 605 381 110 60 36 Dividend income FY19 FY18 4 051 2 569 47 95 69 58 4 750 3 271 4 193 2 696 1 Application of the equity method ceased when the investment was classified as a non-current asset held-for-sale on 30 November 2018. On 15 February 2019, the 26% Tronox UK membership interest was redeemed. 2 Application of the equity method ceased when the investment was classified as a non-current asset held-for-sale on 30 September 2017. 3 Includes equity-accounted income for Cennergi of R45 million (FY18: R65 million) and equity-accounted loss for LightApp of R28 million (FY18: R5 million). The dividend received for both periods is from Cennergi. 4 Includes an equity-accounted income for Black Mountain of R51 million (FY18: R70 million), an equity-accounted loss for Insect Technology of R103 million (FY18: R31 million) and an equity-accounted loss for Curapipe of R4 million (FY18: R3 million). Cash flow and funding Cash flow generated by operations of R5 273 million (FY18: R7 024 million) and dividends received from investments of R4 193 million (FY18: R2 696 million) were sufficient to cover ordinary dividends paid, after paying taxes and net finance costs. Total capital expenditure of R6 076 million increased by R286 million, when compared to the corresponding period last year, consisting of R345 million decrease on sustaining and environmental capital (stay-in-business capital) and R631 million increase on new capacity (expansion capital). Debt exposure Net debt for the year ended 31 December 2019 increased by R1 943 million to R5 810 million (FY18: R3 867 million). The main cash outflow items during 2019 include the funding of our capital expenditure programme of R6 076 million, R344 million cash payment in respect of the ECC contingent consideration, R678 million for the acquisition of shares in the market to settle share-based payments and R263 million being the deferred consideration paid to Insect Technology (previously known as AgriProtein). In addition to the cash generated by our own operations and dividends received, we also received cash of R2 057 million from Tronox UK for the redemption of Exxaro’s 26% membership interest and R2 889 million from Tronox Holdings plc for the repurchase of 14 million shares from Exxaro. Of the cash received, 65% was returned to shareholders as a special dividend of R3 218 million. The dividends received by Eyesizwe resulted in the full settlement of the preference share liability in October 2019. 4 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 5 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 FINANCIAL AND OPERATIONAL RESULTS continued Coal business performance Unreviewed coal production and sales volumes (’000 tonnes) Thermal Commercial – Waterberg Commercial – Mpumalanga Exports Tied Metallurgical Commercial – Waterberg Total coal Semi-coke Total coal (excluding buy-ins) Thermal coal buy-ins Total coal (including buy-ins) Production Sales FY19 43 203 25 683 11 529 5 991 2 074 2 074 FY18 44 417 27 375 10 433 6 609 2 323 2 323 FY19 43 503 24 443 3 975 9 087 5 998 1 030 1 030 FY18 43 967 25 364 4 033 7 965 6 605 1 197 1 197 45 277 46 740 44 533 45 164 45 277 305 45 582 23 46 763 1 049 47 812 33 44 533 45 197 44 533 45 197 In the domestic market, steam coal demand remained stable with Eskom demand varying due to lower offtake from Medupi power station offset by additional offtake from Leeuwpan and ECC. AMSA demand varied due to fluctuations in kiln operations as well as the steel plant in Saldanha being placed on care and maintenance. Exxaro has successfully placed the AMSA material in the market with other customers. Overall, the thermal coal seaborne market remained in oversupply. However, price support for the API4 was evident towards the end of 2019 but the sharp increase in API4 priced South African producers out of their natural markets. The competition in our markets is intensifying, with traditional Atlantic Ocean suppliers competing aggressively. The API4 averaged US$72 per tonne compared to US$98 per tonne in 2018. Export volumes increased 14% from 8.0Mt in FY18 to 9.1Mt in FY19. Production and sales volumes Coal production volumes (excluding buy-ins) were down 1 463kt (-3%). The lower production volumes are mainly attributed to the divestment of NBC at the end of October 2018 as well as lower production at Grootegeluk due to the lower demand from Eskom for the Medupi power station. This was partially offset by the early tonnes from Belfast and ramp-up of Mafube. Sales volumes were only 1% (-632kt) down due to belt failure and ash handling problems experienced at the Medupi power station resulting in lower offtake. Thermal coal Commercial: Waterberg Production at Grootegeluk declined by 1 692kt (-6%) due to the lower offtake from the Medupi power station. This also resulted in a decrease in sales volumes of 921kt (-4%). Commercial: Mpumalanga The commercial Mpumalanga mines’ thermal coal production was 1 096kt (11%) higher compared to FY18 mainly driven by: – Belfast ramping up earlier than expected and producing 1 029kt – Higher production at Mafube of 878kt, mainly due to the ramping down of Springboklaagte in FY18 and the ramping up of Nooitgedacht in FY19 – Higher production at ECC of 438kt following the ramp-up of FZON, the first production of 4 seam coal at DCMW and increased yield and product achieved at DCME – Higher production at Leeuwpan of 176kt due to the change in production specifications resulting in higher yields and improved throughput, partly offset by lower tempos to meet the contracted quality requirement on the Eskom contract at the crush and screening plant. The increase was partly offset by no volume from NBC (-1 425kt) as a result of our divestment in 2H18. 6 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 FINANCIAL AND OPERATIONAL RESULTS continued Production and sales volumes continued Thermal coal continued Commercial: Mpumalanga continued The commercial Mpumalanga mines’ thermal coal sales were marginally down by 58kt (-1%), mainly due to our divestment of NBC (-1 478kt) in 2H18. The decrease was partly offset by higher sales at Leeuwpan (706kt) and ECC (655kt) due to our strategy to divert coal from the export market to Eskom. Exports commercial Export sales increased by 1 122kt (+14%) mainly because of more coal being available from Mafube, ECC and Belfast. Tied Coal production and sales from Matla mine decreased by 9%, mainly due to the shortwall-stop at Mine 3. Metallurgical coal Grootegeluk’s metallurgical coal production decreased by 249kt (-11%) as a result of TFR performance and full stockpiles. Sales volumes were lower by 167kt (-14%) mainly due to lower demand from AMSA. Revenue and core EBITDA Coal revenue and core EBITDA (Rm) Commercial – Waterberg Commercial – Mpumalanga Tied2 Other Total coal Revenue Core EBITDA1 FY19 14 012 7 240 4 038 292 FY18 13 289 7 984 3 665 364 25 582 25 302 FY19 7 146 71 159 (1 474) 5 902 FY18 6 882 1 558 144 (967) 7 617 1 Core EBITDA is calculated after adjusting for non-core adjustments. 2 Matla mine supplying its entire production to Eskom. Coal revenue was 1% higher at R25 582 million (FY18: R25 302 million). The higher revenue was mainly driven by an increase in domestic sales due to price escalations and new contracts, partly offset by other lower domestic volumes. Although export volumes were 14% higher than the previous year, the average realised rand price per tonne was 24% lower at R774 compared to R1 013 in FY18. Coal core EBITDA of R5 902 million (FY18: R7 617 million) decreased by 23%, mainly driven by: – Inflation (-R676 million) – Higher distribution costs due to increased exports (-R514 million) – Higher rehabilitation costs (-R336 million), mainly at our closed operations – Higher operational costs (contract mining and mining consumables) mainly at ECC (-R184 million). The decrease was partly offset by: – Lower royalties (+R151 million). Equity-accounted investment Mafube, a 50% joint venture with Anglo, recorded a core equity-accounted income of R127 million (FY18: R113 million) mainly due to the ramping up of the Nooitgedacht reserve. 6 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 7 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 FINANCIAL AND OPERATIONAL RESULTS continued Coal business performance continued Capex and projects Exxaro’s coal capital expenditure of R5 817 million increased by 2% compared to R5 722 million in FY18. While our expansion capital in the Mpumalanga region increased by R1 345 million, this was partly offset by a lower capex spend of R789 million in the Waterberg region. Our sustaining capital decreased by R534 million, mainly in the Mpumalanga region. As reported previously, first coal from our greenfield Belfast mine was produced in March 2019 and first product sales took place in May 2019. Completion of the beneficiation plant is close to commissioning with ramp up expected in 1Q20. At Mafube, ramping up of the Nooitgedacht reserve to name plate capacity was achieved in 4Q19 and continues to exceed expectations. Coal Capex (Rm) Sustaining Commercial – Waterberg Commercial – Mpumalanga Other Expansion Commercial – Waterberg Commercial – Mpumalanga Other Total coal capex FY19 2 245 1 753 475 17 3 572 1 198 2 301 73 5 817 FY18 2 779 1 904 875 2 943 1 987 956 5 722 % change FY19 vs FY18 -19 -8 -46 +21 -40 +141 +2 Ferrous business Equity-accounted investment The core equity-accounted income from SIOC increased by R1 818 million to R4 423 million (FY18: R2 605 million). The increase is primarily driven by the effect of the higher iron-ore prices realised and a weaker exchange rate. An interim dividend of R2 680 million was received from our investment in SIOC (2H18: R1 263 million). SIOC has declared a final dividend to its shareholders in February 2020. Exxaro’s 20.62% share of the dividend amounts to R1 412 million. The dividend will be accounted for in 2020. Titanium dioxide Equity-accounted investment Core equity-accounted income from Tronox SA decreased by R145 million to R236 million compared to FY18. The decrease is mainly as a result of increased costs (royalties and allocated head office costs), inventory revaluation adjustments and foreign currency exchange losses. Our investment in Tronox Holdings plc continues to meet the criteria to be classified as a non-current asset held-for-sale. 8 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 FINANCIAL AND OPERATIONAL RESULTS continued Energy business Equity-accounted investment Cennergi, a 50% joint venture with Tata Power, recorded core equity-accounted income of R45 million for FY19 (FY18: R65 million). The results were negatively impacted by the ineffective portion of interest rate swaps and fair value adjustments on share-based payment liabilities offset by improved operational performance. Cash flow generation remains positive as Exxaro received dividends of R95 million in FY19 compared to R58 million in FY18. Despite the loss of two turbines due to fire incidents, for a significant period of the year, generation output to date at the two windfarms is better than planned given favourable wind conditions. The replacement turbines have been commissioned in November 2019 and are in full production. As announced on 17 September 2019, Exxaro has concluded an agreement with Khopoli, a wholly owned subsidiary of Tata Power, to acquire Khopoli's 50% shareholding in Cennergi for an amount of R1 550 million, subject to normal working capital adjustments. Post the conclusion of the agreement, Exxaro will have 100% ownership of Cennergi. The last condition precedent was met in March 2020. SALE OF NON-CORE ASSETS AND INVESTMENTS During the second half of 2019, the Exxaro board approved a decision to divest from its 26% interest in Black Mountain. On 30 November 2019, the investment was classified as a non-current asset held-for-sale and the application of the equity method ceased. On 31 January 2020, the Arnot operation was transferred to Arnot OpCo Proprietary Limited Consortium. The accounting of the transfer will be accounted for in 2020. On 20 February 2020, Exxaro announced our intention to divest our entire interest in ECC and the Leeuwpan operations. The divestment will be executed through a formal disposal process. The proposed transaction is a category two transaction in terms of the JSE Listings Requirements and is therefore not regarded as material. PERFORMANCE OF REPLACEMENT BEE TRANSACTION We are proud to report that Eyesizwe, our BEE shareholder, has fully settled its acquisition debt in October 2019, three years earlier than anticipated. The early settlement was funded from dividends received from Exxaro. From an accounting perspective this resulted in the outside shareholders of Eyesizwe being treated as non-controlling interests for the Exxaro group from 1 November 2019. Furthermore, we undertook to transfer at least 10% of our 24.9% shareholding in Eyesizwe into structures for the benefit of Exxaro's employees and communities adjacent to our operations. The transaction agreements are expected to be concluded in 1Q20 with implementation of the employee scheme expected in April 2020 and the implementation of the community scheme dependent on the registration of the company as a public benefit organisation in terms of s18A of the Income tax Act. PERFORMANCE AGAINST NEW BBBEE CODES As mentioned previously, Exxaro is proud to have achieved a level 2 BBBEE recognition status for FY18, two years earlier than planned. While the FY19 audit is still in progress, we expect to maintain our level 2 BBBEE status. The certificate will be published as soon as the audit is concluded. 