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Exxaro Resources Limited - Exx - Detailed Terms Of The Replacement Bee Transaction And Renewal Of Cautionary Announcement

Release Date: 18/09/2017 17:38:00      Code(s): EXX     
Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(?Exxaro? or the ?Company?)

DETAILED TERMS OF THE REPLACEMENT BEE TRANSACTION AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT

1.   INTRODUCTION AND BACKGROUND

1.1.   Exxaro shareholders (?Exxaro Shareholders?) are referred to the cautionary announcement released on
       the Stock Exchange News Service (?SENS?) by the Company on 22 November 2016, as well as the
       renewal of the cautionary announcement, released on SENS on 26 June 2017 (together, the ?Previous
       Announcements?), relating to the unwind of Exxaro?s existing Black Economic Empowerment (?BEE?)
       transaction (the ?Existing BEE Transaction?) and the proposed implementation of a replacement BEE
       transaction (the ?Replacement BEE Transaction?) with the direct and indirect shareholders of Main
       Street 333 Proprietary Limited (?MS333?).

1.2.   On Friday, 15 September 2017, Exxaro, MS333 (and its direct shareholders), the Industrial Development
       Corporation (the ?IDC?) and two special purpose vehicles, the first vehicle being incorporated for the
       purpose of being the empowerment vehicle which will hold ordinary shares in Exxaro (?Exxaro Shares?)
       (?NewBEECo?) and the second vehicle being incorporated for the purpose of holding the interests of
       certain MS333 shareholders separately (?BEE SPV?), entered into a suite of detailed agreements to give
       effect to the Replacement BEE Transaction (the ?Transaction Agreements?).

1.3.   Exxaro implemented a specific repurchase of 43 943 744 Exxaro Shares from MS333 on 20 January
       2017, preceding the implementation of the Replacement BEE Transaction, which should be considered
       as part of the unwinding of the Existing BEE Transaction (the ?First Repurchase?). As part of the
       Replacement BEE Transaction, Exxaro will implement a further specific repurchase of 22 686 572
       Exxaro Shares from MS333 (the ?Second Repurchase?).

1.4.   The implementation of the Replacement BEE Transaction (which includes the Second Repurchase)
       remains subject to various conditions precedent, including those set out in paragraph 6.2.

1.5.   The purpose of this announcement is to provide Exxaro Shareholders with an overview of the key terms
       of the Replacement BEE Transaction.

2.     OVERVIEW OF THE REPLACEMENT BEE TRANSACTION

2.1.   Components of the Replacement BEE Transaction

2.1.1. Exxaro has executed the Transaction Agreements to implement the various components of the
       Replacement BEE Transaction. The key components of the Replacement BEE Transaction include:
       -   COMPONENT 1: the unwinding of the Existing BEE Transaction (the ?MS333 Unwind?);
       -   COMPONENT 2: the Second Repurchase; and
       -   COMPONENT 3: the specific issue by Exxaro of Exxaro Shares to NewBEECo to implement the
                        Replacement BEE Transaction (the ?Specific Issue?).

2.2.   Rationale for the Replacement BEE Transaction

2.2.1. Since its creation in 2006, Exxaro has maintained its status as one of the largest Historically
       Disadvantaged South African (?HDSA?) controlled companies in the South African mining sector.
       Exxaro is aware of the current uncertainty around the legislative requirements for empowerment in the
       South African mining sector. However, both Exxaro?s management and the independent sub-
       committee, established by the Exxaro board of directors (the ?Independent Board Sub-Committee?),
       firmly believe that it is critical to Exxaro?s business strategy that it maintains an appropriate
       empowerment status driven by ownership. Remaining empowered is essential for Exxaro to maintain
       stability in its operational environment, reinforce sustainable relationships with critical stakeholders in
       the industry and to ensure ongoing compliance with customer and other industry requirements. In
       addition, Exxaro supports the imperative for economic transformation in South Africa.

2.2.2. Implementation of the Replacement BEE Transaction will:
       -   protect the stability of Exxaro?s operations by reinforcing the sustainability of its relationships with
           key stakeholders (including customers, employees, communities in which Exxaro operates and
           relevant development funding institutions);
       -   equip Exxaro for growth by positioning Exxaro with market leading empowerment credentials in
           the South African mining sector;
       -   reduce the market impact of the MS333 Unwind by allowing MS333 shareholders to reinvest a
           large portion of their Exxaro Shares into the Replacement BEE Transaction; and
       -   unlock long term value for Exxaro Shareholders.

