Wrap Text
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 financial statements and unreviewed production and sales volumes information
for the year ended 31 December 2015
Salient features
Owner-controlled operations
- Coal sales at 43Mt, up 5%
- Core coal NOP of R4,3 billion, up 29%
SIOC
- R967 million core post-tax equity-accounted income, down 67%
- No dividends declared for FY15
Tronox
- R1,3 billion core post-tax equity losses
- Dividend of R668 million
Group
- Net debt: equity of 8,8%
- Capital expenditure reduction
- R807 million FY15 capex cut
- R3 billion further coal capex cut to FY20
- Cost savings
- R408 million paid in VSPs*
- R250 million future labour bill savings p/a**
- R288 million procurement savings p/a
- Final dividend of 85cps, down 60%
* Voluntary severance and termination packages
** per annum
Condensed group statement of comprehensive income
for the year ended 31 December
2015 2014
Reviewed Audited
Rm Rm
Revenue 18 330 16 401
Operating expenses (13 408) (15 197)
Operating profit (note 5) 4 922 1 204
Other income 1 466
Impairment charges of non-current assets (note 6) (1 749) (5 962)
Net operating profit/(loss) 3 173 (3 292)
Finance income (note 7) 102 80
Finance costs (note 7) (770) (183)
Income from financial assets 1 9
Share of (loss)/income from equity-accounted investments (note 8) (1 137) 2 515
Profit/(loss) before tax 1 369 (871)
Income tax expense (1 102) (13)
Profit/(loss) for the year 267 (884)
Other comprehensive income/(loss), net of tax 2 167 1 190
Items that will not be reclassified to profit or loss: 124 (316)
- Remeasurements of post-employment benefit obligation (17)
- Share of comprehensive income/(loss) of equity-accounted investments 141 (316)
Items that may be subsequently reclassified to profit or loss: 2 043 1 506
- Unrealised gains on translation of foreign operations 329 224
- Revaluation of financial assets available-for-sale (141) 345
- Share of comprehensive income of equity-accounted investments 1 855 937
Total comprehensive income for the year 2 434 306
Profit/(loss) attributable to:
Owners of the parent 296 (883)
Non-controlling interests (29) (1)
Profit/(loss) for the year 267 (884)
Total comprehensive income/(loss) attributable to:
Owners of the parent 2 463 307
Non-controlling interests (29) (1)
Total comprehensive income for the year 2 434 306
2015 2014
Reviewed Audited
cents cents
Attributable earnings/(loss) per share
Aggregate
- Basic 83 (249)
- Diluted 83 (249)
Refer to note 10 for details regarding the number of shares.
Condensed group statement of financial position
at 31 December
2015 2014
Reviewed Audited
Rm Rm
ASSETS
Non-current assets 46 482 41 408
Property, plant and equipment 20 412 18 344
Biological assets 51 84
Intangible assets (note 12) 56 34
Investments in associates (note 13) 19 690 18 588
Investments in joint ventures (note 14) 1 662 966
Financial assets (note 18) 4 067 2 853
Deferred tax 544 539
Current assets 6 016 5 693
Inventories 1 240 998
Trade and other receivables 2 666 2 611
Current tax receivable 55 78
Cash and cash equivalents 2 055 2 006
Non-current assets held-for-sale (note 15) 128 328
Total assets 52 626 47 429
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 2 445 2 409
Other components of equity 6 911 6 031
Retained earnings 25 670 25 985
Equity attributable to owners of the parent 35 026 34 425
Non-controlling interests (800)
Total equity 34 226 34 425
Non-current liabilities 12 701 9 182
Interest-bearing borrowings (notes 16, 17) 4 185 2 976
Non-current provisions 3 112 2 219
Post-retirement employee obligations 217 167
Financial liabilities 116 88
Deferred tax 5 071 3 732
Current liabilities 4 655 3 590
Trade and other payables 3 546 3 208
Current shareholder loan 21
Interest-bearing borrowings (notes 16, 17) 882 34
Current tax payable 48 27
Current provisions 158 254
Overdraft (note 16) 67
Non-current liabilities held-for-sale (note 15) 1 044 232
Total equity and liabilities 52 626 47 429
Group statement of changes in equity
Other components of equity
Foreign Financial Retirement Available-
Share currency instruments Equity- benefit for-sale
capital translation revaluation settled obligation revaluations
Rm Rm Rm Rm Rm Rm
At 1 January 2014 (Audited) 2 396 3 146 310 1 493 (13) 100
Loss for the year
Other comprehensive income 224 345
Share of comprehensive income/(loss)
from equity-accounted investments 827 (194) 310 (316) (63)
Issue of share capital 13
Share-based payments movement (108)
Dividends paid
Reclassification of equity
Disposal and liquidation of subsidiaries (30)
At 31 December 2014 (Audited) 2 409 4 167 116 1 695 (329) 382
Profit/(loss) for the year
Other comprehensive income/(loss)1 329 (17) (141)
Reclassification of equity2 (360)
Share of comprehensive income from
equity-accounted investments 1 438 125 215 141 64
Issue of share capital3 36
Share-based payments movement 98
Dividends paid
Acquisition of subsidiaries
Liquidation of subsidiaries4 (1 012)
At 31 December 2015 (reviewed) 2 445 4 922 241 2 008 (205) (55)
1 Other comprehensive income/(loss) attributable to owners of the parent relating to available-for-sale revaluation
comprise the fair value adjustments, net of tax, on the investments in RBCT R38 million (2014: R344 million) and
Chifeng R103 million (2014: R1 million) (note 18).
2 Reclassification of equity relating to the RBCT investment which has been transferred out of financial assets
available-for-sale and classified as an investment in associate (refer note 13 and 18).
3 Vesting of Mpower 2012 treasury shares to good leavers amounted to R36 million (31 December 2014: R13 million).
4 Gain on translation differences recycled to profit or loss on the liquidation of a foreign subsidiary
(Exxaro Esmore Cooperatief U.A.).
Final dividend paid per share (cents) in respect of the 2014 financial year 210
Dividend paid per share (cents) in respect of the 2015 interim period 65
Final dividend payable per share (cents) in respect of the 2015 financial year 85
Foreign currency translation
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, net of tax, of services received from employees and settled by equity instruments
granted.
Retirement benefit obligation
Comprises remeasurements, net of tax, on the post-retirement obligation.
Other components of equity
Attributable
to owners Non-
Retained of the controlling Total
Other earnings parent interests equity
Rm Rm Rm Rm Rm
At 1 January 2014 (Audited) (802) 29 668 36 298 (26) 36 272
Loss for the year (883) (883) (1) (884)
Other comprehensive income 569 569
Share of comprehensive income/(loss)
from equity-accounted investments (6) 63 621 621
Issue of share capital 13 13
Share-based payments movement (108) (108)
Dividends paid (2 055) (2 055) (2 055)
Reclassification of equity 808 (808)
Disposal and liquidation of subsidiaries (30) 27 (3)
At 31 December 2014 (Audited) 25 985 34 425 34 425
Profit/(loss) for the year 296 296 (29) 267
Other comprehensive income/(loss)1 171 171
Reclassification of equity2 360
Share of comprehensive income from
equity-accounted investments 13 1 996 1 996
Issue of share capital3 36 36
Share-based payments movement 98 98
Dividends paid (984) (984) (984)
Acquisition of subsidiaries (771) (771)
Liquidation of subsidiaries4 (1 012) (1 012)
At 31 December 2015 (reviewed) 25 670 35 026 (800) 34 226
1 Other comprehensive income/(loss) attributable to owners of the parent relating to available-for-sale revaluation
comprise the fair value adjustments, net of tax, on the investments in RBCT R38 million (2014: R344 million) and
Chifeng R103 million (2014: R1 million) (note 18).
2 Reclassification of equity relating to the RBCT investment which has been transferred out of financial assets
available-for-sale and classified as an investment in associate (refer note 13 and 18).
3 Vesting of Mpower 2012 treasury shares to good leavers amounted to R36 million (31 December 2014: R13 million).
4 Gain on translation differences recycled to profit or loss on the liquidation of a foreign subsidiary
(Exxaro Esmore Cooperatief U.A.).
Final dividend paid per share (cents) in respect of the 2014 financial year 210
Dividend paid per share (cents) in respect of the 2015 interim period 65
Final dividend payable per share (cents) in respect of the 2015 financial year 85
Foreign currency translation
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, net of tax, of services received from employees and settled by equity instruments
granted.
Retirement benefit obligation
Comprises remeasurements, net of tax, on the post-retirement obligation.
Condensed group statement of cash flows
for the year ended 31 December
2015 2014
Reviewed Audited
Rm Rm
Cash flows from operating activities 3 011 1 660
Cash generated by operations 4 526 4 083
Interest paid (500) (307)
Interest received 54 59
Tax paid (85) (120)
Dividends paid (984) (2 055)
Cash flows from investing activities (5 130) 620
Property, plant and equipment to maintain operations (note 11) (1 663) (1 460)
Property, plant and equipment to expand operations (note 11) (727) (1 737)
Increase in investment in intangible assets (34) (25)
Proceeds from disposal of property, plant and equipment 198 8
(Increase)/decrease in investments in other non-current assets (106) 214
Increase in loans to related parties (400)
Proceeds from disposal of operation 70
Increase in investment in joint ventures (374) (108)
Income from investments in associates 1 341 3 719
Acquisition of subsidiaries (3 436)
Dividend income from financial assets 1 9
Cash flows from financing activities 2 000 (604)
Interest-bearing borrowings raised (note 16) 4 320 1 000
Interest-bearing borrowings repaid (note 16) (2 320) (1 604)
Net (decrease)/increase in cash and cash equivalents (119) 1 676
Cash and cash equivalents at beginning of the year 1 939 223
Translation difference on movement in cash and cash equivalents 235 40
Cash and cash equivalents at end of the year 2 055 1 939
Cash and cash equivalents 2 055 2 006
Overdraft (67)
Reconciliation of group headline earnings
for the year ended 31 December
Gross Tax Net
Rm Rm Rm
2015 (Reviewed)
Profit attributable to owners of the parent 296
Adjusted for: 1 683 (356) 1 327
- IFRS 10 Gain on disposal of an operation (112) 31 (81)
- IAS 16 Net gains on disposal of property, plant
and equipment (158) 2 (156)
- IAS 16 Compensation from third parties for items
of property, plant and equipment impaired, abandoned or lost (5) 2 (3)
- IAS 21 Gains on translation differences recycled to profit
or loss on the liquidation of a foreign subsidiary (1 012) (1 012)
- IAS 28 Loss on dilution of investment in associate 10 10
- IAS 28 Share of associates' separate identifiable remeasurements 1 211 (328) 883
- IAS 36 Impairment of property, plant and equipment 225 (63) 162
- IAS 36 Impairment of goodwill acquired in a business
combination in terms of IFRS 3 1 524 1 524
Headline earnings 1 623
2014 (Audited)
Loss 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 profit or
loss on the liquidation of a foreign subsidiary (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
2015 2014
Reviewed Audited
cents cents
Headline earnings per share
Aggregate
- Basic 457 1 372
- Diluted 456 1 372
Notes to the reviewed condensed group financial statements
for the year ended 31 December
1. Corporate background
Exxaro, a public company incorporated in South Africa, is a diversified resources group with interests in the coal
(controlled and non-controlled), TiO2 and Alkali chemicals (non-controlled), ferrous (controlled and non-controlled)
and energy (non-controlled) markets. These reviewed condensed group financial statements as at and for the year
ended 31 December 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 preparation
2.1 Statement of compliance
The reviewed condensed group financial statements as at and for the year ended 31 December 2015 are prepared
in accordance with the requirements of the JSE Listings Requirements for preliminary reports and the requirements
of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of IFRS and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council and also, as a minimum, contain the information required by IAS 34
Interim Financial Reporting.
The reviewed condensed group financial statements as at and for the year ended 31 December 2015 have been prepared
under the supervision of WA de Klerk (CA) SA, SAICA registration number: 00133273.
