Wrap Text
Reviewed condensed group interim financial statements for the six-month period ended 30 June 2014
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 condensed Group interim financial statements and unreviewed production and sales volume information
For the six-month period ended 30 June 2014
Performance in brief
- Zero fatalities - record 20 months without a fatality
- Coal production at 18,8 million tonnes
- Coal exports of 2,7 million tonnes, up 43%
- GMEP Project - shortfall income of R888 million
- HEPS up 11% to 793 cents per share
- Interim dividend of 260 cents per share up 11%
- Raised R1 billion in successful debut bond
What we continue to work on
- Regrettable fatality on 5 July 2014
- Lost-time injury frequency rate at 0,22 a regression of 5%
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
6 months ended 6 months ended 12 months ended.
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
(Restated)
Rm Rm Rm
Revenue 7 412 6 245 13 568
Operating expenses (6 620) (5 714) (12 576)
Operating profit (note 6) 792 531 992
Other income (note 7) 888 645 1 594
Impairment charges of non-current
assets (notes 8, 14) (5 760) (292) (143)
Net operating (loss)/profit (4 080) 884 2 443
Interest income (note 9) 43 42 81
Interest expense (note 9) (86) (268) (367)
Income from investments 7 2 12
Share of income from
equity-accounted investments
(note 10) 1 515 2 015 3 631
(Loss)/profit before tax (2 601) 2 675 5 800
Income tax benefit/(expense) 159 (429) (645)
(Loss)/profit for the period from
continuing operations (2 442) 2 246 5 155
(Loss)/profit for the period from
discontinued operations (note 11) (7) 1 049
(Loss)/profit for the period (2 442) 2 239 6 204
Other comprehensive income, net
of tax 468 1 101 2 640
Items that will not be
reclassified to profit or loss: 35 12 150
– Share of comprehensive income
of equity-accounted investments 35 12 150
Items that may be subsequently
reclassified to profit or loss: 433 1 089 2 490
– Unrealised exchange gains on
translating foreign operations 164 320 537
– Revaluation of
available-for-sale financial
assets 148 94 100
– Share of comprehensive income
of equity-accounted investments 121 675 1 853
Total comprehensive (loss)/income
for the period (1 974) 3 340 8 844
(Loss)/profit attributable to:
Owners of the parent (2 441) 2 244 6 217
– continuing operations (2 441) 2 251 5 168
– discontinued operations (7) 1 049
Non-controlling interests (1) (5) (13)
– continuing operations (1) (5) (13)
(Loss)/profit for the period (2 442) 2 239 6 204
Total comprehensive (loss)/income
attributable to:
Owners of the parent (1 969) 3 343 8 854
– continuing operations (1 969) 3 350 7 805
– discontinued operations (7) 1 049
Non-controlling interests (5) (3) (10)
– continuing operations (5) (3) (10)
Comprehensive (loss)/income for
the period (1 974) 3 340 8 844
RECONCILIATION OF GROUP HEADLINE EARNINGS
Gross Tax Net
Rm Rm Rm
6 months ended 30 June 2014 (Reviewed)
Loss for the period attributable to owners of
the parent (2 441)
Adjusted for:
– IAS 36 Impairment of goodwill acquired in a
business combination in terms of IFRS 3 1 020 1 020
– IAS 16 Net losses or gains on disposal of
property, plant and equipment 19 (5) 14
– IAS 28 Loss on dilution of investment in
associate 29 29
– IAS 28 Share of associates’ gains or
losses on disposal of property, plant and
equipment 4 4
– IAS 36 Impairment of property, plant and
equipment 4 740 (552) 4 188
Headline earnings 5 812 (557) 2 814
12 months ended 31 December 2013 (Audited)
Profit for the year attributable to owners of
the parent 6 217
Adjusted for:
– IFRS 10 Gains on disposal of subsidiary (964) (964)
– IAS 16 Net losses or gains on disposal of
property, plant and equipment 9 (4) 5
– IAS 28 Loss on dilution of investment in
associate 12 12
– IAS 28 Share of associates’ gains or
losses on disposal of property, plant and
equipment (114) 2 (112)
– IAS 36 Impairment of property, plant and
equipment 292 (11) 281
– IAS 36 Reversal of impairment of property,
plant and equipment (247) (247)
– IAS 38 Loss on the scrapping of intangible
assets 2 2
Headline earnings (1 010) (13) 5 194
– continuing operations 5 218
– discontinued operations (24)
6 months ended 30 June 2013 (Reviewed)
Profit for the period 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
associate 13 13
– IAS 28 Share of associates’ gains or
losses on disposal of property, plant and
equipment (5) 1 (4)
– IAS 36 Impairment of property, plant and
equipment 292 (11) 281
Headline earnings 296 (11) 2 529
– continuing operations 2 537
– discontinued operations (8)
HEADLINE EARNINGS AND ATTRIBUTABLE EARNINGS PER SHARE
6 months ended 6 months ended 12 months ended.
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Headline earnings/(loss) per share cents cents cents
Headline earnings per share – aggregate
– basic 793 712 1 463
– diluted 790 712 1 459
Headline earnings per share – continuing
operations
– basic 793 714 1 470
– diluted 790 714 1 466
Headline loss per share – discontinued
operations
– basic (2) (7)
– diluted (2) (7)
Attributable (loss)/earnings per share
Attributable (loss)/earnings per share –
aggregate
– basic (688) 632 1 751
– diluted (686) 632 1 746
Attributable (loss)/earnings per share –
continuing operations
– basic (688) 634 1 456
– diluted (686) 634 1 452
Attributable (loss)/earnings per share –
discontinued operations
– basic (2) 295
– diluted (2) 294
Refer to note 12 for details regarding the number of shares.
CONDENDSED GROUP STATEMENT OF FINANCIAL POSITION
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
(Restated)
Rm Rm Rm
ASSETS
Non-current assets 40 402 41 268 44 681
Property, plant and equipment 17 057 17 980 20 342
Biological assets 72 56 72
Intangible assets (note 14) 232 994 1 176
Investments in associates (note 15) 18 828 18 616 19 207
Investments in joint ventures (note 16) 859 513 861
Financial assets (note 20) 2 763 2 879 2 657
Deferred tax 591 230 366
Current assets 5 578 4 777 4 483
Inventories 1 018 915 938
Trade and other receivables 2 875 2 510 2 434
Current tax receivable 98 122 82
Cash and cash equivalents 1 587 1 230 1 029
Non-current assets held-for-sale (note 17) 284 342
Total assets 46 264 46 045 49 506
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 2 402 2 388 2 396
Other components of equity 5 334 2 678 4 234
Retained earnings 25 328 26 500 29 668
Equity attributable to owners of the parent 33 064 31 566 36 298
Non-controlling interests (4) (19) (26)
Total equity 33 060 31 547 36 272
Non-current liabilities 9 186 9 844 9 157
Interest-bearing borrowings (notes 18, 19, 20) 3 405 3 565 3 569
Non-current provisions 1 950 3 200 1 863
Post-retirement employee obligations 158 142 149
Financial liabilities 91 126 95
Deferred tax 3 582 2 811 3 481
Current liabilities 3 809 4 654 3 852
Trade and other payables 2 888 3 029 2 867
Interest-bearing borrowings (notes 18, 19, 20) 197 29 31
Current tax payable 57 166 131
Current provisions 29 117 17
Overdraft (notes 18, 19, 20) 638 1 313 806
Non-current liabilities held-for-sale (note 17) 209 225
Total equity and liabilities 46 264 46 045 49 506
CONDENSED GROUP STATEMENT OF CASH FLOWS
6 months ended 6 months ended 12 months ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Cash flows from operating activities 262 (189) 422
Cash generated by operations 1 555 602 2 159
Interest paid (170) (165) (262)
Interest received 34 37 70
Tax paid (31) (117) (158)
Dividends paid (1 126) (546) (1 387)
Cash flows from investing activities 485 (1 240) (1 480)
Property, plant and equipment to maintain
operations (note 13) (502) (577) (1 257)
Property, plant and equipment to expand
operations (note 13) (1 076) (1 826) (3 507)
Investment in intangible assets (10) (23) (201)
Proceeds from disposal of property, plant
and equipment 11 17
Decrease in investments in other non-current
assets 51 33 222
Proceeds from disposal of subsidiaries 87
Increase in equity-accounted joint ventures (61) (76) (82)
Dividend income from equity-accounted
investments 2 081 1 216 3 229
Income from investments 2 2 12
Cash flows from financing activities 715 715
Interest-bearing borrowings raised (note 18) 1 000 800 800
Interest-bearing borrowings repaid (note 18) (1 000)
Consideration paid to non-controlling interests (96) (96)
Proceeds from issuance of share capital 11 14
Other financing activities (3)
Net increase/(decrease) in cash and cash
equivalents 747 (714) (343)
Cash and cash equivalents at beginning of
the period 223 553 553
Translation difference on movement in cash and
cash equivalents (21) 78 13
Cash and cash equivalents/(overdraft) at end of
the period 949 (83) 223
– cash and cash equivalents 1 587 1 230 1 029
– overdraft (638) (1 313) (806)
Cash and cash equivalents/(overdraft) at end of
the period 949 (83) 223
GROUP STATEMENT OF CHANGES IN EQUITY
Other components of equity
Foreign Financial Retirement Available- Attributable Non-
Share currency instruments Equity- benefit for-sale Retained to owners of controlling Total
capital translations revaluation settled obligation revaluations Other income the parent interests equity
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 31 December
2012 (Audited) 2 374 1 211 21 1 300 (163) (733) 24 784 28 794 12 28 806
Profit/(loss) for the
period 2 244 2 244 (5) 2 239
Other comprehensive income 318 94 412 2 414
Share of comprehensive
income/(loss) from
equity-accounted
investments 618 (9) 48 12 18 687 687
Issue of share capital 14 14 14
Share-based payments
movements 29 29 29
Dividends paid (546) (546) (546)
Acquisition of
non-controlling interest (68) (68) (28) (96)
Balance at 30 June 2013
(Reviewed, restated) 2 388 2 147 12 1 377 (151) 94 (801) 26 500 31 566 (19) 31 547
Profit/(loss) for the
period 3 973 3 973 (8) 3 965
Other comprehensive income 216 6 222 1 223
Share of comprehensive
income/(loss) from
equity-accounted
investments 783 298 62 138 (1) 36 1 316 1 316
Issue of share capital1 8 8 8
Share-based payments
movements 54 54 54
Dividends paid (841) (841) (841)
Balance at 31 December
2013 (Audited) 2 396 3 146 310 1 493 (13) 100 (802) 29 668 36 298 (26) 36 272
Loss for the period (2 441) (2 441) (1) (2 442)
Other comprehensive
income/(loss) 168 148 316 (4) 312
Share of comprehensive
income/(loss) from
equity-accounted
investments 69 (124) 147 35 (6) 35 156 156
Issue of share capital1 6 6 6
Share-based payments
movements (118) (118) (118)
Reclassification of
equity2 808 (808)
Dividends paid (1 126) (1 126) (1 126)
Acquisition of
non-controlling interest (27) (27) 27
Balance at 30 June 2014
(Reviewed) 2 402 3 383 186 1 522 22 248 (27) 25 328 33 064 (4) 33 060
1. Vesting of Mpower 2012 shares to good leavers. A good leaver is defined as a participant to a share-based payment scheme whose
employment has been terminated due to retrenchment, retirement, death, serious disability, serious incapability or promotion out of
the relevant qualifying category.