2.3.   Mechanism and steps to give effect to the Replacement BEE Transaction

2.3.1. As agreed in the Transaction Agreements, the Replacement BEE Transaction will be effected by way
       of several indivisible steps, to give effect to Exxaro?s new empowerment shareholding structure (the
       ?New Empowerment Structure?). This process is summarised below:

2.3.1.1 The Replacement BEE Transaction will be implemented using a reference price of R125.01,
        being the 5-day weighted average trading price as at market close on Thursday, 14
        September 2017, being the last day before the signing of the Transaction Agreements (the
        ?Reference Price?). This Reference Price (prior to any discount) applies to both the Second
         Repurchase and the Specific Issue;

2.3.1.2 MS333 conducting a formal election process (the ?MS333 Election Process?) in terms of
        which its indirect shareholders elect whether to:
        i. reinvest Exxaro Shares into the New Empowerment Structure (the ?MS333
           Reinvestment?); and/or
       ii. divest Exxaro Shares in the form of:
           - cash; and/or
           - Exxaro Shares that are not subject to any disposal or related restrictions applicable to the
                     New Empowerment Structure (?Unrestricted Exxaro Shares?);

2.3.1.3 Implementation of the MS333 Unwind to enable the reinvestment and divestment as
        described above;

2.3.1.4 Implementation of the Second Repurchase, resulting in Exxaro repurchasing 22 686 572
        Exxaro Shares from MS333 at a 5% discount to the Reference Price;

2.3.1.5 The capitalisation of NewBEECo as follows:
        i.  the IDC subscribing for ordinary shares in NewBEECo by contributing 12 337 616 Exxaro
            Shares (the ?IDC Reinvestment?);
       ii.  the MS333 Reinvestment, resulting in MS333 indirect shareholders (excluding the IDC)
            who have elected to reinvest Exxaro Shares into the New Empowerment Structure
            pursuant to the MS333 Election Process (the ?Reinvesting MS333 Shareholders?),
            subscribing for ordinary shares, on a pro-rata basis, in BEE SPV, by contributing a
            minimum of 26 623 276 Exxaro Shares to BEE SPV, which will in turn be utilised by BEE
            SPV to subscribe for ordinary shares in NewBEECo; and
       iii. Exxaro subscribing for ordinary shares in NewBEECo for a cash consideration (the
            ?Exxaro Equity Investment?);

2.3.1.6 NewBEECo raising external funding from commercial funders through the issuance of
        preference shares (the ?Third Party Funding?). The amount of the Third Party Funding will
        be reduced to the extent that the MS333 Reinvestment is greater than the minimum number
        of 26 623 276 Exxaro Shares required to be reinvested; and

2.3.1.7 Implementation of the Specific Issue, where NewBEECo will utilise the proceeds from the
        Exxaro Equity Investment and the Third Party Funding to subscribe for the number of Exxaro
        Shares which, together with the Exxaro Shares received through the MS333 Reinvestment
        and the IDC Reinvestment, will result in NewBEECo holding 30.0% of the Exxaro Shares
        following the implementation of the Replacement BEE Transaction:
        i.  the Specific Issue will occur at a discount equal to 6.8% of the Exxaro market
            capitalisation, based on the Reference Price but diluted for the implementation of the
            Replacement BEE Transaction (including the Second Repurchase and the Specific Issue)
            (the ?BEE Facilitation Value?); and
        ii. this discount equates to 22.6% of the total value of all the Exxaro Shares to be held by
            NewBEECo following implementation of the New Empowerment Structure (the ?New
            Empowerment Structure Value?). The total BEE Facilitation Value will be transferred to
            New BEECo through the Specific Issue (which represents 64.0% of the New
            Empowerment Structure Value) and as such the discount of the Specific Issue to the
            Reference Price equates to 40.1% (the ?BEE Discount?) This is further explained in
            paragraph 5.4.2.

2.3.2. Before implementation of the Replacement BEE Transaction, Exxaro?s empowerment shareholding
       structure consists of MS333 holding 32.0% of the Exxaro Shares (as at 14 September 2017).

2.3.3. Following the implementation of the Replacement BEE Transaction, and assuming the Reinvesting
       MS333 Shareholders reinvest the minimum number of Exxaro Shares pursuant to the MS333
       Reinvestment of 26 623 276 Exxaro Shares, the New Empowerment Structure will be such that BEE
       SPV (representing the Reinvesting MS333 Shareholders) holds 51.0%, Exxaro holds 25.4% and the
       IDC holds 23.6% of the ordinary shares in NewBEECo respectively. Exxaro will share the specific
       details of the Reinvesting MS333 Shareholders with the market following the conclusion of the MS333
       Election Process, which is currently expected to be concluded by Friday, 29 September 2017, after
       which Exxaro will release a further announcement on SENS, detailing the outcome of the MS333
       Election Process and the final New Empowerment Structure.

