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EXXARO RESOURCES LIMITED - Financial Director's FYE 31 December 2016 Pre-close message

Release Date: 23/11/2016 10:06:00      Code(s): EXX     
Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
(?Exxaro? or the ?Company? or the ?Group?)

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This message covers the expected financial and  operational performance of the Exxaro group for the FYE 
31 December 2016. 

While we acknowledge and recognise the diverse stakeholders for  our  group, this  message is  targeted 
primarily at the financial and investor community with a distinct focus on financial and  operational 
matters, as well as progress on some of our strategic initiatives, without undermining the importance of 
other sustainability matters.

Dear stakeholder,
Below is an update on the group?s operational performance for the financial year ending 31 December 2016 
(FYE16). Unless otherwise indicated, all comparisons are  against FY15.

We achieved a significant milestone of 27 fatality free months during the year (as at 31 October 2016). 
We achieved a lost-time injury frequency rate (LTIFR) of 0.08 as at 31 October 2016, which is a 53% 
improvement on the  LTIFR recorded for FY15 of 0.17.

Following weakness in 1H16, commodity prices started to rebound in 2H16 due  to production cuts,  weather 
disruptions and supply reforms in various producer countries. For Exxaro?s key commodities the API4 export 
price is expected to average US$75 per tonne for 2H16 (1H16: US$53) and iron ore fines US$57 per dry metric 
tonne, Cost and Freight (CFR) China (1H16: US$52).

On the production front our coal business continued to be resilient with a slight increase in production 
forecast (excluding buy-ins) despite the closure of  Arnot. We are  continuing our cost-saving initiatives 
and  capital optimisation with total coal capital expenditure (capex) for  FYE16 forecast at R2 728 million  
compared to R2 313 million in FY15.

We are also in the process of finalising our improvement project to ensure a fit for purpose operating 
model. Following the completion of the project we expect to be able to quantify the resulting cost savings 
in the 1Q17.
Despite negative sentiment in the capital markets towards mining, we successfully refinanced our R8 billion 
loan facility at competitive rates and expect the balance sheet to remain robust in 2017.

We are also pleased that we are now in a position to start implementing the unwinding of our existing Black 
Economic Empowerment (BEE) shareholding structure following the expiry of the lock-in period on 28 November
2016. The share repurchase from our controlling shareholder Main Street 333 Proprietary Limited 
(Main Street 333) and the replacement BEE transaction will ensure that the structure unwinds in a 
coordinated manner which should be supportive of our share price and ensure investor certainty. Interest 
received from Exxaro?s BEE shareholder to reinvest in a replacement transaction is testimony of our 
BEE shareholders? confidence in Exxaro?s strategy and quality  asset base.

The disposal of our non-core assets is progressing well and we completed the disposal of Inyanda (mainly the 
mining right, plant, private rail siding and  associated liabilities) and the Mayoko iron ore project in 2H16. 
We are continuing to review our portfolio to ensure we have a robust portfolio of assets that can withstand a 
low commodity price environment.

We will provide a detailed account of FYE16 operational and financial performance when we announce our 
financial results on the 9th of March 2017.

Yours sincerely 
Riaan  Koppeschaar 
Finance director

   TABLE 1:
                                       Production (Re-presented)                       Sales (Re-presented)
                                          FY(E) 31 December                             FY(E) 31 December
                                        2016        2015           %                   2016        2015           %    
                                 Forecast(1)      Actual      change            Forecast(1)      Actual      change    
   Thermal                            42 083      41 100           2                 43 302      42 146           3    
   ? Tied(2)                           8 215       9 260         (11)                 8 199       9 270         (12)   
   ? Commercial: domestic(3)          33 868      31 840           6                 27 024      26 694           1    
   ? Commercial: export                                                               8 079       6 182          31    
   Metallurgical                       2 016       1 856           9                  1 299       1 341          (3)   
   ? Commercial: domestic              2 016       1 856           9                  1 299       1 341          (3)   
   Total coal                         44 099      42 956           3                 44 601      43 487           3    
   Semi-coke                              54          48          13                     66          49          35    
   Total (excluding buy-ins)          44 153      43 004           3                 44 667      43 536           3    
   Thermal buy-ins(3)                    585       1 222         (52)                                                  
   Total (including buy-ins)          44 738      44 226           1                 44 667      43 536           3    
   (1) Based on latest internal management forecast assumptions and estimates.
   (2) Mines managed on behalf of and supplying their entire production to Eskom.
   (3) Mafube trading division buy ins of 1 818kt from Mafube JV are included under Thermal coal 
       production and prior periods have also been recorded as Thermal coal production (FY15: 1 147kt).

