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Reviewed Condensed Group Interim Financial Results for the six-month period ended 30 June 2015
Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(“Exxaro” or “the company” or “the group”)
REVIEWED CONDENSED GROUP INTERIM FINANCIAL RESULTS AND UNREVIEWED PRODUCTION AND SALES VOLUME INFORMATION
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2015
PERFORMANCE IN BRIEF
No fatality for 1H15
Lost-time injury frequency rate (LTIFR) improved by 23% to 0,17
Coal production volumes at 19 million tonnes, up 1%
Coal exports at 2,4 million tonnes, down 12%
53% decrease in dividends received from associates
Net cash position of R55 million
Headline earnings per share of 303 cents, down 62%
Interim dividend of 65 cents per share, down 75%
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 8 324 7 412 16 401
Operating expenses (6 513) (6 620) (15 197)
Operating profit (note 4) 1 811 792 1 204
Other income (note 5) 888 1 466
Impairment charges of non-current assets (note 6) (5 760) (5 962)
Net operating profit/(loss) 1 811 (4 080) (3 292)
Finance income (note 7) 33 43 80
Finance costs (note 7) (359) (86) (183)
Income from financial assets 1 7 9
Share of income of equity-accounted investments (note 8) 83 1 515 2 515
Profit/(loss) before tax 1 569 (2 601) (871)
Income tax (expense)/benefit (402) 159 (13)
Profit/(loss) for the period 1 167 (2 442) (884)
Other comprehensive income, net of tax 561 468 1 190
Items that will not be reclassified to profit or loss: 16 35 (316)
- share of comprehensive income/(loss) of equity-accounted
investments 16 35 (316)
Items that may be subsequently reclassified to profit or loss: 545 433 1 506
- unrealised gains on translation of foreign operations 28 164 224
- revaluation of financial assets available-for-sale 14 148 345
- share of comprehensive income of
equity-accounted investments 503 121 937
Total comprehensive income/(loss) for the period 1 728 (1 974) 306
Profit/(loss) attributable to:
Owners of the parent 1 167 (2 441) (883)
Non-controlling interests (1) (1)
Profit/(loss) for the period 1 167 (2 442) (884)
Total comprehensive income/(loss) attributable to:
Owners of the parent 1 728 (1 969) 307
Non-controlling interests (5) (1)
Total comprehensive income/(loss) for the period 1 728 (1 974) 306
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed Audited
cents cents cents
Attributable earnings/(loss) per share
Aggregate
- basic 329 (688) (249)
- diluted 328 (686) (249)
Refer to note 9 for details regarding the number of shares
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 41 638 40 402 41 408
Property, plant and equipment 19 018 17 057 18 344
Biological assets 84 72 84
Intangible assets 30 232 34
Investments in associates (note 11) 18 118 18 828 18 588
Investments in joint ventures (note 12) 1 104 859 966
Financial assets 2 766 2 763 2 853
Deferred tax 518 591 539
Current assets 9 987 5 578 5 693
Inventories 995 1 018 998
Trade and other receivables 1 906 2 875 2 611
Current tax receivable 102 98 78
Cash and cash equivalents 6 984 1 587 2 006
Non-current assets held-for-sale (note 13) 314 284 328
Total assets 51 939 46 264 47 429
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 2 435 2 402 2 409
Other components of equity 6 581 5 334 6 031
Retained earnings 26 413 25 328 25 985
Equity attributable to owners of the parent 35 429 33 064 34 425
Non-controlling interests (4)
Total equity 35 429 33 060 34 425
Non-current liabilities 12 638 9 186 9 182
Interest-bearing borrowings (note 14) 5 931 3 405 2 976
Non-current provisions 2 373 1 950 2 219
Post-retirement employee obligations 167 158 167
Financial liabilities 82 91 88
Deferred tax 4 085 3 582 3 732
Current liabilities 3 645 3 809 3 590
Trade and other payables 2 465 2 888 3 208
Interest-bearing borrowings (note 14) 465 197 34
Current tax payable 14 57 27
Current provisions 168 29 254
Overdraft (note 14) 533 638 67
Non-current liabilities held-for-sale (note 13) 227 209 232
Total equity and liabilities 51 939 46 264 47 429
GROUP STATEMENT OF CHANGES IN EQUITY
Other components of equity
Foreign Financial Retirement Available-
Share currency instruments Equity- benefit for-sale
capital translations revaluation settled obligation revaluations Other
Rm Rm Rm Rm Rm Rm Rm
At 31 December 2013 (Audited) 2 396 3 146 310 1 493 (13) 100 (802)
Loss for the period
Other comprehensive income/(loss) 168 148
Share of comprehensive income/(loss)
of equity-accounted investments 69 (124) 147 35 (6)
Issue of share capital1 6
Share-based payments movement (118)
Reclassification of equity 808
Dividends paid
Acquisition of non-controlling interest (27)
At 30 June 2014 (Reviewed) 2 402 3 383 186 1 522 22 248 (27)
Profit for the period
Other comprehensive income 56 197
Share of comprehensive income/(loss)
of equity-accounted investments 758 (70) 163 (351) (63)
Issue of share capital1 7
Share-based payments movement 10
Dividends paid
Disposal of non-controlling interest 27
Disposal and liquidation of subsidiaries (30)
At 31 December 2014 (Audited) 2 409 4 167 116 1 695 (329) 382
Profit for the period
Other comprehensive income 282 14
Share of comprehensive income/(loss)
of equity-accounted investments 384 (23) 116 16 13
Issue of share capital1 26
Share-based payments movement 2
Dividends paid
At 30 June 2015 (Reviewed) 2 435 4 579 93 1 813 (313) 409
1 Vesting of treasury shares held by Mpower 2012 to good leavers. A good leaver is a participant to a share-based payment scheme whose
employment has been terminated due to retrenchment, retirement, death, serious disability, serious incapacity or promotion out of the
relevant qualification category as defined internally by the remuneration and nominations committee.
2 Includes R33 million gain on translation differences recycled to the statement of comprehensive income.
GROUP STATEMENT OF CHANGES IN EQUITY (continued)
Attributable Non-
Retained to owners of controlling Total
earnings the parent interests equity
Rm Rm Rm Rm
At 31 December 2013 (Audited) 29 668 36 298 (26) 36 272
Loss for the period (2 441) (2 441) (1) (2 442)
Other comprehensive income/(loss) 316 (4) 312
Share of comprehensive income/(loss)
of equity-accounted investments 35 156 156
Issue of share capital1 6 6
Share-based payments movement (118) (118)
Reclassification of equity (808)
Dividends paid (1 126) (1 126) (1 126)
Acquisition of non-controlling interest (27) 27
At 30 June 2014 (Reviewed) 25 328 33 064 (4) 33 060
Profit for the period 1 558 1 558 1 558
Other comprehensive income 253 4 257
Share of comprehensive income/(loss)
of equity-accounted investments 28 465 465
Issue of share capital1 7 7
Share-based payments movement 10 10
Dividends paid (929) (929) (929)
Disposal of non-controlling interest 27 (27)
Disposal and liquidation of subsidiaries (30) 27 (3)
At 31 December 2014 (Audited) 25 985 34 425 34 425
Profit for the period 1 167 1 167 1 167
Other comprehensive income 42 42
Share of comprehensive income/(loss)
of equity-accounted investments 13 519 519
Issue of share capital1 26 26
Share-based payments movement 2 2
Dividends paid (752) (752) (752)
At 30 June 2015 (Reviewed) 26 413 35 429 35 429
1 Vesting of treasury shares held by Mpower 2012 to good leavers. A good leaver is a participant
to a share-based payment scheme whose employment has been terminated due to retrenchment, retirement,
death, serious disability, serious incapacity or promotion out of the relevant qualification category
as defined internally by the remuneration and nominations committee.
2 Includes R33 million gain on translation differences recycled to the statement of comprehensive income.
Final dividend paid per share (cents) in respect of the 2014 financial year 210
Interim dividend paid per share (cents) in respect of the 2014 interim period 260
Dividend payable per share (cents) in respect of the 2015 interim period 65
Foreign currency translations
Arise from the translation of the financial statements of foreign operations within the group.
Financial instruments revaluation
Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where
the hedged transaction has not yet occurred.
Equity-settled
Represents the fair value of services received from employees and settled by equity instruments granted.
Retirement benefit obligation
Comprises remeasurements on the post-retirement obligation.
Available-for-sale revaluations
Comprise the fair value adjustments, net of tax, on the investments in RBCT R15 million decrease (2014: R344 million increase)
and Chifeng Kumba Hongye Corporation Limited (Chifeng) R29 million increase (2014: R1 million increase) (refer note 16).
Other
Comprise mainly transactions with non-controlling interests for the acquisition of the Mayoko iron ore project of R808 million
and Botswana of R27 million during 2014.
