An update from Dr Nombasa Tsengwa, CEO Designate and MD Minerals

Where does the Minerals business fit into the strategy? How are we building capabilities for a diversified mining company? What role will coal play in the Sustainable Growth & Impact (SG&I) Strategy and the overall mission of the Minerals business?

What is the Exxaro Minerals journey?

The Exxaro Minerals journey is a measured one, with a purposely driven target, which is to build a minerals business that represents 50% of coal EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation and is a widely used measure of a company’s performance) within the next decade. This is an aspiration we hold on to, but not at all costs! Ours will be guided by a sound investment criteria that helps us achieve our objectives.

Our mission holds firm and is based on two key principles:

• We aim to use Exxaro’s mining skills to supply minerals that power a cleaner world, and
• Provide our shareholders with superior returns while driving our decarbonisation ambitions.

There is no better time than now for Exxaro to embark on this journey. Given our fiscal performance over the last five years, Exxaro is in a position of strength, which can only be leveraged through an ambitious growth strategy.

What does our recent performance tell us about the business?

Looking back, we have proven that we can create value. We have achieved an above target Return On Capital Employed of 25% over the past four years. We achieved an average net Debt-to-Equity ratio of 9%. This proves that we have a healthy balance sheet to leverage growth. So we are perfectly positioned to leverage up and exploit the minerals opportunity in front of us.

This strategy offers the ability to scale the organisation, and through this, diversify geographically into other minerals, giving us access to a diverse suite of markets. We’re also offering strong growth prospects underpinned by robust fundamentals enabled by de-risked investment criteria.

What role will Coal play?

Our Coal business is the cornerstone that has driven the value creation for our stakeholders, and it will remain an integral part of our strategy and a driver of value going forward. Our reality as a business is that coal, as an energy source, carries a social and environmental burden on society. With the global focus on climate change, and our own aspiration to achieve carbon neutrality by 2050, this has emphasised the need to transition in a responsible manner into a low carbon economy.

In the near term, coal is likely to remain dominant in South Africa’s energy mix. Our Coal business remains robust, delivering high-quality coal safely and cost efficiently to generate returns for shareholders. It also meets market requirements and is able to respond to broader stakeholder needs and expectations.