Our business risks and opportunities

• Commodity price volatility
• Disengaged and anxious workforce (permanent employees and contractors)
• Rapid spread of COVID-19
• Increased risk of cyberattacks due to remote working
• Deterioration of employee health (mental and physical)
• Uncontrollable cost of goods and services
• Unavailability of critical goods and services
• Community unrest due to loss of livelihoods impacting Exxaro's operations
• Counterparty risk (contractors/suppliers/customers)
• Productivity decline (operations not operating at full capacity and not complying with disaster management guidelines, among others)
• Possible resistance to vaccination and boosters
• Perpetual cycles of COVID-19

• Safety impacts (fatalities and incidents)
• Health and mental wellbeing impacts
• Financial losses
• Unable to meet financial targets
• Legal and regulatory non-compliance with the Disaster Management Act, 2002 (Act 57 of 2002)
• Production stoppages
• Delay in implementation of strategy
• Inability to obtain lines of credit

• Implement strict security processes and tools, and increase monitoring
• Certified testing facilities in Limpopo and Mpumalanga to conduct mass testing
• Mental wellness programmes in place
• Monitor compliance with contractual agreements (cost of goods and services)
• Monitor critical goods stock levels and services required
• Ongoing engagement with Minerals Council, and provincial and local governments
• Ongoing monitoring of messaging and continuous updates of critical information
• Roll out and continuously update COVID-19 business continuity management plan at operations
• Human resource guidelines in line with government's lockdown regulations
• Activation of crisis management plan

The COVID-19 management plan will continue to be implemented with focus on disease management protocols given the anticipated wave of infections during winter.

With more than 80% of the workforce vaccinated, Exxaro will continue to roll out the vaccination programme, including administering booster vaccines.

• Rapid spread of COVID-19 infections among employees and contractors
• Anxious and disengaged workforce (additional COVID-19 regulations and some companies impacted by COVID-19 having to retrench contractors)
• High/excessive fatigue levels
• Poor procedures for maintenance of equipment and machinery
• Inadequate on-the-job training due to illiteracy
• Lack of awareness of health risks
• Lack of hazard awareness
• Non-adherence to procedures
• Lack of communication between teams working on equipment
• Lack of change management
• Design or modification of equipment without sign-off
• Inadequate supervision
• Perpetual cycles of COVID-19
• Demobilisation and divestment journey

• Unwanted health and safety incidents
• Operational stoppages
• High insurance premiums
• Loss of licence to operate
• Decrease in quality of life
• Section 54 and 55 fines and penalties imposed by the DMRE
• Loss of productivity (deaths, medical incapacity or sick leave)

• Analyse historical incident data to identify trends and root causes
• Mental wellness programmes
• Certified COVID-19 testing facilities in Mpumalanga and Lephahlale
• Ongoing safety, health, environment and community risk management
• Improve safety management with innovation (including wearables)
• Ensure proximity detection systems are implemented and maintained
• Ensure safety improvement plan is communicated and implemented
• COVID-19 response plan developed and rolled out

• Limited LoM
• Poor capital project execution
• Not achieving productivity indices (benchmark standards)
• Cost containment discipline not uniform
• Inflationary pressures
• Deteriorating mining conditions (decreasing yield and increasing stripping ratio)
• Not meeting production volumes
• Exchange rate volatility
• Commodity price decline
• Inaccurate financial modelling
• Higher fixed costs (corporate office costs charged to BUs)
• South African geographical constraints
• Frequent changes in legislation (cost of licence to operate)

• Reputational damage
• Social impact
• Financial loss
• Margin squeeze
• Premature mine closure and allocation of costs to other operations
• Reduced earnings will impact approval of capital projects

• Embrace technology and innovation initiatives to improve productivity performance
• Ensure BUs comply with concurrent rehabilitation
• Optimise operating model and avoid duplicated activities
• Create strategic partnership to leverage economies of scale
• Ensure balance between capital optimisation and prioritisation
• Investigate and divest non-core and non-robust assets
• Provide for post-production stoppage (rehabilitation cost)
• Review and monitor performance of suppliers and service providers
• Increased awareness of cost management
• Focus on sustainable cost reduction programmes and business improvement initiatives
• Planned reviews by coal operating company
• Rebalancing product chains for better use of infrastructure

Inflationary pressure expected to continue to persist given challenges in the global economy exacerbated by the Russia/Ukraine conflict.