2.3.4. Following the implementation of the Replacement BEE Transaction as set out in paragraph 2.3.3, the
       New Empowerment Structure Value will be comprised as follows:

                                                Percentage of New
             Source                           Empowerment Structure                      BEE Shares                 Value (R?m) (1)
                                                      Value
            Reinvestments                                36.0%                            38 960 892                     4 510
            Minimum MS333
                                                         24.6%                            26 623 276                     3 082
            Reinvestment (2)
            IDC Reinvestment (3)                         11.4%                            12 337 616                     1 428
            Specific Issue                               64.0%                            69 264 236                     8 020
            BEE Facilitation Value                       22.6%                            24 458 782                     2 832
            Exxaro Equity Investment                     19.9%                            21 536 715                     2 494
            Maximum Third Party
                                                         21.5%                            23 268 310                     2 694
            Funding (2)
            New Empowerment
                                                         100.0%                          108 224 699                     12 530
            Structure Value

Notes:
(1)   Value is based on the ex Replacement BEE Transaction Exxaro Share price of R115.78, which is calculated as the accretion impact of the
      Second Repurchase and the dilution impact of the Specific Issue on the Reference Price (before implementation of the Replacement BEE
      Transaction) of R125.01.
(2)   The 24.6% MS333 Reinvestment represents 26 623 276 Exxaro Shares reinvested. Should the MS333 Reinvestment exceed 26 623 276
      Exxaro Shares, the value raised through the Third Party Funding will be reduced accordingly.
(3)   The 11.4% IDC Reinvestment represents 12 337 616 Exxaro Shares reinvested.

2.4.  Key terms relating to the New Empowerment Structure

2.4.1. Empowerment levels
       Following the implementation of the Replacement BEE Transaction, NewBEECo will directly hold
       30.0% of the Exxaro Shares.

2.4.2. Term and lock-in arrangements
2.4.2.1 The New Empowerment Structure will have a duration of 10 years. The period during which
        Exxaro Shares held by NewBEECo will be locked-in, is staggered between seven and ten
        years.
2.4.2.2 The Exxaro Shares reinvested by Reinvesting MS333 Shareholders and the IDC will
        become unrestricted on the 7th anniversary of the Replacement BEE Transaction with the
        remaining Exxaro Shares becoming unrestricted in equal proportions at the end of the 8th,
        9th and 10th anniversary of the Replacement BEE Transaction.
2.4.2.3 NewBEECo will have the interim liquidity mechanisms, listed in paragraph 2.4.2.4 below,
        available to it in order to create liquidity. Notwithstanding anything to the contrary in the
        Transaction Agreements, Exxaro will only be obliged to approve or implement a liquidity
        mechanism if
        -   it is satisfied that Exxaro will be compliant with the empowerment shareholding requirements
            set out in any relevant legislation, or as it may have contractually agreed; and
        -   all required and applicable regulatory, Exxaro Shareholder and contractual consents, including
            in respect of the agreements relating to the Third Party Funding, if any, have been obtained.
2.4.2.4 The following interim liquidity mechanisms form part of the New Empowerment Structure:
        -   Trade sale: After the third anniversary of the Replacement BEE Transaction, each of BEE
            SPV, the IDC and any Reinvesting MS333 Shareholder will be entitled to sell shares in BEE
            SPV or NewBEECo, as the case may be, to any other party with at least the same HDSA
            status, with the approval of Exxaro;
        -   Public offering: NewBEECo may be listed on a recognised securities exchange that restricts
            trading to HDSA shareholders, with the approval of Exxaro;
        -   Further community or employee empowerment: Should Exxaro explore any transaction
            designed to further empower the communities in areas where Exxaro operates or employees
            of the group before the tenth anniversary of the Replacement BEE Transaction, other than as
            contemplated in paragraph 2.4.3.2 of this announcement, NewBEECo will have the first right
            to sell Exxaro Shares to enable such transaction, on terms determined by Exxaro; and
        -   Exxaro facilitated staggered vesting: Should the Exxaro Share Price increase by more than
            50% from the date of implementation of the Replacement BEE Transaction, NewBEECo has
            the right to sell Exxaro Shares back to Exxaro, at a pre-agreed discount, limited to the amount
            of the existing Third Party Funding, subject to Exxaro Shareholder approval (as it will be a
            specific repurchase of Exxaro Shares for cash), and assuming Exxaro remains sufficiently
            empowered from a regulatory perspective.