Despite the fragile economic activity in 1H16 and the high levels of political and economic uncertainty, global 
economic fundamentals for 2H16 remained positive. Rising commodity prices were supportive to commodity producing 
economies such as Brazil, Russia and South Africa to return to positive Gross Domestic Product (GDP) growth 

Following years of weakness, coal markets showed some improvement during 2H16. Globally, weather disruptions, 
production cuts, above-average seasonal demand and supply reforms, most notably the 276-operating days per annum 
policy implemented by the Chinese government, caused thermal and hard coking coal (HCC) prices to surge 
significantly. Iron ore fines prices also traded above US$55 per dry metric tonne, CFR China, for most of 2H16.

For Exxaro?s key commodities, the API4 coal export index price is expected to average US$75 per tonne for 2H16 
(1H16: US$53) while 2H16 iron ore fines prices are expected to average US$57 per dry metric tonne, CFR China 
(1H16: US$52).

The successful implementation of the 1H16 price increases for titanium dioxide (TiO2) pigment supported 
improvements in net operating profit margins for Tronox during  2H16.

Commercial mines
Thermal coal production from commercial mines is expected to increase by 6% mainly due to the inclusion of Exxaro 
Coal Central Proprietary Limited (ECC) for FYE16 compared to 4 months in FY15, partly offset by the sale of the 
Inyanda in 2H16. Metallurgical coal production volumes for FYE16 are expected to be 9% higher than FY15.

Coal buy-ins are expected to decrease by 52% due to the availability of sufficient coal to fulfill contracts.

Export sales volumes are expected to increase by 31% mainly due to the inclusion of ECC exports, and exports of 
Mafube power station coal, previously supplied to Eskom. Sales to Eskom are expected to decrease by 8% mainly 
due to lower offtake from Leeuwpan mine where the contract to supply Eskom was not extended at the end of 1Q16, 
coupled with lower offtake from Grootegeluk in line with Addendum 9 to the Medupi Coal Supply Agreement (CSA).

Domestic thermal coal sales, other than sales to Eskom, are expected to increase by 73%, mainly due to higher 
demand in the domestic market.

Tied mines
Thermal coal production and sales from tied mines are expected to decrease by 11% and 12% respectively due to 
the cessation of the mining activities at the Arnot operation.

Since the last report on Arnot the following activities have taken place:
? All production has ceased and the mine equipment is being reclaimed from the underground sections;
? Consultation with employees, in terms of section 189 of the Labour Relations Act (section 189) was finalised 
  at the  end  of July  2016;
? Continuing our discussions with Eskom to ensure full provision for the rehabilitation  funds, mine closure 
  costs and post mine  closure costs in terms of the  National Environmental Management Act (NEMA) regulations, 
  as stipulated in the CSA.

Large capital projects at Matla remain unfunded by Eskom, with mine 1 on care-and-maintenance. In the meantime, 
the remaining mine shafts (mine 2 and mine 3) are expected to produce 8.2 million tonnes (Mt) for FYE16 against 
contractual volumes of 10,1Mt. We continue to engage Eskom to provide the  required capital funding and are 
considering available recourse in terms of the  CSA.

Demand for our coal remained stable in FYE16 amidst some uncertainty in commodity markets. There was an increase 
in semi-coke sales on the back of sustained marketing efforts which are expected to continue into FYE17.

Export markets are still dependent on India for the lower quality coal products. New markets are being explored 
in the Middle-East, largely for higher quality coal. Prices increased on the back of renewed buying interest out 
of China, and are expected to remain high into the 1Q17. Growth is expected to come from Africa and South East 

We expect Coal capex to increase by 18% on FY15 due to higher sustaining capex resulting from a change in the 
timing of the planned capital spend. The expenditure for FYE16 is 4% lower than guided in August 2016, mainly 
as a result of timing.

Grootegeluk capex is expected to be 10% higher than that reported for 2015. No major changes are expected to 
the FYE16 Grootegeluk capex, as reported in August 2016.

All Medupi coal deliveries are in line with Addendum 9 to the  Medupi CSA.

   TABLE 2:                                                                  
   GROUP CAPEX (R?million)                                                  
                                      FYE16            FYE16                
                                    Current         Previous        FY15    
                                Forecast(1)      Forecast(1)      Actual    
   Sustaining                         2 275            2 201       1 663    
   Coal                               2 232            2 144       1 597    
   ? Waterberg                        1 738            1 492       1 362    
   ? Mpumalanga                         494              652         235    
   Other                                 43               57          66    
   Expansion                            496              764         727    
   Coal                                 496              764         716    
   ? Waterberg                          439              687         609    
   ? Mpumalanga                          57               77         107    
   Other                                                              11    
   Total                              2 771            2 965       2 390    
   (1) Based on internal management forecast assumptions and estimates, excluding tied operations.

