Operational performance

Exxaro's manufactured capital is the physical mining, energy and property assets that enable us to deliver our products. The quality of our assets and how effectively we use them impact our overall value creation and operational performance.

How we deliver value through our manufactured capital

We invest in our assets to maintain their enduring value, upkeep and performance, and optimise their use in delivering our products at optimal qualities. Optimising our portfolio and effectively using our invested capital enables us to achieve excellent operational performance, which in turn enables value creation and preservation across the other five capitals.

We deliver value through our:

• Operational excellence and digital transformation programmes that use data-driven insights for decision making to enable safety performance, improve productivity and optimise cost
• Integrated operations centres enable timeous decision making, allowing our business to focus on controllable elements, consequently limiting the impact of disruptions in the value chain. We continue enhancing this process through deployment of data science and advanced analytics initiatives
• Market to resource optimisation strategy that informs operational plans with market insights to deliver coal products that meet customer specifications
• Continuous portfolio reviews and appropriate sustaining capital investments, which ensure we prioritise our investments - enabling the right investment that will contribute and add value to the portfolio

Material theme	Matter	Supporting our strategy	Our broader impact
Adapting to a changing context	Macro-environment Country risk Geopolitical context Commodity price risk	Transition at speed and scale Make our minerals and energy businesses thrive Be carbon neutral by 2050 Become a catalyst for economic growth and environmental stewardship
Executing our strategy	Diversity into critical minerals and energy Coal portfolio optimisation

Performance snapshot

Exxaro's manufactured capital

Five mines (including one joint venture), one coal project, one ferro-silicon manufacturing facility, two windfarms and one solar project in construction

Investments in our manufactured capital

R2.5 billion

invested in sustaining capital (2022: R1.4 billion)

R0.2 billion

invested in expansion capital (2022: R0.3 billion)

R2.7 billion

invested in property, plant and equipment (2022: R1.7 billion)

Improving our outcomes (business model)

Optimising our portfolio

• Disposal of shareholding in Exxaro FerroAlloys Proprietary Limited

Accelerating our decarbonisation

• Financial close of the 68MW LSP on 29 June 2023

Exxaro's operational performance areas encompass coal, energy, ferrous, portfolio optimisation and investments in minerals and energy.

Our performance

Coal

Total product (Mt)

Total sales (Mt)

Export sales (Mt)

Cash cost per total tonnes handled (R/t)

Cash cost per production tonne (R/t)

International thermal coal pricing (API4) averaged US$121/t in 2023 (2022: US$271/t). Prices declined from 2023 levels due to coal to gas switching in Europe. Europe and key markets in Asia also remained well stocked during the year, keeping prices stable.

Production cost per tonne was mainly impacted by lower offtake, resulting in increased total tonnes handled with the following impact on costs:

• Volumes handled resulted in increased contractor activities, equipment hire and enhanced maintenance costs
• Employee costs increased primarily due to normal labour increases
• Energy costs rose, primarily due to a 16.5% increase in electricity rates, offset by improved efficiencies

These costs were offset somewhat by the decrease in the rehabilitation liability mainly due to an increase in discount rates.

Other operational costs were impacted by a net positive foreign exchange variance due to a weaker ZAR/USD exchange rate on revenue as well as realised and unrealised foreign exchange differences on foreign debtors and cash balances. Royalties decreased in line with lower revenue, while our insurance expense also decreased due to the change in accounting treatment of new insurance products. These decreases resulted in a premium expense (classified as a financial asset) on the balance sheet.

Our net cash cost per tonne was above mining inflation, impacted by increased cost as explained. However, our cost per total tonnes handled was R1 lower, demonstrating our ability to cost-efficiently move volumes.

In the face of a challenging macro-environment, our commitment to cost containment remains. We therefore see ourselves returning to normalised cost as we bolster our responsiveness to a new, ongoing reality.

Energy

Cennergi's operational EBITDA margin was 80% (2022: 80%), showing the consistency of earnings underpinned by long-term offtake agreements.

The two windfarms generated 727GWh in 2023 (2022: 671GWh), despite the Tsitsikamma community windfarm suffering 15GWh of losses owing to an Eskom distribution line fault. The increase in generation resulted from improved wind conditions. Our average equipment availability was 97.3% in 2023, slightly above the contracted levels of 97.0%.

Ferrous

SIOC

• Adjusted equity-accounted income of R6 157 million (2022: R4 902 million) primarily driven by higher iron ore prices, higher sales volumes and cost optimisation initiatives
• An interim dividend of R1 967 million was received from the investment in SIOC in August 2023. SIOC declared a final dividend to its shareholders in February 2024. Exxaro's share of the dividend amounts to R2 107 million, which is 7% higher than the interim dividend received. The dividend will be accounted for in the first half of 2024