2. Relates to the reclassification of transactions with non-controlling interest to retained income due to the impairment of the
Mayoko project.
Final dividend paid per share (cents) in respect of the 2013 financial year 315
Interim dividend paid per share (cents) in respect of the 2013 interim period 235
Dividend payable per share (cents) in respect of the 2014 interim period 260
Foreign currency translations
Comprises all foreign exchange differences arising from the translation of the financial statements of foreign entities 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 of services received and settled by equity instruments granted.
Retirement benefit obligation
Comprises remeasurements on the post-retirement obligation.
Available-for-sale revaluations
Comprises the fair value adjustments on the investments in Richards Bay Coal Terminal (RBCT) (2014: R114 million) and Chifeng Kumba
Hongye Corporation Limited (Chifeng) (2014: R34 million) (refer note 20).
Other
Comprises mainly transactions with non-controlling interests for the acquisition of the Mayoko project (R808 million) and Botswana
(R27 million).
NOTES TO THE REVIEWED CONDENSED GROUP INTERIM FINANCIAL STATEMENTS
for the six-month period ended 30 June 2014
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 (TiO2) (non-controlled), ferrous (controlled and non-controlled) and energy
(controlled and non-controlled) markets.
2. Basis of accounting
Statement of compliance
The reviewed condensed group interim financial statements as at and for the six-month period ended 30 June 2014 comprise the company
and its subsidiaries (together referred to as the group) and the group’s interest in equity-accounted investments and 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 Listings Requirements of the
Johannesburg Securities Exchange (JSE), Financial Pronouncements as issued by the Financial Reporting Standards Council, the
requirements of the South African Companies Act No 71 of 2008 as well as the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committees.
The reviewed condensed group interim financial statements should be read in conjunction with the group annual financial statements as
at and for the year ended 31 December 2013, 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 statements have
been prepared on the historical cost basis, excluding financial instruments and biological assets, which are at fair value.
The reviewed condensed group interim financial statements for the six-month period ended 30 June 2014 were authorised for issue by the
board of directors on 19 August 2014.
Judgments and estimates
In preparing these reviewed condensed group interim financial statements, management made judgments, 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 judgments 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 2013.
Taxes on income for the six-month period ended 30 June 2014 were accrued using the tax rates that would be applicable to expected total
annual profit or loss.
3. Significant accounting policies
The accounting policies adopted in the preparation of the reviewed condensed interim financial statements are consistent with those
followed in the preparation of the group’s annual financial statements for the year ended 31 December 2013, except for the adoption of
new standards and interpretations effective 1 January 2014.
The accounting standards and amendments issued to accounting standards and interpretations which are relevant to the group, but not yet
effective at 30 June 2014, 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.
The nature and the impact of each new standard or amendment, effective on 30 June 2014, are described below:
Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27)
These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity
under IFRS 10 Consolidated Financial Statements. The exception to consolidation requires investment entities to account for
subsidiaries at fair value through profit or loss. These amendments have no impact on the group, since none of the entities in the
group qualify to be classified as investment entities under IFRS 10.
Offsetting Financial Assets and Financial Liabilities (amendments to IAS 32 Financial instruments: Presentation)
These amendments clarify the meaning of the phrase ‘currently has a legally enforceable right to offset’ as well as the criteria for
non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments have no impact on the group as
the group does not offset financial assets and financial liabilities.
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39 Financial instruments: Recognition and Measurement)
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument
meets certain criteria. These amendments have no impact on the group as the group has not novated its derivatives during the current or
prior periods.
Recoverable amount disclosures for non-financial assets (amendments to IAS 36 Impairment of Assets)
These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosure required under IAS 36
Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating
units (CGU’s) for which an impairment loss has been recognised or reversed during the period. The group adopted these disclosure
requirements on 1 January 2014.
4. Correction of prior period error
During the finalisation of the 2013 year end results audit an accounting error in the equity-accounting of a foreign associate, Tronox
Limited, was identified. Exxaro did not translate the total net assets of Tronox Limited, which has a functional currency of US Dollar,
to South African Rand as required by IFRS. Instead, Exxaro translated the individual reserves. The omission of translating the total
net assets of Tronox Limited in the previous period financial statements (June 2013) represents a prior period accounting error which
must be accounted for retrospectively in the financial statements. Consequently, Exxaro adjusted all comparative amounts presented in
the current period’s financial statements affected by the accounting error.
The accounting error impacted the results as follows:
– investments in associates for the period ended 30 June 2013 increased from R17,0 billion, as previously published, to R18,6 billion;
– foreign currency translation reserve for the period ended 30 June 2013 increased from R539 million, as previously published, to
R2 147 million;
– total assets for the TiO2 operating segment for the period ended 30 June 2013 increased from R11,6 billion, as previously published,
to R13,2 billion;
– there was no impact on the reported profit for the period ended 30 June 2013;
– there was no impact on the statement of cash flows for the period ended 30 June 2013;
– there was no impact on the headline earnings per share for the period ended 30 June 2013; and
– there was no impact on the attributable earnings per share for the period ended 30 June 2013.
Refer below for the impact of corrections on the statements of comprehensive income and financial position as well as related notes
previously published:
6 months ended 6 months ended
30 Jun 2013 30 Jun 2013 30 Jun 2013
Previously published Restatement impact Restated
Reviewed Reviewed Reviewed
Rm Rm Rm
Impact on statement of comprehensive income
Profit for the period 2 239 2 239
Other comprehensive
income/(loss), net of tax (507) 1 608 1 101
Items that will not be
reclassified to profit or loss,
net of tax: 12 12
– Share of comprehensive income
of equity-accounted investments 12 12
Items that may be reclassified
subsequently to profit or loss: (519) 1 608 1 089
– Unrealised exchange gains
on translating foreign operations 320 320
– Revaluation of
available-for-sale
financial assets 94 94
– Share of comprehensive
(loss)/income of equity-accounted
investments (933) 1 608 675
Total comprehensive income for
the period 1 732 1 608 3 340
Total comprehensive income
attributable to:
Owners of the parent 1 735 1 608 3 343
– continuing operations 1 742 1 608 3 350
– discontinued operations (7) (7)
Non-controlling interests (3) (3)
– continuing operations (3) (3)
Total comprehensive income for
the period 1 732 1 608 3 340
Impact on statement of financial
position
Non-current assets
Investments in associates 17 008 1 608 18 616
Equity
Capital and other components of
equity
Other components of equity 1 070 1 608 2 678
Equity attributable to owners of
the parent 29 958 1 608 31 566
Impact on segmental information
Total assets
TiO2 11 566 1 608 13 174
Other components of equity
Foreign Financial Retirement Attributable Non-
Share currency instruments Equity- benefit Retained to owners controlling Total
capital translations revaluation settled obligation Other earnings of the parent interests equity
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 30 June 2013
(previously published -
reviewed) 2 388 539 106 1 377 (151) (801) 26 500 29 958 (19) 29 939
Impact of restatement 1 608 1 608 1 608
Balance at 30 June 2013
(restated, - reviewed) 2 388 2 147 106 1 377 (151) (801) 26 500 31 566 (19) 31 547
5. Segmental information
Operating segments are reported on in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the reportable operating
segments, has been identified as the executive committee of the group. Operating segments reported are based on the group’s different
products and operations.
Total operating segment revenue, which excludes Value Added Tax (VAT), represents the gross value of goods invoiced. Export revenue is
recorded according to the relevant sales terms, when the risks and rewards of ownership are transferred.
Total segment revenue further includes operating revenue directly and reasonably allocable to the segments. Segment revenue includes
sales made between segments. These sales are made on a commercial basis.
Segment net operating profit equals segment revenue less operating segment expenses and includes impairment charges.
Segment operating expenses represent direct or reasonably allocable operating expenses on a segment basis. Segment assets and
liabilities include directly and reasonably allocable operating assets and liabilities.
The group has four reportable operating segments, as described below, which are the group’s strategic divisions. The strategic
divisions offer different products and services and are managed separately because they require different technology and marketing
strategies. For each of the strategic divisions, the executive committee of the group reviews internal management reports on at least a
quarterly basis. The following summary describes the operations in each of the group’s reportable operating segments:
Coal
The coal operations are mainly situated in the Waterberg and Mpumalanga regions and are split between Commercial coal operations and
Tied (Captive) coal operations. The operations produce thermal, metallurgical and semi-coking coal.
Ferrous
The ferrous operations include the group’s investment in African Iron ore Limited (AKI), a 19,98% investment in Sishen Iron Ore Company
Proprietary Limited (SIOC) and investments in the FerroAlloys and AlloystreamTM operations.
TiO2
Exxaro holds a 44,18% (2013: 44,40%) equity interest in Tronox Limited, a 26% direct investment in each of the South African based KZN
Sands and Namakwa Sands operations (collectively referred to as the SA operators) as well as a 26% interest in the Tronox Sands Limited
Liability Partnership in the United Kingdom (UK financing entity).
Other
The other operating segment includes the 50% investment in Cennergi Proprietary Limited (a joint venture with Tata Power), 26% equity
interest in Black Mountain Mining Proprietary Limited, an effective investment of 11,7% in the Chifeng operations as well as the
results of Exxaro Base Metals which was sold during 2013.