CONDENSED GROUP STATEMENT OF CASH FLOWS
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
Cash flows from operating activities 1 297 262 1 660
Cash generated by operations 2 330 1 555 4 083
Interest paid (230) (170) (307)
Interest received 23 34 59
Tax paid (74) (31) (120)
Dividends paid (752) (1 126) (2 055)
Cash flows from investing activities (178) 485 620
Property, plant and equipment to maintain operations (note 10) (703) (502) (1 460)
Property, plant and equipment to expand operations (note 10) (298) (1 076) (1 737)
Increase in investment in intangible assets (10) (25)
Proceeds from disposal of property, plant and equipment 73 8
(Increase)/decrease in investments in other non-current assets (158) 51 214
Increase in investment in joint ventures (77) (61) (108)
Income from investments in associates 984 2 081 3 719
Dividend income from financial assets 1 2 9
Cash flows from financing activities 3 350 (604)
Interest-bearing borrowings raised (note 14) 4 320 1 000 1 000
Interest-bearing borrowings repaid (note 14) (970) (1 000) (1 604)
Net increase in cash and cash equivalents 4 469 747 1 676
Cash and cash equivalents at beginning of the period 1 939 223 223
Translation difference on movement in cash and cash equivalents 43 (21) 40
Cash and cash equivalents at end of the period 6 451 949 1 939
- cash and cash equivalents 6 984 1 587 2 006
- overdraft (533) (638) (67)
RECONCILIATION OF GROUP HEADLINE EARNINGS
Gross Tax Net
Rm Rm Rm
6 months ended 30 June 2015 (Reviewed)
Profit for the period attributable to owners of the parent 1 167
Adjusted for: (90) (90)
- IAS 16 Net gains on disposal of property, plant and equipment (66) (2) (68)
- IAS 16 Compensation from third parties for items of property,
plant and equipment impaired, given up or lost (5) 2 (3)
- IAS 21 Gains on translation differences recycled to the
statement of comprehensive income (33) (33)
- IAS 28 Loss on dilution of investment in associate 11 11
- IAS 28 Share of associates’ separate identifiable remeasurements 3 3
Headline earnings 1 077
6 months ended 30 June 2014 (Reviewed)
Loss for the period attributable to owners of the parent (2 441)
Adjusted for: 5 812 (557) 5 255
- IAS 16 Net losses 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’ separate identifiable remeasurements 4 4
- IAS 36 Impairment of property, plant and equipment 4 740 (552) 4 188
- IAS 36 Impairment of goodwill acquired in a business combination
in terms of IFRS 3 1 020 1 020
Headline earnings 2 814
12 months ended 31 December 2014 (Audited)
Loss for the year attributable to owners of the parent (883)
Adjusted for: 6 328 (576) 5 752
- IFRS 10 Loss on disposal of subsidiary 28 28
- IAS 16 Net losses on disposal of property, plant and equipment 27 (6) 21
- IAS 21 Gains on translation differences recycled to the
statement of comprehensive income (47) (47)
- IAS 28 Loss on dilution of investment in associate 58 58
- IAS 28 Share of associates’ separate identifiable remeasurements 296 (18) 278
- IAS 36 Impairment of property, plant and equipment 4 740 (552) 4 188
- IAS 36 Impairment of intangible asset 202 202
- IAS 36 Impairment of goodwill acquired in a business combination
in terms of IFRS 3 1 020 1 020
- IAS 38 Loss on the write-off of intangible assets 4 4
Headline earnings 4 869
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed Audited
cents cents cents
Headline earnings per share
Aggregate
- basic 303 793 1 372
- diluted 303 790 1 372
Refer to note 9 for details regarding the number of shares.
NOTES TO THE REVIEWED CONDENSED GROUP INTERIM FINANCIAL STATEMENTS
for the six-month period ended 30 June 2015
1. Corporate background
Exxaro Resources Limited (Exxaro), a public company incorporated in South Africa, is a diversified resources group
with interests in the carbon (controlled and non-controlled), TiO2 and Alkali Chemicals (non-controlled), ferrous
(controlled and non-controlled) and energy (non-controlled) markets. These reviewed condensed group interim
financial statements as at and for the six-month period ended 30 June 2015 comprise the company and its
subsidiaries (together referred to as the group) and the group’s interest in associates and joint ventures.
2. Basis of accounting
Statement of compliance
The reviewed condensed group interim financial statements as at and for the six-month period ended 30 June 2015 have
been prepared in accordance with IFRS, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and the requirements of the South African Companies Act No 71 of 2008. The reviewed condensed group
interim financial statements as at and for the six-month period ended 30 June 2015 have been prepared under the supervision
of WA de Klerk (CA)SA, SAICA registration number: 00133273.
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 2014, which have been prepared in accordance with IFRS as issued by
the 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 of Exxaro and its subsidiaries as at and for the six-month
period ended 30 June 2015 were authorised for issue by the board of directors on 18 August 2015.
Judgements and estimates
In preparing these reviewed condensed group interim financial statements, management made judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates. The significant judgements made by management
in applying the group’s accounting policies and the key source of estimation uncertainty were similar to those
applied to the group annual financial statements as at and for the year ended 31 December 2014.
Significant accounting policies
The accounting policies adopted in the preparation of the reviewed condensed group interim financial statements are
consistent with those followed in the preparation of the group annual financial statements as at and for the year ended
31 December 2014. Amendments to IFRSs effective for the financial year ended 31 December 2015 are not expected to have
a material impact on the group.
New accounting standards and amendments issued to accounting standards and interpretations which are relevant to the group,
but not yet effective on 30 June 2015, have not been adopted. The group continuously evaluates the impact of these standards
and amendments.
Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual profit
or loss.
3. 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 group executive committee. Operating segments reported
are based on the group’s different products and operations.
Total operating segment revenue, which excludes VAT, represents the gross value of goods invoiced, services rendered and
includes operating revenues directly and reasonably allocable to the segments. Export revenue is recorded according to the
relevant sales terms, when the risks and rewards of ownership are transferred.
Segment revenue includes sales made between segments. These sales are made on a commercial basis.
Segment operating expenses, assets and liabilities represent direct or reasonably allocable operating expenses, assets and
liabilities.
Segment net operating profit equals segment revenue less operating segment expenses, less impairment charges, plus impairment
reversals.
The group has four reportable operating segments, as described below, which are the group’s strategic divisions. These offer
different products and services, and are managed separately because they require different technology and marketing strategies.
The group executive committee reviews internal management reports on these strategic divisions at least quarterly. The summary
below describes the operations in each of the group’s reportable operating segments:
Carbon
The carbon segment was previously referred to as the coal segment. Carbon segment is now used to include the future envisaged
development of the operations which includes not only coal. The operations are mainly situated in the Waterberg and Mpumalanga
regions and are split between commercial carbon operations and tied carbon operations as well as a 50% joint venture interest
in Mafube Coal Proprietary Limited (Mafube) (a joint venture with Anglo South Africa Capital Proprietary Limited).
The operations produce thermal and metallurgical coal as well as other small-scale products.
Ferrous
The ferrous segment includes the Mayoko iron ore project in the RoC (iron ore operating segment), a 19,98% equity interest in
SIOC reported within the other ferrous operating segment as well as the FerroAlloys and Alloystream™ operations
(collectively referred to as Alloys).
TiO2 and Alkali Chemicals
The TiO2 and Alkali Chemicals segment was previously referred to as TiO2. This change is due to the acquisition of the
Alkali Chemicals business from FMC Corporation by Tronox Limited on 1 April 2015. Tronox Limited now operates two vertically
integrated divisions: TiO2 and Alkali Chemicals. Exxaro holds a 43,84% (June 2014: 44,18%; December 2014: 43,98%) equity interest in
Tronox and a 26% equity interest in each of the South African-based operations, Tronox KZN Sands Proprietary Limited and Tronox
Mineral Sands Proprietary Limited (collectively referred to as Tronox SA) as well as a 26% member’s interest in Tronox Sands Limited
Liability Partnership in the United Kingdom (Tronox UK).
Other
The other operating segment includes the 50% investment in Cennergi Proprietary Limited (Cennergi) (a joint venture with Tata Power),
a 26% equity interest in Black Mountain Proprietary Limited (Black Mountain), an effective investment of 11,7% in Chifeng as well
as the corporate office which renders support services to both internal and external parties.
3. Segmental information (continued)
The following table presents a summary of the group’s segmental information:
TiO2 and
Alkali
Carbon Ferrous Chemicals Other Total
Tied Commercial Iron Other Base
operations operations ore Alloys ferrous metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
6 months ended 30 June 2015 (Reviewed)
Total revenue 1 847 6 370 83 24 8 324
Inter-segmental revenue
External revenue 1 847 6 370 83 24 8 324
Segment net operating profit/(loss) 102 1 562 (40) 3 (11) 195 1 811
External finance income 2 15 16 33
(note 7)
External finance costs (note 7) (29) (65) (265) (359)
Income tax (expense)/benefit (15) (427) (3) (2) 8 37 (402)
Depreciation and amortisation (note 4) (12) (367) (2) (30) (411)
Cash generated by/(utilised in) operations1 233 2 078 (65) (16) (15) 115 2 330
Share of income/(loss) of equity-accounted
investments (note 8) 132 633 (659) 9 (32) 83
Capital expenditure (note 10) (956) (10) (35) (1 001)
At 30 June 2015 (Reviewed)
Segment assets and liabilities
Deferred tax 9 33 125 111 240 518
Investments in associates (equity-accounted)
(note 11) 5 498 12 255 365 18 118
Investments in joint ventures
(equity-accounted) (note 12) 935 169 1 104
External assets2 1 742 22 813 106 146 32 305 6 741 31 885
Total assets 1 751 23 781 106 271 5 641 12 255 670 7 150 51 625
Non-current assets held-for-sale (note 13) 314 314
Total assets as per statement of
financial position 1 751 24 095 106 271 5 641 12 255 670 7 150 51 939
External liabilities 1 366 3 564 165 43 75 6 971 12 184
Deferred tax (78) 4 143 3 7 10 4 085
Current tax payable 8 2 4 14
Total liabilities 1 288 7 715 170 50 75 6 985 16 283
Non-current liabilities 227 227
held-for-sale (note 13)
Total liabilities as per statement of
financial position 1 288 7 942 170 50 75 6 985 16 510
1 Cash utilised for the iron ore operating segment (within the ferrous reportable operating segment) relates to the day-to-day costs for having a
presence in the RoC.
2 Excluding deferred tax, investments in equity-accounted associates and joint ventures and non-current assets held-for-sale.
