CHAPTER 16:
Financial instruments

• 16.3FINANCIAL INSTRUMENTS

• 16.3.1Carrying amounts and fair value amounts of financial instruments

The tables below set out the group and company's classification of each category of financial assets and financial liabilities.

	Group
At 31 December 2021	Financial  assets at  FVOCI  Rm	Financial  assets at  FVPL  Rm	Financial  assets at  amortised  cost  Rm	Derivative  financial  liabilities  designated  as hedging  instruments  Rm	Financial  liabilities at  amortised  cost  Rm		Total  carrying  amount  Rm
Financial assets
Non-current
Financial assets, consisting of:	446	2 173	618				3 237
– Equity: unlisted – Chifeng	446						446
– Debt: unlisted – environmental rehabilitation funds		2 173					2 173
– ESD loans			91				91
– Vendor finance loan			293				293
– Other financial assets at amortised cost			234				234
Total non-current financial assets	446	2 173	618				3 237
Current
Financial assets, consisting of:		4	307				311
– ESD loans			90				90
– Vendor finance loan			7				7
– Derivative financial assets		4					4
– Other financial assets at amortised cost			210				210
Trade and other receivables, consisting of:			2 701				2 701
– Trade receivables			2 626				2 626
– Other receivables			75				75
Cash and cash equivalents			7 042				7 042
Total current financial assets		4	10 050				10 054
Total financial assets	446	2 177	10 668				13 291
Financial liabilities
Non-current
Interest-bearing borrowings					(9 255)		(9 255)
Other payables					(53)		(53)
Financial liabilities, consisting of:				(406)			(406)
– Cash flow hedge derivatives: interest rate swaps				(406)			(406)
Total non-current financial liabilities				(406)	(9 308)		(9 714)
Current
Interest-bearing borrowings					(1 000)		(1 000)
Trade and other payables					(2 230)		(2 230)
Overdraft					(1)		(1)
Total current financial liabilities					(3 231)		(3 231)
Total financial liabilities				(406)	(12 539)		(12 945)

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.

The carrying amounts of non-current financial instruments measured at amortised cost approximate fair value due to the nature and terms of these instruments.

	Group
At 31 December 2020	Financial  assets at  FVOCI  Rm	Financial  assets at  FVPL  Rm	Financial  assets at  amortised  cost  Rm	Financial  liabilities at  FVPL  Rm	Derivative  financial  liabilities  designated  as hedging  instruments  Rm	Financial  liabilities at  amortised  cost  Rm		Total  carrying  amount  Rm
Financial assets
Non-current
Financial assets, consisting of:	222	1 247	672					2 141
– Equity: unlisted – Chifeng	222							222
– Debt: unlisted – environmental rehabilitation funds		1 247						1 247
– ESD loans			79					79
– Other financial assets at amortised cost			593					593
Total non-current financial assets	222	1 247	672					2 141
Current
Financial assets, consisting of:			169					169
– ESD loans			105					105
– Other financial assets at amortised cost			64					64
Trade and other receivables, consisting of:			2 827					2 827
– Trade receivables			2 698					2 698
– Other receivables			129					129
Cash and cash equivalents			3 196					3 196
Total current financial assets			6 192					6 192
Non-current assets held-for-sale		655	186					841
Total financial assets	222	1 902	7 050					9 174
Financial liabilities
Non-current
Interest-bearing borrowings						(7 448)		(7 448)
Other payables						(24)		(24)
Financial liabilities, consisting of:					(713)	(69)		(782)
– Cash flow hedge derivatives: interest rate swaps					(713)			(713)
– Loan from NCI						(69)		(69)
Total non-current financial liabilities					(713)	(7 541)		(8 254)
Current
Interest-bearing borrowings						(6 163)		(6 163)
Trade and other payables						(2 940)		(2 940)
Financial liabilities, consisting of:				(49)				(49)
– Derivative financial liabilities				(49)				(49)
Overdraft						(17)		(17)
Total current financial liabilities				(49)		(9 120)		(9 169)
Non-current liabilities held-for-sale						(296)		(296)
Total financial liabilities				(49)	(713)	(16 957)		(17 719)

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.

The carrying amounts of non-current financial instruments measured at amortised cost approximate fair value due to the nature and terms of these instruments.

	Company
At 31 December 2021	Financial  assets at  FVPL  Rm	Financial  assets at  amortised  cost  Rm	Financial  liabilities at  amortised  cost  Rm		Total  carrying  amount  Rm
Financial assets
Non-current
Financial assets, consisting of:	34	5 225			5 259
– Debt: unlisted – environmental rehabilitation funds	34				34
– ESD loans		91			91
– Vendor finance loan		293			293
– Interest-bearing loans to subsidiaries		4 841			4 841
Total non-current financial assets	34	5 225			5 259
Current
Financial assets, consisting of:		6 260			6 260
– ESD loans		90			90
– Vendor finance loan		7			7
– Other financial assets at amortised cost		145			145
– Interest-bearing loans to subsidiaries		858			858
– Non-interest-bearing loans to subsidiaries		357			357
– Treasury facilities with subsidiaries		4 803			4 803
Trade and other receivables, consisting of:		325			325
– Other receivables		1			1
– Indebtedness by subsidiaries		324			324
Cash and cash equivalents		4 868			4 868
Total current financial assets		11 453			11 453
Total financial assets	34	16 678			16 712
Financial liabilities
Non-current
Interest-bearing borrowings			(4 704)		(4 704)
Total non-current financial liabilities			(4 704)		(4 704)
Current
Interest-bearing borrowings			(851)		(851)
Trade and other payables			(159)		(159)
Financial liabilities, consisting of:			(9 746)		(9 746)
– Non-interest-bearing loans from subsidiaries			(76)		(76)
– Treasury facilities with subsidiaries			(9 670)		(9 670)
Overdraft			(1)		(1)
Total current financial liabilities			(10 757)		(10 757)
Total financial liabilities			(15 461)		(15 461)

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.