The following table presents a summary of the group’s segmental information:
Coal Ferrous TiO2 Other Total
Tied Commercial Other Base
6 months ended operations operations Iron ore Alloys ferrous metals Other
30 June 2014 (Reviewed) Rm Rm Rm Rm Rm Rm Rm Rm Rm
Total revenue 2 094 5 220 71 11 29 7 425
Inter-segmental (2) (11) (13)
External revenue 2 094 5 218 71 29 7 412
Segment net operating
profit/(loss) 208 1 628 (5 821) (96) 1 (4 080)
Depreciation and
amortisation of
intangible assets (note
6) 21 326 8 2 3 48 408
Impairment charges of
non-current assets
(note 8) 5 751 9 5 760
Impairment charges of
trade and other
receivables (note 6) 1 26 2 29
Impairment charges of
non-current financial
asset (note 6) 21 21
Cash generated
by/(utilised in)
operations 169 1 483 108 (20) (9) (176) 1 555
Income/(loss) from
equity-accounted
investments (note 10) 109 1 711 (304) 46 (47) 1 515
Capital expenditure
(note 13) 1 045 456 8 69 1 578
At 30 June 2014
(Reviewed)
Segment assets and
liabilities
Deferred tax 43 98 125 50 275 591
Investments in
associates
(equity-accounted)
(note 15) 5 583 12 918 327 18 828
Investments in joint
ventures
(equity-accounted)
(note 16) 636 223 859
External assets
(excluding deferred
tax, investments in
equity-accounted
associates and joint
ventures and
non-current assets
held-for-sale) 1 803 21 364 62 88 78 287 2 020 25 702
Total assets 1 846 22 098 62 213 5 711 12 918 614 2 518 45 980
Non-current assets
held-for-sale (note 17) 284 284
Total assets as per
statement of financial
position 1 846 22 382 62 213 5 711 12 918 614 2 518 46 264
Liabilities (external) 1 432 3 318 193 91 11 4 311 9 356
Deferred tax liabilities 105 3 343 51 2 40 41 3 582
Current tax payable 10 2 45 57
Total liabilities 1 537 6 671 246 93 51 4 397 12 995
Non-current liabilities
held-for-sale (note 17) 209 209
Total liabilities as
per statement of
financial position 1 537 6 880 246 93 51 4 397 13 204
Coal Ferrous TiO2 Other Total
Tied Commercial Other Base
6 months ended operations operations Iron ore Alloys ferrous metals Other
30 June 2013 (Reviewed, Rm Rm Rm Rm Rm Rm Rm Rm Rm
restated)
Total revenue 1 782 4 367 55 6 41 6 251
Inter-segmental (6) (6)
External revenue 1 782 4 367 55 41 6 245
Revenue from continuing
operations 1 782 4 367 55 41 6 245
Revenue from
discontinued operations
Segment net operating
profit/(loss) 210 821 (1) (26) (17) 32 (102) 917
Net operating
profit/(loss) from
continuing operations 210 821 (1) (26) (17) (1) (102) 884
Net operating profit
from discontinued
operations 33 33
Depreciation and
amortisation of
intangible assets (note
6) 18 301 1 1 93 414
Impairment charges of
non-current assets
(note 8) 292 292
Cash generated
by/(utilised in)
operations 161 641 (131) (5) (20) 42 (86) 602
Income/(loss) from
equity-accounted
investments (note 10) 80 2 120 (168) 52 (69) 2 015
Capital expenditure
(note 13) 1 485 793 5 78 42 2 403
At 30 June 2013
(Reviewed, restated)
Segment assets and
liabilities
Deferred tax 2 67 2 82 3 74 230
Investments in
associates
(equity-accounted)
(note 15) 5 110 13 174 332 18 616
Investments in joint
ventures
(equity-accounted)
(note 16) 468 45 513
External assets
(excluding deferred tax
and investments in
equity-accounted
associates and joint
ventures) 1 830 18 783 4 171 65 126 234 1 477 26 686
Total assets as per
statement of financial
position 1 832 19 318 4 173 147 5 239 13 174 566 1 596 46 045
Liabilities (external) 1 549 3 723 87 33 2 896 5 231 11 521
Deferred tax liabilities 58 2 311 544 1 (103) 2 811
Current tax payable 20 118 4 4 20 166
Total liabilities as
per statement of
financial position 1 627 6 152 631 38 2 900 5 148 14 498
Coal Ferrous TiO2 Other Total
Tied Commercial Other Base
12 months ended operations operations Iron ore Alloys ferrous metals Other
31 December 2013 (Audited) Rm Rm Rm Rm Rm Rm Rm Rm Rm
Total revenue 3 917 9 445 120 21 86 13 589
Inter-segmental (21) (21)
External revenue 3 917 9 445 120 86 13 568
Revenue from continuing
operations 3 917 9 445 120 86 13 568
Revenue from
discontinued operations
Segment net operating
profit/(loss) 215 2 554 (27) (61) (53) 145 793 3 566
Net operating
profit/(loss) from
continuing operations 215 2 554 (27) (61) (53) (14) (171) 2 443
Net operating profit
from discontinued
operations 159 964 1 123
Depreciation and
amortisation of
intangible assets (note
6) 41 624 8 3 5 175 856
Impairment
charges/(reversals) of
non-current assets
(note 8) 143 (98) 45
Impairment charges of
trade and other
receivables (note 6) 23 2 25
Cash generated
by/(utilised in)
operations 75 2 072 (7) (60) (44) 26 97 2 159
Income/(loss) from
equity-accounted
investments (note 10) 129 4 166 (638) 77 (103) 3 631
Capital expenditure
(note 13) 2 996 1 453 17 160 1 137 4 764
At 31 December 2013
(Audited)
Segment assets and
liabilities
Deferred tax (36) 80 5 95 53 169 366
Investments in
associates
(equity-accounted)
(note 15) 5 523 13 325 359 19 207
Investments in joint
ventures
(equity-accounted)
(note 16) 528 333 861
External assets
(excluding deferred
tax, investments in
equity-accounted
associates and joint
ventures and
non-current assets
held-for-sale) 1 579 19 893 5 109 94 216 252 1 587 28 730
Total assets 1 543 20 501 5 114 189 5 792 13 325 611 2 089 49 164
Non-current assets
held-for-sale (note 17) 342 342
Total assets as per
statement of financial
position 1 543 20 843 5 114 189 5 792 13 325 611 2 089 49 506
Liabilities (external) 1 387 3 046 128 32 12 4 792 9 397
Deferred tax liabilities 4 2 872 600 40 (35) 3 481
Current tax payable 18 1 1 111 131
Total liabilities 1 391 5 936 729 33 52 4 868 13 009
Non-current liabilities
held-for-sale (note 17) 225 225
Total liabilities as
per statement of
financial position 1 391 6 161 729 33 52 4 868 13 234
6. Significant items included in operating profit
6 months ended 6 months ended 12 months ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Depreciation and amortisation 408 414 856
Net realised foreign currency exchange losses/(gains) 24 (88) (56)
Net unrealised foreign currency exchange (gains)/losses (5) 15 20
Net (gains)/losses on derivative instruments held-for-trading (28) 84 81
Impairment charges of trade and other receivables1 29 25
Impairment charges of non-current financial asset2 21
Royalties 46 24 8
Net losses/(gains) on disposal of property, plant and equipment 18 (3) 23
Loss on dilution of investment in associate 29 13 12
1. Include trade and other receivables relating to the Mayoko project (R26 million).
2. Non-current financial asset relating to the Mayoko project.
7. Other income
Other income 888 645 1 594
Other income relates to shortfall income
received from Eskom as a result of delays
in agreed upon production off-take plans.
8. Impairment charges/(reversals) of non-current assets
Included in operating expenses are the following impairment charges/(reversals):
Mayoko project 5 208
Impairment of property, plant and equipment 4 740
Impairment of goodwill (note 14) 1 020
– Total impairment charges 5 760
– Net tax effect (552)
New Clydesdale Colliery (NCC) operation 281 132
Impairment of property, plant and equipment 292 292
Partial reversal of impairment of property, plant and equipment (149)
– Total impairment charges 292 143
– Net tax effect (11) (11)
Zincor
Partial reversal of impairment of property, plant and equipment (98)
Net impairment charges per statement of comprehensive income 5 760 292 45
Net tax effect (552) (11) (11)
Net effect on attributable earnings 5 208 281 34
– continuing operations 5 208 281 132
– discontinued operations (98)
Mayoko project
The Mayoko project is located in the Republic of the Congo (RoC) and was acquired in 2012 with the acquisition of AKI. The project is
reported within the iron ore operating segment contained in the ferrous reporting segment.
The concept study on the revised 12 million tonnes Mayoko project was concluded during June 2014. However, Exxaro has not yet been
successful in concluding the definitive port and rail agreements for the Mayoko project. As a result of the delays in these agreements
as well as higher future project development costs following the outcome of the concept study, a pre-tax impairment loss of
R5 807 million (R5 760 excluding financial assets written down), was raised consisting of an impairment of goodwill acquired in the
business combination with AKI in 2012 of R1 020 million, impairment of property, plant and equipment of R4 740 million (including the
mineral resource of R1 877 million recognised on acquisition of the project and project related cost capitalised of R1 696 million) as
well as financial assets amounting to R47 million written down in terms of IAS 39 Financial instruments: Recognition and Measurement
(refer note 20).
The recoverable amount, being the fair value less costs of disposal (level 3 as per IFRS 13 Fair value Measurement), is a discounted
cash flow valuation technique (consistent with the valuation technique used on 31 December 2013) using cash flow projections and a pre-
tax discount rate of 17,4% (31 December 2013: 14,6%). The main reason for the increase in the discount rate is the market assumptions
of risk around the implementation of the Mayoko project. The decrease in life of mine (LoM) is mainly due to the increase in annual
production cost, acceleration in ramp-up, lower plant yield and different ore mix, based on the most recent information available.
Key assumptions made in the valuation, include the following:
LoM: estimated at 25 years (31 December 2013: 35 years)
Iron ore price: range between US$70/tonne to US$120/tonne (31 December 2013: US$70/tonne to US$120/tonne).
NCC operation
The carrying value of property, plant and equipment of the NCC coal operation, reported within the commercial operating segment
contained in the coal operating segment, was impaired with R292 million to the recoverable amount based on impairment tests performed
in June 2013. The recoverable amount was revised following the classification of the NCC operation as held-for-sale at the end of the
reporting year due to the signing of the sales agreement of the NCC asset, which was concluded with Universal Coal Development VIII
Proprietary Limited (Universal) (refer note 17) in January 2014. As a result of the revision of the recoverable amount, a partial
impairment reversal to the amount of R149 million was recorded, bringing the net impairment loss (pre-tax) recorded to R143 million.
Zincor
The partial impairment reversal of the carrying value of property, plant and equipment at the Zincor operation was based on the revised
recoverable amount of the operation. The recoverable amount was revised following the sale transaction of Exxaro Base Metals
Proprietary Limited (Exxaro Base Metals), which included the Zincor assets (refer note 11).
9. Net financing costs
6 months ended 6 months ended 12 months ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Interest income 43 42 81
– Interest income on cash and cash equivalents 33 22 48
– Finance leases interest 5 6 11
– Interest received from joint ventures 5 14 22
Total interest expense
(net of borrowing costs capitalised) (86) (268) (367)
Interest expense (273) (433) (705)
– Interest expense and loan costs (182) (160) (329)
– Unwinding of discount rate on rehabilitation cost (86) (268) (367)
– Amortisation of transaction costs (5) (5) (9)
Borrowing cost capitalised1 187 165 338
Total net financing costs (43) (226) (286)
1. Borrowing cost capitalisation rate. 6,56% 5,61% 5,67%
10. Income/(loss) from equity-accounted investments
6 months ended 6 months ended 12 months ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Sishen Iron Ore Company Proprietary Limited (SIOC) 1 711 2 120 4 166
Tronox (including Tronox Limited, SA and
UK operations) (304) (168) (638)
Mafube Coal Proprietary Limited 109 80 131
South Dunes Coal Terminal Company SOC Limited (SDCT) (2)
Black Mountain Proprietary Limited 46 52 77
Cennergi Proprietary Limited (47) (69) (103)
Share of income from equity-accounted investments 1 515 2 015 3 631
11. Discontinued operations
Exxaro Base metals
All the conditions precedent to the sale of Exxaro’s 100% shareholding in Exxaro Base Metals to Lebonix Proprietary Limited were met on
2 December 2013. The subsidiary, which included the Zincor operations, was disposed for a total consideration of R183 million. This
process completed the Zincor divestment process, which commenced with the cessation of the production of zinc metal at Zincor in 2011
and was followed by the sale of the Rosh Pinah mine during 2012.
