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EXX - Reviewed Condensed Group Annual Financial Statements and Unreviewed Production and Sales Volumes
EXXARO RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(“Exxaro” or “the company” or “the group”)
REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS AND UNREVIEWED PRODUCTION AND SALES VOLUMES INFORMATION
for the year ended 31 December 2016
SALIENT FEATURES
Owner-controlled operations
- Coal revenue R20,7 billion, up 14%
- Coal NOP* of R5,2 billion, up 101%
SIOC
- R2,4 billion post-tax equity-accounted income
- No dividends declared for FY16
Tronox
- R384 million post-tax equity-accounted losses
- Dividend of R298 million
Group
- Net debt: equity of 3,8%
- Final dividend of 410 cents per share, up 382%
- HEPS** of R13,02 per share, up 185%
- AEPS*** of R16,00 per share, up from 83 cents per share
* Net operating profit.
** Headline earnings per share.
*** Attributable earnings per share.
Please refer to the end for an explanation of the acronyms used throughout this document.
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
2015
2016 Audited
Reviewed (Re-presented)
Rm Rm
Revenue 20 897 18 330
Operating expenses (16 413) (13 116)
Operating profit (note 8) 4 484 5 214
Gain on disposal of joint venture (note 7.1) 203
Impairment charges of non-current assets (note 9) (100) (1 749)
Net operating profit 4 587 3 465
Finance income (note 10) 229 102
Finance costs (note 10) (857) (770)
Income from financial assets 1
Share of income/(loss) of equity-accounted investments (note 11) 2 373 (1 137)
Profit before tax 6 332 1 661
Income tax expense (1 179) (1 102)
Profit for the year from continuing operations 5 153 559
Profit/(loss) for the year from discontinued operations (note 6) 538 (292)
Profit for the year 5 691 267
Other comprehensive (loss)/income, net of tax (549) 2 167
Items that will not be reclassified to profit or loss: (57) 124
- Remeasurements of post-employment benefit obligation (17)
- Share of comprehensive (loss)/income of equity-accounted investments (57) 141
Items that may be subsequently reclassified to profit or loss: (492) 2 043
- Unrealised (losses)/gains on translation of foreign operations (45) 329
- Revaluation of financial assets available-for-sale (5) (141)
- Share of comprehensive (loss)/income of equity-accounted investments (442) 1 855
Total comprehensive income for the year 5 142 2 434
Profit/(loss) attributable to:
Owners of the parent 5 679 296
- Continuing operations 5 141 588
- Discontinued operations 538 (292)
Non-controlling interests 12 (29)
- Continuing operations 12 (29)
Profit for the year 5 691 267
Total comprehensive income/(loss) attributable to:
Owners of the parent 5 130 2 463
- Continuing operations 4 666 2 768
- Discontinued operations 464 (305)
Non-controlling interests 12 (29)
- Continuing operations 12 (29)
Total comprehensive income for the year 5 142 2 434
2015
2016 Audited
Reviewed (Re-presented)
cents cents
Attributable earnings/(loss) per share
Aggregate
- Basic 1 600 83
- Diluted 1 591 83
Continuing operations
- Basic 1 448 165
- Diluted 1 440 165
Discontinued operations
- Basic 152 (82)
- Diluted 151 (82)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December
2016 2015
Reviewed Audited
Rm Rm
ASSETS
Non-current assets 49 959 46 482
Property, plant and equipment 21 972 20 412
Biological assets 45 51
Intangible assets 31 56
Investments in associates (note 14) 21 518 19 690
Investments in joint ventures (note 15) 1 258 1 662
Financial assets (note 16) 4 720 4 067
Deferred tax 415 544
Current assets 9 842 6 016
Inventories 1 036 1 240
Financial assets (note 16) 480
Trade and other receivables 3 050 2 666
Current tax receivable 81 55
Cash and cash equivalents 5 195 2 055
Non-current assets held-for-sale (note 17) 130 128
Total assets 59 931 52 626
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 2 509 2 445
Other components of equity 2 085 6 911
Retained earnings 31 281 25 670
Equity attributable to owners of the parent 35 875 35 026
Non-controlling interests (788) (800)
Total equity 35 087 34 226
Total liabilities 24 844 18 400
Non-current liabilities 16 282 12 701
Interest-bearing borrowings (note 18) 6 002 4 185
Provisions 4 162 3 112
Post-retirement employee obligations 239 217
Financial liabilities (note 20) 479 116
Deferred tax 5 400 5 071
Current liabilities 7 461 4 655
Trade and other payables 3 010 3 546
Shareholder loans 18 21
Interest-bearing borrowings (note 18) 503 882
Current tax payable 210 48
Financial liabilities (note 20) 3 599
Provisions 109 158
Overdraft (note 18) 12
Non-current liabilities held-for-sale (note 17) 1 101 1 044
Total equity and liabilities 59 931 52 626
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Other components of equity
Foreign Financial Retirement Available-
Share currency instruments Equity- benefit for-sale
capital translation revaluation settled obligation revaluation
Rm Rm Rm Rm Rm Rm
At 1 January 2015 (Audited) 2 409 4 167 116 1 695 (329) 382
Profit/(loss) for the year
Other comprehensive income/(loss) 329 (17) (141)
Reclassification of equity (360)
Share of comprehensive income of
equity-accounted investments 1 438 125 215 141 64
Issue of share capital 36
Share-based payments movement 98
Dividends paid
Acquisition of subsidiaries
Liquidation of subsidiaries (1 012)
At 31 December 2015 (Audited) 2 445 4 922 241 2 008 (205) (55)
Profit for the year
Other comprehensive loss (45) (5)
Share of associates’
reclassification of equity (557)
Share of comprehensive
(loss)/income of equity-accounted
investments (466) (218) 242 (57)
Issue of share capital1 64
Share-based payments movement 205
Dividends paid
Share repurchase2
Disposal of foreign subsidiaries3 (401)
At 31 December 2016 (Reviewed) 2 509 4 010 23 1 898 (262) (60)
1 Vesting of Mpower 2012 treasury shares to good leavers.
2 Refer note 20.
3 Gain on translation differences recycled to profit or loss on the disposal of subsidiaries (Mayoko iron ore project
and related subsidiaries).
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Other components of equity
Attributable
to owners Non-
Retained of the controlling Total
Other earnings parent interests equity
Rm Rm Rm Rm Rm
At 1 January 2015 (Audited) 25 985 34 425 34 425
Profit/(loss) for the year 296 296 (29) 267
Other comprehensive income/(loss) 171 171
Reclassification of equity 360
Share of comprehensive income of
equity-accounted investments 13 1 996 1 996
Issue of share capital 36 36
Share-based payments movement 98 98
Dividends paid (984) (984) (984)
Acquisition of subsidiaries (771) (771)
Liquidation of subsidiaries (1 012) (1 012)
At 31 December 2015 (Audited) 25 670 35 026 (800) 34 226
Profit for the year 5 679 5 679 12 5 691
Other comprehensive loss (50) (50)
Share of associates’
reclassification of equity 557
Share of comprehensive
(loss)/income of equity-accounted
investments (499) (499)
Issue of share capital1 64 64
Share-based payments movement 205 205
Dividends paid (625) (625) (625)
Share repurchase2 (3 524) (3 524) (3 524)
Disposal of foreign subsidiaries3 (401) (401)
At 31 December 2016 (Reviewed) (3 524) 31 281 35 875 (788) 35 087
1 Vesting of Mpower 2012 treasury shares to good leavers.
2 Refer note 20.
3 Gain on translation differences recycled to profit or loss on the disposal of subsidiaries (Mayoko iron ore
project and related subsidiaries).
Final dividend paid per share (cents) in respect of the 2015 financial year 85
Dividend paid per share (cents) in respect of the 2016 interim period 90
Final dividend payable per share (cents) in respect of the 2016 financial year 410
Foreign currency translation
Arises from the translation of the financial statements of foreign operations within the group.
Financial instruments revaluation
Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where the hedged transaction
has not yet occurred.
Equity-settled
Represents the fair value, net of tax, of services received from employees and settled by equity instruments granted.
Retirement benefit obligation
Comprises remeasurements, net of tax, on the post-retirement obligation.
Available-for-sale revaluation
Comprises fair value adjustments, net of tax, on the available-for-sale financial assets.
