Wrap Text
EXX: Reviewed condensed consolidated AFS; unreviewed production & sales volumes and dividend for FYE 31 Dec 2017
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 consolidated annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2017
Salient features
Sustainable operations
* LTIFR of 0,12
Group
- Revenue R22,8 billion, up 9%
- Net operating profit R6,1 billion, up 17%
- BEE credentials expense of R4,2 billion
- Cash generated by operations at R6,8 billion, up 23%
- HEPS* of 502 cents down 61%
- AEPS** of 1 923 cents, up 20%
- Final dividend of 400 cents per share
Tronox
- R5,2 billion gain on partial disposal of investment in Tronox Limited
- Dividend of R109 million received in FY17
SIOC
- R3,3 billion post-tax equity-accounted income
- Dividend of R1,4 billion in FY17
* Headline earnings per share
** Attributable earnings per share
Please refer to the end of this document for an explanation of the acronyms used throughout this
announcement.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
2017 (Re-presented)
Reviewed 2016
Rm Audited
Rm
Revenue 22 813 20 897
Operating expenses (17 593) (16 377)
Operating profit (note 9) 5 220 4 520
BEE credentials (note 6) (4 245)
Gain on disposal of joint venture (note 8.1) 203
Impairment charges of non-current assets (100)
Net operating profit 975 4 623
Finance income (note 10) 217 229
Finance costs (note 10) (828) (857)
Income from financial assets 2
Share of income of equity-accounted
investments (note 11) 3 952 2 764
Profit before tax 4 318 6 759
Income tax expense (1 542) (1 179)
Profit for the year from continuing
operations 2 776 5 580
Profit for the year from discontinued
operations (note 7) 3 256 111
Profit for the year 6 032 5 691
Other comprehensive (loss)/income, net of tax (1 352) (950)
Items that will not be reclassified to profit
or loss: 13 (57)
- Remeasurements of post-employment benefit
obligation (29)
- Share of comprehensive income/(loss) of
equity-accounted investments 42 (57)
Items that may be subsequently reclassified to
profit or loss: (92) (492)
- Unrealised losses on translation of foreign
operations (62) (45)
- Revaluation of financial assets
available-for-sale (14) (5)
- Share of comprehensive loss of equity-accounted
investments (16) (442)
Items that have subsequently been reclassified to
profit or loss: (1 273) (401)
- Losses/(gains) on translation of foreign
operations 58 (401)
- Share of comprehensive loss of equity-accounted
investments (1 331)
Total comprehensive income for the year 4 680 4 741
Profit attributable to:
Owners of the parent 5 982 5 679
- Continuing operations 2 726 5 568
- Discontinued operations 3 256 111
Non-controlling interests 50 12
- Continuing operations 50 12
Profit for the year 6 032 5 691
Total comprehensive income/(loss) attributable to:
Owners of the parent 4 630 4 729
- Continuing operations 2 545 5 419
- Discontinued operations 2 085 (690)
Non-controlling interests 50 12
- Continuing operations 50 12
Total comprehensive income for the year 4 680 4 741
2017 (Re-presented)
Reviewed 2016
cents Audited
cents
Attributable earnings per share
Aggregate
- Basic 1 923 1 600
- Diluted 1 724 1 591
Continuing operations
- Basic 876 1 569
- Diluted 786 1 560
Discontinued operations
- Basic 1 047 31
- Diluted 938 31
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December
2017 2016
Reviewed Audited
Rm Rm
ASSETS
Non-current assets 47 706 49 959
Property, plant and equipment 24 362 21 972
Biological assets 34 45
Intangible assets 17 31
Investments in associates (note 14) 15 810 21 518
Investments in joint ventures (note 15) 1 479 1 258
Financial assets (note 16) 5 433 4 720
Deferred tax 571 415
Current assets 10 936 9 842
Inventories 1 055 1 036
Financial assets (note 16) 48 480
Trade and other receivables 3 199 3 050
Current tax receivable 28 81
Cash and cash equivalents 6 606 5 195
Non-current assets held-for-sale (note 17) 3 910 130
Total assets 62 552 59 931
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 1 021 2 509
Other components of equity 8 120 2 085
Retained earnings 30 962 31 281
Equity attributable to owners of the parent 40 103 35 875
Non-controlling interests (738) (788)
Total equity 39 365 35 087
Non-current liabilities 17 409 16 282
Interest-bearing borrowings (note 18) 6 480 6 002
Provisions 3 864 4 162
Post-retirement employee obligations 227 239
Financial liabilities (note 20) 850 479
Deferred tax 5 988 5 400
Current liabilities 4 127 7 461
Trade and other payables 3 237 3 010
Shareholder loans 18
Interest-bearing borrowings (note 18) 2 503
Current tax payable 368 210
Financial liabilities (note 20) 371 3 599
Provisions 95 109
Overdraft (note 18) 54 12
Non-current liabilities held-for-sale (note 17) 1 651 1 101
Total liabilities 23 187 24 844
Total equity and liabilities 62 552 59 931
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Other components of equity
Foreign Financial Retirement Available-
Share currency instruments Equity- benefit for-sale
capital translation revaluation settled obligation revaluation
Rm Rm Rm Rm Rm Rm
At 31 December 2015 (Audited) 2 445 4 922 241 2 008 (205) (55)
Profit for the year
Other comprehensive loss (45) (5)
Share of associates’
reclassification (557)
of equity
Share of comprehensive (loss)/ (466) (218) 242 (57)
income of equity-accounted
investments
Issue of share capital(1) 64
Share-based payments 205
movement
Dividends paid
Share repurchase(2)
Disposal of foreign (401)
subsidiaries(3)
At 31 December 2016 (Audited) 2 509 4 010 23 1 898 (262) (60)
Profit for the year
Other comprehensive loss (62) (29) (14)
Share of comprehensive (loss)/ (154) (65) 203 42
income of equity-accounted
investments
Issue of share capital(1) 10 705
Share-based payments 4 057
movement(4)
Dividends paid
Share repurchase(2) (1 951)
Treasury shares(5) (10 242)
Disposal of an associate(6) (1 332) 1 (286) 91
Liquidation of subsidiaries(7) 58
Reclassification within equity(8)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY cont.
Other components of equity
Attributable
to owners Non-
Retained of the controlling Total
Other earnings parent interests equity
Rm Rm Rm Rm Rm
At 31 December 2015 (Audited) 25 670 35 026 (800) 34 226
Profit for the year 5 679 5 679 12 5 691
Other comprehensive loss (50) (50)
Share of associates’
reclassification 557
of equity
Share of comprehensive (loss)/ (499) (499)
income of equity-accounted
investments
Issue of share capital(1) 64 64
Share-based payments 205 205
movement
Dividends paid (625) (625) (625)
Share repurchase(2) (3 524) (3 524) (3 524)
Disposal of foreign (401) (401)
subsidiaries(3)
At 31 December 2016 (Audited) (3 524) 31 281 35 875 (788) 35 087
Profit for the year 5 982 5 982 50 6 032
Other comprehensive loss (105) (105)
Share of comprehensive (loss)/ 26 26
income of equity-accounted
investments
Issue of share capital(1) 10 705 10 705
Share-based payments 4 057 4 057
movement(4)
Dividends paid (2 227) (2 227) (2 227)
Share repurchase(2) 3 524 (4 268) (2 695) (2 695)
Treasury shares(5) (10 242) (10 242)
Disposal of an associate(6) 195 (1 331) (1 331)
Liquidation of subsidiaries(7) 58 58
Reclassification within equity(8) 1 (1)
1 For 2017, the issue of share capital comprises the vesting of Mpower 2012 treasury shares to good leavers and
beneficiaries upon final vesting of the share-based payment scheme on 31 May 2017 amounting to R464 million. In
addition, there was an issue of 67 221 565 ordinary shares to NewBEECo at a discounted share price of R73,92
per share which had a market share price of R152,35 on 11 December 2017. For 2016, the issue of share capital
comprises the vesting of Mpower 2012 treasury shares to good leavers.
2 Exxaro executed two repurchases during the year. Exxaro repurchased 43 943 744 ordinary shares from Main Street
333 for a purchase consideration of R3 524 million during January and Exxaro repurchased 22 686 572 ordinary
shares from Main Street 333 for a purchase consideration of R2 695 million during December.
3 Gain on translation difference recycled to profit or loss on the disposal of the Mayoko iron ore project and
related subsidiaries.
4 Comprises the final vesting of Mpower 2012 shares as well as the potential benefit to be obtained by the
BEE Parties amounting to R4 245 million.
5 107 612 026 ordinary shares held by NewBEECo in Exxaro which are accounted for as treasury shares on
consolidation of NewBEECo.
6 During October 2017, Exxaro disposed of 22 425 000 class A Tronox Limited ordinary shares which resulted in
a gain on translation differences being recycled to profit or loss, the release of a loss from the financial
instruments revaluation reserve to profit or loss, a net reclassification within equity from retirement
benefit obligation reserve and equity-settled reserve to retained earnings.
7 Gain on translation difference recycled to profit or loss on the liquidation of a foreign subsidiary
(Exxaro Mineral Sands BV).
8 Relates to a foreign entity (EITAG) which is required to reallocate distributable reserves to a
non-distributable reserve.
Dividend distribution
Final dividend paid per share (cents) in respect of the 2016 financial year 410
Dividend paid per share (cents) in respect of the 2017 interim period 300
Final dividend payable per share (cents) in respect of the 2017 financial year 400
Foreign currency translation
Arises from the translation of the financial statements of foreign operations within the group.
Financial instruments revaluation
Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
where the hedged transaction has not yet occurred.
Equity-settled
Represents the fair value, net of tax, of services received from employees and settled by equity instruments
granted as well as the fair value of the potential benefit to be obtained by the BEE Parties in relation to the
Replacement BEE Transaction.
Retirement benefit obligation
Comprises remeasurements, net of tax, on the post-retirement obligation.
Available-for-sale revaluation
Comprises the fair value adjustments, net of tax, on the available-for-sale financial assets.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December
2017 2016
Reviewed Audited
Rm Rm
Cash flows from operating activities 3 400 3 918
Cash generated by operations 6 826 5 549
Interest paid (597) (595)
Interest received 188 136
Tax paid (790) (547)
Dividends paid (2 227) (625)
Cash flows from investing activities 4 377 (2 198)
Property, plant and equipment acquired to maintain operations (note 13) (2 977) (2 413)
Property, plant and equipment acquired to expand operations (note 13) (944) (367)
Increase in investment in intangible assets (1)
Proceeds from disposal of property, plant and equipment 11 35
Decrease in loans to related parties 400
Interest received on loans to related parties 84
Settlement of contingent consideration (note 21.2) (74)
Decrease in loan to joint venture 42
Increase in loan to joint venture (126)
Increase in loan to associate (1)
Decrease in non-current receivables 1
Increase in non-current receivables (66)
Decrease in non-current financial assets 14 18
Increase in non-current financial assets (4)
Increase in environmental rehabilitation funds (130) (29)
Proceeds from disposal of operation 47
Proceeds from disposal of equity-accounted investments 6 525 200
Increase in investment in associate (26) (233)
Increase in investment in joint venture (55)
Income from investments in associates and joint ventures 1 499 748
Dividend income from financial assets 1
Cash flows from financing activities (6 361) 1 483
Interest-bearing borrowings raised 2 491 7 565
Interest-bearing borrowings repaid (2 534) (6 066)
Shares acquired in the market to settle share-based payments (99) (16)
Repurchase of share capital (6 219)
Net increase in cash and cash equivalents 1 416 3 203
Cash and cash equivalents at beginning of the year 5 183 2 055
Translation difference on movement in cash and cash equivalents (33) (75)
Cash and cash equivalents at end of the year 6 566 5 183
Cash and cash equivalents 6 606 5 195
Cash and cash equivalents classified as held-for-sale (note 17) 14
Overdraft (54) (12)
RECONCILIATION OF GROUP HEADLINE EARNINGS
Gross Tax Net
Rm Rm Rm
For the year ended 31 December 2017 (Reviewed)
Profit attributable to owners of the parent 5 982
Adjusted for: (4 674) 252 (4 422)
- IAS 16 Compensation from third parties for
items of property, plant and equipment
impaired, abandoned or lost (3) 1 (2)
- IAS 16 Net losses on disposal of
property, plant and equipment 61 (18) 43
- IAS 21 Net gains on translation
differences recycled to profit
or loss on the liquidation of a foreign
subsidiary and partial disposal of
investment in foreign associate (1 274) (1 274)
- IAS 28 Loss on dilution of investment
in associate 106 106
- IAS 28 Share of equity-accounted
investments’ impairment reversal of
property, plant and equipment (987) 271 (716)
- IAS 28 Share of equity-accounted
investments’ loss on disposal of a
subsidiary 1 271 1 271
- IAS 28 Share of equity-accounted
investments’ separate identifiable
remeasurements 12 (2) 10
- IAS 28 Gain on partial disposal of
investment in associate (3 860) (3 860)
Headline earnings/(loss) 1 560
- Continuing operations 2 120
- Discontinued operations (560)
For the year ended 31 December 2016
(Audited) (Re-presented)
Profit attributable to owners of the parent 5 679
Adjusted for: (1 001) (57) (1 058)
- IFRS 10 Gain on disposal of subsidiaries (670) (670)
- IAS 16 Gain on disposal of an operation (100) (100)
- IAS 16 Net losses on disposal of property,
plant and equipment 35 (13) 22
- IAS 28 Loss on dilution of investment in
associate 36 36
- IAS 28 Share of equity-accounted
investments’ separate identifiable
remeasurements 57 (17) 40
- IAS 28 Excess of fair value over cost of
investment in associate (256) (256)
- IAS 28 Gain on disposal of joint
venture (203) (203)
- IAS 36 Impairment of property, plant
and equipment 100 (27) 73
Headline earnings/(loss) 4 621
- Continuing operations 5 155
- Discontinued operations (534)
2017 (Re-presented)
Reviewed 2016
cents Audited
cents
Headline earnings/(loss) per share
Aggregate
- Basic 502 1 302
- Diluted 450 1 294
Continuing operations
- Basic 682 1 452
- Diluted 611 1 444
Discontinued operations
- Basic (180) (150)
- Diluted (161) (150)
NOTES TO THE REVIEWED CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
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 consolidated
annual financial statements as at and for the year ended 31 December 2017 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 consolidated annual financial statements as at and for the year ended 31 December 2017
have been 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 consolidated annual financial statements as at and for the year ended 31 December 2017
have been prepared under the supervision of PA Koppeschaar CA(SA), SAICA registration number: 00038621.