The reviewed condensed group 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 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 financial statements of Exxaro and its subsidiaries for the year ended 31 December 2015
were authorised for issue by the board of directors on 1 March 2016.
2.2 Judgements and estimates
In preparing these reviewed condensed group financial statements, management made judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expense. Actual results may differ from these estimates. The significant judgements made by management
in applying the group's accounting policies and the key source of estimation uncertainty were similar to those
applied to the group annual financial statements as at and for the year ended 31 December 2014. Additional
judgements, estimates and assumptions relating to the business combination and impairments of non-current assets
in 2015 are detailed in notes 9 and 6 respectively.
3. Accounting policies
The accounting policies adopted in the preparation of the reviewed condensed group 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 ending 31 December 2015 have not had an impact on
the group.
New accounting standards and amendments issued to accounting standards and interpretations which are relevant to the
group, but not yet effective on 31 December 2015, have not been adopted. The group continuously evaluates the impact of
these standards and amendments.
4. Segmental information
Operating segments are reported on in a manner consistent with the internal reporting provided to the chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the reportable operating
segments. The chief operating decision-maker has been identified as the group executive committee. 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 strategic reportable operating segments, as described below. These offer different products and
services, and are managed separately based on commodity, location and support function grouping. The group executive
committee reviews internal management reports on these strategic divisions at least quarterly.
Coal
The coal operations are mainly situated in the Waterberg and Mpumalanga regions and are split between coal commercial
operations and coal tied operations, a 50% joint venture interest in Mafube as well as a 9,37% effective equity interest
in RBCT. The newly acquired controlling interest in TCSA, renamed ECC, forms part of the coal commercial operations
(refer note 9). The coal operations produce thermal, metallurgical and SSCC.
Ferrous
The ferrous segment comprises the Mayoko iron ore project in the RoC (iron ore operating segment), a 19,98% equity
interest in SIOC (located in South Africa) reported within the other ferrous operating segment as well as the
FerroAlloys and AlloystreamTM operations (collectively referred to as Alloys). Although the SIOC investment is an
investment in an iron ore commodity company and the executive committee classifies the investment as a non-controlled
business, it is classified under other ferrous segment where investments and other are reviewed by the executive
committee.
TiO2 and Alkali chemicals
The TiO2 and Alkali chemicals segment was previously referred to as TiO2. It was renamed after the acquisition of the
Alkali chemicals business by Tronox on 1 April 2015. Tronox now operates two vertically integrated divisions: TiO2 and
Alkali chemicals. Exxaro holds a 43,87% (2014: 43,98%) equity interest in Tronox and a 26% equity interest in Tronox SA
(each of the South African-based operations), as well as a 26% member's interest in Tronox UK.
Other
This operating segment comprises the 50% investment in Cennergi (a South African joint venture with Tata Power), 26%
equity interest in Black Mountain (located in the Western Cape province), an effective investment of 11,7% in Chifeng
(located in the PRC) as well as the corporate office which renders services to customers.
4. Segmental information continued
The following table presents a summary of the group's segmental information:
Coal Ferrous TiO2 and Other Total
Alkali
chemicals
Tied Commercial Iron Other Base
operations operations ore Alloys ferrous metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year ended 31 December 2015 (Reviewed)
External revenue 3 835 14 258 173 64 18 330
Segment net operating 195 2 379 (292) 10 (24) 905 3 173
profit/(loss)
External finance income (note 7) 3 38 61 102
External finance costs (note 7) (63) (154) (553) (770)
Income tax (expense)/benefit (17) (1 115) (3) 6 27 (1 102)
Depreciation and amortisation (note 5) (24) (927) (7) (4) (67) (1 029)
Impairment charges - goodwill (note 6) (1 524) (1 524)
Impairment charges - non-current assets
(excluding financial assets and goodwill) (note 6) (225) (225)
Impairment charges - trade and other receivables
(note 5) (4) (3) 11 (81) (77)
Cash generated by/(utilised in) operations 332 4 300 (285) (38) (74) 291 4 526
Share of income/(loss) from equity-accounted
investments (note 8) 251 104 (1 503) 64 (53) (1 137)
Capital expenditure (note 11) (2 313) (28) (49) (2 390)
At 31 December 2015 (Reviewed)
Segment assets and liabilities
Deferred tax 39 47 124 109 225 544
Investments in associates (equity-accounted)
(note 13) 1 919 5 081 12 270 420 19 690
Investments in joint ventures (equity-accounted)
(note 14) 1 067 595 1 662
External assets1 1 934 25 948 114 189 29 210 2 178 30 602
Total assets 1 973 28 981 114 313 5 219 12 270 630 2 998 52 498
Non-current assets held-for-sale (note 15) 128 128
Total assets as per statement of financial position 1 973 28 981 114 313 5 219 12 270 630 3 126 52 626
External liabilities 1 775 5 179 286 37 52 4 908 12 237
Deferred tax2 (30) 5 094 1 5 1 5 071
Current tax payable2 (100) 145 3 48
Total liabilities 1 645 10 418 290 42 52 4 909 17 356
Non-current liabilities held- 1 044 1 044
for-sale (note 15)
Total liabilities as per statement of financial position 1 645 11 462 290 42 52 4 909 18 400
1 Excluding deferred tax, investments in equity-accounted associates and joint ventures and non-current assets held-for-sale.
2 Off-set per legal entity and tax authority.
Coal Ferrous TiO2 and Other Total
Alkali
chemicals
Tied Commercial Iron Other Base
operations operations ore Alloys ferrous metals Other
Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year 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 5) (43) (734) (8) (4) (4) (96) (889)
Impairment charges - goodwill (note 6) (1 020) (1 020)
Impairment charges - non- (4 731) (9) (202) (4 942)
current assets (excluding
goodwill) (note 6)
Impairment charges - non- (21) (21)
current financial assets (note 5)
Impairment charges - trade and other
receivables (note 5) (1) (22) (17) (40)
Cash generated by/(utilised in) operations1 95 4 365 (75) (64) (109) (129) 4 083
Share of income/(loss) from equity-accounted
investments (note 8) 268 2 830 (568) 77 (92) 2 515
Capital expenditure (note 11) (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 13) 5 422 12 809 357 18 588
Investments in joint ventures (equity-accounted)
(note 14) 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 15) 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 tax2 (71) 3 718 57 5 23 3 732
Current tax payable2 10 5 5 7 27
Total liabilities 1 462 7 446 201 54 73 3 536 12 772
Non-current liabilities 232 232
held-for-sale (note 15)
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.
2 Off-set per legal entity and tax authority.
Year ended 31 December
2015 2014
Reviewed Audited
Rm Rm
5. Significant items included in operating profit
Depreciation and amortisation (1 029) (889)
Net realised foreign currency exchange gains1 1 325 97
Net unrealised foreign currency exchange gains 498 7
Net (losses)/gains on derivative instruments held-for-trading (125) 28
Net impairment charges and write-offs of trade and other receivables (77) (40)
Royalties (119) (125)
Net gain/(loss) on disposal of property, plant and equipment 158 (27)
Loss on dilution of investment in associate (10) (58)
Impairment charges of non-current financial assets (21)
Gain/(loss) on disposal of operation/subsidiary2 112 (28)
Termination benefits3 (408) (138)
1 Include R1 012 million relating to the liquidation of a foreign subsidiary.
2 Sale of the NCC operation in 2015 and Botswana in 2014.
3 Voluntary package costs and other termination costs incurred and accrued for.
6. Impairment charges of non-current assets
ECC
Impairment, net of tax 1 524
- Goodwill (note 12) 1 524
Reductants
Impairment, net of tax 162
- Property, plant and equipment 225
- Tax effect (63)
Mayoko iron ore project
Impairment, net of tax 5 208
- Property, plant and equipment 4 740
- Goodwill (note 12) 1 020
- Tax effect (552)
Intellectual property
Impairment, net of tax 202
- Intangible asset 202
Net impairment charges per statement of comprehensive income 1 749 5 962
Net tax effect (63) (552)
Net effect on attributable earnings 1 686 5 410
ECC
Exxaro acquired TCSA on 20 August 2015 and renamed it ECC. The PPA was completed and goodwill of R1 524 million
was recognised at acquisition. Refer note 9 and note 12 regarding detail of the business combination and goodwill
recognised. The goodwill was as a result of the purchase price being in excess of the net identifiable assets and
assumed liabilities.
ECC forms part of the coal commercial operating segment for chief operating decision-maker reporting purposes.
The goodwill recognised was allocated to ECC, with all its business units and legal entities, for group reporting
purposes. Upon finalisation of the PPA, the goodwill was assessed for impairment as required by IAS 36 Impairment
of Assets on 31 December 2015.
The recoverable amount of ECC, being the fair value less costs of disposal (Level 3 as per IFRS 13 Fair Value
Measurements), marginally exceed the carrying amount (excluding goodwill) of R1 087 million, and therefore the full
amount of goodwill was impaired. This was derived using a discounted cash flow method where the net cash flows
taking into account the capital, working capital, operating costs and tax against the revenue generated from sales
are discounted over the LOM of the Dorstfontein East and West operations, Forzando North and South operations as
well as Tumelo operation. The financial model was performed in nominal terms in South African rand.
Key assumptions made in the valuation included the following (all in real terms):
- Costs of disposal was assumed to be 2% of the fair value of each business unit
- Coal API4 selling price: range US$44,07/tonne and US$70,00/tonne
- Discount factor on API4 was applied for the specific coal quality: 20%
- Coal domestic selling price: range R789/tonne and R796/tonne
- Post-tax discount rate: 13%
- Corporate tax rate: 28%
- R/US$ exchange rate: range R15,50 and R16,58
- RSA production price index: range 6,00% and 5,50%
- LOM: range 5 years and 23 years.
The values assigned to the key assumptions represented management's best estimates of LOM, operating conditions
projections and pricing forecasts. The coal price ranges were based on the current industry trends and analysis.
The discount rate was based on a post-tax weighted average cost of capital.
Reductants operation
The char plant was commissioned in 2009 and had its first year of full production in 2011. The plant was selling
semi-coke to five major customers until September 2015 when the FeCr market started to experience difficulties
after the demise of steel and stainless steel markets globally. Three of the five customers were put into business
rescue and the remaining two customers turned off their furnaces. There is no commercially viable demand for the
semi-coke or char products in the current market.
The weakness in the FeCr industry and lack of demand resulted in the char plant's four retorts being placed on
care and maintenance. This impairment indicator (according to IFRS) resulted in an impairment assessment being
performed at 31 December 2015.
The decline in demand, lower FeCr prices and rising production costs have drastically impacted local producers
coupled with continued declining imported semi-coke and cheaper market coke prices, which has resulted in
producers increasing market coke usage and further reducing semi-coke demand. There are no foreseeable sales
contracts that will be acquired in 2016. The char plant was fully impaired (R225 million) based on the cessation
of production.
Mayoko iron ore project
The Mayoko iron ore project was acquired in 2012 when Exxaro acquired 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 in 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 as well as financial assets amounting to R43 million written down in terms of
IAS 39 Financial Instruments: Recognition and Measurement.
Other impairment considerations
Impairment indicators, including declining commodity prices, share prices and increased cost pressures, resulted
in impairment assessments being performed for the operations and other investments within the Exxaro group on
31 December 2015. Other than the impairments discussed above, the recoverable amount exceeded the carrying value
of the respective assets.