2.4.3. Participants
2.4.3.1 The initial participants in the New Empowerment Structure will be the Reinvesting MS333
        Shareholders, the IDC, and Exxaro, through the Exxaro Equity Investment. This participation
        is set out in paragraph 2.3.3 of this announcement. The exact composition is subject to
        finalisation of the MS333 Election Process.
2.4.3.2 Exxaro has earmarked a portion of its holding in the ordinary shares of NewBEECo,
        received through the Exxaro Equity Investment, for the empowerment of relevant Exxaro
        communities and employees. The form, size and structure of such empowerment will be
        finalised following implementation of the Replacement BEE Transaction and Exxaro
        Shareholder approval for this empowerment will be sought, to the extent required.

2.4.4. Funding of the New Empowerment Structure
2.4.4.1 The New Empowerment Structure will effectively be funded through a combination of
        (assuming the minimum of 26 623 276 Exxaro Shares reinvested pursuant to the MS333
         Reinvestment):
         -     vendor facilitation, equal to the BEE Facilitation Value of R2 832 million;
         -     equity, consisting of the MS333 Reinvestment of R3 082 million for 51.0% of
               NewBEECo, the IDC Reinvestment, of R1 428 million for 23.6% of NewBEECo and the
               Exxaro Equity Investment of R2 494 million for 25.4% of NewBEECo; and
         -     the Third Party Funding of R2 694 million.

               The composition of the funding sources set out above remains subject to the outcome of the
                MS333 Election Process.
2.4.4.2 The manner of funding of the New Empowerment Structure Value is detailed in paragraph
        2.3.4 of this announcement.

2.4.5. NewBEECo distributions
2.4.5.1 Subject to a minimum value cover, any distributions made by Exxaro to NewBEECo, will be
        applied equally to settle Third Party Funding (including the accrued funding charges, in the
        form of preference share dividends) and to distribute to NewBEECo shareholders.
2.4.5.2 Any special dividend or distribution, received by NewBEECo, out of the proceeds from the
        disposal of Exxaro?s interest in Tronox Limited and/or Sishen Iron Ore Company Proprietary
        Limited, will be applied fully toward the settlement of Third Party Funding.

2.5. The MS333 Election Process
2.5.1. As described in paragraph2.3.1.2, the MS333 Election Process will determine the parameters of the
       MS333 Reinvestment as well as the divestment in the form of cash and Unrestricted Exxaro Shares.
2.5.2. The MS333 Election will commence on Monday, 18 September 2017, and will be concluded by Friday,
       29 September 2017.
2.5.3. Exxaro will release an announcement on SENS as soon as practically possible after the finalisation of
       the MS333 Election Process, including the final New Empowerment Structure.

3.   COMPONENT 1: THE MS333 UNWIND
3.1. The MS333 Unwind explained
3.1.1. MS333 will not be retained as the empowerment vehicle for the Replacement BEE Transaction. The
       MS333 Unwind will apply to all the Exxaro Shares still held by MS333, excluding the Exxaro Shares
       subject to the Second Repurchase, the MS333 Reinvestment and the IDC Reinvestment.
3.1.2. The MS333 Unwind serves as a mechanism for the Exxaro Shares not reinvested into the New
       Empowerment Structure (the ?Exiting MS333 Interests?) to be divested from (in the form of cash
       and/or Unrestricted Exxaro Shares), and to enable Reinvesting MS333 Shareholders and the IDC to
       invest into the New Empowerment Structure. The MS333 Unwind is not subject to Exxaro Shareholder
       approval.

3.2. MS333 shareholding in Exxaro
3.2.1. The table below sets out the changes in MS333?s shareholding in Exxaro from 31 December 2015 to
       its current shareholding (as at 14 September 2017):

                                         Number of Exxaro          Total Exxaro Shares        MS333
                                         Shares held by MS333      (million)                  shareholding
                                         (million)                                            percentage in
                                                                                              Exxaro
         Initial shareholding as at
         31 December 2015                     186.6                 358.1                     52.1%

         Sale of Shares in the
         market during 2016 to                 (6.8)                -
         repay debt

         Shares sold in December
         2016 as part of the Anglo          
         American placement                    (17.4)               -

         First Repurchase by
         Exxaro in January 2017                (43.9)               (43.9)
         
         Regulated sale of Shares in
         the market during 2017                (17.8)               -
  
         Current shareholding as
         at 14 September 2017                  100.7                314.2                     32.0%                                           


3.2.2. It is anticipated that MS333?s shareholding in Exxaro will reduce as illustrated in the below table, due
       to the Second Repurchase and the minimum reinvestment into the New Empowerment Structure:

                                                                                                         MS333
                                                 Number of Exxaro               Total                    shareholding
                                                 Shares held by MS333           Exxaro Shares            percentage in
                                                 (million)                      (million)                Exxaro
                                                                                                                     
           Current shareholding                   100.7                         314.2                    32.0%
           Second Repurchase                     (22.7)                        (22.7)
           Minimum MS333 Reinvestment            (26.7)                         -
           IDC Reinvestment                      (12.3)                         -
           Specific Issue(1)                      -                             69.3
           MS333 remaining
           shareholding in Exxaro                 39.0                          360.8                     10.8%

Notes:
(1)   Number of Specific Issue Shares to be issued pursuant to the Specific Issue, assuming the Reinvesting MS333 Shareholders reinvest the
      minimum of 26 623 276 Exxaro Shares. Should the MS333 Reinvestment exceed 26 623 276 Exxaro Shares, the Specific Issue Shares to be
      issued to ensure NewBEECo holds 30.0% of Exxaro Shares, will be less.

3.2.3. Subject to the MS333 Election Process, the remaining 39.0 million Exxaro Shares held by MS333 will be:
       a. retained as Unrestricted Exxaro Shares, outside the New Empowerment Structure.; and/or
       b. disposed of in the market.

      The detail of the above split, including the number of Exxaro Shares to be reinvested will be included
      in an announcement on SENS, to be made by Exxaro as soon as practically possible after the
      conclusion of the MS333 Election Process, which is expected to be Friday, 29 September 2017.

3.3. Regulated sale of Exxaro Shares
     As set out in the Previous Announcements, the sale of Exxaro Shares by MS333 and/or any of its direct or
     indirect MS333 shareholders pursuant to the MS333 Unwind, is overseen by the joint advisory committee
     established between Exxaro and MS333 to regulate any sale of Exxaro Shares in the market.

4.   COMPONENT 2: THE SECOND REPURCHASE
4.1. Overview of the Second Repurchase in the context of the Replacement BEE Transaction
4.1.1. As part of the Replacement BEE Transaction, Exxaro will repurchase 22 686 572 Exxaro Shares (the
       ?Second Repurchase Scheme Shares?) from MS333 pursuant to the Second Repurchase through a
       scheme of arrangement in terms of section 114, read with section 115, of the Companies Act No. 71
       of 2008 (the ?Companies Act?) (the ?Second Repurchase Scheme?).
4.1.2. The Second Repurchase Scheme Shares equate to 7.2% of the Exxaro Shares (currently in issue,
       prior to the Second Repurchase and the Specific Issue).
4.1.3. The Second Repurchase is an integral part of the Replacement BEE Transaction, and is conditional
       on the remainder of the Replacement BEE Transaction, including the Specific Issue, becoming
       unconditional.

4.2. Rationale for the Second Repurchase
4.2.1. The rationale for the Replacement BEE Transaction is set out above in paragraph 2.2 of this
       announcement. A key component of the Replacement BEE Transaction is the Specific Issue which
       results in the issue of the Specific Issue Shares to NewBEECo, which would be dilutive for Exxaro
       Shareholders, excluding MS333 (the ?Exxaro Independent Shareholders?). The Second
       Repurchase will act as an anti-dilutive measure for the Specific Issue. The Independent Board Sub-
       Committee is of the opinion that it is in the best interest of Exxaro Independent Shareholders and
       MS333 alike.
4.2.2. Furthermore, the Independent Board Sub-Committee believes that there is a strong rationale to
       implement the Second Repurchase at a price equal to a 5% discount to the Reference Price, taking
       into account:
       -  Exxaro?s assessment of the group?s intrinsic value; and
       -   Exxaro?s cash generating ability and capital requirements over the medium term.
4.2.3. The arrangements regulating the Existing BEE Transaction came to an end on 28 November 2016.
       Since then, MS333 has disposed of Exxaro Shares in the market to settle certain of its obligations. It
       is anticipated that MS333 will dispose of further Exxaro Shares to provide liquidity for the Exiting
       MS333 Interests in the form of cash (as elected by MS333 indirect shareholders as part of the MS333
       Election Process). The implementation of the Second Repurchase is thus also intended to contribute
       to the orderly realisation of the Exiting MS333 Interests, and reducing the Exxaro Share overhang in
       the market.