The reviewed condensed consolidated annual financial statements should be read in conjunction with the group
annual financial statements as at and for the year ended 31 December 2016, which have been prepared in
accordance with IFRS as issued by the IASB. The reviewed condensed consolidated annual financial statements
have been prepared on the historical cost basis, excluding financial instruments and biological assets, which
are measured at fair value.
The reviewed condensed consolidated annual financial statements of Exxaro and its subsidiaries for the year
ended 31 December 2017 were authorised for issue by the board of directors on 6 March 2018.
2.2 Judgements and estimates
In preparing these reviewed condensed consolidated annual financial statements, management made judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expense. Actual results may differ from these estimates. The significant
judgements made by management in applying the group’s accounting policies and the key source of estimation
uncertainty were similar to those applied to the group annual financial statements as at and for the year
ended 31 December 2016. Refer note 6 for judgements and estimates relating to the Replacement BEE Transaction
which were made during 2017.
3. Accounting policies
The accounting policies adopted in the preparation of the reviewed condensed consolidated 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 2016. A number of new or amended standards became effective for the current
reporting period. However, the group did not have to change its accounting policies or make retrospective
adjustments as a result of adopting these standards. Additional disclosures required in terms of the amendments
to IAS 7 Statement of Cash Flows have been provided by the group in note 19.
New accounting standards and amendments issued to accounting standards and interpretations which are relevant
to the group, but not yet effective on 31 December 2017, have not been adopted. The group continuously evaluates
the impact of these standards and amendments. In summary the following are the current expectations in relation
to IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases.
IFRS 9 Financial Instruments
The group has reviewed its financial assets and financial liabilities and is expecting the following impact from
the adoption of IFRS 9 on 1 January 2018:
Financial assets of the group include:
- Equity instruments currently classified as available-for-sale for which a fair value through other
comprehensive income (FVOCI) election is available
- Equity instruments currently measured at fair value through profit or loss (FVPL) which will continue to be
measured on the same basis under IFRS 9
- Debt instruments currently measured at amortised cost which meet the conditions for classification at
amortised cost under IFRS 9.
Accordingly, the group does not expect the new guidance to affect the classification and measurement of these
financial assets. However, gains or losses realised on the sale of financial assets at FVOCI will no longer be
transferred to profit or loss on sale, but instead reclassified within equity from FVOCI reserve to retained
earnings.
The environmental rehabilitation funds which are currently classified as designated at FVPL financial assets
will be classified as FVPL debt instruments.
Financial liabilities of the group include:
- Derivative financial liabilities which are currently classified as held-for-trading at FVPL
- Contingent consideration which is currently classified as designated at FVPL
- Financial liabilities at amortised cost
which will continue to be measured on the same basis under IFRS 9.
Accordingly, there will be no impact on the group’s accounting for financial liabilities.
The new impairment model requires the recognition of impairment provisions based on expected credit losses
(ECL) rather than only incurred credit losses as is the case under IAS 39 Financial Instruments: Recognition
and Measurement. It applies to financial assets classified at amortised cost, debt instruments measured at
FVOCI, contract assets under IFRS 15, lease receivables, loan commitments and certain financial guarantee
contracts. Based on sample assessments performed to date, the group expects a small increase in the loss
allowance for trade receivables. The average probability of default and loss given default for the sample
assessment ranged from 0,45% to 3,87% and 43,18% to 18,21%, respectively. The group will continue finalising
the impairment methodologies based on the financial assets as at 1 January 2018.
IFRS 9 also introduces expanded disclosure requirements and changes in presentation. These are expected to
change the nature and extent of the group’s disclosures about its financial instruments particularly in the
year of the adoption of the new standard.
IFRS 15 Revenue from Contracts with Customers
A preliminary assessment was performed on significant contracts with customers, in line with the IFRS 15
five-step revenue model.
Sale of goods
Revenue from the sale of goods is recognised when the goods are delivered to the customers’ premises, at which
point in time the related risks and rewards of ownership transfers. Under IFRS 15 the point of revenue
recognition is when a customer accepts control of the goods. The point of delivery will therefore continue to
drive the revenue recognition under IFRS 15 as this point is where customers accept control of the goods.
Elements of variable consideration were identified in the pricing adjustments which are based on the quality
of coal delivered. The requirements for constraining estimates of variable consideration will not have an
impact on Exxaro as the adjustments are done within the reporting period. No significant reversal of revenue is
expected to be recognised.
Rendering of services
Revenue arising from services is currently recognised on the accrual basis over the period the services are
rendered. Under IFRS 15 the total consideration in the service contracts will be allocated to all services based
on their standalone selling prices. Based on the assessment the fair value and standalone selling prices of the
services are broadly similar. Therefore, the group does not expect the application of IFRS 15 to result in
significant differences in the timing of revenue recognition for these services.
Currently the only material impact identified on the measurement and timing of revenue recognition, is a separate
performance obligation identified on one of the contracts with customers. Up to 31 December 2017, the cost for
the management of a stock pile on behalf of the customer was accounted for as a cost recovery. As the service is
seen as a separate performance obligation, revenue will be recognised separate from the corresponding cost. There
will be no impact on profit or loss of the group.
Exxaro is currently in the process of finalising the impact assessment of IFRS 15 on the group.
IFRS 16 Leases
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted
provided that IFRS 15 is adopted at or before the date of initial application of IFRS 16. The group made progress
on the initial assessment of the potential impact of this standard on the group’s financial statements and reached
a conclusion that this standard will not be early adopted with the implementation of IFRS 15. This initial
assessment included the identification of material lease transactions within the group. The group must still make
a decision on the transition method to be applied as well as the practical expedients to be used, if elected.
4. Re-presentation of comparative information
The prior year audited results as per the condensed consolidated statement of comprehensive income
(and related notes) has been re-presented as a result of:
- The investment in Tronox Limited being identified as a discontinued operation (refer note 7)
- Total comprehensive income for 2016 of R5 142 million decreasing with R401 million to R4 741 million to
reflect the recycling of foreign translation differences to profit or loss. In the prior year such
reclassification was recycled directly through equity.
5. Segmental information
Operating segments are reported on in a manner consistent with the internal reporting provided to the chief
operating decision-maker, who is responsible for allocating resources and assessing performance of the
reportable operating segments. The chief operating decision-maker has been identified as the group executive
committee. Segments reported are based on the group’s different products and operations.
The corporate transactions during 2016 and 2017 necessitated a change in the segmental reporting structures
and the manner in which operating results are reported to the chief operating decision-maker. Changes to segmental
reporting which resulted in the re-presentation of the comparative year segmental information, included:
- the iron ore operating segment now included within the other operating segment which forms part of the other
reportable segment
- an energy segment was added as an additional reportable segment.
The re-presentation resulted in five reportable operating segments compared to the four reportable operating
segments in prior periods. In addition to this, the 2016 segmental information was re-presented for Tronox Limited
which was classified as a non-current asset held-for-sale (refer note 17) and met the criteria for a discontinued
operation (refer note 7).
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. Segment net operating
profit or loss equals segment revenue less segment expenses, impairment charges, plus impairment reversals. Segment
operating expenses, assets and liabilities represent direct or reasonably allocatable operating expenses, assets
and liabilities.
The reportable operating segments, as described below, offer different products and services, and are managed
separately based on commodity, location and support function grouping. The group executive committee reviews
internal management reports on these divisions at least quarterly.
Coal
The coal operations are mainly situated in the Waterberg and Mpumalanga regions and are split between coal
commercial operations and coal tied operations. Coal commercial operations include a 50% (2016: 50%) investment
in Mafube (a joint venture with Anglo), as well as a 10,82% (2016: 10,82%) effective equity interest in RBCT. The
coal operations produce thermal coal, metallurgical coal and SSCC.
Ferrous
The ferrous segment comprises a 20,62% (2016: 20,62%) equity interest in SIOC (located in the Northern Cape
province) reported within the other ferrous operating segment as well as the FerroAlloys operations (referred
to as Alloys).
TiO2 and Alkali chemicals
Exxaro holds a 23,66% (2016: 43,66%) equity interest in Tronox Limited subsequent to the sale of 22 425 000
class A Tronox Limited ordinary shares on 10 October 2017. The investment in Tronox Limited has been classified
as a non-current asset held-for-sale on 30 September 2017 (refer note 17). Exxaro holds a 26% (2016: 26%) equity
interest in Tronox SA (both South African-based operations), as well as a 26% (2016: 26%) member’s interest in
Tronox UK.
Energy
The energy segment comprises a 50% (2016: 50%) investment in Cennergi (a South African joint venture with
Tata Power) which operates two windfarms.
Other
This reportable segment comprises the 26% (2016: 26%) equity interest in Black Mountain (located in the Northern
Cape province), an effective investment of 11,7% (2016: 11,7%) in Chifeng (located in the PRC), the Mayoko iron
ore project (and related subsidiaries) which was classified as a discontinued operation in 2016 and sold on
23 September 2016, as well as the corporate office which renders services to operations within the group and
other customers.
The following table presents a summary of the group’s segmental information:
TiO2
and
Coal Ferrous Alkali Other
Tied Commercial Other che- Base
operations operations Alloys ferrous micals Energy metals Other Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year ended
31 December 2017
(Reviewed)
External revenue
(continuing
operations) 3 256 19 297 243 17 22 813
Segment net operating
profit/(loss) 133 5 876 54 (1) 5 085 (5 087) 6 060
- Continuing operations 133 5 876 54 (1) (5 087) 975
- Discontinued operations 5 085 5 085
External finance income
(note 10) 1 45 1 170 217
External finance costs
(note 10) (254) (574) (828)
Income tax expense (24) (1 326) (13) (179) (1 542)
Depreciation and
amortisation (note 9) (12) (1 296) (85) (1 393)
Gain on disposal of
associate 3 860 3 860
Cash generated by/
(utilised in)
operations 151 6 754 (54) (2) (23) 6 826
Share of income/
(loss) of equity-
accounted
investments
(note 11) 235 3 303 (1 643) 2 226 2 123
- Continuing
operations 235 3 303 186 2 226 3 952
- Discontinued
operations (1 829) (1 829)
Capital expenditure
(note 13) (3 804) (6) (111) (3 921)
At 31 December 2017
(Reviewed)
Segment assets and
liabilities
Deferred tax 32 104 11 1 423 571
Investments in
associates
(note 14) 2 193 9 367 3 477 747 26 15 810
Investments in joint
ventures (note 15) 1 105 374 1 479
Preference dividends
receivable
from associate 2 2
Loan to joint venture 126 126
External assets(1) 3 012 30 648 309 25 6 660 40 654
Assets 3 044 34 050 320 9 393 3 477 500 747 7 111 58 642
Non-current assets
held-for-sale (note 17) 385 3 396 129 3 910
Total assets as per
statement of
financial position 3 044 34 435 320 9 393 6 873 500 747 7 240 62 552
External liabilities 2 677 4 726 27 4 7 746 15 180
Deferred tax(2) 1 6 030 (43) 5 988
Current tax payable(2) 292 76 368
Liabilities 2 678 11 048 27 4 7 779 21 536
Non-current liabilities
held-for-sale (note 17) 1 651 1 651
Total liabilities as
per statement
of financial position 2 678 12 699 27 4 7 779 23 187
1 Excluding deferred tax, investments in and loans to associates and joint ventures and non-current assets held-for-sale.