We continue to engage with Eskom on a possible Addendum 10 to the Medupi CSA. The discussions include 
consideration of the options to reduce future take-or-pay obligations through coal storage and/or possible 
movement of coal to the Mpumalanga region.

Thabametsi Mine
The Thabametsi Mine has all the required licenses in place. However, the Environmental Authorisation has been 
appealed and Exxaro is following due process to get the appeal finalised. The rate of production ramp-up will 
ultimately depend on the developments with the coal baseload independent power producer procurement programme 
(CBIPPPP). The Thabametsi Mine Phase 1 will be developed at an approximate cost of R3 billion to supply 
approximately 3.9Mt of coal per year at full capacity. The Phase 1 mine is scheduled to produce its first coal 
in 2020, in line with the development ramp-up schedule of the Thabametsi IPP power station. Commercial operation 
of the Thabametsi Independent Power Producer (IPP) Power Station is anticipated to be in 2021. Exxaro will solely 
be responsible for the supply of coal for a contractual period of 30 years.

On 10 October 2016 the Department of Energy (DoE) announced the Thabametsi IPP Power Station as a preferred bidder 
under Window 1 of its CBIPPPP. The circa 600MW Thabametsi IPP Power Station is being developed by Japan?s Marubeni 
Corporation and Korea Electric Power Corporation (KEPCO) together with a local consortium of Broad-Based Black 
Economic Empowerment (BBBEE) partners including  Royal Bafokeng Holdings, KDI, Tirasano and the Public Investment 
Corporation (PIC). Financial Close on the Thabametsi IPP Power Station is anticipated to be in 2H17.

Due to an appeal on our rezoning application, a further delay in the start of construction is expected. The 
construction is expected to start 2H17. This appeal will be dealt with in terms of the applicable legislations.

The project team is continuing with actions to be ready for construction should the rezoning appeal matter be 
dealt with sooner.

The sale of Inyanda was completed to a consortium of Burgh Group Holdings Proprietary Limited and Lurco Group 
Proprietary Limited on 3 October 2016.

Transnet Freight Rail (TFR) railed 35,49Mt to Richards Bay Coal Terminal (RBCT) during the first half of its 
financial year ended 30 September 2016, equivalent to an annualised rail tempo of 72,5Mt. The coal line shut in 
July 2016 was completed successfully and performance has stabilised. As indicated by TFR, the performance on the 
North West Corridor has improved after the coal line shut, matching the best performance on record since 
March 2009 with four consecutive weeks of five trains per week during October 2016.

Exxaro is pleased to report that the sale of the Mayoko iron ore project (and related subsidiaries) to a Congolese 
Consortium has been completed for an amount of US$2 million.

Guidance on SIOC?s equity-accounted contribution will be provided when we have reasonable certainty on its FYE16 
financial results.

The TiO2 business is generating momentum on the back of higher pigment sales volumes and selling prices as well as 
improved operating cost performance. Ilmenite feedstock prices have also increased, driven by reduced supply by 
Chinese ilmenite producers.

Alkali Chemicals are expected to deliver a stable performance, which will positively contribute to the Tronox 

We expect our equity-accounted results from Tronox for 2H16 to improve on those reported in 1H16.

The two wind-farm projects, Amakhala Emoyeni (AE) and Tsitsikamma Community Wind Farm (TCWF), have both achieved 
Commercial Operation Date during 3Q16 and within the project budget.

The group?s interests in Black Mountain Mining Proprietary Limited and Chifeng Kumba Hongye Corporation Limited 
(Chifeng) remain non-core and we intend to divest from these investments through a disposal process once the 
lock-in periods expire in 4Q16.

We are also reviewing our coal portfolio as part of our optimisation programme, with specific focus on closure 
and/or divesting from assets that do not meet our expectation of net present value, robustness of earnings and 
net operating profit margins that can withstand a low commodity price environment. Exxaro envisages to commence 
with this process early in FY17.

Refer to the detailed announcement published on the 22nd of November 2016.

The ministers of Environmental Affairs and Mineral Resources have determined that requirements for making 
financial provision to manage, rehabilitate and remediate environmental impacts from mining operations will be 
regulated under NEMA and no longer under the Mineral and Petroleum Resources Development Amendment Act, 2008 
(MPRDA). This agreement has been formalised by amending the relevant environmental and mining legislation.

The financial provisioning regulations will come into force in February 2019 for implementation and contain 
more onerous and detailed requirements than previously required by the  MPRDA.

The sum total of closure costs will be covered by actual contributions and guarantees. In terms of our 
corporate rehabilitation standards we are assessing the full impact of these developments on our rehabilitation 
and decommissioning financial  provisions.

