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Exx - Exxaro Resources Limited - Condensed Group Financial Results And

Release Date: 24/02/2011 07:05:04      Code(s): EXX
EXX - Exxaro Resources Limited - Condensed group financial results and          
physical information for the year ended 31 December 2010                        
Exxaro Resources Limited                                                        
(Incorporated in the Republic of South Africa)                                  
Registration number: 2000/011076/06                                             
JSE Share code: EXX                                                             
ISIN code: ZAE000084992                                                         
ADR code: EXXAY                                                                 
("Exxaro" or "the company" or "the group")                                      
Condensed group financial results and physical information for the year ended   
31 December 2010                                                                
- Improvement in safety                                                         
    Lost time injury frequency rate down 24% to 0,25                            
- Revenue increased by 14% to R17,2 billion                                     
- Net operating profit up 52% to R2,6 billion excluding the 2009                
    KZN Sands impairment                                                        
- Headline earnings per share up 105% to 1 495 cents per share                  
- Final dividend of 300 cents per share; total dividend of 500 cents per        
share covered three times by attributable earnings                              
- Net cash inflow of R1,4 billion                                               
- Net debt to equity of 13%                                                     
CONDENSED GROUP INCOME STATEMENT (AUDITED)                                      
2010       2009        
Year ended 31 December                                    Rm         Rm         
Revenue                                                   17 155     15 009     
Operating expenses                                        (14 519)   (14 705)   
Net operating profit                                      2 636      304        
Net financing costs (note 4)                              (455)      (415)      
Share of income from investments and equity-accounted     3 719      1 900      
Profit before tax (note 2)                                5 900      1 789      
Income tax expense                                        (665)      (766)      
Profit for the year                                       5 235      1 023      
Profit attributable to:                                                         
Owners of the parent                                      5 208      1 023      
Non-controlling interests                                 27                    
Profit for the year                                       5 235      1 023      
2010       2009        
Year ended 31 December                                    Rm         Rm         
Profit for the year                                       5 235      1 023      
Other comprehensive income (restated):                                          
Exchange differences on translating foreign operations    (9)        (35)       
Cash flow hedges                                          227        (474)      
Share of comprehensive income of associates               40         (34)       
Income tax relating to components of other comprehensive  (115)      142        
Net gain/(loss) recognised in other comprehensive income  143        (401)      
Total comprehensive income for the year                   5 378      622        
Total comprehensive income attributable to:                                     
Owners of the parent                                      5 408      759        
Non-controlling interests                                 (30)       (137)      
Total comprehensive income for the year                   5 378      622        
Ordinary shares (million)                                                       
- in issue                                                358         357       
- weighted average number of shares                       347         345       
- diluted weighted average number of shares               361         358       
Attributable earnings per share (cents)                                         
- basic                                                   1 501      297        
- diluted                                                 1 443      286        
                                                         2010       2009        
At 31 December                                            Rm         Rm         
Non-current assets                                                              
Property, plant and equipment                              13 305     11 869    
Biological assets                                          46         41        
Intangible assets                                          75         87        
Investments in unlisted associates and joint ventures      3 880      1 966     
(note 6)                                                                        
Deferred tax                                               726        629       
Financial assets                                           1 375      1 217     
                                                          19 407     15 809     
Current assets                                                                  
Inventories                                                3 120      3 133     
Trade and other receivables                                3 752      3 121     
Current tax receivable                                     105        57        
Cash and cash equivalents                                  2 140      1 023     
9 117      7 334      
Non-current assets classified as held for sale             85         86        
Total assets                                               28 609     23 229    
EQUITY AND LIABILITIES                                                          
Capital and reserves                                                            
Equity attributable to owners of the parent                17 437     12 908    
Non-controlling interests                                  (23)       1         
Total equity                                               17 414     12 909    
Non-current liabilities                                                         
Interest-bearing borrowings                                3 644      4 347     
Non-current provisions                                     2 193      1 853     
Financial liabilities                                                 75        
Deferred tax                                               1 353      995       
                                                          7 190      7 270      
Current liabilities                                                             
Trade and other payables                                   3 057      2 510     
Interest-bearing borrowings                                716        407       
Current tax payable                                        147        57        
Current provisions                                         33         27        
                                                          3 953      3 001      
Non-current liabilities classified as held for sale        52         49        
Total equity and liabilities                               28 609     23 229    
Net debt (note 7)                                         2 220      3 731      
Net asset value per share (Rand)                          49         36         
Capital expenditure                                                             
- incurred                                               2 677      1 982       
- contracted                                             6 475      3 550       
- authorised but not contracted                          2 490      1 420       
Capital expenditure contracted relating to captive mines,                       
Tshikondeni, Arnot and Matla, which will be financed by                         
ArcelorMittal South Africa Limited and Eskom respectively 1          18         
Contingent liabilities (note 8)                           1 007      717        
Contingent assets (note 9)                                63         158        
Operating lease commitments                               132        92         
Operating sublease rentals receivable                     6          4          
2010       2009        
Year ended 31 December                                    Rm         Rm         
Cash retained from operations                             4 106      2 117      
- net financing costs                                     (256)      (381)      
- tax paid                                                (430)      (892)      
- dividends paid                                          (1 056)    (1 050)    
Cash flows from investing activities                                            
- capital expenditure                                     (2 677)    (1 982)    
- proceeds from disposal of property, plant and equipment 60         11         
- dividends from investments and equity-accounted         1 817      1 754      
- increase in investments                                 (149)      (8)        
- increase in joint venture                                          (1 082)    
- other                                                   (29)       (107)      
Net cash inflow/(outflow)                                 1 386      (1 620)    
Net cash flows from financing activities                                        
- shares issued                                           29         43         
- increase in non-controlling interests` loans            6          10         
- net borrowings (repaid)/raised                          (304)      821        
Net increase/(decrease) in cash and cash equivalents      1 117      (746)      
Cash and cash equivalents at beginning of year            1 023      1 769      
Cash and cash equivalents end of year                     2 140      1 023      
Calculation of movement in net debt:                                            
Net cash inflow/(outflow)                                 1 386      (1 620)    