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December
2016 2015
Reviewed Audited
Rm Rm
Cash flows from operating activities 3 918 3 011
Cash generated by operations 5 549 4 526
Interest paid (595) (500)
Interest received 136 54
Tax paid (547) (85)
Dividends paid (625) (984)
Cash flows from investing activities (2 198) (5 130)
Property, plant and equipment to maintain operations (note 13) (2 413) (1 663)
Property, plant and equipment to expand operations (note 13) (367) (727)
Increase in investment in intangible assets (34)
Proceeds from disposal of property, plant and equipment 35 198
Increase in investments in other non-current assets (160) (106)
Increase in loans to related parties (400)
Proceeds from disposal of operation (note 7.1) 47 70
Proceeds from disposal of joint venture (note 7.1) 200
Increase in investment in associate (233)
Increase in investment in joint venture (55) (374)
Income from investments in associates and joint ventures 748 1 341
Acquisition of subsidiaries (3 436)
Dividend income from financial assets 1
Cash flows from financing activities 1 483 2 000
Interest-bearing borrowings raised 7 565 4 320
Interest-bearing borrowings repaid (6 066) (2 320)
Shares acquired in market to settle share-based payments (16)
Net increase/(decrease) in cash and cash equivalents 3 203 (119)
Cash and cash equivalents at beginning of the year 2 055 1 939
Translation difference on movement in cash and cash equivalents (75) 235
Cash and cash equivalents at end of the year 5 183 2 055
Cash and cash equivalents 5 195 2 055
Overdraft (12)
RECONCILIATION OF GROUP HEADLINE EARNINGS
for the year ended 31 December
Gross Tax Net
2016 (Reviewed) Rm Rm Rm
Profit attributable to owners of the parent 5 679
Adjusted for: (1 001) (57) (1 058)
- IFRS 10 Gain on disposal of subsidiaries (670) (670)
- IAS 16 Net losses on disposal of property,
plant and equipment 35 (13) 22
- IAS 16 Gain on disposal of an operation (100) (100)
- IAS 28 Excess of fair value over cost of
investment in associate (256) (256)
- IAS 28 Loss on dilution of investment in associate 36 36
- IAS 28 Share of equity-accounted investments’
separate identifiable remeasurements 57 (17) 40
- IAS 28 Gain on disposal of joint venture (203) (203)
- IAS 36 Impairment of property, plant and equipment 100 (27) 73
Headline earnings/(loss) 4 621
- Continuing operations 4 763
- Discontinued operations (142)
2015 (Audited) (Re-presented)
Profit attributable to owners of the parent 296
Adjusted for: 1 683 (356) 1 327
- IAS 16 Gain on disposal of an operation (112) 31 (81)
- IAS 16 Net gains on disposal of property,
plant and equipment (158) 2 (156)
- IAS 16 Compensation from third parties from items
of property, plant and equipment impaired, abandoned or lost (5) 2 (3)
- IAS 21 Gains on translation differences recycled to
profit or loss on the liquidation of a foreign subsidiary (1 012) (1 012)
- IAS 28 Loss on dilution of investment in associate 10 10
- IAS 28 Share of equity-accounted investments’ separate
identifiable remeasurements 1 211 (328) 883
- IAS 36 Impairment of property, plant and equipment 225 (63) 162
- IAS 36 Impairment of goodwill acquired in a business
combination in terms of IFRS 3 1 524 1 524
Headline earnings/(loss) 1 623
- Continuing operations 2 035
- Discontinued operations (412)
2015
2016 Audited
Reviewed (Re-presented)
cents cents
Headline earnings/(loss) per share
Aggregate
- Basic 1 302 457
- Diluted 1 294 456
Continuing operations
- Basic 1 342 573
- Diluted 1 334 572
Discontinued operations
- Basic (40) (116)
- Diluted (40) (116)
NOTES TO THE REVIEWED CONDENSED GROUP ANNUAL FINANCIAL STATEMENTS
for the year ended 31 December
1. CORPORATE BACKGROUND
Exxaro, a public company incorporated in South Africa, is a diversified resources group with interests in the coal (controlled and
non-controlled), TiO2 and Alkali chemicals (non-controlled), ferrous (controlled and non-controlled) and energy (non-controlled)
markets. These reviewed condensed group annual financial statements as at and for the year ended 31 December 2016 comprise the
company and its subsidiaries (together referred to as the group) and the group’s interest in associates and joint ventures.
2. BASIS OF PREPARATION
2.1 Statement of compliance
The reviewed condensed group annual financial statements as at and for the year ended 31 December 2016 are prepared in accordance
with the requirements of the JSE Listings Requirements for preliminary reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum,
contain the information required by IAS 34 Interim Financial Reporting.
The reviewed condensed group annual financial statements as at and for the year ended 31 December 2016 have been prepared under the
supervision of PA Koppeschaar CA(SA), SAICA registration number: 00038621.
The reviewed condensed group annual financial statements should be read in conjunction with the group annual financial statements
as at and for the year ended 31 December 2015, which have been prepared in accordance with IFRS as issued by the IASB. The reviewed
condensed group annual financial statements have been prepared on the historical cost basis, excluding financial instruments and
biological assets, which are at fair value.
The reviewed condensed group annual financial statements of Exxaro and its subsidiaries for the year ended 31 December 2016 were
authorised for issue by the board of directors on 7 March 2017.
2.2 Judgements and estimates
In preparing these reviewed condensed group annual financial statements, management made judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense.
Actual results may differ from these estimates. The significant judgements made by management in applying the group’s accounting
policies and the key source of estimation uncertainty were similar to those applied to the group annual financial statements as
at and for the year ended 31 December 2015.
3. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the reviewed condensed group annual financial statements are consistent with
those followed in the preparation of the group annual financial statements as at and for the year ended 31 December 2015. Amendments
to IFRS effective for the financial year ending 31 December 2016 did not have a material impact on the group.
New accounting standards and amendments issued to accounting standards and interpretations which are relevant to the group, but
not yet effective on 31 December 2016, have not been adopted. The group continuously evaluates the impact of these standards and
amendments.
4. RE-PRESENTATION OF COMPARATIVE INFORMATION
The prior year of the condensed group statement of comprehensive income (and related notes) has been re-presented as a result of
the ferrous iron ore operating segment being identified as discontinued operations. Refer note 6 on discontinued operations.
5. SEGMENTAL INFORMATION
Operating segments are reported on in a manner consistent with the internal reporting provided to the chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the reportable operating segments.
The chief operating decision-maker has been identified as the group executive committee. Segments reported are based on the
group’s different products and operations.
Total operating segment revenue, which excludes VAT, represents the gross value of goods invoiced, services rendered and
includes operating revenues directly and reasonably allocable to the segments. Export revenue is recorded according to the
relevant sales terms, when the risks and rewards of ownership are transferred.
Segment revenue includes sales made between segments. These sales are made on a commercial basis. Segment operating expenses,
assets and liabilities represent direct or reasonably allocable operating expenses, assets and liabilities. Segment net operating
profit equals segment revenue less operating segment expenses, less impairment charges, plus impairment reversals.
The group has four reportable segments, as described below. These offer different products and services, and are managed separately
based on commodity, location and support function grouping. The group executive committee reviews internal management reports on
these divisions at least quarterly.
Coal
The coal operations are mainly situated in the Waterberg and Mpumalanga regions and are split between coal commercial operations
and coal tied operations, a 50% (2015: 50%) investment in Mafube (a joint venture with Anglo) as well as a 10,82% (2015: 9,37%)
effective equity interest in RBCT. The coal operations produce thermal coal, metallurgical coal and SSCC.
Ferrous
The ferrous segment comprises a 20,62% (2015: 19,98%) equity interest in SIOC (located in South Africa) reported within the other
ferrous operating segment as well as the FerroAlloys operations (referred to as Alloys). Although the SIOC investment is an investment
in an iron ore commodity company and the executive committee classifies the investment as a non-controlled business, it is classified
under the other ferrous segment where investments and other are reviewed by the executive committee. The iron ore operating segment
(comprising the Mayoko iron ore project and related subsidiaries) was classified as discontinued operations and sold on
23 September 2016.
TiO2 and Alkali chemicals
Exxaro holds a 43,66% (2015: 43,87%) equity interest in Tronox and a 26% (2015: 26%) equity interest in Tronox SA (each of the South
African-based operations), as well as a 26% (2015: 26%) member’s interest in Tronox UK.
Other
This reportable segment comprises the 50% (2015: 50%) investment in Cennergi (a South African joint venture with Tata Power),
26% (2015: 26%) equity interest in Black Mountain (located in the Northern Cape province), an effective investment of 11,7%
(2015: 11,7%) in Chifeng (located in the PRC) as well as the corporate office which renders services to customers.
The following table presents a summary of the group’s segmental information:
Coal Ferrous TiO2 and Other Total
Tied Commercial Iron Other Alkali Base
operations operations ore Alloys ferrous chemicals metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year ended
31 December 2016 (Reviewed)
External revenue (continuing operations) 3 483 17 190 170 54 20 897
Segment net operating profit/(loss) 226 4 940 613 (75) 28 (532) 5 200
- Net operating profit/(loss) from
continuing operations 226 4 940 (75) 28 (532) 4 587
- Net operating profit from
discontinued operations 613 613
External finance income (note 10) 2 61 1 165 229
External finance costs (note 10) (105) (245) (507) (857)
Income tax benefit/(expense) 13 (1 110) (75) 21 2 (105) (1 254)
Depreciation and amortisation (note 8) (12) (1 072) (7) (107) (1 198)
Impairment charges - non-current assets
(excluding financial assets) (note 9) (100) (100)
Gain on disposal of operation 100 100
Gain on disposal of Mayoko iron ore project
and related subsidiaries 670 670
Gain on disposal of joint venture 203 203
Cash generated by/(utilised in) operations 260 5 426 (29) (53) (22) (33) 5 549
Share of income/(loss) of
equity-accounted investments (note 11) 238 2 416 (384) 100 3 2 373
Capital expenditure (note 13) (2 747) (14) (19) (2 780)
At 31 December 2016 (Reviewed)