2 Offset per legal entity and tax authority.
TiO2
and
Coal Ferrous Alkali Other
Tied Commercial Other che- Base
operations operations Alloys ferrous micals Energy metals Other Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year ended
31 December 2016
(Audited)
(Re-presented)
External revenue
(continuing
operations) 3 483 17 190 170 54 20 897
Segment net
operating profit/
(loss) 226 4 940 (75) 28 (36) 117 5 200
- Continuing
operations 226 4 940 (75) 28 (496) 4 623
- Discontinued
operations (36) 613 577
External finance
income
(note 10) 2 61 1 165 229
External finance costs
(note 10) (105) (245) (507) (857)
Income tax benefit/
(expense) 13 (1 110) 21 2 (180) (1 254)
Depreciation and
amortisation (note 9) (12) (1 072) (7) (107) (1 198)
Cash generated by/
(utilised
in) operations 260 5 426 (53) (22) (62) 5 549
Share of income/
(loss) of
equity-accounted
investments
(note 11) 238 2 416 (384) 3 100 2 373
- Continuing
operations 238 2 416 7 3 100 2 764
- Discontinued
operations (391) (391)
Capital expenditure
(note 13) (2 747) (14) (19) (2 780)
At 31 December 2016
(Reviewed)
Segment assets and
liabilities
Deferred tax 49 22 1 343 415
Investments in
associates
(note 14) 2 217 7 549 11 232 520 21 518
Investments in
joint ventures
(note 15) 839 419 1 258
Loan to joint venture 126 126
External assets(1) 2 952 27 481 201 25 178 5 647 36 484
Assets 2 952 30 586 223 7 575 11 232 545 698 5 990 59 801
Non-current assets
held-for-sale (note 17) 1 129 130
Total assets as
per statement
of financial position 2 952 30 587 223 7 575 11 232 545 698 6 119 59 931
External liabilities 2 631 4 939 39 4 10 520 18 133
Deferred tax(2) (54) 5 515 (61) 5 400
Current tax payable(2) (14) 224 210
Liabilities 2 563 10 678 39 4 10 459 23 743
Non-current liabilities
held-for-sale (note 17) 1 101 1 101
Total liabilities as
per statement of
financial position 2 563 11 779 39 4 10 459 24 844
1 Excluding deferred tax, investments in and loans to associates and joint ventures and non-current assets held-for-sale.
2 Offset per legal entity and tax authority.
6. Replacement BEE Transaction
Background
On 15 September 2017, Exxaro entered into the Transaction Agreements in order to implement the various
components of the Replacement BEE Transaction. Shareholders approved the Replacement BEE Transaction on
20 November 2017 and on 11 December 2017 Exxaro implemented the Replacement BEE Transaction which comprised
various indivisible transaction components, being the MS333 Unwind, the Second Repurchase and the Specific Issue.
MS333 Unwind
The MS333 Unwind served both as a mechanism for the Exiting MS333 Interests to be divested from, and to correctly
balance the shareholdings in MS333 to enable Reinvesting MS333 Shareholders and the IDC to invest into the New
Empowerment Structure.
Second Repurchase
The Second Repurchase was implemented to reduce the dilutionary impact of the Replacement BEE Transaction on Exxaro
Independent Shareholders. Exxaro repurchased 22 686 572 ordinary shares from MS333 at a share price of R118,76 per
share. The Second Repurchase was funded from Exxaro’s cash reserves and the ordinary shares were immediately
cancelled as issued ordinary shares.
Specific Issue
Exxaro issued 67 221 565 ordinary shares for consideration of R73,92 per share to NewBEECo resulting in NewBEECo
holding 30% of Exxaro’s ordinary shares after implementation of the Replacement BEE Transaction. NewBEECo acquired
the Exxaro issued ordinary shares by means of third-party funding raised in terms of the preference share liability
and funding from the equity contribution by Exxaro into NewBEECo.
Lock-in mechanism
The New Empowerment Structure will have a duration of 10 years, subject to the seven to 10-year lock-in release
mechanism and interim liquidity mechanisms.
Interim liquidity mechanisms
NewBEECo will have the following mechanisms available, in order to create interim liquidity in the New Empowerment
Structure:
- Trade sale
After the third anniversary of the BEE Implementation Date, subject to Exxaro approval, the Reinvesting MS333
Shareholders, including the IDC, will be entitled to sell their shareholding to any party with the same HDSA status.
- Public offering
Exxaro may at any time, and NewBEECo may after the third anniversary of the BEE Implementation Date, subject to
Exxaro’s approval, list NewBEECo’s ordinary shares on a stock exchange which restricts trading to HDSA parties.
- Put option
Subject to certain restrictions, Exxaro has granted NewBEECo the right to require Exxaro to buy-back, at a discount
to the market price a certain number of Exxaro shares. The proceeds received by NewBEECo upon exercise of the put
option may only be used to settle the preference share liability. The option therefore expires once the preference
share liability has been fully settled. The put option can only be exercised if the 20-day weighted average trading
price of Exxaro’s shares is greater than 150% of the closing Exxaro share price on BEE Implementation Date.
These interim liquidity mechanisms are subject to:
- Exxaro remaining in compliance with the empowerment shareholding legislative and contractual requirements
- All required regulatory, contractual and shareholder consents are obtained.
Accounting implications
The accounting impact of the Replacement BEE Transaction on the Exxaro group is as follows:
- NewBEECo is consolidated as Exxaro has control over NewBEECo in terms of IFRS 10 Consolidated Financial Statements
- The shares held by NewBEECo in Exxaro are treated as treasury shares and eliminated for group reporting purposes
- The preference share liability of NewBEECo is recognised as a financial liability for the Exxaro group (refer
note 18) and therefore no accounting for the put option liability required
- A share-based payment expense is recognised in profit or loss which relates to the potential benefit to be obtained
by the BEE Parties. This has been valued using an option pricing model.
Significant judgements and assumptions made by management
Investment in subsidiaries
In applying IFRS 10 Consolidated Financial Statements management has applied judgement in assessing whether Exxaro
has control over NewBEECo even though Exxaro only holds a 24,9% equity interest in NewBEECo. NewBEECo was created
and designed for the sole purpose of providing Exxaro with BEE credentials and as a structure to hold Exxaro shares.
The implementation of the Replacement BEE Transaction will protect the stability of Exxaro’s operations reinforcing
the sustainability of relationships with key stakeholders, equip Exxaro for growth by positioning Exxaro with market
leading empowerment credentials in the South African mining sector and create long-term value for shareholders.
Exxaro is able to direct the strategic direction of NewBEECo and as per the Transaction Agreements, NewBEECo’s
memorandum of incorporation may not be amended or replaced without Exxaro’s prior written consent. All these points
indicate that Exxaro has been involved from the inception of the Replacement BEE Transaction, to ensure that the
design and operation of NewBEECo achieves the purpose for which it was created. NewBEECo can also not dispose of
Exxaro shares without the prior consent of Exxaro. Exxaro has significant exposure to the variable returns of
NewBEECo, through the creation and maintenance of the BEE credentials during the lock-in period as well as through
the equity investment held by Exxaro in NewBEECo. All these factors have been considered in determining that even
though Exxaro does not have majority voting rights in NewBEECo it still has control over NewBEECo and consolidates
the results of NewBEECo in the consolidated results of the Exxaro group of companies.
BEE credentials valuation
In applying IFRS 2 Share-Based Payment management is required to make estimates and assumptions in determining
the share-based payment expense. The share-based payment expense, amounting to R4 245 million, was calculated
with reference to the requirements of IFRS 2 and the SAICA Financial Reporting Guide 2 Accounting for BEE
Transactions. Since these options are not tradeable, IFRS 2 requires that the fair value of these instruments
be calculated using a suitable, market-consistent valuation model. A Monte Carlo simulation model was selected
in order to account for the path-dependency inherent in the transaction arising from the relationship between
the share price and the strike price (the outstanding preference share liability balance at maturity after
taking into account dividends used to repay the preference share liability and preference dividend). The
valuation is based on 30% of Exxaro’s issued ordinary share capital being held by NewBEECo at a spot Exxaro
share price of R152,35 per share, being the closing share price as at 11 December 2017. Established derivative
pricing theory requires the use of the underlying share value on the valuation date, and precludes the use of
WATP (VWAP), for the purposes of measuring a share-based payment expense and for this reason the closing share
price has been used. The model applied a term structure of dividend yields over the life of the transaction,
using estimated dividend forecasts. The dividend term-structure used equates to an average continuously
compounded dividend rate of 4,49% per annum. The model assumed an option life of five years, an average flat,
continuous risk-free rate of 8,02% and a historical share volatility of 41,20% as inputs into the valuation model.
The model further assumes funding rates of 80% of Prime Rate for the preference share liability. The outstanding
preference share liability balance, as at the valuation date, of R2 491 million was used as the starting point
in modelling the outstanding preference share liability balance as at the maturity date of the transaction.
Exxaro’s 24,9% interest in NewBEECo has been deducted from this value as an intercompany adjustment. The
reinvestment cost by both BEE SPV and IDC are subtracted from the IFRS 2 share-based payment expense as this
represents a cost to these shareholders for the participation in the Replacement BEE Transaction.
7. Discontinued operations
On 30 September 2017, Exxaro classified the Tronox Limited investment as a non-current asset held-for-sale
(refer note 17). It was concluded that the related performance and cash flow information be presented as a
discontinued operation as the Tronox Limited investment represents a major geographical area of operation
as well as the majority of the TiO2 and Alkali chemicals reportable operating segment.
The 2016 financial performance and cash flow information relates to the disposal of the Mayoko iron ore project
and related subsidiaries as well as the impact of the Tronox Limited re-presentation.
Financial information relating to discontinued operations for the period to the date of disposal is set out
below:
(Re-presented)
2017 2016
Reviewed Audited
Rm Rm
The financial performance and cash flow information
Other operating expenses (106) (93)
Losses on financial instruments revaluations recycled
to profit or loss (1)
Gains on translation differences recycled to profit
or loss on partial disposal of investment in foreign
associate 1 332
Operating income/(expense) 1 225 (93)
Gain on partial disposal of associate (note 8.2) 3 860
Gain on disposal of subsidiaries (note 8.2) 670
Net operating profit 5 085 577
Share of loss of equity-accounted investment (1 829) (391)
Income tax expense (75)
Profit for the year from discontinued operations 3 256 111
Cash flow attributable to operating activities (29)
Cash flow attributable to investing activities 6 634 307
Cash flow attributable to discontinued operations 6 634 278
8. Gains on the disposal of associate, joint venture, operations and subsidiaries
8.1 Continuing operations
SDCT Inyanda
joint venture operation
Rm Rm
For the year ended 31 December 2016
Gain on the disposal
Consideration received:
- Cash 200 47
Total disposal consideration 200 47
Carrying amount of net liabilities sold 3 53
- Carrying amount of investment sold(1)
- Equity-accounted losses realised on disposal 3
- Provisions 53
Gain on disposal(2) 203 100
1 The investment in SDCT was sold on 31 March 2016. The carrying value of the investment was below R1 million
(R1 333).
2 After tax of nil.
8.2 Discontinued operations
Tronox Limited
associate
Rm
For the year ended 31 December 2017
Gain on the disposal
Consideration received:
- Cash 6 525
Total disposal consideration 6 525
Carrying amount of investment sold (2 665)
- Investment in associate (2 665)
Gain on disposal(1) 3 860
- Gains on translation differences recycled to
profit or loss on partial disposal of investment
in foreign associate 1 332
- Losses on financial instruments revaluations
recycled to profit or loss (1)
Total gains relating to the disposal 5 191
1 After tax of nil.
Mayoko iron
ore project1
Rm
For the year ended 31 December 2016
Gain on the disposal
Consideration receivable:
- Cash 28
Total disposal consideration 28
Carrying amount of net liabilities sold 642
- Trade and other receivables (13)
- Provisions 32
- Trade and other payables 153
- Current tax payable 69
- Foreign currency translation reserve 401
Gain on disposal(2) 670
1 The following subsidiaries relating to the Mayoko iron ore project were disposed of:
- African Iron Exploration SA
- African Iron Proprietary Limited
- AKI Exploration (Bermuda) Proprietary Limited
- AKI Exploration Proprietary Limited
- DMC Iron Congo SA
- DMC Mining Proprietary Limited
- Exxaro Mayoko SA
- Mayoko Investment Company
2 After tax of nil.
For the year ended 31 December
(Re-presented)
2017 2016
Reviewed Audited
Rm Rm
9. Significant items included in operating profit
Raw materials and consumables (3 058) (2 443)
Staff costs (4 060) (4 365)
Royalties (143) (82)
Depreciation and amortisation (1 393) (1 198)
Fair value adjustments on contingent consideration(1) (354) (445)
Net realised foreign currency exchange losses (147) (116)
Consultancy fees (424) (230)
Net losses on disposal or scrapping of property, plant and equipment (55) (44)
1 Relating to the ECC acquisition.
10. Net financing costs
Finance income 217 229
- Interest income 207 218
- Finance lease interest income 10 11
Finance costs (828) (857)
- Interest expense (600) (496)
- Unwinding of discount rate on rehabilitation cost (410) (347)
- Recovery of unwinding of discount rate on rehabilitation cost (tied mines) 163
- Finance lease interest expense (3) (5)
- Amortisation of transaction costs (9) (25)
- Borrowing costs capitalised(1) 31 16
Total net financing costs (611) (628)
1 Borrowing costs capitalisation rate: 8,98% 9,55%
For the year ended 31 December
(Re-presented)
2017 2016
Reviewed Audited
Rm Rm
11. Share of income/(loss) of equity-accounted investments
Associates
Unlisted investments 3 691 2 523
- SIOC(1) 3 303 2 416
- Tronox SA 67 (111)
- Tronox UK 119 118
- RBCT (24)
- Black Mountain 226 100
Joint ventures 261 241
- Mafube 259 238
- Cennergi 2 3
Share of income of equity-accounted investments 3 952 2 764
Included in discontinued operations:
Associates: Listed investments (1 829) (391)
- Tronox Limited(2) (1 829) (391)
1 Includes an amount of R716 million (net of tax) that relates to Exxaro’s share of the impairment reversal
of property, plant and equipment.