- shares issued                                           29         43         
- loans from non-controlling interests                    6          10         
- non-cash flow movements in net debt applicable to       187        340        
currency translation differences of transactions                                
denominated in foreign currency                                                 
- non-cash flow movements in net debt applicable to       (97)       (123)      
currency translation differences of net debt items of                           
foreign entities                                                                
Decrease/(increase) in net debt                           1 511      (1 350)    
RECONCILIATION OF HEADLINE EARNINGS (AUDITED)                                   
Gross     Tax        interest      Net     
Year ended 31 December 2010           Rm        Rm         Rm           Rm      
Profit for the year attributable to                                      5 208  
owners of the parent                                                            
Adjusted for:                                                                   
- impairment of property, plant and    4         (1)                     3      
- gains or losses on disposal of       (26)                              (26)   
property, plant and equipment                                                   
- share of associates` gains or        1                                 1      
losses on disposal of property, plant                                           
and equipment                                                                   
Headline earnings                     (21)       (1)                    5 186   
Year ended 31 December 2009                                                     
Profit for the year attributable to                                     1 023   
owners of the parent                                                            
Adjusted for:                                                                   
- impairment of property, plant and   1 435                             1 435   
- gains or losses on disposal of       88        (24)       (2)          62     
property, plant and equipment                                                   
- share of associates` gains or        (8)       2                       (6)    
losses on disposal of property, plant                                           
and equipment                                                                   
Headline earnings                     1 515     (22)       (2)          2 514   
Year ended 31 December                                     2010         2009    
Headline earnings per share (cents)                                             
- basic                                                    1 495        729     
- diluted                                                  1 437        702     
GROUP STATEMENT OF CHANGES IN EQUITY (AUDITED)                                  
                                              Other components of equity        
                                              Foreign      Financial            
Share    Share    currency     instruments  Equity- 
                            capital  premium  translation  revaluation  settled 
                            Rm       Rm       Rm           Rm           Rm      
Balance at 1 January 2009    4        2 094    964          145          1 081  
Total comprehensive income                     (162)        (142)               
Issue of share capital1               43                                        
Share-based payment                                                      160    
movements (restated)                                                            
Non-controlling interests                                                       
additional contributions                                                        
Dividends paid (2)                                                              
Balance at 31 December 2009  4        2 137    802          3            1 241  
Total comprehensive income                     (86)         213                 
Issue of share capital (1)            29                                        
Share-based payment                                                      148    
Non-controlling interests                                                       
additional contributions                                                        
Dividends paid (2)                                                              
Balance at 31 December 2010  4        2 166    716          216          1 389  
Dividend paid per share      200                                                
(cents) in respect of the                                                       
2009 financial year                                                             
Dividend paid per share      200                                                
(cents) in respect of the                                                       
2010 interim period                                                             
Final dividend payable per   300                                                
share (cents) in respect of                                                     
2010 financial year                                                             
1 Issued to the Kumba Resources Management Share Trust due to options           
2 The STC on these dividends amounts to Rnil million after taking into          
account STC credits.                                                            
GROUP STATEMENT OF CHANGES IN EQUITY (AUDITED)                                  
                                 Retained   Attributable Non-         Total     
                                Income     to owners    controlling  Equity     
Rm         of the       Interest     Rm         
                                          parent       Rm                       
Balance at 1 January 2009         8 708      12 996       128          13 124   
Total comprehensive income        1 063      759          (137)        622      
Issue of share capital (1)                   43                        43       
Share-based payments movements               160                       160      
Non-controlling interests                                 10           10       
additional contributions                                                        
Dividends paid (2)                (1 050)    (1 050)                   (1 050)  
Balance at 31 December 2009       8 721      12 908       1            12 909   
Total comprehensive income        5 281      5 408        (30)         5 378    
Issue of share capital (1)                   29                        29       
Share-based payments movements               148                       148      
Non-controlling interests                                 6            6        
additional contributions                                                        
Dividends paid (2)                (1 056)    (1 056)                   (1 056)  
Balance at 31 December 2010       12 946     17 437       (23)         17 414   
Dividend paid per share (cents)   200                                           
in respect of the 2009 financial                                                
Dividend paid per share (cents)   200                                           
in respect of the 2010 interim                                                  
Final dividend payable per share  300                                           
(cents) in respect of 2010                                                      
financial year                                                                  
1 Issued to the Kumba Resources Management Share Trust due to options           
2 The STC on these dividends amounts to Rnil million after taking into          
account STC credits.                                                            
1.  BASIS OF PREPARATION                                                        
   This condensed report for the year ended 31 December 2010 has been           
  prepared in compliance with International Accounting Standard 34, Interim     
Financial Reporting, the AC 500 standards as issued by the Accounting         
  Practices Board or its successor, schedule 4 Part iv of the South African     
  Companies Act, No 61 of 1973, as amended, and the Listings Requirements of    
  the JSE Limited. The financial statements from which these condensed group    
financial results have been derived are prepared on the historical cost       
  basis excluding financial instruments and biological assets, which are        
  fair valued, and conform to International Financial Reporting Standards       
  (IFRS) as issued by the International Accounting Standards Board. The         
accounting policies adopted are consistent with those applied in the          
  annual financial statements for the year ended 31 December 2009.              
   The disclosure of share-based payment movements has previously been          
  disclosed as other comprehensive income, it is now disclosed directly in      
the statement of changes in equity. The disclosure has been applied to the    
  prior year.                                                                   
   During 2010 the following accounting pronouncements became effective:        
  Amended IFRS 1 First-time Adoption of International Financial Reporting,      
Amended IFRS 2 Share-based Payment, IFRS 7 Financial Instruments:             
  Disclosures, Revised IFRS 3 Business Combinations, Amended IFRS 5 Non         
  current Assets Held for Sale and Discontinued Operations, Amended IFRS 8      
  Operating Segments, Amended IAS 1 Presentation of Financial Statements,       
Amended IAS 7 Statement of Cash Flows, Amended IAS 17 Leases, Revised IAS     
  27 Consolidated and Separate Financial Statements, Revised IAS 28             
  Investments in Associates, Revised IAS 31 Interests in Joint Ventures,        
  Amended IAS 36 Impairment of Assets, Amended IAS 38 Intangible Assets,        
Amended IAS 39 Financial Instruments: Recognition and Measurement, Amended    
  IFRIC 9 Reassessment of Embedded Derivatives, IFRIC 17 Distributions of       
  Non-cash Assets to Owners, IFRIC 18 Transfers of Assets from Customers.       