Year ended 31 December
2015 2014
Reviewed Audited
Rm Rm
7. Net financing costs
Total finance income 102 80
- Interest income 91 66
- Finance lease interest income 11 9
- Interest income from loans to joint ventures 5
Total finance costs (770) (183)
- Interest expense (546) (323)
- Unwinding of discount rate on rehabilitation cost (220) (183)
- Amortisation of transaction costs (10) (10)
- Borrowing costs capitalised1 6 333
Total net financing costs (668) (103)
1 Borrowing costs capitalisation rate. 6,94% 6,69%
8. Share of (loss)/income from equity-accounted investments
Associates (1 339) 2 339
Listed investments
- Tronox Limited (1 646) (628)
Unlisted investments 307 2 967
- SIOC1 104 2 830
- Tronox SA 40 (38)
- Tronox UK 103 98
- RBCT2 (4)
- Black Mountain 64 77
Joint ventures 202 176
- Mafube 253 267
- SDCT 2 1
- Cennergi (53) (92)
Share of (loss)/income from equity-accounted investments (1 137) 2 515
1 The reduction in equity-accounted income from SIOC was mainly due to the impairment of property,
plant and equipment (Exxaro's share amounted to R1 194 million, pre-tax) and the decline in iron
ore prices.
2 Previously reported as a financial asset available-for-sale (refer note 13).
9. Business combination
On 20 August 2015, the group acquired a 100% controlling interest of the share capital of TCSA for a cash amount
of US$262 million (R3 381 million) from Total S.A. 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 2015 and 2019 (contingent
consideration). The acquisition was classified as an acquisition of a business in accordance with IFRS 3 Business
Combinations.
TCSA was renamed ECC on 20 August 2015, which forms part of the coal commercial operating segment for purposes of
reporting to the chief operating decision-maker. ECC is a large-scale South African business which has a majority
interest in two mining complexes, DCM and Forzando, located in the Witbank coal basin in the Mpumalanga province.
The majority of ECC's production is export coal which is shipped via RBCT to international markets, mainly India
and China. ECC also sells some of its production into the South African domestic market.
The business combination increases the scale of the group's coal portfolio and further entrenches Exxaro as one of
the premier coal producers in South Africa. The transaction complements Exxaro's strategic imperative to focus on
coal businesses and it provides access to primary RBCT export entitlement.
The following table summarises the consideration paid for the ECC group, the fair value of the assets acquired,
liabilities assumed and the non-controlling interest at the acquisition date.
2015
Reviewed
Rm
Consideration
Cash 3 381
Contingent consideration 33
Consideration 3 414
Less: indemnification asset (1 044)
Total consideration 2 370
Recognised amounts of identifiable assets acquired and liabilities assumed
- Property, plant and equipment 1 064
- Intangible assets 2
- Investment in RBCT 1 133
- Deferred tax assets 42
- Financial assets 211
- Inventories 133
- Trade and other receivables 235
- Current tax receivable 25
- Cash and cash equivalents 31
- Current outside shareholder loans (21)
- Non-current provisions (878)
- Deferred tax liabilities (507)
- Trade and other payables (248)
- Current tax payable (4)
- Contingent liability (13)
- Overdraft (86)
- Non-current liabilities held-for-sale (1 044)
Net identifiable assets acquired 75
Add: non-controlling interests 771
Add: goodwill 1 524
Net assets acquired 2 370
Purchase consideration - cash flow
Subsidiary acquired, net of cash:
Cash consideration 3 381
Add: overdraft acquired 55
- Bank (31)
- Overdraft 86
Net cash outflow investing activities 3 436
Goodwill
The goodwill of R1 524 million arising from the business combination was a result of the purchase price being in
excess of the net identifiable assets (including mineral properties, RBCT investments and other assets) and
assumed liabilities. The goodwill is not deductible for tax purposes. This goodwill was recognised as part of
intangible assets, refer to note 12.
Acquisition-related costs
Acquisition-related costs of R39,3 million were charged to operating expenses in profit or loss and included in
operating cash flows for the year ended 31 December 2015. Total acquisition-related costs since the inception of
the transaction amounts to R71,2 million.
Contingent consideration
The potential undiscounted amount of all deferred future payments that the group could be required to make under
this arrangement is between nil and US$120 million. The amount of future payments is dependent on the API4 coal
price.
The fair value of the contingent consideration arrangement of US$2,52 million (R32,51 million) was estimated by
applying the discounted cash flow method. The fair value estimates are based on a discount rate of 3,44% and
assumed API4 price per tonne between US$51 and US$63. This is a Level 3 fair value measurement.
At 31 December 2015, there was an increase of US$0,03 million (R0,44 million) recognised in profit or loss for
the contingent consideration arrangement.
API4 coal price range Future payment
(US$/tonne)
Reference year Minimum Maximum US$million
2015 60 80 10
2016 60 80 25
2017 60 80 25
2018 60 90 25
2019 60 90 35
The amount to be paid in each of the five years is determined as follows:
- If the average API4 price in the reference year is below the minimum API4 price of the agreed range, then
no payment will be made
- If the average API4 price falls within the range, then the amount to be paid is determined based on a
formula contained in the agreement
- If the average API4 price is above the maximum API4 price of the range, then Exxaro is liable for the full
amount due for that reference year.
No additional payment to Total S.A. was required for the 2015 financial year as the API4 price was below the
range.
Acquired trade and other receivables
The fair value and gross contractual amount of trade and other receivables acquired was R235 million. The full
amount is expected to be collectable.
Indemnification asset
Total S.A. has contractually agreed to indemnify Exxaro for any claims brought by Scinta Energy Proprietary
Limited (Scinta, the buyer of ECC's interest in the EMJV) or any third party in relation to the sale of ECC's
interest in the EMJV to Scinta, including without limitation all liabilities arising out of the mine closure in
respect of the EMJV and all environmental liabilities attributable to the mining operations which were subject of
the EMJV. Ermelo indemnification amounts to R1 044 million. (Refer note 15).
The indemnification asset is deducted from the consideration for the business combination. As is the case with the
indemnified liabilities, there have been no changes in the amount recognised for the indemnification asset as at
31 December 2015.
Accounting policy choice for non-controlling interests
Exxaro has elected to measure non-controlling interests at their proportionate share in the recognised amounts of
the acquiree's identifiable net assets and assumed liabilities. The non-controlling interests of R771 million
represents the proportionate share of net identifiable assets and assumed liabilities attributable to non-controlling
interests, arising from the acquisition of ECC.
Revenue and profit contribution
The acquired business contributed R827 million revenue to the group results. It also contributed no profit or loss
to the group's profits for the period from 21 August 2015 to 31 December 2015. If the date of acquisition had been
1 January 2015, revenue contribution from this business would have been R2 268 million, while losses would have
been R1 163 million.
Other judgements, estimates and assumptions applied to the business combination transaction:
Contingent liability:
A contingent liability of R13 million was recognised in the statement of financial position on the acquisition of
ECC for a take-or-pay penalty. The take-or-pay penalty is being finalised by the charging party. There is
uncertainty on the probability of the take-or-pay penalty.
Consolidation of entities with less than 50% ownership:
It has been concluded that the ECC group controls Mmakau Coal, even though it holds less than half of the voting
rights of this subsidiary. This is because the group has provided the majority of the funding, is exposed to the
downside risk and carries all the operational risk for the company.
Fair value of material assets acquired:
Asset acquired Valuation technique
Mineral assets (included in property, plant The market approach was used to fair value the mineral assets. A range
and equipment) of indicative market-related values of R/tonne attributed to different
coal resources were identified. This was applied to the inside and
outside LOM resources.
Investment in RBCT The income approach was used to fair value the RBCT investment.
Discounted cash flow methodology was applied to the free cash flows
expected to be generated. The discount rate applied is one which would
be for a similar investment. The discount rate was adjusted for a similar
size shareholding.
10. Dividend distribution
Total dividends paid in 2015 amounted to R984 million, made up of a 2014 final dividend of R752 million which was
paid in April 2015 as well as a 2015 interim dividend of R232 million, paid in September 2015.
A final dividend for 2015 of 85 cents per share (2014: 210 cents per share) was approved by the board of directors
on 2 March 2016. The dividend is payable on 18 April 2016 to shareholders who will be on the register on
15 April 2016. This final dividend, amounting to approximately R304 million (2014: R752 million), has not been
recognised as a liability in these reviewed condensed group financial statements. It will be recognised in
shareholders' equity in the year ending 31 December 2016.
The final 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 72,25000 cents per share. The number of
ordinary shares in issue at the date of this declaration is 358 115 505 (2014: 358 115 505). The Exxaro company's
tax reference number is 9218/098/14/4.
At 31 December
2015 2014
Reviewed Audited
Issued share capital as at declaration date (number) 358 115 505 358 115 505
Ordinary shares (million)
- Weighted average number of shares 355 355
- Diluted weighted average number of shares 356 355
11. Capital expenditure
Incurred 2 390 3 197
- To maintain operations 1 663 1 460
- To expand operations 727 1 737
Contracted 2 162 2 887
- Contracted for the group (owner-controlled) 1 721 1 402
- Share of capital commitments of equity-accounted investments 441 1 485
Authorised, but not contracted 1 376 2 160
At 31 December
2015 2014
Reviewed Audited
Rm Rm
12. Intangible assets
Goodwill1
Gross carrying amount
At beginning of the year 1 020 953
Acquisition of subsidiaries 1 524
Exchange differences 67
At end of the year 2 544 1 020
Accumulated impairment
At beginning of the year (1 020)
Impairment charge (1 524) (1 020)
At end of the year (2 544) (1 020)
Patents and licences2
Gross carrying amount
At beginning of the year 258 232
Acquisition of subsidiaries 2
Additions 34 30
Transfer from other assets 1
Write-offs (5)
At end of the year 294 258
Accumulated amortisation
At beginning of the year (22) (9)
Scrapping of other intangibles 1
Amortisation charge (14) (14)
At end of the year (36) (22)
Accumulated impairment
At beginning of the year (202)
Impairment charge (202)
At end of the year (202) (202)
Net carrying amount at end of the year 56 34
1 2015 goodwill was allocated to ECC (refer notes 6 and 9), 2014 goodwill was allocated to AKI with
the acquisition in 2012.
2 Includes software licences, intellectual property (which was impaired on 31 December 2014) and an
option to receive specific quantities of water from the Eungella water pipeline (Australia) and the
right to receive water from the Zeeland Water Treatment Works (Lephalale, South Africa).
At 31 December
2015 2014
Reviewed Audited
Rm Rm
13. Investments in associates
Listed investments
- Tronox Limited1 8 997 9 686
Unlisted investments 10 693 8 902
- SIOC 5 081 5 422
- Tronox SA 1 833 1 786
- Tronox UK 1 440 1 337
- RBCT2 1 919
- Black Mountain 420 357
Total carrying value of investment in associates 19 690 18 588
1 Fair value based on a listed price (Level 1 within the IFRS 13 Fair
Value Measurement fair value hierarchy). The recoverable amount
(value in use) of this investment was determined based on Exxaro's share
of the present value of Tronox's future cash flows, and resulted in no
impairment charge being recognised on 31 December 2015. 3 095 14 122
Listed share price (US$ per share) 3,91 23,88
2 The investment in RBCT increased as part of the ECC acquisition. This
resulted in RBCT being accounted for as an associate. The carrying
amount of the investment in RBCT was deemed to be the carrying amount of
the previously held interest plus the newly acquired additional cost.
14. Investments in joint ventures
Unlisted investments 1 662 966
- Mafube 1 067 818
- SDCT1
- Cennergi 595 148
Total carrying value of investment in joint ventures 1 662 966
1 The cost of the investment is below R1 million (R1 333) and included in
financial assets, is a loan to SDCT to the value of: 105 83
15. Non-current assets and liabilities held-for-sale
EMJV
Exxaro concluded the purchase of ECC in 2015 (refer note 9), and as part of this acquisition Exxaro acquired
non-current liabilities held-for-sale relating to the EMJV (classified as a joint operation). The sale of the
EMJV is conditional on section 11 approval required in terms of the MPRDA for transfer of the new-order mining
right to the new owners, Scinta, as well as section 43(2) approval for the transfer of environmental liabilities
and responsibilities. The EMJV remains a non-current liability held-for-sale for the Exxaro group.
The EMJV does not meet the criteria to be classified as a discontinued operation since it does not represent a
separate major line of business, nor does it represent a major geographical area of operation.