Financial information relating to the discontinued operations for the prior periods to the date of disposal is set out below:
6 months ended 6 months ended 12 months ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Revenue
Operating income 33 61
Impairment reversal 98
Operating profit 33 159
Profit on sale of subsidiary 964
Net operating profit 33 1 123
Interest expense (40) (74)
(Loss)/profit for the period from discontinued operations (7) 1 049
Cash flow attributable to operating activities 43 26
Cash flow attributable to investing activities 98
Cash flow attributable to financing activities (43) (37)
Cash flow attributable to discontinued operations 87
12. Dividends
Total dividends paid in 2013 amounted to R1 387 million, made up of a final dividend of R546 million that relates to the year ended
31 December 2012, which was paid in April 2013, as well as an interim dividend of R841 million, paid in September 2013.
An interim cash dividend for 2014 of 260 cents per share (2013: 235 cents per share) was approved by the board of directors on
20 August 2014. The dividend is payable on 15 September 2014 to shareholders who will be on the register at 12 September 2014.
This interim dividend, amounting to approximately R931 million (2013: R841 million), has not been recognised as a liability in this
reviewed condensed interim financial statements. It will be recognised in shareholders’ equity in the year ending 31 December 2014.
The dividend declared will be subject to a dividend withholding tax of 15% for all shareholders who are not exempt from or do not
qualify for a reduced rate of withholding tax. Although the local dividend tax rate was 15% for the corresponding period in 2013, no
tax was due as a result of the secondary tax on companies (STC) credits utilised. The number of ordinary shares in issue at the date of
this declaration is 358 115 505 (2013: 358 061 205). Exxaro’s tax reference number is 9218/098/14/4.
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
Issued shares as at declaration date (number) 358 115 505 358 061 205 358 115 505
Ordinary shares (million)
– weighted average number of shares 355 355 355
– diluted weighted average number of shares 356 355 356
13. Property, plant and equipment
6 months ended 6 months ended 12 months ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Capital expenditure
– incurred 1 578 2 403 4 764
to maintain operations 502 577 1 257
to expand operations 1 076 1 826 3 507
– contracted 2 084 2 756 4 204
contracted for the group excluding group’s
share of capital commitments of equity-
accounted investments 1 251 1 574 3 241
group’s share of capital commitments of
equity-accounted investments 833 1 182 963
– authorised, but not contracted 523 2 055 2 826
14. Intangible assets
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
(Restated)
Rm Rm Rm
Goodwill 1
At beginning of the period 953 902 902
Exchange differences 67 23 51
Impairment charge (1 020)
At end of the period 925 953
Patents and licences 2
Gross carrying amount
At beginning of the period 232 121 121
Additions 10 21 201
Transfer from other assets 6
Scrapping of other intangibles (19) (90)
Exchange differences
At end of the period 248 123 232
Accumulated amortisation
At beginning of the period 9 61 61
Scrapping of other intangibles (19) (88)
Amortisation charge included in depreciation charge 7 12 36
At end of the period 16 54 9
Net carrying amount at end of the period 232 994 1 176
1. Goodwill was allocated to AKI, which is regarded as a single cash generating unit. Impairment testing was performed on this
goodwill based on fair value less cost of disposal where factors such as iron ore prices, exchange rates and respective discount
rates were considered. The full amount of goodwill was impaired at 30 June 2014 (refer note 8).
2. Include SAP licences, Linc Energy Intellectual Property as well as an option to receive specific quantities of water from the
Eungella water pipeline at lower than market rates.
15. Investments in associates
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
(Restated)
Rm Rm Rm
Listed investments
Tronox Limited1 9 823 10 685 10 267
Unlisted investments 9 005 7 931 8 940
SIOC 5 583 5 110 5 523
Tronox Mineral Sands Proprietary Limited
& Tronox KZN Sands Proprietary Limited 1 807 1 493 1 819
Tronox Sands Limited Liability Partnership 1 288 995 1 239
Black Mountain Mining Proprietary Limited 327 333 359
Total carrying value of investment in associates 18 828 18 616 19 207
1. Fair value based on a listed price
(Level 1 within the IFRS 13 Fair Value Measurement
fair value hierarchy) for Tronox Limited
– Fair value 14 559 10 184 12 319
– Listed share price US$26,90 US$20,15 US$23,07
16. Investments in joint ventures
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
(Restated)
Rm Rm Rm
Unlisted investments 999 878 1 116
Mafube Coal Mining Proprietary Limited1 696 765 714
SDCT2 80 68 69
Cennergi Proprietary Limited 223 45 333
Total carrying value of investment in joint ventures 999 878 1 116
1. Includes a loan to the joint venture of
R60 million (June 2013: R297 million;
31 December 2013: R186 million) disclosed as part of
financial assets (note 20).
2. Includes a loan to the joint venture of
R80 million (June 2013: R68 million;
31 December 2013: R69 million) disclosed as part of
financial assets (note 20).
17. Non-current assets held-for-sale
Exxaro concluded a sale of asset agreement relating to the NCC operation with Universal in January 2014. The sale is conditional on a
section 11 approval required in terms of the Mineral and Petroleum Resources Development Act No 28 of 2002 for the transfer of the new-
order mining right from Exxaro Coal Mpumalanga Proprietary Limited to the new owners.
On 30 June 2014, conditions precedent to the sales agreement with Universal had not been met. The NCC operation remains a non-current
asset classified as held-for-sale.
The NCC operation met the relevant recognition to be classified as a non-current asset held-for-sale on 31 December 2013. The NCC
operation 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 since it forms part of the Mpumalanga coal region which is
reported as part of the commercial coal operating segment.
The major classes of assets and liabilities classified as non-current assets held-for-sale are as follows:
At 30 Jun 2014 At 31 Dec 2013
Reviewed Audited
Rm Rm
Assets
Property, plant and equipment 149 149
Deferred tax 31 90
Financial assets 70 67
Inventories 7 8
Trade and other receivables 6 4
– Trade receivables 3
– Non-financial instrument receivables 3 4
Current tax receivable 21 24
Total assets 284 342
Liabilities
Non-current provisions (151) (144)
Post-retirement employee obligations (4) (3)
Trade and other payables (16) (39)
– Trade payables (9) (20)
– Other payables (1) (7)
– Derivative instruments (5) (9)
– Non-financial instrument payables (1) (3)
Current provisions (38) (39)
Total liabilities (209) (225)
Net assets classified as held-for-sale 75 117
18. Interest-bearing borrowings
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Non-current borrowings
Summary of loans by financial year of redemption
2014 29 31
2015 197 157 324
2016 324 326 326
2017 1 406 1 927 1 927
2018 328 327 329
2019 850 330 331
2020 onwards 497 498 332
Total interest-bearing borrowings 3 602 3 594 3 600
– current 197 29 31
– non-current 3 405 3 565 3 569
The R197 million current portion represents a capital repayment of R166 million, interest capitalised of R41 million and amortised
transaction costs of R10 million.
Senior loan facility
During April 2012, Exxaro secured a senior loan facility of R8 billion. The senior loan facility comprises of a:
– term loan facility of R5 billion for a duration of 97 months; and
– revolving credit facility of R3 billion for a duration of 62 months.
Interest is based on JIBAR plus a margin of 2,75% for the term loan and JIBAR plus a margin of 2,5% for the revolving facility. The
effective interest rate for the transaction costs for the term loan is 0,47%. Interest is paid on a three monthly basis for the term
loan and on a monthly basis for the revolving facility.
The undrawn portion relating to the term loan amount to R3 billion (30 June 2013: R3 billion; 31 December 2013: R3 billion).
The undrawn portion of the revolving facility amount to R2,4 billion (30 June 2013: R1,4 billion; 31 December 2013: R1,4 billion).
On 22 May 2014 R1 billion of the revolving facility was repaid.
No capital repayments are expected until 2015. However, on 24 July 2014 (an event after the reporting period), an addendum to the
senior loan facility was signed extending the first capital repayment to 2016.
Bond issue
In terms of Exxaro’s R5 billion Domestic Medium Term Note (DMTN) programme, a senior unsecured floating rate note (bond) of R1 billion
was raised during May 2014. The bond consists of a:
– R480 million senior unsecured floating rate note due 19 May 2017; and
– R520 million senior unsecured floating rate note due 19 May 2019.
Interest is based on JIBAR plus a margin of 1,7% for the R480 million bond and JIBAR plus a margin of 1,95% for the R520 million bond.
The effective interest rates 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 three monthly basis for both bonds.
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Overdraft
Bank overdraft 638 1 313 806
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 the reporting period.
19. Net debt
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Net debt is presented by the following
items on the face of the statement of
financial position (excluding assets
and liabilities held-for-sale): (2 653) (3 677) (3 377)
– Cash and cash equivalents 1 587 1 230 1 029
– Non-current interest-bearing borrowings (3 405) (3 565) (3 569)
– Current interest-bearing borrowings (197) (29) (31)
– Overdraft (638) (1 313) (806)
Calculation of movement in net debt:
Cash inflow/(outflow): 747 (1 429) (1 058)
Add:
– shares issued 11 14
– share-based payments (2) (3)
– non-cash flow movement for interest
accrued not yet paid (1) (40)
– non-cash flow amortisation of transaction costs (1) (9)
– translation difference on movements in cash
and cash equivalents (21) 77
– consideration paid to non-controlling interests (96) (96)
– non-cash flow movements in net debt applicable
to currency translation differences of transactions
denominated in foreign currency (39) 14
Decrease/(increase) in net debt 724 (1 478) (1 178)
20. Financial instruments
Carrying amounts and fair values
The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed group statement of
financial position, are as follows:
At 30 June 2014 At 31 December 2013
Carrying Fair Carrying Fair
amount value amount value
Rm Rm Rm Rm
ASSETS
Non-current assets
Financial assets, consisting of: 2 603 2 603 2 469 2 469
– Exxaro Environmental Rehabilitation Trust asset 749 749 618 618
– Loans to equity-accounted investments 140 140 255 255
– Richards Bay Coal Terminal (RBCT) 691 691 551 551
– Kumba Iron Ore Limited 30 30 40 40
– New Age Exploration Limited 1 1 1 1
– Chifeng Kumba Hongye Zinc Corporation Limited (Chifeng) 287 287 253 253
– Non-current receivables 705 705 751 751
Current assets1 3 896 3 896 2 875 2 875
Trade and other receivables 2 306 2 306 1 845 1 845
Derivative financial instruments 3 3 1 1
Cash and cash equivalents 1 587 1 587 1 029 1 029
Non-current assets held-for-sale (note 17) 73 73 67 67
Total assets 6 572 6 572 5 411 5 411
LIABILITIES
Non-current liabilities 3 405 3 405 3 569 3 569
Interest-bearing borrowings2 3 405 3 405 3 569 3 569
Current liabilities1 2 994 2 994 2 907 2 907
Trade and other payables 2 159 2 159 2 056 2 056
Derivative financial instruments 14 14
Interest-bearing borrowings2 197 197 31 31
Overdraft 638 638 806 806
Non-current liabilities held-for-sale (note 17) 15 15 36 36
Total liabilities 6 414 6 414 6 512 6 512
1. Carrying amounts approximate the fair values due to the short-term nature of the maturities of these financial assets and
liabilities.
2. Carried at amortised cost representing fair value in terms of IAS 39 Financial Instruments: Recognition and Measurement.
