Wrap Text
Reviewed interim financial results for the six-month period ended 30 June 2013
Exxaro Resources Limited
Registration number: 2000/011076/06
JSE Share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(Exxaro or the company or the group)
Reviewed interim financial results for the six-month period ended 30 June
2013
Overview of the six-month period ended 30 June 2013
30 June 2013 R44,4bn assets up 9% on 1H12, up 5% on 2H12
Coal produced 18,8mt down 3% on 1H12 down 9% on 2H12
30 June 2103 R52bn market capitalization
HEPS of 712 cents down 39% on 1H12, up 199% on 2H12
AEPS of 632 cents down 75% on 1H12, up 157% on 2H12
Interim dividend of 235 cents per share down 33% on 1H12, up 57% on 2H12
LTIFR at 0,21 against group target of 0,15
Revenue from continuing operations R6,2bn up 6% on 1H12, down 2% on 2H12
NCC pre-tax impairment R292m
Operating profit from continuing operations R884m down 30% on 1H12, up 105%
on 2H12
Equity-income of R2bn down 23% on 1H12, up 103% on 2H12
GMEP 96% complete
30 June 2013 Net debt: equity 12%
Condensed group statement of comprehensive income
6 months
6 months ended 12 months
ended 30 June ended
30 June 2012 31 Dec
2013 Reviewed 2012
Reviewed (Restated) Audited
Rm Rm Rm
Revenue 6 245 5 873 12 229
Operating expenses (5 361) (4 609) (10 533)
Operating profit 884 1 264 1 696
Gains on disposal of non-core assets 40 42
Net operating profit (note 5) 884 1 304 1 738
Interest income (note 7) 42 66 138
Interest expense (note 7) (268) (186) (325)
Income from investments 2 2 3
Share of income from equity-accounted
investments 2 015 2 608 3 602
Profit before tax 2 675 3 794 5 156
Income tax expense (429) (339) (537)
Profit for the period from continuing
operations 2 246 3 455 4 619
(Loss)/profit for the period from
discontinued operations (note 8) (7) 5 336 5 028
Profit for the period 2 239 8 791 9 647
(Loss)/income recognised in other
comprehensive income for the period, net of
tax
Items that will not be reclassified to
profit or loss 12 (21) (181)
Share of comprehensive income/(loss) from
equity-accounted investments 12 (21) (181)
Items that may be subsequently reclassified
to profit or loss (521) 126 249
Unrealised foreign exchange differences on
translating foreign operations 318 (120) (33)
Revaluation of available-for-sale financial
assets 94
Cash flow hedges (27) (21)
Share of comprehensive (loss)/income from
equity-accounted investments (933) 273 303
Share of comprehensive income of non-
controlling interests 2
Total other comprehensive (loss)/income for
the period, net of tax (507) 105 68
Total comprehensive income for the period 1 732 8 896 9 715
Profit/(loss) attributable to:
Owners of the parent 2 244 8 809 9 677
continuing operations 2 251 3 458 4 634
discontinued operations (7) 5 351 5 043
Non-controlling interests (5) (18) (30)
continuing operations (5) (2) (15)
discontinued operations (16) (15)
Profit for the period 2 239 8 791 9 647
Total comprehensive income/(loss)
attributable to:
Owners of the parent 1 735 8 914 9 745
continuing operations 1 742 3 842 5 706
discontinued operations (7) 5 072 4 039
Non-controlling interests (3) (18) (30)
continuing operations (3) (2) (15)
discontinued operations (16) (15)
Total comprehensive income for the period 1 732 8 896 9 715
Attributable earnings per share (cents)
basic 632 2 488 2 734
diluted 632 2 461 2 726
Attributable earnings per share continuing
operations (cents)
basic 634 977 1 309
diluted 634 966 1 305
Attributable (loss)/earnings per share
discontinued operations (cents)
basic (2) 1 511 1 425
diluted (2) 1 495 1 421
Refer to note 10 for details regarding the
number of shares.
Reconciliation of group headline earnings
Gross Tax Net
6 months ended 30 June 2013 (Reviewed) Rm Rm Rm
Profit attributable to owners of the parent 2 244
Adjusted for:
IAS 16 Net gains on disposal of property,
plant and equipment (4) (1) (5)
IAS 28 Loss on dilution of investment in
associates 13 13
IAS 28 Share of associates gains or losses (5) 1 (4)
on disposal of property, plant and equipment
IAS 36 Impairment of property, plant and
equipment 292 (11) 281
Headline earnings 296 (11) 2 529
continuing operations 2 537
discontinued operations (8)
6 months ended 30 June 2012 (Reviewed) (Restated)
Profit attributable to owners of the parent 8 809
Adjusted for:
IFRS 10 Gains on disposal of subsidiaries and
non-core assets (4 121) (4 121)
IAS 16 Net gains on disposal of property,
plant and equipment (32) 1 (31)
IAS 28 Excess of fair value over cost of
investment in associate (470) (470)
IAS 28 Share of associates gains or losses
on disposal of property, plant and equipment 3 (1) 2
IAS 36 Reversal of impairment of property,
plant and equipment (103) 29 (74)
Headline earnings (4 723) 29 4 115
continuing operations 2 920
discontinued operations 1 195
12 months ended 31 December 2012 (Audited)
Profit attributable to owners of the parent 9 677
Adjusted for:
IFRS 10 Gains on disposal of subsidiaries and
non-core assets (4 034) (4 034)
IAS 16 Net gains on disposal of property,
plant and equipment (65) 4 (61)
IAS 28 Excess of fair value over cost of
investment in associate (470) (470)
IAS 28 Share of associates gains or losses
on disposal of property, plant and equipment (4) 1 (3)
IAS 36 Reversal of impairment of property,
plant and equipment (103) 29 (74)
IAS 38 Gains on disposal of intangible assets (77) (77)
Headline earnings (4 753) 34 4 958
continuing operations 3 999
discontinued operations 959
6 months
6 months ended 12 months
ended 30 June ended
30 June 2012 31 Dec
2013 Reviewed 2012
Reviewed (Restated) Audited
Headline earnings per share: aggregate
(cents)
basic 712 1 162 1 401
diluted 712 1 149 1 397
Headline earnings per share: continuing
operations (cents)
basic 714 825 1 130
diluted 714 816 1 127
Headline (loss)/earnings per share:
discontinued operations (cents)
basic (2) 337 271
diluted (2) 333 270
Condensed group statement of financial position
At
At 30 June At
30 June 2012 31 Dec
2013 Reviewed 2012
Reviewed (Restated) Audited
Rm Rm Rm
Assets
Non-current assets 39 660 35 416 37 445
Property, plant and equipment 17 980 12 802 15 881
Biological assets 56 66 55
Intangible assets 994 1 207 962
Investments in associates 17 008 18 329 17 154
Investments in joint ventures 513 309 425
Deferred tax 230 314 241
Financial assets (note 13) 2 879 2 389 2 727
Current assets 4 777 5 185 4 972
Inventories 915 746 776
Trade and other receivables (note 13) 2 510 2 073 2 642
Current tax receivable 122 123 190
Cash and cash equivalents (note 13) 1 230 2 243 1 364
Total assets 44 437 40 601 42 417
Equity and liabilities
Capital and reserves
Equity attributable to owners of the
parent 29 958 29 174 28 794
Non-controlling interests (19) 23 12
Total equity 29 939 29 197 28 806
Non-current liabilities 9 844 8 136 8 417
Interest-bearing borrowings (note 13) 3 565 3 422 2 761
Non-current provisions 3 200 2 184 2 842
Post-retirement employee obligations 142 129 142
Finance lease liability 126 106
Deferred tax 2 811 2 401 2 566
Current liabilities 4 654 3 268 5 194
Trade and other payables (note 13) 3 029 2 823 4 099
Interest-bearing borrowings (note 13) 29 (9)
Current tax payable 166 220 172
Current provisions 117 116 121
Overdraft (note 13) 1 313 109 811
Total equity and liabilities 44 437 40 601 42 417
Condensed group statement of cash flows
6 months
6 months ended 12 months
ended 30 June ended
30 June 2012 31 Dec
2013 Reviewed 2012
Reviewed (Restated) Audited
Rm Rm Rm
Cash flows from operating activities (189) 470 543
cash generated by operations 602 2 485 3 969
interest paid (165) (221) (345)
interest received 37 141 208
tax paid (117) (164) (277)
dividends paid (546) (1 771) (3 012)
Cash flows from investing activities (1 240) (1 745) (2 940)
property, plant and equipment to
maintain operations (577) (675) (1 571)
property, plant and equipment to expand
operations (1 826) (1 677) (3 762)
proceeds from disposal of property,
plant and equipment 11 37 77
proceeds from disposal of subsidiaries 931 1 133
proceeds from disposal of intangible
assets 77
proceeds from disposal of financial
assets designated through profit or loss 5
investment in intangible assets (23) (1) (36)
dividends from equity-accounted
investments 1 216 1 958 4 019
investment in other non-current assets 33 150 (16)
decrease in cash and cash equivalents
on disposal of subsidiaries (1 052) (1 052)
acquisition of subsidiaries (1 421) (1 421)
investment in associates and joint
ventures (76) (396)
income from investments 2 2 3
other investing activities 3
Cash flows from financing activities 715 (678) (1 291)
proceeds from issuance of share capital 11 9 15
consideration paid to non-controlling
interests (96) (1 181) (1 181)
interest-bearing borrowings raised 800 5 000 5 800
interest-bearing borrowings repaid (4 506) (5 925)
Net decrease in cash and cash equivalents (714) (1 953) (3 688)
Cash and cash equivalents at beginning of
the period 553 4 118 4 118
Translation difference on movement in
cash and cash equivalents 78 (31) 123
Cash and cash equivalents at end of the
period (83) 2 134 553
Cash and cash equivalents as per the
statement of financial position 1 230 2 243 1 364
Overdraft as per the statement of
financial position (1 313) (109) (811)
Refer to note 8 for cash flows from discontinued operations.