Exxaro has achieved a commendable level 4 BBBEE recognition level. This performance positions Exxaro amongst the 
forerunners in BEE within the mining industry. Our analysis for 2016 and future performance indicate that 
enterprise and supplier development (ED) presents a new challenge given the considerable budgets that are required 
to achieve the targets. A total of 3% of net profit after tax (NPAT) must be spent to achieve full compliance. An
ED policy and procedure is being put in place to govern and maximize the ED impact on social development and to 
ensure that Exxaro an improve its performance in future years.
Exxaro, through the Chamber of Mines, has participated with the mining industry to provide inputs to the Department 
of Mineral Resources (DMR) to revise the  Mining Charter elements and targets. Exxaro supports the strategic intention 
of transforming the  mining industry. The Chamber of Mines and the regulator continue to engage to seek alignment in 
this regard. The revised Mining Charter is expected to come into force in January 2017. Clarity and certainty of the 
requirements of this legislation is critical to our imminent review of the black ownership status, our replacement 
BEE transaction and the ongoing investment and development of South Africa?s mining industry.

Exxaro has performed exceptionally well in the previous CDP submission for the 2015/2016 year, with a score exceeding 
the industry average. The challenge going forward is to reduce our Scope 3 (Other indirect greenhouse gas) emissions, 
which are primarily contingent on the downstream use of our end products.

Following the announcement of the section 189 (of the  Labour Relations Act) relating to the EIP in April 2016, the 
consultation process was concluded at the end  of August. It is anticipated that the staffing of the new structures 
will be completed at the end of November. The financial impact of the process is expected to be determined during 

We expect an improvement in the operational results of the coal business for 2017 mainly due to:
?  Stable trading conditions in domestic markets;
?  Higher international coal prices than 2016;
?  Our operational excellence process delivering further results; and
?  Technology and innovation improvements expected to contribute positively.

The performance of the investment portfolio (SIOC and Tronox) will be positively influenced by a favourable price
outlook for 2017.

Rising commodity prices, receding deflationary pressures and the slight but continuing improvements in business 
sentiment will continue to support global economic activity during 1H17.

The information in this update is the responsibility of the directors of Exxaro and has not been reviewed or 
reported on by Exxaro?s external auditors.
A dial-in teleconference call on the details of this announcement will be held on Wednesday, 23 November 2016 
at 13h00 (GMT+2:00).

Internet broadcast: www.exxaro.com

? Republic of South Africa toll-free: 0800 200 648
? Johannesburg: 011 535 3600 / 010 201 6800
? UK toll-free: 0808 162 4061
? USA and Canada toll-free: 1 855 481 5362
? Conference ID: Exxaro FD?s pre-close teleconference

A playback will be available until 30 November 2016. To access the playback, dial one of the following numbers 
using the playback code 54072#:
? South Africa: 011 305 2030
? UK (Toll-free): 0808 234 6771
? USA & Canada: 1 855 481 5363
? Australia (Toll-free): 1 800 091 250

Exxaro is one of the largest South Africa-based diversified resources companies, with interests in the coal, 
titanium dioxide, iron ore and energy commodities. www.exxaro.com

Mzila Mthenjane, Executive Head: Strategy & Stakeholder Engagement
Tel: + 27 12 307 7393
Mobile: +27 83 417 6375
Email: mzila.mthenjane@exxaro.com
Pretoria 23 November 2016

Absa Bank Limited (acting through its corporate and investment banking division).

1H16 ? Six-months period ended 30 June 2016                         FY15 ? Financial year ended 31 December 2015
1H17 ? Six-months period ended 30 June 2017                         FYE16 ? Financial year ending 31 December 2016 
2H15 ? Six-months period ended 31 December 2015                     FYE17 ? Financial year ending 31 December 2017 
2H17 ? Six-months period ended 31 December 2017                     2H16 ? Six-months period ended 31 December 2016 
1Q17 ? First quarter of 2017                                        2Q16 ? Second quarter of 2016
1Q16 ? First quarter of 2016                                        3Q16 ? Third quarter of 2016
1Q18 ? First quarter of 2018                                        4Q16 ? Fourth quarter of 2016

Coal ? IHS Energy Iron ore ? MB Online
Mineral sands and pigments - TZMI

The financial information on which any outlook statements are based have not been reviewed nor reported on by Exxaro?s 
external auditors. These forward-looking statements are based on management?s current beliefs and expectations and are 
subject to uncertainty and changes in circumstances. The forward-looking statements involve risks that may affect the 
group?s operations, markets, products, services and prices. Exxaro undertakes no obligation to update or reverse the 
forward-looking statements, whether as a result of new information or future developments.

Date: 23/11/2016 10:06:00 Supplied by www.sharenet.co.za                     
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