We continue tracking and monitoring initiatives to manage ongoing volatile conditions and cost pressures, focusing on reducing consulting costs and continued focus on production efficiencies.

• Poor plant or operations design unable to withstand extreme weather conditions
• Poor monitoring and reporting of climate change impacts
• Infrastructure vulnerabilities
• Lack of awareness of climate change impacts
• Increased non-governmental organisation activism
• International and local investor negative sentiment towards fossil fuels

• Reputational damage
• Loss of licence to operate
• Financial loss (increased carbon tax, among others)
• Environmental impacts (extreme heat and drought)
• Legal claims against heavy polluters
• Health and safety impacts on employees (increased occupational incident rate due to heatstroke and increase in skin cancer, among others)
• Energy security and supply
• Loss of throughput
• Natural disasters (flooding)

• Invest in renewable energy initiatives
• Raise awareness about climate change impacts
• Continuously investigate measures to reduce climate change impacts
• Engagement with regulators to anticipate policy changes
• Investigate suitable personal protective equipment for extreme weather conditions
• Link performance reward system to climate change mitigation
• Review conditions of work under extreme weather conditions
• Engage with government and other role players in the industry to align in the transition to a low-carbon future
• Invest in appropriate technology to reduce our emissions
• Embed climate change mitigations in design criteria for existing and new projects
• Plan and embark on our early value coal strategy to reduce stranded assets
• Develop a renewable energy strategy to transition to a low-carbon economy
• Adopt the TCFD framework to engage with stakeholders
• Align with the Paris Agreement
• Develop market intelligence on carbon pricing
• Effective water management processes for water security

We will execute our decarbonisation plan and have implemented a process to create baseline measures and planning for decarbonisation initiatives.

• Lack of investment and low employment creation
• Uncertainty about land ownership and security of tenure
• Limited local government capacity to deliver services
• Potential for nationalisation sentiment
• Continued poor economic performance will influence policy and political outcomes
• Slow implementation of required reforms
• Corrupt practices (private and public sector)
• Rating agencies downgrade South Africa to junk status
• South Africa's real GDP growth forecast to be (3.1%) for 2021
• Limited fiscal capacity
• National party leadership elections every five years
• Nature of influence of opposition parties

• Political instability
• Possibility of community unrest for political support
• Stakeholder dissatisfaction
• Potential regulatory penalties/oversight
• Increased compliance burden
• Potential increase in royalties/taxes
• Reduced investment opportunities (increase in cost of capital)
• Increased cost of doing business (due to increased compliance burden)
• Fewer opportunities for co-investment with government in community development
• Breakdown in government relationships with Exxaro
• Higher expectation from society and government for more social investment
• Potential for junk status rating and downgrade of Exxaro's credit status due to link to Eskom
• Pressure on revenue
• Policy uncertainty

• Aligning our purpose with governance and ethics
• Continuous monitoring of independent country risk assessment report
• Engage with shareholders on coal business and capital allocation for new strategy
• Establish and participate in collaborative regional development platforms for community impact
• Develop renewables strategy that could result in new investment and electricity security
• Long-term investment perspective for growth, development and impact
• Municipal capacity building
• Ongoing engagement with Minerals Council and provincial and local governments
• Strive for full compliance with relevant legislation for business continuity
• Continued support of relevant business lobby groups to engage business and government
• Increased and improved analysis of dynamic political landscape and impacts on stakeholders
• Increased focus on provincial and local players and intensified engagement across local stakeholder networks to mitigate shocks "from above"