2 Application of the equity method ceased when the investment was classified as a non-current asset
held-for-sale on 30 September 2017. 2017 includes an amount of R1 271 million that relates to Exxaro’s
share of the loss realised on the disposal of the Alkali chemicals business.
12. Dividend distribution
Total dividends paid in 2017 amounted to R2 227 million, made up of a final dividend of R1 284 million which
related to the year ended 31 December 2016, paid in April 2017, as well as an interim dividend of R943 million,
paid in September 2017.
A final dividend for 2017 of 400 cents per share (2016: 410 cents per share) was approved by the board of
directors on 6 March 2018. The dividend is payable on 23 April 2018 to shareholders on the register on
20 April 2018. This final dividend, amounting to approximately R1 435 million (2016: R1 284 million), has
not been recognised as a liability in these reviewed condensed consolidated annual financial statements. It
will be recognised in shareholders’ equity in the year ending 31 December 2018.
The final dividend declared will be subject to a dividend withholding tax of 20% for all shareholders who are
not exempt from or do not qualify for a reduced rate of dividend withholding tax. The net local dividend payable
to shareholders, subject to dividend withholding tax at a rate of 20%, amounts to 320,00000 cents per share. The
number of ordinary shares in issue at the date of this declaration is 358 706 754. Exxaro company’s tax reference
number is 9218/098/14/4.
On 13 February 2018 Exxaro declared a special dividend amounting to 1 255 cents per share following the partial
disposal of its shareholding in Tronox Limited during October 2017. The dividend amounting to R4 502 million
was paid to shareholders on 5 March 2018.
At 31 December
2017 2016
Reviewed Audited
Issued share capital (number) 358 706 754 358 115 505
Ordinary shares (million)
- Weighted average number of shares 311 355
- Diluted weighted average number of shares 347 357
At 31 December
2017 2016
Reviewed Audited
Rm Rm
13. Capital expenditure
Incurred 3 921 2 780
- To maintain operations 2 977 2 413
- To expand operations 944 367
Contracted 5 409 2 333
- Contracted for the group (owner-controlled) 4 313 1 382
- Share of capital commitments of equity-accounted investments 1 096 951
Authorised, but not contracted 2 838 3 500
14. Investments in associates
Listed investments 7 946
- Tronox Limited(1) 7 946
Unlisted investments 15 810 13 572
- SIOC 9 367 7 549
- Tronox SA 1 800 1 728
- Tronox UK 1 677 1 558
- RBCT 2 193 2 217
- Black Mountain 747 520
- Curapipe(2) 26
Total carrying value of investments in associates 15 810 21 518
1 The investment in Tronox Limited was classified as a non-current asset
held-for-sale on 30 September 2017 (refer note 17).
2 Included in financial assets is a preference dividend receivable from
Curapipe of R2 million.
15. Investments in joint ventures
Unlisted investments 1 479 1 258
- Mafube 1 105 839
- Cennergi(1) 374 419
Total carrying value of investments in joint ventures 1 479 1 258
1 Included in financial assets is a loan to Cennergi (refer note 16): 126 126
At 31 December
2017 2016
Reviewed Audited
Rm Rm
16. Financial assets
Non-current financial assets
Environmental rehabilitation funds 1 648 1 401
Loan to joint venture(1) 126 126
Preference dividends receivable from associate(2) 2
Non-current receivables(3) 2 081 1 768
Indemnification asset(4) 1 268 1 100
Investments 186 193
- Available-for-sale 152 178
- Fair value through profit or loss 34 15
Lease receivables 118 132
Non-current prepayment 4
Total non-current financial assets 5 433 4 720
Current financial assets
Loan to BEE shareholder(5) 480
Current portion of non-current receivables(3) 48
Total current financial assets 48 480
Total financial assets 5 481 5 200
1 Relates to a loan which was granted to Cennergi in 2016. The Cennergi loan is interest free, unsecured
and repayable on termination date in 2026, unless otherwise agreed by the parties.
2 The Curapipe preference dividend is equivalent to 8%, compounded annually.
3 Includes an amount receivable in relation to a deferred pricing adjustment. The amount of R437 million
will be settled over seven years and bears interest at Prime Rate less 2%.
4 Arose on the ECC acquisition.
5 During January 2017 Main Street 333 settled its interest-bearing loan with Exxaro.
17. Non-current assets and liabilities held-for-sale
Tronox Limited
In September 2017, the directors of Exxaro formally decided to dispose of the investment in Tronox Limited. As
part of this decision, Tronox Limited was required to publish an automatic shelf registration statement of
securities of well-known seasoned issuers which allowed for the conversion of Exxaro’s Class B Tronox Limited
ordinary shares to Class A Tronox Limited ordinary shares. From this point, it was concluded that the Tronox
Limited investment should be classified as a non-current asset held-for-sale as all the requirements in terms
of IFRS 5 Non-Current Assets Held-for-sale and Discontinued Operations were met. As of 30 September 2017, the
Tronox Limited investment, totalling 42,66% of Tronox Limited’s total outstanding voting shares, was classified
as a non-current asset held-for-sale and the application of the equity method ceased.
Subsequent to the classification as a non-current asset held-for-sale, Exxaro completed an initial offering of
22 425 000 Class A Tronox Limited ordinary shares. Refer note 8.2 for further details of the initial offering.
Exxaro will continue to assess market conditions going forward for further possible sell downs of the remaining
23,66%, as at 31 December 2017, of the Class A Tronox Limited ordinary shares before 30 September 2018.
The Tronox Limited investment is presented within the total assets of the TiO2 and Alkali chemicals reportable
operating segment and presented as a discontinued operation (refer note 7).
Manyeka
Exxaro concluded a sale of share agreement with Universal for ECC’s 100% shareholding in Manyeka, which includes
a 51% interest in Eloff. The sale is conditional on section 11 approval required in terms of the MPRDA for transfer
of the mining right as well as approval from the Competition Commission for the transaction. The investment in
Manyeka has been classified as a non-current asset held-for-sale on 30 September 2017. On 31 December 2017,
conditions precedent to the sale agreement with Universal had not been met. The sale of Manyeka 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.
NBC
During 2017 Exxaro took the decision to divest from the NBC operation and the divestment process commenced
during August 2017. On 2 March 2018, Exxaro concluded a sale of asset agreement for the disposal of the NBC
operation. The sale will only be effective once all conditions precedent to the sales agreement have been met. On
31 December 2017, the NBC operation met the criteria to be classified as a non-current asset held-for-sale in
terms of IFRS 5 Non-Current Assets Held-for-sale and Discontinued Operations. The 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.
EMJV
As part of the ECC acquisition in 2015, Exxaro acquired non-current liabilities held-for-sale relating to the
EMJV. The sale of the EMJV is conditional on section 11 approval required in terms of the MPRDA for transfer
of the new-order mining right to the new owners, Scinta Energy Proprietary Limited, as well as section 43(2)
approval for the transfer of environmental liabilities and responsibilities. The EMJV remains a non-current
liability held-for-sale for the Exxaro group on 31 December 2017, as the required approvals are still pending.
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.
17. Non-current assets and liabilities held-for-sale (continued)
Other
The land and buildings situated at corporate centre were classified as a non-current asset held-for-sale
on 31 December 2015. The sale was subject to the fulfilment of suspensive conditions which were not met
and the sales agreement subsequently lapsed.
A new agreement was entered into with a property consortium in June 2016. These agreements have been amended and
finalised during May 2017. All conditions precedent to this agreement have been met except for the completion
of the legal transfer of the property. The land and buildings situated at corporate centre remains classified
as a non-current asset held-for-sale until the legal transfer of the property has been concluded.
The major classes of assets and liabilities classified as non-current assets and liabilities are as follows:
At 31 December
2017 2016
Reviewed Audited
Rm Rm
Assets
Property, plant and equipment 282 129
Investment in associate 3 396
Deferred tax 9 1
Inventories 133
Trade and other receivables 49
- Trade receivables 39
- Non-financial instrument receivables 10
Current tax receivable 27
Cash and cash equivalents 14
Non-current assets held-for-sale 3 910 130
Liabilities
Non-current provisions (1 494) (1 083)
Post-retirement employee obligations (22) (18)
Trade and other payables (99)
- Trade payables (54)
- Other payables (8)
- Non-financial instrument payables (37)
Shareholder loans (18)
Current provisions (18)
Non-current liabilities held-for-sale (1 651) (1 101)
Net non-current assets/(liabilities) held-for-sale 2 259 (971)
The following items of other comprehensive income that may be subsequently reclassified to profit or loss
relate to non-current assets classified as held-for-sale:
At 31 December
2017 2016
Reviewed Audited
Rm Rm
Cumulative share of comprehensive income/
(losses) of equity-accounted investments
- Unrealised gains on translation of foreign operations 1 708
- Losses on financial instruments revaluations (1)
18. Interest-bearing borrowings
At 31 December
2017 2016
Reviewed Audited
Rm Rm
Non-current(1) 6 480 6 002
Loan facility 3 474 5 465
Bond issue 520 520
Preference share liability 2 483
Finance leases 3 17
Current(2) 2 503
Loan facility (9) (8)
Bond issue 479
Preference share liability (5)
Finance leases 16 32
Total interest-bearing borrowings 6 482 6 505
Summary of loans and finance leases by period of redemption
- Less than six months 1 496
- Six to 12 months 1 7
- Between one and two years 509 5
- Between two and three years (13) 514
- Between three and four years 3 239 (9)
- Between four and five years 2 620 5 244
- Over five years 125 248
Total interest-bearing borrowings 6 482 6 505
1 The non-current portion includes R44 million (2016: R35 million) in respect of transaction costs that will be
amortised using the effective interest rate method, over the term of the facilities.
2 The current portion represents capital repayments amounting to R16 million (2016: R512 million), reduced by
capitalised transaction costs amounting to R14 million (2016: R9 million).
Minimum finance lease payments:
- Not later than one year 17 35
- Later than one year but not later than five years 3 18
Total 20 53
Less: future finance charges (1) (4)
Present value of finance lease liabilities 19 49
- Non-current 3 17
- Current 16 32
Overdraft
Bank overdraft 54 12
The bank overdraft is repayable on demand and interest payable is based on current South African money
market rates.
There were no defaults or breaches in terms of interest-bearing borrowings during the reporting periods.
Loan facility
The loan facility comprises a:
- R3 250 million bullet term loan facility with a term of five years (term loans)
- R2 000 million amortised term loan facility with a term of seven years (term loans)
- R2 750 million revolving credit facility with a term of five years (revolving credit facility).
Interest is based on JIBAR plus a margin of 3,25% (2016: 3,25%) for the bullet term loan facility (R3 250 million),
JIBAR plus a margin of 3,60% (2016: 3,60%) for the amortised term loan facility (R2 000 million) and JIBAR plus a
margin of 3,25% (2016: 3,25%) for the revolving credit facility (R2 750 million). The effective interest rate for
the transaction costs on the term loans is 0,24% (2016: 0,32%). Interest is paid on a quarterly basis for the term
loans, and on a monthly basis for the revolving credit facility.
The undrawn portion relating to the term loan facilities amounts to R1 750 million (2016: R1 750 million).
The undrawn portion of the revolving credit facility amounts to R2 750 million (2016: R750 million).
Bond issue
In terms of Exxaro’s R5 000 million DMTN programme, a senior unsecured floating rate note (bond) of R1 000 million
was issued in May 2014. The outstanding bond comprises a R520 million senior unsecured floating rate note due
19 May 2019.
During 2017 the R480 million senior unsecured floating rate note was settled. Interest on the R520 million bond
is based on JIBAR plus a margin of 1,95% (2016: 1,95%). The effective interest rate for the transaction costs
was 0,13% (2016: 0,13%) for the R480 million bond and 0,08% (2016: 0,08%) for the R520 million bond. Interest
is paid on a quarterly basis for both bonds.
Preference share liability
The preference share liability relates to the consolidation of NewBEECo (refer note 6). The preference share
liability represents 249 069 Class “A” variable rate cumulative redeemable preference shares issued on
11 December 2017 by NewBEECo at an issue price of R10 000 per share. The preference shares are redeemable
five years after the subscription date or earlier as agreed between the parties at R10 000 per share plus
the cumulative preference dividends. The preference shareholders are entitled to receive a dividend equal to
the issue price multiplied by the dividend rate of 80% of Prime Rate calculated on a daily basis based on a
365-day year compounded per period and capitalised per period.
Subscription undertakings for the full value of the preference shares were secured at a total cost of
R23,8 million. The preference share liability will be measured at amortised cost and the transaction costs
have therefore been included on initial measurement. The amount will be amortised over the five-year period.