The carrying amounts of non-current financial instruments measured at amortised cost approximate fair value due to the nature and terms of these instruments.

	Company
At 31 December 2020	Financial  assets at  FVPL  Rm	Financial  assets at  amortised  cost  Rm	Financial  liabilities at  amortised  cost  Rm		Total  carrying  amount  Rm
Financial assets
Non-current
Financial assets, consisting of:	30	1 376			1 406
– Debt: unlisted – environmental rehabilitation funds	30				30
– ESD loans		79			79
– Interest-bearing loans to subsidiaries		1 297			1 297
Total non-current financial assets	30	1 376			1 406
Current
Financial assets, consisting of:		11 386			11 386
– ESD loans		105			105
– Interest-bearing loans to subsidiaries		6 041			6 041
– Non-interest-bearing loans to subsidiaries		353			353
– Treasury facilities with subsidiaries		4 887			4 887
Trade and other receivables, consisting of:		646			646
– Other receivables		7			7
– Indebtedness by subsidiaries		639			639
Cash and cash equivalents		1 864			1 864
Total current financial assets		13 896			13 896
Total financial assets	30	15 272			15 302
Financial liabilities
Non-current
Interest-bearing borrowings			(2 748)		(2 748)
Total non-current financial liabilities			(2 748)		(2 748)
Current
Interest-bearing borrowings			(6 053)		(6 053)
Trade and other payables			(200)		(200)
Financial liabilities, consisting of:			(16 071)		(16 071)
– Non-interest-bearing loans from subsidiaries			(8 672)		(8 672)
– Treasury facilities with subsidiaries			(7 399)		(7 399)
Overdraft			(17)		(17)
Total current financial liabilities			(22 341)		(22 341)
Total financial liabilities			(25 089)		(25 089)

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.

The carrying amounts of non-current financial instruments measured at amortised cost approximate fair value due to the nature and terms of these instruments.

• 16.3.2Fair values

16.3.2.1        Fair value hierarchy

Financial assets and financial liabilities at fair value have been categorised in the following hierarchy structure, based on the inputs used in the valuation technique:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets that can be accessed at the measurement date.
Level 2 – Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable.
Level 3 – Inputs that are not based on observable market data (unobservable inputs).

	Group
2021	Fair value  Rm	Level 2  Rm	Level 3  Rm
Financial assets at FVOCI	446		446
Equity: unlisted – Chifeng	446		446
Financial assets at FVPL	2 173	2 173
Non-current debt: unlisted – environmental rehabilitation funds	2 173	2 173
Derivative financial assets	4	4
Current derivative financial assets	4	4
Derivative financial liabilities designated as hedging instruments	(406)	(406)
Non-current cash flow hedge derivatives: interest rate swaps	(406)	(406)
Net financial assets held at fair value	2 217	1 771	446

Reconciliation of Level 3 hierarchy	Chifeng  Rm	Total  Rm
At 31 December 2020	222	222
Movement during the year
Gains recognised in OCI (pre-tax effect)1	49	49
Disposal2	(217)	(217)
Acquisition2	392	392
At 31 December 2021	446	446

1

Tax on Chifeng amounts to nil.

2

During the year the four Chifeng refinery companies embarked on a process to consolidate the separate companies into one consolidated entity. The investments in the separate companies for certain of the phases were derecognised and the investment in the consolidated entity which includes all phases of the Chifeng refinery, was recognised on the consolidation date. Exxaro now holds an 8.81% shareholding in Chifeng.

	Group
2020	Fair value  Rm	Level 2  Rm	Level 3  Rm
Financial assets at FVOCI	222		222
Equity: unlisted – Chifeng	222		222
Financial assets at FVPL	1 902	1 902
Non-current debt: unlisted – environmental rehabilitation funds	1 247	1 247
Non-current debt: unlisted – environmental rehabilitation funds, included in non-current assets held-for-sale	655	655
Derivative financial liabilities	(49)	(49)
Current derivative financial liabilities	(49)	(49)
Derivative financial liabilities designated as hedging instruments	(713)	(713)
Non-current cash flow hedge derivatives: interest rate swaps	(713)	(713)
Net financial assets held at fair value	1 362	1 140	222

	Group
Reconciliation of Level 3 hierarchy	Contingent  consideration  Rm	Chifeng  Rm	Total  Rm
At 31 December 2019	(191)	235	44
Movement during the year
Losses recognised in profit or loss	(3)		(3)
Losses recognised in OCI (pre-tax effect)1		(13)	(13)
Acquisition of subsidiaries2	(98)		(98)
Settlements3	296		296
Exchange losses recognised in profit or loss	(4)		(4)
At 31 December 2020		222	222

1	Tax on Chifeng amounts to nil.
2	Relates to the acquisition of the remaining 50% interest in Cennergi.
3	Relates to the ECC contingent consideration, amounting to R195 million, which was fully settled in January 2020 and the Cennergi contingent consideration, amounting to R101 million, which was fully settled in December 2020.