Other
Exxaro concluded a sale of asset agreement relating to the land and buildings situated at the corporate office in
Pretoria, with Africorp International Properties Proprietary Limited (Africorp) in November 2015. The sale is
conditional to Africorp providing a guarantee issued by a financial institution. The land and buildings situated at
corporate centre was classified as a non-current asset held-for-sale on 31 December 2015.
NCC
Exxaro concluded a sale of asset agreement of the NCC operation with Universal Coal Development VIII Proprietary
Limited (Universal) in January 2014. The sale was conditional on section 11 approval required in terms of the MPRDA
for transfer of the new-order mining right from Exxaro Coal Mpumalanga Proprietary Limited to the new owners. On
31 July 2015 all conditions precedent to the NCC sale of asset agreement were met and the sale became effective. The
NCC operation did not meet the criteria to be classified as a discontinued operation since it did not represent a
separate major line of business, nor did it represent a major geographical area of operation and is reported as part
of the coal commercial operating segment.
The major classes of non-current assets and liabilities held-for-sale are as follows:
At 31 December
2015 2014
Reviewed Audited
Rm Rm
Assets
Property, plant and equipment 128 174
Deferred tax 65
Financial assets 73
Inventories 8
Trade and other receivables 8
- Trade receivables 3
- Non-financial instrument receivables 5
Total assets 128 328
Liabilities
Non-current provisions (1 027) (158)
Post-retirement employee obligations (17) (4)
Trade and other payables (21)
- Trade payables (11)
- Other payables (3)
- Non-financial instrument payables (7)
Current provisions (40)
Current tax payable (9)
Total liabilities (1 044) (232)
Net (liabilities)/assets held-for-sale (916) 96
16. 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
- 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 facility amounts to R1 billion (2014: R3 billion). The undrawn
portion of the revolving facility amounts to R3 billion (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 in May 2014. The bond comprises a:
- R480 million senior unsecured floating rate note due 19 May 2017
- R520 million senior unsecured floating rate note due 19 May 2019
Interest on the bond is based on JIBAR plus a margin of 1,70% for the R480 million bond and JIBAR plus a margin
of 1,95% for the R520 million bond. The effective interest rate for the transaction costs is 0,13% for the
R480 million bond and 0,08% for the R520 million bond. Interest is paid on a quarterly basis for both bonds.
At 31 December
2015 2014
Reviewed Audited
Rm Rm
Summary of loans by financial year of redemption
2015 34
20161 882 392
2017 1 274 874
2018 795 395
2019 1 317 917
2020 onwards 799 398
Total interest-bearing borrowings 5 067 3 010
- Current interest-bearing borrowings2 882 34
- Non-current interest-bearing borrowings3 4 185 2,976
1 During the 2014 year, an addendum to the senior loan facility
was signed extending the first capital repayment to 30 January 2016.
2 The current portion represents 882 34
- Capital repayments 800
- Interest capitalised 90 44
- Reduced by the amortised transaction costs (8) (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. 15 34
Overdraft
Bank overdraft 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 2015.
At 31 December
2015 2014
Reviewed Audited
Rm Rm
17. Net debt1
Net debt is presented by the following items on the face of the statement
of financial position (excluding assets and liabilities held-for-sale): (3 012) (1 071)
- Cash and cash equivalents 2 055 2 006
- Non-current interest-bearing borrowings (4 185) (2 976)
- Current interest-bearing borrowings (882) (34)
- Overdraft (67)
Calculation of movement in net debt:
Cash (outflow)/inflow: (2 119) 2 280
Add:
- Non-cash flow movement for interest accrued not yet paid (47) (4)
- Non-cash flow amortisation of transaction costs (10) (10)
- Translation differences of movements in cash and cash equivalents 235 40
(Increase)/decrease in net debt (1 941) 2 306
1 Non-IFRS measure.
18. Financial instruments
a) Carrying amounts and fair values
The carrying amounts and fair values of financial assets and liabilities in the statement of financial position, are as follows:
At 31 December
2015 2014
Reviewed Audited
Carrying Fair Carrying Fair
amount value amount value
Rm Rm Rm Rm
ASSETS
Non-current assets
Financial assets, consisting of: 3 921 3 921 2 693 2 693
- Environmental rehabilitation funds 1 329 1 329 826 826
- Loans to joint ventures 105 105 83 83
- KIO 4 4 22 22
- Chifeng 210 210 267 267
- RBCT 973 973
- Indemnification asset 1 044 1 044
- Loan to BEE shareholder1 426 426
- Non-current receivables 803 803 522 522
Current assets2 4 411 4 411 4 104 4 104
Trade and other receivables 2 355 2 355 2 090 2 090
Derivative financial instruments 1 1 8 8
Cash and cash equivalents 2 055 2 055 2 006 2 006
Non-current assets held-for-sale 76 76
Total financial instrument assets 8 332 8 332 6 873 6 873
At 31 December
2015 2014
Reviewed Audited
Carrying Fair Carrying Fair
amount value amount value
Rm Rm Rm Rm
LIABILITIES
Non-current liabilities 4 224 4 224 2 976 2 976
Interest-bearing borrowings 4 185 4 185 2 976 2 976
Non-current derivative financial liability 39 39
Current liabilities2 3 630 3 630 2 603 2 603
Trade and other payables 2 686 2 686 2 502 2 502
Current shareholder loans 21 21
Derivative financial liabilities 41 41
Interest-bearing borrowings 882 882 34 34
Overdraft 67 67
Non-current liabilities held-for-sale 14 14
Total financial instrument liabilities 7 854 7 854 5 593 5 593
1 During 2015 Exxaro provided Mainstreet 333 with a loan. The loan is repayable by April 2017 and attracts interest
at prime plus 5%.
2 Carrying amounts approximate the fair values due to the short-term nature of the maturities of these financial
assets and liabilities.
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 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 31 December 2015 (Reviewed) 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
- Environmental rehabilitation funds 1 113 1 113
- KIO 4 4
Available-for-sale financial assets
- Chifeng 210 210
Financial liabilities held-for-trading at fair value through profit or loss
- Current derivative financial liabilities (41) (41)
Financial liabilities designated at fair value through profit or loss
- Non-current derivative financial liability (39) (39)
Net financial assets/(liabilities) held at fair value 1 117 (40) 171 1 248
Level 1 Level 2 Level 3 Total
At 31 December 2014 (Audited) 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 fund 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 and liabilities within Level 3 of the hierarchy
Non-
current
derivative
financial
liability Chifeng RBCT Total
Rm Rm Rm Rm
At 1 January 2014 (Audited) 253 551 804
Movement during the year
Gains recognised for the year in other comprehensive income (pre-tax effect)1 1 422 423
Exchange gains for the year recognised in other comprehensive income 13 13
At 31 December 2014 (Audited) 267 973 1 240
Movement during the year
Gains recognised for the year in other comprehensive income (pre-tax effect)1 (103) (61) (164)
Reclassification of loan repayments (229) (229)
Acquisition of subsidiaries (33) (33)
Exchange gains for the period recognised in other comprehensive income 46 46
Exchange losses for the period recognised in profit or loss (6) (6)
Transfers out of Level 32 (683) (683)
At 31 December 2015 (Reviewed) (39) 210 171
1 Tax on RBCT amounts to R23 million (2014: R78 million).
2 Relates to the RBCT investment now accounted for as an investment in associate.
18. Financial instruments continued
b) Fair value hierarchy continued
Transfers
The group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period
during which the transfer has occurred. There were no transfers between Level 1 and Level 2 nor between Level 2
and Level 3 of the fair value hierarchy during the years ended 31 December 2015 and 2014, as shown in the
reconciliation on page 26.
The RBCT investment has been transferred out of Level 3 of the fair value hierarchy, and classified as an investment
in associate following the acquisition of additional interest in RBCT through the ECC acquisition. Refer note 13.
Valuation process applied by the group
The fair value computations of the investments are performed by the group's corporate finance department, reporting
to the finance director, on a six monthly basis.
The valuation reports are discussed with the chief operating decision-maker and the audit committee in accordance
with the group's reporting governance.
Current derivative financial instruments
Level 2 fair values for simple over-the-counter derivative financial instruments are based on market quotes. These
quotes are assessed for reasonability by discounting estimated future cash flows using the market rate for similar
instruments at measurement date.
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 R/RMB exchange rate, RMB/US$ exchange rate, Zinc LME price, production volumes, operational costs and the
discount rate.
At 31 December 2015 (Reviewed)
Sensitivity analysis
of a 10% increase
in the inputs is
Sensitivity of inputs and demonstrated
Observable inputs Inputs fair value measurement1 below2 Rm
Rand/RMB exchange rate R2,31/RMB1 Strengthening of the rand to the RMB 21
RMB/US$ exchange rate RMB6,26 to Strengthening of the RMB to the US$ 203
RMB7,12/US$1
Zinc LME price (US$ per tonne US$1 611 to
in real terms) US$2 200 Increase in price of zinc concentrate 203
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in production volumes 31
Operational costs (US$ million per US$56,94 to
annum in real terms) US$75,22 Decrease in operations costs (173)
Discount rate (%) 9,93% Decrease in the discount rate (19)
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that
all other variables remain constant.
c) Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant
inputs used in the valuation models continued
Chifeng continued
At 31 December 2014 (Audited) Sensitivity analysis
of a 10% increase
in the inputs is
Sensitivity of inputs and demonstrated
Observable inputs Inputs fair value measurement1 below2 Rm
Rand/RMB exchange rate R1,86/RMB1 Strengthening of the rand to the RMB 26
RMB6,13 to
RMB/US$ exchange rate RMB6,75/US$1 Strengthening of the RMB to the US$ 152
Zinc LME price (US$ per US$2 311 to
tonne in real terms) US$2 226 Increase in price of zinc concentrate 152
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in production volumes 37
Operational costs (US$ million US$63 to
per annum in real terms) US$76 Decrease in operations costs (133)
Discount rate (%) 9,94% Decrease in the discount rate (20)
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis
that all other variables remain constant.
Inter-relationships
Any inter-relationship between unobservable inputs are not considered to have a significant impact within the
range of reasonably possible alternative assumptions for both reporting periods.
Non-current derivative financial liability
The non-current derivative financial liability, arising on the contingent consideration relating to the acquisition
of ECC, is classified within a Level 3 of the fair value hierarchy as there is no quoted market price or observable
price available for this financial instrument. This financial instrument is valued as the present value of the
estimated future cash flows, using a discounted cash flow model.
The significant observable and unobservable inputs used in the fair value measurement of this financial instrument
are the rand/US$ exchange rate, API4 export price and the discount rate.
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
Non-current derivative financial liability continued
At 31 December 2015 (Reviewed) Sensitivity analysis
of a 10% increase
in the inputs is
Sensitivity of inputs and demonstrated
Observable inputs Inputs fair value measurement1 below2 Rm
Rand/US$ exchange rate R15,48/US$1 Strengthening of the rand to the US$ 4
API4 export price (price US$51,15 to
per tonne) US$62,50 Increase in API4 export price per tonne 175
Unobservable inputs
Discount rate (%) 3,44% Decrease in the discount rate (1)
1 Change in observable/unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the
basis that all other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within
the range of reasonably possible alternative assumptions for the reporting period.
RBCT
For 2014, RBCT was classified within Level 3 of the fair value hierarchy as there was no quoted market
price or observable price available for this investment. This unlisted investment was valued as the present
value of the estimated future cash flows, using a discounted cash flow model. It was not anticipated that the
RBCT investment would be disposed of in the near future. The valuation technique was consistent to that used in
previous reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in RBCT
were rand/US$ exchange rate, API4 export price, Transnet market demand strategy, discount rate and annual
utilisation factor.