Finance leases
Included in interest-bearing borrowings are obligations relating to finance leases for mining equipment.
At 31 December
2017 2016
Reviewed Audited
Rm Rm
19. Net cash/(debt)
Net cash/(debt) is presented by the following items on the
statement of financial position (excluding assets and
liabilities classified as held-for-sale): 70 (1 322)
- Cash and cash equivalents 6 606 5 195
- Non-current interest-bearing borrowings (6 480) (6 002)
- Current interest-bearing borrowings (2) (503)
- Overdraft (54) (12)
Analysis of movement in net debt:
Current Liabilities from financing
assets/ activities
liabilities Non-current Current
Cash and interest- interest-
cash equivalents/ bearing bearing Total
overdraft borrowings borrowings Rm
Rm Rm Rm
Net debt at 1 January 2016 2 055 (4 185) (882) (3 012)
Cash flows 3 203 (2 302) 803 1 704
- Interest-bearing borrowings raised 7 565 (7 548) (17)
- Interest-bearing borrowings repaid (6 066) 5 246 820
- Operating activities 3 918 3 918
- Investing activities (2 198) (2 198)
- Shares acquired in the market to settle
share-based payments (16) (16)
Non-cash movements (75) 485 (424) (14)
- Amortisation of transaction costs (15) (10) (25)
- Interest capitalised or interest accrued 89 89
- Movement in external shareholder loans (3) (3)
- Transfers between non-current and
current liabilities 503 (503)
- Translation difference on movement in cash
and cash equivalents (75) (75)
Net debt at 31 December 2016 5 183 (6 002) (503) (1 322)
Cash flows 1 416 (472) 515 1 459
- Interest-bearing borrowings raised 2 491 (2 491)
- Interest-bearing borrowings repaid (2 534) 2 019 515
- Operating activities 3 400 3 400
- Investing activities 4 377 4 377
- Repurchase of share capital (6 219) (6 219)
- Shares acquired in the market to settle
share-based payments (99) (99)
Non-cash movements (47) (6) (14) (67)
- Amortisation of transaction costs (9) (9)
- Preference dividend accrued (11) (11)
- Reclassification to non-current assets
held-for-sale (14) (14)
- Transfers between non-current and
current liabilities 5 (5)
- Translation difference on movement in cash
and cash equivalents (33) (33)
Net cash at 31 December 2017 6 552 (6 480) (2) 70
20. Financial liabilities
At 31 December
2017 2016
Reviewed Audited
Rm Rm
Non-current financial liabilities
Finance lease 56 66
Contingent consideration(1) 414 408
Deferred revenue(2) 374
Other 6 5
Total non-current financial liabilities 850 479
Current financial liabilities
Contingent consideration(1) 309 75
Share repurchase(3) 3 524
Deferred revenue(2) 62
Total current financial liabilities 371 3 599
Total financial liabilities 1 221 4 078
1 Relating to the ECC acquisition.
2 Deferred pricing adjustment recognised in relation to a coal supply agreement which will be released to profit
or loss over seven years.
3 During January 2017 Exxaro repurchased 43 943 744 ordinary shares from Main Street 333 for a purchase
consideration of R3 524 million.
21. Financial instruments
21.1 Carrying amounts and fair values
Due to the short-term nature of the current financial assets and current financial liabilities, the carrying
amount is assumed to be the same as the fair value. For the non-current financial assets and non-current financial
liabilities, the fair value is also equivalent to the carrying amounts.
21.2 Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and financial liabilities.
These fair value measurements are categorised into different levels in the fair value hierarchy based on the
inputs to the valuation techniques used. The different levels are defined as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the group can
access at the measurement date.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3 - unobservable inputs for the asset and liability.
Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm
At 31 December 2017 (Reviewed)
Financial assets held-for-trading at fair value
through profit or loss 4 4
- Current derivative financial assets 4 4
Financial assets designated at fair value through
profit or loss 1 391 1 391
- Environmental rehabilitation funds 1 357 1 357
- KIO 34 34
Available-for-sale financial assets 152 152
- Chifeng 152 152
Financial liabilities held-for-trading at fair
value through profit or loss (6) (6)
- Current derivative financial liabilities (6) (6)
Financial liabilities designated at fair value
through profit or loss (723) (723)
- Non-current contingent consideration (414) (414)
- Current contingent consideration (309) (309)
Net financial assets/(liabilities) held at fair value 1 391 (2) (571) 818
At 31 December 2016 (Audited)
Financial assets designated at fair value through
profit or loss 1 183 1 183
- Environmental rehabilitation funds 1 168 1 168
- New Age Exploration Limited 1 1
- KIO 14 14
Available-for-sale financial assets 178 178
- Chifeng 178 178
Financial liabilities held-for-trading at fair
value through profit or loss (25) (25)
- Current derivative financial liabilities (25) (25)
Financial liabilities designated at fair value
through profit or loss (483) (483)
- Non-current contingent consideration (408) (408)
- Current contingent consideration (75) (75)
Net financial assets/(liabilities) held at fair value 1 183 (25) (305) 853
21.2 Fair value hierarchy (continued)
Reconciliation of financial assets and financial liabilities within Level 3 of the hierarchy
Contingent
conside-
ration Chifeng Total
Rm Rm Rm
At 31 December 2015 (Audited) (39) 210 171
Movement during the year
Losses recognised for the period in profit or loss (445) (445)
Losses recognised for the period in other comprehensive
income (pre-tax effect)(1) (5) (5)
Exchange losses recognised for the period in other
comprehensive income (27) (27)
Exchange gains recognised for the period in profit or loss 1 1
At 31 December 2016 (Audited) (483) 178 (305)
Movement during the year
Losses recognised for the period in profit or loss (354) (354)
Losses recognised for the period in other comprehensive
income (pre-tax effect)(1) (26) (26)
Settlements 74 74
Exchange gains recognised for the period in profit or loss 40 40
At 31 December 2017 (Reviewed) (723) 152 (571)
1 Tax on Chifeng amounts to R12 million (2016: nil).
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 2017 and 2016, as shown in the
reconciliation above.
Valuation process applied by the group
The fair value computations of the investments are performed by the group’s corporate finance department,
reporting to the 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 value for over-the-counter derivative financial instruments are based on market quotes. These quotes
are assessed for reasonableness by discounting estimated future cash flows using the market rate for similar
instruments at measurement date.
21.3 Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as
significant inputs used in the valuation models
Chifeng
Chifeng is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable
price available for this investment. This unlisted investment is valued as the present value of the estimated
future cash flows, using a DCF model. The valuation technique is consistent to that used in previous reporting
periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment in Chifeng
are rand/RMB exchange rate, RMB/US$ exchange rate, zinc LME price, production volumes, operational costs and the
discount rate.
Sensitivity
analysis of a
10% increase
Sensitivity of in the inputs is
inputs and fair demonstrated
value below(2)
At 31 December 2017 (Reviewed) Inputs measurement(1) Rm
Observable inputs
Rand/RMB exchange rate R1,90/RMB1 Strengthening 15
of the rand
to the RMB
RMB/US$ exchange rate RMB6,52 to Strengthening 100
RMB7,28/US$1 of the RMB
to the US$
Zinc LME price (US$ per tonne in real terms) US$3 000 to Increase in 100
US$2 100 price of zinc
concentrate
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in 29
production
volumes
Operational costs (US$ million per annum in real terms) US$58,46 to Decrease in (75)
US$70,20 operations costs
Discount rate (%) 11,05% Decrease in the (12)
discount rate
1 Change in observable or unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis
that all other variables remain constant.
21.3 Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as
significant inputs used in the valuation models (continued)
Chifeng (continued)
Sensitivity
analysis of a
10% increase
Sensitivity of in the inputs is
inputs and fair demonstrated
value below(2)
At 31 December 2016 (Audited) Inputs measurement(1) Rm
Observable inputs
Rand/RMB exchange rate R1,96/RMB1 Strengthening 18
of the rand
to the RMB
RMB/US$ exchange rate RMB6,52 to Strengthening 158
RMB7,13/US$1 of the RMB
to the US$
Zinc LME price (US$ per tonne in real terms) US$2 026 to Increase in 158
US$2 113 price of zinc
concentrate
Unobservable inputs
Production volumes (tonnes) 85 000 tonnes Increase in 33
production
volumes
Operational costs (US$ million per annum in real terms) US$58,97 to Decrease in (129)
US$74,38 operations costs
Discount rate (%) 11,23% Decrease in the (15)
discount rate
1 Change in observable or unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the basis that all
other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within the range
of reasonably possible alternative assumptions for both reporting periods.
Contingent consideration
The potential undiscounted amount of all deferred future payments that the group could be required to make under the
ECC acquisition is between nil and US$120 million. The amount of future payments is dependent on the API4 coal price.
During 2017, there was an increase of US$28,5 million (R354 million) (2016: US$32,9 million (R445 million))
recognised in profit or loss for the contingent consideration arrangement.
API4 coal price range (US$/tonne) Future payment
Reference year Minimum Maximum US$ million
2015 60 80 10
2016 60 80 25
2017 60 80 25
2018 60 90 25
2019 60 90 35
21.3 Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant
inputs used in the valuation models (continued)
Contingent consideration (continued)
The amount to be paid in each of the five years is determined as follows (refer table above):
- If the average API4 price in the reference year is below the minimum API4 price of the agreed range, then no
payment will be made
- If the average API4 price falls within the range, then the amount to be paid is determined based on a formula
contained in the agreement
- If the average API4 price is above the maximum API4 price of the range, then Exxaro is liable for the full amount
due for that reference year.
An additional payment to Total S.A. amounting to R74 million was required for the 2016 reference year as the API4
price was within the agreed range. No additional payment to Total S.A. was required for the 2015 reference year as
the API4 price was below the range.
The contingent consideration is classified within Level 3 of the fair value hierarchy as there is no quoted market
price or observable price available for this financial instrument. This financial instrument is valued as the
present value of the estimated future cash flows, using a DCF model.
The significant observable and unobservable inputs used in the fair value measurement of this financial instrument
are rand/US$ exchange rate, API4 export price and the discount rate.
Sensitivity
analysis of a
10% increase
Sensitivity of in the inputs is
inputs and fair demonstrated
value below(2)
At 31 December 2017 (Revised) Inputs measurement(1) Rm
Observable inputs
Rand/US$ exchange rate R12,37/US$1 Strengthening 72
of the rand
to the US$
API4 export price (price per tonne) US$74,41 to Increase in 180
US$84,35 API4 export
price per tonne
Unobservable inputs
Discount rate (%) 3,44% Decrease in the (19)
discount rate
At 31 December 2016 (Audited)
Observable inputs
Rand/US$ exchange rate R13,63/US$1 Strengthening 48
of the rand
to the US$
API4 export price (price per tonne) US$57,19 to Increase in 248
US$75,00 API4 export
price per tonne
Unobservable inputs
Discount rate (%) 3,44% Decrease in the (21)
discount rate
1 Change in observable or 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, except for the API4
export price which would result in a decrease of R245 million for 2017, on the basis that all other variables
remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within the
range of reasonably possible alternative assumptions for both the reporting periods.
At 31 December
2017 (Re-presented)
Reviewed 2016
Rm Audited
Rm
22. Contingent liabilities
Total contingent liabilities 5 306 7 041
- Pending litigation and other claims(1) 876 1 136
- Operational guarantees(2) 3 346 4 465
- Share of contingent liabilities of equity-accounted investments(3) 1 084 1 440
1 Consists 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 a later stage.
2 Includes guarantees to banks and other institutions in the normal course of business from which it is anticipated
that no material liabilities will arise. The prior year contingent liabilities balances have been re-presented to
present the gross position of the back-to-back guarantees with customers (2017: R134 million; 2016: R134 million).
3 The decrease mainly relates to Cennergi guarantees cancelled after construction was finalised and the
liabilities settled.
The timing and occurrence of any possible outflows of the contingent liabilities above are uncertain.
SARS
On 18 January 2016, Exxaro received a letter of audit findings from SARS following an international income tax audit
for the years of assessment 2009 to 2013. According to the letter, SARS proposed that certain international Exxaro
companies would be subject to South African income tax under section 9D of the Income Tax Act. Assessments to the
amount of R442 million (R199 million tax payable, R91 million interest and R152 million penalties) were issued on
30 March 2016 and Exxaro formally objected against these assessments. These assessments were subsequently reduced
by SARS to R246 million (including interest and penalties). Resolution hearing with SARS was on 18 July 2017 but
the parties could not settle the matter. Notice was given to refer the matter to the Tax Court and Exxaro currently
awaits a court date.
These assessments have been considered in consultation with external tax and legal advisers and senior counsel.
Exxaro believes this matter has been treated appropriately by disclosing a contingent liability for the amount
under dispute.
23. Related party transactions
The group entered into various sale and purchase transactions with associates and joint ventures during the
ordinary course of business. These transactions were subject to terms that are no less, nor more favourable than
those arranged with independent third parties.
Exxaro’s previous majority BEE shareholder, Main Street 333, settled its loan with Exxaro and the accrued interest
thereon in January 2017. Refer note 6 for the details on the Replacement BEE Transaction.