	Company
2021	Fair value Rm	Level 2 Rm
Financial assets at FVPL	34	34
Non-current debt: unlisted – environmental rehabilitation funds	34	34
Net financial assets held at fair value	34	34

	Company
2020	Fair value Rm	Level 2 Rm
Financial assets at FVPL	30	30
Non-current debt: unlisted – environmental rehabilitation funds	30	30
Net financial assets held at fair value	30	30

	Company
Reconciliation of Level 3 hierarchy	Contingent  consideration  Rm	Total  Rm
At 31 December 2019	(191)	(191)
Movement during the year
Losses recognised in profit or loss	(3)	(3)
Acquisition of subsidiaries1	(98)	(98)
Settlements2	296	296
Exchange losses recognised in profit or loss	(4)	(4)
At 31 December 2020

1	Relates to the acquisition of the remaining 50% shareholding in Cennergi.
2	Relates to the ECC contingent consideration, amounting to R195 million, which was fully settled in January 2020 and the Cennergi contingent consideration, amounting to R101 million, which was fully settled in December 2020.

16.3.2.2        Transfers

Transfers between levels of the fair value hierarchy are recognised as at the end of the reporting period during which the transfer has occurred. There were no transfers between Level 1 and Level 2 nor between Level 2 and Level 3 of the fair value hierarchy during the periods ended 31 December 2021 and 31 December 2020.

16.3.2.3        Valuation process applied

The fair value computations of investments are performed by the 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 Exxaro's reporting governance.

16.3.2.4        Current derivative financial instruments

Level 2 fair values for simple over-the-counter derivative financial instruments are based on market quotes. These quotes are assessed for reasonableness by discounting estimated future cash flows using the market rate for similar instruments at measurement date.

16.3.2.5        Environmental rehabilitation funds

Level 2 fair values for debt instruments held in the environmental rehabilitation funds are based on quotes provided by the financial institutions at which the funds are invested at measurement date. These financial institutions invest in instruments which are listed.

16.3.2.6        Interest rate swaps

Level 2 fair values for interest rate swaps are based on valuations provided by the financial institutions with whom the interest rate swaps have been entered into, and take into account credit risk. The valuations are assessed for reasonability by discounting the estimated future cash flows based on observable ZAR swap curves.

• 16.3.3 Risk management

16.3.3.1        Financial risk management

The group's corporate treasury function predominantly provides financial risk management services to the business, coordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the group through internal risk reports which analyse exposure by degree and magnitude of risks. These risks include market risk (including foreign currency risk, commodity price risk, interest rate risk and price risk), credit risk and liquidity risk.

The group's objectives, policies and processes for measuring and managing these risks are detailed below.

The group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of derivative financial instruments is governed by the group's policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, commodity price risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis and the results are reported to the audit committee.

Financial instruments, including derivative financial instruments, are not entered into nor traded for speculative purposes rather, financial instruments are entered into to manage and reduce the possible adverse impact on earnings and cash flows of changes in interest rates, foreign currency exchange rates and commodity prices.

Capital management
In managing its capital, the group focuses on a sound net debt position, return on shareholders' equity (or ROCE) and the level of dividends to shareholders. The group's policy is to cover its annual net funding requirements through long-term loan facilities with maturities spread over time. Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements.

16.3.3.2        Market risk management

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices, will affect profit or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The group's activities expose it primarily to the financial risks of changes in the environmental rehabilitation funds quoted prices (see 16.3.3.2.1), foreign currency exchange rates (see 16.3.3.2.2), commodity prices (see 16.3.3.2.3) and interest rates (see 16.3.3.2.4). The group enters into a variety of derivative financial instruments to manage its exposure to foreign currency risks, commodity price risks and interest rate risks, including:

• Currency FECs, currency options and currency swap agreements to manage the exchange rate risk arising on the export of coal and import of capital expenditure
• Commodity FECs to manage coal price risk on the export of coal
• Interest rate swaps and interest rate forwards to manage interest rate risk on the interest-bearing borrowings.

16.3.3.2.1        Price risk management
The group's exposure to equity price risk arises from investments held by and classified either as at FVOCI or at FVPL. Currently, the group's exposure to equity price risk is not considered to be significant as Chifeng is seen as a non-core investment.

The group's exposure to price risk in relation to quoted prices of the environmental rehabilitation funds is not considered a significant risk as the funds are invested with reputable financial institutions in accordance with a strict mandate to ensure capital preservation and growth. The funds are held for strategic purposes rather than trading purposes.

16.3.3.2.2        Foreign currency risk management
Certain transactions are denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.

The currency in which transactions are entered into is mainly denominated in US dollar, euro and Australian dollar.

Exchange rate exposures are managed within approved policy parameters utilising FECs, currency options and currency swap agreements.

The group maintains a fully covered exchange rate position for foreign balances (if any) and imported capital equipment resulting in these exposures being fully converted to rand. Trade-related import exposures are managed using economic hedges arising from export revenue and through FECs. Trade-related export exposures are hedged using FECs and currency options with specific focus on short-term receivables.

Uncovered cash and cash equivalents amount to US$49.85 million (2020: US$116.35 million).

Monetary items have been translated at the closing rate at the last day of the reporting period.

The FECs used to hedge foreign currency exposure mostly have a maturity of less than one year from the reporting date. When necessary, FECs are rolled over at maturity.

