Operational performance

Coal

All time records achieved in FY18

• Production volumes of 47.8Mt
• Sales volumes of 45.2Mt
• Export volumes of 8.0Mt

Despite changes in the coal portfolio, with some operations mining diminishing reserves plus delayed expansion projects, our optimisation initiatives are delivering value, particularly operational excellence and digitalisation. These record achievements position us well to launch into the next phase of volume and value growth as our projects become operational.

Total coal product (Mt)		Total exports (Mt)		Total coal sales (Mt)

Cash cost per tonne – Excluding Matla (R/t)		The average API4 price was strong for FY18. Although Exxaro's average export price for FY18 was higher than prior years, it was lower than the average API4 price for the review period. This was due to our product mix, which was affected by China's clampdown on Indonesian lower-grade imports. This, in turn, resulted in oversupply in the Indian market. Cash cost per tonne Cash cost per tonne was affected by higher labour, maintenance and project costs, as well as lower volumes. We continue to drive operational excellence - using the benefits of digitalisation to visualise in real-time the mass flow of coal from pit to port. These integrated visual operations centres augment our operational excellence initiatives for a step-change that will protect margins from inflationary pressures and improve productivity.

Ferrous

SIOC

• R2.6 billion post-tax equity-accounted income
• Dividend of R2.6 billion in FY18.

Energy

Cennergi performance

• Core equity-accounted income of R65 million (2017: R2 million)
• Cash returned to Exxaro of R244 million.

Titanium dioxide (TiO2)

• Tronox SA reported improved operating performance, reflected in increased core equity-accounted income of R382 million (2017: R67 million)
• Exxaro's membership interest in Tronox UK was classified as a non-current asset held-for-sale on 30 November 3018. Subsequent to year end, this interest was disposed of for R2.1 billion
• Our 23.4% interest in Tronox Limited remains classified as a non-current asset held-for-sale and we are committed to monetising this asset through an efficient and stages sales process.

Sale of non-core assets and investments

In line with our portfolio optimisation strategy, our interests in Black Mountain and the Chifeng refinery in Mongolia remain non-core. We intend to ultimately divest from these investments.

In March 2018, we concluded an agreement to dispose of certain assets and liabilities of North Block Complex. The divestment from the Glisa and Eerstelingsfontein assets was finalised and Universal Coal took ownership of these assets on 1 November 2018. The mining right for the Paardeplaats portion was granted and we await approval (section 11) to transfer the mining right to Universal Coal.

In October, ECC sold all its shares and claims in Manyeka Coal Mines (majority shareholder in Eloff Mining Company) to Universal, which operates a mine next to the Eloff reserves.

For the Moranbah South coking coal project, Exxaro and Anglo American are still reassessing the potential development plan.

Responding to community challenges

We are on track to achieve level 4 BBBEE status after implementing our enterprise and supplier development strategy. Benefits for recipients of financial support (from Gauteng, Limpopo and Mpumalanga) include an increase in their asset base, refinancing assets at more affordable rates to ease cash flow, and an improvement in business operations. We expect these businesses to increase their turnover and employ more people in the medium term.

Our social and labour plans (SLPs) are five-year community investment programmes with annual initiatives for co-investing with local government and other social partners. In 2018, we focused on education and infrastructure projects in our operational provinces:

• In Mpumalanga, our education enhancement programmes benefited 929 learners and 104 teachers at a total cost of R15.1 million.
• In Limpopo, we have almost completed a 36km regional road at a cost of R71.2 million in partnership with Roads Agency Limpopo.
• In the community of Tshikondeni, we spent R20.5 million constructing 56 houses, three early childhood development centres and a community hall as part of our post-mine closure investment.

Employee and community empowerment scheme

We are studying implementation guidelines accompanying the new mining charter of September 2018 to determine the impact on Exxaro. This includes complying with the charter and meeting the aspirations of our stakeholders including shareholders, employees and communities adjacent to our operations.

We aim to complete a new share scheme for employees and communities in 2019.