8 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 9 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 COAL RESOURCES AND COAL RESERVES During 2018, Exxaro indicated that it was considering options relating to four prospecting rights grouped into two projects, namely Waterberg North and South. The projects are located approximately 30km north of Grootegeluk, and consist of Inferred Coal Resources of 2 147Mt and 869Mt, respectively. Following a strategic review, a decision was taken to relinquish these prospecting rights, resulting in the Exxaro total attributable Coal Resources decreasing by approximately 22%. We are conducting all activities to ensure we fulfil the necessary closure requirements. Furthermore, Exxaro total attributable Coal Reserves decreased by approximately 3%. The Coal Reserves for ECC’s Forzando operation decreased by approximately 37% for the reporting year. The most significant contributors to the decrease are mining depletion, the review of macro-economic assumptions and certain areas excluded due to unfavourable floor gradients. Changes in Coal Reserves larger than 10% (material) are also reported at our Matla and Leeuwpan operations. The approximate 13% decrease at Leeuwpan is primarily due to mining depletion and the approximate 14% decrease at Matla is mainly due to mining depletion and the disposal of mining areas due to unfavourable stoping conditions in close proximity to surface infrastructure. For all our other operations no material changes to Coal Resources and Coal Reserves estimates are reported, other than normal LOM depletion. MINING AND PROSPECTING RIGHTS Matla's mining right lapsed in November 2019. A compliant mining right renewal application was submitted in August 2019. OUTLOOK For 1H20, global economic growth stabilisation is anticipated. However, depending on the duration and speed of the coronavirus in China, the recovery in the thermal coal import demand in China might support the seaborne market somewhat. We expect domestic thermal coal demand and pricing to remain relatively stable during 2020. The API4 is expected to be under pressure as a similar liquefied natural gas (LNG) supply wave, as was evident in 2019, is anticipated to continue into 2020, together with low gas prices globally. However, a potential increase in thermal coal import demand in China might support the seaborne market somewhat. South Africa’s fiscal imbalance is set to remain a huge constraint in addressing the increasing socio-economic challenges with the risk of a sovereign rating downgrade increasing. As a result, the rand/dollar exchange rate is expected to remain volatile. As we roll out the integrated operations centres (IOCs) at all our operations, according to our digitalisation plan, the increased visualisation of the mining value chain will highlight embedded inefficiencies that will be addressed through in-time decision making relating to safety, productivity and cost performance. At an enterprise level, we are on schedule to implement our integrated management platform allowing us to access strategic insights across our operations, enabling future looking value add conversations. The expected recovery in iron ore seaborne supply with narrowing steel margins will soften the iron ore market. Our shareholding in Tronox Holdings plc has been reduced to approximately 14.7 million shares, representing about 10% of the total outstanding shares as at 31 December 2019. We remain committed to monetising our stake in Tronox Holdings plc over time and in the best possible manner, taking into account prevailing market conditions. In 2017 Exxaro adopted a strategy to explore new investment opportunities based on three pillars, namely water security, food security and energy security. Based on our experience since then, we have now changed that 10 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 COMMENTARY continued For the year ended 31 December 2019 strategy to focus solely on new opportunities in the energy security space. As we pursue these opportunities, our approach continues to be measured with a view to mitigating potential risks and ensuring that the capital allocation decisions are in line with appropriate metrics. In respect of the Moranbah South hard coking coal project, Exxaro, together with Anglo Coal, is in the process of reassessing the potential development plan for the project. In August 2019, we reported that we will share our climate response strategy, including our progress with incorporating the recommendations from the FSB’s Taskteam on Climate-related Financial Disclosures (TCFD) which highlight climate change transitional and physical risks confronting our business and the related financial impacts of these risks. Our Climate Change Position Statement contains details on our approach to climate change mitigation and adaption. The document also includes our aspirational target of carbon neutrality by 2050. We have developed climate change scenarios that take into account the 2°C world as per the recommendation of the TCFD. We will be using these scenarios to conduct a detailed analysis to quantify the financial risks and opportunities in our operations. FINAL DIVIDEND In terms of our capital allocation framework, we will remain prudent in returning cash to shareholders, managing debt, and selectively reinvesting for the growth of our business. Exxaro’s declared dividend policy is based on two components: a pass-through of the SIOC dividend received and a targeted cover ratio of 2.5 times to 3.5 times core attributable coal earnings. Additionally, Exxaro is targeting a gearing ratio below 1.5 times net debt to EBITDA. The board of directors has declared a cash dividend comprising: – 3 times core attributable coal earnings and – Pass through of SIOC dividend of R1 412 million. Notice is hereby given that a gross final cash dividend, number 34 of 566 cents per share, for the year ended 31 December 2019 was declared, and is payable to shareholders of ordinary shares. For details of the dividend, please refer note 11 of the reviewed condensed group annual financial statements for the year ended 31 December 2019. Salient dates for payment of the interim dividend are: – Last day to trade cum dividend on the JSE – First trading day ex dividend on the JSE – Record date – Payment date Tuesday, 21 April 2020 Wednesday, 22 April 2020 Friday, 24 April 2020 Monday, 28 April 2020 No share certificates may be dematerialised or re-materialised between Wednesday, 22 April 2020 and Friday, 24 April 2020, 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 or broker credited on Tuesday, 28 April 2020. GENERAL Additional information on financial and operational results for the year ended 31 December 2019, and the accompanying presentation can be accessed on our website on www.exxaro.com. On behalf of the board Jeff van Rooyen Chairman 12 March 2020 Mxolisi Mgojo Chief executive officer Riaan Koppeschaar Finance director 10 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 11 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December Revenue (note 7) Operating expenses (note 8) Net operating profit Finance income (note 9) Finance costs (note 9) Income from financial assets Share of income of equity-accounted investments (note 10) Profit before tax Income tax expense Profit for the year from continuing operations Profit for the year from discontinued operations (note 6) Profit for the year Other comprehensive (loss)/income, net of tax Items that will not be reclassified to profit or loss: – Remeasurement of retirement employee obligations – Changes in fair value of equity investments at fair value through other comprehensive income – Share of other comprehensive income of equity-accounted investments Items that may subsequently be reclassified to profit or loss: – Unrealised exchange differences on translation of foreign operations – Share of other comprehensive income of equity-accounted investments Items that have subsequently been reclassified to profit or loss: – Recycling of exchange differences on translation of foreign operations – Recycling of share of other comprehensive income of equity- accounted investments Total comprehensive income for the year Profit attributable to: Owners of the parent – Continuing operations – Discontinued operations Non-controlling interests – Continuing operations – Discontinued operations Profit for the year Total comprehensive income attributable to: Owners of the parent – Continuing operations – Discontinued operations Non-controlling interests – Continuing operations – Discontinued operations Total comprehensive income for the year Attributable earnings per share (cents) Aggregate1 – Basic – Diluted Continuing operations – Basic – Diluted Discontinued operations – Basic – Diluted (Re-presented) 2018 Audited Rm 25 491 (19 788) 5 703 283 (605) 6 3 189 8 576 (1 653) 6 923 139 7 062 246 66 39 21 6 194 67 127 (14) (14) 2019 Reviewed Rm 25 726 (21 457) 4 269 318 (355) 4 641 8 873 (968) 7 905 2 164 10 069 (710) 71 19 50 2 58 (7) 65 (839) (7) (832) 9 359 7 308 9 809 7 649 2 160 260 256 4 7 030 6 891 139 32 32 10 069 7 062 9 108 7 778 1 330 251 247 4 9 359 3 908 3 908 3 047 3 047 861 861 7 276 7 135 141 32 32 7 308 2 801 2 156 2 746 2 113 55 43 1 In 2020 the BEE Parties will share in the consolidated Eyesizwe results for the 12-month period as opposed to two months in 2019. 12 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 CONDENSED GROUP STATEMENT OF FINANCIAL POSITION At 31 December (Re-presented)1 ASSETS Non-current assets Property, plant and equipment Right-of-use assets (note 13) Inventories Equity-accounted investments (note 14) Financial assets (note 22) Lease receivables Deferred tax Other assets (note 15) Current assets Inventories Financial assets (note 22) Trade and other receivables Lease receivables Cash and cash equivalents Other assets (note 15) Non-current assets held-for-sale (note 16) 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 (note 17) Lease liabilities (note 18) Other payables Provisions (note 19) Retirement employee obligations Financial liabilities (note 22) Deferred tax Other liabilities (note 21) Current liabilities Interest-bearing borrowings (note 17) Lease liabilities (note 18) Trade and other payables Provisions (note 19) Financial liabilities (note 22) Overdraft (note 17) Other liabilities (note 21) Non-current liabilities held-for-sale (note 16) Total liabilities Total equity and liabilities 2019 Reviewed Rm 57 106 33 562 462 101 16 630 2 674 61 467 3 149 9 121 1 809 272 3 241 6 2 695 1 098 2 613 68 840 1 021 2 723 31 032 34 776 8 111 42 887 19 364 6 991 461 121 4 305 181 7 138 167 5 179 50 27 2 603 99 498 976 926 1 410 25 953 68 840 2018 Audited Rm 52 226 28 825 17 046 2 634 66 523 3 132 7 641 1 604 134 3 140 5 2 080 678 5 183 65 050 1 021 8 028 32 797 41 846 (701) 41 145 15 745 3 843 152 3 952 193 713 6 874 18 6 823 571 2 2 960 70 757 1 531 932 1 337 23 905 65 050 12 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 13 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 1 The investments in associates and joint ventures have been aggregated as both are accounted for as equity-accounted investments. In addition, the non-current intangible assets, biological assets and current tax receivables have been reclassified as part of other assets respectively. Similarly the current tax payables have been reclassified as part of other liabilities. These reclassifications have been made to remove these immaterial items from the face of the statement of financial position so as to provide a better presentation of assets and liabilities for the users. CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY At 31 December 2017 (Audited) Adjustment on initial application of IFRS 9, net of tax Adjustment on initial application of IFRS 15, net of tax Adjusted balance at 1 January 2018 Total comprehensive income – Profit for the year – Other comprehensive income for the year Transactions with owners of the company – Dividends paid1 – Share-based payments movement2 Changes in ownership interest – Adjustment to NCI – Disposal of subsidiary At 31 December 2018 (Audited) Adjustment on initial application of IFRS 16, net of tax3 Adjusted balance at 1 January 2019 Total comprehensive (loss)/income – Profit for the year – Other comprehensive (loss)/income for the year Transactions with owners of the company – Dividends paid1 – Share-based payments movement2 – Reclassifications within equity4 Changes in ownership interest – Recognition of NCI5 – Loss of control of subsidiary6 – Partial disposal of associate classified as non-current asset held-for-sale7 Other components of equity Share capital Rm 1 021 Foreign currency translation Rm 2 520 Financial instruments revaluation Rm (41) 1 021 2 520 171 171 (41) 9 9 Equity- settled Rm 5 872 5 872 (338) (338) 1 021 2 691 (32) 5 534 (701) 41 145 Retirement Available- employee for-sale obligations revaluation revaluation Financial asset FVOCI Rm (74) 74 Attributable to owners of the parent controlling interests Retained earnings Rm 30 962 40 103 Rm (74) (74) 21 21 (53) (53) 57 57 Other Rm 1 1 1 1 3 3 (738) 39 668 Non- Rm (738) 32 32 5 15 (10) (701) 251 260 (9) 8 561 8 479 82 Total equity Rm 39 365 (11) 314 7 308 7 062 246 (5 821) (5 483) (338) (10) (10) (12) 41 133 9 359 10 069 (710) (7 687) (5 812) (1 875) 82 82 Rm (11) 314 40 406 7 276 7 030 246 (5 821) (5 483) (338) (15) (15) 41 846 (12) 41 834 9 108 9 809 (701) (7 687) (5 812) (1 875) (8 479) (8 479) (11) 314 31 265 7 030 7 030 (5 483) (5 483) (15) (15) 32 797 (12) 32 785 9 809 9 809 (3 204) (5 812) 2 608 (8 358) (8 479) 121 4 4 31 032 34 776 8 111 42 887 Rm (158) (158) 45 45 (113) (113) 17 17 57 57 (39) 1 021 2 691 (785) (785) (32) (3) (3) 5 534 10 10 (4 483) (1 875) (2 608) (178) (178) 883 At 31 December 2019 (Reviewed) 1 021 1 906 (35) 1 Refer note 11 for details of the dividends paid. 2 The share-based payments movement includes an amount of R1.391 billion (2018: R247 million) paid to the BEE Parties as a dividend. 3 Refer note 4 for details of the adjustment on initial application of IFRS 16. 4 An amount of R2.608 billion was reclassified within equity upon the BEE Parties exercising their option subsequent to the settlement of the preference share liability. 5 Recognition of the NCI's share of Eyesizwe's consolidated net asset value upon the exercise of the option held by the BEE Parties as they are now true equity holders. 6 Derecognition of NCI reserve upon the loss of control of Tumelo. 7 Tronox Holdings plc repurchased 14 000 000 Tronox Holdings plc ordinary shares from Exxaro which resulted in a net reclassification within equity from the retirement employee obligations reserve and equity-settled reserve to retained earnings. 14 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 Other components of equity Foreign Financial Share currency instruments capital translation revaluation Rm 1 021 Rm 2 520 2 520 171 171 At 31 December 2017 (Audited) Adjustment on initial application of IFRS 9, net of tax Adjustment on initial application of IFRS 15, net of tax Adjusted balance at 1 January 2018 1 021 Total comprehensive income – Profit for the year – Other comprehensive income for the year Transactions with owners of the company – Dividends paid1 – Share-based payments movement2 Changes in ownership interest – Adjustment to NCI – Disposal of subsidiary At 31 December 2018 (Audited) 1 021 2 691 (32) 5 534 Adjustment on initial application of IFRS 16, net of tax3 Adjusted balance at 1 January 2019 Total comprehensive (loss)/income – Profit for the year – Other comprehensive (loss)/income for the year Transactions with owners of the company 1 021 2 691 (785) (785) – Dividends paid1 – Share-based payments movement2 – Reclassifications within equity4 Changes in ownership interest – Recognition of NCI5 – Loss of control of subsidiary6 – Partial disposal of associate classified as non-current asset held-for-sale7 At 31 December 2019 (Reviewed) 1 021 1 906 (35) 1 Refer note 11 for details of the dividends paid. 2 The share-based payments movement includes an amount of R1.391 billion (2018: R247 million) paid to the BEE Parties as a dividend. 