The following significant exchange rates applied during the year:

	2021				2020
	Average spot rate	Average achieved rate	Closing spot rate		Average spot rate	Average achieved rate	Closing spot rate
US$	14.78	14.88	15.94		16.45	16.43	14.62
€	17.47		18.04		18.76		17.97
AU$	11.11		11.55		11.35		11.27

16.3.3.2.3        Commodity price risk management
The group entered into commodity FECs to hedge certain of its export product exposure, in terms of coal prices for the period ended 31 December 2020. The commodity price hedges on coal matured in April 2021, realising a total loss of R43 million.

Details of the contracts at 31 December 2020 were as follows:

	Group
2020	Tonnes	Market related value Rm	Contract value Rm	Recognised  fair value  losses  Rm
Coal	450 000	577	528	(49)

Commodity price sensitivity

An adverse change in the commodity price of 10% is demonstrated below. This analysis assumes that all other variables remains constant.

2020	Impact on  profit/(loss) Rm
Coal	(53)

A 10% positive move against the above commodity prices at 31 December 2020 would have had on equal but opposite effect on the amount shown above, on the basis that all other variables remain constant.

16.3.3.2.4        Interest rate risk management
The group is exposed to interest rate risk as it borrows and deposits funds at floating interest rates on the money market and extended bank borrowings. The group's main interest rate risk arises from long-term borrowings with floating rates, which expose the group to cash flow interest rate risk. The risk is managed by undertaking controlled management of the interest structures of the investments and borrowings, maintaining an appropriate mix between fixed and floating interest rate facilities in line with the interest rate expectations. The group also uses interest rate swaps and interest rate forwards to manage the interest rate risk exposure.

As part of the Cennergi business combination, in 2020, the group assumed Cennergi's borrowings and interest rate swaps as financial liabilities. The contractual terms of these borrowings required interest rate swaps (hedging instruments) to be entered into to swap out the floating interest rate of the underlying project financing for a fixed interest rate. This was required to fix the future expected returns given the long-term nature of the project financing. In 2020, the group amended its interest rate risk management strategy as follows:

• When the contractual terms of the borrowings and covenants thereof require the use of hedging instruments to mitigate the risk of fluctuations of the underlying interest rate risk cash flow exposure and the impact on profit or loss of specific projects being financed, the group looks to apply hedge accounting where an effective hedge relationship is expected and to the extent that such exposure poses a real risk to the achievement of the loan covenants.

The financial institutions chosen are subject to compliance with the relevant regulatory bodies.

16.3.3.2.4.1        Loan facility and bonds
The loan facility and bonds were entered into at floating interest rates in anticipation of a decrease in the interest rate cycle. The interest rate repricing profile for the loan facility and bonds is summarised below for group and company:

	1 to 6 months  Rm	Total  borrowings  Rm
At 31 December 2021
Non-current interest-bearing borrowings: loan facility and bond	(4 704)	(4 704)
Current interest-bearing borrowings: loan facility and bond	(851)	(851)
Total interest-bearing borrowings: loan facility and bond	(5 555)	(5 555)
Total borrowings (%)	100	100
At 31 December 2020
Non-current interest-bearing borrowings: loan facility and bond	(2 748)	(2 748)
Current interest-bearing borrowings: loan facility and bond	(6 053)	(6 053)
Total interest-bearing borrowings: loan facility and bond	(8 801)	(8 801)
Total borrowings (%)	100	100

Interest rate sensitivity

The following table reflects the potential impact on earnings, given an increase in interest rates of 50 basis points:

	2021  Rm	2020  Rm
Impact on earnings: loss	(28)	(44)

A decrease in interest rates of 50 basis points would have an equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant.

16.3.3.2.4.2 Project financing
The group is exposed to the risk of variability in future interest payments on the project financing, attributable to fluctuations in 3-month JIBAR. The designated hedged item is the group of forecast floating interest rate cash flows arising from the project financing, up to the notional amount of each interest rate swap, over the term of the hedging relationship. The notional amounts per interest rate swap match up to the designated exposure being hedged.

Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. This will effectively result in recognising interest expense at a fixed interest rate for the hedged project financing. The exposure profile is summarised as follows:

	Group			Group
	Percentage exposure
At 31 December	2021  %	2020  %		2021  Rm	2020  Rm
Project financing nominal amount	100	100		(4 700)	(4 810)
– Linked to fixed rate	3	3		(145)	(158)
– Linked to floating rate	97	97		(4 556)	(4 652)
Project financing nominal amount linked to floating rate	97	97		(4 556)	(4 652)
Interest rate swap notional amount (swap floating rate to fixed rate)	(81)	(81)		3 808	3 885
Effective floating rate exposure on project financing1	16	16		(748)	(767)

1	Represents 40% exposure on the Tsitsikamma SPV project financing.

Interest rate sensitivity

The following table reflects the potential impact on earnings, given an increase in interest rates of 50 basis points:

	2021  Rm	2020  Rm
Impact on finance costs	(37)	(38)

A decrease in interest rates of 50 basis points would have an equal but opposite effect on the amounts shown above, all other variables held constant.

Hedge accounting: Cash flow hedges

Hedge effectiveness:
The group has assumed certain interest rate swaps from its business combination with Cennergi that have similar critical terms as the hedged item, such as reference rates, reset dates, payment dates, maturities and notional amounts. The group does not hedge 100% of its project financing, therefore the hedged item is identified as a proportion of the outstanding project financing up to the notional amount of the interest rate swaps. As all critical terms matched during the year, there is an economic relationship.

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments, to ensure that an economic relationship exists between the hedged item and hedging instrument.