  These pronouncements had no material impact on the accounting of              
transactions or the disclosure thereof. The application of IFRS 3,            
  together with IAS 27, IAS 28 and IAS 31 will have a significant impact on     
  the accounting and disclosure of business combinations and the accounting     
  for the carrying value of investments on partial disposals of investments     
for such transactions in the future.                                          
   The accounting standards, amendments to issued accounting standards and      
  interpretations, which are relevant to the group, but not yet effective at    
  31 December 2010, have not been adopted. The group continuously evaluates     
the impact of these pronouncements.                                           
                                                         2010        2009       
   Year ended 31 December                                Rm          Rm         
2.  PROFIT BEFORE TAX IS ARRIVED AT AFTER                                       
Depreciation and amortisation                          (1 380)     (1 136)   
   Net realised foreign currency exchange losses          (125)       (576)     
   Net unrealised foreign currency exchange losses        (30)        (45)      
   Derivative instruments held for trading: gains         452         379       
Fair value adjustments on financial instruments:       13          26        
   Impairment charges (note 3)                            (4)         (1 435)   
   Net surplus/(deficit) on disposal of property, plant   26          (88)      
and equipment                                                                 
3.  IMPAIRMENT CHARGES                                                          
   Impairment of property, plant and equipment                        (1 435)   
   Impairment of property, plant and equipment held for   (4)                   
   Total impairments before tax                           (4)         (1 435)   
4.  NET FINANCING COSTS                                                         
   Interest expense and loan costs                       321         460        
Finance leases                                        70          66         
   Interest income                                        (135)       (145)     
   Net interest expense                                  256         381        
   Interest adjustment on non-current provisions         199         34         
Net financing costs as per income statement           455         415        
5.  TAX RATE RECONCILIATION                               %           %         
   Tax as a percentage of profit before tax               11,3        42,8      
   Tax effect of                                                                
- assessed losses not provided for                     (0,2)       (1,5)     
   - capital losses                                       (0,3)       (1,3)     
   - disallowable expenditure                             (0,2)       (1,3)     
   - exempt income                                        0,7         2,2       
- special tax allowances                               1,3         2,1       
   - share of associates and joint ventures               17,6        29,6      
   - tax rate differences                                 0,1         0,5       
   - imputed income                                       (0,2)       (0,8)     
- prior year tax                                       (1,9)       1,7       
   - derecognition of deferred tax asset                  (0,2)       (46,0)    
                                                          28,0        28,0      
                                                         2010        2009       
At 31 December                                        Rm          Rm         
6.  INVESTMENTS IN UNLISTED ASSOCIATES AND JOINT                                
   Unlisted investments in associates                                           
- directors` valuation                                 20 782      14 165    
   Unlisted investments included in other financial                             
   - directors` valuation                                 407         408       
7.  NET DEBT                                                                    
   Net debt is calculated as being interest-bearing borrowings less cash and    
  cash equivalents.                                                             
8.  CONTINGENT LIABILITIES                                                      
Includes guarantees in the normal course of business from which it is        
  anticipated that no material liabilities will arise. This includes            
  guarantees to banks and other institutions. The increase in 2010 and 2009     
  is mainly attributable to guarantees to the Department of Mineral             
Resources (DMR) in respect of environmental liabilities on immediate          
  closure of mining operations.                                                 
   Includes the group`s share of contingent liabilities of associates and       
  joint ventures of R117 million (2009: R61 million).                           

  The timing and occurrence of any possible outflows are uncertain.             
9.  CONTINGENT ASSETS                                                           
   A surrender fee of R63 million (2009: R59 million) in exchange for the       
exclusive right to prospect, explore, investigate and mine for coal           
  within a designated area in Central Queensland and Moranbah, Australia,       
  conditional on the grant of a mining lease.                                   
   The insurance claim of R99 million reported as outstanding in 2009 in        
respect of the Furnace 2 incident at Exxaro TSA Sands (Pty) Limited was       
  settled and received during the first half of 2010.                           
10. RELATED PARTY TRANSACTIONS                                                  
   During the year the company and its subsidiaries, in the ordinary course     
of business, entered into various sale and purchase transactions with         
  associates and joint ventures. These transactions were subject to terms       
  that are no less favourable than those arranged with third parties.           
11. EVENTS AFTER THE REPORTING PERIOD                                           
After the fulfilment of all suspensive conditions, the Glen Douglas          
  dolomite mine investment was sold to JSE-listed materials supplier            
  Afrimat Limited with effective date 1 January 2011. On 31 December 2010,      
  this investment still constituted a non-current asset held for sale, with     
its operating results therefore still included for the full 12 months of      
  2010. This event constitutes a non-adjusting event.                           
   An impairment charge of R1,435 million was recorded in the 2009 financial    
  period to reflect the value in use calculation of the Exxaro KZN Sands        
business. On further impairment testing done in 2010, no further              
  impairment or reversal was indicated as being necessary. A final decision     
  will be taken by the Exxaro board of directors on the development of the      
  Fairbreeze mine as a replacement feedstock producer for the Hillendale        
mine at KZN Sands in the first half of 2011. A possible reversal or           
  partial reversal of the previous impairments of the carrying value of the     
  assets will be considered simultaneously by the board.                        
   The directors are not aware of any matter or circumstance arising after      
the statement of financial position date up to the date of this report,       
  not otherwise dealt with in this report.                                      
12. JSE LIMITED LISTINGS REQUIREMENTS                                           
   The financial year end results announcement has been prepared in             
accordance with the Listings Requirements of the JSE Limited.                 