At 31 December 2014 (Audited) Sensitivity analysis
of a 10% increase
in the inputs is
Sensitivity of inputs and demonstrated
Observable inputs Inputs fair value measurement1 below2 Rm
R10,94 to
Rand/US$ exchange rate R18,80/US$1 Strengthening of the rand to the US$ 257
API4 export price
(US$ steam coal A-grade US$62 to
price per tonne in real terms) US$93 Increase in API4 export price per tonne 154
Unobservable inputs
Transnet market 74Mtpa to Acceleration of TFR performance, ie:
demand strategy 81 Mtpa reach full capacity sooner 97
for the terminal
Discount rate (%) 13% to 17% Decrease in the discount rate (120)
At 31 December 2014 (Audited) continued
Annual utilisation factor
(safety and rail delay factor) (%) 90% Increase in annual utilisation factor 123
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-relationship between unobservable inputs were not considered to have a significant impact within
the range of reasonably possible alternative assumptions for the prior reporting periods.
At 31 December
2015 2014
Reviewed Audited
Rm Rm
19. Contingent liabilities
Total contingent liabilities 7 378 2 609
- DMC Iron Congo SA 6
- Pending litigation claims1 1 233 445
- Operational guarantees2 3 559 1 263
- Share of contingent liabilities from equity-accounted investments 2 580 901
1 Pending litigation and other claims consist of legal cases as well as tax disputes with Exxaro as defendant.
The outcome of these claims is uncertain and the amount of possible legal obligations that may be
incurred can only be estimated at this stage.
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.
The timing and occurrence of any possible outflows of the contingent liabilities above are uncertain.
Exxaro's share of contingent liabilities from equity-accounted investments relates mainly to:
- Operational guarantees (guarantees to banks and other institutions) amounting to R1 394 million
(2014: R901 million).
- Municipality rates and taxes levied but under objection of R87 million (2014: Rnil).
- Tax assessments under process of objection of R1,1 billion, which includes R739 million of interest
and penalties.
SIOC has received a tax assessment from SARS in relation to the tax years 2006 to 2010, for the amount of
R5,5 billion. This includes interest and penalties of R3,7 billion. Exxaro's share of the additional tax
would be approximately R1,1 billion, which includes R739 million of interest and penalties.
SIOC has considered these matters in consultation with specialist external tax and legal advisers and
disagrees with SARS' audit findings. SIOC is therefore in the process of preparing an objection to the
assessment, together with an application to the Commissioner of SARS for a suspension of payment until the
matter is resolved. Furthermore, during 2015 SARS notified SIOC of its intention to conduct a field audit
covering the 2011 to 2013 years of assessment, which is in progress.
Mayoko
At 31 December 2015 DMC, a subsidiary of Exxaro, is exposed to possible customs import duties as a result
of a review by the RoC customs department on assets imported by DMC into the RoC in 2012 under a temporary
arrangement, pending the ratification of the mining convention. To date, the mining convention has not been
ratified, which increases the potential risk. The penalties are deemed reasonably possible, but the level of
probability for the outflow of economic resources is considered not probable.
To date, no notification has been issued by the RoC customs department. Exxaro believes that these matters
have been appropriately treated by disclosing a contingent liability. The group will be defending any claims
for penalties by following due process in the RoC.
SARS
On 18 January 2016, Exxaro received a letter of intent from SARS following an international income tax audit
for the years of assessment 2009 - 2013. According to the letter, SARS proposes that certain international
Exxaro companies will be subject to South African Income Tax. No assessment has been issued at this stage
and Exxaro is following due processes to respond to SARS.
As at the date of this announcement, Exxaro has responded to the letter of intent, disputing to the basis
for the proposed adjustments. The group is awaiting SARS's response. These matters have been considered
in consultation with external tax and legal advisors, who support the group's position set out in its dispute.
Exxaro believes that these matters have been appropriately treated by disclosing a contingent liability.
At 31 December
2015 2014
Reviewed Audited
Rm Rm
20. Contingent assets
Total contingent assets 86 256
- Guarantee on sale of NCC1 170
- Share of contingent assets from equity-accounted investments2 86 86
1 Exxaro received a guarantee from Universal as part of the sales transaction of NCC. This transaction
was concluded in 2015.
2 Bank guarantee issued in favour of SIOC related to environmental rehabilitation.
21. Related party transactions
The group entered into various sale and purchase transactions with associates and joint ventures during
the ordinary course of business. These transactions were subject to terms that are no less, nor more
favourable than those arranged with third parties.
Exxaro also granted a loan of R400 million to Main Street 333, Exxaro's majority BEE shareholder during July 2015.
22. Going concern
Based on the results for the year ended 31 December 2015, and the latest budget for 2016, as well as the
available bank facilities and cash generating capability, Exxaro satisfies the criteria of a going concern.
23. JSE Listings Requirements
The reviewed condensed group annual financial results were prepared in accordance with the Listings
Requirements of the JSE Limited.
24. Events after the reporting period
Details of the final dividend proposed are given in note 10.
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.
25. Review conclusion
The reviewed condensed group financial statements for the year ended 31 December 2015, on page 2 to 32,
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.
26. Corporate governance
Detailed disclosure of the company's application of the principles contained in the King Report on Governance
for South Africa 2009 (King III) will be made in the 2015 integrated report and will be available on the
company's website in April 2016 in accordance with the JSE Listings Requirements. As announced in August 2015,
Mr Norman Mbazima resigned from the board from 18 August 2015 and Saleh Mayet was appointed from the same day.
As previously communicated, Mxolisi Mgojo will be succeeding Sipho Nkosi as chief executive officer on 1 April 2016.
Please contact the group company secretary, Carina Wessels, if you require additional information in this regard.
27. Mining and prospecting rights
On 20 August 2015, Exxaro acquired TCSA (renamed ECC) with a number of mining and prospecting rights held by ECC
under the operations of Forzando, Dorstfontein and Tumelo. The Forzando Complex, an underground operation comprises
of two mining rights, Forzando South and Forzando North and five associated (immediate adjacent) prospecting rights
in which ECC holds a 74% ownership.
ECC also holds a 49% interest in the prospecting right of Schurvekop, a highly prospective project area to the
immediate north of the complex. The Dorstfontein Complex consists of three mining rights and one prospecting right
in which ECC holds a 74% ownership. The complex comprises an eastern primarily open cut operation Dorstfontein
East (DCME) and a western underground operation namely Dorstfontein West (DCMW). The Rietkuil Vhakoni prospecting
right for which a section 102 was timely submitted for the incorporation to the Dorstfontein Complex mining right,
is viewed as a potential extension of the Dorstfontein Complex operation. ECC has reasonable expectation that the
approval will not be withheld. The Tumelo operation consists of one mining right (116MR). The operation was put
under care and maintenance in early 2014. The Eloff project located near the town of Delmas and in close proximity
of the Exxaro Leeuwpan operation consists of two prospecting rights.
The converted mining right of Matla mine, a dedicated coal supplier to Eskom, was executed in March 2015 and
timelessly submitted for registration.
The two mining rights at Leeuwpan mine have both been executed. The approval of a ministerial consent (section 102)
submitted to amalgamate the two rights is pending.
A prospecting right renewal was submitted for the Thabametsi project area, a resource adjacent to the Grootegeluk
coal mine. In addition, a new mining right application was submitted in April 2012. Exxaro has a reasonable
expectation that the mining right will be granted in the first quarter of 2016.
The Belfast mining right was registered in March 2015. Exxaro applied for an extension for the commencement
of mining activities based of the pending resolution of environmental appeals. The application was granted.
The North Block Complex includes the traditional mining areas of Glisa (converted mining right), Strathrae
(converted mining right) and Eerstelingsfontein, an executed new mining right. Environmental approvals for
Eerstelingsfontein have been granted and approval for the renewal of the mining right, timeously submitted
in March 2013, is pending. In addition, a renewal for a prospecting right and an application for a new mining
right for the Glisa South project area, immediately adjacent to Glisa, was timeously submitted in November 2013.
An appeal received on this right is currently being addressed through the regional mining development and
environment committee.
28. Key measures*
At 31 December
2015 2014
Net asset value per share (rand/share) 98 96
Operating lease commitments (Rm) 152 135
Closing share price (rand/share) 44,04 103,50
Market capitalisation (Rbn) 15,77 37,06
Average rand/US$ exchange rate (for the period ended) 12,76 10,83
Closing rand/US$ spot exchange rate 15,48 11,56
* Non-IFRS numbers.
Exxaro 2015 performance at a glance
Sustainable operations - 18 months fatality free
- Lost-time injury frequency rate (LTIFR) improved 11% to 0,17
Strong profit margins and - Core net operating profit margin of 19%, in line with FY14
resilient balance sheet - R1,1 billion losses from investments, down 145% from FY14 profits
- Headline earnings per share (HEPS) down 67% at 457 cps
- R1,7 billion impairment of assets
- Net debt to equity at 8,8%
Cost and capital expenditure - 464 termination packages
discipline - Procurement contracts review savings - R288 million
- Capital expenditure reduced by 25% to R2,4 billion
Growth in coal - R4,3 billion coal core net operating profit (NOP)
- Operating profit margin of 24%
- Volumes up:
- Production - 7% at 42 million tonnes (Mt)
- Sales - 5% at 43Mt
- Exports - 17% at 6Mt
Maintain dividend policy - Final dividend of 85 cents per share (cps) at a core
earnings cover of 2,8 times
COMMENTARY FOR THE YEAR ENDED 31 DECEMBER
Comments below are based on a comparison between the financial years ended 31 December 2015 and 2014
(FY15 and FY14 respectively).
1. SAFETY
Exxaro has operated for 18 consecutive months without a loss of life. Although no mining-related fatalities were
recorded in 2015, regrettably one road-related fatality occurred in 2H15. We achieved an LTIFR of 0,17 in FY15
compared to 0,19 in FY14. Our internal LTIFR target remains 0,15 and we are encouraged by the 11% progress to date.
We will continue to concentrate on this target, in line with our zero-harm vision.
2. RESILIENT PERFORMANCE
2.1. Commodity prices
Calendar 2015 saw the continued downward trend in commodity prices, reaching new lows for iron ore and thermal
coal. Despite this, Exxaro has delivered a robust set of results.
The API4 for FY15 averaged US$57 per tonne, compared with US$72 in FY14. Iron ore fines prices also plummeted
by over 42%, averaging US$56 (cost and freight (CFR) China) in FY15 compared to US$97 in FY14. The ongoing
oversupply in the titanium dioxide (TiO2) market and lacklustre demand continued to depress pigment prices.
2.2. Delivery on key priorities
In this challenging time, we continued to focus on our coal business to improve our operational efficiency
and we reviewed our capital allocation in the short to medium term. We reprioritised and staggered our project
pipeline to preserve cash in the year, and continued the drive to reduce input and overhead costs, while
protecting our profit margins.
Key results from our initiatives include:
- Cash conservation:
- R1 billion (58%) reduction in expansionary capital expenditure compared to FY14
- R18 billion coal capital expenditure (R13 billion for the Waterberg region) for the period to FY20,
down from previous guidance of R21 billion (R15 billion for the Waterberg region)
- Maintaining low debt levels:
- Net debt at R3 billion, reflecting a net debt to equity ratio of 8,8%;
- Operational efficiency:
- R288 million reduction in input costs
A total of 464 employees, with minimal impact on the critical and scarce skills categories, accepted voluntary
severance packages and left between FY15 or first quarter of 2016 (1Q16). While this came at a cost of
R408 million in FY15, it is expected to save future labour costs of R250 million per annum (based on FY15
notional cost of employment).
- Optimisation of Exxaro Coal Central Proprietary Limited (ECC) after announcing that all conditions precedent
to the acquisition of Total Coal South Africa Proprietary Limited (TCSA) were met:
- Rolling out cost-savings initiatives across all operations (R80 million in FY15).
We completed the purchase price allocation accounting for the acquisition of TCSA as required by International
Financial Reporting Standards (IFRS). Exxaro acquired TCSA on 20 August 2015 for R3,4 billion, and renamed
it ECC. ECC is included in the results of coal commercial operations from 1 September 2015.