4.3. Key terms of the Second Repurchase
     Exxaro and MS333 have reached agreement on the terms of the Second Repurchase, subject to the
     provisions of Exxaro?s Memorandum of Incorporation, the Companies Act, the JSE Listings Requirements
     (the ?Listings Requirements?) and Exxaro Shareholder approval, on the following terms:
4.3.1. the Second Repurchase will be effected by way of the Second Repurchase Scheme;
4.3.2. the Second Repurchase Scheme Shares, being 22 686 572 Exxaro Shares currently held by MS333,
       will be repurchased by Exxaro;
4.3.3. the Second Repurchase Scheme Shares will be repurchased for R118.76 per Second Repurchase
       Scheme Share, which equates to a 5% discount to the Reference Price;
4.3.4. the Second Repurchase will be funded from Company cash reserves; and
4.3.5. the Second Repurchase Shares will be immediately cancelled as issued Exxaro Shares and there will
       thus be no effect on Exxaro?s treasury shares as a result of the Second Repurchase.

5.   COMPONENT 3: THE SPECIFIC ISSUE
5.1. Overview of the Specific Issue in the context of the Replacement BEE Transaction
5.1.1. As part of the Replacement BEE Transaction, Exxaro will issue, pursuant to the Specific Issue, the
       Specific Issue Shares to NewBEECo.
5.1.2. The Specific Issue Shares will equate to 19.2% of the total Exxaro Shares following the
       implementation of the Replacement BEE Transaction. This, together with the Exxaro Shares
       reinvested pursuant to the MS333 Reinvestment and the IDC Reinvestment, will result in NewBEECo
       holding 30.0% of the Exxaro Shares following the implementation of the Second Repurchase and the
       Specific Issue.
5.1.3. The Specific Issue is conditional on the remainder of the Replacement BEE Transaction, including the
       Second Repurchase, becoming unconditional.

5.2. Rationale for the Specific Issue
5.2.1. The Specific Issue is an integral part of the Replacement BEE Transaction and will result in
       NewBEECo holding 30.0% of the Exxaro Shares.
5.2.2. The proceeds from the Specific Issue will restore Exxaro?s cash reserves following the implementation
       of the Second Repurchase and the Exxaro Equity Investment, thereby limiting the cash impact of the
       Replacement BEE Transaction on Exxaro.

5.3. Intended use of funds
     The funds from the Specific Issue will be used by Exxaro to restore its cash reserves after effecting the
     Second Repurchase and the Exxaro Equity Investment and thus ensure that the cash effect of the
     implementation of the Replacement BEE Transaction on Exxaro is minimal.

5.4. Key terms of the Specific Issue
     Exxaro and NewBEECo have reached agreement on the Specific Issue, subject to the provisions of
     Exxaro?s Memorandum of Incorporation, the Companies Act, the Listings Requirements and Exxaro
     Shareholder approval, on the following terms:
5.4.1. the Specific Issue Shares, being a maximum of 69 263 807 Exxaro Shares (which will be reduced
       should the Reinvesting MS333 Shareholders reinvest more than the minimum of 26 623 276 Exxaro
       Shares pursuant to the MS333 Reinvestment) will be issued by Exxaro to NewBEECo;
5.4.2. the Specific Issue will occur at a discount to the Reference Price, equal to the BEE Discount, which
       equates to 22.6% of the New Empowerment Structure following implementation of the Replacement
       BEE Transaction (this is based on the BEE Shares as opposed to the Specific Issue Shares only).
       However, given that the BEE Facilitation Value will be transferred through the Specific Issue, the
       discount on the Specific Issue Shares equates to 40.1%. This is illustrated below:

 Number of Exxaro Shares held                         New Empowerment Structure             Specific Issue
 Total value received (R million)                     10 472(1)                             5 188(2)
 Exxaro Shares (million)                              108.2(3)                              69.3(4)
 Value per Exxaro Share (R)                           96.76                                 74.90
 Discount to Reference Price                          22.6%                                 40.1%

Notes:
(1)   Sum of the BEE Shares attributable to the MS333 Reinvestment, the IDC Reinvestment, the Exxaro Equity Investment and the Third Party
      Funding at the Reference Price (refer to the BEE Shares in the table included in paragraph 2.3.4). This assumes that the all Replacement BEE
      Transaction funding is procured at the Reference Price and the BEE Facilitation Value is transferred by issuing free Exxaro Shares (for no
      value), i.e. (26.6m + 12.3m + 21.5m + 23.3m) x R125.01.
(2)   Value of the Exxaro Equity Investment and the Third Party Funding.
(3)   The BEE Shares.
(4)   The Specific Issue Shares.