3. Segmental information (continued)
TiO2 and
Alkali
Carbon Ferrous Chemicals Other Total
Tied Commercial Iron Other Base
operations operations ore Alloys ferrous metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
6 months ended 30 June 2014 (Reviewed)
Total revenue 2 094 5 220 71 11 29 7 425
Inter-segmental revenue (2) (11) (13)
External revenue 2 094 5 218 71 29 7 412
Segment net operating 208 1 628 (5 821) (96) 1 (4 080)
profit/(loss)
External finance income (note 7) 3 27 13 43
External finance costs (note 7) (34) (63) 11 (86)
Income tax (expense)/benefit (43) (467) 563 27 (3) 82 159
Depreciation and amortisation (note 4) (21) (326) (8) (2) (3) (48) (408)
Impairment charges of non-current assets
(excluding financial assets) (note 6) (5 751) (9) (5 760)
Write-off and impairment of trade and
other receivables (note 4) (1) (26) (2) (29)
Impairment charges of non-current
financial assets (note 4) (21) (21)
Cash generated by/(utilised in) operations 169 1 483 108 (20) (9) (176) 1 555
Share of income/(loss) of equity-accounted
investments (note 8) 109 1 711 (304) 46 (47) 1 515
Capital expenditure (note 10) (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 11) 5 583 12 918 327 18 828
Investments in joint ventures
(equity-accounted) (note 12) 636 223 859
External assets1 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 284 284
held-for-sale (note 13)
Total assets as per statement of
financial position 1 846 22 382 62 213 5 711 12 918 614 2 518 46 264
External liabilities 1 432 3 318 193 91 11 4 311 9 356
Deferred tax 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 13) 209 209
Total liabilities as per statement of
financial position 1 537 6 880 246 93 51 4 397 13 204
1 Excluding deferred tax, investments in equity-accounted associates and joint ventures and non-current assets held-for-sale.
3. Segmental information (continued)
TiO2 and
Alkali
Carbon Ferrous Chemicals Other Total
Tied Commercial Iron Other Base
operations operations ore Alloys ferrous metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
12 months ended
31 December 2014 (Audited)
Total revenue 4 577 11 601 159 14 67 16 418
Inter-segmental revenue (2) (14) (1) (17)
External revenue 4 577 11 599 159 66 16 401
Segment net operating 319 2 978 (6 100) (97) (41) (1) (350) (3 292)
profit/(loss)
External finance income (note 7) 4 43 33 80
External finance costs (note 7) (69) (124) 10 (183)
Income tax (expense)/benefit (53) (751) 624 23 90 54 (13)
Depreciation and amortisation (note 4) (43) (734) (8) (4) (4) (96) (889)
Impairment charges of non-current assets
(excluding financial assets) (note 6) (5 751) (9) (202) (5 962)
Write-off and impairment of trade and
other receivables (note 4) (1) (22) (17) (40)
Impairment charges of non-current
financial assets (note 4) (21) (21)
Cash generated by/(utilised in) operations 95 4 365 (75) (64) (109) (129) 4 083
Share of income/(loss) of equity-accounted
investments (note 8) 268 2 830 (568) 77 (92) 2 515
Capital expenditure (note 10) (2 576) (352) (42) (104) (123) (3 197)
At 31 December 2014 (Audited)
Segment assets and liabilities
Deferred tax 4 41 57 123 103 211 539
Investments in associates (equity-accounted)
(note 11) 5 422 12 809 357 18 588
Investments in joint ventures
(equity-accounted) (note 12) 818 148 966
External assets1 1 883 22 075 81 124 16 267 2 562 27 008
Total assets 1 887 22 934 138 247 5 541 12 809 624 2 921 47 101
Non-current assets held-for-sale (note 13) 303 25 328
Total assets as per statement of
financial position 1 887 23 237 138 247 5 566 12 809 624 2 921 47 429
External liabilities 1 523 3 723 139 49 73 3 506 9 013
Deferred tax (71) 3 718 57 5 23 3 732
Current tax payable 10 5 5 7 27
Total liabilities 1 462 7 446 201 54 73 3 536 12 772
Non-current liabilities held-for-sale (note 13) 232 232
Total liabilities as per statement of
financial position 1 462 7 678 201 54 73 3 536 13 004
1 Excluding deferred tax, investments in equity-accounted associates and joint ventures and non-current assets held-for-sale.
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
4. Significant items included in operating profit
Depreciation and amortisation 411 408 889
Net realised foreign currency exchange (35) 24 (97)
(gains)/losses
Net unrealised foreign currency exchange gains1 (307) (5) (7)
Net gains on derivative instruments (9) (28) (28)
held-for-trading
Write-off and impairment of trade and other receivables2 3 29 40
Impairment charges of non-current 21 21
financial asset3
Royalties 53 46 125
Net (gains)/losses on disposal of property, plant and equipment (66) 19 27
Loss on dilution of investment in associate 11 29 58
Loss on disposal of subsidiary 28
Termination benefits4 40 25 138
1 Include unrealised (gains)/losses on revaluations of foreign cash balances.
2 Include trade and other receivables relating to the Mayoko iron ore project
(Rnil) (June 2014: R26 million; 31 December 2014: R22 million).
3 Non-current financial asset relating to the Mayoko iron ore project.
4 Include voluntary severance package costs incurred and accrued for.
5. Other income
Other income (888) (1 466)
Other income relates to shortfall income received from Eskom as a result of
delays in agreed upon production off-take plans.
6. Impairment charges of non-current assets
Mayoko iron ore project 5 208 5 208
Impairment charges 5 760 5 760
- property, plant and equipment 4 740 4 740
- goodwill 1 020 1 020
Net tax effect (552) (552)
Intellectual property 202
Impairment of intangible asset
- total impairment charges (pre-tax and post-tax) 202
Net impairment charges per statement of comprehensive income 5 760 5 962
Net tax effect (552) (552)
Net effect on attributable earnings 5 208 5 410
Mayoko iron ore project
The Mayoko iron ore project is located in the RoC and was acquired in 2012 with the acquisition of AKI. The project is reported within
the iron ore operating segment which forms part of the ferrous reportable operating segment.
The concept study on the revised 12 million tonnes Mayoko iron ore project was concluded during June 2014. As a result of the delays
in the rail and port agreements as well as higher future project development costs following the outcome of the concept study, a
pre-tax impairment loss of R5 803 million (R5 760 million excluding financial assets and trade and other receivables written down),
was raised on 30 June 2014 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 R43 million written down in terms of IAS 39 Financial instruments: Recognition and Measurement.
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
7. Net financing costs
Total finance income 33 43 80
- interest income 27 33 66
- finance lease interest income 6 5 9
- interest income from loans to joint ventures 5 5
Total finance costs (359) (86) (183)
- interest expense1 (260) (182) (323)
- unwinding of discount rate on rehabilitation cost (96) (86) (183)
- amortisation of transaction costs (5) (5) (10)
- borrowing costs capitalised2 2 187 333
Total net financing costs (326) (43) (103)
1 Refer to note 14 for details on the movements on
interest-bearing borrowings.
2 Borrowing costs capitalisation rate 6,93% 6,56% 6,69%
8. Share of income/(loss) of equity-accounted investments
Associates (17) 1 453 2 339
Listed investments (713) (339) (628)
Tronox Limited (713) (339) (628)
Unlisted investments 696 1 792 2 967
SIOC 633 1 711 2 830
Tronox SA 3 (13) (38)
Tronox UK 51 48 98
Black Mountain 9 46 77
Joint ventures 100 62 176
Mafube 132 109 267
SDCT 1
Cennergi (32) (47) (92)
Share of income of equity-accounted investments 83 1 515 2 515
9. Dividend distribution
Total dividends paid in 2014 amounted to R2 055 million, made up of a final dividend of R1 126 million that related to the
year ended 31 December 2013, which was paid in April 2014, as well as an interim dividend of R929 million, paid in
September 2014. A final dividend relating to the 2014 year of 210 cents per share (amounting to R752 million) was paid to
shareholders in April 2015.
An interim cash dividend for 2015 of 65 cents per share (2014: 260 cents per share) was approved by the board of directors
on 18 August 2015. The dividend is payable on 14 September 2015 to shareholders who will be on the register at 11 September 2015.
This interim dividend, amounting to approximately R233 million (2014: R929 million), has not been recognised as a liability in
these reviewed condensed group interim financial statements. It will be recognised in shareholders’ equity in the year ended
31 December 2015.
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 dividend withholding tax. The net local dividend payable to shareholders, subject to dividend
withholding tax at a rate of 15% amounts to 55,25 cents per share. The number of ordinary shares in issue at the date of this
declaration is 358 115 505 (2014: 358 115 505). Exxaro’s company tax reference number is 9218/098/14/4.
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Issued shares as at declaration date (number) 358 115 505 358 115 505 358 115 505
Ordinary shares (million)
- weighted average number of shares 355 355 355
- diluted weighted average number of shares 356 356 355
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
10. Property, plant and equipment
Capital expenditure
Incurred 1 001 1 578 3 197
- to maintain operations 703 502 1 460
- to expand operations 298 1 076 1 737
Contracted 2 715 2 084 2 887
- contracted for the group (owner controlled) 1 580 1 251 1 402
- group’s share of capital commitments of equity-accounted investments 1 135 833 1 485
Authorised, but not contracted 581 523 2 160
11. Investments in associates
Listed investments 9 075 9 823 9 686
Tronox Limited1 9 075 9 823 9 686
Unlisted investments 9 043 9 005 8 902
SIOC 5 498 5 583 5 422
Tronox SA 1 792 1 807 1 786
Tronox UK 1 388 1 288 1 337
Black Mountain 365 327 357
Total carrying value of investments in associates 18 118 18 828 18 588
1 Fair value based on a listed price (Level 1 within the IFRS 13
Fair Value Measurement fair value hierarchy) 9 183 14 559 14 122
Listed share price (US$ per share) 14,63 26,90 23,88
Subsequent to 30 June 2015, the Tronox Limited share price has declined to US$8,83 per share on 17 August 2015, a decline of 40%.