3. COMPARABILITY OF RESULTS
The results of the two years are not comparable mainly due to key transactions shown in table 1 below.
Table 1: Key transactions in the reporting periods that make financial and operational results not comparable
Reporting FY15 FY14
segment Description Rm Description Rm
Coal - Termination and voluntary (110) - Voluntary severance packages (6)
severance packages
- Impairment charges1 (1 749) - Loss on disposal of non-core assets1 (16)
- Compensation from third 137
parties, gain on disposal
of non-core assets and
property, plant and equipment1
Ferrous - Termination and voluntary (39) - Termination and voluntary (2)
severance packages severance packages
- Gain on disposal of 122 - Loss on disposal of non-core assets1 (12)
property, plant and equipment1
- Partial reversal of previous 11 - Mayoko iron ore project impairment (5 803)
write-off of financial assets in 1H14 and pre-tax partial reversal
of the write-off of financial assets
in 2H141
Other - Loss on dilution of shareholding (10) - Loss on dilution of shareholding (58)
in Tronox1 in Tronox1
- Gain on disposal of property, 17 - Loss on disposal of other non-core (32)
plant and equipment and assets1
non-core assets1
- Foreign exchange gain on US$ held 747 - Impairment of intellectual (202)
for the TCSA acquisition property assets1
- Termination and voluntary (259) - Termination and voluntary (82)
severance packages severance packages
- Gains on translation differences 1 012 - Gains on translation differences 47
recycled to profit or loss on recycled to profit or loss on
liquidating foreign subsidiaries1 liquidating foreign subsidiaries
- Other (96)
Group Total net operating loss impact (217) Total net operating loss impact (6 166)
Coal - Tax impact 28 - Tax impact 5
Ferrous - Exxaro's post-tax share of 3 - Exxaro's post-tax share of SIOC (36)
Sishen Iron Ore Company loss on sale of non-core assets1
Proprietary Limited's (SIOC)
gains on sale of non-core assets
and compensation from third parties1
- Exxaro's post-tax share of SIOC
loss on impairment of operation1 (866) - Exxaro's post-tax share of SIOC (77)
loss on impairment of operation1
- Tax on Mayoko iron ore project 554
pre-tax impairment1
TiO2 and - Exxaro's post-tax share of (141) - Exxaro's post-tax share of Tronox (73)
chemicals Tronox Limited (Tronox) restructuring costs and other
restructuring costs
- Loss on disposal of property, (21) - Exxaro's post-tax share of Tronox 2
plant and equipment1 profit on sale of property, plant
and equipment1
- Prior-year tax adjustment and 30
translation of net investment
in foreign operation
Group - Total attributable loss (1 214) Total attributable loss (5 761)
1 Excluded from headline earnings.
4. FINANCIAL AND OPERATIONAL EXCELLENCE
4.1. Group financial results
4.1.1. Revenue
Group revenue increased by 12% to R18 330 million in FY15, mainly due to increased power station coal sales.
Table 2: Group segment results (Rm)
Net operating
Revenue profit/(loss)
FY15 FY14 FY15 FY14
Reviewed Audited Reviewed Audited
Coal 18 093 16 176 2 574 3 297
- Tied1 3 835 4 577 195 319
- Commercial2 14 258 11 599 2 379 2 978
Ferrous 173 159 (306) (6 238)
- Iron ore3 (292) (6 100)
- Alloys 173 159 10 (97)
- Other (24) (41)
Other 64 66 905 (351)
- Base metals (1)
- Other4 64 66 905 (350)
Total 18 330 16 401 3 173 (3 292)
1 Mines managed on behalf of and supplying their entire production to Eskom (FY14: either Eskom or
ArcelorMittal South Africa Limited (ArcelorMittal) in terms of contractual agreements.
2 Net operating profit includes pre-tax impairment of the carrying value of goodwill recognised
on the acquisition of TCSA of R1 524 million and the reductants operation property, plant
and equipment of R225 million in FY15.
3 FY14 net operating loss includes pre-tax impairment of 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 write-off and impairment of financial assets totalling R43 million.
4 FY14 net operating loss includes pre-tax impairment of intellectual property of R202 million.
4.1.2. Net operating profit or loss
The group recorded a net operating profit for the period of R3 173 million compared to a net operating
loss of R3 292 million in FY14. The improvement was mainly due to:
- Medupi power station ramp-up
- Non-recurrence of pre-tax impairments of the carrying value of the Mayoko iron ore project non-current assets
and intellectual property R5 962 million in FY14
Offset by FY15 pre-tax impairments of the carrying value of:
- Goodwill recognised on the acquisition of TCSA of R1 524 million
- Reductants operation property, plant and equipment of R225 million.
4.1.3. Earnings
Earnings attributable to owners of the parent, which include Exxaro's equity-accounted investments in
associates and joint ventures, were R296 million (FY14: attributable losses of R883 million) or 83 cents
earnings per share (2014: 249 cents losses per share), an increase of 134% mainly due to non-recurring
post-tax impairment losses in FY14.
Headline earnings, excluding the impact of any impairment, impairment reversals and profits or losses realised
on the sale of subsidiaries and other non-core assets, were 67% lower at R1 623 million (FY14: R4 869 million)
or 457 cents per share (FY14: 1 372 cents per share), mainly due to a R3 652 million (145%) reduction in
post-tax equity-accounted income from associates (mainly SIOC and Tronox, refer sections 4.3.2 and 4.4.1).
4.1.4. Cash flow and funding
Cash preservation remains key to managing the business through this challenging period. It is imperative that we
continue to maintain a balance between project capital investment and returning cash to shareholders. Cash flow
generated from operations was R44 million higher at R4 526 million (FY14: R4 083 million), used to pay for
capital expenditure of R2 390 million, dividends of R984 million, net financing charges of R446 million and
taxation of R85 million.
At R2 390 million, overall capital expenditure decreased 25% in FY15 compared to FY14. A total of R727 million
(FY14: R1 737 million) was invested in new capacity (expansion capital), and R1 663 million (FY14: R1 460 million)
was applied to sustaining and environmental capital (stay-in-business capital). Of the funds spent on stay-in
business capital, R833 million was for Grootegeluk's replacement of trucks, shovels and stacker reclaimers.
We continue to critically assess our overall project pipeline and the timing of cash flows to prioritise and
preserve capital.
Dividends received of R1 341 million (FY14: R3 719 million) were down 64% primarily due to the non-declaration of
dividends by SIOC for FY15. Tronox continued its dividend payout at US$0,25 cents per quarter, resulting in the
receipt of dividends of R668 million. We expect to receive no dividends from SIOC and significantly lower
dividends from Tronox in FY16.
R3 436 million was spent to fund the acquisition of TCSA in August 2015.
Due to lower dividends received, funding the acquisition of TCSA and the outflow associated with capital
expenditure, the group had net cash outflow before financing activities of R2 119 million (FY14: net cash
inflow of R2 280 million).
4.1.4.1. Debt exposure
Net debt at 31 December 2015 was R3 012 million, up 181% on the R1 071 million at 31 December 2014,
reflecting a net debt to equity ratio of 8,8% (at 31 December 2014: 3,1%). The increase was mainly due
to funding the TCSA acquisition in August 2015.
Our South African credit rating was downgraded in first half of 2015 (1H15) by Standard & Poor's Ratings Services
from A- to BBB+. We began a process to refinance our R8 billion debt facilities and an information memorandum
was sent to potential lenders. We have received sufficient expressions of interest, confirming there is appetite
to refinance the facility, which we intend to close in second quarter of 2016 (2Q16).
4.2. Coal business performance
Domestic trading conditions remained challenging in FY15. The metals and reductants markets remained under pressure
as they struggled to compete with Chinese imports, weak demand and lower international metals prices.
Despite an oversupplied export thermal coal market, we recorded good demand for our export coal. Export volumes rose
from 5,3Mt to 6,2Mt mainly on additional volumes from ECC.
The group realised an average export price of US$50 per tonne in FY15 compared to US$65 in FY14.
4.2.1. Production and sales volumes
Coal production volumes (excluding buy-ins) were 2,66Mt (7%) higher than FY14, mainly due to the ramp-up on
Medupi supply and inclusion of ECC from September 2015 (1,37Mt).
Sales were 1,95Mt higher (5%) also due to increased Medupi off-take and the inclusion of ECC.
4.2.1.1. Metallurgical coal
Grootegeluk's production was 264kt (12%) lower than FY14 after reduced semi-soft coking coal (SSCC) production
and high demand from ArcelorMittal in FY14. Tshikondeni production decreased by 154kt (100%) after its closure
in FY14.
Table 3: Unreviewed coal production and sales volumes (000 tonnes)
Production Sales
FY15 FY14 FY15 FY14
Thermal 39 953 36 875 41 739 39 071
Tied 9 260 11 814 9 270 11 808
Commercial 30 693 25 061 32 469 27 263
- Domestic 30 693 25 061 26 694 22 753
- Export 5 775 4 510
Metallurgical 1 856 2 274 1 748 2 470
Tied 154 233
Commercial 1 856 2 120 1 748 2 237
- Domestic 1 856 2 120 1 341 1 456
- Export1 407 781
Total coal 41 809 39 149 43 487 41 541
Semi-coke 48 127 49 115
Total coal (excluding buy-ins) 41 857 39 276 43 536 41 656
Thermal buy-ins 2 369 2 202
Total coal (including buy-ins) 44 226 41 478 43 536 41 656
1 Exported as a steam coal product, blended at Richards Bay Coal Terminal (RBCT).
Grootegeluk sales decreased by 722kt (29%), reflecting lower exports after reprioritising production to
deliver power station coal to Eskom's Medupi and Matimba plants in 1H15 and lower train allocation
for exports via RBCT. There were no sales from Tshikondeni to ArcelorMittal in FY15 due to closure.
4.2.1.2. Thermal coal
Power station coal production from tied mines was 2,55Mt (22%) lower than FY14, reflecting the
closure of Matla mine 1 due to safety risks and challenging geological conditions at mine 3.
The commercial mines' power station coal production was 5,08Mt (25%) higher than FY14 mainly
due to higher production at Grootegeluk 7 and 8 plants after ramping-up according to the Medupi
off-take schedule, higher production at North Block Complex (NBC) due to improved coal and
equipment availability.
Domestic power station coal sales for the commercial mines rose 4,43Mt (23%) on higher demand.
Steam coal production was 551kt (12%) higher after including ECC from September 2015 and better yields
at Grootegeluk, partly offset by lower yields at Inyanda as the mine reached its end of life in 2015
and the Leeuwpan dense medium separation plant realised lower yield.
Domestic steam sales decreased by 491kt (16%) mainly due to lower demand from local customers (mainly
ArcelorMittal) and lower volumes at Inyanda on end of life. Steam coal export sales were 2,44Mt (64%)
higher mainly due to the inclusion of ECC (1,42Mt) from September and higher buy-ins.
4.2.1.3. Semi-coke
Semi-coke production was 79kt (62%) lower than FY14, reflecting depressed conditions in the ferroalloy
industry. In addition, only two retorts of the reductants plant were running during the year and the
plant was shut in September given the lack of demand.
Several ferroalloy companies have closed or are in business rescue as they struggle to compete globally
due to low commodity prices and high domestic electricity tariffs, despite a weaker R/US$ exchange rate.
Demand has dropped to 2012 lows. As such, the group recorded a pre-tax impairment loss of R225 million
on property, plant and equipment.
4.2.2. Revenue
Coal revenue rose 12% from FY14, mainly from commercial mines, reflecting a combination of higher export
sales volumes (including ECC since September) at weaker rand international prices, higher Medupi power
station coal sales and lower domestic steam volumes at lower prices.
