Chapter 16Financial instruments

16.3Financial instruments

16.3.3.2.3.1 Loan facility and bonds

The loan facility and bonds were entered into at floating interest rates.

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 2024
Non-current interest-bearing borrowings: loan facility and bond	(2 499)	(2 499)
Current interest-bearing borrowings: loan facility and bond	(498)	(498)
Total interest-bearing borrowings: loan facility and bond	(2 997)	(2 997)
Percentage profile (%)	100	100
At 31 December 2023
Non-current interest-bearing borrowings: loan facility and bond	(2 945)	(2 945)
Current interest-bearing borrowings: loan facility and bond	(1 153)	(1 153)
Total interest-bearing borrowings: loan facility and bond	(4 098)	(4 098)
Percentage profile (%)	100	100

Interest rate sensitivity

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

	2024 Rm	2023 Rm
Impact on earnings: loss	(15)	(20)

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.

16.3.3.2.3.2 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, during operations phase, and 1-month JIBAR during the construction phase. The designated hedged items are the group of expected 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 instruments and the hedged items. 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
	Percentage exposure
At 31 December	2024 %	2023 %	2024 Rm	2023 Rm
Project financing nominal amount	100	100	(5 223)	(4 825)
– Linked to fixed rate	2	3	(127)	(135)
– Linked to floating rate	98	97	(5 096)	(4 690)

Project financing nominal amount linked to floating rate	98	97	(5 096)	(4 690)
Interest rate swap notional amount (swap floating rate to fixed rate)	(74)	(83)	3 872	4 002
Effective floating rate exposure on project financing	24	14	(1 224)	(688)

Interest rate sensitivity

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

	Group
Impact	2024 Rm	2023 Rm
Increase in finance costs	6	3
Increase in equity	28	41

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.

Hedge accounting: Cash flow hedges – interest rate swaps

Hedge effectiveness

The group has assumed certain interest rate swaps from its business combination with Cennergi, as well as entered into new interest rate swaps for further project financing arrangements 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 relationships, and through periodic prospective effectiveness assessments, to ensure that an economic relationship exists between the hedged items and hedging instruments.

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
Changes to amounts or timing of drawdowns during construction phase.

The recognised ineffectiveness in 2024 amounted to R12 million (2023: R18 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 during the operations phase, and every 1-month during construction phase. The settlement dates coincide with the dates on which interest is payable on the underlying debt.

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
For the year ended 31 December	Line item in which recognised	Note	2024 Rm	2023 Rm
Fair value losses resulting from hedge ineffectiveness	Operating expenses	6.1.3	(12)	(18)
Fair value gains on settlement of underlying swap (reclassified from OCI)	Finance costs	12.1.2	26	20

Hedging instruments and hedged items

	Group
At 31 December	2024 Rm	2023 Rm
Hedged items: Cash flows on floating rate project financing linked to JIBAR
Nominal amount	3 872	4 002
Carrying amount in cash flow hedge reserve	(35)	17
Cumulative gains in fair value used for calculating hedge ineffectiveness	47	7
Hedging instruments: Outstanding receive floating, pay fixed contracts
Nominal amount	3 872	4 002
Carrying amount	(128)	(125)
– Non-current financial asset	1	2
– Non-current financial liability	(129)	(127)
Cumulative losses in fair value used for calculating hedge ineffectiveness	(203)	(209)

Hedging reserves

Cash flow hedge reserves composition:

	Group
At 31 December	2024 Rm	2023 Rm
Cash flow hedge reserve – interest rate swaps	(26)	12
– Gross	(35)	17
– Deferred tax thereon	9	(5)
Cash flow hedge reserve – spot element of FECs	2	(6)
– Gross	3	(8)
– Deferred tax thereon	(1)	2
Balance of share of movements of equity-accounted investees	(87)
Balance of NCI share of financial instruments revaluation reserve		(33)
Cash flow hedge reserves	(111)	(27)