Group statement of changes in equity
Other components of equity
Foreign Financial
Share currency instruments
capital translations revaluation
Rm Rm Rm
At 1 January 2012 (Audited) 2 359 1 585 196
Profit for the period
Other comprehensive income (120) (27)
Share of comprehensive income of
associates and joint ventures 21 (21)
Issue of share capital 9
Share-based payments movements
Dividends paid
Acquisition of subsidiaries (13)
Acquisition of
non-controlling interest
Disposal of subsidiaries (459) (137)
Balance at 30 June 2012 (Reviewed)
(Restated) 2 368 1 014 11
Profit for the period
Other comprehensive income 87 6
Share of comprehensive income of
associates and joint ventures 97 4
Issue of share capital 6
Share-based payments movement
Dividends paid
Acquisition of subsidiaries 13
Disposal of subsidiaries
Balance at 31 December 2012 (Audited) 2 374 1 211 21
Profit for the period
Other comprehensive income 318
Financial instruments fair value
movements 94
Share of comprehensive income of
associates and joint ventures (990) (9)
Issue of share capital 14
Share-based payments movement
Dividends paid
Acquisition of non-controlling interest
Balance at 30 June 2013 (Reviewed) 2 388 539 106
Other components of equity
Retirement
Equity benefit
settled obligation Other
reserve reserves reserves
Rm Rm Rm
At 1 January 2012 (Audited) 1 412 1 8
Profit for the period
Other comprehensive income
Share of comprehensive income of
associates and joint ventures 62 135
Issue of share capital
Share-based payments movements (217)
Dividends paid
Acquisition of subsidiaries
Acquisition of non-controlling interest (740)
Disposal of subsidiaries
Balance at 30 June 2012 (Reviewed)
(Restated) 1 257 1 (597)
Profit for the period
Other comprehensive income
Share of comprehensive income of
associates and joint ventures 32 (164) (136)
Issue of share capital
Share-based payments movement 34
Dividends paid
Acquisition of subsidiaries
Disposal of subsidiaries (23)
Balance at 31 December 2012 (Audited) 1 300 (163) (733)
Profit for the period
Other comprehensive income
Financial instruments fair value movements
Share of comprehensive income of
associates and joint ventures 48 12
Issue of share capital
Share-based payments movement 29
Dividends paid
Acquisition of non-controlling interest (68)
Balance at 30 June 2013 (Reviewed) 1 377 (151) (801)
Attributable Non-
Retained to owners of controlling Total
income the parent interests equity
Rm Rm Rm Rm
At 1 January 2012 (Audited) 18 027 23 588 20 23 608
Profit for the period 8 809 8 809 (18) 8 791
Other comprehensive income (147) (147)
Share of comprehensive
income of associates and
joint ventures 55 252 252
Issue of share capital 9 9
Share-based payments
movements (217) (217)
Dividends paid (1 771) (1 771) (1 771)
Acquisition of subsidiaries (13) 467 454
Acquisition of non-
controlling interest (740) (441) (1 181)
Disposal of subsidiaries (596) (5) (601)
Balance at 30 June 2012
(Reviewed) (Restated) 25 120 29 174 23 29 197
Profit for the period 868 868 (12) 856
Other comprehensive income 93 93
Share of comprehensive income
of associates and
joint ventures 37 (130) (130)
Issue of share capital 6 6
Share-based payments
movement 34 34
Dividends paid (1 241) (1 241) (1 241)
Acquisition of subsidiaries 13 1 14
Disposal of subsidiaries (23) (23)
Balance at 31 December 2012
(Audited) 24 784 28 794 12 28 806
Profit for the period 2 244 2 244 (5) 2 239
Other comprehensive income 318 2 320
Financial instruments fair
value movements 94 94
Share of comprehensive income
of associates and
joint ventures 18 (921) (921)
Issue of share capital 14 14
Share-based payments
movement 29 29
Dividends paid (546) (546) (546)
Acquisition of non- (68) (28) (96)
controlling interest
Balance at 30 June 2013
(Reviewed) 26 500 29 958 (19) 29 939
Final dividend paid per share (cents) in respect of the 2012 financial year
150
Interim dividend paid per share (cents) in respect of the 2012 interim period
350
Dividend payable per share (cents) in respect of the 2013 interim period 235
Notes to the reviewed condensed group interim financial results for the
six-month period ended 30 June 2013
1. Corporate information
Exxaro Resources Limited (Exxaro), a public company incorporated in South
Africa, is a diversified resources group, with interests in the coal
(controlled and non-controlled), titanium dioxide (non-controlled), ferrous
(controlled and non-controlled) and energy (controlled and non-controlled)
markets. These reviewed condensed group interim financial results as at and for
the six-month period ended 30 June 2013 comprise the company and its
subsidiaries (together referred to as the group) and the groups interest in
associates and joint ventures.
2. Basis of preparation
(a) Statement of compliance
The reviewed condensed group interim financial results for the six-month period
ended 30 June 2013 have been prepared under the supervision of WA de Klerk
(CA)SA, South African Institute of Chartered Accountants (SAICA) registration
number: 00133273, in accordance with International Accounting Standard (IAS) 34
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee, the Listings Requirements of the
Johannesburg Stock Exchange (JSE), Financial Pronouncements as issued by the
Financial Reporting Standards Council and the requirements of the South African
Companies Act No 71 of 2008.
The reviewed condensed group interim financial results should be read in
conjunction with the audited group annual financial statements as at and for
the year ended 31 December 2012, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB). The reviewed condensed group
interim financial results have been prepared on the historical cost basis,
excluding financial instruments and biological assets, which are at fair value.
(b) Judgements and estimates
In preparing these reviewed condensed group interim financial results,
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
groups accounting policies and the key source of estimation uncertainty were
the same as those applied to the audited group annual financial statements as
at and for the year ended 31 December 2012.
3. Significant accounting policies
The accounting policies, methods of computation and presentation adopted are
consistent with those applied in the audited group annual financial
statements as at and for the year ended 31 December 2012, except as described
below. The following changes in accounting policies are expected to be
reflected in the group annual financial statements as at and for the year
ending 31 December 2013.
During the first half of 2013 the following pronouncements became effective:
Effective date
IAS 1 Financial statement presentation (as amended) 1 July 2012
IAS 19 Employee benefits (revised) 1 July 2012*
IAS 27 Consolidated financial statements (revised) 1 January 2013*
IAS 28 Investments in associates and joint ventures
(revised) 1 January 2013*
IFRS 10 Consolidated financial statements (revised) 1 January 2013*
IFRS 11 Joint arrangements (as amended) 1 January 2013*
IFRS 12 Disclosure of interest in other entities (as
amended) 1 January 2013*
IFRS 13 Fair value measurement 1 January 2013
IFRIC 20 Stripping costs in the production phase of a
surface mine 1 January 2013
Annual improvements to IFRS 2009 2011 cycle 1 January 2013
* Early adopted in 2012.
The accounting standards and amendments issued to current accounting standards
and interpretations which are relevant to the group, but not yet effective at
30 June 2013, have not been adopted. It is expected that, where applicable,
these standards and amendments will be adopted on each respective effective
date, except where specifically identified. The group continuously evaluates
the impact of these standards and amendments.
During 2012, Exxaro early adopted the suite of consolidation standards,
including IFRS 10, 11 and 12 and IAS 27 and 28, effective 1 January 2013 as
well as IAS 19 Employee Benefits (revised). The impact of this early adoption
has been disclosed in the group audited annual financial statements as at and
for the year ended 31 December 2012.