4.2.3. Net operating profit or loss
For FY15, coal net operating profit decreased 22% mainly due to:
- Impairment of ECC goodwill (R1 524 million) and the reductants property, plant and equipment (R225 million)
- No Grootegeluk Medupi expansion project (GMEP) coal-supply agreement shortfall income (FY14: R1 466 million)
- Higher depreciation (R188 million) due to a higher asset base
- Inflationary pressures (R157 million)
Offset by:
- Higher prices (R451 million)
- Higher volumes (R899 million)
- Higher exchange rate gains (R549 million)
- Lower scope changes on environmental rehabilitation provision, including water treatment liabilities
(R778 million)
- Lower distribution cost (R451 million).
The inclusion of ECC from 1 September 2015 added R17 million to net operating profit.
4.2.3.1. ECC goodwill impairment
On finalising the purchase price allocation accounting, goodwill of R1 524 million was recognised in terms
of IFRS. ECC operations were assessed to be sensitive to the coal index price and R/US$ exchange rate, with
a 10 cent move affecting net operating profit by R12 million. At 31 December 2015, the ECC operations were
assessed for impairment against these indicators. The 12% decrease in export coal prices from transaction
signature date to the reporting date, partially offset by the weakening in the R/US$ exchange rate in the
same period. Impairment assessments resulted in an impairment of goodwill at 31 December 2015.
4.2.4. Eskom coal-supply agreements
Short-term Long-term
Fixed Fixed Tied
Leeuwpan - Majuba (monthly rolling contract) Grootegeluk - Medupi Matla
North Block Complex Grootegeluk - Matimba Arnot1
1 Up to 31 December 2015.
We continue to supply coal under existing contracts and no contracts are currently open for review. Exxaro
and Eskom are discussing a possible addendum 10 to the Medupi coal-supply and off-take agreement.
4.2.5. Portfolio improvement
The coal business will continue to deliver growth as Medupi power station ramps up its coal off-take.
Additional growth is anticipated and planned from the Belfast project which will boost export volumes
when production begins in 2018, and the Thabametsi IPP coal supply in 2020.
The capital expenditure programme for the five-year period to 2020 has been reduced by 15% to preserve cash
during this period of market uncertainty. All remaining capital expenditure is focused on coal to ensure
this business's continued growth.
Project details were included in the finance director's pre-close message published on the Stock Exchange
News Service (SENS) on 20 November 2015. The details below relate to further developments since then.
4.2.5.1. Grootegeluk
Medupi power station coal-supply
As part of our continued engagement with Eskom on later dates to commission Medupi power station's next five
units, we had initial discussions on a possible addendum 10 to the GMEP coal-supply and off-take agreement.
The basis of the discussions is Eskom's request to review options available to both parties to reduce future
take-or-pay obligations. FY15 deliveries to Eskom were in line with addendum 9, including 2,6Mt delivered
to Matimba on addendum 9 terms.
For now, all supply and off-take remains in line with addendum 9 to the coal-supply agreement.
Grootegeluk 10
We expect construction to be completed in 2Q16 with the plant scheduled for handover in May 2016.
Grootegeluk 6 phase 2
The approved water use licence was received in December 2015. However, project execution was delayed by one
year due to current market and capital constraints and further delays in the Medupi ramp-up. Detail design
is progressing as planned.
Project optimisation continues across the group against ongoing changes in market fundamentals.
4.2.5.2. ECC
We initiated a section 189 (retrenchments under the Labour Relations Act) process in fourth quarter of 2015
(4Q15), focusing on the Illovo office and Dorstfontein East operations. Consultation sessions concluded
on 2 February 2016.
Optimisation
We are implementing Exxaro's operating philosophy by:
- Implementing the Exxaro operational excellence methodology
- Adding a fifth 4-seam section at Forzando South which is expected to contribute 200 kilo tonnes (kt) to
FY16 production
- Optimising the resource-to-market value chain through plant and product-mix adjustments, taking the
acquired export entitlement into account (evaluating 4 800kcal and 5 300kcal option combinations for FY16)
- Rolling out cost-saving initiatives across all operations (R80 million in FY15)
- Exploring available adjacent reserves to extend the current life of mine
- Exploring the Eskom market as a potential customer.
The capital expenditure plan is continuously being reviewed and only critical capital expenditure is approved
until the actions above have been finalised.
ECC volumes are currently focused on exports, with minimal volumes to the domestic market.
4.2.5.3. Arnot
Eskom issued Exxaro with a notice that the offtake of coal from Arnot mine would discontinue after 31 December
2015. All production has ceased, a section 189 process was declared and discussions continue with Eskom on
the closure and rehabilitation of this mine Exxaro owns the mining right for this resource while Eskom owns
the assets and is responsible for the ultimate mine rehabilitation and post closure obligations.
From FY13, both parties agreed on the need for a memorandum of understanding to develop win-win scenarios on
the R/tonne cost. Since then, Exxaro and Eskom agreed to investigate plans to optimise the mine as the cost
was becoming excessive given Eskom's delay in procuring surface rights for the opencast reserves, Mooifontein.
As part of this review:
- An optimised scenario was discussed and agreed in principle by Eskom, after which an independent study was to
be launched to test assumptions. Eskom never initiated this independent study despite repeated requests by
Exxaro
- The chosen scenario would form the basis of a new coal-supply agreement post FY15
- On 8 September 2015, Eskom notified Exxaro in writing that the coal-supply agreements would expire at the end
of 2015, and advised Exxaro to initiate closure activities. In terms of the agreements, either party has to
give two years' notice of its intent to terminate the coal-supply agreement
- Numerous engagements have taken place with Eskom and there is an impasse between the companies on the
interpretation of the obligations for closure in the agreement, notably relating to funding the rehabilitation
trust fund shortfall, future liabilities, operational and all closure-related costs
- The parties are proceeding with arbitration in terms of the coal-supply agreement resolution mechanisms.
Impact on employees
- Employees were briefed by mine management on the contents of the Eskom letter on 21 September 2015
- 1 853 people are directly affected by the closure
- A section 189 notice was issued to organised labour and employees on 2 December 2015
- A commissioner from the Commission for Conciliation, Mediation and Arbitration (CCMA) was appointed, with the
first meeting on 14 January 2016
- Organised labour requested additional information which was supplied on 15 January and 4 February 2016
- To date, all required information has been submitted to organised labour and further sessions have been
scheduled.
Exxaro, Department of Mineral Resources (DMR), Eskom and organised labour discussions
- Meetings between Exxaro, Eskom, DMR and organised labour took place on 22 December 2015 and 4 February 2016 to
identify ways to prevent job losses and the sterilisation of coal reserves
- A revised coal-supply agreement proposal was sent to Eskom in February 2016, based on an optimised mine plan,
including the Mooifontein opencast reserves which would effectively halve the unit cost per tonne to Eskom.
Going forward
All equipment and infrastructure is being reclaimed for a disposal strategy that will be implemented by Eskom.
In the meantime, the section 189 process is continuing.
4.2.5.4. Matla
Matla is the only remaining mine with production tied to Eskom.
As previously reported, Matla mine 1 remains closed on safety concerns until the required capital for shaft
development and safety improvement initiatives is obtained from Eskom. A capital expenditure request for
mine 2 was submitted to Eskom for approval.
The main production at Matla is currently from mine 2.
4.2.5.5. Inyanda
Mining at Inyanda ended in November 2015. A sale transaction for the assets and liabilities of this mine
is in progress, subject to conditions precedent (including the section 11 mineral rights transfer).
4.2.5.6. Belfast
Following the integrated water use licence authorisation in 2014, an appeal was lodged, resulting in the
suspension of the licence. We expect the appeal case to be heard by the water tribunal in 2Q16. We also
expect the tribunal hearing on the objection against the project's rezoning application received in 2015
to be heard in 2Q16.
Only 7% of the approved project start-up capital budget has been released to date, primarily for detail
engineering designs and activities beginning in 2016, until we have more certainty on the regulatory process
for this project.
We continue to review our portfolio in the Mpumalanga area for optimal reconfiguration.
4.2.5.7. Thabametsi independent power producer (IPP) coal-supply project
The mining right application for Thabametsi was submitted in January 2013 and is being reviewed by the DMR.
The bankable feasibility study was completed at the end of 2015, and the integrated water use licence was
approved in January 2016. An appeal was lodged and Exxaro is following due legal process.
Preferred bidders for the IPP submissions in the first bid window under the Department of Energy's coal
baseload IPP procurement programme are expected to be announced in 1Q16. Based on this, we expect early
construction works will begin in 2Q16.
4.2.6. Logistics and infrastructure
Exxaro was forced to cancel trains to RBCT due to low coal demand from the Indian market.
Transnet Freight Rail (TFR) performance from our Mpumalanga mines to RBCT remained on schedule. However, rail
performance on the North West corridor remains a key concern as it impacts materially on Grootegeluk's ability
to dispatch trains to RBCT and ArcelorMittal. Active engagement with TFR has confirmed its commitment to
ensuring that adequate rail performance levels are reached and maintained. We will continue to align our
Waterberg production with TFR's rail ramp-up schedule.
On the export allocation profile, we expect Inyanda tonnes to be replaced by ECC, Belfast and Grootegeluk tonnes
in future.
4.3. Ferrous business
4.3.1. Net operating loss
Net operating losses reduced 95% from R6 238 in FY14 to R306 million in FY15, mainly due to:
- Non-recurring pre-tax impairment loss recorded in FY14 for the Mayoko iron ore project of R5 760 million
- The reduction in operational activities at Mayoko (R69 million)
- Closure of the loss-making AlloystreamTM operation in 1Q15 (R108 million).
Included in FY15 net operating loss is a once-off tax expense provision relating to non-income-based taxes of
R156 million recorded after receipt of the assessment. Exxaro will rigorously contest this assessment by
following the appropriate processes.
4.3.2. Equity-accounted investments
In FY15, Exxaro received 96% lower equity-accounted income and 78% lower dividends from SIOC compared to FY14,
largely attributable to the deteriorating iron ore price which necessitated a reconfiguration of the Sishen pit
to a lower cost shell. This, together with the significant impact of a weaker iron ore price outlook, resulted
in an impairment charge for Sishen mine of R6 billion (pre-tax), of which Exxaro's share is R1,2 billion (pre-tax).
We will continue to review our major investment as markets evolve. We are considering our options following the
announcement by Anglo American plc to dispose of its interest in Kumba Iron Ore Limited (SIOC's parent company)
at an appropriate time.
4.3.3. Portfolio improvement
4.3.3.1. Mayoko iron ore project
Most of the rolling stock, except for two locomotives, was sold in FY15. No further capital was spent on the
project, and we kept operating costs to the minimum. The labour force was reduced from 140 to 15 employees.
Despite submitting all documents to the Republic of the Congo parliamentary authorities in FY15, the mining
convention has not yet been ratified.
Table 4: Equity-accounted investments (Rm)
Equity-accounted income/(loss) Dividends received
FY15 FY14 FY15 FY14
Reviewed Audited Reviewed Audited
SIOC 104 2 830 673 3 095
Tronox (1 503) (568) 668 553
Black Mountain 64 77 71
Mafube 253 267
Cennergi (53) (92)
RBCT (4)
SDCT 2 1
Total (1 137) 2 515 1 341 3 719
4.4. Titanium dioxide and Alkali chemicals business
4.4.1. Equity-accounted losses
Equity-accounted losses from the Tronox investment were R1 503 million, compared to R568 million in FY14.
This was mainly due to our share of:
- Stock write-downs to the lower of cost or net realisable value
- Higher consulting fees and financing costs on the Alkali acquisition in FY15.
The performance of this business reflects the resilience and cash-generating abilities from vertical
integration model. Therefore, Tronox continued its dividend pay-out at 25 US$ cents per quarter,
resulting in our share of the dividends received of R668 million.
We will maintain our investment in Tronox at current levels, given prevailing market conditions.
4.5. Energy business
4.5.1. Equity-accounted losses
Equity-accounted losses of R53 million from Cennergi (a 50% joint venture with Tata Power) for FY15
improved by 42% compared to the R92 million loss in FY14, mainly due a successful cost-reduction
initiative focused on both labour and non-labour cost.