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
At 30 June 2014 (Reviewed) Rm Rm Rm Rm
Financial assets held-for-trading at
fair value through profit or loss
– Current derivative financial assets 3 3
Financial assets designated at fair value
through profit or loss
– Exxaro Environmental Rehabilitation Trust 749 749
– Exxaro Environmental Rehabilitation Trust
held-for-sale 70 70
– Kumba Iron Ore Limited 30 30
Available-for-sale financial assets
– RBCT 691 691
– New Age Exploration Limited 1 1
– Chifeng 287 287
Financial liabilities held-for-trading at
fair value through profit or loss
– Current derivative financial liabilities
held-for-sale (5) (5)
Net financial assets/(liabilities)
carried at fair value 850 (2) 978 1 826
Level 1 Level 2 Level 3 Total
At 31 December 2013 (Audited) Rm Rm Rm Rm
Financial assets held-for-trading at
fair value through profit or loss
– Current derivative financial assets 1 1
Financial assets designated at fair value
through profit or loss
– Exxaro Environmental Rehabilitation Trust 618 618
– Exxaro Environmental Rehabilitation Trust
held-for-sale 67 67
– Kumba Iron Ore Limited 40 40
Available-for-sale financial assets
– RBCT 551 551
– New Age Exploration Limited 1 1
– Chifeng 253 253
Financial liabilities held-for-trading at
fair value through profit or loss
– Current derivative financial liabilities (14) (14)
– Current derivative financial liabilities held-for-sale (9) (9)
Net financial assets/(liabilities) carried at fair value 726 (22) 804 1 508
Level 3 fair values
Reconciliation of assets within Level 3 of the hierarchy
Chifeng RBCT
Rm Rm
Balance at 31 December 2012 174 467
Movement during the year
Gains recognised in other comprehensive income
(pre-tax effect) 46 82
Settlements 2
Exchange gains for the year recognised in profit or loss 33
Closing balance at 31 December 2013 253 551
Movement during the period
Gains recognised in other comprehensive income
(pre-tax effect) 34 140
Closing balance at 30 June 2014 287 691
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 of the fair value hierarchy during the periods ended 30 June 2014 and 31 December
2013.
There were no transfers between level 2 and level 3, as shown in the reconciliations above.
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 financial
director, on a six monthly basis.
The valuation reports are discussed with 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 tested
for reasonability by discounting estimated future cash flows using the market rate for similar instruments at measurement date.
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 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 was consistent with the valuation technique used on 31 December 2013.
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 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.
At 30 June 2014 (Reviewed)
Sensitivity analysis
of a 10% increase
Range of inputs Sensitivity of inputs in the inputs is
and fair value measurement1 demonstrated below2
Observable inputs Rm
Rand/RMB exchange rate R1,70/RMB1 Strengthening of the Rand to the RMB 28
RMB/US$ exchange rate RMB6,02 to
RMB6,18/US$1 Strengthening of the RMB to the US$ 153
Zinc LME price 2 007 to
(US$ per tonne in real terms) 2 140 Increase in price of Zinc concentrate 153
Unobservable inputs
Production volumes
(tonnes) 108 750 Increase in production volumes 76
Operational costs
(US$ million per annum in real terms) 69 to 71 Decrease in operational costs 160
Discount rate 10% Decrease in discount rate 23
At 31 December 2013 (Audited)
Sensitivity analysis
of a 10% increase
Range of inputs Sensitivity of inputs in the inputs is
and fair value measurement1 demonstrated below2
Observable inputs Rm
Rand/RMB exchange rate R1,72/RMB1 Strengthening of the Rand to the RMB 25
RMB/US$ exchange rate RMB6,02 to
RMB5,95/US$1 Strengthening of the RMB to the US$ 161
Zinc LME price
(US$ per tonne in real terms) 2 039 to
2 027 Increase in price of Zinc concentrate 161
Unobservable inputs
Production volumes (tonnes) 208 750 Increase in production volumes 177
Operational costs
(US$ million per annum in real terms) 74 to 88 Decrease in operational costs 143
Discount rate 10% Decrease in discount rate 21
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.
Interrelationships
Any interrelationships between unobservable inputs are not considered to have a significant impact within the range of reasonably
possible alternative assumptions for the periods ended 30 June 2014 and 31 December 2013.
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 valuation technique was consistent with the valuation technique
used on 31 December 2013.
The significant observable and unobservable inputs used in the fair value measurement of the investment in RBCT are Rand/US$ exchange
rate, API4 export price, Transnet Market Demand Strategy, discount rate and the annual utilisation factor. Significant
increases/(decreases) in any of those inputs in isolation would result in a significantly lower/(higher) fair value measurement.
At 30 June 2014 (Reviewed)
Sensitivity analysis
of a 10% increase
Range of inputs Sensitivity of inputs in the inputs is
and fair value measurement1 demonstrated below2
Observable inputs Rm
Rand/US$ exchange rate R10.53 to
R15.47/US$1 Strengthening of the Rand to the US$ 145
API4 export price per tonne
(steam coal A-grade price in
real terms) 83.33 to 97 US$
per tonne Increase in API4 export price per tonne 145
Unobservable inputs
Transnet Market
Demand Strategy for the terminal
(million tonnes per annum – Mtpa) 72 to 91 Mtpa Acceleration of Transnet Freight Rail
performance, ie reach full capacity sooner 145
Discount rate 13% to 17% Decrease in discount rate 116
Annual utilisation factor (safety
and rail delay factor) 90% Increase in annual utilisation factor 145
At 31 December 2013 (Audited)
Sensitivity analysis
of a 10% increase
Range of inputs Sensitivity of inputs in the inputs is
and fair value measurement1 demonstrated below2
Observable inputs Rm
Rand/US$ exchange rate R9,85 to
R10,15/US$1 Strengthening of the Rand to the US$ 119
API4 export price per tonne
(steam coal A-grade price in
real terms) 75,50 to 97 US$
per tonne Increase in API4 export price per tonne 119
Unobservable inputs
Transnet Market
Demand Strategy for the terminal
(million tonnes per annum – Mtpa) 70 to 91 Mtpa Acceleration of Transnet Freight Rail
performance, ie reach full capacity sooner 127
Discount rate 13% to 17% Decrease in discount rate 109
Annual utilisation factor
(safety and rail delay factor) 90% Increase in annual utilisation factor 119
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.
Interrelationships
Any interrelationships between unobservable inputs are not considered to have a significant impact within the range of reasonably
possible alternative assumptions for the periods ended 30 June 2014 and 31 December 2013.
21. Contingent liabilities
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Total contingent liabilities 2 447 1 856 2 066
– Grootegeluk Medupi Expansion Project 145 50
– DMC Iron Congo SA 84 84 84
– Pending litigation claims 411 304 328
– Operational guarantees 1 258 831 927
– Group’s share of contingent liabilities of
equity-accounted investments 694 492 677
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.
The timing and occurrence of any possible
outflows of the contingent liabilities
above are uncertain.
Due to the Mineral and Petroleum Resources
Development Act of 2002 currently not specifying
how to financially provide for future water
treatment liabilities at post mine closure.
Exxaro is in the process of developing a
specific policy to provide for such expenses.
An estimate of this amount is currently not
available, however, a liability may arise
in future.
22. Contingent assets
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Reviewed Reviewed Audited
Rm Rm Rm
Total contingent assets 226 113 108
– Surrender fee on prospecting rights,
exploration rights and mining rights1 87 86 81
– Group’s share of contingent assets of
equity-accounted investments 139 27 27
The timing and occurrence of any possible
inflows of the contingent assets above
are uncertain.
1. Relate to a surrender fee in exchange for the exclusive right to prospect, explore, investigate and mine coal within a designated
area of Central Queensland and Moranbah, Australia, conditional on the grant of a mining lease.
23. Related party transactions
During the year the group, 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, nor more favourable than those arranged with third parties.
24. Going concern
Taking into account the group’s liquidity position as well as internal budgets 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.
25. JSE Limited Listings Requirements
The condensed group interim financial statements have been prepared in accordance with the Listings Requirements of the JSE Limited.
26. Events after the reporting period
Details of the final dividend are given in Note 12.
The following non-adjusting events occurred after the reporting date and are disclosed for information purposes:
– Subsequent to the reporting date of 30 June 2014, Exxaro entered into a binding sale and purchase agreement with Total S.A. on
28 July 2014, subject to certain conditions precedent, for the acquisition of 100% of the issued share capital of Total Coal South
Africa Proprietary Limited and its related export marketing rights under primary RBCT allocation. Exxaro has agreed to pay a purchase
consideration of US$472 million and is required to provide a US$-based guarantee. As a result, R5,4 billion of Exxaro’s debt facilities
have been ring-fenced for this guarantee.
– On 31 July 2014 R600 million of Exxaro’s remaining revolving facility was repaid.
– On 24 July 2014 the capital repayments on the senior loan facility was extended to January 2016.
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
The reviewed condensed group interim financial statements for the six-month period ended 30 June 2014, on page 2 to 25, have been
reviewed by the company’s external auditors, PricewaterhouseCoopers Inc, in accordance with International Standards on Reviewed
Engagements 2410 – "Review interim financial information performed by the Independent Auditors of the entity". The unmodified review
conclusion is available for inspection at the company’s registered office.
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) was made in the 2013 Integrated Report and is available on the company’s website in accordance with the JSE Listings
Requirements. Other than the appointment of Dr CJ Fauconnier to the Remuneration and Nomination Committee and the appointment of
Mr V Nkonyeni to both the Board and the Audit Committee, no material changes have occurred since the disclosure.
29. Mineral resources and reserves
Other than the normal life of mine depletion there have been no material changes to the mineral reserves and resources as disclosed in
the 2013 annual report.
30. Salient features1
At 30 Jun 2014 At 30 Jun 2013 At 31 Dec 2013
Net asset value per share (Rand/share) 92 88 101
Capital expenditure contracted relating to
captive mines, Tshikondeni, Arnot and Matla,
which will be financed by ArcelorMittal SA
Limited and Eskom, respectively (Rm) 239 257 317
Operating lease commitments (Rm) 146 3 212
Closing share price (Rand/share) 138,50 145,58 146,46
Market capitalisation (Rbn) 49,60 52,13 52,45
Average Rand/US rate (spot rate) 10,67 9,20 9,62
Closing Rand/US rate (spot rate) 10,58 9,88 10,44
1. Non-IFRS numbers. 1. Non-IFRS numbers.
COMMENTARY
1H14 VS 1H13 IN BRIEF
What we did well
- Zero fatalities, record 20 months without a fatality
- Coal production at 18,8 million tonnes
- Coal exports of 2,7 million tonnes, up 43%
- Grootegeluk Medupi Expansion Project shortfall income of R888 million
- Headline earnings per share up 11% to 793 cents per share
- Interim dividend of 260 cents per share, up 11%
- Raised R1 billion in successful debut bond
What we continue to work on
- Regrettable fatality on 5 July 2014
- Lost-time injury frequency rate at 0,22 a regression of 5%
Comparability of results
Comments are based on a comparison of reviewed group condensed interim financial results and unreviewed production and sales volumes
information for the six-month periods ended 30 June 2014 and 2013 (1H14 and 1H13), respectively, unless where specifically indicated.
The financial results for the six-month periods ended 30 June 2014 and 2013 are not comparable due to certain key events listed in
table 1. Where relevant, comments exclude transactions which make the results under review not comparable.