3 Refer note 4 for details of the adjustment on initial application of IFRS 16. 4 An amount of R2.608 billion was reclassified within equity upon the BEE Parties exercising their option subsequent to the settlement of the preference share liability. 5 Recognition of the NCI's share of Eyesizwe's consolidated net asset value upon the exercise of the option held by the BEE Parties as they are now true equity holders. 6 Derecognition of NCI reserve upon the loss of control of Tumelo. 7 Tronox Holdings plc repurchased 14 000 000 Tronox Holdings plc ordinary shares from Exxaro which resulted in a net reclassification within equity from the retirement employee obligations reserve and equity-settled reserve to retained earnings. Rm (41) (41) 9 9 (32) (3) (3) Equity- settled Rm 5 872 5 872 (338) (338) 5 534 10 10 (4 483) (1 875) (2 608) (178) (178) 883 Retirement employee obligations Rm (158) Available- for-sale revaluation Rm (74) 74 (158) 45 45 (113) (113) 17 17 57 57 (39) Financial asset FVOCI revaluation Rm (74) (74) 21 21 (53) (53) 57 57 Attributable to owners of the parent Rm 40 103 (11) 314 40 406 7 276 7 030 246 (5 821) (5 483) (338) (15) (15) 41 846 (12) 41 834 9 108 9 809 (701) (7 687) (5 812) (1 875) (8 479) (8 479) Non- controlling interests Rm (738) (738) 32 32 5 15 (10) (701) (701) 251 260 (9) 8 561 8 479 82 Other Rm 1 1 Retained earnings Rm 30 962 (11) 314 31 265 7 030 7 030 1 1 3 3 (5 483) (5 483) (15) (15) 32 797 (12) 32 785 9 809 9 809 (3 204) (5 812) 2 608 (8 358) (8 479) 121 Total equity Rm 39 365 (11) 314 39 668 7 308 7 062 246 (5 821) (5 483) (338) (10) (10) 41 145 (12) 41 133 9 359 10 069 (710) (7 687) (5 812) (1 875) 82 82 4 4 31 032 34 776 8 111 42 887 Foreign currency translation Arises from the translation of the financial statements of foreign operations within the group. Financial instruments revaluation Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where the hedged transaction has not yet occurred. Equity-settled Represents the fair value, net of tax, of services received from employees and settled by equity instruments granted as well as the fair value of the potential benefit to be obtained by the BEE Parties in relation to the Replacement BEE Transaction. Retirement employee obligations Comprises remeasurements, net of tax, on the retirement employee obligations. Available-for-sale revaluation Comprises the fair value adjustments, net of tax, on the available-for-sale financial assets (Pre IFRS 9). Financial asset FVOCI revaluation Comprises the fair value adjustments, net of tax, on the financial assets classified at FVOCI (Post IFRS 9). 14 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 15 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 CONDENSED GROUP STATEMENT OF CASH FLOWS For the year ended 31 December Cash flows from operating activities Cash generated by operations Settlement of contingent consideration Interest paid Interest received Tax paid Dividends paid Cash flows from investing activities Property, plant and equipment acquired (note 12) Intangible assets acquired Proceeds from disposal of property, plant and equipment Decrease in other financial assets at amortised cost Increase in enterprise and supplier development loans Decrease in enterprise and supplier development loans Deferred consideration paid for acquisition of associates1 Decrease in loan to joint venture Increase in loan to joint venture Increase in loan to associate Decrease in lease receivables Proceeds from disposal of operation Proceeds from disposal of subsidiaries Proceeds from disposal of financial asset Acquisition of associates Dividend income received from equity-accounted investments Proceeds from disposal of associates classified as non-current assets held-for-sale2 Increase in environmental rehabilitation funds Dividend income received from financial assets and non-current assets held-for-sale3 Cash flows from financing activities Interest-bearing borrowings raised (note 20) Interest-bearing borrowings repaid (note 20) Lease liabilities paid Shares acquired in the market to settle share-based payments Dividends paid to BEE Parties Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Translation difference on movement in cash and cash equivalents Cash and cash equivalents at end of the year Cash and cash equivalents Overdraft 2019 Reviewed Rm 2018 Audited Rm (2 329) 5 273 (344) (558) 289 (1 177) (5 812) 2 974 (6 076) (5) 83 82 (121) 39 (306) 250 (40) 15 76 (14) 4 146 4 486 (148) 507 526 4 250 (1 622) (33) (678) (1 391) 1 171 549 (1) 1 719 2 695 (976) (54) 7 024 (299) (518) 229 (1 007) (5 483) (3 195) (5 790) (1) 268 82 (125) 186 (250) 14 17 75 24 (263) 2 627 (135) 76 (2 861) 14 (2 161) (467) (247) (6 110) 6 617 42 549 2 080 (1 531) 1 Relates to deferred consideration paid to Insect Technology (R263 million) and LightApp (R43 million). 2 Relates to the redemption of the membership interest in Tronox UK (R1 597 million) and partial disposal of shares in Tronox Holdings plc (R2 889 million). 3 Mainly includes a cash dividend received from Tronox UK of R460 million. 16 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 RECONCILIATION OF GROUP HEADLINE EARNINGS Gross Rm Tax Rm Non- controlling interest Rm 14 17 (3) 8 (1) (12) 5 For the year ended 31 December 2019 (Reviewed) Profit attributable to owners of the parent Adjusted for: – IFRS 10 Loss on loss of control of subsidiary – IAS 16 Gain on disposal of operation – IAS 16 Net gains on disposal of property, plant and equipment – IAS 16 Compensation from third parties for items of property, plant and equipment impaired, abandoned or lost – IAS 21 Net gains on translation differences recycled to profit or loss on partial disposal of associate – IAS 21 Net gains on translation differences recycled to profit or loss on dilution of associates – IAS 21 Net gain on translation differences recycled to profit or loss on liquidation of foreign subsidiary – IAS 21 Net loss on translation differences recycled to profit or loss on deregistration of foreign entity – IAS 28 Losses on dilution of investments in associates – IAS 28 Net gains on disposal of associates1 – IAS 28 Share of equity-accounted investments’ separately identifiable remeasurements – IAS 36 Net impairment of non-current assets Headline earnings Continuing operations Discontinued operations For the year ended 31 December 2018 (Audited) (Re-presented) Profit attributable to owners of the parent Adjusted for: – IFRS 10 Gain on disposal of subsidiaries – IAS 16 Gain on disposal of operation – IAS 16 Net gains on disposal of property, plant and equipment – IAS 16 Compensation from third parties for items of property, plant and equipment impaired, abandoned or lost – IAS 21 Net gain on translation differences recycled to profit or loss on liquidation of foreign subsidiary – IAS 28 Share of equity-accounted investments’ separately identifiable remeasurements Headline earnings Continuing operations Discontinued operations (2 286) 62 35 (76) (49) (832) (1) (10) 3 42 (1 504) 71 35 (348) (69) (102) (122) (57) (14) 16 (3) 14 65 (14) 25 13 16 (4) Net Rm 9 809 (2 210) 35 (59) (6) (27) (832) (1) (10) 2 42 (1 439) 45 40 7 599 7 437 162 7 030 (323) (69) (102) (109) (41) (14) 12 6 707 6 568 139 1 Includes a gain of R1 234 million on the partial disposal of Tronox Holdings plc and a gain of R270 million on the redemption of the membership interest in Tronox UK. Headline earnings per share (cents) Aggregate – Basic – Diluted Continuing operations – Basic – Diluted Discontinued operations – Basic – Diluted Refer note 11 for details regarding the number of shares. 2019 Reviewed (Re-presented) 2018 Audited 3 027 3 027 2 962 2 962 65 65 2 672 2 057 2 617 2 014 55 43 16 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 17 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS 1. CORPORATE BACKGROUND Exxaro, a public company incorporated in South Africa, is a diversified resources group with interests in the coal (controlled and non-controlled), TiO2 (non-controlled), ferrous (controlled and non-controlled) and energy (non-controlled) markets. These reviewed condensed group annual financial statements as at and for the year ended 31 December 2019 (condensed annual financial statements) comprise the company and its subsidiaries (together referred to as the group) and the group’s interest in associates and joint ventures. 2. 2.1 BASIS OF PREPARATION Statement of compliance The condensed annual financial statements have been prepared in accordance with the requirements of the JSE Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of IFRS (as issued by the IASB), the SAICA Financial Reporting Guides (as issued by the Accounting Practices Committee) and Financial Pronouncements (as issued by the Financial Reporting Standards Council). As a minimum, preliminary reports must contain the information required by IAS 34 Interim Financial Reporting. The condensed annual financial statements have been prepared under the supervision of Mr PA Koppeschaar CA(SA), SAICA registration number: 00038621. The condensed annual financial statements should be read in conjunction with the group annual financial statements as at and for the year ended 31 December 2018, which have been prepared in accordance with IFRS. The condensed annual financial statements have been prepared on the historical cost basis, except for financial instruments, share-based payments and biological assets, which are measured at fair value. This is the first set of condensed annual financial statements where IFRS 16 Leases (IFRS 16) has been applied. Changes to significant accounting policies are described in note 4. The condensed annual financial statements of the Exxaro group were authorised for issue by the board of directors on 10 March 2020. 2.2 Judgements and estimates Management made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements and the key source of estimation uncertainty were similar to those applied to the group annual financial statements as at and for the year ended 31 December 2018, except for new judgements and assumptions related to the adoption of IFRS 16 as described in note 4.3. 2.3 Re-presentation of comparative information The condensed group statement of comprehensive income (and related notes) for the year ended 31 December 2018 has been re-presented as a result of the investment in Black Mountain being classified as a discontinued operation as described further in note 6. 3. ACCOUNTING POLICIES The accounting policies applied in the preparation of the condensed annual financial statements are consistent with those of the group annual financial statements as at and for the year ended 31 December 2018, except for the adoption of new or amended standards as set out below. 3.1 New or amended standards adopted by the group A number of new or amended standards became effective for the current reporting period. The group has adopted IFRS 16 for the first time for the year commencing on 1 January 2019. The adoption of IFRS 16 has resulted in the group changing its accounting policies. The impact of the adoption and the new accounting policies are disclosed in note 4. 18 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 3. 3.2 ACCOUNTING POLICIES continued Impact of new, amended or revised standards issued but not yet effective New accounting standards, amendments to accounting standards and interpretations issued which are relevant to the group, but not yet effective on 31 December 2019, have not been adopted. The group continuously evaluates the impact of these standards and amendments. 3.3 Carbon tax The Carbon Tax Bill has been implemented with an effective date of 1 June 2019. The registration forms were issued in January 2020 but the payment procedures have not yet been finalised. The first payment of the carbon tax levy is due on 31 July 2020, relating to the period 1 June 2019 to 31 December 2019. An accrual of R3.4 million has been recognised during 2019. 4. CHANGES IN ACCOUNTING POLICIES This note explains the impact of the adoption of IFRS 16 on the condensed annual financial statements and also discloses the new leases accounting policies that have been applied from 1 January 2019. Overview of changes resulting from the adoption of IFRS 16 IFRS 16 replaces IAS 17 Leases (IAS 17), IFRIC 4 Determining whether an Arrangement contains a Lease (IFRIC 4), SIC 15 Operating Leases-Incentives and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard establishes a new definition and criteria to identify whether a contract is, or contains, a lease as well as principles for the recognition, measurement, presentation and disclosure of leases. For lessee accounting, a single accounting model is introduced that requires lessees to recognise assets and liabilities for all leases. The standard, however, allows an optional exemption to recognise leases with a lease term of less than 12 months (short-term leases) or leases of low value assets in profit or loss on a straight-line basis. For lessor accounting, IFRS 16's approach is substantially unchanged from IAS 17. Lessor's continue to classify leases as either operating leases or finance leases. Subleases are classified with reference to the underlying right-of-use asset of the head lease. Refer note 4.1 for details of the group's transition to IFRS 16. Refer note 4.2 for the new accounting policy applied from 1 January 2019. Refer note 4.3 for the judgements and assumptions made by management in applying the related accounting policies. Refer note 8, 13 and 18 for the related disclosures of leases. Leasing activities (as lessee) The group leases various land, buildings and equipment as the need arises. Lease contracts are typically made for fixed periods between 18 months to 15 years but may have extension options. Lease contracts are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease contracts do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Extension and termination options are included in a number of leases across the group. These options are used to maximise operational flexibility in terms of managing lease contracts. The majority of extension and termination options held are exercisable only by the group and not by the respective lessor. 18 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 19 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 4. 