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
12. Investments in joint ventures
Unlisted investments 1 104 859 966
Mafube1 935 636 818
SDCT2
Cennergi 169 223 148
Total carrying value of investments in joint ventures 1 104 859 966
1 Included in financial assets, is a loan to Mafube of: 60
2 The cost of the investment is R1 333 and included in financial assets,
is a loan to SDCT of: 90 80 83
13. Non-current assets and liabilities held-for-sale
NCC operation
Exxaro concluded a sale of asset agreement relating to the NCC operation with Universal Coal Development VIII Proprietary Limited
(Universal) in January 2014. On 30 June 2015, all conditions precedent to the sale agreement had not been met, and the NCC operation
remains a non-current asset classified as held-for-sale.
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 carbon region
which is reported as part of the commercial carbon operating segment.
The conditions precedent to this sale have since been met. Refer note 22 for events after reporting period.
Other
The held-for-sale property, plant and equipment for 31 December 2014 included farms, with a carrying amount of R25 million, which
were expected to be sold during 2015. Subsequently, the potential buyer indicated that it would not be able to accumulate the
purchase price. Management is still committed to a formal plan to sell the land. However, since a sale is unlikely within the next
12 months the farms have been reclassified from non-current assets held-for-sale to property, plant and equipment.
The major classes of assets and liabilities classified as non-current assets and liabilities held-for-sale are as follows:
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
Assets
Property, plant and equipment 149 149 174
Deferred tax 79 31 65
Financial assets 75 70 73
Inventories 8 7 8
Trade and other receivables 3 6 8
- trade receivables 1 3 3
- non-financial instrument receivables 2 3 5
Current tax receivable 21
Total assets 314 284 328
Liabilities
Non-current provisions (158) (151) (158)
Post-retirement employee obligations (4) (4) (4)
Trade and other payables (16) (16) (21)
- trade payables (7) (9) (11)
- other payables (3) (1) (3)
- derivative instruments (5)
- non-financial instrument payables (6) (1) (7)
Tax payable (9) (9)
Current provisions (40) (38) (40)
Total liabilities (227) (209) (232)
Net assets held-for-sale 87 75 96
14. Interest-bearing borrowings
Loans
Senior loan facility
During April 2012, Exxaro secured a senior loan facility of R8 billion. The senior loan facility comprises 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 2,50% for the revolving facility.
The effective interest rate for the transaction costs for the term loan is 0,47%. Interest is paid on a six-monthly basis for the
term loan, and on a monthly basis for the revolving facility.
The undrawn portion relating to the term loan amounts to R1 billion (30 June 2014: R3 billion; 31 December 2014: R3 billion).
The undrawn portion of the revolving facility amounts to R1,65 billion (30 June 2014: R2,4 billion; 31 December 2014: R3 billion).
Bond issue
In terms of Exxaro’s R5 billion DMTN programme, a senior unsecured floating rate note (bond) of R1 billion was raised during May 2014.
The bond comprises 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 1,70% for the R480 million bond and JIBAR plus a margin of 1,95% for the R520 million bond.
The effective interest rate for the transaction costs is 0,13% for the R480 million bond and 0,08% for the R520 million bond. Interest
is paid on a three monthly basis for both bonds.
Events after reporting period
Refer note 22 for detail on the financial assistance that Exxaro has provided to its BEE shareholder after reporting date.
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
Summary of loans by financial year of redemption
2015 197 34
2016 465 324 392
20171 2 622 1 406 874
2018 795 328 395
2019 1 316 850 917
2020 onwards 1 198 497 398
Total interest-bearing borrowings 6 396 3 602 3 010
- current2 465 197 34
- non-current3 5 931 3 405 2 976
1 The repayment in 2017 comprises a portion of the term loan, as well as the full
repayment of the revolving credit facility that is drawn at the end of the
reporting period, and the R480 million senior unsecured floating rate note.
2 The current portion represents 465 197 34
- capital repayments 400 166
- interest capitalised 74 41 44
- reduced by the amortised transaction costs amounting to (9) (10) (10)
3 The non-current portion includes the following amounts in respect of transaction
costs that will be amortised using the effective interest rate method, over the
term of the facilities. 28 38 34
Overdraft
Bank overdraft 533 638 67
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 periods.
15. Net cash/(debt)
Net cash/(debt) is presented by the following items on the statement of
financial position (excluding assets and liabilities classified as held-for-sale): 55 (2 653) (1 071)
- cash and cash equivalents 6 984 1 587 2 006
- non-current interest-bearing borrowings (5 931) (3 405) (2 976)
- current interest-bearing borrowings (465) (197) (34)
- overdraft (533) (638) (67)
Calculation of movement in net debt:
Cash inflow from operating and investing activities 1 119 747 2 280
Add:
- non-cash flow movement for interest accrued not yet paid (31) (1) (4)
- non-cash flow of amortisation of transaction costs (5) (1) (10)
- translation differences of movements in cash and cash equivalents 43 (21) 40
Decrease in net debt 1 126 724 2 306
16. Financial instruments
a) Carrying amounts and fair values
The carrying amounts and fair values of financial assets and financial liabilities in the condensed group statement of
financial position, are as follows:
At 30 June 2015
Carrying Fair
amount value
Rm Rm
ASSETS
Non-current assets
Financial assets, consisting of: 2 612 2 612
- environmental rehabilitation funds 876 876
- loans to joint ventures 90 90
- KIO 13 13
- Chifeng 305 305
- RBCT 739 739
- non-current receivables 589 589
Current assets1 8 617 8 617
Trade and other receivables 1 630 1 630
Derivative financial assets 3 3
Cash and cash equivalents 6 984 6 984
Non-current assets held-for-sale (note 13) 76 76
Total financial instrument assets 11 305 11 305
LIABILITIES
Non-current liabilities 5 931 5 931
Interest-bearing borrowings2 5 931 5 931
Current liabilities1 2 868 2 868
Trade and other payables 1 868 1 868
Derivative financial liabilities 2 2
Interest-bearing borrowings2 465 465
Overdraft 533 533
Non-current liabilities held-for-sale (note 13) 10 10
Total financial instrument liabilities 8 809 8 809
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 that approximates fair value in terms of IAS 39 Financial Instruments: Recognition and Measurement.
16. Financial instruments (continued)
a) Carrying amounts and fair values (continued)
At 30 June 2014
Carrying Fair
amount value
Rm Rm
ASSETS
Non-current assets
Financial assets, consisting of: 2 603 2 603
- environmental rehabilitation funds 749 749
- loans to joint ventures 140 140
- KIO 30 30
- Chifeng 287 287
- RBCT 691 691
- New Age Exploration Limited 1 1
- non-current receivables 705 705
Current assets1 3 896 3 896
Trade and other receivables 2 306 2 306
Derivative financial assets 3 3
Cash and cash equivalents 1 587 1 587
Non-current assets held-for-sale (note 13) 73 73
Total financial instrument assets 6 572 6 572
LIABILITIES
Non-current liabilities 3 405 3 405
Interest-bearing borrowings2 3 405 3 405
Current liabilities1 2 994 2 994
Trade and other payables 2 159 2 159
Interest-bearing borrowings2 197 197
Overdraft 638 638
Non-current liabilities held-for-sale (note 13) 15 15
Total financial instrument liabilities 6 414 6 414
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 that approximates fair value in terms of IAS 39 Financial Instruments: Recognition and Measurement.
16. Financial instruments (continued)
a) Carrying amounts and fair values (continued)
At 31 December 2014
Carrying Fair
amount value
Rm Rm
ASSETS
Non-current assets
Financial assets, consisting of: 2 693 2 693
- environmental rehabilitation funds 826 826
- loans to joint ventures 83 83
- KIO 22 22
- Chifeng 267 267
- RBCT 973 973
- non-current receivables 522 522
Current assets1 4 104 4 104
Trade and other receivables 2 090 2 090
Derivative financial assets 8 8
Cash and cash equivalents 2 006 2 006
Non-current assets held-for-sale (note 13) 76 76
Total financial instrument assets 6 873 6 873
LIABILITIES
Non-current liabilities 2 976 2 976
Interest-bearing borrowings2 2 976 2 976
Current liabilities1 2 603 2 603
Trade and other payables 2 502 2 502
Interest-bearing borrowings2 34 34
Overdraft 67 67
Non-current liabilities held-for-sale (note 13) 14 14
Total financial instrument liabilities 5 593 5 593
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 that approximates fair value in terms of IAS 39 Financial Instruments: Recognition and Measurement.
b) Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and 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 that the group can access at the measurement date.
Level 2 - inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset
or liability.