Hedge ineffectiveness for interest rate swaps is assessed frequently. It may occur due to:

• The DVA on the interest rate swaps which is not matched by the project financing
• Differences in critical terms between the interest rate swaps and project financing.

The recognised ineffectiveness in 2021 amounted to R10 million (2020: R57 million) and is mainly as a result of the DVA. Credit valuation adjustments are not considered due to the terms of the underlying loans, which allow for set-off.

The interest rate swaps require settlement of net interest receivable or payable every six months. The settlement dates coincide with the dates on which interest is payable on the underlying project financing.

The following tables detail the financial position and performance of the interest rate swap contracts outstanding at the end of the reporting period and their related hedged items.

Financial performance effects of hedging recognised during the year:

		Group
	Line item in which recognised	2021  Rm	2020  Rm
Fair value losses resulting from hedge ineffectiveness	Operating expenses	(10)	(57)
Fair value losses on settlement of underlying swap (reclassified)	Finance costs	(146)	(107)

Hedging instruments

	Group
At 31 December	2021  Rm	(Restated)1 2020    Rm
Hedged items: Cash flows on floating rate project financing linked to JIBAR
Nominal amount1	3 808	3 885
Carrying amount in cash flow hedge reserve	(165)	(428)
Cumulative loss in fair value used for calculating hedge ineffectiveness	(165)	(428)
Hedging instruments: Outstanding receive floating, pay fixed contracts
Nominal amount1	3 808	3 885
Carrying amount	(406)	(713)
Cumulative loss in fair value used for calculating hedge ineffectiveness	(354)	(549)

1	The following disclosed items within the note have been restated to reflect the correct applicable amount. The restatement only impacts the disclosure of these items:

	Previously presented Rm	Restated Rm
Notional amount of:
– Hedged items	4 219	3 885
– Hedged instruments	4 219	3 885

The interest rate swaps settle on a bi-annual basis. The group settles the difference between the fixed and floating interest rate (3-month JIBAR) on a net basis. The 3-month JIBAR is swapped out to a fixed rate as follows:

• Tsitsikamma SPV floating rate facility: 9.55% up to 30 June 2030. The swaps cover 60% of the remaining loan notional value.
• Amakhala SPV floating rate facilities:
  • IFC facilities: 8.42% up to 30 June 2031. The swaps cover 100% of the remaining loans notional values.
  • A and C banking facilities:
    • 8 .00% up to 30 June 2021. The swaps cover 100% of the remaining loans notional values.
    • 9.46% up to 30 June 2026. The swaps cover 100% of the remaining loans notional values.

The interest rate swaps require settlement of net interest receivable or payable every six months. The settlement dates coincide with the dates on which interest is payable on the underlying debt.

Hedging reserves

The hedging reserve relates to the fair value movements on cash flow hedges of interest rate swaps. The reserve is included within the financial instruments revaluation reserve on the group statement of changes in equity, which includes the group's share of movements in its equity-accounted investees' hedging reserves.

Financial instruments revaluation reserve composition:

	Group
	2021  Rm	2020  Rm
Cash flow hedge reserve – interest rate swaps	(119)	(308)
– Gross	(165)	(428)
– Deferred tax thereon	46	120
Balance of share of movements of equity-accounted investees		2
Balance of NCI share of financial instruments revaluation reserve	2	51
Financial instruments revaluation reserve	(117)	(255)

Movement analysis of cash flow hedge reserve – interest rate swaps:

	Gross  Rm	Tax  Rm	Net  Rm
At 31 December 2019
Movement during the year
Change in fair value of interest rate swaps recognised in OCI	(535)	150	(385)
Reclassified from OCI to profit or loss in finance costs	107	(30)	77
At 31 December 2020	(428)	120	(308)
Movement during the year
Change in fair value of interest rate swaps recognised in OCI	117	(33)	84
Reclassified from OCI to profit or loss in finance costs	146	(41)	105
At 31 December 2021	(165)	46	(119)

16.3.3.3        Liquidity risk management

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the group's reputation.

The ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the group's short, medium and long-term funding and liquidity management requirements.

The group manages liquidity risk by monitoring forecast cash flows in compliance with loan covenants and ensuring that adequate unutilised borrowing facilities are maintained.

Borrowing capacity is determined by the board of directors, from time to time.

	Group
	2021  Rm	2020  Rm
Amount approved	49 438	48 476
Total borrowings	(10 255)	(13 611)
Unutilised borrowing capacity	39 183	34 865

The group's capital base and the borrowing powers of the company and the group were set at 125% of shareholders' funds (equity attributable to owners of the parent) for both the 2021 and 2020 financial years.

Standard payment terms for the majority of trade payables is the end of the month following the month in which the goods are received or services are rendered. A number of trade payables do, however, have shorter contracted payment periods.

To avoid incurring interest on late payments, financial risk management policies and procedures are entrenched to ensure the timeous matching of orders placed with goods received notes or services acceptances and invoices.