Segment assets and liabilities
Deferred tax 49 22 1 343 415
Investments in associates (note 14) 2 217 7 549 11 232 520 21 518
Investments in joint ventures (note 15) 839 419 1 258
External assets1 2 952 27 481 13 201 25 178 5 760 36 610
Assets 2 952 30 586 13 223 7 575 11 232 698 6 522 59 801
Non-current assets held-for-sale (note 17) 1 129 130
Total assets as per statement
of financial position 2 952 30 587 13 223 7 575 11 232 698 6 651 59 931
External liabilities 2 631 4 939 39 4 10 520 18 133
Deferred tax2 (54) 5 515 (61) 5 400
Current tax payable2 (14) 224 210
Liabilities 2 563 10 678 39 4 10 459 23 743
Non-current liabilities held-for-sale
(note 17) 1 101 1 101
Total liabilities as per statement
of financial position 2 563 11 779 39 4 10 459 24 844
1 Excluding deferred tax, investments in associates and joint ventures and non-current assets held-for-sale.
2 Offset per legal entity and tax authority.
Coal Ferrous TiO2 and Other Total
Tied Commercial Iron Other Alkali Base
operations operations ore Alloys ferrous chemicals metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year ended
31 December 2015 (Audited) (Re-presented)
External revenue (continuing operations) 3 835 14 258 173 64 18 330
Segment net operating profit/(loss) 195 2 379 (292) 10 (24) 905 3 173
- Net operating profit/(loss) from
continuing operations 195 2 379 10 (24) 905 3 465
- Net operating loss from
discontinued operations (292) (292)
External finance income (note 10) 3 38 61 102
External finance costs (note 10) (63) (154) (553) (770)
Income tax (expense)/benefit (17) (1 115) (3) 6 27 (1 102)
Depreciation and amortisation (note 8) (24) (927) (7) (4) (67) (1 029)
Impairment charges - goodwill (note 9) (1 524) (1 524)
Impairment charges - non-current assets
(excluding financial assets
and goodwill) (note 9) (225) (225)
Gain on disposal of operation 112 112
Cash generated by/(utilised in)
operations 332 4 300 (285) (38) (74) 291 4 526
Share of income/(loss) of
equity-accounted investments (note 11) 251 104 (1 503) 64 (53) (1 137)
Capital expenditure (note 13) (2 313) (28) (49) (2 390)
At 31 December 2015 (Audited)
Segment assets and liabilities
Deferred tax 39 47 124 109 225 544
Investments in associates (note 14) 1 919 5 081 12 270 420 19 690
Investments in joint ventures (note 15) 1 067 595 1 662
External assets1 1 934 25 948 114 189 29 210 2 178 30 602
Assets 1 973 28 981 114 313 5 219 12 270 630 2 998 52 498
Non-current assets held-for-sale
(note 17) 128 128
Total assets as per statement of
financial position 1 973 28 981 114 313 5 219 12 270 630 3 126 52 626
External liabilities 1 775 5 179 286 37 52 4 908 12 237
Deferred tax2 (30) 5 094 1 5 1 5 071
Current tax payable2 (100) 145 3 48
Liabilities 1 645 10 418 290 42 52 4 909 17 356
Non-current liabilities held-for-sale
(note 17) 1 044 1 044
Total liabilities as per statement
of financial position 1 645 11 462 290 42 52 4 909 18 400
1 Excluding deferred tax, investments in associates and joint ventures and non-current assets held-for-sale.
2 Offset per legal entity and tax authority.
6. DISCONTINUED OPERATIONS
Exxaro entered into a sale of shares agreement for the sale of the Mayoko iron ore project (and related subsidiaries) for a purchase
consideration of US$2 million which became effective on 23 September 2016. The disposal group represents a separate geographical
area of operation and represents the iron ore operating segment within the ferrous reportable segment. Financial information
relating to discontinued operations for the period to the date of disposal is set out below:
For the year ended 31 December
2015
2016 Audited
Reviewed (Re-presented)
Rm Rm
The financial performance and cash flow information
Operating expenses (57) (292)
Operating loss (57) (292)
Gain on disposal of subsidiaries 670
Net operating profit/(loss) 613 (292)
Income tax expense (75)
Profit/(loss) for the year from discontinued operations 538 (292)
Cash flow attributable to operating activities (29) (326)
Cash flow attributable to investing activities 9 119
Cash flow attributable to discontinued operations (20) (207)
7. GAINS ON THE DISPOSAL OF JOINT VENTURE, OPERATIONS AND SUBSIDIARIES
7.1 Continuing operations
SDCT Inyanda
joint venture operation
Rm Rm
For the year ended 31 December 2016
Gain on the disposal
Consideration received:
- Cash 200 47
Total disposal consideration 200 47
Carrying amount of net liabilities sold 3 53
- Carrying amount of investment sold1
- Equity-accounted losses realised on disposal 3
- Provisions 53
Gain on disposal2 203 100
1 The investment in SDCT was sold on 31 March 2016. The carrying value of the investment was
below R1 million (R1 333).
2 After tax of nil.
NCC operation
Rm
For the year ended 31 December 2015
Gain on the disposal
Consideration received:
- Cash 70
Total disposal consideration 70
Carrying amount of net liabilities sold 42
- Property, plant and equipment (149)
- Inventories (7)
- Provisions 197
- Trade and other payables 1
Gain on disposal 112
Net tax effect (31)
7.2 Discontinued operations
Mayoko
iron ore
project1
Rm
For the year ended 31 December 2016
Gain on the disposal
Consideration receivable:
- Cash 28
Total disposal consideration 28
Carrying amount of net liabilities sold 642
- Trade and other receivables (13)
- Provisions 32
- Trade and other payables 153
- Current tax payable 69
- Foreign currency translation reserve 401
Gain on disposal2 670
1 The following subsidiaries relating to the Mayoko iron ore project were disposed of:
- African Iron Exploration SA
- African Iron Proprietary Limited
- AKI Exploration (Bermuda) Proprietary Limited
- AKI Exploration Proprietary Limited
- DMC Iron Congo SA
- DMC Mining Proprietary Limited
- Exxaro Mayoko SA
- Mayoko Investment Company
2 After tax of nil.
For the year ended 31 December
2015
2016 Audited
Reviewed (Re-presented)
Rm Rm
8. SIGNIFICANT ITEMS INCLUDED IN OPERATING PROFIT
Depreciation and amortisation (1 198) (1 029)
Net realised foreign currency exchange (losses)/gains1 (116) 1 336
Fair value adjustment on contingent consideration2 (445)
Royalties (82) (126)
Gain on disposal of operations3 100 112
Termination benefits4 (226) (372)
1 2015 includes R1 012 million relating to the liquidation
of a foreign subsidiary.
2 Relating to the ECC acquisition.
3 Sale of the Inyanda operation in 2016 and the
NCC operation in 2015 (refer note 7.1).
4 Voluntary severance package costs and other termination
costs incurred and accrued for.
9. IMPAIRMENT CHARGES OF NON-CURRENT ASSETS
FerroAlloys operation
Impairment charges, net of tax 73
- Property, plant and equipment 100
- Tax effect (27)
ECC
Impairment charges, net of tax 1 524
- Goodwill 1 524
Reductants operation
Impairment charges, net of tax 162
- Property, plant and equipment 225
- Tax effect (63)
Net impairment charges per statement of comprehensive income 100 1 749
Net tax effect (27) (63)
Net effect on attributable earnings 73 1 686
FerroAlloys operation
The ferrosilicon plant was expanded during 2013/4 which led to a material increase in production capacity on commissioning.
This expansion project was in line with Exxaro’s strategy and expected increased demand from customers. During 2016, one
of the major customers was put into business rescue and another major customer gave notice to terminate the current supply
agreement on 31 December 2018.
FerroAlloys has been engaged in product diversification, promotions and test campaigns at various plants and markets.
Although some interest was shown in the product and positive test results were obtained, it is not possible to determine
growth in the new market. The significant lower demand from current customers and the prospects of securing new customers for
the ferrosilicon product has been identified as an impairment indicator (according to IFRS) and as a result an impairment
assessment was performed at 31 December 2016. The ferrosilicon plant was fully impaired (R100 million) on 31 December 2016.
ECC
Exxaro acquired TCSA on 20 August 2015 and renamed it ECC. The PPA was completed and goodwill of R1 524 million was recognised
at acquisition. The goodwill was assessed for impairment on 31 December 2015 and was fully impaired on that date.
Reductants operation
The decline in demand, lower FeCr prices and rising production costs drastically impacted local producers. This, coupled
with continued declining imported semi-coke and cheaper market coke prices resulted in producers increasing market coke usage
and further reducing semi-coke demand. The char plant was fully impaired in 2015 based on the cessation of production.
For the year ended 31 December
2016 2015
Reviewed Audited
Rm Rm
10. NET FINANCING COSTS
Total finance income 229 102
- Interest income 218 91
- Finance lease interest income 11 11
Total finance costs (857) (770)
- Interest expense (496) (546)
- Unwinding of discount rate on rehabilitation cost (347) (220)
- Finance lease interest expense (5)
- Amortisation of transaction costs (25) (10)
- Borrowing costs capitalised1 16 6
Total net financing costs (628) (668)
1 Borrowing costs capitalisation rate: 9,55% 6,94%
For the year ended 31 December
2016 2015
Reviewed Audited
Rm Rm
11. SHARE OF INCOME/(LOSS) OF EQUITY-ACCOUNTED INVESTMENTS
Associates 2 132 (1 339)
Listed investments (391) (1 646)
- Tronox (391) (1 646)
Unlisted investments 2 523 307
- SIOC1 2 416 104
- Tronox SA (111) 40
- Tronox UK 118 103
- RBCT2 (4)
- Black Mountain 100 64
Joint ventures 241 202
- Mafube 238 253
- SDCT 2
- Cennergi 3 (53)
Share of income/(loss) of equity-accounted investments 2 373 (1 137)
1 2016 includes R221 million excess of fair value over the cost of the investment which arose on the increase of
0,64% in the shareholding of SIOC.
2 2016 includes R35 million excess of fair value over the cost of the investment which arose on the increase in
the shareholding in RBCT (refer note 14).
12. DIVIDEND DISTRIBUTION
Total dividends paid in 2016 amounted to R625 million (2015: R984 million), made up of a final dividend of
R304 million which related to the year ended 31 December 2015, paid in April 2016, as well as an interim dividend
of R321 million, paid in September 2016.
A final dividend for 2016 of 410 cents per share (2015: 85 cents per share) was approved by the board of directors on
8 March 2017. The dividend is payable on 24 April 2017 to shareholders who will be on the register on 21 April 2017.
This final dividend, amounting to approximately R1 289 million (2015: R304 million), has not been recognised as a
liability in these reviewed condensed group annual financial statements. It will be recognised in shareholders’
equity in the year ending 31 December 2017.
The final dividend declared will be subject to a dividend withholding tax of 20% for all shareholders who are not
exempt from or do not qualify for a reduced rate of dividend withholding tax. The net local dividend payable to
shareholders, subject to dividend withholding tax at a rate of 20% amounts to 328,00000 cents per share. The number
of ordinary shares in issue at the date of this declaration is 314 171 761 (2015: 358 115 505) after the share
repurchase on 17 January 2017. Exxaro company’s tax reference number is 9218/098/14/4.