(a) IAS 1 Financial statement presentation
As a result of the amendments to IAS 1, the group has modified the presentation
of items of other comprehensive income in the reviewed condensed group
statement of comprehensive income, to present separately: items that could be
reclassified to profit or loss in the future from those that could never be.
Comparative information has also been re-presented accordingly. The adoption of
the amendment to IAS 1 has no impact on the recognised assets, liabilities and
comprehensive income of the group.
(b) IFRS 13 Fair value measurement
IFRS 13 establishes a single framework for measuring fair value and recording
the disclosure thereof, when such measurements are required or permitted by
other IFRS. In particular, it unifies the definition of fair values as the
price at which an orderly transaction to sell an asset or to transfer a
liability would take place between market participants at the measurement date.
It also replaces and expands the disclosure requirements on fair value
measurements in other IFRS, including IFRS 7 Financial Instruments:
Disclosures. Some of these disclosures are specifically required in interim
financial statements. Accordingly, the group has included additional
disclosures (refer note 13).
In accordance with the transitional provisions of IFRS 13, the group has
applied the new fair value measurement guidance prospectively, and has not
provided any comparative information for new disclosures. Notwithstanding the
above, the change had no significant impact on the measurements of the
groups assets and liabilities.
(c) IFRIC 20 Stripping costs in the production phase of a surface mine IFRIC 20
sets out the accounting for overburden waste removal (stripping) costs in the
production phase of a surface mine. The interpretation clarifies when
production stripping should lead to the recognition of an asset and how that
asset should be measured, both initially and in subsequent periods.
An extensive exercise to determine the impact of IFRIC 20 on the surface mines
within the group was performed during the first half of 2013. Based on the
results thereof, it has been concluded that there is no impact on the
current treatment of stripping costs. Stripping activities in the coal mining
environment are not typically done in advance (generally limited to one to
three months) due to the spontaneous combustion that may occur. Therefore the
benefits derived from stripping are for current production and not for access
to production beyond a 12-month future period.
Exxaro does not have any predecessor stripping assets (stripping assets
recognised prior to the effective date) and therefore the transitional
adjustments of IFRIC 20 are not applicable.
An associate of the group has been impacted by IFRIC 20 and as a result
changed the treatment of past and present stripping costs. Management
considered the impact to be insignificant to the group, and as such no
adjustment was made for the prior comparative period.
4. Representation of comparative information
On 14 February 2012, the group acquired a controlling interest in the share
capital of African Iron Limited (AKI). During the second half of the 2012
financial year, the group completed the purchase accounting for its acquisition
of AKI.
The results from the completion of the acquisition accounting is shown in the
table below:
Provisional as Final as
disclosed at disclosed at
30 June 31 Dec Increase/
2012 2012 (decrease)
Rm Rm Rm
Intangible assets 3 235 862 (2 373)
Property, plant and equipment
Mineral resources 1 586 1 586
Deferred tax liability 476 789 313
Transactions with non-controlling
interests 740 740
Other equity movements (52) 214 (266)
In line with IFRS 3 Business Combinations, the group represented its 30 June
2012 comparative financial information to reflect the above adjustments as at
acquisition date.
On 15 June 2012, Exxaro Resources Limited acquired 39,2% of the shares in
Tronox Limited and a 26% members interest in Tronox Sands LLP. Subsequent to
this transaction, Exxaro completed the purchase accounting for the
acquisition of its interest in the associate and the excess of the fair value
over the cost of the investment was calculated as R470 million and recognised
in the Statement of comprehensive income. This resulted in a decrease in the
carrying amount of the investment of R237 million, compared to the amount
previously presented.
The group represented its 30 June 2012 comparative financial information to
reflect the above adjustments as at acquisition date.
5. Net operating profit is arrived at after
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Continuing operations
Depreciation and amortisation (414) (345) (701)
Net realised foreign currency exchange
gains 88 60 60
Net unrealised foreign exchange losses (15) (17) (79)
(Losses)/gains on derivative instruments
held-for-trading (84) 165 (1)
Impairment reversals of trade and other
receivables 13 6
Royalties (24) (19) (124)
Profit on disposal of property, plant and
equipment 3 33 139
Gain on disposal of non-core assets 40 42
Loss on dilution of investment in
associate (13)
Other income(1) 645 44 352
(1) The other income relates to shortfall income received from customers
as a result of delays in agreed upon production off-take plans.
6. Impairment charges/(reversals) of non-current assets
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Included in operating expenses are
the following impairment losses/(reversals):
Impairment of property, plant and
equipment(1) 292
Reversal of impairment of property, plant
and equipment(2) (103) (103)
Tax effect (11) 29 29
Net effect on attributable earnings 281 (74) (74)
continuing operations 281
discontinued operations (74) (74)
(1) The carrying value of property, plant and equipment of the New Clydesdale
Colliery (NCC) coal operation was impaired to the respective recoverable
amounts based on impairment tests performed in June 2013. The
decline in recoverable amounts are mainly due to lower export sales prices,
lower train availability as well as operational challenges.
(2) The partial
impairment reversal relates to the carrying value of property, plant and
equipment of the KZN Sands operations.
7. Net financing costs
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Continuing operations
Total interest income 42 66 138
Interest income on cash and cash
equivalents 22 42 81
Interest received from loans with joint
ventures 14 24 42
Interest income on finance leases 6 15
Total interest expense (433) (210) (655)
Interest expense and loan costs (160) (129) (249)
Interest adjustment on non-current
provisions (268) (81) (404)
Amortisation of transaction costs (5) (2)
Borrowing costs capitalised 165 24 330
Total net financing costs (226) (120) (187)
8. Discontinued operations
During 2011 Exxaro announced the cessation of zinc production at the Zincor
refinery. Following the necessary consultations, Zincor ceased production on
12 December 2011. During 2012 the mineral sands and Rosh Pinah operations
were sold. The Zincor refinery, mineral sands and Rosh Pinah operations have
been classified as discontinued operations in 2012. Discontinued operations for
the six-month period ended 30 June 2013 relates only to Zincor.
Financial information relating to the discontinued operations is set out below:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Performance and cash flow information
Revenue 3 883 3 893
Operating income/(expenses) 33 (2 027) (2 069)
Profit on sale of subsidiaries 4 081 3 995
Net operating profit 33 5 937 5 819
Interest income 75 75
Interest expense (40) (111) (241)
(Loss)/profit before tax (7) 5 901 5 653
Income tax expense (565) (625)
(Loss)/profit for the period from discontinued
operations (7) 5 336 5 028
Cash flow attributable to operating
activities 43 1 092 1 036
Cash flow attributable to investing
activities (684) (1 358)
Cash flow attributable to financing
activities (43) (1 065) (2 778)
Cash flow attributable to discontinued
operations (657) (3 100)
9. Dividends
A final dividend of R546 million for the year ended 31 December 2012, was
paid in April 2013.
In addition, an interim dividend of 235 cents per share (2012: 350 cents per
share) was declared by the board of directors on 21 August 2013. The dividend
is payable on 16 September 2013 to shareholders who are on the register at 13
September 2013. This interim dividend, amounting to approximately R841 million
(2012: R1 253 million) has not been recognised as a liability in these reviewed
condensed group interim financial results. It will be recognised in
shareholders equity in the year ending 31 December 2013. Dividend tax of 15%
is payable by shareholders on the dividends received during the year. As a
result of the Secondary Tax on Companies (STC) credits available to the
company, the dividend tax payable amounts to Rnil (2012: Rnil).
30 June 2013
Issued share capital as at declaration date (number) 358 061 205
Company tax reference number 9218/098/14/4
10. Share capital
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Number of ordinary shares (million)
in issue 358 358 358
weighted average number of shares 355 354 354
diluted weighted average number of shares 355 358 355
11. Transactions with non-controlling interests
During April 2013, the group acquired the remaining 3% of the issued shares of
DMC Iron Congo SA for a purchase consideration of AUD9,9 million (R96 million).
The group now holds 100% of the equity share capital of DMC Iron Congo SA. The
carrying amount of the non-controlling interest in DMC Iron Congo SA on the
date of acquisition was R28 million.
The group derecognised non-controlling interests of R28 million and recorded
a decrease in equity attributable to owners of the parent of R68 million. The
effect of changes in the ownership interest of DMC Iron Congo SA on the
equity attributable to owners of the company during the period is summarised
as follows:
6 months ended
30 June
2013
Reviewed
Rm
Carrying amount of non-controlling interests acquired (28)
Excess of consideration paid recognised in parents equity (68)
Consideration paid for non-controlling interest (96)
12. Investments
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Fair value of unlisted investments in
associates and joint ventures 36 219 34 690 29 963
Fair value of unlisted investments
included in other financial assets
(refer note 13) 763 716 716
Market value of listed investments in
associates 10 184 9 956 7 911
Market value of listed investments
included in financial assets
(refer note 13) 42 50 52
The groups 44,65% interest in Tronox Limited on 31 December 2012 was diluted
during the period to 44,42% on 30 June 2013 due to share warrants and share
options that were exercised by participants during the period.