16.3.3.3.1 Maturity profile of financial instruments
The following tables detail the contractual maturities of financial assets and financial liabilities:

	Group
			Maturity
At 31 December 2021	Carrying  amount  Rm	Contractual  cash flows  Rm	0 to  12 months  Rm	1 to  2 years  Rm	2 to  5 years  Rm	More than  5 years  Rm
Financial assets
ESD loans	181	181	90	52	39
Vendor finance loan	300	453	27	15	77	334
Other financial assets at amortised cost1	350	369	220	72	77
Derivative financial assets	4	4	4
Trade and other receivables	2 701	2 701	2 701
Cash and cash equivalents	7 042	7 042	7 042
Total financial assets	10 578	10 750	10 084	139	193	334
Percentage profile (%)		100	94	1	2	3
Financial liabilities
Interest-bearing borrowings	(10 255)	(13 526)	(1 655)	(1 261)	(6 678)	(3 932)
Non-current other payables	(53)	(53)		(53)
Trade and other payables	(2 230)	(2 230)	(2 230)
Cash flow hedge derivatives: interest rate swaps	(406)	(468)	(173)	(114)	(179)	(2)
Overdraft	(1)	(1)	(1)
Total financial liabilities	(12 945)	(16 278)	(4 059)	(1 428)	(6 857)	(3 934)
Percentage profile (%)		100	25	9	42	24
Liquidity gap identified2	(2 367)	(5 528)	6 025	(1 289)	(6 664)	(3 600)

1	Excludes the environmental rehabilitation funds at amortised cost of R94 million.
2	The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place.

	Group
			Maturity
At 31 December 2020	Carrying  amount  Rm	Contractual  cash flows  Rm	0 to  12 months  Rm	1 to  2 years  Rm	2 to  5 years  Rm	More than  5 years  Rm
Financial assets
ESD loans	184	184	105	56	23
Other financial assets at amortised cost1	271	300	76	71	153
Trade and other receivables	2 827	2 827	2 827
Cash and cash equivalents	3 196	3 196	3 196
Total financial assets	6 478	6 507	6 204	127	176
Percentage profile (%)		100	95	2	3
Financial liabilities
Interest-bearing borrowings	(13 611)	(16 709)	(6 907)	(1 841)	(3 342)	(4 619)
Non-current other payables	(24)	(24)		(18)	(6)
Trade and other payables	(2 940)	(2 940)	(2 940)
Derivative financial liabilities	(49)	(49)	(49)
Cash flow hedge derivatives: interest rate swaps	(713)	(728)	(208)	(197)	(315)	(8)
Loan from NCI	(69)	(101)				(101)
Overdraft	(17)	(17)	(17)
Total financial liabilities	(17 423)	(20 568)	(10 121)	(2 056)	(3 663)	(4 728)
Percentage profile (%)		100	49	10	18	23
Liquidity gap identified2	(10 945)	(14 061)	(3 917)	(1 929)	(3 487)	(4 728)

1	Excludes the environmental rehabilitation funds at amortised cost of R386 million.
2	The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place. Exxaro was in the process of refinancing its loan facility.

	Company
			Maturity
At 31 December 2021	Carrying  amount  Rm	Contractual  cash flows  Rm	0 to  12 months  Rm	1 to  2 years  Rm	2 to  5 years  Rm	More than  5 years  Rm
Financial assets
ESD loans	181	181	90	52	39
Vendor finance loan	300	453	27	15	77	334
Trade and other receivables	325	325	325
Cash and cash equivalents	4 868	4 868	4 868
Non-interest-bearing loans to subsidiaries	357	357	357
Interest-bearing loans to subsidiaries	5 699	6 822	1 170	726	4 738	188
Treasury facilities with subsidiaries	4 803	4 803	4 803
Total financial assets	16 533	17 809	11 640	793	4 854	522
Percentage profile (%)		100	66	4	27	3
Financial liabilities
Interest-bearing borrowings	(5 555)	(6 596)	(1 158)	(717)	(4 721)
Trade and other payables	(159)	(159)	(159)
Overdraft	(1)	(1)	(1)
Non-interest-bearing loans from subsidiaries1	(76)	(76)	(76)
Treasury facilities with subsidiaries	(9 670)	(9 670)	(9 670)
Total financial liabilities	(15 461)	(16 502)	(11 064)	(717)	(4 721)
Percentage profile (%)		100	67	4	29
Liquidity gap identified	1 072	1 307	576	76	133	522

1	The majority of the non-interest-bearing loans from subsidiaries are not expected to be called upon in the foreseeable future.

	Company
			Maturity
At 31 December 2020	Carrying  amount  Rm	Contractual  cash flows  Rm	0 to  12 months  Rm	1 to  2 years  Rm	2 to  5 years  Rm	More than  5 years  Rm
Financial assets
ESD loans	184	184	105	56	23
Trade and other receivables	646	646	646
Cash and cash equivalents	1 864	1 864	1 864
Non-interest-bearing loans to subsidiaries	353	353	353
Interest-bearing loans to subsidiaries	7 338	7 851	6 341	461	752	297
Treasury facilities with subsidiaries	4 887	4 887	4 887
Total financial assets	15 272	15 785	14 196	517	775	297
Percentage profile (%)		100	90	3	5	2
Financial liabilities
Interest-bearing borrowings	(8 801)	(9 401)	(6 455)	(1 355)	(1 591)
Trade and other payables	(200)	(200)	(200)
Overdraft	(17)	(17)	(17)
Non-interest-bearing loans from subsidiaries1	(8 672)	(8 672)	(8 672)
Treasury facilities with subsidiaries	(7 399)	(7 399)	(7 399)
Total financial liabilities	(25 089)	(25 689)	(22 743)	(1 355)	(1 591)
Percentage profile (%)		100	89	5	6
Liquidity gap identified2	(9 817)	(9 904)	(8 547)	(838)	(816)	297

1	The majority of the non-interest-bearing loans from subsidiaries are not expected to be called upon in the foreseeable future.
2	The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place. Exxaro was in the process of refinancing its loan facility.