13. CORPORATE GOVERNANCE                                                        
   The group complies in all material respects with the Code of Corporate       
  Practice and Conduct published in the King III Report on Corporate            
14. MINERAL RESOURCES AND MINERAL RESERVES                                      
   The group`s Mineral Resources and Ore Reserves have been reviewed to         
  provide updated estimates. No material changes to the Mineral Resources       
and Ore Reserves disclosed in the Exxaro annual report for the year ended     
  31 December 2009 were identified other than depletion due to continued        
  mining activities.                                                            
15. AUDIT OPINION                                                               
The auditors, Deloitte & Touche, have issued their opinion on the group`s    
  financial statements for the year ended 31 December 2010. The audit was       
  conducted in accordance with International Standards on Auditing. They        
  have issued an unmodified audit opinion. A copy of their audit report is      
available for inspection at the company`s registered office. These            
  summarised financial results have been derived from the group financial       
  statements and are consistent in all material respects, with the group        
  annual financial statements.                                                  
REPORTED ACTUAL SEGMENT RESULTS (audited)                                       
Year ended 31 December (Rm)                             2010        2009        
Coal                                                    10 515      9 731       
Tied operations                                         2 952       2 681       
Commercial operations                                   7 563       7 050       
Mineral Sands                                           4 640       3 508       
KZN Sands                                               1 288       705         
Australia Sands                                         1 551       1 469       
Namakwa Sands                                           1 801       1 334       
Base Metals                                             1 787       1 582       
Rosh Pinah                                              674         566         
Zincor                                                  1 598       1 413       
Inter-segmental                                         (485)       (397)       
Other                                                   213         188         
Total external revenue                                  17 155      15 009      
NET OPERATING PROFIT/(LOSS)                                                     
Coal                                                    2 690       1 905       
Tied operations                                         186         75          
Commercial operations                                   2 504       1 830       
Mineral Sands                                           179         (1 559)     
KZN Sands1                                              (66)        (1 447)     
Australia Sands                                         138         (2)         
Namakwa Sands                                           107         (110)       
Base Metals                                             (113)       (8)         
Rosh Pinah                                              143         105         
Zincor                                                  (171)       (47)        
Other                                                   (85)        (66)        
Other                                                   (120)       (34)        
Total                                                   2 636       304         
1Includes a pre-tax impairment of R1 435 million of the carrying value of the   
assets of KZN Sands in 2009.                                                    
PHYSICAL INFORMATION (UNAUDITED)                                                
                                 12 months ended       6 months ended           
                                 31 December           30 June                  
`000 Tonnes                       2010       2009        2010         2009      
Power station coal                36 767     36 562      18 269       18 583    
?Tied operations1                 16 461     16 486      8 365        8 704     
?Commercial operations            20 306     20 076      9 904        9 879     
Coking coal                       2 419      2 020       1 187        922       
?Tied operations1                 285        268         124          129       
?Commercial operations            2 134      1 752       1 063        793       
Other coal                        7 502      6 638       3 518        3 061     
Char                              114        38          49                     
Coal buy-ins                                 759                      430       
Total                             46 802     46 017      23 023       22 996    
Eskom coal                        36 428     36 299      18 379       18 494    
?Tied operations1                 16 438     16 473      8 356        8 700     
?Commercial operations            19 990     19 826      10 023       9 794     
Other domestic coal               5 044      4 587       2 447        1 920     
?Tied operations1                 260        259         117          130       
?Commercial operations            4 784      4 328       2 330        1 790     
Coal export                       4 106      4 715       1 842        2 389     
Char                              122        31          52                     
Total                             45 700     45 632      22 720       22 803    
Mineral Sands2                                                                  
Ilmenite                          718        819         367          424       
Zircon                            196        185         94           97        
Rutile                            63         62          28           33        
Synthetic Rutile                  90         109         51           54        
Pig iron (LMPI)                   153        181         81           95        
Scrap iron                        12         15          8            7         
Slag tapped                       262        331         141          171       
Chloride slag                     232        201         84           104       
Sulphate slag                     52         44          16           19        
Leucoxene                         13         14          7            7         
Pigment                           57         53          25           25        
Total                             1 848      2 014       902          1 036     
Zircon                            243        146         124          47        
Rutile                            79         51          35           19        
Synthetic Rutile                  30         50          23           24        
Pig iron (LMPI)                   194        138         107          64        
Scrap iron                        3          6           1            4         
Chloride slag                     264        144         98           67        
Sulphate slag                     39         44          7            14        
Leucoxene                         16         15          7            1         
Pigment                           55         54          24           23        
Total                             923        648         426          263       
Base Metals                                                                     
Zinc concentrate                  120        108         60           53        
?Rosh Pinah                       101        94          52           47        
?Black Mountain                   19         14          8            6         
Zinc Metal                        120        116         54           54        
?Zincor                           90         87          43           44        
?Chifeng3                         30         29          11           10        
Lead concentrate                  37         38          17           20        
?Rosh Pinah                       19         20          9            12        
?Black Mountain                   18         18          8            8         
Zinc metal sales                  119        122         59           58        
?Domestic                         90         93          46           44        
?Export                           29         29          13           14        
Lead concentrate sales                                                          
?Export                           20         19          7            6         
1 Tied operations refer to mines that supply their entire production to either  
Eskom or ArcelorMittal South Africa Limited in terms of contractual             
2 Includes Exxaro Sands Australia`s interest in the Tiwest joint venture.       
3 Exxaro`s effective interest in the Chifeng refinery is disclosed.             
COMPARABILITY OF RESULTS                                                        
The group`s audited financial results and actual physical information for the   
years ended 31 December 2010 and 2009 are not comparable due to the R1 435      
million impairment of the carrying value of the assets of KZN Sands, which      
impairment was accounted for on 31 December 2009, and the inclusion of the      
50% proportionally consolidated interest in Mafube Coal Mining (Pty) Limited    
(Mafube) for 12 months in 2010 compared to seven months in 2009.                