4.1 CHANGES IN ACCOUNTING POLICIES continued Transition 4.1.1 Transition method, exemptions and practical expedients applied As lessor The group had no adjustments to its lessor accounting. As lessee IFRS 16 has been adopted using the cumulative effect method. In terms of this method, comparative information has not been restated. Instead, the cumulative effect of initially applying IFRS 16 has been recognised as an adjustment to the opening balance of retained earnings on date of initial application (being 1 January 2019). In applying IFRS 16 for the first time, the group has elected the following practical expedients: (a) In applying the definition of a lease: – The group has elected not to re-assess whether a contract is, or contains, a lease at the date of initial application. Instead, the group has applied this standard, at date of initial application, to all contracts previously identified as leases in terms of IAS 17 and IFRIC 4. Therefore the definition of a lease in terms of IFRS 16 will only be applied to contracts entered into or changed on or after 1 January 2019. (b) In determining the transition adjustments of leases previously classified as operating leases: – Leases of low value assets were excluded as the group has elected the exemption to not apply lease accounting to these leases from 1 January 2019 – Leases with a lease term of less than 12 months on initial application were excluded and accounted for as short-term leases from 1 January 2019 (i.e. recognised through profit or loss on a straight-line basis) – Initial direct costs of leases were excluded from the measurement of the right-of-use assets recognised on 1 January 2019; and – Hindsight was applied to determine the lease term for contracts containing options to extend or terminate the lease. 4.1.2 Impact on retained earnings at 1 January 2019 The impact on retained earnings at 1 January 2019 is summarised as follows: Closing balance at 31 December 2018 (IAS 17) Adjustments from the adoption of IFRS 16, net of tax Adjustment from Exxaro's adoption of IFRS 16, net of tax – Portion of gross carrying amount of right-of-use assets recognised relating to the present value of lease payments incurred before 1 January 20191 – Accumulated depreciation on right-of-use assets recognised from commencement date of leases to 1 January 2019 Share of equity-accounted investments’ adjustment from the adoption of IFRS 16 Note Rm 32 797 4.1.4, 4.1.5 4.1.5 (12) (1) 10 (11) (11) Opening balance at 1 January 2019 (after IFRS 16 restatement) 32 785 1 Calculated as the difference between the gross carrying amount of the right-of-use assets recognised of R76 million (refer note 4.1.5) and the lease liabilities recognised of R66 million (refer note 4.1.4), that relate to leases previously classified as operating leases. The IFRS 16 adoption impact, net of tax, has been adjusted by R1 million, compared to the interim results presented for the six month period ended 30 June 2019, as a result of a lease in an offshore entity being remeasured applying a foreign incremental borrowing rate. 20 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 4. 4.1 CHANGES IN ACCOUNTING POLICIES continued Transition continued 4.1.3 Impact on the statement of financial position at 1 January 2019 The table below shows the reclassifications and adjustments recognised on initial application of IFRS 16 for each individual line item as per the statement of financial position. Statement of financial position (extract) ASSETS Non-current assets Property, plant and equipment Right-of-use assets Equity-accounted investments1 Note 4.1.5 4.1.5 Financial assets Lease receivables Deferred tax Other assets Current assets Inventories Financial assets Trade and other receivables Lease receivables Cash and cash equivalents Other assets Non-current assets held-for-sale Total assets At 31 December 2018 As presented Rm IFRS 16 adjustment Rm At 1 January 2019 Restated Rm 52 226 28 825 17 046 2 634 66 523 3 132 7 641 1 604 134 3 140 5 2 080 678 5 183 65 050 54 (14) 79 (11) 54 52 280 28 811 79 17 035 2 634 66 523 3 132 7 641 1 604 134 3 140 5 2 080 678 5 183 65 104 1 Relates to the group's share of equity-accounted investments’ adjustment from the adoption of IFRS 16. 20 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 21 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 4. 4.1 CHANGES IN ACCOUNTING POLICIES continued Transition continued 4.1.3 Impact on the statement of financial position at 1 January 2019 continued Statement of financial position (extract) 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 Lease liabilities Other payables Provisions Retirement employee obligations Financial liabilities Deferred tax Other liabilities Current liabilities Interest-bearing borrowings Lease liabilities Trade and other payables Provisions Financial liabilities Overdraft Other liabilities Non-current liabilities held-for-sale Total liabilities Total equity and liabilities At 31 December 2018 As presented Rm IFRS 16 adjustment Rm Note At 1 January 2019 Restated Rm 4.1.4 4.1.4 (12) (12) (12) 39 39 27 27 1 021 8 028 32 797 41 846 (701) 41 145 15 745 3 843 152 3 952 193 713 6 874 18 6 823 571 2 2 960 70 757 1 531 932 1 337 23 905 65 050 66 54 1 021 8 028 32 785 41 834 (701) 41 133 15 784 3 843 39 152 3 952 193 713 6 874 18 6 850 571 29 2 960 70 757 1 531 932 1 337 23 971 65 104 22 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 4. 4.1 CHANGES IN ACCOUNTING POLICIES continued Transition continued 4.1.4 Lease liabilities recognised on initial application Lease liabilities were recognised for leases, previously classified as operating leases under IAS 17, that had commenced prior to 1 January 2019, excluding leases of low-value assets and short-term leases. These liabilities were measured as the present value of the remaining lease payments discounted using the incremental borrowing rate at 1 January 2019 which ranged between 7.85% and 10.42%. The table below shows the reconciliation between operating lease commitments (disclosed under IAS 17) at 31 December 2018 and lease liabilities recognised on 1 January 2019: Operating lease commitments at 31 December 2018 (adjusted)1 Less: lease commitments relating to leases commencing on or after 1 January 2019 Less: lease commitments that relate to short-term leases Less: lease commitments that relate to leases of low-value assets Lease commitments (remaining lease payments) to which initial application of IFRS 16 has been applied Less: discounting impact using the lessee's incremental borrowing rate at 1 January 2019 Lease liabilities recognised at 1 January 2019 Non-current Current Rm 1 004 (864) (13) (52) 75 (9) 66 39 27 1 Operating lease commitments at 31 December 2018, previously disclosed as R876 million, has been adjusted to an amount of R1 004 million, to include an additional R128 million worth of lease commitments (in terms of IAS 17 and IFRIC 4) that was erroneously excluded. For leases previously classified as finance leases, the group recognised the carrying amount of the lease liability immediately before transition as the carrying amount of the lease liability at the date of initial application. Therefore no adjustment was required for finance lease liabilities at 1 January 2019. The measurement principles of IFRS 16 have been applied since 1 January 2019. 4.1.5 Right-of-use-assets recognised on initial application Right-of-use assets were recognised for leases, previously classified as operating leases under IAS 17, that had commenced prior to 1 January 2019, excluding leases of low-value assets and short-term leases. These assets were measured as if IFRS 16 had been applied since the commencement date of the leases, but discounted using the incremental borrowing rate at date of initial application. In other words, the gross carrying amount of the right-of-use assets were determined taking into account the present value of all remaining lease payments at the commencement date of the leases, but discounted at the incremental borrowing rate of 1 January 2019. The accumulated depreciation was measured from the commencement date of the leases until 1 January 2019. The right-of-use assets recognised at 1 January 2019 were considered for impairment in terms of IAS 36 Impairment of Assets, however, as the recoverable amounts were in excess of the carrying amounts, no impairment adjustments were required. For assets acquired in terms of finance leases, as previously classified under IAS 17, the group recognised the carrying amount of these assets immediately before transition as the carrying amount of the right-of-use assets at 1 January 2019. Therefore no adjustment was required except that the carrying amount of these assets has been reclassified from property, plant and equipment to right-of-use assets. The measurement principles of IFRS 16 have been applied since 1 January 2019. 22 Reviewed condensed group annual financial statements and unreviewed production 23 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 4. 4.1 4.1.5 CHANGES IN ACCOUNTING POLICIES continued Transition continued Right-of-use-assets recognised on initial application continued The table below shows the right-of-use assets, by class of asset, at 1 January 2019, reconciled to the reclassifications and adjustments made on initial application of IFRS 16: Land and buildings Residential land and buildings Buildings and infrastructure Machinery, plant and equipment Total right-of-use assets Relating to leases previously classified as operating leases recognised retrospectively on 1 January 2019 Relating to leases previously classified as finance leases reclassified from property, plant and equipment1 1 Included in machinery, plant and equipment. 4.2 Accounting policies applied from 1 January 2019 Gross carrying amount Rm Accumulated depreciation Rm Net carrying amount Rm 1 4 33 54 92 76 16 (4) (9) (13) (11) (2) 1 4 29 45 79 65 14 The group has elected as an accounting policy choice not to apply IFRS 16 to leases of intangible assets. At inception of a contract, the group assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: – The contract involves the use of an identified asset, this may be specified explicitly or implicitly, and must be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified – The group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and – The group has the right to direct the use of the asset. The group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where all the decisions about how and for what purpose the asset is used are predetermined, the group has the right to direct the use of the asset if either: – The group has the right to operate the asset; or – The group designed the asset in a way that predetermines how and for what purpose it will be used. The group has applied this definition to contracts entered into or changed on or after 1 January 2019. At inception, or on reassessment, of a contract that contains a lease component, the group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative standalone prices. As lessee (a) Recognition Leases are recognised as a lease liability and corresponding right-of-use asset at the commencement date of the leases. Each lease payment is allocated between the settlement of the lease liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the lease liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis, except, when there is a purchase option which is expected to be exercised, in which case it is depreciated over the asset's useful life. Non-lease components, contained in a lease, are recognised as an expense in profit or loss when incurred. 24 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 4. 4.2 CHANGES IN ACCOUNTING POLICIES continued Accounting policies applied from 1 January 2019 continued As lessee continued (b) Measurement (i) Initial measurement Right-of-use assets Measured at cost which is: – The amount of the initial measurement of the lease liability – Plus any lease payments made at or before the commencement date – Less any lease incentives received – Plus any initial direct costs – Plus estimated restoration costs. Lease liabilities Measured at the present value of the following lease payments: – Fixed payments (including in-substance fixed payments), less any lease incentives receivable – Variable lease payments that are based on an index or a rate – Amounts expected to be payable by the group, as a lessee, under residual value guarantees – The exercise price of a purchase option if the group, as a lessee, is reasonably certain to exercise that option; and – Payments of penalties for terminating the lease, if the lease term reflects the group, as a lessee, exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, an incremental borrowing rate is applied. (ii) Subsequent measurement Right-of-use assets Lease liabilities After commencement date of the lease, the group measures the right-of-use asset applying the cost model where a right-of-use asset falls within the scope of IAS 16 Property, Plant and Equipment. Measured at: – Cost less – Any accumulated depreciation and any accumulated impairment losses; and – Adjusted for any remeasurements or modifications of the lease liability. Useful lives: Land and buildings – 15 years Residential land and buildings – 10 years Buildings and infrastructure – three to 10 years Machinery, plant and equipment – two to five years After commencement date of the lease, the group measures the lease liability by: – Increasing the carrying amount to reflect interest on the lease liability – Reducing the carrying amount to reflect the lease payments made, and – Remeasuring the carrying amount to reflect any reassessment or lease modification or to reflect revised in-substance fixed lease payments. Incremental borrowing rates: Lease term greater than 12 months but less than 18 months – 7.85% Lease term greater than 18 months – 10.42% to 10.44% 24 Reviewed condensed group annual financial statements and unreviewed production 25 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 4. 4.2 CHANGES IN ACCOUNTING POLICIES continued Accounting policies applied from 1 January 2019 continued As lessee continued (c) Short-term leases and leases of low-value assets Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis, over the lease term, as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Leases of low-value assets comprise IT equipment, furniture, fittings and appliances as well as tools and other small equipment used at the plants. As lessor When the group acts as a lessor, it determines at lease inception whether a lease is a finance lease or an operating lease. To classify a lease, the group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease. If not, then it is an operating lease. As part of this assessment, the group considers certain indicators such as whether the lease is for the major part of the economic life of the asset. When the group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the group applies the exemption described above, then it classifies the sublease as an operating lease. If an arrangement contains lease and non-lease components, the group applies IFRS 15 to allocate the consideration in the contract. Lease income from operating leases is recognised as income on a straight-line basis over the lease term in profit or loss. The group recognises the net investment in finance leases, which is the aggregate of the minimum lease payments receivable, discounted at the interest rate implicit in the lease, at the commencement of the lease. On conclusion of the lease agreement the leased asset is derecognised and depreciation ceases. Each lease payment received is allocated between the receivable and finance income. The interest element is recognised in profit or loss over the lease period. 