At 31 December
2016 2015
Reviewed Audited
Issued share capital (number) 358 115 505 358 115 505
Ordinary shares (million)
- Weighted average number of shares 355 355
- Diluted weighted average number of shares 357 356
For the year ended 31 December
2016 2015
Reviewed Audited
Rm Rm
13. CAPITAL EXPENDITURE
Incurred 2 780 2 390
- To maintain operations 2 413 1 663
- To expand operations 367 727
Contracted 2 333 2 162
- Contracted for the group (owner-controlled) 1 382 1 721
- Share of capital commitments of
equity-accounted investments 951 441
Authorised, but not contracted 3 500 1 376
At 31 December
2016 2015
Reviewed Audited
Rm Rm
14. INVESTMENTS IN ASSOCIATES
Listed investments 7 946 8 997
- Tronox1 7 946 8 997
Unlisted investments 13 572 10 693
- SIOC 7 549 5 081
- Tronox SA 1 728 1 833
- Tronox UK 1 558 1 440
- RBCT2 2 217 1 919
- Black Mountain 520 420
Total carrying value of investments in associates 21 518 19 690
1 Fair value based on a listed price
(Level 1 within the IFRS 13 Fair
Value Measurement fair value hierarchy) (Rm): 7 186 3 095
Listed share price (US$ per share): 10,31 3,91
The recoverable amount (value in use) of this investment was determined based on Exxaro’s share of
the present value of Tronox’s cash flows, and resulted in no impairment charge being recognised on
31 December 2016. Subsequent to 31 December 2016, the Tronox share price improved to US$17,80 per share
on 7 March 2017, an increase of 73%.
2 On 31 March 2016 Exxaro restructured the shareholding in SDCT for a direct interest in RBCT. The restructuring
resulted in a R203 million gain on disposal of SDCT and a R35 million excess of fair value over cost of the
investment in RBCT on the additional 20 000 shares acquired in RBCT. The total purchase consideration of the
additional RBCT investment amounted to R297 million, comprising R233 million cash consideration and R64 million
non-cash consideration.
At 31 December
2016 2015
Reviewed Audited
Rm Rm
15. INVESTMENTS IN JOINT VENTURES
Unlisted investments 1 258 1 662
- Mafube 839 1 067
- SDCT1
- Cennergi2 419 595
Total carrying value of investments
in joint ventures 1 258 1 662
1 The investment in SDCT was sold on 31 March 2016.
Refer note 7 and 14. The carrying value of the
investment was below R1 million (R1 333) for the
comparative year and included in financial assets,
was a loan to SDCT which was settled on the disposal
of the investment (refer note 16): 105
2 Included in financial assets is a loan
to Cennergi (refer note 16): 126
At 31 December
2016 2015
Reviewed Audited
Rm Rm
16. FINANCIAL ASSETS
Non-current financial assets
Environmental rehabilitation funds 1 401 1 329
Loans to joint ventures 126 105
Non-current receivables 1 768 803
Loan to BEE shareholder1 426
Indemnification asset2 1 100 1 044
Investments 193 214
- Available-for-sale 178 210
- Fair value through profit or loss 15 4
Lease receivables 132 146
Total non-current financial assets 4 720 4 067
Current financial assets
Loan to BEE shareholder1 480
Total current financial assets 480
Total financial assets 5 200 4 067
1 Exxaro provided a loan to Main Street 333, during 2015, which has been classified as current for the year ended
31 December 2016. The loan is repayable by April 2017 and attracts interest at prime plus 5%.
2 The indemnification asset arose on the ECC business combination transaction.
17. NON-CURRENT ASSETS AND LIABILITIES HELD-FOR-SALE
EMJV
Exxaro concluded the purchase of ECC in 2015, and as part of this acquisition Exxaro acquired non-current liabilities
held-for-sale relating to the EMJV. The sale of the EMJV is conditional on section 11 approval required in terms of
the MPRDA for transfer of the new-order mining right to the new owners, Scinta Energy Proprietary Limited as well as
section 43(2) approval for the transfer of environmental liabilities and responsibilities. The EMJV remains a non-current
liability held-for-sale for the Exxaro group on 31 December 2016.
The EMJV does not meet the criteria to be classified as a discontinued operation since it does not represent a separate
major line of business, nor does it represent a major geographical area of operation.
Other
The land and buildings situated at corporate centre were classified as a non-current asset held-for-sale on
31 December 2015. The sale was subject to the fulfilment of suspensive conditions which were not met and the
sales agreement subsequently lapsed.
A new agreement was entered into with a property consortium in June 2016. The sale is conditional on Exxaro entering
into a leaseback agreement for a minimum of two years. These agreements have been finalised during January 2017.
The land and buildings situated at corporate centre remains classified as a non-current asset held-for-sale on
31 December 2016.
The major classes of non-current assets and liabilities held-for-sale are as follows:
At 31 December
2016 2015
Reviewed Audited
Rm Rm
Assets
Property, plant and equipment 129 128
Deferred tax 1
Total assets 130 128
Liabilities
Non-current provisions (1 083) (1 027)
Post-retirement employee obligations (18) (17)
Total liabilities (1 101) (1 044)
Net liabilities held-for-sale (971) (916)
18. INTEREST-BEARING BORROWINGS
Loans
Refinanced loan facility
Exxaro refinanced the previous senior loan facility by entering into a new facility agreement during July 2016.
The refinanced loan facility comprises a:
- R3 250 million bullet term loan facility with a term of five years (term loans)
- R2 000 million amortised term loan facility with a term of seven years (term loans)
- R2 750 million revolving credit facility with a term of five years (revolving facility)
Interest is based on JIBAR plus a margin of 3,25% for the bullet term loan (R3 250 million), JIBAR plus a margin
of 3,60% for the amortised term loan facility (R2 000 million) and JIBAR plus a margin of 3,25% for the revolving
credit facility. The effective interest rate for the transaction costs on the term loans is 0,32%. Interest is
paid on a quarterly basis for the term loans, and on a monthly basis for the revolving credit facility.
The undrawn portion relating to the term loan facilities amounts to R1 750 million. The undrawn portion of the
revolving facility amounts to R750 million.
Senior loan facility
During July 2016 the senior loan facility was settled.
Exxaro had secured the senior loan facility of R8 000 million during April 2012. The senior loan facility comprised a:
- Term loan facility of R5 000 million for a duration of 97 months
- Revolving credit facility of R3 000 million for a duration of 62 months.
Interest was based on JIBAR plus a margin of 2,75% for the term loan, and JIBAR plus a margin of 2,50% for the
revolving credit facility. The effective interest rate for the transaction costs for the term loan was 0,47%.
Interest was paid on a six-monthly basis for the term loan, and on a monthly basis for the revolving credit facility.
Bond issue
In terms of Exxaro’s R5 000 million DMTN programme, a senior unsecured floating rate note (bond) of R1 000 million was
issued in May 2014. The bond comprises a:
- R480 million senior unsecured floating rate note due 19 May 2017
- R520 million senior unsecured floating rate note due 19 May 2019.
Interest on the bond is based on JIBAR plus a margin of 1,70% for the R480 million bond and JIBAR plus a margin of
1,95% for the R520 million bond. The effective interest rate for the transaction costs is 0,13% for the R480 million
bond and 0,08% for the R520 million bond. Interest is paid on a quarterly basis for both bonds.
Included in the 2016 interest-bearing borrowings are obligations relating to finance leases for mining equipment.
At 31 December
2016 2015
Reviewed Audited
Rm Rm
Summary of loans and finance leases
by financial year of redemption1
2016 882
2017 503 1 274
2018 5 795
2019 514 1 317
2020 (9) 799
2021 5 244
2022 onwards 248
Total interest-bearing borrowings 6 505 5 067
- Current interest-bearing borrowings2 503 882
- Non-current interest-bearing borrowings3 6 002 4 185
1 During 2016 the R8 000 million loan facility was refinanced which resulted in a new redemption profile.
2 The current portion represents capital repayments amounting to R512 million (2015: R800 million), interest
capitalised amounting to nil (2015: R90 million) reduced by transaction costs amounting to R9 million
(2015: R8 million).
3 The non-current portion includes R35 million (2015: R15 million) in respect of transaction costs that
will be amortised using the effective interest rate method, over the term of the facilities.
Minimum finance lease payments:
- Not later than one year 35
- Later than one year but not later than five years 18
Total 53
Less: future finance charges (4)
Present value of finance lease liabilities 49
- Current 32
- Non-current 17
Overdraft
Bank overdraft 12
The bank overdraft is repayable on demand and interest payable is based on current South African
money market rates.
There were no defaults or breaches in terms of interest-bearing borrowings during 2016.
At 31 December
2016 2015
Reviewed Audited
Rm Rm
19. NET DEBT1
Net debt is presented by the following
items on the statement of financial position
(excluding assets and liabilities
classified as held-for-sale): (1 322) (3 012)
- Cash and cash equivalents 5 195 2 055
- Non-current interest-bearing borrowings (6 002) (4 185)
- Current interest-bearing borrowings (503) (882)
- Overdraft (12)
Calculation of movement in net debt:
Cash inflow/(outflow) from operating
and investing activities: 1 720 (2 119)
Add:
- Shares acquired in market to
settle share-based payments (16)
- Movement in external shareholder loans (3)
- Movement for interest
capitalised/interest accrued 89 (47)
- Non-cash amortisation of transaction costs (25) (10)
- Translation differences of movements
in cash and cash equivalents (75) 235
Decrease/(increase) in net debt 1 690 (1 941)
1 Non-IFRS measure.
20. FINANCIAL LIABILITIES
Non-current financial liabilities
Finance lease 66 77
Contingent consideration1 408 39
Other 5
Total non-current financial liabilities 479 116
Current financial liabilities
Contingent consideration1 75
Share repurchase2 3 524
Total current financial liabilities 3 599
Total financial liabilities 4 078 116
1 Relates to the contingent consideration which arose on the 2015 ECC business combination transaction.
A portion of the contingent consideration has been classified as current as it is payable in 2017, due
to the API4 export price being within the agreed range for the 2016 financial year.
2 On 30 December 2016 Exxaro shareholders approved the repurchase of shares by means of a special resolution.
Subsequent to year-end Exxaro repurchased 43 943 744 ordinary shares from Main Street 333 for a purchase
consideration of R3 524 million.
21. FINANCIAL INSTRUMENTS
21.1 Carrying amounts and fair values
Due to the short-term nature of the current financial assets and current financial liabilities, the carrying amount
is assumed to be the same as the fair value. For the non-current financial assets and non-current financial liabilities,
the fair value is also equivalent to the carrying amounts.
21.2 Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair
value measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation
techniques used. The different levels are defined as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the group can access
at the measurement date.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3 - unobservable inputs for the asset and liability.
Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm
At 31 December 2016 (Reviewed)
Financial assets designated at fair value
through profit or loss 1 183 1 183
- Environmental rehabilitation funds 1 168 1 168
- New Age Exploration Limited 1 1
- KIO 14 14
Available-for-sale financial assets 178 178
- Chifeng 178 178
Financial liabilities held-for-trading at fair
value through profit or loss (25) (25)
- Current derivative financial liabilities (25) (25)
Financial liabilities designated at fair
value through profit or loss (483) (483)
- Non-current contingent consideration (408) (408)
- Current contingent consideration (75) (75)
Net financial assets/(liabilities) held at fair value 1 183 (25) (305) 853
At 31 December 2015 (Audited)
Financial assets held-for-trading at fair value
through profit or loss 1 1
- Current derivative financial assets 1 1
Financial assets designated at fair value
through profit or loss 1 117 1 117
- Environmental rehabilitation funds 1 113 1 113
- KIO 4 4
Available-for-sale financial assets 210 210
- Chifeng 210 210
Financial liabilities held-for-trading at fair
value through profit or loss (41) (41)
-Current derivative financial liabilities (41) (41)
Financial liabilities designated at fair value
through profit or loss (39) (39)
- Non-current contingent consideration (39) (39)
Net financial assets/(liabilities) held at fair value 1 117 (40) 171 1 248
Reconciliation of financial assets and financial liabilities within Level 3 of the hierarchy
Contingent Chifeng RBCT Total
consideration Rm Rm Rm
Rm
At 1 January 2015 (Audited) 267 973 1 240
Movement during the year
Losses recognised for the year in other
comprehensive income (pre-tax effect)1 (103) (61) (164)
Acquisition of subsidiaries (33) (33)
Reclassification of loan repayments (229) (229)
Exchange gains recognised in other comprehensive income 46 46
Exchange losses recognised in profit or loss (6) (6)
Transfers out of Level 32 (683) (683)
At 31 December 2015 (Audited) (39) 210 171
Movement during the year
Losses recognised for the year in profit or loss (445) (445)
Losses for the year recognised in other
comprehensive income (pre-tax effect) (5) (5)
Exchange losses recognised in other comprehensive income (27) (27)
Exchange gains recognised in profit or loss 1 1
At 31 December 2016 (Reviewed) (483) 178 (305)
1 Tax on RBCT amounts to R23 million.
2 Relates to the RBCT investment now accounted for as an investment in associate.
Transfers
The group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period
during which the transfer has occurred. There were no transfers between Level 1 and Level 2 nor between Level 2
and Level 3 of the fair value hierarchy during the years ended 31 December 2016 and 2015, as shown in the
reconciliation above.
During 2015, the RBCT investment was transferred out of Level 3 of the fair value hierarchy and classified as an investment
in associate following the acquisition of an additional interest in RBCT through the ECC acquisition.
Valuation process applied by the group
The fair value computations of the investments are performed by the group’s corporate finance department, reporting to the
finance director, on a six-monthly basis.
The valuation reports are discussed with the chief operating decision maker and the audit committee in accordance with the
group’s reporting governance.
Current derivative financial instruments
Level 2 fair values for simple over-the-counter derivative financial instruments are based on market quotes. These quotes
are assessed for reasonability by discounting estimated future cash flows using the market rate for similar instruments
at measurement date.
21.3 Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant
inputs used in the valuation models
Chifeng
Chifeng is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable
price available for this investment. This unlisted investment is valued as the present value of the estimated future
cash flows, using a discounted cash flow model. The valuation technique is consistent to that used in previous
reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in
Chifeng are rand/RMB exchange rate, RMB/US$ exchange rate, Zinc LME price, production volumes, operational costs
and the discount rate.
Sensitivity
analysis of a
10% increase
Sensitivity of in the inputs is
inputs and fair demonstrated
value below2
At 31 December 2016 (Reviewed) Inputs measurement1 Rm
Observable inputs
Rand/RMB exchange rate R1,96/RMB1 Strengthening of 18
the rand to the
RMB
RMB/US$ exchange rate RMB6,52 Strengthening of 158
to RMB7,13/US$1 the RMB to the
US$
Zinc LME price (US$ per tonne in real terms) US$2 026 to Increase in 158
US$2 113 price of zinc
concentrate
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in 33
production
volumes
Operational costs (US$ million per annum in real terms) US$58,97 to Decrease in (129)
US$74,38 operations
costs
Discount rate (%) 11,23% Decrease in the (15)
discount rate
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that
all other variables remain constant.
Sensitivity
analysis of a
10% increase
Sensitivity of in the inputs is
inputs and fair demonstrated
value below2
At 31 December 2015 (Audited) Inputs measurement1 Rm
Observable inputs
Rand/RMB exchange rate R2,31/RMB1 Strengthening of 21
the rand to the
RMB
RMB/US$ exchange rate RMB6,26 to Strengthening of 203
RMB7,12/US$1 the RMB to the
US$
Zinc LME price (US$ per tonne in real terms) US$1 611 to Increase in 203
US$2 200 price of zinc
concentrate
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in 31
production
volumes
Operational costs (US$ million per annum in real terms) US$56,94 Decrease in (173)
to US$75,22 operations
costs
Discount rate (%) 9,93% Decrease in the (19)
discount rate
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that
all other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within the range
of reasonably possible alternative assumptions for both reporting periods.
Contingent consideration
The potential undiscounted amount of all deferred future payments that the group could be required to make under the
ECC acquisition is between nil and US$120 million. The amount of future payments is dependent on the API4 coal price.
At 31 December 2016, there was an increase of US$32,9 million (R445 million) (2015 since acquisition: US$0,03 million
(R0,44 million)) recognised in profit or loss for the contingent consideration arrangement.
API4 coal price range (US$/tonne) Future payment
Reference year Minimum Maximum US$ million
2015 60 80 10
2016 60 80 25
2017 60 80 25
2018 60 90 25
2019 60 90 35
The amount to be paid in each of the five years is determined as follows (refer table above):
- If the average API4 price in the reference year is below the minimum API4 price of the agreed range, then no
payment will be made
- If the average API4 price falls within the range, then the amount to be paid is determined based on a formula
contained in the agreement
- If the average API4 price is above the maximum API4 price of the range, then Exxaro is liable for the full
amount due for that reference year
An additional payment to Total S.A. is required for the 2016 financial year as the API4 price was within the agreed range.
No additional payment to Total S.A. was required for the 2015 financial year as the API4 price was below the range.
This derivative financial liability is classified within Level 3 of the fair value hierarchy as there is no quoted
market price or observable price available for this financial instrument. This financial instrument is valued as the
present value of the estimated future cash flows, using a discounted cash flow model.
The significant observable and unobservable inputs used in the fair value measurement of this financial instrument are
rand/US$ exchange rate, API4 export price and the discount rate.
Sensitivity
analysis of a
10% increase
Sensitivity of in the inputs is
inputs and fair demonstrated
value below2
At 31 December 2016 (Reviewed) Inputs measurement1 Rm
Observable inputs
Rand/US$ exchange rate R13,63/US$1 Strengthening of 48
the rand
to the US$
API4 export price (price per tonne) US$57,19 to Increase in API4 248
US$75 export price
per tonne
Unobservable inputs
Discount rate (%) 3,44% Decrease in the (21)
discount rate
At 31 December 2015 (Audited)
Observable inputs
Rand/US$ exchange rate R15,48/US$1 Strengthening of 4
the rand
to the US$
API4 export price (price per tonne) US$51,15 Increase in API4 175
to US$62,5 export price
per tonne
Unobservable inputs
Discount rate (%) 3,44% Decrease in the (1)
discount rate
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that
all other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within the
range of reasonably possible alternative assumptions for the reporting period.
At 31 December
2016 2015
Reviewed Audited
Rm Rm
22. CONTINGENT LIABILITIES
Total contingent liabilities 6 907 7 378
- DMC Iron Congo SA 6
- Pending litigation and other claims1 1 136 1 233
- Operational guarantees2 4 331 3 559
- Share of contingent liabilities of equity-accounted investments3 1 440 2 580
1 Pending litigation and other claims consist of legal cases as well as tax disputes with Exxaro as defendant.
The outcome of these claims is uncertain and the amount of possible legal obligations that may be incurred
can only be estimated at date of reporting.
2 Operational guarantees include guarantees to banks and other institutions in the normal course of business
from which it is anticipated that no material liabilities will arise.
3 Decrease mainly relates to SIOC settlement with SARS.
The timing and occurrence of any possible outflows of the contingent liabilities above are uncertain.
SARS
On 18 January 2016, Exxaro received a letter of intent from SARS following an international income tax audit
for the years of assessment 2009 to 2013. According to the letter, SARS proposes that certain international
Exxaro companies will be subject to South African Income Tax under Section 9D of the Income Tax Act. Assessments
to the amount of R442 million (R199 million tax payable, R91 million interest and R152 million penalties) were
issued on 30 March 2016 and Exxaro formally objected against these assessments. The group is awaiting SARS’ response.
These assessments have been considered in consultation with external tax and legal advisers and senior counsel.
Exxaro believes this matter has been treated appropriately by disclosing a contingent liability.
23. RELATED PARTY TRANSACTIONS
The group entered into various sale and purchase transactions with associates and joint ventures during the ordinary
course of business. These transactions were subject to terms that are no less, nor more favourable than those arranged
with independent third parties.
Exxaro received payments amounting to R15,5 million from Main Street 333, Exxaro’s majority BEE shareholder, during the
year for interest on the loan granted in July 2015. Subsequent to the reporting date, Main Street 333 settled the loan
and accrued interest thereon.
24. GOING CONCERN
Based on the results for the year ended 31 December 2016, and the latest budget for 2017, as well as the available
bank facilities and cash generating capability, Exxaro satisfies the criteria of a going concern.
25. JSE LISTINGS REQUIREMENTS
The reviewed condensed group annual financial results were prepared in accordance with the Listings Requirements of
the JSE.
26. EVENTS AFTER THE REPORTING PERIOD
Details of the final dividend proposed are given in note 12.
On 17 January 2017, Exxaro paid R3 524 million to Main Street 333 for the repurchase of 43 943 744 ordinary shares.
On 20 January 2017, Main Street 333 settled its loan with Exxaro.