The Amakhala Emoyeni Wind Farm project is on track and within budget.
5. BROAD-BASED BLACK ECONOMIC EMPOWERMENT
5.1. BEE shareholder
Financial assistance
Following our announcements in FY15, we secured additional funding to support Exxaro's controlling BEE
shareholder, Main Street 333 Proprietary Limited(RF) (Main Street 333). This provides a longer-term
solution to Exxaro's BEE status until the structure unwinds in FY16. The current Main Street 333
preference share balance is R2,8 billion (IDC supported - R621 million, Exxaro loan R426 million and
other R175 million) at 31 December 2015.
The lock-in restrictions originally imposed on Main Street 333 as part of Exxaro's current empowerment
scheme expire on 30 November 2016, at which point Main Street 333 is free to trade its shares in Exxaro.
Currently Main Street 333 has debt obligations that need to be settled by March 2017. We are assessing
alternative solutions to address Main Street 333 and its empowerment strategy includes:
- Formulating a proposed mechanism for a potential unwind of Exxaro's existing BEE structure
- Managing all risks, particularly market risk, associated with unwinding
- Evaluating the requirements and potential alternatives of a subsequent BEE structure/scheme.
We are actively engaging Main Street 333 on these matters to find a sustainable and satisfactory solution
for all stakeholders and working to implement this solution prior to the November 2016 deadline. We will
provide further guidance to the market in due course.
5.2. ECC transaction
As part of the DMR's conditions for approving the transfer of ECC's mineral rights to Exxaro (and granting
a section 11 transfer of the mining rights in terms of the Mineral and Petroleum Resources Development
Act 28 2002 (MPRDA)), Exxaro was required to include additional broad-based black economic empowerment
(BBBEE) partners in ECC's assets.
We are reconfiguring the ECC asset base to ensure BEE partners are introduced to a sustainable business,
aiming for the most appropriate mechanism to introduce BBBEE participation.
6. SUSTAINABILITY OF THE COAL BUSINESS MODEL IN THE SOUTH AFRICAN AND GLOBAL CONTEXT
There has recently been much activism against coal as a source of energy given to the environmental impact from
carbon dioxide (CO2) emissions. Our efforts to reduce emissions are well regarded by CDP, the global carbon disclosure
project. Continued participation in this project remains one of our strategic imperatives as it highlights our
climate change strategy and mitigation activities. Our 2014/15 performance was again excellent as we improved by
1% to 99% on our disclosure score and received the Platinum Award for the longest-reporting organisation.
We have made written comments on draft laws for carbon emission regulations to government and were part of a
business coalition that was actively engaging government on implementation of the carbon tax and greenhouse gas
mandatory reporting.
Given the current and expected outlook for South Africa's electricity requirements, we believe coal remains a
relevant source of affordable electricity generation for the economy and that we are well positioned to supply this
energy source to Eskom and IPPs. We have a responsibility to supply the people of South Africa with an affordable
and sustainable source of energy.
7. OUTLOOK
We anticipate that 2016 will be challenging. The key risk to the South African economy for FY16 is the anticipated
slowing economic growth (forecast rate of 0,9% for 2016), and thus weakening fiscal fundamentals which could pave
the way for a credit rating downgrade. We expect the weak exchange rate to remain vulnerable in FY16 on account
of domestic and global events.
We anticipate that international thermal coal prices will remain at current levels for the short to medium term.
There is, however, still good international demand for Exxaro's coal. We expect demand from the local metals
market to remain subdued in the short to medium term, given the over supply in the market.
We expect iron ore markets to remain oversupplied, with suppliers' focus further entrenched on cost reductions
to shift the cost curve lower.
We also expect pricing weakness in the mineral sands and TiO2 pigment sectors to continue throughout FY16, with
the slowdown in the Chinese construction industry weighing heavily on the titanium value chain.
The challenges facing the group relate mainly to:
- Securing mining rights
- Securing water use licences and section 11 certificates. Delays in securing these affect the timely delivery
of projects, and we continue to liaise with the authorities to ensure licences are granted expeditiously
- Security of supply contracts with Eskom.
As a result of delays in ratifying the Mayoko iron ore project mining convention, we will focus on obtaining
the mining right in FY16 while finalising our options.
Our cost base was streamlined but, given the prevailing operating environment, we will continue to identify
areas where we can achieve both reductions and efficiency improvements.
We expect to receive no dividends from SIOC and significantly lower dividends from Tronox in FY16. In the meantime,
we will continue to review our major investments as markets evolve. Part of this includes considering our options
following the announcement by Anglo American plc to dispose of its interest in Kumba Iron Ore Limited at an
appropriate time.
In summary, our focus in the short to medium term will be to:
- Prioritise and stagger projects (mainly expansion capex) to preserve cash and ensure debt remains within
acceptable levels. An internal target of net debt at less than two times earnings before interest, taxes,
depreciation and amortisation (EBITDA) has been set
- Continue to reduce input and overhead costs by R300 million in FY16
- Ensure we maintain high levels of cash generated from controlled operations
- Maintain our dividend payout philosophy of between 2,5 to 3,0 times core earnings cover
- Develop Exxaro's future BEE shareholding strategy amid regulatory uncertainty and ensure the current BEE
structure unwinds efficiently with minimal impact on stakeholders
- Evaluate our continued shareholding in key investments (mainly SIOC and Tronox) and assess the ability of these
investments to contribute to our future earnings and cash flow.
- Further optimising ECC assets
- Increasing investor confidence in Exxaro's prospects for the coal business through increased communication of the
coal business strategy.
8. FINAL DIVIDEND
Our dividend policy is based on a cover ratio of between 2,5 and 3,5 times core attributable earnings. While our
target has been to move towards a 2,0 times core earnings cover, we are cognisant of the environment in which we operate
and our stakeholders' needs. We continuously review this policy to ensure our dividend pay-outs are sustainable.
Notice is therefore given that a gross final cash dividend, number 26 of 85 cents (final FY14: 210 cents) per share,
for the financial year ended 31 December 2015 was declared, payable to shareholders of ordinary shares. For details of
the dividend, please refer note 10 of the reviewed condensed group financial statements.
Salient dates for payment of the final dividend are:
Last day to trade cum dividend on the JSE Friday, 8 April 2016
First trading day ex dividend on the JSE Monday, 11 April 2016
Record date Friday, 15 April 2016
Payment date Monday, 18 April 2016
No share certificates may be dematerialised or rematerialised between Monday, 11 April 2016 and Friday, 15 April
2016, both days inclusive. Dividends for certificated shareholders will be transferred electronically to their bank
accounts on payment date. Shareholders who hold dematerialised shares will have their accounts at their central
securities depository participant or broker credited on Monday, 18 April 2016.
9. CHANGES TO THE BOARD
As announced in August 2015, Norman Mbazima resigned from the board from 18 August 2015 and Saleh Mayet was
appointed from the same day. The board thanks Norman for his diligent service and welcomes Saleh to the team.
As previously communicated, Mxolisi Mgojo will succeed Sipho Nkosi as chief executive officer on 1 April 2016.
Sipho has served the company with absolute diligence and dedication over the eight years since November 2007,
a year after Exxaro listed on the JSE Limited following the unbundling of Kumba Resources Limited (Kumba).
Sipho was instrumental in forming Exxaro, which involved the merger of Kumba's coal, mineral sands and base metals
assets with Eyesizwe Coal Proprietary Limited, a company he had founded earlier with Mxolisi and others. Under his
leadership, Exxaro has developed into one of the largest and foremost black-owned, South Africa-based diversified
resources companies.
The board of directors thanks Sipho for his tenure during which the group's net asset value per share rose by 250%
to R98 per share at 31 December 2015 from R28 in 2007.
GENERAL
Additional information on financial and operational results for the year ended 31 December 2015, and the accompanying
presentation can be accessed on our website on www.exxaro.com.
On behalf of the board
Len Konar Sipho Nkosi Wim de Klerk
Chairman Chief executive officer Finance director
2 March 2016
The Exxaro board would like to thank Sipho for developing Exxaro into a leading South African resources company and
for delivering significant value to stakeholders. The group has a strong balance sheet, solid growth potential and is
poised to move to the next level of growth,' said Dr Len Konar, chairman of the Exxaro board.
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
Absa Bank Limited (acting through its Corporate and Investment Bank Division)
Tel: +27 11 895 6000
If you have any queries regarding your shareholding in Exxaro Resources Limited, please contact the transfer
secretaries at +27 11 370 5000.
ANNEXURE: Acronyms
Acronyms
AKI African Iron Limited
AMSA ArcelorMittal SA Limited
API4 All publications index 4 (fob Richards Bay 6 000kcal/kg)
ArcelorMittal ArcelorMittal South Africa Limited
AU$ Australian dollar
AEWF Amakhala Emoyeni Wind Farm
BEE Black-Economic Empowerment
Black Mountain Black Mountain Proprietary Limited
Cennergi Cennergi Proprietary Limited
CFR Cost and Freight
CGU Cash-generating unit
Chifeng Chifeng Kumba Hongye Corporation Limited
Cps cents per share
DCM Dorstfontein Coal Mine
DMR Department of Mineral Resources
DMTN Domestic Medium-Term Note
ECC Exxaro Coal Central Proprietary Limited
EMJV Ermelo joint venture
Exxaro Exxaro Resources Limited
FCTR Foreign currency translation reserve
FeCr FerroChrome
HEPS Headline earnings per share
IAS International Accounting Standard
IASB International Accounting Standards Board
IFRS International Financial Reporting Standard
JIBAR Johannesburg Interbank Average Rate
JSE JSE Limited
kcal kilocalorie
KIO Kumba Iron Ore Limited
kt kilo tonnes
LME London Metal Exchange
LOM Life of Mine
LTIFR Lost-time injury frequency rate
Mafube Mafube Coal Proprietary Limited
Main Street 333 Mainstreet 333 Proprietary Limited(RF)
Mmakau Coal Mmakau Coal Proprietary Limited
MPRDA Mineral and Petroleum Resources Development Act
Mt Million tonnes
Mtpa Million tonnes per annum
NBC North Block Complex
NCC New Clydesdale Colliery
OCI Other comprehensive income
PPA Purchase Price Allocation
Rb Rand billion
RB1 Richards Bay export product 1
RBCT Richards Bay Coal Terminal
Rm Rand million
RMB Chinese Renminbi
RoC Republic of Congo
PRC Peoples Republic of China
RSA Republic of South Africa
SAICA South African Institute of Chartered Accountants
SARS South African Revenue Service
Scinta Scinta Energy Proprietary Limited
SDCT South Dunes Coal Terminal SOC Limited
SIOC Sishen Iron Ore Company Proprietary Limited
SOC State owned company
SSCC Semi-soft coking coal
TCSA Total Coal South Africa Proprietary Limited
TFR Transnet Freight Rail
TiO2 Titanium dioxide
Tronox Tronox Limited
Tronox SA Tronox KZN Sands Proprietary Limited and Tronox Mineral Sands Proprietary Limited
Tronox UK Tronox Sands Limited Liability Partnership in the United Kingdom
US$ United States dollar
VAT Value Added Tax
Disclaimer
Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information
or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the 'Company') to
differ materially from those expressed or implied in the forward looking statements. Financial forecasts and data given
herein are estimates based on the reports prepared by experts who in turn relied on management estimates. Undue reliance
should not be placed on such opinions, forecasts or data. No representation is made as to the completeness or correctness of
the opinions, forecasts or data contained herein. Neither the Company, nor any of its affiliates, advisors or
representatives accepts any responsibility for any loss arising from the use of any opinion expressed or forecast or data herein.
Forward-looking statements apply only as of the date on which they are made and the Company does not undertake any
obligation to publicly update or revise any of its opinions or forward looking statements whether to reflect new data or
future events or circumstances.
The full report is available on
www.exxaro.com or scan the code with your smartphone to take you there.
Date: 03/03/2016 07:07:00 Supplied by www.sharenet.co.za
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