4.3 Judgements and assumptions made by management in applying the related accounting policies (a) Useful lives of right-of-use assets In determining the useful lives of right-of-use assets, management considers all available information about the lease term as well as the asset's useful life itself. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. (b) Incremental borrowing rates In determining the incremental borrowing rates, management considers the term of the lease, the nature of the asset being leased and the funding strategy and principles applied by the group's treasury department. (c) Extensions and termination options In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. 26 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 5. SEGMENTAL INFORMATION Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who is responsible for allocating resources and assessing performance of the reportable operating segments. The chief operating decision maker is the group executive committee. Segments reported are based on the group’s different commodities and operations. During the first half of 2019, the chief operating decision maker revised the segment in which the remaining NBC assets and liabilities were reported on. These assets and liabilities are reported as part of the coal other operating segment instead of the coal commercial Mpumalanga operating segment. The comparative segmental information has been represented to reflect this change. The export revenue and related export cost items are allocated between the coal operating segments based on the origin of the initial coal production. The reportable operating segments, as described below, offer different goods and services, and are managed separately based on commodity, location and support function grouping. The group executive committee reviews internal management reports on these operating segments at least quarterly. Coal The coal reportable operating segment is split between commercial (Waterberg and Mpumalanga), tied and other operations. Commercial Mpumalanga operations include a 50% (2018: 50%) investment in Mafube (a joint venture with Anglo). The 10.36% (2018: 10.82%) effective equity interest in RBCT is included in the other coal operations. The 49% equity interest in Tumelo continues to be reported as part of the commercial Mpumalanga operations although it is no longer accounted for as a subsidiary, but as an associate since 1 January 2019. The coal operations produce thermal coal, metallurgical coal and SSCC. Ferrous The ferrous segment mainly comprises the 20.62% (2018: 20.62%) equity interest in SIOC (located in the Northern Cape province) reported within the other ferrous operating segment as well as the FerroAlloys operation (referred to as Alloys). The Alloys operation manufactures ferrosilicon. TiO2 The TiO2 segment comprises a 10.38% (2018: 23.35%) equity interest in Tronox Holdings plc, which was classified as a non-current asset held-for-sale on 30 September 2017 (refer note 16), and a 26% (2018: 26%) equity interest in Tronox SA (both South African-based operations). The 26% member’s interest in Tronox UK was redeemed on 15 February 2019. Energy The energy segment comprises a 50% (2018: 50%) investment in Cennergi (a South African joint venture with Tata Power), which operates two wind-farms, and an equity interest of 28.59% (2018: 28.98%) in LightApp, as well as an equity interest of 22% in GAM which was acquired in 2019 (refer note 14). Other The other reportable segment comprises an equity interest in Curapipe of 15% (2018: 10.53%), an equity interest in Insect Technology of 25.86% (2018: 26.37%), the Ferroland agricultural operation as well as the corporate office which renders services to operations and other customers. The 26% (2018: 26%) equity interest in Black Mountain (located in the Northern Cape province) was classified as a non-current asset held-for-sale and a discontinued operation on 30 November 2019 (refer note 16). 26 Reviewed condensed group annual financial statements and unreviewed production 27 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 5. SEGMENTAL INFORMATION continued The following table presents a summary of the group’s segmental information: For the year ended 31 December 2019 (Reviewed) Waterberg Rm Mpumalanga Rm Coal Commercial External revenue (note 7) Segmental net operating profit/(loss) – Continuing operations – Discontinued operations External finance income (note 9) External finance costs (note 9) Income tax (expense)/benefit – Continuing operations – Discontinued operations 14 012 5 752 5 752 57 (54) (1 627) (1 627) Depreciation and amortisation (note 8) (1 383) Tied Rm 4 038 136 136 Other Rm 292 (1 623) (1 623) (47) (47) (23) 30 (27) 627 627 (3) 1 1 7 240 (318) (318) 21 (165) 120 120 (382) (35) 127 127 Loss on loss of control of subsidiary Share of income/(loss) of equity-accounted investments (note 10) – Continuing operations – Discontinued operations Cash generated by/(utilised in) operations Capital spend (note 12) At 31 December 2019 (Reviewed) Segmental assets and liabilities Deferred tax1 Equity-accounted investments (note 14) Loans to associates External assets Assets Non-current assets held-for-sale (note 16) Total assets per statement of financial position External liabilities Deferred tax1 Liabilities Non-current liabilities held-for-sale (note 16) Total liabilities per statement of financial position 1 Offset per legal entity and tax authority. 6 062 (2 951) (253) (2 776) 201 (1 042) (90) 28 832 28 832 28 832 1 951 6 411 8 362 (107) 1 210 1 103 1 103 938 340 2 067 3 951 6 358 6 358 2 684 68 938 2 752 1 335 133 10 499 11 967 11 967 2 336 715 3 051 1 410 8 362 4 461 938 2 752 28 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 5. SEGMENTAL INFORMATION continued Ferrous Other Other ferrous Rm TiO2 Rm Energy Rm Base metals Rm (1) 2 400 (58) Other Rm Total Rm 14 25 726 114 6 399 (1) 270 (58) 114 4 269 Alloys Rm 130 (3) (3) (1) 3 3 (5) For the year ended 31 December 2019 (Reviewed) External revenue (note 7) Segmental net operating profit/(loss) – Continuing operations – Discontinued operations External finance income (note 9) External finance costs (note 9) Income tax (expense)/benefit – Continuing operations – Discontinued operations Depreciation and amortisation (note 8) Loss on loss of control of subsidiary Share of income/(loss) of equity- accounted investments (note 10) – Continuing operations – Discontinued operations Cash generated by/(utilised in) operations 1 Capital spend (note 12) At 31 December 2019 (Reviewed) Segmental assets and liabilities 2 130 (65) (65) 4 413 4 413 234 234 18 18 Deferred tax1 11 Equity-accounted investments (note 14) 9 835 2 472 350 Loans to associates External assets Assets 279 290 25 65 9 860 2 537 350 210 (108) (44) (44) 2 130 318 (355) (1 033) (968) (65) (116) (1 912) (35) 52 (152) 4 693 (152) 4 641 52 52 304 5 273 (259) (6 076) 223 467 571 16 630 133 4 136 48 997 4 930 66 227 Non-current assets held-for-sale (note 16) 1 741 872 2 613 Total assets per statement of financial position 290 9 860 4 278 350 872 4 930 68 840 External liabilities Deferred tax1 Liabilities Non-current liabilities held-for-sale (note 16) Total liabilities per statement of financial position 1 Offset per legal entity and tax authority. 30 30 6 6 9 460 17 405 (56) 7 138 9 404 24 543 1 410 30 6 9 404 25 953 28 Reviewed condensed group annual financial statements and unreviewed production 29 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 5. SEGMENTAL INFORMATION continued For the year ended 31 December 2018 (Audited) (Re-presented) Waterberg Rm Mpumalanga Rm Coal Commercial External revenue (note 7) Segmental net operating profit/(loss) – Continuing operations External finance income (note 9) External finance costs (note 9) Income tax (expense)/benefit – Continuing operations Depreciation and amortisation (note 8) Share of income/(loss) of equity-accounted investments (note 10) – Continuing operations – Discontinued operations Cash generated by/(utilised in) operations Capital spend (note 12) At 31 December 2018 (Audited) Segmental assets and liabilities Deferred tax1 Equity-accounted investments (note 14) Loans to joint ventures External assets Assets Non-current assets held-for-sale (note 16) Total assets per statement of financial position External liabilities Deferred tax1 Liabilities Non-current liabilities held-for-sale (note 16) Total liabilities per statement of financial position 1 Offset per legal entity and tax authority. 13 289 5 738 5 738 48 (47) (1 572) (1 572) (1 204) 7 984 1 429 1 429 33 (164) (302) (302) (299) 114 114 Tied Rm 3 665 250 250 (48) (48) (13) Other Rm 364 (966) (966) 19 (47) 378 378 (36) (36) 6 955 (3 890) 1 490 (1 832) 99 (1 366) 35 1 237 259 7 709 9 240 9 240 2 531 866 3 397 1 337 (53) 135 2 157 1 062 1 009 4 542 6 834 1 009 725 6 834 2 552 39 725 2 591 26 514 26 514 26 514 2 567 6 009 8 576 8 576 4 734 725 2 591 30 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 5. SEGMENTAL INFORMATION continued Ferrous Other Alloys Rm 169 17 17 (4) (4) For the year ended 31 December 2018 (Audited) (Re-presented) External revenue (note 7) Segmental net operating profit/(loss) – Continuing operations External finance income (note 9) External finance costs (note 9) Income tax (expense)/benefit – Continuing operations Depreciation and amortisation (note 8) Share of income/(loss) of equity-accounted investments (note 10) – Continuing operations – Discontinued operations Cash generated by/(utilised in) operations 60 (2) Capital spend (note 12) At 31 December 2018 (Audited) Segmental assets and liabilities Other ferrous Rm TiO2 Rm Energy Rm Base metals Rm (3) (3) Other Rm Total Rm 20 25 491 (762) 5 703 (762) 5 703 183 (347) 283 (605) (105) (1 653) (105) (1 653) (66) (1 582) 2 592 492 2 592 492 61 61 (34) (34) 70 70 3 259 3 189 70 (212) 7 024 (68) (5 790) Deferred tax1 8 1 397 523 Equity-accounted investments (note 14) 9 511 2 185 473 818 665 17 046 Loans to joint ventures External assets Assets 265 25 259 1 922 42 039 273 9 537 2 185 473 818 2 984 59 867 Non-current assets held-for-sale (note 16) 5 183 5 183 273 9 537 7 368 473 818 2 984 65 050 Total assets per statement of financial position External liabilities Deferred tax1 Liabilities 23 23 5 5 Non-current liabilities held-for-sale (note 16) Total liabilities per statement of financial position 23 5 1 Offset per legal entity and tax authority. 7 291 15 694 (40) 6 874 7 251 22 568 1 337 7 251 23 905 30 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 31 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 6. DISCONTINUED OPERATIONS Tronox Holdings plc On 30 September 2017, Exxaro classified the Tronox Limited investment as a non-current asset held-for-sale (refer note 16). During March 2019, Tronox Limited redomiciled from Australia to the UK by “top-hatting” Tronox Limited with a new holding company incorporated under the laws of England and Wales called Tronox Holdings plc. Each Tronox Limited shareholder received one share in the newly incorporated company in exchange for each share held in the Australian-incorporated Tronox Limited, which shares are listed on the New York Stock Exchange. On 9 May 2019, Tronox Holdings plc repurchased 14 000 000 shares from Exxaro. The remaining investment in Tronox Holdings plc remains classified as a non-current asset held-for-sale. It was concluded that the related performance and cash flow information be presented as a discontinued operation as the Tronox Holdings plc investment represents a major geographical area of operation as well as the majority of the TiO2 reportable operating segment. Black Mountain On 30 November 2019, Exxaro classified the Black Mountain investment as a non-current asset held-for-sale (refer note 16). It was concluded that the related performance and cash flow information be presented as a discontinued operation as Black Mountain represents the base metals operating segment which management view to be a separate major operation. Financial information relating to the discontinued operations is set out below: For the year ended 31 December 2019 Reviewed Rm (Re-presented) 2018 Audited Rm Financial performance Losses on financial instruments revaluations recycled to profit or loss Net gains on translation differences recycled to profit or loss on partial disposal of investment in foreign associate Indemnification asset movement1 Operating profit Gain on partial disposal of associate2 Net operating profit Dividend income received from non-current assets held-for-sale Share of income of equity-accounted investment3 Profit before tax Income tax expense Profit for the year from discontinued operations Other comprehensive (loss)/income, net of tax Items that have subsequently been reclassified to profit or loss: – Recycling of share of other comprehensive income of equity- accounted investments Items that will not be reclassified to profit or loss: – Share of other comprehensive income of equity-accounted investments (1) 832 65 896 1 234 2 130 47 52 2 229 (65) 2 164 (830) (831) (831) 1 1 69 70 139 139 2 2 2 Total comprehensive income for the year Cash flow information Cash flow attributable to investing activities Dividend income received from non-current assets held-for-sale Proceeds from partial disposal of associate classified as non-current assets held-for-sale 69 Cash flow attributable to discontinued operations 1 The indemnification asset movement arose on the repurchase of the Tronox Holdings plc ordinary shares as Tronox Holdings plc has indemnified Exxaro from any tax obligation which may arise on the disposal of any of the Tronox Holdings plc ordinary shares held by Exxaro since the redomicile. 2 889 2 936 1 334 141 69 47 2 Comprises proceeds of R2 889 million and carrying value of R1 655 million. 3 Relates to Black Mountain. 