Legend
1H14 Six-month period ended 30 June 2014
2H13 Six-month period ended 31 December 2013
1H13 Six-month period ended 30 June 2012
Table 1: Key events and transactions during the reporting periods some of which make the financial results not comparable
2014 1H14 2H13 1H13
Rm AI(1) 2013 Rm Rm AI(1)
January New Clydesdale Colliery
operations disposal
agreement signed
Mayoko mining convention
signed
June Impairments Impairments
Pre-tax impairment of the Pre-tax impairment of the
original investment including carrying value of property,
goodwill, carrying value of plant and equipment at
the property, plant and New Clydesdale Colliery (292) =
equipment and qualifying
project costs capitalised for
the Mayoko project as well as
the write-off of financial
assets (5 807) #
Other Other
A loss on dilution of the A loss on dilution of the
shareholding in Tronox (29) ^ shareholding in Tronox (13) *
July Fatality at Arnot
Announcement of the offer to
acquire Total Coal South
Africa subject to terms and
conditions precedent
December Impairment reversals
Partial pre-tax impairment
reversal (R247 million) at:
– Zincor 98 +
– New Clydesdale Colliery 149 +
Other
Profit on sale of Zincor
refinery 964 “
Profit on dilution of the
shareholding in Tronox 1 >
Total net operating (loss)/profit Total net operating profit/
impact (5 836) (loss) impact 1 212 (305)
Explanatory notes
(1) AI – Adjustment indicator in the commentary where applicable
SAFETY, HEALTH, ENVIRONMENT AND COMMUNITY
On 30 June 2014 Exxaro achieved a record uninterrupted 20 months without a fatality. Regrettably on 5 July 2014, Exxaro recorded a
fatality at Arnot mine in Mpumalanga when an employee, Mr Solomon Latebotse Mashigo, was fatally injured by a rock that slid from a
continuous miner. The incident is being investigated by the Department of Mineral Resources (DMR) Mpumalanga. Exxaro extends sincere
condolences to the family, colleagues and friends of Mr Mashigo. This fatality follows Exxaro’s 2013 achievement of a full year without
a fatality, and we remain committed to our goal of zero harm.
For the six-month period under review a lost-time injury frequency of 0,22 was recorded, marginally higher than the 0,21 recorded in
June 2013. Twenty-two lost-time injuries were reported for the review period compared to 21 in the corresponding period in 2013. Exxaro
will continue to roll-out safety improvement plans, which include the Global Mining Industry Risk Management and Safety Health
Environment Representative Empowerment programmes, to further raise awareness of safety risks.
Nineteen cases of occupational diseases were reported in the review period compared to 46 in the corresponding period in 2013, a
decline of 59%. This includes seven cases of tuberculosis (18 in 2013), six cases of pneumoconiosis (23 in 2013) and four cases of
noise-induced hearing loss (the same as in 2013). During the period, there was a 46% (211 enrolments) increase in the number of
employees enrolled on the HIV/Aids programme compared to 456 in the corresponding period in 2013. The chronic disease campaign was
launched at the company’s annual Safety Indaba. During the period, 18 new cases of diabetes, 45 new cases of hypertension and one
epilepsy case were diagnosed.
Water is crucial to the sustainability of our business and the company implements a holistic programme to manage water-related risks,
minimise impact and operate efficiently using water-reduction plans and recycling procedures. Group-wide water conservation plans
aligned to the national water management strategy will be finalised in the first quarter of 2015. Two scheduled water treatment plants
at the Matla and North Block Complex mines, will now be delivered in the third quarter of 2014 and first quarter of 2016, respectively,
due to delays in the approval of an integrated water use licence. Potential post mine-closure affected-water treatment liabilities will
be included in financial provisions at all mines in future as required by the water use licence.
For the six months to 30 June 2014, the Exxaro Chairman’s Fund contributed R55 million (1H13: R23 million) towards the group’s local
economic development projects. Exxaro’s focus areas for community development are education, infrastructure, skills development,
agriculture and enterprise development. For example, to improve the quality of education in labour-sending communities, the Inyanda
mine launched a programme where extra classes are provided to high school learners on Saturdays and during school holidays. The project
was officially launched at Pine Ridge combined school and aimed at improving the pass rates of students by focusing on maths, science,
English and life orientation. This initiative is also expected to assist in providing a steady throughput of local learners suitable
for Exxaro’s bursary and artisan programmes. Exxaro provides teaching aids for teachers along with study materials, a science
laboratory, transportation and nutrition. The Klarinet community will also benefit from this initiative as local suppliers are used to
provide supporting services and six new permanent jobs have been created.
MINERAL RESOURCES AND RESERVES
There have been no material changes to the mineral reserves and resources as disclosed in the 2013 Exxaro integrated report (summarised
in the integrated report with a full report available on www.exxaro.com). Appointed competent persons initiate the update of models
that will support the changes in annual mineral reserve and resource statements, as applicable. Internal and external reviews, which
form part of the Exxaro resource and reserve reporting calendar, are scheduled for the second half of 2014.
Exploration drilling at the Grootegeluk, Leeuwpan, Matla and Arnot coal mines to enhance the level of geological confidence is
progressing on schedule. Initiatives to refine resource reconciliation processes are ongoing and results are expected to assist in the
optimal extraction of coal resources at the North Block Complex and Leeuwpan mines where selective mining of various coal seams is a
priority.
The 2014 drilling programme, which was focused on enhancing geological and metallurgical information on the Mayoko project, has been
suspended.
The application for the Paardeplaats mining right (an extension of the North Block Complex mine) has been resubmitted due to an
administrative error, while the approval of the integrated water use licence at the Belfast mining right is progressing well.
A section 11 application has been submitted to the Department of mineral resources in relation to the proposed sale of the
New Clydesdale Colliery mine. The outstanding mining right executions of Matla and Tshikondeni mines are expected to be finalised in
the second half of 2014.
OPERATIONAL AND FINANCIAL EXCELLENCE
GROUP FINANCIAL RESULTS
Revenue
Group consolidated revenue increased by 19% to R7 412 million compared to R6 245 million in the six-month period ended 30 June 2013,
but remained stable compared to the R7 323 million recorded in the second half of 2013, predominantly due to the increase in export
sales.
Table 2: Group segment results
Revenue Net operating profit/(loss)
6 months 6 months 12 months 6 months 6 months 12 months
ended ended ended ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2014 2013 2013 2013 2014 2013 2013 2013
Rm Reviewed Reviewed Reviewed Audited Reviewed Reviewed Reviewed Audited
Coal 7 312 6 149 7 213 13 362 1 836 1 031 1 738 2 769
- Tied(1) 2 094 1 782 2 135 3 917 208 210 5 215
- Commercial(2) 5 218 4 367 5 078 9 445 1 628 821 1 733 2 554
Ferrous 71 55 65 120 (5 917) (44) (97) (141)
- Iron ore(3) (5 821) (1) (26) (27)
- Alloys 71 55 65 120 (96) (26) (35) (61)
- Other(4) (17) (36) (53)
Other 29 41 45 86 1 (70) 1 008 938
- Base metals(5) 32 113 145
- Other(6) 29 41 45 86 1 (102) 895 793
Total 7 412 6 245 7 323 13 568 (4 080) 917 2 649 3 566
(1) Tied operations refer to mines that supply their entire production to either Eskom or ArcelorMittal South Africa Limited in terms
of contractual agreements.
(2) Includes the New Clydesdale Colliery pre-tax impairment loss of R292 million recorded in the six-month period ended 30 June 2013
as well as the subsequent partial impairment loss reversal recorded during the six-month period ended 31 December 2013. This
resulted in a net impairment loss of R143 million recorded during the 12 months ended 31 December 2013.
(3) Includes the pre-tax impairment of the original investment including goodwill, carrying value of the property, plant and equipment
and qualifying project costs capitalised for the Mayoko project of R 5 760 million as well as the write-off of financial assets
totalling R47 million recorded in the six-month period ended 30 June 2014.
(4) Mainly made up of ferrous head office costs not directly attributable to the operation at Mayoko and as such could not be
capitalised with the development of the project.
(5) Includes a Zincor refinery partial impairment loss reversal of R98 million recorded during the six-month period ended 31 December
2013.
(6) Includes a profit on the sale of subsidiaries of R964 million on the sale of Base Metals Proprietary Limited (which held the
Zincor refinery) recorded during the six-month period ended 31 December 2013.
Net operating profit
Group consolidated net operating profit was R557 million higher at R1 774 million#^ (1H13: R1 218 million=*, 2H13: R1 452 million+”>)
after excluding items noted in the ‘comparability of results’ section above. The exclusion is the responsibility of the group’s board
of directors and has been presented to illustrate the impact of the items noted in the ‘comparability of the results’ section above and
hence may not fairly present the group’s operational results. This exclusion has not been reviewed nor reported on by the group’s
external auditors. This adjusted net operating profit represented a 46% increase on 1H13 and a 22% increase on 2H13, mainly due to a
higher net operating profit contribution from the coal business.
Other net operating profit improved from an operating loss of R70 million recorded in 1H13 to a marginal net operating profit of
R1 million in 1H14. This was mainly due to lower corporate costs (R61 million) recorded in 1H14.
An average exchange rate of R10,83 to the US dollar was realised for the six-month period ended 30 June 2014 compared to R9,19 in 2013
(2H13: R9,70).
Earnings
Attributable losses to owners of the parent, which include Exxaro’s equity-accounted investments in associates and joint ventures, were
R2 441 million (1H13: earnings of R2 244 million; 2H13: earnings of R3 973 million) or 688 cents loss per share, down 209% from 1H13
(down 161% from 2H13) mainly due to the non-recurring impairment loss of the Mayoko project in 2014.
Headline earnings, which exclude the impact of any impairment and partial impairment reversal as well as profits realised on the sale
of discontinued subsidiaries and other non-core assets, were R2 814 million (1H13: R2 529 million, 2H13: R2 665 million) or 793 cents
per share (1H13: 712 cents per share; 2H13: 751 cents per share), representing an 11% increase on 1H13 (6% on 2H13) headline earnings
per share.
Cash flow
Cash generated from operations was R1 555 million (1H13: R602 million; 2H13: R1 557 million) for the group. This was primarily used to
fund net financing charges of R136 million (1H13: R128 million; 2H13: R64 million), taxation payments of R31 million
(1H13: R117 million; 2H13: R41 million) and to pay dividends of R1 126 million (1H13: R546 million; 2H13: R841 million).
A total of R1 578 million (1H13: R2 403 million; 2H13: R2 361 million) was spent on acquiring property, plant and equipment (capital
expenditure), of which R1 076 million (1H13: R1 826 million; 2H13: R1 681 million) was invested in new capacity (expansion capital),
with R502 million (1H13: R577 million; 2H13: R680 million) applied to sustaining and environmental capital. Of the funds spent on new
capacity, R134 million (1H13: R850 million; 2H13: R962 million) was for the Grootegeluk Medupi Expansion Project (GMEP), R60 million
(1H13: R237 million; 2H13: R122 million) was for Grootegeluk backfill and R456 million (1H13: R854 million, 2H13: R759 million) for the
Mayoko project, which was subsequently impaired.