24. Going concern
Based on the results for the year ended 31 December 2017, and the latest budget for 2018, as well as the available
bank facilities and cash generating capability, Exxaro satisfies the criteria of a going concern.
25. JSE Listings Requirements
The reviewed condensed consolidated annual financial statements were prepared in accordance with the Listings
Requirements of the JSE.
26. Events after the reporting period
Details of the final dividend proposed are given in note 12.
On 13 February 2018 Exxaro declared a special dividend amounting R4 502 million (refer note 12).
On 2 March 2018, Exxaro entered into a sale of asset agreement regarding the disposal of the NBC operation.
The sale will only be effective once all conditions precedent to the sales agreement have been met.
(Refer note 17).
Exxaro is exploring opportunities in the water and agriculture sector and is currently in active negotiations
for a potential investment.
The directors are not aware of any other significant matter or circumstance arising after the reporting period
up to the date of this report, not otherwise dealt with in this report.
27. Review conclusion
These reviewed condensed consolidated annual financial statements for the year ended 31 December 2017 have been
reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion. A copy of the auditor’s
review report is available for inspection at the company’s registered office together with the financial
statements identified in the auditor’s report.
28. Corporate governance
The Board of directors endorses the principles contained in King IV. Detailed disclosure of the company’s
application of these principles are set out in the supplementary information, as well as, in the 2017 Integrated
Report and will, in accordance with the JSE Listings Requirements, be available on the company’s website in
April 2018. The company has undertaken a process to determine the gaps to achieve application of King IV and will
disclose actions taken toward compliance in the Integrated Report for the year ending 31 December 2018. Please
contact the group company secretary and legal, Mrs SE van Loggerenberg, for any additional information.
29. Mineral resources and mineral reserves
Other than the normal LOM depletion, there were no material changes to the mineral resources and mineral reserves
estimates as disclosed in the 2016 integrated report. Exxaro has updated its internal competent persons report
for applicable operations to align with the third edition of the SAMREC Code which came into effect in
January 2017.
30. Key measures(1)
At 31 December
2017 2016
Closing share price (rand/share) 162,50 89,50
Market capitalisation (R billion) 58,29 32,05
Average rand/US$ exchange rate (for the year ended) 13,30 14,69
Closing rand/US$ spot exchange rate 12,37 13,63
1 Non-IFRS numbers.
Exxaro 2017 performance at a glance
Performance overview
- Revenue up 9% at R22,8 billion
- Core net operating profit of R5,8 billion at a 25% margin
- Core EBITDA up 17% at R7,2 billion
- Core HEPS increase by 38%
- Strong balance sheet with a net cash position
Growth in coal
- Coal tonnes produced up 5%
- Operating profit margin of 27%
- R6,0 billion coal net operating profit up 16%
Returning cash to shareholders
- Final dividend of 400 cps
- Special dividend of R12,55 per share paid on 5 March
Commentary
for the year ended 31 December
Comments below are based on a comparison between the financial years ended 31 December 2017 and 2016 (FY17
and FY16 respectively).
1. SAFETY
Exxaro recorded an LTIFR of 0,12 (FY16: 0,09) against a target of 0,11. The group regrettably incurred one
High Potential Incident at Grootegeluk Mine and one fatality at Matla Mine in 2017. Exxaro remains
committed to the Zero Harm Vision and to continuously improve all aspects of safety.
2. REPLACEMENT BEE TRANSACTION
Shareholders approved the Replacement BEE Transaction on 20 November 2017 and on 11 December 2017 Exxaro
implemented the transaction which comprised various indivisible transaction components, including the
MS333 Unwind, the Second Repurchase of 22 686 572 ordinary shares from MS333 and the Specific Issue of
67 221 565 ordinary shares to the new empowerment partner, NewBEECo.
The accounting impact of the Replacement BEE Transaction on the Exxaro group results is as follows:
- NewBEECo is consolidated in Exxaro’s group results as Exxaro has control over NewBEECo in terms of
IFRS 10 Consolidated Financial Statements
- The shares held by NewBEECo in Exxaro are treated as treasury shares and eliminated for group
reporting purposes
- The preference share liability of NewBEECo of R2 478 million, that was raised as part of NewBEECo’s
funding structure, is recognised as a financial liability for the Exxaro group
- A share-based payment expense, amounting to R4 245 million, is recognised in profit or loss which
relates to the potential benefit to be obtained by the BEE Parties. The share-based payment expense
was valued on 11 December 2017 using an option pricing model of which one of the assumptions was
the spot Exxaro share price of R152,35 per share.
3. FINANCIAL PERFORMANCE
The group’s net operating profit for FY17 increased by 17% (R860 million) to R6 060 million compared to
FY16. The coal business benefited from higher selling prices and volumes while the group’s results were
impacted by various once-off transactions; namely, the costs associated with the implementation of the
Replacement BEE Transaction (R4 339 million), and a net gain realised on the partial disposal of our
shareholding in Tronox Limited (R5 191 million). Refer to table 1 for a list of all key transactions
impacting Exxaro’s financial results. Exxaro is of the view that these impacts should be excluded in
order to enable a more meaningful year-on-year comparison.
The income from equity-accounted investments of R2 123 million for FY17 (FY16: R2 373 million)
decreased by 11%. Although there was a positive impact of a recovery in iron ore export prices coupled
with Exxaro’s share of an impairment reversal of property, plant and equipment (R716 million net of tax)
from SIOC, this was partly offset by R1 271 million, constituting Exxaro’s share of the loss incurred by
Tronox Limited, on the disposal of its Alkali chemicals business in September 2017.
4. COMPARABILITY OF RESULTS
The corporate transactions implemented during 2017 and 2016 have necessitated a change in the segmental
reporting structures and the manner in which the operating results are reported to the chief operating
decision-maker. Refer to notes 4 and 5 to the reviewed condensed consolidated annual financial statements
for additional information.
The key transactions shown in table 1 below should be taken into account to gain a better understanding
of the comparability of the results for the two years.
Table 1: Key transactions impacting on comparability
Reporting Description FY17 Description FY16
segment Rm (Re-
presented)
Rm
Coal -Insurance claim received 3 -Termination and (10)
by Leeuwpan from voluntary severance
external parties(1) packages
-Loss on disposal of (62) -Gain on disposal of 100
property, plant and operation (Inyanda)(1)
equipment(1)
- Gain on restructuring 203
of SDCT shareholding(1)
- Loss on disposal of (45)
property, plant and
equipment(1)
Ferrous - Impairment of property, (100)
plant and equipment
(FerroAlloys)(1)
- Termination and (1)
voluntary severance
packages
TiO2 and -Loss on dilution of (106) -Loss on dilution of (36)
Alkali chemicals shareholding in shareholding in
Tronox Limited(1) Tronox Limited(1)
-Gain on disposal of 5 191
partial investment
in Tronox Limited
including the recycling
of the foreign currency
translation reserve,
offset by a loss on the
recycling of the
financial instruments
revaluation reserve to
profit or loss(1,2)
Other -Receivable relating to (27) -Gain on disposal 670
the Mayoko iron ore of Mayoko iron
project written off ore project(1)
- Loss on disposal of (2) - Gain on disposal 10
property, plant of property, plant
and equipment(1) and equipment(1)
-Fair value adjustment (354) -Fair value adjustment (445)
on contingent consideration on contingent consideration
relating to the acquisition relating to the acquisition
of ECC of ECC
-Recycling of foreign (58) -Termination and (87)
currency translation voluntary severance
reserve on liquidation packages
of foreign entities to
profit and loss(1)
-BEE credentials expense (4 339)
and transaction costs
Group Total net operating 246 Total net operating 259
profit impact profit impact
1 Excluded from headline earnings.
2 The loss on recycling of the financial instruments revaluation reserve to profit or loss of R1 million
is not a headline earnings adjustment.
Coal -Tax on disposal of 18 -Tax on disposal of 13
property, plant and property, plant
equipment(1) and equipment(1)
-Tax on insurance (1) -Excess of fair value 35
claim received by over cost of investment
Leeuwpan(1) in RBCT(1)
-Post-tax share of Mafube (16)
impairment of property,
plant and equipment(1)
-Post-tax share of Mafube 1
gain on disposal of
property, plant and
equipment(1)
Ferrous -Post-tax share of SIOC (11) Tax on impairment of property, 27
loss on disposal of plant and equipment(1)
property, plant
and equipment(1)
-Post-tax share of SIOC 716 Excess of fair value over 221
reversal of impairment cost of investment in
of property, plant and SIOC1
equipment(1)
-Post-tax share of SIOC (28)
loss on disposal of property,
plant and equipment(1)
-Post-tax share of SIOC , (1)
impairment of property
plant and equipment(1)
TiO2 and -Post-tax share of Tronox (1 271) -Post-tax share of (9)
Alkali chemicals Limited loss on disposal Tronox restructuring costs
of Alkali chemical
business(1)
-Post-tax share of Tronox 1 -Post-tax share of Tronox 4
gain on disposal of gain on disposal of
property, plant and property, plant and
equipment(1) equipment(1)
Net financing cost -NewBEECo preference (11)
dividend accrued
(consolidation impact)
Group Total attributable (313) Total attributable 506
earnings impact earnings impact
1 Excluded from headline earnings.
5. COMMODITY PRICE PERFORMANCE AND GROUP SEGMENT RESULTS
The movements in main commodity prices impacting on Exxaro’s performance are summarised in table 2 below.
Table 2: Change in commodity prices
Average US$ per tonne%
Commodity price FY17 FY16 Change
API4 coal 84 64 +31
Iron ore fines (cost and freight (CFR) China) 71 58 +22
TiO2 pigment (cost, insurance and freight (CIF), US) 2 622 2 087 +26
Table 3: Group segment results (Rm)
Revenue Net operating profit/(loss)
FY17 FY16 FY17 (Re-presented)
Reviewed Audited Reviewed FY16
Audited
Coal 22 553 20 673 6 009 5 166
- Tied(1) 3 256 3 483 133 226
- Commercial 19 297 17 190 5 876 4 940
Ferrous 243 170 53 (47)
- Alloys 243 170 54 (75)
- Other (1) 28
TiO2 and Alkali chemicals 5 085 (36)
Other 17 54 (5 087) 117
Total 22 813 20 897 6 060 5 200
1 Mines managed on behalf of and supplying their entire production to Eskom in terms of contractual
agreements.
6. FINANCIAL AND OPERATIONAL RESULTS
6.1. Group financial results
6.1.1. Revenue and net operating profit
Consolidated group revenue increased by 9% to R22 813 million (FY16: R20 897 million) mainly due to
higher coal selling prices as well as higher Eskom commercial volumes at Grootegeluk based on demand
from the Medupi Power Station. The average price per tonne achieved on export sales was US$69
(FY16: US$50). A stronger average spot exchange rate of R13,30 to the US dollar for FY17
(FY16: R14,69) was realised, an appreciation of approximately 9%.
Consolidated group net operating profit increased by 17% to R6 060 million (FY16: R5 200 million),
net of costs associated with the Replacement BEE Transaction of R4 339 million and a net gain of
R5 191 million realised on the partial disposal of 22,4 million Class A ordinary shares in Tronox
Limited (including the gains on translation differences recycled to profit or loss of R1 332 million).
6.1.2. Earnings
Earnings, which include Exxaro’s equity-accounted investments in associates and joint ventures, were
R5 982 million (FY16: R5 679 million) or 1 923 cents per share (FY16: 1 600 cents per share), impacted
by the various once-off transactions.
Headline earnings were 66% lower at R1 560 million (FY16: R4 621 million) or 502 cents per share
(FY16: 1 302 cents per share), primarily driven by the Replacement BEE Transaction costs of
R4 339 million (1 395 cents per share), which are not adjusted for in headline earnings.
Table 4: Equity-accounted income/(loss) (Rm)
Equity-accounted Dividends
income/(loss) received
FY17 FY16 FY17 FY16
Reviewed Audited Reviewed Audited
SIOC(1) 3 303 2 416 1 390
Tronox(2) (1 643) (384) 109 298
Mafube 259 238 450
Black Mountain 226 100
Cennergi 2 3
RBCT(3) (24)
Total 2 123 2 373 1 499 748
1 FY17 includes R716 million that relates to Exxaro’s share of property, plant and equipment impairment
reversal; FY16 includes R221 million excess of fair value over the cost of the investment which arose
on the 0,64% increase in Exxaro’s shareholding in SIOC.
2 Tronox Limited investment (excluding the 26% shareholding in South African and UK operations) has been
classified as a non-current asset held-for-sale on 30 September 2017 upon which the application of the
equity method ceased. FY17 includes an amount of R1 271 million that relates to Exxaro’s share of the
loss realised on the disposal of the Alkali chemicals business.
3 FY16 includes R35 million excess of fair value over the cost of the investment which arose on the
increase in the shareholding in RBCT, offset by R35 million equity-accounted loss.
6.1.3. Cash flow and funding
Cash flow generated by operations increased by R1 277 million to R6 826 million (FY16: R5 549 million),
mainly due to higher revenue.
Cash flows from investing activities increased by R6 575 million to a net inflow of R4 377 million
(FY16: R2 198 million net outflow), mainly due to Exxaro’s partial disposal of the investment in Tronox
Limited, realising net proceeds of US$474 million (R6 525 million) and dividends received of R1 499 million
(FY16: R748 million) comprising R1 390 million from SIOC (FY16: nil) and R109 million (FY16: R298 million)
from our investment in Tronox Limited.