32 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 7. REVENUE Revenue is derived from contracts with customers. Revenue has been disaggregated based on timing of revenue recognition, major type of goods and services, major geographic area and major customer industries. Coal Ferrous Other Commercial For the year ended 31 December 2019 (Reviewed) Waterberg Rm Mpumalanga Rm Tied Rm Other Rm Alloys Rm Other Rm Total Rm Segmental revenue reconciliation Segmental revenue based on origin of coal production Export sales allocated to selling entity Total revenue from contracts with customers By timing and major type of goods and services Sale of goods at a point in time Coal Ferrosilicon Biological goods Rendering of services over time Stock yard management services Project engineering services Other mine management services Transportation services1 Other services Total revenue from contracts with customers By major geographic area of customer2 Domestic Export Europe Asia Other 14 012 (1 494) 7 240 (5 468) 4 038 292 6 962 130 14 25 726 12 518 1 772 4 038 7 254 130 14 25 726 12 518 12 518 1 721 1 721 3 414 3 414 6 870 6 870 122 122 624 130 494 51 51 384 8 292 92 2 6 12 12 2 2 24 657 24 523 122 12 1 069 130 494 292 145 8 12 518 1 772 4 038 7 254 130 14 25 726 12 518 1 772 4 038 130 292 6 962 3 617 3 159 186 13 1 1 18 763 6 963 3 618 3 159 186 14 130 1 772 7 254 4 038 4 038 12 518 25 726 Total revenue from contracts with customers By major customer industries Public utilities Merchants Steel Mining Manufacturing Food and beverage Chemicals Cement Other Total revenue from contracts with customers 1 Relates mainly to the rendering of export freight services over time (in terms of incoterm CFR) and separate transport 10 211 179 1 378 81 279 200 1 009 326 68 133 467 6 475 43 266 15 725 6 980 1 489 583 303 201 167 148 130 103 24 148 42 25 726 12 518 4 038 7 254 1 772 130 167 69 13 14 3 1 3 32 Reviewed condensed group annual financial statements and unreviewed production 33 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 requests from customers. 2 Determined based on the customer supplied by Exxaro. 7. REVENUE continued For the year ended 31 December 2018 (Audited) (Re-presented)1 Waterberg Rm Mpumalanga Rm Tied Rm Other Rm Alloys Rm Other Rm Total Rm Coal Ferrous Other Commercial Segmental revenue reconciliation Segmental revenue based on origin of coal production Export sales allocated to selling entity Total revenue from contracts with customers By timing and major type of goods and services1 Sale of goods at a point in time1 Coal1 Ferrosilicon Biological goods Rendering of services over time1 Stock yard management services Project engineering services1 Other mine management services Other services Total revenue from contracts with customers By major geographic area of customer2 Domestic Export Europe Asia Other Total revenue from contracts with customers By major customer industries Public utilities Merchants Steel Mining Manufacturing Food and beverage Chemicals Cement Other Total revenue from contracts with customers 13 289 (1 796) 7 984 (6 254) 3 665 364 8 050 169 20 25 491 11 493 1 730 3 665 8 414 169 20 25 491 11 493 11 493 1 730 1 730 3 145 3 145 8 050 8 050 520 224 296 364 364 163 163 6 6 16 24 597 24 418 163 16 894 224 296 364 10 16 4 4 11 493 1 730 3 665 8 414 169 20 25 491 11 493 1 730 3 665 169 364 8 050 4 920 2 455 675 15 5 2 3 17 436 8 055 4 922 2 458 675 11 493 1 730 3 665 8 414 169 20 25 491 9 101 141 1 557 88 291 89 156 70 301 835 165 43 33 96 202 55 3 665 701 6 458 36 747 101 144 22 371 3 11 493 1 730 3 665 8 414 169 13 768 7 434 1 758 1 022 447 89 96 358 519 25 491 20 20 1 Represented for a separate performance obligation identified in the sale of coal contract, being the project engineering services. There has been no impact on the amount of revenue recognised as both performance obligations have been fulfilled during the year. 2 Determined based on the customer supplied by Exxaro. 34 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 8. SIGNIFICANT ITEMS INCLUDED IN OPERATING EXPENSES The following (expense)/income items are included, amongst others, in operating expenses: Raw materials and consumables Staff costs1 Royalties Contract mining Repairs and maintenance Railage and transport Movement in rehabilitation provisions Depreciation and amortisation – Depreciation of property, plant and equipment – Depreciation of right-of-use assets – Amortisation of intangible assets Fair value adjustments on contingent consideration2 Legal and professional fees Net gains on disposal of property, plant and equipment Loss on loss of control of subsidiary3 Gain on disposal of operation4 Loss on dilution of investment in associates5 Gain on disposal of associate6 Expected credit losses7 Net impairment charges of non-current assets8 Expenses relating to short-term leases Expenses relating to leases of low value assets Gain on termination of lease Operating lease income Operating lease rental expense Insurance recoveries for: – Business interruption – Property, plant and equipment For the year ended 31 December 2019 Reviewed Rm 2018 Audited Rm (3 760) (5 248) (459) (2 308) (2 251) (2 353) (127) (1 912) (1 849) (59) (4) 296 (742) (35) 76 (42) 270 (165) (35) (180) (11) 1 39 148 99 49 (3 175) (4 622) (427) (1 818) (2 213) (1 787) 194 (1 582) (1 579) (3) (357) (776) 122 102 (64) 37 (232) 57 57 1 Includes an amount of R459 million relating to TVPs. 2 Relates to the ECC acquisition. 3 On 1 January 2019 Exxaro lost control over the management function of Tumelo. This resulted in Tumelo being accounted for as an associate at an initial carrying value of nil. 4 2019 relates to the disposal of the Paardeplaats mining right which formed part of the NBC operation. 2018 relates to the sale of certain assets and liabilities of the NBC operation. 5 Relates to the dilution of Insect Technology and LightApp (refer note 14). 6 Relates to the redemption of membership interest in Tronox UK. 7 Mainly relates to ECLs recognised for non-performing other receivables and the loan to Tumelo. 8 Includes an impairment charge of the equity-accounted investment in GAM (R58 million) and an impairment reversal on the Reductants plant (R23 million). 34 Reviewed condensed group annual financial statements and unreviewed production 35 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 9. NET FINANCING COSTS Finance income Interest income Finance lease interest income Commitment fee income Interest income from loan to joint venture Finance costs Interest expense Unwinding of discount rate on rehabilitation costs Recovery of unwinding of discount rate on rehabilitation costs Interest expense on lease liabilities Amortisation of transaction costs Borrowing costs capitalised1 Total net financing costs 1 Borrowing costs capitalisation rate: For the year ended 31 December 2019 Reviewed Rm 2018 Audited Rm 318 292 9 6 11 (355) (506) (414) 167 (36) (14) 448 (37) 9.98% 283 256 10 1 16 (605) (514) (408) 158 (1) (27) 187 (322) 10.13% 10. SHARE OF INCOME OF EQUITY-ACCOUNTED INVESTMENTS Associates SIOC Tronox SA Tronox UK1 RBCT Curapipe Insect Technology LightApp Joint ventures Mafube Cennergi For the year ended 31 December 2019 Reviewed Rm (Re-presented) 2018 Audited Rm 4 468 4 413 234 1 (4) (148) (28) 173 127 46 3 009 2 592 382 110 (36) (3) (31) (5) 180 114 66 Share of income of equity-accounted investments 4 641 3 189 1 Application of the equity method ceased on 30 November 2018 when the investment was classified as a non-current asset held-for-sale. 36 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 11. DIVIDEND DISTRIBUTIONS A final cash dividend, number 34, for 2019 of 566 cents per share, was approved by the board of directors on 11 March 2020. The dividend is payable on 28 April 2020 to shareholders who will be on the register on 24 April 2020. This final dividend, amounting to approximately R1 420 million (to external shareholders), has not been recognised as a liability in these condensed annual financial statements. It will be recognised in shareholders’ equity in the year ending 31 December 2020. The final dividend declared will be subject to a dividend withholding tax of 20% 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, subject to dividend withholding tax at a rate of 20% amounts to 452.80000 cents per share. The number of ordinary shares in issue at the date of this declaration is 358 706 754. Exxaro company’s tax reference number is 9218/098/14/4. Dividends paid Final dividend (relating to prior year) Special dividend Interim dividend (current year) Dividend per share Final dividend (relating to prior year) Special dividend Interim dividend (current year) Issued share capital (number of shares) Ordinary shares (millions) – Weighted average number of shares – Diluted weighted average number of shares 12. CAPITAL SPEND AND CAPITAL COMMITMENTS Capital spend To maintain operations To expand operations Total capital spend Capital commitments Contracted Contracted for the group (owner-controlled) Share of capital commitments of equity-accounted investments Authorised, but not contracted For the year ended 31 December 2019 Reviewed Rm 2018 Audited Rm 5 812 1 393 2 251 2 168 cents 2 316 555 897 864 5 483 1 004 3 149 1 330 cents 2 185 400 1 255 530 At 31 December 2019 Reviewed 2018 Audited 358 706 754 358 706 754 251 251 251 326 At 31 December 2019 Reviewed Rm 2018 Audited Rm 2 502 3 574 6 076 2 225 1 985 240 3 119 2 847 2 943 5 790 4 508 3 533 975 2 914 36 Reviewed condensed group annual financial statements and unreviewed production 37 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 13. RIGHT-OF-USE ASSETS At 31 December 2019 Gross carrying amount Transfer from property, plant and equipment1 Recognised on initial application of IFRS 16 Balance at 1 January 2019 Additions Remeasurement adjustments2 Lease terminations Transfer to property, plant and equipment3 At end of the year Accumulated depreciation Transfer from property, plant and equipment1 Recognised on initial application of IFRS 16 Balance at 1 January 2019 Charges for the year Lease terminations Transfer to property, plant and equipment3 At end of the year Net carrying amount at end of the year Land and buildings Rm Residential land and buildings Rm Buildings and infrastructure Rm Machinery, plant and equipment Rm Total Rm 1 1 4 4 1 33 33 457 7 1 5 497 (1) (1) 4 1 (4) (4) (44) (48) 449 16 16 38 54 2 (18) (16) 22 76 92 460 7 (18) (16) 525 (2) (2) (7) (9) (14) 7 2 (14) (11) (13) (59) 7 2 (63) 8 462 1 Assets acquired in terms of finance leases transferred from property, plant and equipment on adoption of IFRS 16. 2 Relates to remeasurements arising from changes in CPI. 3 Transfer to property, plant and equipment as there was a transfer in legal ownership of the underlying asset. 38 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 14. EQUITY-ACCOUNTED INVESTMENTS Associates SIOC Tronox SA RBCT1 Black Mountain2 Curapipe3 Insect Technology4 LightApp4 Tumelo1 GAM5 Joint ventures Mafube Cennergi At 31 December 2019 Reviewed Rm 15 056 9 835 2 472 2 067 37 534 111 1 574 1 335 239 2018 Audited Rm 15 477 9 511 2 185 2 157 818 22 643 141 1 569 1 237 332 Total carrying value of equity-accounted investments 16 630 17 046 1 On 1 January 2019 Exxaro lost control over the management function of Tumelo. This resulted in Tumelo being accounted for as an associate and a dilution in the effective interest in RBCT. 2 The investment in Black Mountain was classified as a non-current asset held-for-sale on 30 November 2019 (refer note 16). 3 An additional 4.47% interest was acquired in Curapipe. 4 The interests in Insect Technology and LightApp have diluted during the year. 5 A 22% equity interest in GAM was acquired in exchange for settlement of the Lebonix debt. The investment in GAM has since been impaired to a net carrying value of nil. 15. OTHER ASSETS Non-current Reimbursements1 Indemnification asset: Total S.A.2 Biological assets Intangible assets Other Total non-current other assets Current Indemnification asset: Tronox Holdings plc3 VAT Royalties Prepayments Current tax receivables Other Total current other assets Total other assets At 31 December 2019 Reviewed Rm 2018 Audited Rm 1 648 1 410 24 16 51 3 149 65 501 114 120 265 33 1 098 4 247 1 723 1 337 30 15 27 3 132 480 46 110 23 19 678 3 810 1 Amounts recoverable from Eskom in respect of the rehabilitation, environmental expenditure and retirement employee obligations of the Matla and Arnot mines at the end of life of these mines. 2 Upon the acquisition of ECC in 2015, Total S.A. indemnified Exxaro from any obligations relating to the EMJV. 3 Indemnification asset which arose on the repurchase of the Tronox Holdings plc ordinary shares as Tronox Holdings plc has indemnified Exxaro from any tax obligation which may arise on the disposal of any of the Tronox Holdings plc ordinary shares held by Exxaro subsequent to the redomicile. 38 Reviewed condensed group annual financial statements and unreviewed production 39 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 16. NON-CURRENT ASSETS AND LIABILITIES HELD-FOR-SALE Tronox Holdings plc In September 2017, the directors of Exxaro formally decided to dispose of the investment in Tronox Limited. As part of this decision, Tronox Limited was required to publish an automatic shelf registration statement of securities of well-known seasoned issuers which allowed for the conversion of Exxaro’s Class B Tronox Limited ordinary shares to Class A Tronox Limited ordinary shares. From this point, it was concluded that the Tronox Limited investment should be classified as a non-current asset held-for-sale as all the criteria in terms of IFRS 5 Non-current Assets Held-for-Sale and Discontinued Operations (IFRS 5) were met. As of 30 September 2017, the Tronox Limited investment, totalling 42.66% of Tronox Limited’s total outstanding voting shares, was classified as a non-current asset held-for-sale and the application of the equity method ceased. Subsequently, Exxaro sold 22 425 000 Class A Tronox Limited ordinary shares during October 2017. During May 2019, Tronox Holdings plc repurchased 14 000 0000 Tronox Holdings plc ordinary shares from Exxaro after Tronox Limited had redomiciled to the UK. On 31 December 2019, management concluded that the remaining investment in Tronox Holdings plc continues to meet the criteria to be classified as a non-current asset held-for-sale in terms of IFRS 5. Exxaro continues to assess market conditions for further possible sell downs of the remaining 14 729 280 Tronox Holdings plc ordinary shares. The Tronox Holdings plc investment is presented within the total assets of the TiO2 reportable operating segment and is presented as a discontinued operation (refer note 6). Black Mountain During the second half of 2019, the Exxaro board of directors approved a decision to divest from its 26% interest in Black Mountain. A non-binding offer from an interested party was received. On 30 November 2019 the investment was classified as a non-current asset held-for-sale as all the criteria in terms of IFRS 5 were met and the application of the equity method ceased. The Black Mountain investment is presented within the total assets of the other reportable operating segment and is presented as a discontinued operation (refer note 6). EMJV As part of the ECC acquisition in 2015, Exxaro acquired non-current liabilities held-for-sale relating to the EMJV. The sale of the EMJV business is conditional on section 43 consent required in terms of the MPRDA for transfer of the environmental liabilities and rehabilitation obligations of the EMJV to Scinta Energy Proprietary Limited. The liabilities remain classified as non-current liabilities held-for-sale for the Exxaro group as at 31 December 2019 as the required approvals were still pending. Subsequent to 31 December 2019, the required approvals have been obtained (refer note 26). The EMJV does not meet the criteria to be classified as a discontinued operation since it does not represent a separate major line of business, nor does it represent a major geographical area of operation. 