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
16. Financial instruments (continued)
b) Fair value hierarchy (continued)
At 30 June 2015 (Reviewed) Level 1 Level 2 Level 3 Fair value
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
- environmental rehabilitation funds 876 876
- environmental rehabilitation funds held-for-sale 75 75
- KIO 13 13
Available-for-sale financial assets
- Chifeng 305 305
- RBCT 739 739
Financial liabilities held-for-trading at fair value through profit or loss
- current derivative financial liabilities (2) (2)
Net financial assets carried at fair value 964 1 1 044 2 009
At 30 June 2014 (Reviewed)
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
- environmental rehabilitation funds 749 749
- environmental rehabilitation funds held-for-sale 70 70
- KIO 30 30
Available-for-sale financial assets
- Chifeng 287 287
- RBCT 691 691
- New Age Exploration Limited 1 1
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
16. Financial instruments (continued)
b) Fair value hierarchy (continued)
At 31 December 2014 (Audited) Level 1 Level 2 Level 3 Fair value
Rm Rm Rm Rm
Financial assets held-for-trading at fair value through profit or loss
- current derivative financial assets 8 8
Financial assets designated at fair value through profit or loss
- environmental rehabilitation funds 826 826
- environmental rehabilitation funds held-for-sale 73 73
- KIO 22 22
Available-for-sale financial assets
- Chifeng 267 267
- RBCT 973 973
Net financial assets carried at fair value 921 8 1 240 2 169
Reconciliation of assets within Level 3 of the fair value hierarchy
Chifeng RBCT
Rm Rm
Opening balance at 31 December 2013 253 551
Movement during the period
Gains recognised for the period in OCI (pre-tax effect)1 34 140
Closing balance at 30 June 2014 287 691
Movement during the period
(Loss)/gain recognised for the period in OCI (pre-tax effect)1 (33) 282
Exchange gain for the period recognised in OCI 13
Closing balance at 31 December 2014 267 973
Movement during the period
Gain/(loss) recognised for the period in OCI (pre-tax effect)1 29 (18)
Reclassification of loan repayments (216)
Exchange gain for the period recognised in OCI 9
Closing balance at 30 June 2015 305 739
1 Tax on RBCT amounts to R3 million (30 June 2014: R26 million; 31 December 2014: R78 million).
Transfers
The group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the
transfer has occurred.
There were no transfers between Level 1 and Level 2 nor between Level 2 and Level 3 of the fair value hierarchy during the periods
ended 30 June 2015, 30 June 2014 and 31 December 2014.
Valuation process applied by the group
The fair value computations of the investments are performed by the group’s corporate finance department, reporting to the
Finance Director, on a six-monthly basis. The valuation reports are discussed with the audit committee in accordance with the
group’s reporting governance.
Current derivative financial instruments
Level 2 fair value for simple over-the-counter derivative financial instruments are based on market quotes. These quotes are tested
for reasonableness by discounting estimated future cash flows using the market rate for similar instruments at measurement date.
16. Financial instruments (continued)
c) Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant inputs used
in the valuation models
Chifeng
Chifeng is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable price available
for this investment. This unlisted investment is valued as the present value of the estimated future cash flows, using a discounted
cash flow model. The valuation technique is consistent to that used in previous reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in Chifeng are rand/RMB
exchange rate, RMB/US$ exchange rate, Zinc LME price, production volumes, operational costs and the discount rate.
At 30 June 2015 (Reviewed)
Sensitivity
analysis
of a 10% increase
Sensitivity of inputs in the inputs is
and fair value demonstrated
Inputs measurement1 below2
Observable inputs
Rand/RMB exchange rate R1,88/RMB1 Strengthening of the rand to the RMB 30
RMB/US$ exchange rate RMB6,28 to Strengthening of the RMB to the US$ 175
RMB7,18/US$1
Zinc LME price (US$ per tonne in real terms) US$2 000 to Increase in price of zinc concentrate 175
US$2 400
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in production volumes 44
Operational costs
(US$ million per annum in real terms) US$64 to US$83 Decrease in operations costs (139)
Discount rate (%) 9,94% Decrease in discount rate (25)
At 30 June 2014 (Reviewed)
Observable inputs
Rand/RMB exchange rate R1,70/RMB1 Strengthening of the rand to the RMB 28
RMB/US$ exchange rate RMB6,02 to Strengthening of the RMB to the US$ 153
RMB6,18/US$1
Zinc LME price (US$ per tonne in real terms) US$2 007 to Increase in price of zinc concentrate 153
US$2 140
Unobservable inputs
Production volumes (tonnes) 108 750 tonnes Increase in production volumes 76
Operational costs
(US$ million per annum in real terms) US$69 to US$71 Decrease in operations costs (160)
Discount rate (%) 10% Decrease in discount rate (23)
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all
other variables remain constant.
16. Financial instruments (continued)
c) Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant inputs used
in the valuation models (continued)
Chifeng (continued)
At 31 December 2014 (Audited)
Sensitivity
analysis
of a 10% increase
Sensitivity of inputs in the inputs is
and fair value demonstrated
Inputs measurement1 below2
Observable inputs
Rand/RMB exchange rate R1,86/RMB1 Strengthening of the rand to the RMB 26
RMB/US$ exchange rate RMB6,13 to Strengthening of the RMB to the US$ 152
RMB6,75/US$1
Zinc LME price (US$ per tonne US$2 311 to Increase in price of zinc concentrate 152
in real terms) US$2 226
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in production volumes 37
Operational costs
(US$ million per annum in real terms) US$63 to US$76 Decrease in operations costs (133)
Discount rate (%) 9,94% Decrease in the discount rate (20)
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all
other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within the range of
reasonably possible alternative assumptions for the periods ended 30 June 2015, 30 June 2014 and 31 December 2014.
RBCT
RBCT is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable price available
for this investment. This unlisted investment is valued as the present value of the estimated future cash flows, using a discounted
cash flow model. It is not anticipated that the RBCT investment will be disposed of in the near future. The valuation technique is
consistent with that used in previous reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in RBCT are rand/US$
exchange rate, API4 export price, Transnet market demand strategy, annual utilisation factor and the discount rate.
16. Financial instruments (continued)
c) 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 (continued)
RBCT (continued)
At 30 June 2015 (Reviewed)
Sensitivity analysis
of a 10% increase
Sensitivity of inputs in the inputs is
and fair value demonstrated
Inputs measurement1 below2
Observable inputs
Rand/US$ exchange rate R11,81 to Strengthening of the rand to the US$ 209
R20,43/US$1
API4 export price (US$ steam coal A-grade US$60,30 to Increase in API4 export price per tonne 140
price per tonne in real terms) US$85
Unobservable inputs
Transnet market Acceleration of TFR performance,
demand strategy for the 77Mtpa to ie reach full capacity sooner 74
terminal (Mtpa) 81Mtpa
Discount rate (%) 13% to 17% Decrease in the discount rate (125)
Annual utilisation factor (safety and Increase in annual utilisation factor 99
rail delay factor) (%) 90%
At 30 June 2014 (Reviewed)
Observable inputs
Rand/US$ exchange rate R10,53 to Strengthening of the rand to the US$ 145
R15,47/US$1
API4 export price (US$ steam coal A-grade US$83,33 to Increase in API4 export price per tonne 145
price per tonne in real terms) US$97
Unobservable inputs
Transnet market Acceleration of TFR performance,
demand strategy for the 72Mtpa to ie reach full capacity sooner 145
terminal (Mtpa) 91Mtpa
Discount rate (%) 13% to 17% Decrease in the discount rate (116)
Annual utilisation factor (safety and rail Increase in annual utilisation factor 145
delay factor) (%) 90%
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all other
variables remain constant.
16. Financial instruments (continued)
c) Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant inputs used
in the valuation models (continued)
RBCT (continued)
At 31 December 2014 (Audited)
Sensitivity analysis
of a 10% increase
Sensitivity of inputs in the inputs is
and fair value demonstrated
Inputs measurement1 below2
Observable inputs
Rand/US$ exchange rate R10,94 to Strengthening of the rand to the US$ 257
R18,80/US$1
API4 export price (US$ steam coal A-grade US$62 to Increase in API4 export price per tonne 154
price per tonne in real terms) US$93
Unobservable inputs
Transnet market Acceleration of TFR performance,
demand strategy for the 74Mtpa to ie reach full capacity sooner 97
terminal (Mtpa) 81Mtpa
Discount rate (%) 13% to 17% Decrease in the discount rate (120)
Annual utilisation factor (safety and rail Increase in annual utilisation factor 123
delay factor) (%) 90%
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all other
variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within the range of
reasonably possible alternative assumptions for the periods ended 30 June 2015, 30 June 2014 and 31 December 2014.
At 30 June At 30 June At 31 December
2015 2014 2014
Reviewed Reviewed Audited
Rm Rm Rm
17. Contingent liabilities
Total contingent liabilities 3 678 2 447 2 609
- DMC Iron Congo SA 18 84
- Pending litigation claims1 995 411 445
- Operational guarantees2 1 292 1 258 1 263
- Share of contingent liabilities of equity-accounted investments3 1 373 694 901
1 Pending litigation claims consist of legal cases where Exxaro is the defendant. The outcome of these claims is uncertain and the
amount of possible legal obligations that may be incurred can only be estimated at date of reporting.
2 Operational guarantees include guarantees to banks and other institutions in the normal course of business from which it is
anticipated that no material liabilities will arise.
3 Relate mainly to rehabilitation guarantees.
The timing and occurrence of any possible outflows of the contingent liabilities above are uncertain.
18. Contingent assets
Total contingent assets 170 226 256
- Surrender fee on prospecting rights, exploration rights and mining rights1 87
- Guarantee on sale of NCC2 170 170
- Share of contingent assets of equity-accounted investments3 139 86
1 In June 2014 a surrender fee in exchange for the exclusive right to prospect, explore, investigate and mine for
coal within a designated area of Central Queensland and Moranbah, Australia, conditional to the grant of a mining lease
was included as a contingent asset. However, in the second half of 2014, circumstances changed to the extent that the
probability for this surrender fee no longer existed, hence no amount relating to this matter was included since December 2014.
2 Exxaro has received a guarantee from Universal as part of the sales transaction of NCC.
3 Bank guarantees issued in favour of SIOC related to environmental rehabilitation.
The timing and occurrence of any possible inflows of the contingent assets above are uncertain.
19. Related party transactions
During the period 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 independent third parties.
20. Going concern
Taking into account the group’s liquidity position as well as internal budgets and forecasts for the short- to medium term,
it is expected that the group will continue to trade as a going concern over the next 12 months.
21. JSE Listings Requirements
The reviewed condensed group interim financial statements have been prepared in accordance with the Listings Requirements
of the JSE.
22. Events after the reporting period
Details of the final dividend are provided in note 9.