13. Financial instruments
(a) Carrying amounts and fair values
The fair values of financial assets and financial liabilities, together with
the carrying amounts in the reviewed condensed group statement of financial
position, are as follows:
Carrying Fair
amount value
At 30 June 2013 (Reviewed) Rm Rm
Assets
Non-current assets 2 691 2 691
Financial assets, consisting of:
Exxaro Environmental Rehabilitation Trust asset 584 584
Loans to associates and joint ventures 365 365
Richards Bay Coal Terminal (RBCT) 553 553
Kumba Iron Ore Limited 41 41
New Age Exploration Limited 1 1
Chifeng Kumba Hongye Zinc Corporation Limited 210 210
Non-current receivables 937 937
Current assets 3 156 3 156
Trade and other receivables 1 923 1 923
Derivative financial instruments 3 3
Cash and cash equivalents 1 230 1 230
Total assets 5 847 5 847
Liabilities
Non-current liabilities 3 565 3 565
Interest-bearing borrowings 3 565 3 565
Current liabilities 3 666 3 666
Trade and other payables 2 278 2 278
Derivative financial instruments 46 46
Interest-bearing borrowings 29 29
Overdraft 1 313 1 313
Total liabilities 7 231 7 231
(b) Fair value hierarchy
The following table analyses recurring fair value measurements of 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
At 30 June 2013 (Reviewed) Rm Rm Rm
Financial assets held-for-trading at fair value
through profit or loss
Current derivatives financial assets 3
Financial assets designated at fair value through
profit or loss
Exxaro Environmental Rehabilitation Trust 584
Kumba Iron Ore Limited 41
Available-for-sale financial assets
Chifeng Kumba Hongye Zinc Corporation Limited 210
New Age Exploration Limited 1
Richards Bay Coal Terminal 553
Financial liabilities held-for-trading at fair
value through profit or loss
Current derivatives financial liabilities (46)
Net financial assets/(liabilities) carried at
fair value 626 (43) 763
Level 2 fair values for over-the-counter derivative financial instruments are
based on market information (quotes). These quotes are tested for
reasonableness by discounting estimated future cash flows using the market rate
for similar instruments at measurement date.
The fair value computations of the investments are performed by the groups
corporate finance department, reporting to the Finance Director, on a six-
monthly basis. The valuation reports are discussed with the audit committee in
accordance with the groups reporting governance.
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 of the fair value hierarchy
during the six-month period ended 30 June 2013.
There were no transfers between level 2 and level 3, as shown in the
reconciliation below.
(c) Level 3 fair values
For the six-month period ended 30 June 2013 (Reviewed)
Chifeng Kumba Richards
Hongye Zinc Bay
Corporation Coal
Limited Terminal
Rm Rm
Opening balance at 1 January 2013 174 467
Movement during the year:
Total gains recognised in other comprehensive
income 10 84
Settlements 2
Exchange gains or losses for the period
recognised in profit or loss 26
Closing balance at 30 June 2013 210 553
(i) Chifeng Kumba Hongye Zinc Corporation Limited
Chifeng Kumba Hongye Zinc Corporation Limited is classified within level 3 as
there is no quoted market price or observable price available for this
investment. This unlisted investment is valued at the present value of the
estimated future cash flows, using a discounted cash flow model. For the six-
month period ended 30 June 2012, this investment was accounted for as an
equity-accounted associate. During August 2012 the shareholding diluted and
consequently the investment was accounted for as a financial asset.
The significant unobservable inputs used in the fair value measurement of the
investment in Chifeng Kumba Hongye Zinc Corporation Limited are Rand/United
States Dollar (USD) exchange rate, Zinc London Metal Exchange (LME) price,
production volumes, operational costs and the discount rate. Significant
increases/(decreases) in any of those inputs in isolation, would result in a
significantly lower/(higher) fair value measurement. Interrelationships between
unobservable inputs are not considered to have a significant impact within the
range of reasonably possible alternative assumptions.
Observable inputs
Range of Sensitivity
unobservable of
inputs unobservable
inputs and
fair value
measurement(1)
Rand/USD exchange rate R9,03 to Strengthening
R9,85/USD1 of the Rand
to the USD
Zinc LME price 2 044 to Increase in of
(USD per tonne in real terms) 2 238 USD/ price of zinc
tonne concentrate
Unobservable inputs
Production volumes 208 750 tonne Increase in
production
volumes
Operational costs (USD million per 88,5 Decrease in
annum in real terms) operational
costs
Discount rate 13% Decrease in
discount rate
(1) Change in unobservable/observable input which will result in an increase in
the fair value measurement.
(ii) Richards Bay Coal Terminal (RBCT)
RBCT is classified within a level 3 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. It is not anticipated that the RBCT investment will
be disposed of in the near future.
The significant unobservable inputs used in the fair value measurement of the
investment in RBCT are Rand/USD exchange rate, API#4 export price, Transnet
Market Demand Strategy, annual utilisation factor and the discount rate.
Significant increases/(decreases) in any of those inputs in isolation would
result in a significantly lower/(higher) fair value measurement. Any
interrelationships between unobservable inputs are not considered to have a
significant impact within the range of reasonably possible alternative
assumptions.
Sensitivity of
unobservable
Range of inputs and
unobservable fair value
Observable inputs inputs measurement(1)
Rand/USD exchange rate R9,03 to Strengthening of
R19,09/USD1 the Rand to
the USD
API#4 export price per tonne R80,39 to R97 Increase in API#4
(steam coal A-grade price in real terms) export price
per tonne
Unobservable inputs 68Mtpa to Acceleration of
Transnet Market Demand Strategy for 91Mtpa Transnet Freight
the terminal (million tonnes per rail performance,
annum Mtpa) i.e. reach full
capacity sooner
Discount rate 13% Decrease in
discount rate
Annual utilisation factor 90% Increase in annual
(safety and rail delay factor) utilisation factor
(1) Change in unobservable/observable input which will result in an increase in
the fair value measurement.
14. Segmental information
Reported segments are based on the groups different products and operations
as well as the physical location of these operations and associated products.
The corporate transactions during 2012 necessitated a change in the segmental
reporting structures and the manner in which operating results are reported
to the chief operating decision-maker.
The following operating segments were impacted as a result of the changes in
the organisational structure:
Base metals.
Up to and including 31 December 2012, the reportable segments included an
operating segment for Base metals which consisted of Zincor, Rosh Pinah and
other base metals.
Exxaros 50,04% interest in the Rosh Pinah operations was sold to a
subsidiary of Glencore International plc on 1 June 2012. This sale formed part
of Exxaros strategic plan to divest from its zinc assets.
The remaining Base metals entities no longer meet the quantitative thresholds
described in IFRS 8 Operating Segments. These have been aggregated in the
remaining Base metals entities within the Other reportable segment.
Mineral sands/Titanium dioxide
The previously reported Mineral sands operating segment, included KZN Sands,
Namakwa Sands and Australia Sands.
The Mineral sands operations sale and acquisition of a shareholding in Tronox
Limited in 2012 resulted in Exxaro holding 44,42% (31 December 2012: 44,65%) of
the shares in Tronox Limited and 26% directly in each of the South African
based KZN Sands and Namakwa Sands operations. Exxaro currently equity- accounts
for the interest in Tronox Limited and the South African Mineral sands
operations. The investment value in these associated companies is seen as
significant and will be reported as a separate operating segment.
The Mineral sands operating segment was restructured to include both Mineral
sands and Titanium dioxide (TiO2) which is reported in the share of income from
equity-accounted investments in the Statement of comprehensive income. The
mineral sands segment consisted of the business now disposed, whereas the TiO2
segment consists of the newly acquired business.
Ferrous
In line with the groups strategy to establish an Exxaro controlled ferrous
business, Exxaro acquired African Iron Limited (AKI) in February 2012. AKI is
an iron ore development company involved in the exploration and evaluation of
the Mayoko Iron Ore and Ngoubou-Ngoubou projects, located in the Republic of
Congo in Central West Africa.
The AlloyStreamTM and FerroAlloys operations as well as Exxaros 19,98%
interest in Sishen Iron Ore Company were previously reported within the
Other operating segment of Exxaro. These investments are now reported
within the Ferrous operating segment, based on the similar commodity suite of
these operations.
Following the change in the composition of the groups reportable segments, the
prior periods segmental information has been represented to reflect these
changes.
The numbers below include both the continuing and discontinued operations.