40 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 16. NON-CURRENT ASSETS AND LIABILITIES HELD-FOR-SALE continued The major classes of assets and liabilities classified as non-current assets and liabilities held-for-sale are as follows: Assets Investments in associates – Tronox Holdings plc – Tronox UK – Black Mountain Non-current assets held-for-sale Liabilities Non-current provisions1 Retirement employee obligations1 Non-current liabilities held-for-sale Net non-current assets held-for-sale 1 Relates to the EMJV. At 31 December 2019 Reviewed Rm 2018 Audited Rm 2 613 1 741 872 2 613 (1 393) (17) (1 410) 1 203 5 183 3 396 1 787 5 183 (1 320) (17) (1 337) 3 846 40 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 41 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 17. INTEREST-BEARING BORROWINGS Non-current1 Loan facility Bonds2 Preference share liability3 Current4 Loan facility Bonds Preference share liability At 31 December 2019 Reviewed Rm 6 991 5 991 1 000 50 46 4 2018 Audited Rm 3 843 3 233 610 571 47 525 (1) Total interest-bearing borrowings 7 041 4 414 Summary of interest-bearing borrowings by period of redemption: Less than six months Six to 12 months Between one and two years Between two and three years Between three and four years Between four and five years Total interest-bearing borrowing 1 Has been reduced by the amortisation of transaction costs of: 2 New bonds issued during May 2019. 3 Capital redemption on preference share liability of: 4 The current portion represents: – Capital repayments – Interest capitalised – Reduced by the amortisation of transaction costs Overdraft Bank overdraft 54 (4) 2 744 3 605 (1) 643 7 041 (9) 602 50 59 (9) 576 (5) (10) 3 242 611 4 414 (20) 1 889 571 520 61 (10) 976 1 531 The bank overdraft is repayable on demand and interest is based on current South African money market rates. There were no defaults or breaches in terms of interest-bearing borrowings. 42 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 17. INTEREST-BEARING BORROWINGS continued Below is a summary of the salient terms and conditions of the facilities: Loan facility Year Bullet term loan Amortised loan Revolving facility Aggregate nominal amount (Rm) 31 December 2019 31 December 2018 3 250 3 250 1 750 1 750 2 750 2 750 Issue date or draw date Maturity date Capital payments 29 July 2016 29 July 2016 29 July 2016 29 July 2021 29 July 2023 29 July 2021 The total outstanding amount is payable on final maturity date The total outstanding amount is payable on final maturity date Four consecutive semi-annual instalments commencing on the date occurring 18 months prior to the final maturity date Duration (months) Secured or unsecured Undrawn portion (Rm) 31 December 2019 31 December 2018 60 84 60 Unsecured Unsecured Unsecured nil nil 1 750 1 750 nil 2 750 Interest Interest-payment basis Interest-payment period Interest rate Effective interest rates for transaction costs 31 December 2019 31 December 2018 Closing rate of interest 31 December 2019 31 December 2018 Floating rate Floating rate Floating rate Three months Three months Monthly JIBAR plus a margin of 325 basis points (3.25%) JIBAR plus a margin of 360 basis points (3.60%) JIBAR plus a margin of 325 basis points (3.25%) 0.17% 0.17% 10.04% 10.28% N/A 0.17% nil nil N/A N/A 9.63% nil 42 Reviewed condensed group annual financial statements and unreviewed production 43 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 17. INTEREST-BEARING BORROWINGS continued Year 31 December 2019 Aggregate nominal amount (Rm) Issue date or draw date Maturity date Capital payments Duration (months) Secured or unsecured Interest Interest-payment basis Interest-payment period Interest rate Closing rate of interest 31 December 2019 18. LEASE LIABILITIES DMTN Programme (bonds) R357 million senior unsecured floating rate note 357 R643 million senior unsecured floating rate note 643 13 June 2019 13 June 2022 No fixed or determinable payments, the total outstanding amount is payable on final maturity date 36 Unsecured 13 June 2019 13 June 2024 No fixed or determinable payments, the total outstanding amount is payable on final maturity date 60 Unsecured Floating rate Three months JIBAR plus a margin of 165 basis points (1.65%) 8.45% Floating rate Three months JIBAR plus a margin of 189 basis points (1.89%) 8.69% At 31 December Non-current Current Total lease liabilities Summary of lease liabilities by period of redemption: Less than six months Six to 12 months Between one and two years Between two and three years Between three and four years Between four and five years Over five years Total lease liabilities Analysis of movement in lease liabilities At beginning of the year – IAS 17 Recognised on initial application of IFRS 16 Balance at 1 January 2019 New leases Lease terminations Lease remeasurement adjustments Capital repayments – Lease payments – Interest charges 2018 Audited Rm 2 2 2 2 2019 Reviewed Rm 461 27 488 15 12 28 34 34 43 322 488 2 66 68 458 (12) 7 (33) (69) 36 At end of the year The lease liabilities relate to the right-of-use assets disclosed under note 13. Interest is based on incremental borrowing rates ranging between 7.85% and 10.44%. 488 44 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 19. PROVISIONS Environmental rehabilitation Restoration Rm Decommis- sioning Rm Residual impact Rm Other site closure costs Rm 2 516 451 975 (244) 374 (618) 228 (58) (4) (6) 52 56 (4) 47 (4) (2) 301 403 (102) 139 (69) (1) 2 432 66 2 366 544 1 345 11 544 1 334 80 18 19 (1) (15) 83 22 61 Total Rm 4 022 127 852 (725) 414 (4) (73) (73) (9) 4 404 99 4 305 2 473 450 956 80 3 959 (133) 35 (168) 219 (35) (8) 2 516 46 2 470 (29) (29) 42 (12) 451 (32) 45 (77) 124 (73) 975 451 975 (194) 80 (274) 408 (12) (58) (81) 4 022 70 3 952 23 (23) 80 24 56 At 31 December 2019 At beginning of the year Charge to operating expenses (note 8) – Additional provision – Unused amounts reversed Unwinding of discount rate on rehabilitation costs (note 9) Provisions capitalised to property, plant and equipment Utilised during the year Reclassification to non-current liabilities held-for-sale Loss of control of subsidiary Total provisions at end of the year – Current provision – Non-current provision At 31 December 2018 At beginning of the year Charge to operating expenses (note 8) – Additional provision – Unused amounts reversed Unwinding of discount rate on rehabilitation costs (note 9) Provisions capitalised to property, plant and equipment Utilised during the year Reclassification to non-current liabilities held-for-sale Total provisions at end of the year – Current provision – Non-current provision 44 Reviewed condensed group annual financial statements and unreviewed production 45 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 20. NET DEBT At 31 December 2019 Reviewed Rm 2018 Audited Rm Net debt is presented by the following items on the statement of financial position: Non-current interest-bearing debt Interest-bearing borrowings Lease liabilities Current interest-bearing debt Interest-bearing borrowings Lease liabilities Net cash and cash equivalents Cash and cash equivalents Overdraft Total net debt Analysis of movement in net cash/(debt): (7 452) (6 991) (461) (77) (50) (27) 1 719 2 695 (976) (5 810) Liabilities arising from financing activities Cash and cash equivalents/ (overdraft) Rm Non- current interest- bearing debt Rm Current interest- bearing debt Rm Net cash at 31 December 2017 (Audited) Cash flows Operating activities Investing activities Financing activities – Interest-bearing borrowings raised – Interest-bearing borrowings repaid – Shares acquired in the market to settle share-based payments – Dividends paid to BEE Parties Non-cash movements Amortisation of transaction costs Preference dividend accrued Interest accrued Lease terminations Transfers between non-current and current liabilities Translation difference on movement in cash and cash equivalents Net debt at 31 December 2018 (Audited) 6 617 (6 110) (54) (3 195) (2 861) 14 (2 161) (467) (247) 42 42 549 (6 480) 2 139 2 139 2 139 498 (1) 5 (68) 8 8 (14) 22 (513) (27) 5 3 494 (494) (3 843) (3 843) (573) (571) (2) 549 2 080 (1 531) (3 867) Total Rm 69 (3 963) (54) (3 195) (714) (467) (247) 27 (27) (1) 5 8 42 (3 843) (573) (3 867) 46 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 20. NET DEBT continued Analysis of movement in net cash/(debt) continued: Liabilities arising from financing activities Cash and cash equivalents/ (overdraft) Rm Non- current interest- bearing debt Rm Current interest- bearing debt Rm (3 843) (3 148) (573) 553 (3 148) (3 750) 602 553 (500) 1 020 33 549 1 171 (2 329) 2 974 526 4 250 (1 622) (33) (678) (1 391) (1) (461) 13 (7) (524) 57 (1) (57) (14) 2 12 (57) Total Rm (3 867) (1 424) (2 329) 2 974 (2 069) (678) (1 391) (519) (14) 13 2 (7) (524) 12 (1) 1 719 (7 452) (77) (5 810) Net debt at 31 December 2018 (Audited) Cash flows Operating activities Investing activities Financing activities – Interest-bearing borrowings raised – Interest-bearing borrowings repaid – Lease liabilities paid – Shares acquired in the market to settle share-based payments – Dividends paid to BEE Parties Non-cash movements Amortisation of transaction costs Preference dividend accrued Interest accrued Lease remeasurements New leases (including IFRS 16 adoption adjustment) Lease terminations Transfers between non-current and current liabilities Translation difference on movement in cash and cash equivalents Net debt at 31 December 2019 (Reviewed) 46 Reviewed condensed group annual financial statements and unreviewed production 47 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 21. OTHER LIABILITIES At 31 December 2019 Reviewed Rm 2018 Audited Rm 18 18 144 23 167 Non-current Termination benefits1 Income received in advance Total non-current other liabilities Current Termination benefits1 Leave pay Bonuses VAT Royalties Current tax payables Other Total current other liabilities Total other liabilities 1 During 2019, Exxaro announced the implementation of TVPs. Under this policy, employees that qualified would receive a severance package in exchange for termination of employment. Offers made by Exxaro to the targeted employees (who accepted the agreements) were signed by the end of 2019. 305 203 241 21 9 50 97 926 1 093 17 171 305 86 50 209 94 932 950 22. FINANCIAL INSTRUMENTS The group holds the following financial instruments: Non-current Financial assets Financial assets at fair value through other comprehensive income Equity: unlisted – Chifeng Financial assets at fair value through profit or loss Debt: unlisted – environmental rehabilitation funds Financial assets at amortised cost Loans to associates and joint ventures1 ESD loans2 Other financial assets at amortised cost – Environmental rehabilitation funds – Deferred pricing receivable3 – Impairment allowances Financial liabilities Financial liabilities at amortised cost Interest-bearing borrowings Other payables Deferred consideration payable4 Financial liabilities at fair value through profit or loss Contingent consideration At 31 December 2019 Reviewed Rm 2018 Audited Rm 235 235 2 039 2 039 400 124 276 279 (3) (7 112) (6 991) (121) 185 185 1 432 1 432 1 017 250 80 687 351 336 (4 220) (3 843) (152) (225) (488) (488) 48 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 22. FINANCIAL INSTRUMENTS continued The group holds the following financial instruments continued: At 31 December 2019 Reviewed Rm 2018 Audited Rm Current Financial assets Financial assets at amortised cost Loans to associates and joint ventures Associates5 – Gross – Impairment allowances Joint ventures1 – Gross ESD loans2 – Gross – Impairment allowances Other financial assets at amortised cost – Deferred pricing receivable3 – Deferred consideration receivable6 – Employee receivables – Impairment allowances Trade and other receivables Trade receivables – Gross – Impairment allowances Other receivables – Gross – Impairment allowances Cash and cash equivalents Financial liabilities Financial liabilities at amortised cost Interest-bearing borrowings Deferred consideration payable4 Trade and other payables – Trade payables – Other payables Overdraft Financial liabilities at fair value through profit or loss Derivative financial liabilities Contingent consideration 6 208 133 133 182 (49) 82 83 (1) 57 57 1 5 (6) 3 241 2 928 3 023 (95) 313 464 (151) 2 695 (3 936) (50) (307) (2 603) (1 164) (1 439) (976) (191) (191) 5 354 9 9 9 45 45 80 52 29 4 (5) 3 140 2 971 3 052 (81) 169 223 (54) 2 080 (5 457) (571) (395) (2 960) (1 456) (1 504) (1 531) (362) (1) (361) 1 Loan granted to Mafube in 2018. The loan bears interest at JIBAR plus a margin of 4%, is unsecured and repayable within five years (ending 2023), unless otherwise agreed by the parties. The loan was settled in 2019. 2 Interest-free loans advanced to successful applicants in terms of the Exxaro ESD programme. 3 Relates to a deferred pricing adjustment which arose during 2017. The amount receivable will be settled over seven years (ending 2024) and bears interest at Prime Rate less 2%. 4 Relates to deferred consideration payable in relation to the acquisition of the investment in Insect Technology and LightApp. 5 Loan granted to Tumelo. The loan is interest free, unsecured and repayable on demand, unless otherwise agreed by the parties. 6 Relates to deferred consideration receivable which arose on the disposal of a mining right. 48 Reviewed condensed group annual financial statements and unreviewed production 49 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 22. FINANCIAL INSTRUMENTS continued The group has granted the following loan commitments: Total loan commitment Mafube1 Insect Technology2 Undrawn loan commitment Mafube Insect Technology 1 Revolving credit facility available for five years, ending 2023. 2 A US$50 million term loan facility available from 2020 to 2025. 