After the receipt of dividends of R2 083 million (1H13: R1 218 million; 2H13: R2 023 million), primarily from Sishen Iron Ore Company
Proprietary Limited and Tronox, as well as the outflow associated with capital expenditure, the group had net cash inflow before
financing activities of R747 million (1H13: R1 429 million outflow; 2H13: R371 million inflow) for the review period. Net debt at
30 June 2014 decreased to R2 653 million (1H13: R3 677 million; 2H13: R3 377 million), reflecting a net debt to equity ratio of 8%
(1H13: 12%; 2H13: 9%).
Funding
Exxaro raised R1 billion in its debut bonds against an oversubscribed order book of R5 billion during the period under review.
This transaction marked Exxaro’s entrance to the bond market and established a new source of financing for the group. Two floating-rate
bonds were on offer, a three-year bond and a five-year bond. Both bonds received strong investor support, allowing Exxaro to issue the
full targeted R1 billion at pricing levels better than the initial price guidance. The bonds were issued under Exxaro’s new R5 billion
domestic medium-term note programme listed on the interest rate market of the Johannesburg Stock Exchange Limited (JSE Limited or JSE).
The debut bond will support Exxaro’s strategy of diversifying sources of funding to optimise its portfolio.
COAL COMMODITY BUSINESS
Trading conditions were challenging in 2014 with average export API4 coal index prices dropping from US$83 per tonne at the beginning
of January to a low of US$74 per tonne in June, averaging the six-month period at US$77 per tonne. Exxaro realised an average export
price of US$68 per tonne in 2014 compared to US$82 per tonne in 1H13. This was mainly due to the fact that a higher weighting of low-
value products is included in the period under review compared to 2013, resulting in the group realising an overall lower export price.
Export volumes increased from the corresponding period in 2013. This was enhanced by 490kt (90%) higher buy-ins from Mafube and other
suppliers.
Demand in the domestic market for metallurgical, power station and steam coal was lower than the corresponding period in 2013.
The demand from the ferroalloys market has recovered compared to 2013, resulting in Exxaro returning to full production on its semi-
coke production plant.
Production and sales volumes
Overall coal production volumes (excluding buy-ins from Mafube and other external suppliers) were in line with 1H13, although sales
were 766kt (4%) higher.
Metallurgical coal
Grootegeluk metallurgical coal production was 214kt (23%) higher, mainly due to an initiative to fill an increased number of trains
allocated by Transnet Freight Rail. Grootegeluk sales to ArcelorMittal South Africa increased by 11kt (2%). Tshikondeni production
decreased by 71kt as the mine ramps down to closure in December 2014, when it is expected to reach its end of life. As a result, sales
to ArcelorMittal South Africa Limited decreased by 28kt.
Thermal coal
Power station coal production from the tied mines was 361kt (6%) higher compared to 1H13. Matla production was 384kt (8%) higher,
mainly due to improved cutting rates at the short walls as well as timing of short wall moves. Difficult geological conditions resulted
in 23kt (3%) lower production at Arnot.
The commercial mines’ power station coal production was 311kt (3%) lower than 1H13, mainly reflecting a cut-back in production at
Grootegeluk as a result of the lower burn rate at Matimba power station due to shuts on units and stacker/reclaimer problems. Lower
demand from Matimba resulted in Grootegeluk sales decreasing by 391kt (6%). At Leeuwpan production increased by 257kt (23%) on higher
yields achieved by the crush and screen plant, while sales increased 198kt (22%) due to higher customer demand. Production decreased
278kt (18%) at North Block Complex due to breakdowns, blockages and in-pit water issues. North Block Complex sales were 180kt (13%)
lower mainly due to the contractual sales limitation agreement (200kt limit per month) with Eskom implemented in 1H14. During the
review period, 341kt were exported via the Maputo and Richards Bay Coal Terminal harbours.
Table 3: Unreviewed coal production and sales volumes
Production Sales
6 months 6 months 12 months 6 months 6 months 12 months
ended ended ended ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
(000 tonnes) 2014 2013 2013 2013 2014 2013 2013 2013
Thermal 17 561 17 704 18 849 36 553 18 462 17 902 19 957 37 859
- Tied(1) 6 001 5 640 6 126 11 766 5 997 5 643 6 125 11 768
- Commercial:
domestic 11 560 12 064 12 723 24 787 10 238 10 634 11 570 22 204
- Commercial:
export 2 227 1 625 2 262 3 887
Metallurgical 1 238 1 095 1 156 2 251 1 348 1 142 1 073 2 215
- Tied 108 179 164 343 157 185 150 335
- Commercial:
domestic 1 130 916 992 1 908 693 681 627 1 308
- Commercial:
export(2) 498 276 296 572
Total coal 18 799 18 799 20 005 38 804 19 810 19 044 21 030 40 074
Semi-coke 63 24 67 91 65 16 81 97
Total (excluding
buy-ins) 18 862 18 823 20 072 38 895 19 875 19 060 21 111 40 171
Thermal buy-ins 1 032 542 928 1 470
Total (including
buy-ins) 19 894 19 365 21 000 40 365 19 875 19 060 21 111 40 171
(1) Tied operations refer to mines that supply their entire production to either Eskom or ArcelorMittal South Africa Limited in terms
of contractual agreements.
(2) Exported as a steam coal product, blended at Richards Bay Coal Terminal.
Steam coal production was 193kt (7%) lower mainly due to New Clydesdale Colliery mine stoppage while Inyanda production decreased 96kt
(10%) as a result of lower qualities on reserves mined. Domestic sales at Inyanda rose by 59kt (48%) due to higher demand while export
sales decreased by 49kt (7%) as a result of some export product being redirected to the domestic market. Leeuwpan production increased
by 190kt (29%) due to better production from the JIG plant and better yields achieved. Sales at Leeuwpan declined by 30kt (4%) due to
lower customer demand. Production at Grootegeluk increased by 15kt (2%) due to good yields achieved. Domestic steam sales from
Grootegeluk decreased by 43kt (6%) on lower demand from customers while other export sales decreased by 9kt (36%).
Semi-coke plant production was 39kt (162%) higher mainly due to new markets and the technical repositioning of the product as semi-coke
late in 2013 during a downturn in the ferrochrome industry where production was reduced to match demand.
Revenue
The coal business revenue of R7 312 million was 19% higher than the comparable period in 2013, mainly from the commercial mines due to
a combination of higher export sales volumes recorded at weaker Rand and US dollar prices, higher local steam coal sales volumes
against higher prices as well as lower power station coal sales volumes at higher prices.
Net operating profit
A 39%= increase in net operating profit to R1 836 million (at an operating margin of 25%) was recorded for the review period compared
to the corresponding period in 2013, after the exclusion on R292 million pre-tax impairment loss recorded in 1H13 on the property,
plant and equipment at New Clydesdale Colliery. The exclusion is the responsibility of the group’s board of directors and has been done
to illustrate the impact of the items listed in table 1 on coal’s net operating profit in the respective periods and hence may not
fairly present coal’s operational results.
The 39% increase was mainly made up of higher sales volumes (R189 million), higher shortfall income received from Eskom (R243 million),
favourable exchange rate variances due to the weakening of the Rand against the US dollar (R237 million), lower operating losses
(R111 million) at New Clydesdale Colliery which is under care and maintenance and higher overall cost savings (R45 million). However,
higher net operating profit was partially offset by lower sales price (R52 million) and inflationary cost pressures in electricity and
diesel (R242 million).
Table 4: Coal segment results
Revenue Net operating profit
6 months 6 months 12 months 6 months 6 months 12 months
ended ended ended ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2014 2013 2013 2013 2014 2013 2013 2013
Rm Reviewed Reviewed Reviewed Audited Reviewed Reviewed Reviewed Audited
- Tied(1) 2 094 1 782 2 135 3 917 208 210 5 215
- Commercial(2) 5 218 4 367 5 078 9 445 1 628 821 1 733 2 554
Total 7 312 6 149 7 213 13 362 1 836 1 031 1 738 2 769
(1) Tied operations refer to mines that supply their entire production to either Eskom or ArcelorMittal South Africa Limited in terms
of contractual agreements.
(2) Includes the New Clydesdale Colliery pre-tax impairment loss of R292 million recorded in the six-month period ended 30 June 2013
as well as the subsequent partial impairment loss reversal recorded during the six-month period ended 31 December 2013. This
resulted in a net impairment loss of R143 million recorded during the 12 months ended 31 December 2013.
Logistics
The Transnet Freight Rail rate was at 61,3 million tonnes for 1H14, including the force majeure event in February 2014 and annual
Transnet Freight Rail shut in May. Exxaro has used 100% of its available Richards Bay Coal Terminal entitlement as at 30 June 2014.
Markets
Demand in international coal markets is generally stable amid the global drive for energy efficiency and energy mix changes. Both
global thermal and metallurgical markets are, however, oversupplied. This is expected to prolong the current imbalance between supply
and demand, and pricing is forecast to be generally flat for the remainder of the year.
Portfolio improvement
Capital expenditure and project pipeline
Following the delays in the construction of the Medupi power station, Exxaro and Eskom continue to engage in order to reach an amicable
agreement on a revised Grootegeluk Medupi Expansion Project ramp-up profile in terms of the Medupi coal supply agreement (CSA).
In January 2014, Eskom formally notified Exxaro that it would not be able to begin offtake from 1 February 2014 as agreed in the CSA
due to construction delays. The terms and conditions of the CSA remain in full force until a revised agreement is reached. It is
envisaged that such an agreement will be reached in the form of an addendum to the agreement which will be submitted for approval by
the respective boards of directors of Exxaro and Eskom in August 2014. Coal dispatches to Medupi power station began in June 2014.
Total project costs remain estimated at R10,2 billion.
Thabametsi is a prospective multi-product greenfields opencast mine adjacent to Grootegeluk in the Waterberg, Limpopo. Phase 1
development of the mine is expected to coincide with the 600MW coal-fired base-load independent power producer (IPP) power station
project, owned and developed by GDF SUEZ. Thabametsi mine will supply approximately 3,5Mtpa of run-of-mine coal to the power station at
full production. The prefeasibility study was completed in the second quarter of 2014 for the first-phase development of the Thabametsi
mine. A bankable feasibility study will begin in the third quarter of 2014 and is expected to be completed by mid-2015.
The Belfast project is a greenfields opencast mine development in Mpumalanga. The project encompasses one of the last high-quality coal
reserves in the province and presents Exxaro with an opportunity for excellent returns. The estimated annual production from the mine
is 2,2Mpta of A-grade export coal and 0,5Mtpa of power station coal over a 16-year period post commissioning which is scheduled for
2H17. The mining right was awarded in 2013. In June 2014, the Exxaro board approved R3,8 billion for the project development with
R3,6 billion to be spent only once all required licences and regulatory approvals are obtained.
Moranbah South is a prospective greenfields mine (50:50 joint venture with Anglo American plc) in Queensland, Australia, with estimated
production of 10 million tonnes per annum of hard coking coal through a dual long-wall operation. Project development has been deferred
until 2018/2019. In the meantime, the environmental impact study is progressing well with the final response to public submissions
submitted in May 2014. The environmental authorisation is expected to be granted in the second half of 2014.
The prefeasibility study of the semi-coke two-retort expansion (a 50% expansion of the existing reductants business) was concluded in
1H14. A bankable feasibility study commenced in June 2014.