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
(Restated) (Restated)
Rm Rm Rm
(a) Revenue
Coal 6 149 5 825 12 064
Tied 1 782 1 453 3 449
Commercial 4 367 4 372 8 615
Ferrous 55 45 107
Alloys 55 45 107
TiO2 3 594 3 594
Other 41 292 357
Base metals 288 298
Other 41 4 59
Total external revenue 6 245 9 756 16 122
(b) Net operating profit/(loss)
Coal 1 031 1 352 2 105
Tied 210 79 285
Commercial 821 1 273 1 820
Ferrous (44) (87) (31)
Iron ore (1) (78) (6)
Alloys (26) (9) (25)
Other (17)
TiO2 1 925 1 925
Other (70) 4 051 3 558
Base metals 32 448 422
Other (102) 3 603 3 136
Total net operating profit 917 7 241 7 557
(c) Total assets
Coal 21 150 16 558 19 717
Tied 1 832 1 692 1 719
Commercial 19 318 14 866 17 998
Ferrous 9 559 7 051 6 917
Iron ore 9 408 7 011 6 858
Alloys 147 40 59
Other 4
TiO2 11 566 12 064 13 037
Other 2 162 4 928 2 746
Base metals 567 638 552
Other 1 595 4 290 2 194
Total external assets 44 437 40 601 42 417
(d) Total liabilities
Coal 7 779 6 216 8 001
Tied 1 627 1 260 1 596
Commercial 6 152 4 956 6 405
Ferrous 671 511 593
Iron ore 631 497 572
Alloys 38 14 21
Other 2
Other 6 048 4 677 5 017
Base metals 900 753 867
Other 5 148 3 924 4 150
Total external liabilities 14 498 11 404 13 611
15. Net (debt)/cash
Net (debt)/cash is calculated as being
interest-bearing borrowings, less cash
and cash equivalents, including those
borrowings and cash balances classified as
non-current assets held-for-sale.
Net debt (3 677) (1 288) (2 199)
Calculation of movement in net debt:
Cash outflow: (1 429) (1 275) (2 397)
shares issued 11 9 15
share-based payments (2)
translation differenceon movement in cash
and cash equivalents 77
net debt of subsidiaries disposed 820 820
net cash of subsidiaries acquired 141
consideration paid tonon-controlling interests (96) (1 181)
non-cash flow movements in net debt
applicable to currency translation differences
of transactions denominated in foreign currency (869) (45) (70)
non-cash flow movements in net debt
applicable to currency translation differences
of net debt items of foreign entities 830 (103) 268
Increase in net debt (1 478) (453) (2 545)
16. Contingent liabilities
Contingent liabilities 1 856 993 1 055
Grootegeluk Medupi Expansion Project 145
Ferrous 84
Share of contingent liabilities of associates
and joint ventures 492 198 276
Operational guarantees 1 135 795 779
Other contingent liabilities include operational guarantees to banks and other
institutions in the normal course of business from which it is anticipated that
no material liabilities will arise.
These contingent liabilities have no tax impact. The timing and occurrence of
any possible outflows are uncertain.
17. Contingent assets
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
Rm Rm Rm
Contingent assets 113 80 85
Contingent assets relate mainly to a surrender fee in exchange for the
exclusive right to prospect, explore and mine for coal within a designated area
in Central Queensland and Moranbah, Australia, conditional on the grant of a
mining lease.
Included in contingent assets are the groups share of contingent assets of
associates and joint ventures of R27 million (June 2012: Rnil; December 2012:
Rnil). The timing and occurrence of any possible inflows are uncertain.
18. Related party transactions
During the period the company and its subsidiaries, in the ordinary course of
business, entered into various sale and purchase transactions with associates
and joint ventures. These transactions were subject to terms that are no less
or more favourable than those arranged with third parties.
19. Going concern
After taking into account the current economy, the groups liquidity position
as well as internal budgets and forecasts for the short to medium term, it is
expected that the group will continue to trade as a going concern within the
next 12 months.
20. JSE Limited Listings Requirements
The interim results announcement has been prepared in accordance with the
Listings Requirements of the JSE Limited.
21. Corporate governance
Detailed disclosure of the companys application of the principles contained in
the King Report on Governance for South Africa 2009 (King III) was made in the
2012 Integrated Report and is available on the companys website in accordance
with the JSE Listings Requirements. No material changes have occurred since the
disclosure. Efforts are constantly employed to address the areas requiring
improvement. The classification of the independence of the non-executive directors
is currently under review and could potentially change in the short term. Please
contact the Group Company Secretary, Carina Wessels, for any additional information
in this regard.
22. Mineral resources and mineral reserves
No material changes to the mineral resources and mineral reserves disclosed
in the 2012 Integrated Report as at and for the year ended 31 December 2012
have occurred, other than the depletion due to continued mining activities. The
new order mining right of Tshikondeni and Matla, although granted, still
require execution. Until execution, old mining licences remain in place.
23. Events after the reporting period
Details of the interim dividend proposed are given in note 9.
On 8 August 2013, Exxaro announced that its board has taken an in-principle
decision to cease production at NCC, subject to the consultation and engagement
process for the full or partial disposal of this operation.
A final decision in this regard is only expected in the latter part of 2013.
This announcement does not constitute an adjusting event post the reporting
period.
24. Review conclusion
The condensed group interim financial results for the six-month period ended
30 June 2013, on page 2 to 21, have been reviewed by the companys external
auditors, PricewaterhouseCoopers Inc, in accordance with International
Standards on Review Engagements 2410 review interim financial information
performed by the Independent Auditors of the entity. The unmodified review
conclusion is available for inspection at the companys registered office.
25. Additional disclosure*
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Rm Rm Rm
Net asset value per share (Rand) 84 82 80
Capital expenditure
incurred 2 403 2 352 5 333
contracted 1 574 3 071 6 283
authorised, but not contracted 2 055 1 233 4 208
Capital expenditure contracted relating to
captive mines, Tshikondeni, Arnot
and Matla, which will be financed by
ArcelorMittal SA Limited and Eskom,
respectively 257 574 116
Operating lease commitments 3 14 18
Operating sub-lease rentals receivable 1 1
* Non-IFRS numbers.
Commentary
Salient features
Core net operating profit of R1 187 million (2012: R2 609 million)
Headline earnings per share (HEPS) of 712 cents (R2012: 1 162 cents)
Interim dividend of 235 cents per share (2012: 350 cents)
Challenges
Lost time injury frequency rate (LTIFR) at 0,21 against target of 0,15
Three-week industrial action in first quarter of 2013, causing coal
production losses of 2,2Mt
New Clydesdale Colliery (NCC) pre-tax impairment of R292 million
Comparability of results
The following comments are based on a comparison of the groups condensed
reviewed interim financial results and unreviewed production and sales volumes
information for the six-month periods ended 30 June 2013 and 2012 respectively.
These results are not comparable due to (amongst others):
the pre-tax impairment charges on the NCC carrying value of property, plant
and equipment of R292 million recorded in the six-month period ended 30 June
2013;
the partial impairment reversal of the carrying value of property, plant
and equipment at KZN Sands of R103 million in 2012;
profits realised on the sale of the mineral sands operations amounting to
R3 537 million and Rosh Pinah operations amounting to R544 million as well as
other assets amounting to R40 million during 2012; and
the loss recognised on the dilution of the investment in the Tronox Limited
(Tronox) associate, amounting to R13 million as a result of a decrease in the
effective shareholding to 44,42% (2012: 44,65%).
Delivery of the groups strategy
Exxaros strategy is to create and grow value through the extraction of energy,
metal and mineral commodities from diverse geographies, using own capabilities
and through the development of appropriate and relevant local partnerships.
Exxaro aims to develop markets for its energy, metal and
mineral products and apply appropriate technology throughout the value chain
for added value and competitive market advantage. Exxaro will invest in
commodities that generate sustainable economic returns above the cost of
capital for the benefit of all our stakeholders.
Coal
In line with Eskoms recent announcement of the Medupi power station
construction being delayed by six months resulting in unit six only expected to
supply electricity to the grid in the second half of 2014, Exxaro confirms that
the parties have reached an amicable agreement to deal with this delay.
Construction on the Grootegeluk Medupi Expansion Project (GMEP), to supply
Eskoms Medupi power station with 14,6 million tonnes per annum, continues to
progress on time and within budget and is 96% complete.
Exxaro is contemplating the cessation of production at NCC. This is subject to
the consultation and engagement processes as stipulated and required in terms
of the Labour Relations Act for the full or partial disposal of this operation.
NCCs carrying value of property, plant and equipment has been impaired by R292
million (pre-tax), during the six-month period ended 30 June
2013 mainly as a result of reduced profitability in turn caused by lower export
sales prices, lower train availability as well as operational challenges.