The directors are not aware of any other significant matter or circumstance arising after the reporting period up
to the date of this report, not otherwise dealt with in this report.
27. REVIEW CONCLUSION
These reviewed condensed group annual financial statements for the year ended
31 December 2016 have been reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion.
A copy of the auditor’s review report is available for inspection at the company’s registered office together with the
financial statements identified in the auditor’s report.
28. CORPORATE GOVERNANCE
Detailed disclosure of the company’s application of the principles contained in the King Report on Governance for
South Africa 2009 (King III) will be made in the 2016 Integrated Report and will, in accordance with the JSE Listings
Requirements, be available on the company’s website in April 2017. The company is in the process of preparing itself for
the implementation of the King Report on Corporate Governance for South Africa 2016 (King IV) and further information
on the plans and progress will be provided in due course. As previously communicated, during the 2016 financial year
Messrs EJ (Ras) Myburgh and PCCH (Peet) Snyders were appointed as independent non-executive directors to the board and
Mr PA (Riaan) Koppeschaar as Finance Director. Please contact the group company secretary and legal, Mrs CH (Carina) Wessels,
for any additional information in this regard.
29. KEY MEASURES1
At 31 December
2016 2015
Closing share price (rand/share) 89,50 44,04
Market capitalisation (Rb) 32,05 15,77
Average rand/US$ exchange rate (for the year ended) 14,69 12,76
Closing rand/US$ spot exchange rate 13,63 15,48
1 Non-IFRS numbers.
EXXARO 2016 PERFORMANCE AT A GLANCE
Sustainable operations Lost-time injury frequency rate (LTIFR) improved 47% to 0,09
Strong profit margins and resilient balance sheet Core net operating profit margin of 24%, up 6%
R2,4 billion income from equity-accounted investments, up 309% from FY15
Headline earnings per share at 1 302 cents per share
Net debt to equity at 3,8%
Cash generated from operations at R5,5 billion, up 23%
Growth in coal R5,2 billion coal net operating profit (NOP), up 101%
Operating profit margin of 25%
Exports volume - at 7,9Mt up 27%
Returning cash to shareholders Final dividend of 410 cents per share (cps) at a FY16 core attributable
earnings cover of 3,2 times
COMMENTARY
for the year ended 31 December
Comments below are based on a comparison between the financial years ended 31 December 2016 and 2015 (FY16 and FY15 respectively).
1. ROBUST PERFORMANCE
The Exxaro group of companies reached another unprecedented milestone on 31 December 2016 achieving two consecutive
calendar years without a fatality. By December 2016, the company had operated for a record 30 consecutive months without
a fatality. The group also achieved a lost-time injury frequency rate (LTIFR) of 0,09 (FY15: 0,17) representing a
47% improvement.
Regrettably, an employee at Matla Mine 2 in Mpumalanga, Mr Sibongiseni Sihle Majozi, was fatally injured on 1 March 2017
following an underground accident. Exxaro continues to strive for a consistent fatality-free environment and to
continuously improve all aspects of safety.
Exxaro delivered a very strong performance for FY16 with higher net operating profit, mainly driven by higher
coal selling prices. The income from equity-accounted investments increased substantially during the second half of
the year, to end FY16 at R2 373 million (FY15: loss of R1 137 million). The increase can mainly be attributed to an
improved performance from SIOC (increase of R2 312 million) as a result of a recovery in iron ore export selling prices,
and lower losses from our investment in Tronox (decrease in losses of R1 119 million).
Following the Exxaro Improvement Project (EIP) to reduce costs and improve efficiencies, Exxaro achieved sustainable
cost savings of R235 million in FY16.
2. COMPARABILITY OF RESULTS
The key transactions shown in table 1 below should be taken into account to gain a better understanding of the
comparability of the results for the two years.
Table 1: Key transactions impacting on comparability
Reporting FY16 FY15
segment Description Rm Description Rm
Coal - Termination and voluntary severance packages (10) - Termination and voluntary severance packages (110)
- Gain on disposal of operation (Inyanda)1 100 - Impairment of goodwill recognised on the (1 524)
acquisition of TCSA1
- Gain on disposal of SDCT shareholding1 203 - Gain on disposal of non-core assets, property, 137
plant and equipment and insurance claim income1
- Loss on disposal of property, plant and equipment1 (45) - Impairment of property, plant and equipment (225)
(reductants operation)1
Ferrous - Termination and voluntary severance packages (1) - Termination and voluntary severance packages (39)
- Gain on disposal of property, plant 10 - Gain on disposal of property, plant 122
and equipment1 and equipment1
- Gain on disposal of subsidiaries (Mayoko iron 670 - Partial reversal of previous 11
ore project and related subsidiaries)1 write-off of financial assets
- Impairment of property, plant and equipment (100)
(FerroAlloys)1
1 Excluded from headline earnings.
Reporting FY16 FY15
segment Description Rm Description Rm
Other - Termination and voluntary severance packages (87) - Termination and voluntary severance packages (259)
- Loss on dilution of shareholding in Tronox1 (36) - Loss on dilution of shareholding in Tronox1 (10)
- Fair value adjustment on contingent (445) - Gain on disposal of property, plant and 17
consideration relating to the acquisition of ECC equipment and non-core assets1
- Foreign exchange gain on US$ 747
held for TCSA acquisition
- Gains on translation differences of 1 012
foreign subsidiaries1
- Other (96)
Group Total net operating profit impact 259 Total net operating loss impact (217)
Coal - Tax on disposal of property, 13 - Tax on disposal of non-core assets, insurance 28
plant and equipment1 claim income and impairment1
- Excess of fair value over cost of 35
investment in RBCT1
- Post-tax share of Mafube impairment (16)
of property, plant and equipment1
- Post-tax share of Mafube gain on 1
disposal of property, plant and equipment1
Ferrous - Tax on impairment of property, plant 27 - Post-tax share of SIOC gains on disposal of 3
and equipment1 non-core assets and insurance claims income1
- Excess of fair value over cost of 221 - Post-tax share of SIOC’s impairment (866)
investment in SIOC1 of operation1
- Post-tax share of SIOC loss on disposal (28)
of property, plant and equipment1
- Post-tax share of SIOC impairment of (1)
property, plant and equipment1
TiO2 and - Post-tax share of (9) - Post-tax share of (141)
Alkali Tronox restructuring costs Tronox restructuring costs
chemicals - Post-tax share of Tronox gain on disposal 4 - Post-tax share of Tronox loss on disposal (21)
of property, plant and equipment1 of property, plant and equipment1
Group Total attributable earnings impact 506 Total attributable loss impact (1 214)
1 Excluded from headline earnings.
3. COMMODITY PRICE PERFORMANCE AND GROUP SEGMENT RESULTS
The movements in commodity prices significantly impacting Exxaro’s performance is summarised in table 2 below:
Table 2: Change in commodity prices
Average US$ per tonne %
Commodity price FY16 FY15 Change
API4 coal 64 57 +12
Iron ore fines (cost and freight (CFR) China) 58 56 +4
TiO2 pigment (cost, insurance and freight (CIF), US)# 2 087 2 205 -5
# Although a decline in annual average terms, the TiO2 pigment prices were on an upward trajectory from a
relatively low base for most of FY16.
Table 3 below summarise the group revenue and net operating profit.
Table 3: Group segment results (Rm)
Net operating
Revenue profit/(loss)
FY16 FY15 FY16 FY15
Reviewed Audited Reviewed Audited
Coal 20 673 18 093 5 166 2 574
Tied1 3 483 3 835 226 195
Commercial2 17 190 14 258 4 940 2 379
Ferrous 170 173 566 (306)
Iron ore3 613 (292)
Alloys4 170 173 (75) 10
Other 28 (24)
Other5 54 64 (532) 905
Total 20 897 18 330 5 200 3 173
1 Mines managed on behalf of and supplying their entire production to Eskom in terms of contractual agreements.
2 Net operating profit for FY15 includes pre-tax impairment of the goodwill recognised on the acquisition of ECC
of R1 524 million and the reductants operation property, plant and equipment of R225 million.
3 Net operating profit for FY16 includes R670 million pre-tax gain on the disposal of the Mayoko iron ore project
and related subsidiaries.
4 Net operating loss for FY16 include the FerroAlloys property, plant and equipment pre-tax impairment of R100 million.
5 Net operating loss for FY16 includes R445 million fair value adjustment of contingent consideration which relates to
the ECC acquisition.
4. FINANCIAL AND OPERATIONAL RESULTS
4.1. Group financial results
4.1.1. Revenue and net operating profit
Consolidated group revenue increased by 14% to R20 897 million, while group net operating profit increased by 64% to
R5 200 million (FY15: R3 173 million) mainly due to higher coal sales prices and the weakening of the rand against the
US dollar in FY16. An average spot exchange rate of R14,69 to the US dollar was recorded for FY16, compared to R12,76 in
FY15, a depreciation of 15%. Other contributing factors to the increased net operating profit included the following:
- Higher contributions from the coal operations (refer 4.2.2)
- The non-recurrence of impairments of goodwill and property, plant and equipment arising in FY15 of R1 749 million
- R670 million gain on disposal of the Mayoko iron ore project and its related subsidiaries in FY16
- Cost savings in the ferrous segment due to the disposal of Mayoko iron ore project, offset by the non-recurrence
of gains in FY15 relating to:
- Unrealised foreign exchange profits recorded on US dollars held for the ECC acquisition
- Translation differences recycled to profit or loss on liquidation of foreign subsidiaries
- R445 million loss on the fair value adjustment recognised in FY16 relating to the contingent consideration which
arose on the acquisition of ECC.
4.1.2. Earnings
Earnings, which include Exxaro’s equity-accounted investments in associates and joint ventures, was R5 679 million
(FY15: R296 million) or 1 600 cents earnings per share (FY15: 83 cents per share).
Headline earnings were 185% higher at R4 621 million (FY15: R1 623 million) or 1 302 cents per share
(FY15: 457 cents per share).