6.   GENERAL INFORMATION
6.1. Related party considerations
6.1.1. MS333 is a material Exxaro Shareholder, and is therefore considered a related party to Exxaro in
       terms of the Listings Requirements. Section 48, read with sections 114 and 115 of the Companies
       Act, a special resolution is required to approve the Second Repurchase (excluding the vote of the
       persons from which the shares are being repurchased, in this case MS333). Approval isn?t required in
       terms of paragraph 5.69(b) of the Listings Requirements, as the Second Repurchase will occur at a
       discount to the 30-day weighted average traded price of Exxaro Shares as at the date on which the
       Second Repurchase was agreed, being Friday, 15 September 2017.
6.1.2. The Specific Issue to NewBEECo is regarded as an issue to an associate of a related party to Exxaro
       in terms of the Listings Requirements, as the Reinvesting MS333 Shareholders and the IDC
       collectively hold a material interest in Exxaro prior to implementation of the Replacement BEE
       Transaction. In addition, following the implementation of the Replacement BEE Transaction, the
       Reinvesting MS333 Shareholders and the IDC will, together and separately, have a material interest
       in NewBEECo, being the party to whom the Specific Issue Shares will be issued in terms of the
       Specific Issue, and is therefore considered a related party to Exxaro in terms of the Listings
       Requirements. In terms of paragraph 5.51(g) of the Listings Requirements, an ordinary resolution (of
       75%) must be passed by Exxaro Shareholders to implement the Specific Issue.
6.1.3. MS333 and its direct and indirect shareholders (including the IDC) will be excluded from voting on the
       resolutions necessary to authorise and implement the Second Repurchase and the Specific Issue.
       Their votes will however be taken into account for purposes of establishing a quorum for the general
       meeting at which the resolutions required to approve the Replacement BEE Transaction will be
       considered (the ?General Meeting?).

6.2. Conditions precedent to the Replacement BEE Transaction
     The Replacement BEE Transaction will be subject to the fulfilment, or waiver, as the case may be, of
     amongst others the conditions precedent, summarised as follows:
6.2.1. the passing of a special resolution of the Exxaro Independent Shareholders, approving the Second
       Repurchase by way of the Second Repurchase Scheme, as required by section 115(2) of the
       Companies Act, read with section 114 of the Companies Act, and:
       - to the extent required, the approval of the implementation of such resolution by the court; and
       - if applicable, Exxaro not treating such resolution as a nullity, as contemplated in section 115(5)(b)
         of the Companies Act;
6.2.2. within 30 business days following the General Meeting, Exxaro Shareholders holding more than 10%
       of the Exxaro Shares have not exercised their rights in terms of section 164 of the Companies Act by
       giving valid demands in terms of section 164(7) of the Companies Act. If Exxaro Shareholders give
       notice objecting to the Second Repurchase Scheme as contemplated in section 164(3) of the
       Companies Act, or if Exxaro Shareholders holding less than 10% of the issued Exxaro Shares vote
       against the Second Repurchase Scheme resolution, this condition will be deemed to have been
       fulfilled at the time of the passing of the Exxaro Shareholder resolution to approve the Second
       Repurchase by way of the Second Repurchase Scheme;
6.2.3. the passing of a special resolution of the Exxaro Independent Shareholders, approving the Specific
       Issue, as required by Exxaro?s Memorandum of Incorporation (which also addresses the requirement
       for an ordinary resolution of 75%, as required by paragraph 5.51(g) of the Listings Requirements);
6.2.4. the JSE granting approval for the listing of the Specific Issue Shares;
6.2.5. the implementation of the Replacement BEE Transaction resulting in at least 30.0% HDSA ownership
       in Exxaro;
6.2.6. both Exxaro and the IDC being satisfied that the indirect shareholder composition of BEE SPV is
       sufficiently broad-based;
6.2.7. the IDC reinvesting 12 337 616 Exxaro Shares into the New Empowerment Structure pursuant to the
       IDC Reinvestment;
6.2.8. the Transaction Agreements and the agreements relating to the Third Party Funding becoming
       unconditional in accordance with their terms, including the Second Repurchase and the Specific
       Issue; and
6.2.9. the issuance of a compliance certificate by the Takeover Regulation Panel (?TRP?) in relation to the
       Second Repurchase Scheme.

6.3. Posting of the Circular and notice of General Meeting of Exxaro Shareholders
6.3.1. The circular to Exxaro Shareholders containing the details of the Replacement BEE Transaction,
       incorporating a notice of General Meeting and a form of proxy, will be posted on or around Monday,
       16 October 2017 (the ?Circular?).
6.3.2. Exxaro Shareholders are advised that the Circular will be immediately available on Exxaro?s website:
       www.exxaro.com.
6.3.3. The General Meeting of Exxaro Shareholders will be convened, in terms of the notice of General
       Meeting forming part of the Circular, to vote on the Replacement BEE Transaction. The General
       Meeting will be held at Exxaro Corporate Centre, Roger Dyason Road, Pretoria West, at 10h00 on or
       around Monday, 13 November 2017.