Ferrous
Exxaro is actively progressing the groups strategy to develop a controlled and
managed ferrous division. The application for a Mining Convention was submitted
to the government of the RoC in the first quarter of 2013. Negotiations with
regards to the Mining Convention are ongoing. Mining will commence once the
Mining Convention has been ratified by the parliament of the RoC.
Energy
Exxaro continues to engage with Linc Energy Limited to jointly pursue
underground coal gasification as a commercial business with the intention to
develop energy solutions in sub-Saharan Africa.
Following a selection process in the second quarter of 2013, Exxaro chose to
partner with GDF SUEZ for the development of a 600MW coal-fired Independent
Power Producer (IPP) power station in the Waterberg region, with the coal to be
supplied by Exxaros proposed greenfields Thabametsi mine.
Titanium dioxide (TiO2)
The first year of a three-year lock-in period of Exxaros shareholding in
Tronox, listed on the New York Stock Exchange, has lapsed. During the remaining
two years Exxaro will continue to consider its options within the pigment
business.
Exxaros shareholding in Tronox has declined from 44,65% at 31 December 2012 to
44,42% at 30 June 2013. The dilution is as a result of share warrants and share
options exercised by share scheme participants (employees and former employees)
during the period.
Safety, health, environment and community
There were no fatalities for the six-month period ended 30 June 2013 and the
group continues to strive towards achieving zero harm at all operations.
A 0,21 LTIFR per 200 000 man-hours worked was recorded for the six-month
period ended 30 June 2013 (2012: 0,26) against a target of 0,15 mainly as a
result of an increase in slip and fall incidents. Notwithstanding this, seven
operations achieved no lost time injuries. Exxaro has initiated multiple safety
improvement programmes, such as the Global Mining Industry Risk Management
programme, to raise the awareness of risks. The group has also incorporated the
Mine Safety and Health Administration as a standard to proactively manage the
health and safety practices across the group.
The groups health and hygiene efforts show an overall 24% improvement in
number of employees enrolled in the HIV/AIDS programme compared to the
corresponding period in 2012. Exxaro still faces some challenges with
tuberculosis cases.
Given the association of the groups operations with wetlands and associated
biodiversity as well as considering the strain on water resources in South
Africa, water stewardship is a key tenet of Exxaros business strategy. In this
regard, Exxaro has a Water Management Programme which has seen average monthly
operational water use reducing by 42%. In respect of the wetlands, Exxaro
considers trade-offs between the economic benefits of the mining industry and
environmental protection, both in the short and long term. The decision to mine
the Weltevreden area in Leeuwpan was supported by a detailed trade-off study,
details of which are available on Exxaros website.
Progress with the development of the water treatment plants within the group
is at different stages of implementation. At Matla mine the plant is scheduled
for delivery in the second quarter of 2014, while at the North Block Complex
(NBC)Glisa mine the plant is scheduled for the last quarter of
2014. The two plants will have capacity to treat 11,5 mega litres per day and
save 8,9 mega litres per day from industrial application by discharging treated
water back into the water streams around both mines.
Leadership and people
The Exxaro group continues to be focused on transformation, development of
people and rewarding top performers. The group has met its targets on
employment equity on junior and middle management. Continued focus on the
senior management band is expected to result in the group meeting this target
by 2014.
Exxaro spent R68 million (2012: R74 million) for the six months on industry
related training initiatives. This training involved 735 youth candidates, of
which 80% were historical disadvantaged South Africans (HDSAs) selected for
learnerships, internships, bursaries and various skills programmes. Operational
and financial excellence
Group
Revenue and net operating profit
Group consolidated revenue decreased by 36% to R6 245 million for the six-
month period ended 30 June 2013, mainly as a result of the disposal of the
mineral sands and Rosh Pinah businesses in 2012.
Group consolidated net operating profit was R1 795 million lower at R1 222
million, after the exclusion of the items listed in the comparability of
results section above. This was mainly due to the coal operations being the
main contributors to the groups performance in the first half of 2013 compared
to 2012 where the mineral sands and Rosh Pinah operations contributed to
operating profits for five and a half and five months, respectively. Corporate
further saved costs (R231 million) mainly from reduced consulting fees (R180
million).
Earnings
Attributable earnings, inclusive of Exxaros equity-accounted investment in
associates, amounted to R2 244 million (2012: R8 809 million) or 632 cents per
share (R2012: 2 488 cents) for the six-month period, representing an 75%
decrease from the 2012 comparative period, mainly as a result of the non-
recurring profits on the sale of subsidiaries and other non-core assets
recorded in 2012.
Headline earnings
Headline earnings achieved, which exclude, inter alia, the impact of the
impairment and partial impairment reversal as well as profits realised on the
sale of subsidiaries in 2012, were R2 529 million (2012: R4 115 million) or
712 cents per share (2012: 1 162 cents) for the six-month period ended 30
June 2013, representing a 39% decrease in headline earnings per share from the
corresponding period in 2012.
Cash flow
Cash generated from operations was R602 million (2012: R2 485 million) for the
group, which was primarily used to fund net financing charges of R128 million,
taxation payments of R117 million and a portion of the dividends paid of R546
million. A total of R1 826 million of capital was invested in new capacity,
with R577 million applied towards sustaining capital.
After the receipt of R1 216 million (2012: R1 958 million) in dividends,
primarily from Sishen Iron Ore Company Proprietary Limited (SIOC) and Tronox,
as well as the outflow associated with sustaining and expansion capital, the
group had a net cash outflow before financing activities of R1 429 million
(2012: R1 275 million) for the period under review. A total of R1 087 million
of the capital investment in new capacity was for GMEP (R850 million) as well
as the backfill project (R237 million).
Net debt at 30 June 2013 was R3 677 million, reflecting a net debt to equity
ratio of 12%.
Exchange rates
An average exchange rate of R9,19 to the US dollar (USD) was achieved for the
six-month period ended 30 June 2013 compared to R7,88 in 2012. Unrealised
foreign currency losses of R15 million on the revaluation of monetary items
denominated in a foreign currency were recorded based on the relative
weakness of the local currency to the USD at 30 June 2013 (2012: R118 million
profit).
Coal
Trading conditions for the coal business continued to be challenging. The
coal export price declined from approximately USD92 per tonne in January 2013
to a low of around USD77 per tonne in June 2013. Exxaro realised an average
export price of USD84 per tonne in the first half of 2013, compared to USD103
per tonne in the comparable period in 2012.
A marginal increase in export volumes was achieved compared to the
comparative period in 2012, while the continued depressed ferrochrome industry
led to low demand in the metallurgical market.
Revenue and net operating profit
Coal reported revenue of R6 149 million in the six-month period ended 30 June
2013, representing an increase of 6% compared to 2012, mainly due to higher
revenue from tied mines. Revenue from the commercial mines was, however, lower
due to lower prices realised on export and domestic sales partially offset by
higher revenue from Eskom.
A 24% decrease in net operating profit to R1 031 million (at an operating
margin of 17%) was achieved, mainly as a result of the decrease in selling
prices (R228 million), lower volumes sold (R50 million) as well as inflationary
pressures on costs (R164 million). Operating costs recorded were R320 million
higher than in the corresponding period in 2012 mainly due to higher corporate
service fee allocated (R222 million), higher distribution costs (R33 million);
higher labour (R30 million).
Included in the performance of the coal business is the pre-tax impairment of
NCC (R292 million) as well as the favourable impact of the local currency
weakness against the USD of R167 million.
The income received from Eskom as a result of the delay on the Medupi power
station during the six-month period ended 30 June 2013 was R601 million higher
than the corresponding period in 2012.
Due to a continued decline in global market interest rates, the group revised
the inflation and discount rates used to calculate the net present value of its
rehabilitation provisions in line with the latest cost of debt indicators. The
decrease of the rehabilitation provision increased the tied mines net
operating profit by R132 million.
Production and sales volumes
Overall coal production (excluding buy-ins from Mafube) remained stable for the
six-month period ended 30 June 2013 at 19 million tonnes.
Metallurgical coal
Grootegeluks metallurgical coal production was 209kt (19%) lower, negatively
influenced by the unprotected industrial action in the first quarter of 2013,
while Tshikondeni production increased by 30kt (20%) mainly due to better
extraction ratios and better utilisation of equipment.
Sales decreased by 67kt (6%) mainly due to lower off-take by ArcelorMittal
South Africa as a result of the slump in the ferrochrome market and lower
export sales (62kt) as a result of lower train allocations to Grootegeluk for
export via the Richards Bay Coal Terminal.
Thermal coal
Total production was 467kt (3%) lower mainly due to lower (501kt) volumes from
the tied mines.
Matlas lower production was attributable to the delayed phasing of a short
wall move at the mine, difficult geological conditions as well as the
unprotected industrial action in March 2013.