The following non-adjusting events occurred after the reporting date and are disclosed for information purposes:
Sale of non-core assets
On 3 February 2014 Exxaro announced the conclusion of the NCC sale of asset agreement. On 31 July 2015 all conditions
precedent to the NCC sale of asset agreement were met and the sale became effective. Refer note 13 on non-current assets
and liabilities held-for-sale for accounting treatment as at 30 June 2015.
Financial assistance to BEE shareholder
On 24 July 2015 Exxaro announced that it would provide financial assistance to Mainstreet 333 Proprietary Limited
(MS333) to the amount of R400 million, in order for MS333 to be able to comply with the terms of its preference
share facility.
Acquisition of business
On 11 August 2015, Exxaro announced on SENS that all conditions precedent to the Exxaro acquisition of TCSA from Total S.A.
have been met. The closing date of the transaction shall occur on the 10th business day following the completion of
all terms and conditions precedent to the transaction. The initial purchase price, as announced in July 2014, was
reduced and TCSA will be acquired for an upfront cash payment of US$262 million, plus a maximum additional amount of
US$120 million structured in a series of deferred payments, linked to the performance of the API4 price between now
and 2019 (contingent consideration). Exxaro also committed to creating a new broad-based BEE transaction as part
of the overall investment.
Purchase price deferred payments
Reference year API4 coal price range Deferred payment
US$/tonne US$m
2015 60 - 80 10
2016 60 - 80 25
2017 60 - 80 25
2018 60 - 90 25
2019 60 - 90 35
120
TCSA is a large-scale, coal operating business in South Africa and has a majority interest in two operating complexes,
Dorstfontein and Forzando, located in the Witbank coal basin in South Africa’s Mpumalanga province. The majority of
TCSA’s production is export coal which is shipped via RBCT to international markets, mainly India and China. TCSA
also sells its production into the South African domestic market.
The rationale for the acquisition was focused around the alignment of Exxaro’s long-term growth strategy, as well
as the fact that the acquisition complements Exxaro’s existing coal portfolio and it provides access to primary
RBCT entitlement.
At the time of approving the condensed group interim financial statements Exxaro was still in the process of
completing the valuation of the acquired assets and liabilities. This process is expected to be finalised by August 2016.
It is expected that the operations will be re-branded and referred to as ECC, which will be part of the carbon commercial
operating segment for internal reporting purposes to the chief operating decision maker.
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.
23. Review conclusion
The reviewed condensed group interim financial statements for the six-month period ended 30 June 2015 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.
24. 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 2014 integrated report and is available on the company’s website in
accordance with the JSE Listings Requirements. Following the appointment of Ms MW Hlahla as an independent non-executive
director to the board and the appointment of Mr MDM Mgojo, as chief executive officer (designate) and an executive director
to the board, Mr NB Mbazima resigned from the board with effect from 18 August 2015 and Mr S Mayet has been appointed with
effect from the same day. Please contact the group company secretary, Ms CH Wessels, for any additional information in
this regard.
25. Mineral resources and mineral reserves
Other than the normal life of mine depletion, there have been no material changes to the mineral resources and
mineral reserves as disclosed in the 2014 integrated report.
At 30 June At 30 June At 31 December
2015 2014 2014
26. Salient features1
Net asset value per share (rand/share) 99 92 96
Capital expenditure contracted relating to tied mines,
Arnot and Matla, which will be financed by Eskom (Rm) 93 239 159
Operating lease commitments (Rm) 109 146 135
Closing share price (rand/share) 86,92 138,50 103,50
Market capitalisation (Rbn) 31,13 49,60 37,06
Average rand/US$ spot exchange rate (for the period ended) 11,91 10,67 10,83
Closing rand/US$ spot exchange rate 12,27 10,58 11,56
1Non-IFRS numbers.
OPERATING UNDER DIFFICULT MARKET CONDITIONS
- Twelve consecutive months without a fatality - Exxaro average realised coal export price of US$56 per tonne, down 18%
- Medupi power station supply in line with Addendum 9 - Continuing pressure on prices across our basket of commodities
to the coal supply agreement - R0,6 billion core post-tax equity-accounted income from SIOC, down 48%
- Thermal coal sales up 4% on 1H14
- Healthy domestic coal demand
- Continuing cost-containment efforts
COMMENTARY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2015
1. Safety
We are pleased that Exxaro has repeated a significant milestone by again operating for 12 consecutive months without
a fatality. In the first half of 2015, we reduced the LTIFR to 0,17 compared to 0,22 for the first half of 2014. Our
target remains 0,15 LTIFR and we are committed to increasing awareness of safety risks and preventing accidents.
Although not a reportable fatality in terms of the DMR's mining regulations, it saddens us to announce that one of our
colleagues, Mr Johan Swanepoel was killed in a motor car accident at NCC on 7 July 2015 while performing company duties.
This is treated as an internal reportable fatality. We extend our sincere condolences to the family, colleagues and friends
of Mr Swanepoel.
2. Responding to difficult market conditions
2.1 Commodity prices
Despite the continuing pressure on prices across our basket of commodities (coal, iron ore, mineral sands and
pigment) in 1H15, the group weathered the storm and performed well. API4 export prices at the beginning of 2015 averaged
US$63 per tonne, declining to lows of around US$59 per tonne at the end of June 2015. Iron ore fines prices also plummeted
by over 20% over the same period, averaging US$60 per tonne CFR in 1H15 compared to US$112 per tonne CFR in 1H14. Lows of
US$47 per tonne for iron ore fines were recorded in April 2015. The continued oversupply in the TiO2 market has kept
pigment prices at historically low levels.
To ensure our resilience through these challenging times, we have embarked on several strategic initiatives:
- Focus on carbon operations - coal will be our focus of activity and investment in the short to medium term. We
will maintain our investment portfolio at current levels and consider our options as market conditions evolve
- Reprioritise and stagger projects to preserve cash given the poor price outlook
- Continue the drive to reduce input and overhead costs.
These strategic initiatives are targeted to place Exxaro in a favourable position to weather the subdued outlook
for our commodity exposure.
2.2 Events after reporting period
Given the extent of the decline in the Exxaro share price this year, our primary BEE partner, MS333, has requested a
loan from Exxaro to be able to comply with the terms of its preference share facility. Exxaro provided support to
MS333 via a R400 million bridge loan that was applied against the MS333 preference share facility in July 2015.
R200 million of the bridge loan will be settled by MS333 through the coordinated sale of a portion of its shareholding.
As announced on the SENS of the JSE on 24 July 2015, further discussions between MS333, its related parties, Exxaro and
MS333’s financiers on a longer-term solution are progressing well and will be communicated once finalised.
Refer note 22 to the reviewed condensed group interim financial statements for more detail regarding the
rest of the events after the reporting period.
3. Comparability of results
Comments are based on a comparison between the six-month periods ended 30 June 2015 and 30 June 2014 (1H15 and 1H14,
unless otherwise indicated) in terms of the reviewed condensed group interim financial results and unreviewed
production and sales volumes information. The financial results for 1H15 and 1H14 are not comparable mainly due to key
transactions listed in Table 1. Comments are based on the group’s performance excluding these events, which are viewed as non-core.
The exclusions are the responsibility of the group’s board of directors and have been provided to illustrate the impact
on net operating profit or loss in the respective periods, and hence may not fairly present the group’s financial
results, financial position, changes in equity, results of operations or cash flows.
Table 1: Key transactions in the reporting periods that make financial and operational results not comparable
Reporting 1H15 2H14 1H14
segment Description Rm Description Rm Rm
Carbon - Loss on sale of non-core assets, - Loss on sale of non-core assets and
voluntary severance packages voluntary severance packages (9) (13)
and insurance claim income (11)
Ferrous - Profit on sale of non-core assets 73 - Pre-tax partial reversal of the write-off of
financial assets in 2H14 and Mayoko iron ore
project impairment in 1H14 4 (5 807)
- Loss on sale of non-core assets and voluntary
severance packages (14)
Other - Loss on dilution of shareholding in - Loss on dilution of shareholding in Tronox Limited (29) (29)
Tronox Limited (11)
- Net unrealised foreign exchange gain on - Impairment of intellectual property assets (202)
revaluations of US$ accumulated for the
TCSA acquisition 315
- Voluntary severance packages (30) - Profit on sale of other non-core assets and
voluntary severance packages (62) (5)
- Gains on translation differences recycled
to profit or loss 33
Group Total net operating profit impact 369 Total net operating loss impact (312) (5 854)
Carbon - Tax impact 1 4
Ferrous - Exxaro’s post-tax share of SIOC loss on
sale of non-core assets (3)
- Exxaro’s post-tax share of SIOC loss on impairment
of operation, loss on sale of other non-core assets (109) (4)
TiO2 and - Exxaro’s post-tax share of Tronox - Exxaro’s post-tax share of Tronox restructuring costs
Alkali restructuring costs (10) and other (41)
Chemicals
Other - Tax impact 2
Group Total attributable earnings impact 356 Total attributable loss
impact (459) (5 302)
4. Financial and operational excellence
4.1 Group financial results
4.1.1 Revenue
Group revenue increased by 12% to R8 324 million for 1H15 compared to R7 412 million in 1H14 (2H14: R8 989 million),
mainly due to higher revenue in the carbon business arising from higher power station coal sales.
4.1.2 Net operating profit
The group recorded a net operating profit for the period of R1 811 million (1H14: net operating loss of R4 080
million; 2H14: net operating profit of R788 million). The 2014 operating loss was mainly due to the pre-tax impairment of
the carrying value of the Mayoko iron ore project assets totalling R5 807 million in 1H14 as well as the pre-tax
impairment of the carrying value of intellectual property (R202 million) in 2H14.