6.4. Important dates and times relating to the Replacement BEE Transaction

    Set out below are salient dates and times relating to the approval and implementation of the Replacement
    BEE Transaction:
                                                                                                       2017
    Last day to trade in order to be eligible to receive the Circular                                  Tuesday, 3 October
    Record date to determine which Exxaro Shareholders are entitled to receive the Circular            Friday, 6 October
    Circular posted to Exxaro Shareholders                                                             Monday, 16 October
    Last day to trade in order to be eligible to attend and vote at the General Meeting                Tuesday, 31 October
    Record date to determine which Exxaro Shareholders are eligible to attend and vote at              Friday, 3 November
    the General Meeting
    For administrative purposes and the sake of good order, it will be appreciated if forms of         Monday, 13 November
    proxy be received or lodged by 10h00 on Thursday, 9 November 2017. Forms of proxy
    may be lodged at any time before the commencement of the General Meeting
    General Meeting to be held at 10h00, at the Exxaro Corporate Centre, Roger Dyason                  Monday, 13 November
    Road, Pretoria West
    Results of the General Meeting published on SENS                                                   Monday, 13 November
    Results of the General Meeting published in the South African press                                Tuesday, 14 November
    If all of the resolutions relating to the Second Repurchase and the Specific Issue
    are passed by the requisite number of Exxaro Independent Shareholders at the
    General Meeting:
    Last day for Exxaro Independent Shareholders who voted against the Second                          Monday, 20 November
    Repurchase Scheme to require Exxaro to seek court approval for the Second
    Repurchase Scheme in terms of section 115(3)(a) of the Companies Act
    Last day to send notice of adoption of special resolutions to dissenting shareholders in           Monday, 27 November
    accordance of section 164 of the Companies Act
    Last day for Exxaro Independent Shareholders who voted against the Second                          Monday, 27 November
    Repurchase Scheme to apply to court for leave to apply for a review of the Second
    Repurchase Scheme in terms of section 115(3)(b) of the Companies Act
    The following dates assume that no court approval or review of the Second
    Repurchase Scheme is required and will be confirmed in the finalisation
    announcement if the Second Repurchase, and as a result the Specific Issue,
    becomes unconditional:
    Expected date for compliance certificate to be received from the TRP and fulfilment of all         Tuesday, 28 November
    conditions precedent related to the Replacement BEE Transaction
    Finalisation announcement (when the Replacement BEE Transaction becomes                            Tuesday 28 November
    unconditional) expected to be released on SENS
    Finalisation announcement published in the press                                                   Wednesday, 29 November
    Repurchase implementation date (including cancellation and delisting of Second                     Wednesday, 6 December
    Repurchase Scheme Shares) on or about
    BEE implementation date (including Specific Issue Shares issued) on or about                       Thursday, 7 December

Notes:
(1)   All times above are South African local time.
(2)   All dates and times are subject to change. The above dates have been determined based on certain assumptions regarding the Replacement
      BEE Transaction. If relevant dates in respect of the Replacement BEE Transaction change, and the dates above are impacted, an
      announcement highlighting the change will be released on SENS and published in the press.

7.   PRO-FORMA FINANCIAL EFFECTS OF THE REPLACEMENT BEE TRANSACTION

7.1. The pro forma financial effects of the Replacement BEE Transaction are still in the process of being
     reviewed.

7.2. Once finalised, the pro forma financial effects of the Replacement BEE Transaction will be announced on
     SENS.

8.   RENEWAL OF CAUTIONARY
     Further to the renewal of cautionary announcement issued on 26 June 2017, and despite all terms being
     agreed, given that the pro forma financial effects of the Replacement BEE Transaction are still being finalised,
     Exxaro Shareholders are advised to continue to exercise caution when dealing in Exxaro Shares, until these
     effects are announced.

CH Wessels
Group Company Secretary
Pretoria
18 September 2017

Merchant bank, financial adviser and transaction sponsor to Exxaro
Rand Merchant Bank, a division of FirstRand Bank Limited

Legal adviser to Exxaro
Norton Rose Fulbright South Africa

Company sponsor to Exxaro
Absa Bank Limited, acting through its corporate and investment bank division

Tax adviser to Exxaro
Cliffe Dekker Hofmeyr

Financial adviser to MS333
Tamela

Legal adviser to MS333
Fasken Martineau

Tax adviser to MS333
Webber Wentzel

Independent Expert
KPMG




                                                                                                                 13

Date: 18/09/2017 05:38:00 Supplied by www.sharenet.co.za                     
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