22.1 Fair value hierarchy At 31 December 2019 Reviewed Rm 1 206 500 706 1 206 500 706 2018 Audited Rm 1 221 500 721 971 250 721 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 in Level 1 that are either directly or indirectly observable. Level 3 – Inputs that are not based on observable market data (unobservable inputs). At 31 December 2019 (Reviewed) Financial assets at fair value through other comprehensive income Equity – unlisted: Chifeng Financial assets at fair value through profit or loss Non-current debt – unlisted: environmental rehabilitation funds Financial liabilities at fair value through profit or loss Current contingent consideration Net financial assets held at fair value Fair value Rm Level 1 Rm Level 2 Rm Level 3 Rm 235 235 2 039 2 039 (191) (191) 2 083 235 235 (191) (191) 44 2 039 2 039 2 039 50 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 22. 22.1 FINANCIAL INSTRUMENTS continued Fair value hierarchy continued At 31 December 2018 (Audited) Financial assets at fair value through other comprehensive income Equity – unlisted: Chifeng Financial assets at fair value through profit or loss Non-current debt – unlisted: environmental rehabilitation funds Financial liabilities at fair value through profit or loss Non-current contingent consideration Current contingent consideration Derivative financial liabilities Net financial assets/(liabilities) held at fair value Fair value Rm Level 1 Rm Level 2 Rm Level 3 Rm 185 185 1 432 1 432 (849) (488) (361) (1) 767 1 432 1 432 185 185 (849) (488) (361) (1) 1 431 (664) Reconciliation of financial assets and financial liabilities within Level 3 of the hierarchy: At 31 December 2017 (Audited) Movement during the year Gains recognised in other comprehensive income (pre-tax effect)1 Losses recognised in profit or loss Settlements Exchange losses recognised in profit or loss At 31 December 2018 (Audited) Movement during the year Gains recognised in other comprehensive income (pre-tax effect)1 Gains recognised in profit or loss Settlements Exchange gains recognised in profit or loss At 31 December 2019 (Reviewed) Contingent consideration Rm (723) Chifeng Rm 152 (357) 299 (68) (849) 296 344 18 (191) 33 185 50 235 Total Rm (571) 33 (357) 299 (68) (664) 50 296 344 18 44 1 Tax on Chifeng amounts to nil (31 December 2018: R12 million). Transfers The group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the transfer has occurred. There were no transfers between Level 1 and Level 2 nor between Level 2 and Level 3 of the fair value hierarchy. 50 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 51 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 22. 22.1 FINANCIAL INSTRUMENTS continued Fair value hierarchy continued Valuation process applied The fair value computations of the investments are performed by the group’s corporate finance department, reporting to the finance director, on a six-monthly basis. The valuation reports are discussed with the chief operating decision maker and 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 assessed for reasonability by discounting estimated future cash flows using the market rate for similar instruments at measurement date. Environmental rehabilitation funds Level 2 fair values for debt instruments held in the environmental rehabilitation funds are based on quotes provided by the financial institutions at which the funds are invested at measurement date. These financial institutions invest in instruments which are listed. 22.2 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 Contingent consideration The potential undiscounted amount of the remaining future payments that the group could be required to make under the ECC acquisition is between nil and US$35 million. The amount of future payments is dependent on the API4 coal price. At 31 December 2019, there was a decrease of US$20.4 million (R296 million) (31 December 2018: an increase of US$25.4 million (R357 million)) recognised in profit or loss for the contingent consideration arrangement. Reference year 2015 2016 2017 2018 2019 API4 coal price range (US$/tonne) Future payment Minimum Maximum US$ million 60 60 60 60 60 80 80 80 90 90 10 25 25 25 35 The amount to be paid in each of the five years is determined as follows: – If the average API4 price in the reference year is below the minimum API4 price of the agreed range, then no payment will be made – If the average API4 price falls within the range, then the amount to be paid is determined based on a formula contained in the agreement – If the average API4 price is above the maximum API4 price of the range, then Exxaro is liable for the full amount due for that reference year. An additional payment to Total S.A. amounting to R344 million was required for the 2018 reference year, R299 million was required for the 2017 reference year and R74 million was required for the 2016 reference year as the API4 price was within the agreed range. No additional payment to Total S.A. was required for the 2015 reference year as the API4 price was below the range. The contingent consideration is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable price available for this financial instrument. This financial instrument is valued as the present value of the estimated future cash flows, using a discounted cash flow model. The significant observable and unobservable inputs used in the fair value measurement of this financial instrument are the rand/US$ exchange rate, API4 export price and the discount rate. 52 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued 23. CONTINGENT LIABILITIES Pending litigation and other claims1 Operational guarantees2 – Financial guarantees ceded to the DMR – Other financial guarantees Total contingent liabilities At 31 December 2019 Reviewed Rm 1 103 4 506 3 994 512 5 609 2018 Audited Rm 1 155 3 062 2 971 91 4 217 1 Consists of legal cases with Exxaro as defendant. Tax disputes with SARS have been settled. 2 Includes guarantees to banks and other institutions in the normal course of business from which it is anticipated that no material liabilities will arise. SARS As previously reported, on 30 March 2016, SARS had issued additional assessments to the amount of R442 million (R199 million tax payable, R91 million interest and R152 million penalties) to which Exxaro formally objected. The matter was settled outside of the Tax Court. A settlement agreement was concluded and signed on 30 September 2019 in terms of which SARS must refund Exxaro an amount of R24 million. Share of equity-accounted investments' contingent liabilities Share of contingent liabilities of equity-accounted investments1 At 31 December 2019 Reviewed Rm 1 060 2018 Audited Rm 726 1 Mainly operational guarantees issued by financial institutions relating to environmental rehabilitation and closure costs. 24. RELATED PARTY TRANSACTIONS The group entered into various sale and purchase transactions with associates and joint ventures during the ordinary course of business. These transactions were subject to terms that are no less, nor more favourable than those arranged with independent third parties. 25. GOING CONCERN Based on the latest results for the year ended 31 December 2019, the latest board approved budget for 2020, as well as the available banking facilities and cash generating capability, Exxaro satisfies the criteria of a going concern. 52 Reviewed condensed group annual financial statements and unreviewed production 53 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 26. EVENTS AFTER THE REPORTING PERIOD Details of the final dividend are provided in note 11. Subsequent to 31 December 2019, the following notable events occurred: – On 17 January 2020, the outstanding conditions for the sale of the EMJV business to Scinta Energy Proprietary Limited were met (refer note 16). – On 31 January 2020, the Arnot operation was transferred to Arnot OpCo Proprietary Limited Consortium. – On 20 February 2020, Exxaro announced its intention to divest from the ECC group as well as the Leeuwpan operation. – As announced on 17 September 2019, Exxaro has concluded an agreement with Khopoli, a wholly owned subsidiary of Tata Power, to acquire Khopoli's 50% shareholding in Cennergi for an amount of R1 550 million, subject to normal working capital adjustments. Post the conclusion of the agreement, Exxaro will have 100% ownership of Cennergi. The last condition precedent was met in March 2020. 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. 27. EXTERNAL AUDITOR'S REVIEW CONCLUSION These reviewed condensed group annual financial statements for the year ended 31 December 2019, as set out on pages 12 to 54, have been reviewed by the company’s external auditor, PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion. A copy of the auditor’s review report on the condensed group annual financial statements is available for inspection at Exxaro’s registered office, together with the financial statements identified in the external auditor’s report. 28. KEY MEASURES1 Closing share price (rand per share) Market capitalisation (Rbn) Average rand/US$ exchange rate (for the year ended) Closing rand/US$ spot exchange rate 1 Non-IFRS numbers. At 31 December 2019 131.14 47.04 14.44 14.13 2018 137.87 49.45 13.24 14.43 54 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS continued CORPORATE INFORMATION REGISTERED OFFICE Exxaro Resources Limited The ConneXXion 263B West Avenue Die Hoewes, Centurion 0163 Tel: +27 12 307 5000 Fax: +27 12 323 3400 This report is available at: www.exxaro.com DIRECTORS Executive: Non-executive: Independent non-executive: MDM Mgojo (chief executive officer), PA Koppeschaar (finance director) L Mbatha, VZ Mntambo J van Rooyen (chairman), GJ Fraser-Moleketi (lead independent director), MJ Moffett, LI Mophatlane, EJ Myburgh, V Nkonyeni, A Sing, PCCH Snyders PREPARED UNDER THE SUPERVISION OF: PA Koppeschaar CA(SA) SAICA registration number: 00038621 GROUP COMPANY SECRETARY SE van Loggerenberg TRANSFER SECRETARIES Computershare Investor Services Proprietary Limited Rosebank Towers 13 Biermann Avenue Rosebank, 2196 PO Box 61051 Marshalltown, 2107 INVESTOR RELATIONS MI Mthenjane (+27 12 307 7393) SPONSOR Absa Bank Limited (acting through its Corporate and Investment Bank Division) Tel: +27 11 895 6000 EXXARO RESOURCES LIMITED (Incorporated in the Republic of South Africa) Registration number: 2000/011076/06 JSE share code: EXX ISIN: ZAE000084992 ADR code: EXXAY (“Exxaro” or “the company” or “the group”) If you have any queries regarding your shareholding in Exxaro Resources Limited, please contact the transfer secretaries at +27 11 370 5000. Webcast link: http://www.corpcam.com/Exxaro12032020 Conference call details: Johannesburg (Telkom) Johannesburg (Neotel) USA and Canada UK Other countries (Telkom) Other countries (Neotel) 010 201 6800 011 535 3600 1 508 924 4326 0 333 300 1418 +27 10 201 6800 +27 11 535 3600 54 Reviewed condensed group annual financial statements and unreviewed production 55 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 ANNEXURE: ACRONYMS AMSA Anglo ArcelorMittal SA Limited Anglo South Africa Capital Proprietary Limited Anglo Coal Anglo Coal (Grosvenor) Proprietary Limited API4 BBBEE BEE BEE Parties Black Mountain Cennergi CFR Chifeng All publications index 4 (FOB Richards Bay 6000/kcal/kg) Broad-based black economic empowerment Black economic empowerment External shareholders of Eyesizwe Black Mountain Proprietary Limited Cennergi Proprietary Limited Cost and freight Chifeng Kumba Hongye Corporation Limited Companies Act Companies Act No 71 of 2008, as amended CPI Curapipe DCME DCMW DMR DMTN DTI EBITDA ECC ECL(s) EMJV ESD Exxaro Eyesizwe Ferroland FOB FSB FVOCI FZON Consumer price index Curapipe Systems Limited Dorstfontein East Dorstfontein West Department of Mineral Resources Domestic Medium-Term Note Department of Trade and Industry Net operating profit before interest, tax, depreciation, amortisation, impairment charges/reversals and net loss or gain on the disposal of assets and investments (including translation differences recycled to profit or loss) Exxaro Coal Central Proprietary Limited Expected credit loss(es) Ermelo joint venture Enterprise and supplier development Exxaro Resources Limited Eyesizwe (RF) Proprietary Limited, special purpose private company which has a 30% shareholding in Exxaro Ferroland Grondtrust Proprietary Limited Free on board Financial Stability Board Fair value through other comprehensive income Forzando North 56 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 GAM HDSA HEPS IAS IASB IFRIC IFRS IFRS 9 IFRS 15 IFRS 16 Incoterm Global Asset Management Limited The meaning given to it, or any equivalent or replacement term, in the broad-based socio-economic empowerment charter for the South African Mining Industry, developed under section 100 of the MPRDA, as amended or replaced from time to time Headline earnings per share International Accounting Standard(s) International Accounting Standards Board IFRS Interpretations Committee International Financial Reporting Standard(s) IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases International Commercial Terms Insect Technology Insect Technology Group Holdings UK Limited (previously named AgriProtein Holdings UK Limited) JIBAR JSE Khopoli kt Lebonix LightApp Johannesburg Interbank Agreed Rate JSE Limited Khopoli Investments Limited Kilo tonnes Lebonix Proprietary Limited LightApp Technologies Limited Listings Requirements JSE Listings Requirements LOM LTIFR Mafube Manyeka MPRDA Mt NBC NCI NEMA Life of mine Lost-time injury frequency rate Mafube Coal Proprietary Limited Manyeka Coal Mines Proprietary Limited Mineral and Petroleum Resources Development Act 28 of 2002 Million tonnes North Block Complex Non-controlling interests National Environmental Management Act, 1998 56 Reviewed condensed group annual financial statements and unreviewed production 57 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 and sales volumes information for the year ended 31 December 2019 ANNEXURE: ACRONYMS continued Prime Rate South African prime bank rate PwC RB1 RBCT Rbn PricewaterhouseCoopers Incorporated Richards Bay export product 1 Richards Bay Coal Terminal Proprietary Limited Rand billion Replacement BEE Transaction BEE transaction implemented in 2017 which resulted in Exxaro being held 30% by HDSAs Rm SAICA SARS SIC SIOC SSCC Rand million South African Institute of Chartered Accountants South African Revenue Service Standard Interpretations Committee Sishen Iron Ore Company Proprietary Limited Semi-soft coking coal Tata Power Tata Power Company Limited TCFD TiO2 Tronox Tronox SA Tronox UK Tumelo TVP(s) TFR UK US$ VAT Task Force on Climate-related Financial Disclosures Titanium dioxide Exxaro's investment in Tronox entities Tronox KZN Sands Proprietary Limited and Tronox Mineral Sands Proprietary Limited Tronox Sands Limited Liability Partnership in the United Kingdom Tumelo Coal Mines Proprietary Limited Targeted voluntary severance package(s) Transnet Freight Rail United Kingdom United States dollar Value Added Tax WANOS Weighted average number of shares 58 Reviewed condensed group annual financial statements and unreviewed production and sales volumes information for the year ended 31 December 2019 www.exxaro.com