4.1.3 Earnings
Earnings attributable to owners of the parent, which include Exxaro’s equity-accounted investments in associates
and joint ventures, were R1 167 million (1H14: attributable losses of R2 441 million; 2H14: attributable earnings of R1
558 million) or 329 cents earnings per share (1H14: 688 cents loss per share, 2H14: 439 cents earnings per share), an
improvement of 148% from 1H14 mainly due to non-recurring post-tax impairment losses recorded in 2014.
Headline earnings, excluding the impact of any impairment and partial impairment reversals as well as profits
realised on the sale of subsidiaries and other non-core assets, were 62% lower at R1 077 million (1H14: R2 814 million,
2H14: R2 055 million) or 303 cents per share (1H14: 793 cents, 2H14: 579 cents per share), mainly due to a R1 432 million
(95%) reduction in the post-tax equity-accounted income of associates and joint ventures.
4.1.4 Cash flow and funding
Cash preservation remains key to managing the business through this challenging period and maintaining a balance
between project capital investment and return of cash to shareholders. Cash flow generated from operations was 50% higher
at R2 330 million (1H14: R1 555 million; 2H14: R2 528 million). This cash was used to pay dividends of R752 million,
net financing charges of R207 million and taxation of R74 million.
At R1 001 million, a 37% reduction in overall capital expenditure was recorded in 1H15. R298 million (1H14: R1 076
million; 2H14: R661 million) was invested in new capacity (expansion capital), and R703 million (1H14: R 502 million;
2H14: R958 million) applied to sustaining and environmental capital (stay-in-business capital). Of funds spent on stay-in
business capital, R390 million was for Grootegeluk’s replacement of trucks and shovels. We continue to critically
assess growth projects and consider the timing of cash flow in order to prioritise capital accordingly.
After the receipt of dividends of R985 million (1H14: R2 083 million; 2H14: R1 645 million), primarily from SIOC
and Tronox Limited, as well as the outflow associated with capital expenditure, the group had net cash inflow before
financing activities of R1 119 million (1H14: R747 million; 2H14: R1 533 million).
Net debt position reported at 30 June 2014 improved to net cash of R55 million at 30 June 2015 (30 June 2014: net debt
of R2 653 million, 31 December 2014: net debt of R1 071 million), reflecting a net cash to equity ratio of 0,2%
(30 June 2014: net debt to equity ratio of 8%, 31 December 2014: net debt to equity ratio of 3%).
Table 2: Group segment results
Revenue Net operating profit/(loss)
6 months 12 months 6 months 12 months
6 months ended ended ended 6 months ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2015 2014 2014 2014 2015 2014 2014 2014
Reviewed Reviewed Reviewed Audited Reviewed Reviewed Reviewed Audited
Rm Rm Rm Rm Rm Rm Rm Rm
Carbon 8 217 7 312 8 864 16 176 1 664 1 836 1 461 3 297
- Tied1 1 847 2 094 2 483 4 577 102 208 111 319
- Commercial 6 370 5 218 6 381 11 599 1 562 1 628 1 350 2 978
Ferrous 83 71 88 159 (48) (5 917) (321) (6 238)
- Iron ore2 (40) (5 821) (279) (6 100)
- Alloys 83 71 88 159 3 (96) (1) (97)
- Other (11) (41) (41)
Other 24 29 37 66 195 1 (352) (351)
- Base metals (1) (1)
- Other3 24 29 37 66 195 1 (351) (350)
Total 8 324 7 412 8 989 16 401 1 811 (4 080) 788 (3 292)
1 Mines managed on behalf of and supplying their entire production to either Eskom or AMSA in terms of contractual agreements.
2 Net operating loss includes the pre-tax impairment of the original investment including goodwill, carrying value of property,
plant and equipment and qualifying project costs capitalised to the Mayoko iron ore project of R5 760 million as well as the
write-off and impairment of financial assets totalling R43 million recorded in 2014.
3 Net operating profit/(loss) includes a pre-tax impairment loss of intellectual property of R202 million in 2H14.
4.2 Carbon business results
Export volumes reached 2,39Mt for 1H15 against 2,73Mt in 1H14. The group realised an average coal export price of US$56 per tonne
(API4 of US$61 per tonne) in 1H15 compared to US$68 per tonne (API4 of US$77 per tonne) in 1H14, mainly on higher sales volumes
of higher-value product. An average of 81% of export sales was RB1 product, compared with 67% for the same period in 2014.
Demand for steam coal in the domestic boiler market was stable in 1H15. However, sales to Eskom from Leeuwpan were
lower than anticipated mainly due to operational issues at Majuba power station. Exxaro expects to recover these lost
volumes in 2H15. Medupi power station continues to take coal at the agreed tempo in terms of Addendum 9 to the coal supply
and off-take agreement.
4.2.1 Production and sales volumes
Overall coal production volumes (excluding buy-ins) were 221kt higher and sales were 226kt, marginally higher than 1H14.
4.2.1.1 Metallurgical coal
Grootegeluk’s production was 207kt (18%) lower mainly due to the failure of the run-of-mine conveyor feed
structure at the Grootegeluk 8 plant. This resulted in a cut back on semi-soft coking coal production at Grootegeluk
6 plant in order to meet Eskom demand. The closure of Tshikondeni in 4Q14 translated into a 108kt reduction in
production compared to 1H14.
Sales decreased by 505kt (37%) mainly due to lower stock available for exports via RBCT and lower supply to AMSA
because of low semi-soft coking coal stock levels after reprioritising production to deliver power station coal for
Eskom’s Medupi and Matimba plants, coupled with no sales from Tshikondeni to AMSA due to the closure of the mine.
4.2.1.2 Thermal coal
Power station coal production from tied mines was 1 820kt (30%) lower than 1H14. Matla production was 1 754kt
lower (34%) mainly due to suspending some production volume-related bonus schemes, permanent closure of Mine 1 on safety
risks and exacerbated by short wall moves at Mine 2. Arnot’s production was 66kt lower, also due to suspending some
production volume-related bonus schemes.
The commercial mines’ power station coal production was higher by 2 924kt (32%) compared to 1H14 mainly at
Grootegeluk (2 907kt: 45%) after Medupi power station began ramping up from mid-2014. NBC production was 166kt higher (14%)
after Eskom agreed to off-take 240kt per month in 1H15 compared to 200kt per month in 1H14, while Leeuwpan production
decreased by 149kt (11%) on reduced demand from the Majuba plant caused by the silo and tippler breakdown late in 2014.
Power station domestic coal sales for the commercial mines were 2 807kt (32%) higher, mainly due to higher demand
from Eskom with Medupi power station ramping up.
Power station export coal sales via RBCT decreased marginally (93kt). No coal was exported via Maputo in 2015.
Steam coal production was 568kt (23%) lower, reflecting lower production at Inyanda (337kt) as the mine nears the
end of its life, lower Leeuwpan production (198kt) on lower yields and reduced throughput in the DMS plant and lower
Grootegeluk (33kt) production as a result of reprioritisation to deliver power station coal to Eskom.
Steam coal domestic sales decreased by 275kt (18%) mainly due to the low production at Inyanda 157kt (86%) being
diverted to the export market, 80kt (12%) lower sales at Leeuwpan on lower demand, 38kt (5%) lower sales at Grootegeluk
due to lower demand and stock availability.
Steam coal export sales rose 106kt (6%), reflecting high stock levels at the beginning of 1H15.
4.2.1.3 Semi-coke
Semi-coke plant production was down 28kt (44%), mainly due to low demand that limited production to only two
retorts. Sales were 30kt (46%) lower due to the high amount of imported coke from China.
4.2.2 Revenue
Carbon revenue rose 12% from 1H14, reflecting higher revenue from commercial mines due to increased power station
coal sales at higher prices, partly offset by lower export sales volumes at weaker rand prices, and lower domestic
volumes at lower prices.
4.2.3 Net operating profit
A decrease of 9% in carbon net operating profit was recorded for 1H15 compared to 1H14. This reflects the absence
of shortfall income compared to that recorded in 1H14 (R888 million), lower domestic and export sales volumes at
lower average rand selling prices recorded in 1H15, as well as the discontinuation of the capitalisation of GMEP
and backfill mining cost (R152 million) recorded in 1H15 compared to 1H14. This was partly offset by higher Eskom
sales due to the Medupi power station ramp up. Operating margin of 20% was realised in 1H15.
4.2.4 Equity-accounted income
Equity-accounted income from the Mafube joint venture with Anglo South Africa Capital Proprietary Limited
increased by 21% from 1H14 on lower production and financing costs, partly offset by higher royalty payments and labour
expenses.
Table 3: Unreviewed coal production and sales volumes
Production Sales
6 months 12 months 6 months 12 months
6 months ended ended ended 6 months ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2015 2014 2014 2014 2015 2014 2014 2014
'000 tonnes '000 tonnes '000 tonnes '000 tonnes '000 tonnes '000 tonnes '000 tonnes '000 tonnes
Thermal 18 097 17 561 19 314 36 875 19 193 18 462 20 609 39 071
- Tied 4 181 6 001 5 813 11 814 4 181 5 997 5 811 11 808
- Commercial: domestic 13 916 11 560 13 501 25 061 12 770 10 238 12 515 22 753
- Commercial: export 2 242 2 227 2 283 4 510
Metallurgical 923 1 238 1 036 2 274 843 1 348 1 122 2 470
- Tied 108 46 154 157 76 233
- Commercial: domestic 923 1 130 990 2 120 697 693 763 1 456
- Commercial: export1 146 498 283 781
Total coal 19 020 18 799 20 350 39 149 20 036 19 810 21 731 41 541
Semi-coke 35 63 64 127 35 65 50 115
Total carbon (excluding buy-ins) 19 055 18 862 20 414 39 276 20 071 19 875 21 781 41 656
Thermal buy-ins 1 041 1 033 1 169 2 202
Total carbon (including buy-ins) 20 096 19 895 21 583 41 478 20 071 19 875 21 781 41 656
1 Exported as a steam coal product, blended at RBCT.
4.2.5 Portfolio improvement
Project details were included in the finance director’s pre-close message published on SENS on 25 June 2015.