Cash flows from financing activities decreased by R7 844 million to a net outflow of R6 361 million
(FY16: R1 483 million net inflow), mainly due to the following:
- The repurchase of Exxaro ordinary shares to the value of R3 524 million from MS333 in January 2017,
using cash generated from Exxaro’s own operations
- The second repurchase to the value of R2 695 million from MS333 as part of the implementation of the
Replacement BEE Transaction.
6.1.4. Debt exposure
The group was in a net cash position of R84 million (including R14 million classified as a non-current
asset held-for-sale) at 31 December 2017 compared to a net debt position of R1 322 million at
31 December 2016. The net cash position of R84 million is net of a R2 478 million net preference share
liability recognised as a result of consolidating NewBEECo.
Exxaro’s balance sheet structure remains strong. During FY17, Standard & Poor’s upgraded Exxaro’s domestic
credit rating to zaBBB.
6.2. Coal business performance
Table 5: Unreviewed coal production and sales volumes (‘000 tonnes)
Production Sales
FY17 FY16 FY17 FY16
Thermal 42 843 40 811 43 258 42 489
Tied 7 400 7 900 7 403 7 893
Commercial 35 443 32 911 35 855 34 596
- Domestic 28 243 26 738
- Export 7 612 7 858
Metallurgical 2 132 1 985 1 190 1 298
Commercial: domestic 2 132 1 985 1 190 1 298
Total coal 44 975 42 796 44 448 43 787
Semi-coke 86 54 88 65
Total coal (excluding buy-ins) 45 061 42 850 44 536 43 852
Thermal coal buy-ins 504 606
Total coal (including buy-ins) 45 565 43 456 44 536 43 852
International seaborne trade remained strong during FY17, largely owing to sustained demand in Asia
Pacific. The slow increase in coal demand out of China was met with production challenges in both
Indonesia and Australia due to adverse weather conditions (heavy rainfalls in Indonesia and cyclone
Derby in Australia). South Africa filled the gap left by Australia in South Korea and the sustained
freight arbitrage favoured South African supply.
India, on the other hand, remained the flagship market for South African coal as demand remained
relatively stable for lower grade material after a sluggish start to the year. European coal
demand saw a slight increase after France placed some of its nuclear power plants under care and
maintenance. Overall, there were strong fundamentals supporting the bullish sentiment that saw
international API4 coal prices across indices trading around the US$100 per tonne mark at year end.
Trading conditions in the domestic market were strong in FY17, as consumers scrambled for all grades
of coal, as demand from the export market remained upbeat due to strong international thermal coal
prices offset by a stronger rand/US$ exchange rate. Exxaro experienced strong demand for all its
products in the domestic segments.
The benchmark API4 RBCT export price averaged US$84 per tonne versus the US$64 per tonne in FY16,
ending the year at US$95 per tonne.
Export volumes decreased from 7,9Mt in FY16 to 7,6Mt in FY17, mainly as a result of lower volumes
from ECC, lower buy-ins and congestion experienced at RBCT, driven by adverse weather conditions.
The group realised an average export price of US$69 per tonne in FY17 against US$50 per tonne in
FY16.
6.2.1. Production and sales volumes
Overall coal production volumes (excluding buy-ins) were 5% (2 179kt) higher than in FY16. The increase
can mainly be attributed to higher production at Grootegeluk in line with Addendum 9 to the Medupi
Coal Supply Agreement. Although production was 5% higher, sales volumes were only 2% higher (661kt)
due to strategic stockpiling at Grootegeluk.
6.2.1.1. Metallurgical coal
Grootegeluk’s metallurgical coal production was 147kt (7%) higher mainly due to additional production
from Grootegeluk plant 10 (GG10) and reduced unplanned operational interruptions as a result of
increased maintenance as well as improvement efforts to the plant waste system (backfill and plant
conveyors).
6.2.1.2. Thermal coal
Tied mines
Power station coal production from Matla was 500kt (6%) lower mainly due to the shortwall stop from
December 2016 to May 2017 and unfavourable geological conditions.
Commercial mines
The commercial mines’ thermal coal production was higher by 2 532kt (8%) primarily as a result of
the following factors:
- Increased production, mainly at Grootegeluk, of 2 789kt (14%) due to the ramp up volumes
according to Addendum 9 to the Medupi Coal Supply Agreement
- Higher production at ECC 156kt (4%) mainly as a result of higher production at DCM West and
FZO South.
The increase was partly offset by:
- Lower production at Leeuwpan 419kt (11%) due to lower production in the crush and screen plant,
dismantling of the JIG plant, lower ROM availability, industrial action and lower overburden
removal
- Lower production at Mafube of 112kt (18%).
Domestic thermal coal sales from commercial mines was 1 505kt (6%) higher mainly as a result of:
- Increased sales at Grootegeluk of 1 988kt (10%) which is in line with the ramp up volumes
according to Addendum 9 to the Medupi Coal Supply Agreement
- Higher sales at ECC 171kt (34%) mainly due to more sized product available and more discard
re-wash product available for sale at FZO South.
The increase was partly offset by:
- No power station coal sold by Leeuwpan in FY17 (FY16: 416kt) as a result of the termination
of the Eskom Supply Agreement, and redirecting this coal into the export market as well as
slightly lower other domestic sales of 64kt
- Lower NBC sales 162kt (5%) due to the expiry of the Coal Supply Agreement with Eskom. This
contract has subsequently been extended to June 2018.
The semi-coke production was 32kt (59%) higher mainly due to the increased demand in the
Ferrochrome industry.
6.2.2. Revenue and net operating profit
Coal revenue of R22 553 million was 9% higher than FY16 (R20 673 million). The increased revenue
from commercial mines was due to higher selling prices as well as an increase in Eskom volumes.
This was partly offset by lower semi-coke domestic sales volumes.
Net operating profit of R6 009 million (FY16: R5 166 million) represents an increase of 16%, at
an operating margin of 27%, mainly due to:
- Higher prices (+R2 242 million)
- Higher volumes (+R445 million)
- Net scope changes on environmental rehabilitation provisions (+R168 million).
The increase was partly offset by:
- Exchange rate variance due to stronger local currency against the US dollar (-R272 million)
- Inflation (-R505 million)
- Product mix variance at EITAG (-R307 million)
- Closure of Inyanda operation and subsequent disposal (-R235 million)
- Additional outside services for mining contractors (-R255 million)
- Proceeds on sale of SDCT in FY16 (-R203 million).
6.3. Ferrous business
6.3.1. Net operating profit
Net operating profit increased by R100 million to R53 million in FY17 from the net operating loss
of R47 million reported for FY16. The increase is mainly as result of a R100 million pre-tax
impairment charge of the ferrosilicon plant at FerroAlloys which was accounted for in FY16.
6.3.2. Equity-accounted investments
The increase in equity-accounted income from SIOC of R887 million to R3 303 million in FY17, is
largely attributable to the increase in export iron ore prices, as well as Exxaro’s share of a
post-tax impairment reversal of R716 million relating to property, plant and equipment. An interim
dividend of R1 390 million was received from SIOC in FY17 (FY16: nil). A final dividend, of which
Exxaro’s share will be R1 306 million, was declared on 8 February 2018.
6.4. Titanium dioxide and Alkali chemicals
6.4.1. Equity-accounted investment
Equity-accounted losses from the Tronox investment increased from R384 million in FY16 to
R1 643 million in FY17, mainly due to Exxaro’s share of the loss realised on the disposal of the
Alkali chemicals business in September 2017 of R1 271 million.
The Tronox Limited investment was classified as a non-current asset held-for-sale on
30 September 2017 and the application of the equity method ceased on that date. As the Tronox
Limited investment represents a major geographical area of operation and represents the majority
of the TiO2 and Alkali chemicals reportable operating segment, the nine months results of Tronox
Limited were presented as a discontinued operation.
Subsequent to the classification as a non-current asset held-for-sale, Exxaro completed an initial
offering of 22,4 million Class A Tronox Limited ordinary shares. This partial disposal in Tronox
Limited reduced Exxaro’s shareholding from 51,2 million to 28,7 million shares, representing
23,66% of the total outstanding voting shares of Tronox Limited as at 31 December 2017.
Exxaro will continue to assess market conditions going forward for further possible sell downs of
its remaining investment in Tronox Limited.
6.5. Energy business
6.5.1. Equity-accounted investment
Equity-accounted income from Cennergi, a 50% joint venture with Tata Power, remained flat at
R2 million for FY17 (FY16: R3 million). The two windfarm projects which were brought into commercial
operation during 3Q16 are running at planned capacity. FY17 represents a full year of revenue
generation which was offset by a full year of depreciation and finance costs expensed to profit or
loss.
7. SALE OF NON-CORE ASSETS AND INVESTMENTS
As part of Exxaro’s optimisation programme of the coal portfolio, Exxaro concluded a sale of shares
agreement with Universal for ECC’s 100% shareholding in Manyeka, which includes a 51% interest in
Eloff. The sale is conditional on Competition Commission approval as well as section 11 approval in
terms of the MPRDA for the transfer of the mining right. The investment in Manyeka has been classified
as a non-current asset held-for-sale on 30 September 2017. On 31 December 2017 conditions precedent to
the sale agreement had not yet been met.
In addition to the above Exxaro took the decision to divest from the NBC operation and the divestment
process commenced during August 2017. On 31 December 2017, the NBC operation has been classified as
a non-current asset held-for-sale. On 2 March 2018, Exxaro concluded a sale of asset agreement for
the disposal of the NBC operation. The sale will only be effective once all conditions precedent to
the sales agreement have been met.
8. PERFORMANCE AGAINST NEW B-BBEE CODES AND MINING CHARTER
Exxaro currently has a level 6 contribution status. The gaps to improve the status have been analysed
to improve the contribution status year-on-year. Enterprise and Supplier Development has been
identified as an area to receive greater focus in the future.
The revised mining charter (Mining Charter III) has not yet been gazetted, and the mining industry
should have clarity by the end of 2018 on the new legislation.
9. ADDITIONAL INFORMATION WITH REGARDS TO THE REPLACEMENT BEE TRANSACTION
Exxaro has set out in the Circular to shareholders dated 23 October 2017, that a portion of its
shareholding in NewBEECo is earmarked for the empowerment of communities and employees. Exxaro has
undertaken to:
- Finalise an appropriate structure to transfer no less than 10% of its equity holding in NewBEECo
for the empowerment of relevant employees and communities by 30 June 2018
- In consultation with the IDC and PIC pursue, in good faith, the possibility of listing the shares
of NewBEECo on a stock exchange which restricts trading to HDSA parties, by no later than
30 November 2018, to further broaden Exxaro’s BEE shareholding base.
10. MINERAL RESOURCES AND MINERAL RESERVES
Other than the normal LOM depletion, there were no material changes to the mineral resources and
mineral reserves estimates as disclosed in the 2016 integrated report.
Exxaro has updated its internal competent persons reports for applicable operations to align this
with the third edition of the SAMREC Code which came into effect in January 2017.
11. MINING AND PROSPECTING RIGHTS
The Leeuwpan mining right (including the expansion area mining right) has been registered.
Ministerial consent (section 102) to amalgamate the two rights has been received and execution is
expected to occur in the first quarter of 2018.
Exxaro also submitted amendments to existing rights to either protect or ensure greater LOM
potential. These include the addition of associated minerals to the Thabametsi Mining right,
additional mining methods at Matla for greater extraction and the inclusion of environmental and
infrastructure liabilities in the Grootegeluk mining right area.
The Arnot South Prospecting right renewal was successfully concluded during the year.
12. Environmental
All outstanding environmental and rezoning appeals for the Exxaro Belfast Project have been
successfully resolved, and the mine construction commenced in October 2017. The Leeuwpan expansion
environmental licences and wayleave permit were also granted with construction commencing in
October 2017.
13. MINE CLOSURE AND Environmental LIABILITIES
The Financial Provisioning Regulations in terms of NEMA were re-published on 10 November 2017 for
comment, reflecting favourable changes from the original December 2015 version.
The latest version of the NEMA Financial Provisioning Regulations (GNR 1228) will have less of an
impact on Exxaro than the previous version. In principle Exxaro is already compliant with most of
the requirements of the Financial Provisioning Regulations.
14. OUTLOOK
In 2017, the best global economic growth rate in seven years was supported by sound macro-economic
policies, which enabled key world economies to grow at or above trend. Barring any shock, this global
expansion momentum is expected to continue into FY18. The current favourable global environment,
strong global growth outlook and rising global trade volumes, as well as positive foreign
international sentiment are expected to support South Africa’s growth prospects. The implications of
a potential local currency denominated debt downgrade by Moody’s, coupled with continuous fiscal
budget deficit challenges, will prolong the extreme volatility of the rand/US$ exchange rate
experienced to date.