Production at Arnot was mainly affected by the unprotected industrial action
in March 2013, as well as lower volumes from a section due to the ongoing
difficult geological conditions.
Production at Grootegeluk was lower (98kt) mainly as a result of the
unprotected industrial action.
NBC increased production (338kt) mainly as a result of improved extraction
rates.
The unprotected industrial action and lower yields achieved resulted in lower
production at Leeuwpan (120kt).
NCC production was lower (100kt) due to unfavourable mining conditions, plant
maintenance and equipment breakdowns.
Domestic sales from the commercial operations decreased by 24kt (3%) due to
lower sales at Grootegeluk, Inyanda and Leeuwpan as a result of the industrial
action, partially offset by higher sales at NBC and NCC, where
some product was redirected to the domestic market due to a reduced number of
export trains scheduled by Transnet Freight Rail.
Export sales were 10% (147kt) higher mainly due to higher railings from most
of the mines. However, NCC reported lower export volumes due to lower train
availability.
The Char plant production and sales were 37% and 58% lower, respectively,
mainly due to the previously reported downtime in the ferrochrome industry,
with production deliberately reduced to match demand.
Reviewed segment results
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
Reviewed Reviewed Audited
R million (Restated) (Restated)
Revenue
Coal operations 6 149 5 825 12 064
Tied(1) 1 782 1 453 3 449
Commercial 4 367 4 372 8 615
Ferrous 55 45 107
Alloys 55 45 107
TiO2 3 594 3 594
Other 41 292 357
Base metals(2) 288 298
Other 41 4 59
Total external revenue 6 245 9 756 16 122
Net operating profit/(loss)
Coal operations 1 031 1 352 2 105
Tied(1) 210 79 285
Commercial 821 1 273 1 820
Ferrous (44) (87) (31)
Iron ore (1) (78) (6)
Alloys (26) (9) (25)
Other(3) (17)
TiO2(4) 1 925 1 925
Other (70) 4 051 3 558
Base metals(2) 32 448 422
Other(5) (102) 3 603 3 136
Total net operating profit 917 7 241 7 557
(1) Tied operations refer to mines that supply their entire production to either
Eskom or ArcelorMittal South Africa (AMSA).
(2) Previously reported as a separate segment.
(3) Ferrous head office costs not directly attributable to the operation at
Mayoko and as such could not be capitalised with development.
(4) Includes a partial impairment reversal of R103 million in 2012 of the
carrying value of property, plant and equipment at KZN Sands. This segment
was previously reported as the mineral sands segment prior to the sale
transaction in 2012.
(5) Includes a profit on sale of subsidiaries of R544 million and R3 451
million on the sale of the Rosh Pinah and mineral sands operations respectively
as well as R40 million on the sale of other non-core assets in
2012.
Unreviewed coal production and sales information
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
(Restated) (Restated)
(000 tonnes)
Production
Thermal 17 704 18 171 37 641
Tied(1) 5 640 6 141 13 029
Commercial 12 064 12 030 24 612
Metallurgical 1 095 1 274 2 366
Tied(1) 179 149 339
Commercial 916 1 125 2 027
Reductants 24 38 43
Total production (excluding buy-ins) 18 823 19 483 40 050
Buy-ins 542 460 1 111
Total production (including buy-ins) 19 365 19 943 41 161
Sales
Thermal 17 902 18 224 37 929
Tied(1) 5 643 6 136 13 022
Commercial 10 634 10 610 21 708
Export 1 625 1 478 3 199
Metallurgical 1 142 1 209 2 326
Tied(1) 185 141 282
Commercial 681 730 1 348
Export 276 338 696
Reductants 16 38 62
Total sales 19 060 19 471 40 317
(1) Tied operations refer to mines that supply their entire production to
either Eskom or AMSA.
Ferrous
Revenue and net operating profit
FerroAlloys remains the only contributor of revenue to the Ferrous business.
Revenue increased by 22% to R55 million when compared to the six-month period
ended 30 June 2012 due to increased demand from Kumba Iron Ore Limited, and
an average price increase of 6%.
A net operating loss of R44 million was recorded in the six-month period
ended 30 June 2013 compared to the corresponding period in 2012 (R87 million),
due to higher corporate costs, costs of the furnace refurbishment at
AlloyStream and lower 2012 African Iron Ore costs capitalised due to the timing
of the development phase.
Production and sales volumes
Plant availability at FerroAlloys was impacted by furnace related problems in
the six-month period ended 30 June 2013 resulting in a 12% decrease in
production.
Sales volumes were in line with production as tonnes sold at FerroAlloys
decreased by 10% when compared to the corresponding period in 2012.
Equity-accounted investments
Exxaros share in the post-tax profits of its equity-accounted investments
comprise of Exxaros interest in SIOC of R2 120 million, Black Mountain Mining
Proprietary Limited (Black Mountain) of R52 million, Mafube of R80 million and
Tronoxs and Cennergis effective losses of R168 million and R69 million
respectively.
SIOC recorded a restatement of its 2012 numbers as a result of the first time
adoption of the accounting standard: IFRIC 20 Stripping costs in the production
phase of a surface mine. Exxaros share of the restatement amounted to a
positive R71 million.
As this amount was below Exxaros materiality level, no restatement of Exxaros
comparative equity income was, however, done. The full R71 million is
nonetheless included in the R2 120 million equity income recorded for the
six-month period ended 30 June 2013.
Tronox achieved an increase in the mineral sands volumes, however, this was
offset by lower prices, primarily in the depressed zircon market. Pigment
selling prices obtained were lower although higher volumes were achieved in the
European and Asia-Pacific regions.
Post-tax equity-accounted income
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2013 2012 2012
R million Reviewed Reviewed Audited
Sishen Iron Ore Company 2 120 1 935 3 202
Tronox Limited(1) (168) 588 220
Black Mountain 52 45 101
Mafube 80 65 144
Cennergi (69) (25) (65)
Total post-tax equity-accounted income 2 015 2 608 3 602
(1)Includes the excess of fair value of net assets over the cost of the
investment in associates of R470 million in June 2012 (December 2012: R470
million).
Capital expenditure and project pipeline
Macro-economic challenges experienced by the mining industry and specifically
the groups commodity sector continued to be considered in the groups
evaluation of growth projects. Current global economic conditions indicate a
reduction in demand growth rates and commodity prices up to the period
2015/2016. Capital allocation management continues to be a key focus and the
group aims to preserve cash whilst ensuring the delivery of growth projects and
returning cash to shareholders.
Coal
Construction on the GMEP, to supply Eskoms Medupi power station with 14,6
million tonnes of coal per annum, is 96% complete. The capital expenditure on
the project to date is R8,9 billion with total capital expenditure for the
project still forecast at R10,2 billion. The major construction contracts are
expected to be completed during the second half of 2013.
In terms of the contractual arrangement between Exxaro and Eskom, following
Eskoms recent announcement of the delay in the completion of the Medupi power
station, Eskom has the option to defer the commencement of coal deliveries to
the Medupi power station from March 2013 to the first quarter of 2014. The
subsequent rate of coal deliveries will then be increased to
take the full volume of the deferred coal over a period of 24 months prior to
December 2016. There is no adverse financial impact on the parties in the
long run in terms of the revised agreement. The coal supply ramp-up therefore
did not commence during the first half of 2013 as scheduled. However, the
ramp-up completion date remains scheduled to continue until 2016.
The 740 housing units at Grootegeluk were completed by June 2013 and within
the budget of R590 million.
The development of the Thabametsi project, a prospective greenfields opencast
mine adjacent to Grootegeluk mine is expected to coincide with the 600MW
coal-fired base load IPP power station. The Thabametsi mine will supply
approximately 3,8 million tonnes per annum of coal to the 600MW Waterberg IPP
post ramp-up. The period of the coal supply agreement will be determined by the
duration of the power purchase agreement signed with Eskom. It is estimated to
extend up to 25 years. The pre-feasibility study for the Thabametsi mine has
commenced and is anticipated to be completed by the end
of 2013, whilst the bankable feasibility study will commence at the beginning
of 2014.
The Mining Right application process is in progress and the first coal
production is expected to be achieved by 2016/17, subject to the 600MW
Waterberg IPP and water supply development schedules. Stakeholder engagement
for the crucial integrated infrastructure plans of the Waterberg coalfields
development, which will include the supply of water, rail, road and housing
requirements, continues.
The Char Phase 2 expansion continues to be executed in a phased manner due to
continued weak market conditions, which in turn will impact on the timing of
adding retorts. The bankable feasibility study is expected to be completed in
the second half of 2013.
A bankable feasibility study to produce market coke from semi-soft coking
coal at Grootegeluk is expected to be completed in the second half of 2013. The
bankable feasibility study on the Belfast project in Mpumalanga is now only
expected to be completed in the first quarter of 2014. The colliery, once fully
operational, will produce both export and power station coal.