16.3.3.4        Credit risk management

Credit risk relates to potential default by counterparties on cash and cash equivalents, loans, investments, trade receivables and other receivables.

The group limits its counterparty exposure arising from money market and derivative instruments by only dealing with well established financial institutions of high-credit standing. The group's exposure and credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded are spread among approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the board of directors annually.

Trade receivables consist of a number of customers with whom Exxaro has long-standing relationships. A high portion of term supply arrangements exists with such customers resulting in limited credit exposure which exposure is limited by performing customer creditworthiness or country risk assessments.

The group strives to enter into sales contracts with customers which stipulate the required payment terms. It is expected of each customer that these payment terms are adhered to. Where trade receivables balances become past due, the normal recovery procedures are followed to recover the debt, where applicable new payment terms may be arranged to ensure that the debt is fully recovered.

Exxaro has concentration risk because its exposure to one major customer. This is, however, not considered significant as the customer adheres to the stipulated payment terms.

Exxaro establishes an allowance for non-recoverability or impairment that represents its estimate of ECLs for trade receivables, other receivables, loans, cash and cash equivalents and investments. The main components of these allowances are a 12-month ECL component that results from possible default events within the 12 months after the reporting date and a lifetime ECL component that results from all possible default events over the expected life of a financial instrument.

16.3.3.4.1        Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. None of the financial assets were held as collateral for any security provided.

Detail of the trade receivables credit risk exposure:

	Group
At 31 December	2021 %	2020 %
By geographical area
RSA	88	72
Europe	8	16
Asia		12
USA	4
Total	100	100
By industry
Public utilities	67	57
Mining	5	6
Manufacturing	2	1
Merchants	15	30
Food and beverage	1	1
Steel	9	4
Cement	1
Other		1
Total	100	100

Detailed impairment analysis of financial assets measured at amortised cost:

	Group
At 31 December 2021	Total  Rm	Performing  Rm	Under-  performing  Rm	Non-  performing  Rm
ESD loans	181	181
– Non-current – gross	99	91		8
– Non-current – impairment allowances	(8)			(8)
– Current – gross	114	92		22
– Current – impairment allowances	(24)	(2)		(22)
Vendor finance loan	300	300
– Non-current – gross	300	300
– Non-current – impairment allowance	(7)	(7)
– Current – gross	7	7
Other financial assets at amortised cost	444	444
– Non-current – gross	239	239
– Non-current – impairment allowances	(5)	(5)
– Current – gross	221	217		4
– Current – impairment allowances	(11)	(7)		(4)
Lease receivables1	52	52
– Non-current – gross	47	47
– Non-current – impairment allowances	(2)	(2)
– Current – gross	7	7
Trade receivables	2 626	2 606	2	18
– Gross	2 647	2 627	2	18
– Impairment allowances	(21)	(21)
Other receivables	75	75
– Gross	101	75		26
– Impairment allowances	(26)			(26)
Cash and cash equivalents	7 042	7 042
Total financial assets at amortised cost	10 720	10 700	2	18

1	Lease receivables are within the scope of the impairment requirements of IFRS 9.

	Group
At 31 December 2020		Total  Rm	Performing  Rm	Under-  performing  Rm	Non-  performing  Rm
ESD loans		184	184
– Non-current – gross		79	79
– Current – gross		106	106
– Current – impairment allowances		(1)	(1)
Other financial assets at amortised cost		657	657
– Non-current – gross		598	598
– Non-current – impairment allowances		(5)	(5)
– Current – gross		69	65		4
– Current – impairment allowances		(5)	(1)		(4)
Lease receivables1		59	59
– Non-current – gross		54	54
– Non-current – impairment allowances		(1)	(1)
– Current – gross		6	6
Trade receivables		2 698	2 568	15	115
– Gross		2 793	2 583	15	195
– Impairment allowances		(95)	(15)		(80)
Other receivables		129	100	1	28
– Gross		153	100	1	52
– Impairment allowances		(24)			(24)
Cash and cash equivalents		3 196	3 196
Financial assets included in non-current assets held-for-sale		186	38	139	9
– Trade receivables		29	26		3
– Other receivables		10	4		6
– Cash and cash equivalents		8	8
– Loans to associates: Tumelo		139		139
Current – gross		170		170
Current – impairment allowances		(31)		(31)
Total financial assets at amortised cost		7 109	6 802	155	152

1	Lease receivables are within the scope of the impairment requirements of IFRS 9.

	Company
At 31 December 2021	Total  Rm	Performing  Rm	Non-  performing  Rm
ESD loans	181	181
– Non-current – gross	99	91	8
– Non-current – impairment allowances	(8)		(8)
– Current – gross	114	92	22
– Current – impairment allowances	(24)	(2)	(22)
Vendor finance loan	300	300
– Non-current – gross	300	300
– Non-current – impairment allowance	(7)	(7)
– Current – gross	7	7
Other financial assets at amortised cost	145	145
– Current – gross	154	150	4
– Current – impairment allowances	(9)	(5)	(4)
Other receivables	1	1
– Gross	2	1	1
– Impairment allowances	(1)		(1)
Indebtedness to subsidiaries	324	324
– Gross	326	326
– Impairment allowances	(2)	(2)
Non-interest-bearing loans to subsidiaries	357	357
– Current – gross	417	368	49
– Current – impairment allowances	(60)	(11)	(49)
Interest-bearing loans to subsidiaries	5 699	5 699
– Non-current – gross	4 841	4 841
– Current – gross	858	858
Treasury facilities with subsidiaries	4 803	4 803
– Gross	4 836	4 836
– Impairment allowances	(33)	(33)
Cash and cash equivalents	4 868	4 868
Total financial assets at amortised cost	16 678	16 678