Exxaro expects an improvement in the operational results of the coal business for 1H18 primarily
driven by:
- Good export prices leading to a shortage of coal in domestic markets, underpinning stronger
domestic prices
- The Medupi offtake is expected to follow minimum agreed Coal Supply Agreement volumes. This
will be the first commercial year for the minimum contract volumes as agreed in the Coal
Supply Agreement after the previous addendums
- Stable seaborne demand internationally
- Exxaro’s operational excellence process delivering sustainable improved results as well as
technology and innovation improvements starting to contribute positively with the establishment
of the innovation project office.
A relatively stable international thermal coal market is anticipated for 1H18. The iron ore market
remains well supplied and expected to soften somewhat as further volumes enter the market. The current
strong titanium dioxide pigment fundamentals momentum is anticipated to continue into 1H18.
15. SPECIAL DIVIDEND
In October 2017 Exxaro disposed of a portion of its shareholding in Tronox Limited. In assessing the
application of the proceeds realised on the disposal, the board of directors of Exxaro considered
Exxaro’s growth prospects, future capital commitments, the repayment of debt and the return of capital
to its shareholders. On 13 February 2018, Exxaro declared a special dividend of R4 502 million out of
income reserves, which equates to 1 255 cents per share. The dividend was paid on 5 March 2018 to
shareholders on the register on 2 March 2018.
16. FINAL DIVIDEND
Exxaro’s dividend policy is based on a cover ratio of between 2,5 and 3,5 times core attributable
earnings.
Notice is therefore given that a gross final cash dividend, number 30 of 400 cents (final
FY16: 410 cents) per share, for the financial year ended 31 December 2017 was declared, payable to
shareholders of ordinary shares. For details of the dividend, please refer note 12 of the reviewed
condensed consolidated annual financial statements.
Salient dates for payment of the final dividend are:
Last day to trade cum dividend on the JSE Tuesday, 17 April 2018
First trading day ex dividend on the JSE Wednesday, 18 April 2018
Record date Friday, 20 April 2018
Payment date Monday, 23 April 2018
No share certificates may be dematerialised or re-materialised between Wednesday, 18 April 2018 and
Friday, 20 April 2018, 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,
23 April 2018.
17. CHANGES TO THE BOARD
Shareholders are hereby advised, in compliance with paragraph 3.59 of the Listings Requirements of the
JSE Limited, of the following changes to the Board of directors (Board).
As a result of the Replacement BEE Transaction whereby the previous shareholder structure was unwound,
the following directors nominated by their respective shareholder constituencies, resigned with
immediate effect:
- Dr MF (Fazel) Randera
- Mr D (Rain) Zihlangu
- Mrs S (Salu) Dakile-Hlongwane
- Mr VZ (Zwelli) Mntambo
- Ms MW (Monhla) Hlahla
The Board expresses its sincere appreciation to the above individuals for their dedication, service,
invaluable contribution to the business and commitment during their tenure.
In terms of the Replacement BEE Transaction, NewBEECo is entitled to nominate four individuals for
consideration as directors to the Board. After carefully having considered the nominations, the Board
is pleased to announce the appointment of the following non-executive directors, as a result of the
Replacement BEE Transaction, with immediate effect:
- Ms Monhla Wilma Hlahla - Masters of Arts (MA) Urban Planning, UCLA School of Architecture and
Planning, USA; Advanced Management Program (AMP), INSEAD, France; Certificate in Accounting and
Finance, Wits Business School
- Mr Vincent Zwelibanzi Mntambo - BJuris, LLB (Univ North West), LLM (Yale)
- Ms Likhapha Mbatha - LLB (University of Lesotho); LLM (University of Witwatersrand)
- Ms Daphne Mashile-Nkosi - Small business management diploma (University of Witwatersrand)
The Board is of the view that their diverse skills and experience will contribute positively to the
development and execution of the Exxaro strategy.
Dr Deenadayalen (Len) Konar, who has been an independent non-executive director since November 2006
and who also served as chairman of the Board, will be retiring by rotation at the upcoming AGM on
24 May 2018 and will regrettably not be available for re-election. The Board wishes to thank
Dr Konar and expresses its sincere appreciation for his outstanding leadership and valuable
contribution throughout his tenure as independent non-executive director and chairman. His resilience,
acumen and deep business knowledge have stood the organisation in good stead.
Furthermore, Dr CJ (Con) Fauconnier, a seasoned independent non-executive director and mining
professional, who has served on the Board since November 2013, recently turned 70 and will retire in
terms of the requirements of the Memorandum of Incorporation of the Company, by virtue of his age and
will not offer himself for re-election. The Board wishes to thank Dr Fauconnier for his immense
contribution over the years which has lent credence to the maturity and expertise of the Board.
As a result of Anglo American’s disposal of its entire interest in Exxaro, Mr S (Saleh) Mayet, who
has served as a non-executive director since August 2015, will retire at the AGM and will not offer
himself for re-election. His technical and commercial insights with regard to mining were invaluable
to the team.
The Board also welcomes Ms Anuradha Singh - BSc Eng (Mechanical) - University of Natal (Durban), 1994;
MBA - Wits Business School, 2000 Being a Director Parts I & II - Institute of Directors South Africa,
as an independent non-executive director. Ms Singh will bring a richness of skills to augment the
Board.
18. GENERAL
Additional information on financial and operational results for the financial year ended
31 December 2017, and the accompanying presentation can be accessed on our website on
www.exxaro.com.
On behalf of the board
Len Konar Mxolisi Mgojo Riaan Koppeschaar
Chairman Chief executive officer Finance director
6 March 2018
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),
PA Koppeschaar*(finance director), Dr CJ Fauconnier***, V Nkonyeni***, VZ Mntambo**,
EJ Myburgh***, J van Rooyen***, PCCH Snyders***, L Mbatha**, D Mashile-Nkosi**,
A Singh ***
*Executive
**Non-executive
***Independent non-executive
Prepared under supervision of:
PA Koppeschaar, CA(SA)
SAICA registration number: 00038621
Group company secretary
SE van Loggerenberg
Transfer secretaries
Computershare Investor
Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue, Rosebank, 2196
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
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”)
If you have any queries regarding your shareholding in Exxaro Resources Limited, please contact the transfer
secretaries at +27 11 370 5000.
ANNEXURE: Acronyms
AGM Annual general meeting
Anglo Anglo South Africa Capital Proprietary Limited
B-BBEE Broad-based black economic empowerment
BEE Black economic empowerment
BEE Implementation Date The day that the Replacement BEE Transaction (excluding the Second
Repurchase) is implemented, which was 11 December 2017
BEE Parties BEE SPV and IDC
BEE Reinvested Shares 40 390 461 Exxaro shares reinvested as part of the Replacement BEE Transaction,
being the sum of 28 052 845 Exxaro shares reinvested pursuant to the MS333
Reinvestment and 12 337 616 Exxaro Shares reinvested pursuant to the IDC
Reinvestment
BEE Shares The 107 612 026 Exxaro shares that NewBEECo holds after the implementation of
the Replacement BEE Transaction
BEE SPV K2016475450 (South Africa) Proprietary Limited, a special purpose private
company incorporated in accordance with the laws of South Africa, for the
purposes of holding the Reinvesting MS333 Shareholders’ interests in NewBEECo,
reinvested pursuant to the MS333 Reinvestment
Black Mountain Black Mountain Proprietary Limited
Cennergi Cennergi Proprietary Limited
Chifeng Chifeng Kumba Hongye Corporation Limited
Companies Act Companies Act No 71 of 2008, as amended
Curapipe Curapipe Systems Limited
DCF Discounted cash flow
DCM Dorstfontein Coal Mine
DMTN Domestic Medium-Term Note
ECC Exxaro Coal Central Proprietary Limited
EITAG Exxaro International Trading AG
Eloff Eloff Mining Company Proprietary Limited
EMJV Ermelo joint venture
Exiting MS333 Interests The Exxaro shares held by MS333 excluding the BEE Reinvested Shares
Exxaro Exxaro Resources Limited
Exxaro Independent Shareholders Exxaro Shareholders excluding MS333, MS333’s direct and indirect shareholders
and NewBEECo
FY16 Financial year ended 31 December 2016
FY17 Financial year ended 31 December 2017
FZO Forzando Coal Mine
GG Grootegeluk
HDSA The meaning given to it, or any equivalent or replacement term, in the
broad-based socio-economic empowerment charter for the South African Mining
Industry, developed under section 100 of the MPRDA, as amended or replaced
from time to time
HEPS Headline earnings per share
IAS International Accounting Standard
IASB International Accounting Standards Board
IDC Industrial Development Corporation of South Africa Limited
IDC Reinvestment The IDC reinvestment into the Replacement BEE Transaction by contributing
12 337 616 Exxaro shares to NewBEECo, and being issued 22,9% of the ordinary
shares in NewBEECo as consideration
IFRS International Financial Reporting Standard
JIBAR Johannesburg Interbank Agreed
kcal Kilocalorie
King IV King IV Report on Governance for South Africa 2016
KIO Kumba Iron Ore Limited
kt Kilo tonnes
Listings Requirements JSE Listings Requirements
LME London Metal Exchange
LOM Life of mine
LTIFR Lost-time injury frequency rate
Mafube Mafube Coal Proprietary Limited
Main Street 333 or MS333 Main Street 333 Proprietary Limited (RF)
Manyeka Manyeka Coal Mines Proprietary Limited
Mpower 2012 Exxaro Employee Empowerment Trust
MPRDA Mineral and Petroleum Resources Development Act 28 of 2002
MS333 Reinvestment The Reinvesting MS333 Shareholders’ reinvestment into the New Empowerment
Structure by contributing 28 052 845 Exxaro shares to BEE SPV, which were
utilised by BEE SPV to subscribe for 52,2% of the ordinary shares in NewBEECo,
and being issued ordinary shares in BEE SPV on a pro rata basis as
consideration
MS333 Unwind The unwinding of the Previous BEE Transaction in accordance with the
Transaction Agreements
Mt Million tonnes
NBC North Block Complex
NEMA National Environmental Management
Act of 1998
New Empowerment Structure The tiered NewBEECo shareholding structure of the ordinary shareholders and
respective shareholding percentages
NewBEECo K2016473215 (South Africa) Proprietary Limited, a special purpose private company
incorporated in accordance with the laws of South Africa, which will hold the
BEE Shares
PIC Public Investment Corporation
PRC People’s Republic of China
Previous BEE Transaction The series of transactions entered into by Kumba Resources Limited, Anglo
American Plc and Eyesizwe Mining Proprietary Limited which resulted in the creation
of Exxaro, the unbundling of Kumba Iron Ore Limited and the acquisition of a
controlling interest in Exxaro by MS333, as captured in the relevant circular
date 9 October 2006
Prime Rate South African prime bank rate
PwC PricewaterhouseCoopers Incorporated
RBCT Richards Bay Coal Terminal
Rbn Rand billion
Reinvesting MS333 Shareholders Each of the below, together with their holdings in the ordinary share capital of
BEE SPV, set alongside such shareholder’s name:
- Dreamvision Investments 15 Proprietary Limited (RF), 84,2%
- Basadi Ba Kopane Investments Proprietary Limited (RF), 12,7%
- Eyabantu Capital Consortium Proprietary Limited, 3,1%
Replacement BEE Transaction The transaction implemented which resulted in Exxaro being held 30% by HDSAs,
and which transaction includes, as indivisible elements, the Second Repurchase,
the MS333 Unwind and the Specific Issue
Rm Rand million
RMB Chinese renminbi
ROM Run of mine
SAICA South African Institute of Chartered Accountants
SAMREC Code The South African code for the reporting of exploration results, mineral resources
and mineral reserves
SARS South African Revenue Service
SDCT South Dunes Coal Terminal SOC Limited
Second Repurchase Repurchase by Exxaro of 22 686 572 Exxaro shares from MS333 for consideration of
R118,76 per share
SENS Securities Exchange News Service
SIOC Sishen Iron Ore Company Proprietary Limited
SOC State-owned company
Specific Issue Specific issue by Exxaro of 67 221 565 shares to NewBEECo for consideration of
R73,92 per share
SSCC Semi-soft coking coal
Tata Power Tata Power Company Limited
TiO2 Titanium dioxide
Transaction Agreements The detailed agreements entered into by various parties to give effect to the
Replacement BEE Transaction
Tronox Exxaro’s investment in Tronox entities
Tronox SA Tronox KZN Sands Proprietary Limited and Tronox Mineral Sands
Proprietary Limited
Tronox UK Tronox Sands Limited Liability Partnership in the United Kingdom
Universal Universal Coal development IV Proprietary Limited
US$ United States dollar
VAT Value added tax
VWAP Volume weighted average price
WATP Weighted average trading price
Disclaimer
Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information
or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the company) to differ
materially from those expressed or implied in the forward looking statements. Financial forecasts and data given herein
are estimates based on the reports prepared by experts who in turn relied on management estimates. Undue reliance should
not be placed on such opinions, forecasts or data. No representation is made as to the completeness or correctness of
the opinions, forecasts or data contained herein. Neither the company, nor any of its affiliates, advisers or
representatives accepts any responsibility for any loss arising from the use of any opinion expressed or forecast or data herein.
Forward looking statements apply only as of the date on which they are made and the company does not undertake any
obligation to publicly update or revise any of its opinions or forward looking statements whether to reflect new data or
future events or circumstances.
www.exxaro.com
Date: 08/03/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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