The details below relate to further developments since then.
4.2.5.1 Grootegeluk
We continue to engage with Eskom on announced later dates to commission Medupi power station’s units 1 to 5 to
evaluate and understand the impact this may have on the current coal supply and off-take agreement. For now, all
supply and off-take is in line with Addendum 9 to the coal supply and off-take agreement.
4.2.5.2 Acquisitions: TCSA
Approval of the section 11 transfer of mineral rights was granted on 5 August 2015 by the DMR for the TCSA mineral
rights. The purchase price consideration has been amended as detailed in the SENS announcement dated 11 August 2015.
All remaining conditions precedent for the transaction to become effective have been met.
4.2.5.3 NCC
All conditions precedent for the sale of NCC were fulfilled and the transaction was completed on 31 July 2015.
4.3 Ferrous business results
We closed the AlloyStream™ test plant in 2Q15. Most employees (eight) were redeployed within the group, with the
balance (three) accepting retrenchment packages. As such, FerroAlloys is now the only owner-controlled and operated ferrous
business in the group.
4.3.1 Net operating loss
Ferrous core net operating losses increased by 10% to R121 million, excluding the impact of key transactions
listed in Table 1, mainly as a result of R11 million relating to inflationary pressures.
4.3.2 Equity-accounted investments
The significant decline in the iron ore price in 1H15 has translated into 63% lower equity-accounted income and
61% lower dividends from SIOC compared to 1H14.
4.3.3 Portfolio improvement
4.3.3.1 Mayoko iron ore project
Four of the six locomotives were sold to the government of the RoC. We aim to dispose of the remaining
locomotives and rolling stock in 2H15/1H16. No further capital will be spent on the project. In the meantime, our
presence in the RoC is aimed at securing the mining right at the absolute minimum operating costs.
4.4 TiO2 and Alkali Chemicals commodity business
4.4.1 Equity-accounted losses
Equity-accounted loss from the Tronox investment was R659 million, compared to R304 million in 1H14. This was
mainly due to ilmenite stock write-downs (R435 million) to the lower of cost or net realisable value, consulting fees for
the Alkali Chemicals acquisition and higher financing costs in 1H15.
4.5 Energy business
4.5.1 Equity-accounted losses
Equity-accounted losses, from Cennergi (a 50% joint venture with Tata Power), for 1H15 reduced
by 32% on the R47 million loss recorded in 1H14.
Table 4: Reviewed equity-accounted investments
Equity-accounted income/(loss) Exxaro’s share of dividends received
6 months 12 months 6 months 12 months
6 months ended ended ended 6 months ended ended ended
30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 31 Dec
2015 2014 2014 2014 2015 2014 2014 2014
Reviewed Reviewed Reviewed Audited Reviewed Reviewed Reviewed Audited
Rm Rm Rm Rm Rm Rm Rm Rm
SIOC 633 1 711 1 119 2 830 673 1 736 1 359 3 095
Tronox (659) (304) (264) (568) 311 274 279 553
Black Mountain 9 46 31 77 71 71
Mafube 132 109 158 267
Cennergi (32) (47) (45) (92)
SDCT 1 1
Total 83 1 515 1 000 2 515 984 2 081 1 638 3 719
5. Outlook
Our priority in the short- to medium term is to remain cash flow-positive while preserving growth opportunities. The
actions we have implemented in response to current market conditions are expected to position Exxaro to withstand the
subdued macro-economic outlook.
We expect market oversupply, coupled with low demand in our commodity portfolio (coal, iron ore, mineral sands
and pigment), to persist in the near term which will demand more rigorous efforts to ensure short-term survival and
sustainable long-term profitability. Given that the API4 RB1 coal price is expected to remain around US$60 per tonne, we
expect our export sales volumes for FY15 to be roughly 4Mtpa.
While the Eskom power station business provides a hedge against falling export US$ commodity prices, the prolonged
weakness of the ZAR against the US$ raises the risk of increased domestic inflation, which has a direct impact on our
production costs and capital projects for imported goods.
Given the state of commodity markets, we have assumed that no dividends will be received from our SIOC
equity-accounted investment and minimal dividends will be received from Tronox Limited. This will have a direct impact on our current
positive cash flows as well as our ability to continue paying dividends. As such, we will continue to critically review capital
allocation, our project pipeline, as well as our optionality regarding investments. Our BEE structure comes to a ten year end
in 2016, and we continue to put a concerted effort towards a co-ordinated unwinding of this structure.
6. Interim dividend
Notice is given that a gross interim cash dividend, number 25, of 65 cents (interim 2014: 260 cents; final 2014: 210
cents) per share, for the six-month period ended 30 June 2015 has been declared, payable to shareholders of ordinary
shares. The dividend is declared out of retained earnings. The gross local dividend is 65 cents per share for
shareholders exempt from dividend withholding 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 dividend withholding tax. The net
local dividend payable to shareholders who are subject to dividend withholding tax at a rate of 15% is 55,25 cents per
share. The dividend withholding tax amounts to 9,75000 cents per share (interim 2014: 39 cents per share; final
2014: 31,5 cents per share). The number of ordinary shares in issue at the date of this declaration is 358 115 505
(2014: 358 115 505). Exxaro Resources Limited’s tax reference number is 9218/098/14/4.
Salient dates for payment of the interim dividend are:
Last day to trade cum dividend on the JSE Friday, 4 September 2015
First trading day ex dividend on the JSE Monday, 7 September 2015
Record date Friday, 11 September 2015
Payment date Monday, 14 September 2015
No share certificates may be dematerialised or re-materialised between Monday, 7 September 2015 and Friday, 11
September 2015, 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, 14 September 2015.
7. Changes to the board
As announced on SENS on 18 August 2015, Mr NB Mbazima resigned from the board with effect from 18 August 2015 and Mr S Mayet
has been appointed with effect from the same day. The board thanks Mr Mbazima for his diligent service and welcomes
Mr Mayet to the team.
8. General
Additional information on financial and operational results for the six-month period ended 30 June 2015, as well as
the accompanying presentation can be accessed on the company’s website on www.exxaro.com.
On behalf of the board
Len Konar Sipho Nkosi Wim de Klerk
Chairman Chief Executive Officer Finance Director
19 August 2015
CORPORATE INFORMATION
Registered office
Exxaro Resources Limited
Roger Dyason Road
Pretoria West, 0183
Tel: +27 12 307 5000
Fax: +27 12 323 3400
This report is available at: www.exxaro.com
Directors
MW Hlahla***, Dr D Konar*** (chairman), S Mayet**, MDM Mgojo* (chief executive officer designate), SA Nkosi* (chief executive officer),
WA de Klerk* (finance director), S Dakile-Hlongwane***, Dr CJ Fauconnier***, V Nkonyeni***, VZ Mntambo**, RP Mohring ***, Dr MF Randera**,
J van Rooyen***, D Zihlangu ***
*Executive **Non-executive ***Independent non-executive
Prepared under supervision of:
WA de Klerk, CA(SA)
Group company secretary
CH Wessels
Transfer secretaries
Computershare Investor
Services Proprietary Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
Investor relations
MI Mthenjane (+27 12 307 7393)
Sponsor
Deutsche Securities (SA) Proprietary Limited
(+27 11 775 7000)
If you have any queries regarding your shareholding in Exxaro Resources Limited, please contact the transfer
secretaries at +27 11 370 5000.
ANNEXURE TO THE REVIEWED CONDENSED GROUP INTERIM FINANCIAL STATEMENTS
Acronyms
AKI African Iron Limited
AMSA ArcelorMittal South Africa Limited
API4 Argus’s Coal Price Index
AU$ Australian dollar
BEE Black Economic Empowerment
Black Mountain Black Mountain Proprietary Limited
Cennergi Cennergi Proprietary Limited
CFR Cost and Freight
CSDP Central securities depository participant
DMR Department of Mineral Resources
DMS Dense Medium Separation
DMTN Domestic Medium-Term Note
ECC Exxaro Coal Central Proprietary Limited
GMEP Grootgeluk Medupi expansion project
IAS International Accounting Standards
IASB International Accounting Standards Board
IFRS International Financial Reporting Standard
JIBAR Johannesburg Interbank Agreed Rate
JSE JSE Limited
KIO Kumba Iron Ore Limited
kt Thousand tonnes
KZN KwaZulu-Natal
LME London Metal Exchange
MS333 Mainstreet 333 Proprietary Limited
Mt Million tonnes
Mtpa Million tonnes per annum
NBC North Block Complex
NCC New Clydesdale Colliery
OCI Other comprehensive incom
RBI Richards Bay I
Rbn Rand billion
RBCT Richards Bay Coal Terminal
Rm Rand million
RMB Chinese Renminbi
RoC Republic of Congo
SA South Africa
SAICA South African Institute of Chartered Accountants
SDCT South Dunes Coal Terminal SOC Limited
SENS Stock Exchange New Service
SIOC Sishen Iron Ore Company Proprietary Limited
SOC State-owned company
TCSA Total Coal South African Proprietary Limited
Tata Power The Tata Power Company Limited
TFR Transnet Freight Rail
TiO2 Titanium dioxide
Total S.A. Total Société Anonyme
UK United Kingdom
US$ United States dollar
VAT Value Added Tax
Periods
1H14 Six-month period ended 30 June 2014
1H14 Six-month period ended 30 December 2014
1H15 Six-month period ended 30 June 2015
4Q14 Fourth quarter of 2014
This report is available on www.exxaro.com.
Date: 20/08/2015 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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