After fulfilment of all suspensive conditions, the Glen Douglas dolomite mine   
was sold to Afrimat Limited effective 1 January 2011. The operating results     
of Glen Douglas are therefore still included for the full 12 months of 2010.    
Comments are based on a comparison of the group`s audited financial results     
and unaudited physical information for the years ended 31 December 2010 and     
2009 respectively.                                                              
An average exchange rate of R7,72 (spot average of R7,30) to the US dollar      
(USD) was realised compared to R8,39 for the corresponding period. Moreover,    
unrealised foreign currency losses on the revaluation of monetary items         
denominated in a foreign currency were recorded based on the relative           
strength of the local currency to the USD at 31 December 2010. The relative     
strength of the Australian dollar (AUD), most notably in the second half of     
2010 when the AUD traded around parity against the USD, continued to impact     
negatively on the financial results of the mineral sand operations in           
Australia. An average rate of USD0,87 cents (spot average of USD0,92 cents)     
to the AUD was realised compared with USD0,76 cents in 2009.                    
Group consolidated revenue increased by 14% to R17,2 billion due to generally   
higher sales volumes and commodity prices despite the impact of a stronger      
local and Australian currency.                                                  
Revenue was 8% higher due to higher domestic sales volumes at lower realised    
prices being only partially offset by lower export sales volumes at higher      
export prices.                                                                  
MINERAL SANDS                                                                   
Revenue increased by 32% to more than R4,6 billion with increased sales         
volumes realising at higher prices.                                             
BASE METALS                                                                     
Revenue increased by 13% mainly as a result of the higher zinc price at an      
average zinc price for 2010 of USD2?161 per tonne, 30% higher than in 2009      
when an average price of USD1 665 per tonne was realised.                       
NET OPERATING PROFIT                                                            
Group consolidated net operating profit was R897 million or 52% higher at       
R2,6 billion after exclusion of the R1?435 million impairment of the carrying   
value of the assets at KZN Sands in 2009.                                       
The coal business reported a 41% increase in net operating profit to R2 690     
million at an operating margin of 26% with higher export selling prices,        
higher sales volumes to ArcelorMittal South Africa Limited (AMSA) and Eskom     
offset by lower sales prices domestically, lower export volumes and a           
stronger average realised local currency.                                       
Net operating profit for the year for the tied operations increased by 148%     
mainly due to the non-recurring impact of Matla`s scope change in life of       
mine in the previous year together with the inflation related increase in       
2010 in terms of the supply agreements with Eskom and AMSA.                     
MINERAL SANDS                                                                   
The mineral sands business reported a consolidated net operating profit as      
higher sales volumes at higher prices supported by disciplined cost             
management was instrumental in offsetting the significant adverse impact of     
the relative strength of both the local currency and the AUD to the USD.        
The increase in revenue assisted in the achievement of a consolidated net       
operating profit increasing from a loss in 2009 of R124 million, excluding      
the impairment of the carrying value of the KZN Sands assets in 2009, to a      
profit of R179 million. Unlike 2009 where all three businesses reported net     
operating losses, only KZN Sands reported a loss in 2010.                       
BASE METALS                                                                     
Despite the higher revenue recorded a net operating loss of R113 million was    
reported mainly due to production challenges at the Zincor refinery. This was   
exacerbated by the higher cost associated with external zinc concentrate        
purchased, higher selling and distribution, electricity, labour,                
rehabilitation as well as maintenance expenses.                                 
Attributable earnings, inclusive of Exxaro`s equity accounted investment in     
associates, amounted to R5 208 million or 1?501 cents per share, up 405%        
(111% excluding the 2009 KZN Sands impairment).                                 
Equity accounted income in the post-tax profits of associates consists of       
Exxaro`s 20% interest in Sishen Iron Ore Company (Pty) Limited (SIOC) of R3     
623 million, 26% in Black Mountain (Pty) Limited (Black Mountain) of R86        
million and 22% in the Chifeng zinc refinery of R8 million.                     
Headline earnings which exclude, inter alia, the impact of the impairment of    
the carrying value of assets were R5?186 million or 1?495 cents per share.      
This represents a 106% increase on the comparative 2009 earnings of R2?514      
million at 729 cents per share.                                                 
CASH FLOW                                                                       
Cash retained from operations was R4?106 million for the group. This was        
primarily used to fund net financing charges of R256 million, taxation          
payments of R430 million, dividend payments of R1?056 million and capital       
expenditure of R2?677 million of which R1 522 million was invested in new       
capacity and R1?155 million applied to sustaining and environmental capital.    
R918 million of the expansion capacity expenditure was for the Grootegeluk      
Medupi Expansion Project (GMEP). After the receipt of R1 817 million in         
dividends, primarily from SIOC, the group had a net cash inflow of R1 386       
million for the financial year. The final dividend for payment in April 2011    
will amount to a further cash outflow of R1?074 million offset by the           
dividend inflow from SIOC of R1 623 million.                                    
Net debt of R3 731 million at 31 December 2009 accordingly decreased to R2      
220 million at a net debt to equity ratio of 13% at 31 December 2010.           
SAFETY AND SUSTAINABLE DEVELOPMENT                                              
As a result of the programme of continuous engagement of employees and the      
ongoing pursuit of Exxaro`s safety goals and objectives, Exxaro recorded a      
decline in fatalities as well as a record improvement in lost time injury       
frequency rate (LTIFR) per 200 000 man-hours worked of 24% from 0,33 in 2009    
to 0,25 at 31 December 2010. Exxaro however continues to strive for an injury-  
and fatality-free organisation.                                                 
Two CEO Safety Summits were held in 2010 in which the Safety and Sustainable    
Development vision for Exxaro was shared and disseminated throughout the        
Exxaro will continue with this programme in 2011, however health, environment   
and other sustainable development issues will be introduced to enhance          
awareness and participation.                                                    
Aligned with Exxaro`s internal target, 70% of employees have now undergone      
HIV prevalence testing. The prevalence rate is estimated at 13% compared to     
an industry average of 25%, 38% of whom are voluntarily enrolled onto the HIV   
management programme.                                                           
Water management and related issues have been identified as a key               
sustainability issue for Exxaro and as such a dedicated water management        
programme has been initiated to address these issues in an integrated manner.   