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

	Group
	Gross Rm	Tax Rm	Net Rm
At 31 December 2022	88	(24)	64
Movement during the year
Change in fair value of interest rate swaps recognised in OCI	(51)	14	(37)
Reclassified from OCI to profit or loss in finance costs	(20)	5	(15)
At 31 December 2023	17	(5)	12
Movement during the year
Change in fair value of interest rate swaps recognised in OCI	(26)	7	(19)
Reclassified from OCI to profit or loss in finance costs	(26)	7	(19)
At 31 December 2024	(35)	9	(26)

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
	2024 Rm	2023 Rm
Amount approved	67 484	65 309
Total borrowings	(8 220)	(8 923)
Unutilised borrowing capacity	59 264	56 386

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 2024 and 2023 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

Contractual cash flows for financial instruments which are subject to floating interest rates are based on the closing floating interest rate at reporting date.

The following tables detail the contractual maturities of certain financial assets and financial liabilities:

	Group
			Maturity
At 31 December 2024	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 assets¹
ESD loans	151	151	83	48	20
Vendor finance loan	142	160	71	53	36
Intervention receivable	8	8	8
Investment deposits	4	4	4
Cash flow hedge derivatives: interest rate swaps	1
Derivative financial assets	2	2	2
Lease receivables	29	34	14	14	6
Trade and other receivables	4 230	4 230	4 230
Cash and cash equivalents	20 630	20 630	20 630
Total financial assets	25 197	25 219	25 042	115	62
Percentage profile (%)		100	99	1
Financial liabilities
Interest-bearing borrowings	(8 220)	(12 061)	(1 737)	(3 558)	(3 257)	(3 509)
– Loan facility	(2 997)	(3 370)	(785)	(2 585)
– Project financing	(5 223)	(8 691)	(952)	(973)	(3 257)	(3 509)
Lease liabilities	(430)	(659)	(101)	(109)	(266)	(183)
Non-current other payables	(40)	(40)		(3)	(37)
Trade and other payables	(3 351)	(3 352)	(3 352)
Cash flow hedge derivatives: interest rate swaps	(129)	(157)	(55)	(42)	(57)	(3)
Derivative financial liabilities	(22)	(22)	(22)
Total financial liabilities	(12 192)	(16 291)	(5 267)	(3 712)	(3 617)	(3 695)
Percentage profile (%)		100	32	23	22	23
Liquidity gap identified²	13 005	8 928	19 775	(3 597)	(3 555)	(3 695)

¹	Excludes the environmental rehabilitation funds at amortised cost of R118 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 2023	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	169	169	63	49	57
Vendor finance loan	177	216	64	60	92
Other financial assets at amortised cost¹	75	78	78
Cash flow hedge derivatives: interest rate swaps	2	3	1	1	1
Derivative financial assets	22	22	22
Lease receivables	38	48	14	14	20
Trade and other receivables	3 877	3 877	3 877
Cash and cash equivalents	19 859	19 859	19 859
Total financial assets	24 219	24 272	23 978	124	170
Percentage profile (%)		100	98	1	1
Financial liabilities
Interest-bearing borrowings	(8 923)	(12 924)	(2 388)	(1 623)	(5 555)	(3 358)
– Loan facility	(3 452)	(4 183)	(852)	(743)	(2 588)
– Project financing	(4 825)	(8 062)	(857)	(880)	(2 967)	(3 358)
– Bonds	(646)	(679)	(679)
Lease liabilities	(451)	(668)	(95)	(101)	(325)	(147)
Non-current other payables	(42)	(44)		(16)	(28)
Trade and other payables	(3 356)	(3 356)	(3 356)
Cash flow hedge derivatives: interest rate swaps	(127)	(105)	(30)	(30)	(42)	(3)
Cash flow hedge derivatives: FECs	(14)	(21)	(21)
Total financial liabilities	(12 913)	(17 118)	(5 890)	(1 770)	(5 950)	(3 508)
Percentage profile (%)		100	34	10	35	21
Liquidity gap identified²	11 306	7 154	18 088	(1 646)	(5 780)	(3 508)

¹	Excludes the environmental rehabilitation funds at amortised cost of R108 million.
²	The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place.