Table 4: Equity-accounted investments (Rm)
Equity-accounted income/(loss) Dividends received
FY16 FY15 FY16 FY15
Reviewed Audited Reviewed Audited
SIOC1 2 416 104 673
Tronox (384) (1 503) 298 668
Mafube 238 253 450
Black Mountain 100 64
Cennergi 3 (53)
RBCT2 (4)
SDCT 2
Total 2 373 (1 137) 748 1 341
1 FY16 includes R221 million excess of fair value over the cost of the investment which arose on the 0,64% increase
in the shareholding of SIOC and FY15 includes Exxaro’s share of an impairment charge on property, plant and equipment
amounting to R866 million.
2 FY16 includes R35 million excess of fair value over the cost of the investment which arose on the increase in the
shareholding in RBCT, offset by a R35 million equity-accounted loss.
4.1.3. Cash flow and funding
Cash flow generated by operations increased by R1 023 million to R5 549 million (FY15: R4 526 million) and was
sufficient to cover capital expenditure of R2 780 million, dividends of R625 million, net financing charges of R459 million
and tax of R547 million.
Total capital expenditure increased by 16% or R390 million, consisting of a R750 million increase in expenditure on
sustaining and environmental capital (stay-in-business capital) offset by a R360 million decrease in expenditure on new
capacity (expansion capital).
Dividends received of R748 million (FY15: R1 341 million) consisted of R450 million (FY15: nil) from Mafube
(a joint venture with Anglo South Africa Capital Proprietary Limited), and R298 million (FY15: R668 million) from our
investment in Tronox. No dividends were received from SIOC in FY16 (FY15: R673 million).
4.1.4. Debt exposure
Net debt at 31 December 2016 was R1 322 million, compared to R3 012 million at 31 December 2015. This equates to a
net debt to equity ratio of 3,8% (8,8% at 31 December 2015). Exxaro’s capital structure remains robust and we
successfully refinanced our R8 billion term loan facility at attractive terms, despite Standard and Poor’s downgrading
of Exxaro's domestic credit rating to zaBB+/zaB.
In January 2017, the specific repurchase by Exxaro of Exxaro ordinary shares from Main Street 333, to the value of
R3 524 million, was effected using cash generated from Exxaro’s own operations.
The repurchase consideration was funded firstly with available contributed tax capital and the remaining portion from
reserves. The circular posted to shareholders on 29 November 2016 had incorrectly reflected the contributed tax capital
per share as R35.87 instead of the correct amount of R8.31. The only impact of this difference is that a larger portion
of the repurchase is classified as a dividend in the hands of Main Street 333.
Table 5: Unreviewed coal production and sales volumes (’000 tonnes)
Production Sales
FY16 FY15 FY16 FY15
Thermal 40 811 41 100 42 489 42 146
- Tied 7 900 9 260 7 893 9 270
- Commercial 32 911 31 840 34 596 32 876
- Domestic power station coal1 22 029 24 107
- Domestic steam coal1 4 709 2 587
Export 7 858 6 182
Metallurgical 1 985 1 856 1 298 1 341
- Commercial domestic 1 985 1 856 1 298 1 341
Total coal 42 796 42 956 43 787 43 487
Semi-coke 54 48 65 49
Total coal (excluding buy-ins) 42 850 43 004 43 852 43 536
Thermal buy-ins1 606 1 222
Total coal (including buy-ins) 43 456 44 226 43 852 43 536
1 Mafube trading division buy-ins of 1 760kt from Mafube JV are included under thermal coal commercial production
and the prior year has also been re-presented from buy-ins to thermal coal commercial production (FY15: 1 147kt).
4.2. Coal business performance
The fourth quarter of 2016 saw a surge in the international coal price as China reduced its coal production due to
the 276 day cap on production, and prices more than doubled compared to January 2016 index levels. Exxaro also had
good international demand.
Export volumes increased from 6,18Mt to 7,86Mt, mainly as a result of the additional volumes from ECC, but offset
by the sale of Inyanda. The group realised an average export price of US$50 per tonne in both FY16 and FY15.
Trading conditions in the domestic market improved during the second half of 2016 as some producers found the export
market more attractive due to strong international thermal coal prices in the fourth quarter of 2016. Exxaro
experienced strong demand for its products in the domestic power generation, steam coal, metals and reductants segments.
4.2.1. Production and sales volumes
Total coal production volumes (excluding buy-ins) were 160kt lower than FY15. The decrease can mainly be attributed
to the sale of Inyanda as well as the closure of Arnot. However, the inclusion of ECC production for 12 months in FY16
compared to four months in FY15 cushioned the extent of the reduction. Sales, however, increased by 300kt (1%).
4.2.1.1. Metallurgical coal
Grootegeluk (GG) production increased by 129kt (7%). In FY15, semi-soft coking coal production was cut back in order
to produce power station coal due to low stocks in the second half of 2015. Sales decreased by 43kt (3%) mainly due
to lower off-take from local customers.
4.2.1.2. Thermal coal
Tied mines
Power station coal production from the tied mines was 1 360kt (15%) lower compared to FY15, mainly due to Eskom
terminating the contract with Arnot at the end of 2015.
Commercial mines
The commercial mines’ power station coal production was lower by 396kt (2%) attributable to GG for 894kt (4%)
due to full stockpiles at Eskom during the first half of 2016 and lower off-take from Eskom, resulting in production
cut-backs. NBC production was lower by 186kt (7%) due to industrial action and the move of a plant for safety reasons.
This was offset by higher production at Mafube of 625kt (100%).
Domestic power station coal sales from the commercial mines was 2 078kt (9%) lower mainly due to Leeuwpan’s coal no
longer being delivered to Eskom and lower demand as a result of Addendum 9 to the Medupi Coal Supply Agreement. Export
power station coal sales increased by 1 034kt (142%) mainly as a result of the Eskom contracts ceasing at Leeuwpan and
Mafube and redirecting the coal to the export market.
Steam coal production was 1 467kt (23%) higher mainly due to the inclusion of ECC (2 539kt) for the full year and
higher production at NBC of 173kt (100%) as the Eerstelingsfontein reserve was mined for the full year, partly offset by
no production at Inyanda (1 035kt). GG production was lower by 127kt (8%) mainly due to full stockpiles.
Domestic steam sales increased by 2 122kt (82%) mainly from Leeuwpan as a result of the Eskom agreement ceasing and
product being redirected to the domestic market (1 335kt), the inclusion of ECC sales of 402kt for the full year and
increased demand at NBC and GG partly offset by lower Inyanda sales of 111kt. Steam coal export sales were 642kt (12%)
higher mainly from ECC partly offset by the Inyanda closure.
4.2.2. Revenue and net operating profit
Coal revenue was 14% higher than in FY15. The increase in revenue from commercial mines was due to higher prices
while sales volumes were in line with FY15. Volumes lost due to the closure of Inyanda were countered by the inclusion of
ECC for the full year.
Net operating profit of R5 166 million (FY15: R2 574 million) represents an increase of 101%, at an operating margin
of 25%, compared to FY15 due to:
- Impairment (+R1 524 million) of goodwill in FY15 which arose on the acquisition of ECC
- Higher prices (+R931 million)
- Lower buy-in prices from Mafube JV (+R441 million)
- Inclusion of ECC (+R429 million) for the full year
- Impairment of property, plant and equipment of the reductants operation in FY15 (+R225 million)
- Gain on the restructuring of SDCT shareholding (+R203 million)
- Exchange rate variances due to the weakening of the local currency against the US dollar (+R111 million)
Partly offset by:
- Scope changes on environmental rehabilitation provisions (-R417 million)
- Inflation (-R342 million)
- Closure of Inyanda (-R202 million)
- Higher distribution price (-R167 million)
- Higher depreciation (-R95 million)
4.3. Ferrous business
4.3.1. Net operating profit
Net operating profit increased by R872 million to R566 million in FY16 from the R306 million loss reported for FY15.
The increase is mainly as result of a R670 million gain on the disposal of the Mayoko iron ore project and related
subsidiaries, cost savings due to scaling down activities in the RoC offset by a R100 million pre-tax impairment of the
ferrosilicon plant at FerroAlloys. The decision to impair the ferrosilicon plant was based on lower demand from major
customers as well as our current view of securing new contracts in future.
4.3.2. Equity-accounted investments
The increase in equity-accounted income from SIOC is largely attributable to the increase in export iron ore prices in FY16,
a R221 million excess of fair value over the cost of the investment which arose due to a 0,64% increase in Exxaro’s
shareholding following the unwinding of SIOC’s employee ownership scheme in FY16, as well as Exxaro’s share of the impairment
charge amounting to R866 million which was included in FY15. No dividends were received from SIOC in FY16
(FY15: R673 million).
4.4. TiO2 and Alkali chemicals investment
4.4.1. Equity-accounted investment
Equity-accounted losses from the Tronox investment decreased from R1 503 million in FY15 to R384 million for FY16,
mainly due to tax benefits realised on an organisational restructuring which occurred during the latter part of the year,
reduction in restructuring costs as well as net realisable value adjustments on inventory which were released through
profit or loss.
Tronox continued its dividend declaration during the year, however, at a rate of US$0,25 per share for the first
quarter of 2016 (final 2015 dividend) and US$0,045 per share for the remainder of the year
(FY15: US$0,25 per share per quarter).
On 21 February 2017, Tronox entered into a definitive agreement to acquire the titanium dioxide business of Cristal
(also known as The National Titanium Dioxide Company Limited) for US$1 673 million cash and shares, representing a
24% shareholding in the enlarged company. As Tronox’s largest shareholder, Exxaro intends to vote its shares in
favour of the proposed transaction.
Exxaro’s board has determined that it will explore available alternatives to sell its Tronox shares in a thoughtful,
efficient and staged process over time to focus on its core activities.
4.5. Energy business
4.5.1. Equity-accounted investment
Cennergi, a 50% joint venture with Tata Power, recorded equity-accounted income of R3 million for FY16 (FY15: loss
of R53 million) mainly due to the two wind-farm projects being brought into commercial operation. The wind-farm projects,
Amakhala Emoyeni (AE) and Tsitsikamma Community Wind Farm (TCWF), both achieved Commercial Operation Date (COD) during
the third quarter of FY16 and started earning revenue from electricity supplied into the national grid.
5. BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Exxaro supports transformation through, inter alia, economic empowerment ownership and strongly believes that the
proposed replacement BEE transaction (as announced on SENS dated 22 November 2016) has a greater ability to create
wealth through its reduced risk profile, which contributes to sustainable empowerment. The new proposed structure is
less risky and more flexible which is important in a cyclical industry. Exxaro learned valuable lessons from the
previous empowerment transaction and aims to create sustainable value for the BEE shareholders. A sustainable
ownership structure is in the best interest of BEE shareholders, minority shareholders, the company, employees
and our communities.
Exxaro remain of the view that a transaction at the listed level is appropriate to ensure flexibility, a well
capitalised funding package for the new empowerment vehicle, while also allowing our strategic BEE shareholders to
significantly participate in Exxaro. Our benchmarking indicated the proposed cost of the replacement transaction is below
market norms but we could potentially implement a further specific share repurchase from Main Street 333 to act as a
further anti-dilutive measure.
Current contracts with Eskom are not affected by the decision to reduce our BEE shareholding.
It is expected that Exxaro will seek shareholder approval in the second quarter of 2017 for the replacement BEE transaction.
6. MINERAL RESOURCES AND RESERVES
There has been a material change in the reserves of ECC following new geological models and life of mine plans
developed in FY16. Run of mine for the Dorstfontein complex increased from 20,3Mt to 43,5Mt, and Forzando increased from
11,5Mt to 48,5Mt. The reported tonnage in 2015 was a conservative estimate, as the mentioned models and plans were still in
development at the time.
7. MINING AND PROSPECTING RIGHTS
The mining right application for the Thabametsi project, a resource adjacent to the Grootegeluk Waterberg coal mine,
which will supply coal to the Thabametsi Coal IPP, was granted in June 2016 for a period of 30 years. The approval,
execution and subsequent registration of the right signify the start of a new and exciting phase for Exxaro within the
Waterberg. Exxaro also holds a 100% ownership in the Waterberg North and South prospecting right areas situated roughly
30km north-west of the Grootegeluk coal mine. The project areas consist of four prospecting rights for which applications
for renewals were timeously submitted. Approvals for two of the renewals were granted in the second half of 2016 and
Exxaro has a reasonable expectation that the remaining renewals will be granted in early 2017.
ECC holds a 51% interest in the Eloff prospecting right, a project situated near the town of Delmas and close to
Exxaro’s Leeuwpan operation. The project area lies within the Delmas coalfield, to the west of the Witbank Coalfield,
and along the northern edge of the main Karoo sedimentary basin. Three major coal seams are present in the project area
although with variable seam thickness, coal qualities and depth below surface. A mining right compilation for the project
was completed in December 2016 and the application will be submitted within the first quarter of 2017.
Technical studies concluded have resulted in a significant increase in the life of mine at both the Forzando and
Dorstfontein operations, a complex of which ECC holds 74%. The approval of a section 102 application to incorporate the
Forzando-West prospecting right into the Forzando-South mining right was received which adds additional potential for the
expansion of the Forzando operation.
The mining right registrations of Matla, Arnot, Leeuwpan extension, Forzando-South and Glisa (NBC) are pending.
Exxaro has a reasonable expectation that registrations will be concluded during the first half of 2017.
NBC includes the traditional mining areas of Glisa (converted mining right), Strathrae (converted mining right) and
Eerstelingsfontein, an executed new mining right. Environmental approvals for Eerstelingsfontein have been granted and
approval for the renewal of the mining right, timeously submitted in March 2013, is pending. In addition, a renewal for
a prospecting right and an application for a new mining right for the Glisa South project area, immediately adjacent to
Glisa, was timeously submitted in November 2013. An appeal received on this right is being addressed through the DMR’s
Regional Mining Development and Environment Committee.
8. OUTLOOK
Supportive market conditions are expected in 2017 for most of Exxaro’s chosen coal market segments compared to 2016,
both domestically and internationally. Exxaro is confident that the strength of the diversified coal product portfolio
will create new opportunities in this environment.
Exxaro expects an improvement in the operational results of the coal business in 2017 based on:
- Stable trading conditions in domestic markets
- Higher international coal prices compared to 2016
- Our operational excellence process delivering further results
- Technology and innovation improvements
The rand exchange rate against the US dollar is expected to remain volatile for most of 2017 due to the combination
of significant event risks and volatility in the US dollar.
The performance of the investment portfolio (SIOC and Tronox) is currently expected to be positively influenced by a
favourable commodity price outlook for 2017.
9. FINAL DIVIDEND
Exxaro’s dividend policy is based on a cover ratio of between 2,5 and 3,5 times core attributable earnings.
Notice is therefore given that a gross final cash dividend, number 28 of 410 cents (final FY15: 85 cents) per share,
for the financial year ended 31 December 2016 was declared, payable to shareholders of ordinary shares. For details of
the dividend, please refer note 12 of the reviewed condensed group annual financial statements.
Salient dates for payment of the final dividend are:
- Last day to trade cum dividend on the JSE Tuesday, 18 April 2017
- First trading day ex dividend on the JSE Wednesday, 19 April 2017
- Record date Friday, 21 April 2017
- Payment date Monday, 24 April 2017
No share certificates may be dematerialised or rematerialised between Wednesday, 19 April 2017 and Friday,
21 April 2017, both days inclusive. Dividends for certificated shareholders will be transferred electronically
to their bank accounts on payment date. Shareholders who hold dematerialised shares will have their accounts at
their central securities depository participant or broker credited on Monday, 24 April 2017.
10. GENERAL
Additional information on financial and operational results for the financial year ended 31 December 2016, and the
accompanying presentation can be accessed on our website on www.exxaro.com.
On behalf of the board
Len Konar Mxolisi Mgojo Riaan Koppeschaar
Chairman Chief executive officer Finance director
7 March 2017
CORPORATE INFORMATION
Registered office
Exxaro Resources Limited
Roger Dyason Road
Pretoria West, 0183
Tel: +27 12 307 5000
Fax: +27 12 323 3400
Directors
MW Hlahla**, Dr D Konar*** (chairman), S Mayet***, MDM Mgojo* (chief executive officer),
PA Koppeschaar (finance director)*, S Dakile-Hlongwane***, Dr CJ Fauconnier***,
V Nkonyeni***, VZ Mntambo**, EJ Mybrugh***, Dr MF Randera**, J van Rooyen***,
PCCH Snyders***, D Zihlangu**
* Executive
** Non-executive
*** Independent non-executive
Prepared under supervision of:
PA Koppeschaar, CA(SA)
SAICA registration number: 00038621
Group company secretary
CH Wessels
Transfer secretaries
Computershare Investor
Services Proprietary Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
Investor relations
MI Mthenjane (+27 12 307 7393)
Sponsor
Absa Bank Limited (acting through its Corporate and Investment Bank Division)
Tel: +27 11 895 6000
If you have any queries regarding your shareholding in Exxaro Resources Limited, please contact the transfer
secretaries at +27 11 370 5000.
ACRONYMS
Anglo Anglo South Africa Capital Proprietary Limited
API4 All publications index 4 (fob Richards Bay 6000kcal/kg)
BEE Black Economic Empowerment
Black Mountain Black Mountain Proprietary Limited
Cennergi Cennergi Proprietary Limited
CFR Cost and Freight
Chifeng Chifeng Kumba Hongye Corporation Limited
CIF Cost, insurance and freight
Companies Act Companies Act No 71 of 2008, as amended
Cps cents per share
DMR Department of Mineral Resources
DMTN Domestic Medium-Term Note
ECC Exxaro Coal Central Proprietary Limited
EIP Exxaro Improvement Project
EMJV Ermelo joint venture
Exxaro Exxaro Resources Limited
FeCr FerroChrome
FY15 Financial year ended 31 December 2015
FY16 Financial year ended 31 December 2016
GG Grootegeluk
HEPS Headline earnings per share
IAS International Accounting Standard
IASB International Accounting Standards Board
IPP Independent Power Producer
IFRS International Financial Reporting Standard
JIBAR Johannesburg Interbank Average Rate
JSE JSE Limited
KIO Kumba Iron Ore Limited
kt kilo tonnes
Listings Requirements JSE Listings Requirements
LME London Metal Exchange
LTIFR Lost-time injury frequency rate
Mafube Mafube Coal Proprietary Limited
Main Street 333 Main Street 333 Proprietary Limited (RF), controlling shareholder
Mpower 2012 Exxaro Employee Empowerment Trust
MPRDA Mineral and Petroleum Resources Development Act 28 2002
Mt Million tonnes
NBC North Block Complex
NCC New Clydesdale Colliery
NOP Net operating profit
PPA Purchase Price Allocation
PRC People’s Republic of China
Rb Rand billion
RBCT Richards Bay Coal Terminal Proprietary Limited
Rm Rand million
RMB Chinese Renminbi
RoC Republic of Congo
RSA Republic of South Africa
SAICA South African Institute of Chartered Accountants
SARS South African Revenue Service
SDCT South Dunes Coal Terminal SOC Limited
SENS Stock Exchange News Service
SIOC Sishen Iron Ore Company Proprietary Limited
SOC State-owned company
SSCC Semi-soft coking coal
Tata Power Tata Power Company Limited
TCSA Total Coal South Africa Proprietary Limited
TiO2 Titanium dioxide
Tronox Tronox Limited
Tronox SA Tronox KZN Sands Proprietary Limited and Tronox Mineral Sands Proprietary Limited
Tronox UK Tronox Sands Limited Liability Partnership in the United Kingdom
US United States of America
US$ United States dollar
VAT Value Added Tax
Disclaimer
Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information
or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the “Company”) to
differ materially from those expressed or implied in the forward looking statements. Financial forecasts and data given
herein are estimates based on the reports prepared by experts who in turn relied on management estimates. Undue reliance
should not be placed on such opinions, forecasts or data. No representation is made as to the completeness or correctness of
the opinions, forecasts or data contained herein. Neither the company, nor any of its affiliates, advisers or
representatives accepts any responsibility for any loss arising from the use of any opinion expressed or forecast or data herein.
Forward looking statements apply only as of the date on which they are made and the company does not undertake any
obligation to publicly update or revise any of its opinions or forward looking statements whether to reflect new data or
future events or circumstances.
The full report is available on www.exxaro.com
Date: 09/03/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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