Fourteen business units are ISO 14001 and OHSAS 18001 certified with            
certification for the remaining three business units being awaited.             
Volumes were marginally higher than the previous year. Power station coal       
production at the Eskom tied operations was 25kt lower due to adverse           
geological- and technical issues at the Arnot mine which were only partially    
offset by higher production at the Matla mine. Production in 2009 at the        
Matla mine was negatively affected by a water ingress incident for which        
successful mitigation was implemented in 2010.                                  
Production at the commercial operations was marginally higher than in 2009 as   
higher production at Leeuwpan mine following the commissioning of the           
crushing and screening plant in 2010, coupled with the inclusion of             
production from Mafube for 12 months as opposed to seven months in 2009,        
offset lower production at Grootegeluk mine and North Block Complex (NBC) due   
to full stockpiles at Eskom.                                                    
Coking coal production increased at Grootegeluk and Tshikondeni mines as a      
result of increased demand mainly from AMSA.                                    
The inclusion of production from the Mafube joint venture for the full year     
in 2010 compared to seven months in 2009 as well as higher production at the    
Grootegeluk, Leeuwpan, NBC and NCC operations due to higher demand and          
improved dispatches, offset by marginally lower production at Inyanda, led to   
a 13% increase in steam coal production.                                        
The char plant production was 200% higher than the previous year due to the     
plant only starting production in the middle of 2009.                           
Power station and coking coal sales to Eskom and AMSA respectively were         
marginally higher than the previous year. Other domestic sales were 10%         
higher than in 2009 based on higher demand from AMSA which higher demand was    
met by re-directing sales destined for the export market from Grootegeluk;      
this being possible as a result of lower availability of trains and leased      
export entitlement.                                                             
Exxaro Coal`s strategy to increase export volumes was hampered by lower         
availability of trains, the Transnet Freight Rail (TFR) strike as well as       
less export entitlement available for leasing. Exxaro`s Richards Bay Coal       
Terminal (RBCT) export entitlement increased from 1,8Mt to 6,3Mt per annum      
with the commissioning of the Phase V expansion. However TFR`s constraints      
limited export capacity for 2010 at 3Mt per annum. The remainder of the         
exports were either sold on a free on rail basis or through the lease of        
export entitlement.                                                             
Sales of reductants from the char plant improved threefold as 2010 was the      
first full production and sales year.                                           
MINERAL SANDS                                                                   
At KZN Sands, Furnace 2 suffered a burn through on 26 October 2010.             
Fortunately no injuries occurred, however, the incident resulted in both        
furnaces being out of commission simultaneously for two months during the       
last quarter of 2010. Furnace 1 was shut down on 1 July 2010 for a planned      
reline and pre-heating has now been completed with first production at the      
end of January 2011.                                                            
Total run of mine tonnage was more than a million tonnes lower in 2010          
resulting from the Hillendale mine in KwaZulu-Natal nearing the end of life     
of mine. As a consequence of this, and lower grades, heavy mineral              
concentrate was 73kt lower in 2010 at 414kt.                                    
Zircon and rutile production was 11kt and 1kt higher respectively as the        
higher zircon production at Australia Sands due to improved overall             
utilisation of the dredge mine, coupled with improved recoveries at Namakwa     
Sands despite lower zircon head grades, more than offset lower production at    
KZN Sands resulting from the lower concentrate grade.                           
Higher slag and pig iron production at Namakwa Sands resulting from the         
benefits of increasing side feed into the furnaces was not sufficient to        
offset lower furnace production at KZN Sands caused by the extended furnace     
downtime. Total slag tapped was 69kt lower at 262kt while low manganese pig     
iron (LMPI) was 28kt lower at 153kt. Ilmenite production was lower in line      
with the decrease in smelter slag output.                                       
Furnace 2 at Namakwa Sands will be down for a planned reline in February 2011   
for approximately 103 days.                                                     
At Australia Sands, synthetic rutile (SR) production was lower due to the       
planned 38-day shut late in the year as well as from maintenance related        
challenges in the first quarter of 2010. The SR plant has a major shut every    
three years; the previous shut was in 2007.                                     
The Kwinana pigment plant expansion in Australia was successfully               
commissioned in late June 2010 and achieved nameplate production capacity of    
40ktpa in October of the same year. Significant supply interruptions from a     
key raw material supplier and an 11-day shut in May to complete all the tie-    
ins for the expansion, led to lower pigment production although still higher    
than in the previous year.                                                      
Sands volumes at all three businesses generally increased on the back of        
stronger markets and were further supported by higher selling prices. The       
high stockpile levels at the end of 2009 were reduced significantly thus        
improving cash flow.                                                            
BASE METALS                                                                     
Zinc concentrate production at a higher grade at Rosh Pinah mine was 7kt        
higher than in 2009 with lead concentrate production 1kt lower.                 
Production of zinc metal at the Zincor refinery of 90kt was more than 3kt       
higher than the corresponding period and can be attributed to less downtime     
on the acid plant. The 2009 production was however adversely affected by the    
accident in September 2009.                                                     
Zinc production at the Chifeng refinery was marginally higher than in 2009.     
Zinc metal sales were 2% lower due to lower local demand.                       
A total of 60% of Rosh Pinah`s projected zinc and lead-concentrate sales were   
hedged during 2008 for the period July 2008 to December 2011 at forward         
prices ranging from USD2 215 to USD1 887 per tonne for zinc and USD2 385 to     
USD1 771 per tonne for lead. Taking the favourable currency hedging in place    
in respect of these hedged prices, the average ZAR price equates to R19 976     
per tonne. These hedges will mature in 2011.                                    