	Company
At 31 December 2020	Total  Rm	Performing  Rm	Non-  performing  Rm
ESD loans	184	184
– Non-current – gross	79	79
– Current – gross	106	106
– Current – impairment allowances	(1)	(1)
Other financial assets at amortised cost
– Current – gross	4		4
– Current – impairment allowances	(4)		(4)
Other receivables	7	7
– Gross	11	7	4
– Impairment allowances	(4)		(4)
Indebtedness to subsidiaries	639	639
– Gross	720	720
– Impairment allowances	(81)	(81)
Non-interest-bearing loans to subsidiaries	353	353
– Current – gross	425	360	65
– Current – impairment allowances	(72)	(7)	(65)
Interest-bearing loans to subsidiaries	7 338	7 338
Treasury facilities with subsidiaries	4 887	4 887
Cash and cash equivalents	1 864	1 864
Total financial assets at amortised cost	15 272	15 272

16.3.3.4.2        Trade and other receivables age analysis

	Group
		Current			Past due
At 31 December 2021	Total  Rm	1 to  30 days  Rm	31 to  60 days Rm		61 to  90 days  Rm	90 to  180 days  Rm	>180 days  Rm
Trade receivables	2 626	2 488	119		2	17
– Gross	2 647	2 508	120		2	17
– Impairment allowances	(21)	(20)	(1)
Other receivables	75	42			33
– Gross	101	43	3		37	18
– Impairment allowances	(26)	(1)	(3)		(4)	(18)
Total carrying amount of trade and other receivables	2 701	2 530	119		35	17

	Group
		Current			Past due
At 31 December 2021	Total  Rm	1 to  30 days  Rm	31 to  60 days Rm		61 to  90 days  Rm	90 to  180 days  Rm	>180 days  Rm
Trade receivables	2 698	2 516	68		111		3
– Gross	2 793	2 530	69		112		82
– Impairment allowances	(95)	(14)	(1)		(1)		(79)
Other receivables	129	98	2		1		28
– Gross	153	98	2		2	7	44
– Impairment allowances	(24)				(1)	(7)	(16)
Total carrying amount of trade and other receivables	2 827	2 614	70		112		31

	Company
		Current			Past due
At 31 December 2021	Total  Rm	1 to  30 days  Rm	31 to  60 days  Rm		61 to  90 days  Rm	90 to  180 days  Rm
Other receivables	1	1
– Gross	2	1				1
– Impairment allowances	(1)					(1)
Indebtedness by subsidiaries	324	324
– Gross	326	326
– Impairment allowances	(2)	(2)
Total carrying amount of trade and other receivables	325	325

	Company
		Current			Past due
At 31 December 2021	Total  Rm	1 to  30 days  Rm	31 to  60 days  Rm		61 to  90 days  Rm	90 to  180 days  Rm
Other receivables	7	5	1		1
– Gross	11	5	1		1	4
– Impairment allowances	(4)					(4)
Indebtedness by subsidiaries	639	639
– Gross	720	720
– Impairment allowances	(81)	(81)
Total carrying amount of trade and other receivables	646	644	1		1

16.3.3.4.3        Credit quality of financial assets

The credit quality of cash and cash equivalents has been assessed by reference to external credit ratings available from Fitch, Standard & Poor's and Global credit rating.

	Group			Company
At 31 December	2021 Rm	2020 Rm		2021 Rm	2020 Rm
Cash and cash equivalents
Fitch ratings
F1+	302	262		9	22
Standard & Poor's ratings
A-1+	6 014	2 707		4 765	1 812
A-1	632	83
A-2	23			23
BB-		30			30
Global credit rating
AA(za)	71	114		71
Total cash and cash equivalents1	7 042	3 196		4 868	1 864

1	Excludes overdraft and cash and cash equivalents classified as non-current assets held-for-sale.

Fitch ratings
F1 Highest credit quality
+ denotes any exceptionally strong credit feature

Standard & Poor's
A-1+ Highest certainty of payment
A-1 Very high certainty of payment
A-2 Satisfactory capacity to meet its financial commitments
BB- Speculative in nature with some exposure to risk

Global credit ratings
AA(za) Very strong financial security characteristics relative to other issuers in the same country

16.3.3.4.4        Collateral

No collateral was held by the group as security, nor any other enhancements over the financial assets during the years ended 31 December 2021 and 31 December 2020.

Guarantees
The group did not obtain financial or non-financial assets by taking possession of collateral it holds as security or calling on guarantees during the financial year ended 31 December 2021 and 31 December 2020. The guarantees issued relate to operational liabilities (refer note 13.4.1 on contingent liabilities).

16.3.4 Loan commitments

Loan commitments have been granted to the following parties:

	Group			Company
At 31 December	2021 Rm	2020 Rm		2021 Rm	2020 Rm
Total loan commitment1	250	981			731
Mafube2	250	250
Insect Technology3		731			731

1	The loan commitments were undrawn for the reporting periods.
2	Revolving credit facility available for five years, ending 2023.
3	A US$50 million term loan facility available from 2020 to 2025 subject to certain conditions being met. On 31 January 2021 the term loan facility lapsed.