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Exxaro Resources Limited
Group and company annual financial
statements for the year ended
31 December 2023
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Currently viewing: 2.6 Independent external auditorss report | Next: 3.1 Accounting policy relating to segmental reporting

CHAPTER 2:Reports

  • 2.6INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Exxaro Resources Limited

Report on the audit of the consolidated and separate financial statements

Opinion

We have audited the consolidated and separate financial statements of Exxaro Resources Limited (the group and company) set out on Segmental reporting to Compliance, which comprise the group and company statement of financial position at 31 December 2023, and the group and company statement of comprehensive income, the group and company statement of changes in equity and the group and company statement of cash flows for the year then ended, and notes to the group and company financial statements, including a summary of material accounting policies.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Exxaro Resources Limited as at 31 December 2023, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IASB®) and the requirements of the Companies Act of South Africa.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated and separate financial statements section of our report. We are independent of the group and company in accordance with the Independent Regulatory Board for Auditors' Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. There is no key audit matter to report on the separate financial statements.

Enviromental Rehabilitation Provisions
Refer to notes 13.1, 13.2 and 13.3 of the consolidated financial statements.
Key audit matter How the matter was addressed in our audit

In determining the present value of the total environmental rehabilitation provisions, management apply significant judgement and make assumptions relating to the:

  • interpretation and understanding of the laws, regulations and associated legal obligations
  • estimation of the undiscounted environmental rehabilitation costs which includes quantification of the extent of disturbance and cost rate to rehabilitate
  • expected date of cessation of mining activities.

The group's estimates of the undiscounted environmental rehabilitation costs are based on significant judgements and assumptions (complex laws, regulations and legal obligations) made by management, which may not be reasonable or appropriate, resulting in an inaccurate or inappropriately valued (overstated/understated) provision.

Based on the above factors we have determined the environmental rehabilitation provisions to be a key audit matter.

Our team included senior, experienced audit team members and our internal environmental rehabilitation provision specialist team.

The following procedures were performed during the audit:

  • We updated our understanding of management's processes, procedures and controls implemented.
  • We identified and tested the design and implementation of relevant controls.
  • We confirmed our understanding of the methods, models, the data and the assumptions selected and applied by management (and management's environmental experts) to determine both the undiscounted environmental rehabilitation costs, as well as the present value of the obligation.
  • We evaluated the appropriateness of the accounting policies based on the requirements of IFRS Accounting Standards, our understanding of the business and industry practice.
  • We evaluated the mathematical accuracy of management's models.
  • We evaluated the reasonableness of and challenged the selection and application of management's key assumptions and judgements, including:
    • the interpretation and understanding of the laws, regulations and associated legal obligations.
    • the quantification of the extent of disturbance and the cost rate to rehabilitate to determine the undiscounted environmental rehabilitation costs.
    • the expected date of the cessation of mining activities to determine the term of the valuation; and
    • the costs and present value of all the associated water treatment provisions.
  • We evaluated the completeness, accuracy, relevance and reliability of the data used in managements models.
  • We evaluated the objectivity, knowledge, skills and ability of management's environmental experts by obtaining an understanding and evidence of their independence, professional qualifications, experience, affiliations and scope of work.
  • We recalculated the present value of the obligation using independently sourced discount rates and inflation rates, in order to assess the reasonability of the present value of the total environmental rehabilitation provisions.
  • We evaluated the appropriateness of accounting for the change in estimates recognised in profit or loss or allocated to the related decommissioning asset; and
  • We evaluated the appropriateness of the disclosures made as presented in note 13.1, 13.2, and 13.3 against the requirements of IFRS Accounting Standards.

Other information

The directors are responsible for the other information. The other information comprises the information included in the document titled "Exxaro Resources Limited group and company annual financial statements for the year ended 31 December 2023", which includes the Report of the directors, the Audit committee report and the Certificate by the group company secretary as required by the Companies Act of South Africa. The other information does not include the consolidated and separate financial statements and our auditor's report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the consolidated and separate financial statements

The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with IFRS® Accounting Standards as issued by the IASB and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the group and company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and/or company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the consolidated and separate financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's and/or company's internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
  • Conclude on the appropriateness of the directors' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group and company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the group and/or company to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that KPMG Inc. has been the auditor of Exxaro Resources Limited for two years.

KPMG Inc.

Registered Auditor

Per SM Loonat
Chartered Accountant (SA)
Registered Auditor
Director
23 April 2024

Exxaro Resources Limited
Group and company annual financial statements for the year ended 31 December 2023