CAPITAL EXPENDITURE AND PROJECT PIPELINE                                        
The strong recovery in commodity markets and overall faster than anticipated    
recovery in the global economy resulted in renewed focus on carbon,             
reductants, ferrous and energy growth projects in line with the group`s         
approved strategy.                                                              
The Medupi Coal Supply and Offtake Agreement (CSA) became unconditional and     
binding on Exxaro and Eskom on 24 June 2010. In terms of the CSA, Exxaro will   
supply 14,6 million tons of coal per annum to Medupi power station for a 40-    
year period post ramp-up. The total capital cost of the Grootegeluk mine        
expansion is forecast at R9,5 billion. First coal delivery will commence in     
May 2012 and full commissioning is expected during 2014/15. Project detailed    
design is nearing completion and the design will be largely completed by the    
end of February 2011. 90% of the major construction packages and the plant      
equipment packages have already been placed with the remainder to be placed     
during the first quarter of 2011. On-site construction has commenced with the   
majority of the bulk earthworks nearing completion. Civil work is well          
underway with major structural work having commenced in February 2011.          
Current indications are that the project will be completed on schedule and      
within budget.                                                                  
The R4 500 million bridge loan facility for the Grootegeluk expansion was       
secured in the first half of 2010 with a consortium of local and                
international financial institutions. First drawdown of the loan is only        
expected in the second quarter of 2011.                                         
Thabametsi is a prospective greenfields mine adjacent to Grootegeluk mine in    
the Waterberg, Limpopo province. The development of the project was             
originally planned to coincide with Eskom`s future developments in the          
Waterberg as well as the Department of Energy`s formalisation and               
establishment of an appropriate enabling environment, governed by the           
National Integrated Resource Plan 2010 (NIRP 2010), to allow for new            
generation capacity in terms of Eskom`s multi-site base load Independent        
Power Producer (IPP) programme. The draft NIRP 2010, released during October    
2010, does not cater for any new coal-fired power generation development        
until 2027. The draft NIRP 2010 was subjected to a public review process in     
December 2010 and is expected to be finalised early in 2011 after receiving     
comments from all stakeholders. Due to the delays in the above initiatives,     
the focus is now on first developing a smaller mine for the coal supply to      
the Limpopo IPP. A bankable feasibility study as well as the public             
consultation required for environmental approvals will commence once the        
scope for the Limpopo IPP has been determined and the final NIRP 2010           
promulgated. First coal production could be expected by 2015/16, but is         
dependent on the Limpopo IPP and water supply development schedules.            
Exxaro entered into a prospecting joint venture agreement with Sasol Mining     
to investigate the commercial viability of the development of a new coal mine   
in the Waterberg to supply Sasol`s potential new 80 000 barrels per day         
inland coal-to-liquids facility (Project Mafutha). The study is still in an     
extended pre-feasibility stage. The mining of the 170kt bulk sample for large   
scale gasification testing at the Sasol Synfuels Secunda plant commenced in     
August 2009 and was completed during the second quarter of 2010. It is          
envisaged that the gasification tests will be completed during the first        
quarter of 2011.                                                                
An integrated infrastructure plan continues to be developed for the Waterberg   
coalfields with relevant stakeholders. Focus areas include the supply of raw    
water to the area, rail, road, housing and job creation. Exxaro has completed   
Phase I of its eco-friendly housing project in Lephalale and this project       
received an award at the 2010 Nedbank Capital Green Mining Awards in the        
sustainability category.                                                        
The Sintel char plant at Grootegeluk mine to produce reductants for the         
ferroalloy industry has been fully commissioned with all four retorts in        
operation. The plant reached its overall design capacity in the last quarter    
of 2010. Exxaro is currently evaluating the Phase II expansion to produce a     
further 140ktpa of char as well as a study to produce market coke from semi-    
soft coking coal at Grootegeluk mine as part of its strategy of downstream      
integration and beneficiation. These studies are expected to be completed       
during 2011.                                                                    
Exxaro`s application for a mining right for the Belfast project has been        
accepted by the Department of Mineral Resources (DMR) and is being processed.   
Updated specialist environmental studies as required by National                
Environmental Management Act and National Water Act will be submitted to the    
relevant authorities during the first half of 2011. The pre-feasibility study   
was completed in December 2010 and the decision to proceed with a full          
feasibility study will be evaluated in the first quarter of 2011. Depending     
on the outcome, start up and first production is anticipated in 2014.           
Exploration of the hard coking coal resource on the Moranbah South property     
in the Bowen Basin of Queensland, Australia is progressing well and results     
obtained during the pre-feasibility study remain encouraging. It is             
anticipated that a feasibility study will be concluded during the second half   
of 2012 with first production anticipated in 2015. Moranbah South, which is a   
50% joint venture with Anglo American, has the potential to produce premium-    
quality hard coking coal of approximately 6Mtpa.                                
The development of Exxaro`s energy portfolio to explore opportunities in the    
energy markets is progressing according to plan. The focus is on cleaner        
energy initiatives encompassing a combination of co-generation, carbon credit   
trading, renewable energy, coal bed methane development, and coal base load     
project developments. The securing of equity funding partners for projects      
continues in parallel with these developments.                                  
Development of the first five-spot test for the coal bed methane project in     
Botswana, with the aim of testing for economic gas flow, is in the final        
stages of completion. The drilling of the five wells and the fracturing of      
four of the five wells has been completed. De-watering of the well field is     
underway and gas flow is steadily increasing with time. The wells will be       
operated during 2011 until economical gas flow levels have been obtained.       
Clean energy initiatives include:                                               
A pre-feasibility study for a 100MW wind farm on South Africa`s West Coast      
has been completed. An 80m mast was installed at Brand se Baai during March     
2010. The study indicates an initial project of between 40MW and 66MW being     
viable. The bankable feasibility study is underway with planned completion in   
the third quarter of 2011.                                                      
A pre-feasibility study for a 76MW wind farm in the Tsitsikama region is        
continuing. Exxaro has a 75% share in this project. Completion of the pre-      
feasibility study is planned for the end of 2011.                               