The joint value engineering exercise between Exxaro and Anglo American plc on
the Moranbah South project (a 50/50 joint venture) is progressing as planned.
The pre-feasibility study will be updated with the value engineering
findings, before seeking approval to commence with the definitive feasibility
study. The environmental impact study process is progressing on schedule and
authorisation is expected in the second half of 2014.
Ferrous
The development of the Mayoko project commenced during the first half of
2012. The delay in finalising the Mining Convention will impact on Exxaros
planned ramp-up period as well as the timing of operational readiness.
Regular engagement with the relevant Republic of Congo government authorities
continues at all levels to ensure that the project is successfully implemented.
The production of the first ore is scheduled to commence during the second half
of 2014, pending the finalisation of the Mining Convention, which includes rail
and port agreements. All efforts are being made to ensure operational readiness
is achieved to meet this target.
The project expenditure continues to be managed within a contractual risk
exposure limit imposed by the board, which will remain in force until such time
that the Mining Convention is granted.
Total expenditure on the project for the six-month period ended 30 June 2013
was R854 million, bringing the total spent since acquisition in the first half
of 2012 to R1,3 billion.
Exploration at Mayoko during the first half of 2013 was focused on regional
exploration, content testing work on various target areas and improving the
resource accuracy. The Joint Ore Reserves Committee (JORC) compliant resource
has increased from 121 million tonnes at acquisition to 730 million tonnes.
An Exploration Permit for the Mayoko project was approved by the Council of
Ministers of the RoC during the six-month period ended 30 June 2013 and a
decree granting the Permit was signed by the president of the RoC on 9 August
2013. Energy
In a national environment where the need for cleaner energy is evident, Exxaro
continues to explore opportunities in the energy markets.
Cennergi, a 50/50 joint venture with Tata Power, achieved financial closure
on both its Amakhala Emoyeni Wind Farm and Tsitsikamma Community Development
Wind Farm projects in the second quarter of 2013 under Window 2 of the
Department of Energys rolling renewable energy IPP procurement programme.
These two wind projects, with a combined 229MW capacity, represent 35% of the
total wind allocation of the Window 2 renewable energy programme.
Further to the term sheets signed in the second half of 2012, Exxaro and Linc
Energy Limited concluded formal agreements in May 2013. The agreements are
conditional upon obtaining an extension of the prospecting right, which is
awaited from the Department of Mineral Resources, as well as Exchange Control
Approval being granted by the South African Reserve Bank for the payment of
licence fees and royalties for the intellectual property. The parties will
implement a business model, which optimally combines Exxaros strategic
interests to expand its coal beneficiation opportunities with Linc Energys
unique position as a world leader in underground coal gasification and
downstream process integration know-how. This milestone allows Exxaro to
extract the inherent value contained in clean coal technology.
The Botswana gas exploration programme is nearing completion, with ongoing gas
content testing. The pilot programme is scheduled for completion in the third
quarter of 2013.
Conversion of mining rights
The granted mining rights of Tshikondeni and Matla still require execution.
Until execution, old mining licences remain in place.
Outlook
Exxaro is committed to creating and maintaining a safe and healthy environment
for our people to work and live in. Our strategy aims to deliver enduring
financial returns to shareholders balanced with social and environmental value
creation through considered investments that will meet stakeholder
expectations.
To remain a sustainable and diversified mining company, Exxaros focus remains
grounded on improved long-term value creation through cost management, improved
productivity levels and investment in risk-adjusted return projects. General
economic conditions and internal cost pressures require Exxaro to preserve cash
for purposes of future growth and dividend payment. Corporate costs continue to
be overweight following the divestments
in 2012; as such sustainable cost savings initiatives and the need to remove
the inefficiencies across the group will be top priority over the next six to
12 months. The long lead times of Exxaros Grootegeluk Medupi Expansion and
Mayoko projects result in Exxaros earnings being sensitive in the short- to
medium-term period up to 2016.
The financial and operational results for the remainder of 2013 are expected
to be impacted by continued low coal prices, the ZAR/USD exchange rate
volatility as well as the availability of trains for coal exports.
To broaden coal marketing options, Exxaro is active in developing new markets
in China, India and Pakistan. A proposed ban on low-grade imports to China may
benefit higher-grade South African coal. However, developments in the financial
markets may impact on the availability of trade finance and impact coal
trading.
Whilst expected to remain stable, domestic market demand is expected to be
sensitive to international market pricing influences. Supply to Eskom from
Exxaro will remain on schedule at agreed supply levels.
Capital investment management as well as project execution and delivery are
critical factors in Exxaros short- to medium-term outlook.
Key challenges that are expected to have significant influence over the groups
strategy include:
commodity price volatility;
the potential for labour unrest in the mining industry;
the impact of carbon tax on the Exxaro group;
uncertainty in future government policy on South Africas future energy
requirements mix; and
the proposed changes to the Mineral and Petroleum Resources Develoment Act
and introduction of beneficiation legislation.
Exxaros equity income from Tronox is expected to improve in the second half
of 2013. Positive pigment volumes are expected in the second half of 2013 as
the pigment utilisation rates increase. It is expected that Tronox will reach
approximately a 80% utilisation rate. Zircon sales are also expected to pick up
as the market continues to recover.
As reported in the Kumba Iron Ore Limited results announcement on 25 July
2013, annual production volumes from the Sishen mine are expected to increase
in the second half of 2013, whilst export sales volumes are expected to be
similar to those in 2012.
Exxaro will continue to be a diversified and multi-commodity organisation to
mitigate the risk of over-reliance on one commodity.
Changes to the board
Mr U Khumalo resigned as non-executive director effective 31 January 2013. The
board expressed its sincere appreciation to Mr Khumalo for his contribution
during his tenure on the board.
Interim dividend
The dividend declaration was carefully considered to take into account the
groups capital allocation strategy, with an effort to balance distribution
between shareholders and long-term growth.
Notice is hereby given that a gross interim cash dividend number 21 of 235
cents per share for the six-month period ended 30 June 2013 has been declared
payable to shareholders of ordinary shares. The total Secondary Tax on
Companies (STC) credits available for offsetting against the new dividend tax
amount to R1 566 million, which equates to 235 cents per share. The number of
ordinary shares in issue at the date of this declaration is 358 061 205.
Although the local dividend tax rate is 15%, no tax will be due as a result
of the STC credits utilised. Exxaros tax reference number is 9218/098/14/4.
The salient dates relating to the payment of the dividend are as follows:
Last day to trade cum dividend on the JSE Friday, 6 September 2013
First trading day ex dividend on the JSE Monday, 9 September 2013
Record date Friday, 13 September 2013
Payment date Monday, 16 September 2013
No share certificates may be dematerialised or rematerialised between Monday,
9 September 2013 and Friday, 13 September 2013, both days inclusive. Dividends
in respect of certificated shareholders will be transferred electronically to
the shareholders bank accounts on the payment date. Shareholders who hold
dematerialised shares will have their accounts at their Central Securities
Depository Participant (CSDP) or broker credited on
Monday, 16 September 2013.
On behalf of the board
Len Konar Sipho Nkosi Wim de Klerk
Chairman Chief Executive Officer Finance Director
21 August 2013
Registered Office Transfer Secretaries
Exxaro Resources Limited Computershare Investor
Roger Dyason Road Services Proprietary Limited
Pretoria West, 0183 Ground Floor
Tel +27 12 307 5000 70 Marshall Street
Fax +27 12 323 3400 Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
This report is available at: www.exxaro.com
Directors: Dr D Konar*** (Chairman), SA Nkosi* (Chief Executive Officer), WA de
Klerk* (Finance Director), S Dakile-Hlongwane**, JJ Geldenhuys***, NB
Mbazima**, VZ Mntambo**, RP Mohring***, Dr MF Randera**, J van Rooyen***, NL
Sowazi**, D Zihlangu**
* Executive.
** Non-executive.
*** Independent non-executive.
Zambian.
Prepared under supervision of: WA de Klerk, CA(SA) Group company secretary: CH
Wessels
Investor relations: M Mthenjane (+27 12 307 7393)
Sponsor: Deutsche Securities (SA) Proprietary Limited (+27 11 775 7000)
If you have any queries regarding your shareholding in Exxaro Resources
Limited, please contact the transfer secretaries at +27 11 370 5000.
The financial information on which the outlook statement is based has not
been reviewed nor reported on by the groups external auditors. Any forward-
looking statements are based on managements current beliefs and expectations
and are subject to uncertainty and changes in circumstances. The forward-
looking statements involve risks that may affect the groups operations,
markets, products, services and prices. Exxaro undertakes no obligation to
update or revise any forward-looking statements, whether as a result of new
information or future developments.
Date: 22/08/2013 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,
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