As previously announced, Exxaro continues to engage with Universal Coal Development VIII Proprietary Limited on the attainment of all
regulatory approvals as well as the fulfilment of the terms and conditions precedent to the sale of New Clydesdale Colliery.
FERROUS COMMODITY BUSINESS
Production and sales volumes
Changes in the product mix at FerroAlloys in 2014 resulted in an overall production increase of 996 tonnes (37%) from the corresponding
period in 2013. The change in the product mix reflects higher demand for fine ferrosilicon from Sishen Iron Ore Company Proprietary
Limited.
Sales volumes rose by 342 tonnes (12%) from the corresponding period in 2013 due to higher production. Coarse ferrosilicon sold in 2014
is lower than its production as portions of the coarse ferrosilicon produced have been mixed with the fine and blended ferrosilicon.
Revenue and net operating loss
FerroAlloys remains the only contributor of revenue to our ferrous business. Revenue increased by R16 million (29%) for the review
period from the corresponding period in 2013 due to higher demand from Sishen Iron Ore Company Proprietary Limited.
Net operating losses increased by R66 million# (excluding the impact of the pre-tax impairment loss (R5 760 million) and write-off of
financial assets (R47 million) recorded for the Mayoko project) for the review period compared to the R44 million losses in the
corresponding period in 2013. The exclusion is the responsibility of the group’s board of directors and has been done to illustrate the
impact of the items listed in table 1 on Ferrous’s net operating loss in the respective periods and hence may not fairly present the
Ferrous’s operational results. The increase in the net operating loss was mainly due to higher operating costs from AlloyStream
(R19 million), and an increase in corporate costs (R29 million).
Table 5: Ferrous segment results
Revenue Net operating loss
6 months 6 months 12 months 6 months 6 months 12 months
ended ended ended ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2014 2013 2013 2013 2014 2013 2013 2013
Rm Reviewed Reviewed Reviewed Audited Reviewed Reviewed Reviewed Audited
- Iron ore(1) (5 821) (1) (26) (27)
- Alloys 71 55 65 120 (96) (26) (35) (61)
- Other(2) (17) (36) (53)
Total 71 55 65 120 (5 917) (44) (97) (141)
(1) Includes the pre-tax impairment of the original investment including goodwill, carrying value of the property, plant and equipment
and qualifying project costs capitalised for the Mayoko project of R5 760 million as well as the write-off of financial assets
totalling R47 million recorded in the six-month period ended 30 June 2014.
(2) Mainly made up of ferrous head office costs not directly attributable to the operation at Mayoko and as such could not be
capitalised with the development of the project.
Portfolio improvement
Capital expenditure and project pipeline
In January 2014, the mining convention was signed by the government of the Republic of the Congo, along with rail and port framework
agreements for the development of a two to 10 million tonnes per annum Mayoko project. Capital expenditure in the review period to
develop the project was R456 million, bringing the total spent since acquisition to R2,5 billion.
A concept study on a revised 12 million tonnes per annum Mayoko project was concluded in June 2014. However, to date, Exxaro has not
succeeded in concluding definitive port and rail agreements for this project as anticipated and communicated to the market in the
results announcement on 6 March 2014. As a result of these delays as well as higher project development costs indicated by the concept
study, Exxaro has impaired the investment in the Mayoko project. The impact of this decision was a pre-tax write-off of an amount up to
the original acquisition cost as well as project-related costs capitalised to date amounting to R5 807 million.
Exxaro continues to actively liaise with the government of the Republic of the Congo on the conclusion of the port and rail agreements
before a final decision can be made on any future pre-feasibility studies.
EQUITY-ACCOUNTED INVESTMENTS
Overall equity-accounted investment income declined by 25% to R1 515 million. Equity-accounted income from Exxaro’s 19,98% shareholding
in Sishen Iron Ore Company Proprietary Limited (SIOC) decreased 19% compared to the six-months period ended 30 June 2013, mainly due to
a decrease in export iron ore prices and a weaker Rand/US dollar exchange rate.
Exxaro’s share in Tronox’s losses was R304 million for the review period (1H13: R168 million; 2H13: R470 million), mainly as a result
of lower mineral sands and pigment prices in 2014 as well as purchase price accounting adjustments recorded.
Exxaro’s share of Black Mountain’s equity-accounted income declined by 12% to R46 million mainly due to an increase in production
costs.
Equity-accounted income from Mafube increased by 36% due to higher sales prices paid by the JV partners on export coal.
Cennergi equity-accounted losses reduced by 32% mainly as a result of the foreign exchange contracts entered into to hedge future euro
payments during the construction phase of its renewable energy projects.
Table 6: Equity-accounted investments
Equity-accounted income in profit or loss Exxaro’s share of dividends received
6 months 6 months 12 months 6 months 6 months 12 months
ended ended ended ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2014 2013 2013 2013 2014 2013 2013 2013
Rm Reviewed Reviewed Reviewed Audited Reviewed Reviewed Reviewed Audited
SIOC(1) 1 711 2 120 2 046 4 166 1 736 915 1 749 2 664
Tronox(1) (304) (168) (470) (638) 274 243 264 507
Black Mountain 46 52 25 77 71 58 58
Mafube 109 80 51 131
Cennergi (47) (69) (34) (103)
South Dunes Coal
Terminal (2) (2)
Total 1 515 2 015 1 616 3 631 2 081 1 216 2 013 3 229
(1) Includes Exxaro’s effective shareholding in SIOC and Tronox’s restatement of R71 million and R27 million respectively, which were
fully accounted for in 2013 as the amount were not material to restate Exxaro 2012 numbers.
OTHER PORTFOLIO IMPROVEMENT
ENERGY CAPITAL EXPENDITURE AND PROJECT PIPELINE
Construction on the 134MW Amakhala Emoyeni wind farm project began in June 2014 and is expected to be completed in the second quarter
of 2016. Commercial operation is planned for the third quarter of 2016.
Construction on the 95MW Tsitsikamma Community Development wind farm project is due to begin in September 2014 and should be completed
in the fourth quarter of 2015. Commercial operation is planned for the first quarter of 2016.
The underground coal gasification concept study for the generation of electricity was completed in the first half of 2014. The planning
and the concept study augmented with a high-level update of the potential for gas-to-liquids facilities, after which it will be
considered to advance to the pre-feasibility study.
OUTLOOK
Global economic growth improved gradually during the review period, although the performances of major world economies were mixed.
US economic growth contracted significantly in the first quarter of 2014, mainly due to adverse weather, but economic activity bounced
back in the second quarter and is expected to maintain its momentum into the second half of 2014. The deceleration in China’s economic
growth was evident in the first half of 2014 with the construction sector being one of the most affected. However, some measures to
cushion the broad investment slowdown were introduced. In Europe, business and consumer confidence continued an improving trend.
South Africa’s economic growth outlook remains subject to a number of headwinds – prolonged strikes, electricity supply constraints,
low business and consumer confidence and higher consumer debt levels. In addition, gross domestic product contracted by 0,6% in the
first quarter of 2014 with risks of tighter monetary policy due to a weak currency and accelerated inflationary pressures. The recent
downgrades by credit rating agencies are testimony to current economic challenges for South Africa.
The global macro-economic and mineral commodity environment remains challenging. Against this background, Exxaro is optimistic about
prospects for the second half of 2014.
The second half of 2014 is expected to see final coal delivered from the Tshikondeni hard coking coal mine to ArcelorMittal South
Africa Limited as the mine will come to the end of its life. Power station coal demand is expected to increase. Demand in the semi-coke
market segment is expected to remain strong as domestic ferrochrome and ferromanganese producers remain globally competitive. However,
the risk in this segment remains the availability of electricity.
Coal export volumes are expected to be similar to the first half of 2014. Although Transnet Freight Rail performance to Richards Bay
Coal Terminal was affected in the first half of 2014 by the power outage at the terminal as well as the annual coal line maintenance
shut, it is, however, making good progress in ramping up rail performance of the coal line.
Demand in international thermal and coking coal markets is stable and growing in some regions. Due to the international oversupply of
both thermal and coking coal, coal prices are expected to remain under pressure for the rest of the year as there are still signs of
additional supply coming onto the market.
During the first half of 2014, the iron ore market experienced a fairly rapid shift as new, lower cost Australian supply come on-
stream. As a result, price supportive Chinese production is expected to continue during the second half of 2014. However, as
uncompetitive supply is displaced, the supply-demand balance is expected to limit any further significant price falls in the
medium term.
CHANGES TO THE BOARD AND AUDIT COMMITTEE
Dr CJ Fauconnier was appointed as a member of the Audit Committee of the board with effect from 29 January 2014.
Mr JJ Geldenhuys retired as an independent non-executive director with effect from 27 May 2014. Mr NL Sowazi resigned from the board
with effect from 3 June 2014. The board expressed its sincere appreciation to both directors for their respective contributions during
their tenures. Subsequent to Mr Sowazi’s resignation, Mr V Nkonyeni has been appointed as an independent non-executive director with
effect from 3 June 2014. The board welcomes Mr Nkonyeni.
INTERIM DIVIDEND
Notice is given that a gross interim cash dividend, number 23 of 260 cents (2013: 235 cents) per share, for the six-month period ended
30 June 2014 has been declared, payable to shareholders of ordinary shares. No secondary tax on companies (STC) credits are available
for offsetting against the dividend tax, while total STC credits available for the interim dividend number 21 amounted to
R1 566 million, representing 54,51893 cents per share. The gross local dividend is 260 cents per share for shareholders exempt from
dividend tax. The dividend declared will be subject to a dividend withholding tax of 15% for all shareholders who are not exempt from
or do not qualify for a reduced rate of withholding tax. Although the local dividend rate was 15% for the corresponding period in 2013,
no tax was due as a result of STC credits used. The net local dividend is 221 cents per share payable to shareholders who are subject
to withholding tax at a rate of 15%. The withholding tax amounts to 39 cents per share (2013: Zero cents per share). The number of
ordinary shares in issue at the date of this declaration is 358 115 505 (2013: 358 061 205). Exxaro’s tax reference number is
9218/098/14/4.
The salient dates on payment of the interim dividend are:
Last day to trade cum dividend on the JSE Friday, 5 September 2014
First trading day ex dividend on the JSE Monday, 8 September 2014
Record date Friday, 12 September 2014
Payment date Monday, 15 September 2014
No share certificates may be dematerialised or rematerialised between Monday, 8 September 2014 and Friday, 12 September 2014, 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 (CSDP) or
broker credited on Monday, 15 September 2014.
On behalf of the board:
Len Konar Sipho Nkosi Wim de Klerk
Chairman Chief Executive Officer Finance Director
20 August 2014
CORPORATE INFORMATION
Registered Office Transfer Secretaries
Exxaro Resources Limited Computershare Investor
Roger Dyason Road Services Proprietary Limited
Pretoria West, 0183 Ground Floor
Tel no +27 12 307 5000 70 Marshall Street
Fax no +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***,
Dr CJ Fauconnier***, V Nkonyeni***, NB Mbazima**+, VZ Mntambo**, RP Mohring***, Dr MF Randera**, J van Rooyen***, 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)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(Exxaro or the company or the group)
If you have any queries about your shareholding in Exxaro Resources Limited, please contact the transfer secretaries at +27 11 370 5000.
21 August 2014
Date: 21/08/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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