A bankable feasibility study for a 14MW co-generation plant at Namakwa Sands    
is in the final stages. Construction of the power plant is planned for the      
second half of 2011 with commercial operation date planned for the third        
quarter of 2012. The Clean Development Mechanism registration of this project   
is well advanced.                                                               
The facilitation for the development of a 600MW - 1 200MW coal fired power      
station in the Waterberg (Limpopo IPP) continues. Non-binding term sheets for   
the off-take of 1 150MW of electricity have been signed between Exxaro and      
industrial off-takers. The project is one of the options being investigated     
to enable the Thabametsi coal mine.                                             
Exxaro continues to evaluate opportunities aligned with its strategy to         
establish a direct footprint in iron ore.                                       
Exxaro successfully concluded an agreement to partner with Assmang Limited to   
commercialise its AlloyStreamTrade Mark technology for the beneficiation of     
manganese ore into high carbon ferromanganese alloy. A large demonstration      
facility is planned to be completed in 2011. Major benefits of                  
AlloyStreamTrade Mark technology include lower electrical consumption and the   
use of un-agglomerated fine feed materials.                                     
MINERAL SANDS                                                                   
A final decision will be taken by the Exxaro board of directors on the          
development of the Fairbreeze mine as a replacement feedstock producer for      
Hillendale mine at KZN Sands during the first half of 2011. A possible          
reversal or partial reversal of the previous impairments of the carrying        
value of the assets will be considered simultaneously by the board.             
BASE METALS                                                                     
Activities are continuing on the optimisation of our zinc asset portfolio to    
ultimately extract the most value in the divestment process, which is           
earmarked to commence in 2011.                                                  
CONVERSION OF MINING RIGHTS                                                     
The conversion of all old mining rights has been granted except for Arnot and   
Glisa (a part of North Block Complex) which continue to receive priority        
attention. Of the old mining rights converted, five still await execution by    
the DMR.                                                                        
Except for Belfast, all new order mining rights have been granted and           
CHANGES TO THE BOARD                                                            
Ms Noluthando Langeni was appointed to the board with effect from 23 February   
2010. The acting chairman, Dr Len Konar, was elected as chairman of the board   
with effect from 23 February 2010.                                              
OUTLOOK FOR 2011                                                                
Coal export volumes, at higher international prices, are expected to remain     
in line with the tonnage achieved in 2010 despite the build up by TFR to a      
total export rail rate to RBCT of 70 Mtpa. Prices to the domestic market for    
similar volumes should reflect normal inflation increases, however, supply      
agreements with pricing mechanisms linked to hard coking coal prices should     
reflect a considerable increase.                                                
The positive price trends for mineral sands products experienced during the     
second half of 2010 are expected to continue while demand should remain         
strong in the medium to long term until supply and demand imbalances are        
It is expected that base metal prices are expected to be lower in the first     
half of 2011. Production and sales volumes should be in line with those         
achieved in 2010 with the logistical chain to Zincor remaining a challenge.     
The group will continue with prudent capital prioritisation, judicious          
working capital management and the pursuit of business improvement              
The group`s consolidated results for 2011 will continue to be impacted by the   
trading levels of the local currency and the AUD against the USD. On 31         
December 2010 Exxaro had USD106 million of hedging in place at an average       
exchange rate of R7,19 for the local operations as well as USD52 million at     
an average rate of USD0,87c to the AUD for the Australian operation.            
The financial information on which the outlook statement is based has not       
been reviewed nor reported on by the group`s auditors.                          
DIVIDEND DECLARED                                                               
The board has declared a final cash dividend number 16 of 300 cents per share   
in respect of the 2010 financial year end. The dividend has been declared in    
South African currency and is payable to shareholders recorded in the           
register of the company at close of business on Friday, 8 April 2011.           
In compliance with the requirements of Strate, the electronic and custody       
system used by the JSE, the following dates are applicable:                     
Last date to trade cum dividend              Friday, 1 April 2011               
Shares trade ex dividend                     Monday, 4 April 2011               
Record date                                  Friday, 8 April 2011               
Payment date                                 Monday, 11 April 2011              
Share certificates may not be dematerialised or rematerialised during the       
period Monday, 4 April 2011 and Friday, 8 April 2011, both days inclusive.      
On Monday, 11 April 2011 the final cash dividend will be electronically         
transferred to the bank accounts of all certificated shareholders where this    
facility is available. Where electronic fund transfer is not available or       
desired, cheques dated 11 April 2011 will be posted on that date.               
Shareholders who have dematerialised their share certificates will have their   
accounts at their Central Securities Depositary Participants (CSDP) or broker   
credited on Monday, 11 April 2011.                                              
On behalf of the board:                                                         
Len Konar                                                                       
Sipho Nkosi                                                                     
Chief Executive Officer                                                         
Wim de Klerk                                                                    
Finance Director                                                                
23 February 2011                                                                
Registered office                                                               
Exxaro Resources Limited                                                        
Roger Dyason Road                                                               
Pretoria West, 0183                                                             
Telephone +27 12 307 5000                                                       
Fax +27 12 323 3400                                                             
Transfer secretaries                                                            
Computershare Investor Services (Pty) Limited                                   
Ground Floor, 70 Marshall Street                                                
Johannesburg, 2001                                                              
PO Box 61051                                                                    
Marshalltown, 2107                                                              
Dr D Konar (Chairman), SA Nkosi (Chief Executive Officer), WA de Klerk          
(Finance Director), JJ Geldenhuys, CI Griffith, U Khumalo, N Langeni, VZ        
Mntambo, RP Mohring, NL Sowazi, J van Rooyen, D Zihlangu                        
Company secretary                                                               
MS Viljoen                                                                      
Investor relations                                                              
RA de Beer (+27 12 307 4189)                                                    
Deutsche Securities SA (Pty) Limited (+27 11 775 7000)                          
If you have any queries regarding your shareholding in Exxaro Resources         
Limited, please contact the Transfer Secretaries at                             
+27 11 370 5000.                                                                
24 February 2011                                                                
Deutsche Securities SA (Pty) Limited                                            
Date: 24/02/2011 07:05:02 Supplied by www.sharenet.co.za                     
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