	Company
			Maturity
At 31 December 2024	Carrying amount Rm	Contractual cash flows Rm	0 to 12 months Rm	1 to 2 years Rm	2 to 5 years Rm
Financial assets
ESD loans	151	151	83	48	20
Vendor finance loan	142	160	71	53	36
Investment deposits	4	4	4
Trade and other receivables	237	237	237
Cash and cash equivalents	17 300	17 300	17 300
Non-interest-bearing loans to subsidiaries	701	701	701
Interest-bearing loans to subsidiaries	3 002	3 379	792	2 587
Treasury facilities with subsidiaries	69	69	69
Total financial assets	21 606	22 001	19 257	2 688	56
Percentage profile (%)		100	88	12
Financial liabilities
Interest-bearing borrowings	(2 997)	(3 370)	(785)	(2 585)
– Loan facility	(2 997)	(3 370)	(785)	(2 585)
Lease liabilities	(342)	(429)	(91)	(99)	(239)
Trade and other payables	(216)	(216)	(216)
Non-interest-bearing loans from subsidiaries¹	(92)	(92)	(92)
Treasury facilities with subsidiaries	(14 936)	(14 936)	(14 936)
Total financial liabilities	(18 583)	(19 043)	(16 120)	(2 684)	(239)
Percentage profile (%)		100	85	14	1
Liquidity gap identified	3 023	2 958	3 137	4	(183)

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 2023	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	169	169	63	49	57
Vendor finance loan	177	216	64	60	92
Trade and other receivables	150	150	150
Cash and cash equivalents	17 151	17 151	17 151
Non-interest-bearing loans to subsidiaries	575	575	575
Interest-bearing loans to subsidiaries	4 139	4 931	1 540	750	2 641
Treasury facilities with subsidiaries	130	130	130
Total financial assets	22 491	23 322	19 673	859	2 790
Percentage profile (%)		100	84	4	12
Financial liabilities
Interest-bearing borrowings	(4 098)	(4 862)	(1 531)	(743)	(2 588)
– Loan facility	(3 452)	(4 183)	(852)	(743)	(2 588)
– Bonds	(646)	(679)	(679)
Lease liabilities	(383)	(505)	(85)	(92)	(301)	(27)
Trade and other payables	(223)	(223)	(223)
Non-interest-bearing loans from subsidiaries¹	(769)	(769)	(769)
Treasury facilities with subsidiaries	(14 837)	(14 837)	(14 837)
Total financial liabilities	(20 310)	(21 196)	(17 445)	(835)	(2 889)	(27)
Percentage profile (%)		100	82	4	14
Liquidity gap identified	2 181	2 126	2 228	24	(99)	(27)

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

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 audit committee 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 as a result of 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 in respect of 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	2024 %	2023 %
By geographical area
RSA	70	77
Europe	6	9
Asia	21	8
Australia		4
USA	3	2
Total	100	100
By industry
Public utilities	59	54
Mining	2	5
Manufacturing	1	1
Merchants	31	28
Food and beverage		1
Steel	6	6
Cement	1	1
Other		4
Total	100	100

Detailed impairment analysis of financial assets measured at amortised cost:

	Group
At 31 December 2024	Total Rm	Performing Rm	Under- performing Rm	Non- performing Rm
ESD loans	151	151
– Non-current – gross	131	68		63
– Non-current – impairment allowances	(63)			(63)
– Current – gross	247	84		163
– Current – impairment allowances	(164)	(1)		(163)
Vendor finance loan	142		142
– Non-current – gross	81		81
– Non-current – impairment allowance	(1)		(1)
– Current – gross	63		63
– Current – impairment allowance	(1)		(1)
Intervention receivable	8	8
– Current – gross	8	8
Investment deposits	4	4
– Current – gross	4	4
Other financial assets at amortised cost	118	118
– Non-current – gross	118	118
– Current – gross	4			4
– Current – impairment allowances	(4)			(4)
Lease receivables¹	29	29
– Non-current – gross	18	18
– Current – gross	11	11
Trade receivables	4 098	4 093		5
– Gross	4 214	4 105		109
– Impairment allowances	(116)	(12)		(104)
Other receivables	132	131		1
– Gross	140	131		9
– Impairment allowances	(8)			(8)
Cash and cash equivalents	20 630	20 630
Total financial assets at amortised cost	25 312	25 164	142	6

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