Our risks and opportunities

Exxaro operates in a rapidly evolving and uncertain operating environment. Effective risk management is essential to achieving our strategic and business objectives, ensuring resilience and delivering sustainable value to our shareholders.

Our risk management process

Environment (internal and external)

Objective setting
Set Exxaro strategy and objectives

Establish the context
Understand the event, hazard and environment

Risk identification
Name and describe the risk

Risk analysis
Unpack drivers (root causes) and risk impact

Risk evaluation
Determine the inherent, residual and desired risk score

Risk treatment
Implement controls to manage the risk (corrective or preventive)

Monitor and review
Frequently monitor and review risks

Reporting of risks

We follow a cascading approach by identifying risk events at the organisation's strategic, tactical and operational layers.

The mining industry continues to face logistical constraints, fluctuating coal prices, global inflation and increasing geopolitical tension, among other challenges. Heightened but moderating global inflation and the effects of the Russia-Ukraine and Middle East conflicts impacted the global economy. In a dynamic and volatile environment, we rely on our mature risk management strategies to make agile and effective decisions to mitigate risk exposure and leverage opportunities.

Our operating context

Our risk management philosophy and approach

Embedding risk management into our daily activities and processes enables us to make informed decisions and proactively plan for possible future unwanted events stemming from internal and external sources. Exxaro's risk management philosophy identifies risk management as a strategic enabler rather than being compliance driven. This ensures that we think and act proactively at every layer to pursue our strategic objectives.

Exxaro's ERM framework provides a proactive, systematic and integrated approach to risk management. The principles outlined in the framework form the foundation for our risk management philosophy, mission and vision. The ERM framework and process illustrated below are based on principles published by the Committee of Sponsoring Organizations of the Treadway Commission, the ISO 31000 international guideline on risk management and King IV. The framework also considers applicable codes of best practice such as ISO 9001, 14001 and 18001. We regularly review the ERM framework to ensure it remains relevant and effective. Deloitte reviewed the framework in 2023 to assess the maturity of our ERM and benchmark it against best practice. Following this review, we identified improvement recommendations and developed a roadmap to ensure these are implemented.

Accountability and governance

Exxaro's ERM process is a strategic initiative supported by the board and executive management. The chief strategic resilience and governance officer is responsible for enabling ERM across the group and reports to the board and the risk and business resilience (RBR) committee. The RBR committee regularly reviews the ERM framework to ensure alignment with current governance practices and standards. The board and executive committee monitor key performance indicators (KPIs) quarterly to ensure all risks are within Exxaro's risk appetite. The board is satisfied that the company and group have a mature risk process that ensures risks potentially impacting its strategic objectives are treated by management to create stakeholder value.

Significant risks from the strategic layer are filtered down to the tactical and operational layers, supplemented by identifying risks that impact the whole organisation.

Significant risks originating at an operational layer will also be elevated to a strategic or tactical layer. In this way, the process incorporates a top-down/bottom-up view of risks within the organisation.

Risk appetite and thresholds

Extent and type of risk we are willing to endure to meet our strategic and capital allocation objectives

Risk appetite

Extent and type of risk we are willing to endure to meet our strategic and capital allocation objectives

Risk tolerance

The maximum level of uncertainty/exposure we are prepared to accept

The risk appetite framework is updated annually or when deemed necessary as part of the strategic planning process.

Performance against our strategy

Opportunities

We use the ERM framework to identify and pursue opportunities. We are contributing to the global energy transition to maximise value in the medium to long term and manage the risk of being unable to achieve growth objectives. For Exxaro to remain sustainable, it is important to adapt the minerals business to identify and pursue opportunities that ultimately create value, such as transitioning away from coal to energy transition minerals and renewable infrastructure.

The following opportunities inform our Sustainable Growth and Impact strategy:

Opportunity	Strategic objective	Strategic response


The drive for energy transition minerals presents opportunities to invest in operational assets, project development and exploration by leveraging our balanced portfolio approach towards capital allocation and risk and returns management.		We continue to review and invest in opportunities that align with our strategy and investment criteria.
Private-public participation in local rail operations is an opportunity for value unlock and vertical integration.		Amid rail infrastructure challenges in South Africa, we consider potential opportunities for private-public participation as a key strategic enabler.
The multidimensional poverty index highlights the drivers of poverty and inequality in our communities, allowing us to focus our social impact efforts towards sustainable impact. We will focus on education, land use management and SMME development.		Social impact remains a key focus in our Sustainable Growth and Impact strategy and we are committed to going beyond compliance to create positive social impact and sustained economic development beyond our operations.
Our early value strategy and our ability to maximise market to resource opportunities by leveraging the low cost and flexibility of our coal assets and reserves.		Our early value and market to resource optimisation strategies remain key enablers to maximise value from our mineral assets.
Accelerated expansion into renewable energy will support our low-carbon transition.		We remain committed to expanding our energy solutions business to become a leading energy solutions business.
Nature-based solutions to mitigate the impacts of climate change present an opportunity, especially considering the vast amount of viable land that Exxaro owns. We intend to maximise this opportunity through our Sustainable Growth and Impact strategy.		As a responsible mining company, we continuously evaluate opportunities to use our assets (including land) in support of a low-carbon future.
We are leveraging the opportunity to invest in self-generation facilities, which aligns with our energy growth strategy.		Cennergi is constructing a 68MW photovoltaic farm, near Grootegeluk, through our special purpose vehicle, Lephalale Solar (RF) Proprietary Limited. This is our first self-generation project to expand and diversify within the energy space. The project supports low-carbon emissions and long-term savings on electricity usage at Grootegeluk. We continue to explore further opportunities for self-generation.
The global energy transition provides an opportunity to mine and supply the minerals that support green technologies. Through a rigorous screening process, Exxaro identified future energy material and renewable infrastructure as being most aligned to our experience, capabilities and market forecast.		Future energy security remains a key consideration driving our diversification intent. We continue to review opportunities to expand our business through investments in the supply of energy transition minerals.
Technological advancements, especially in the field of AI and computing, present opportunities to optimise our operations and unlock value by increasing productivity, reducing costs, improving safety and improving efficiencies.		We are actively investing in bolstering our data science capabilities as well as implementing advanced analytics and AI solutions across our business.

2025 risk trends

The trend report indicates changes in the residual risk score when comparing the 2024 and 2025 (forward looking) financial years. Our risk scores are derived from the product of the likelihood and the impact of the unwanted event*. The top 10 risks are arranged from highest to lowest risk score.

The 2025 ranking represents the key possible unwanted events we anticipate having a potential impact on our ability to achieve our strategic imperatives in 2025. Although we review risks quarterly, they could change significantly depending on the internal and external root causes that drive them to materialise. We prioritise risks and implement treatment strategies to address them. We continuously monitor the effectiveness of these treatments to ensure risks are managed down to acceptable levels.

2025 ranking	2025 top risks (forward looking)	2024 ranking	2024 vs 2025 trend	Comments

1	Unavailability of rail capacity	1		Unrest in Mozambique impacted road movements in the fourth quarter of 2024. Since the inauguration of the country's new president, the unrest has stabilised with expected improvement in exports through Maputo.
2	Fatal risk incidents	2		Exxaro achieved an LTIFR of 0.06 in 2024 in comparison to 0.07 in 2023. During 2024, we reviewed our safety strategy, framework and fatal risk protocols. Approval is in progress, and the updated strategy, framework and fatal risk protocols are set to be launched in 2025.
3	Cybersecurity attacks impacting business	3		We are implementing several projects as part of Exxaro's cybersecurity programme and risk management. These projects are geared towards strengthening our resilience and cybersecurity risk posture and include employee cybersecurity awareness training, the vault project, network access control, data leakage prevention, and endpoint protection solution roll-out. The effectiveness of the control environment is expected to improve in 2025 as risk treatments are executed to completion.
4	Country risk (geopolitical)	4		In 2024, the main treatment for this risk was to develop an internal and external communications strategy. This was completed and rolled out to senior managers and business unit (BU) stakeholder affairs and communications teams. Implementation is underway.
5	Customer concentration risk	5		We are monitoring this risk considering the local power utility's operational challenges.
6	Adverse threat to licence to operate	6		We will continue to focus on delivering on our commitments in line with our licence to operate. We deployed additional project management, technical and supply chain resources to assist in the delivery of SLP commitments. Implementation of the Social Impact strategy is expected to deliver greater impact to the communities where we operate. We update community members on progress monthly through a community forum, and engagements with the Department of Mineral Resources and Energy (DMRE) are ongoing.
7	Community unrest	7		Considering the local elections in 2026 and associated risks, we will continue to intensify our community stakeholder engagements and deliver on our Social Impact strategy and SLP commitments.
8	Inability to achieve growth objectives	8		There were no material changes to this risk in 2024.
9	Decarbonisation challenges (previously reported as ‘Inadequate response to climate change’)	10		National Treasury released a Draft Phase Two Carbon Tax Discussion Paper for comment. The phase will be implemented from 1 January 2026. Proposed changes will result in higher carbon tax liabilities for Exxaro from 2026.
10	Financial targets not met	11		Exxaro will likely meet our EBITDA and ROCE targets in 2025. Head office cost and optimisation initiatives at Grootegeluk and Leeuwpan are ongoing. The performance of SIOC and deployment of capital in growth initiatives may put pressure on achieving our ROCE targets in the second half of 2025.

* Risk = f (likelihood of risk occurring x impact of the risk).

	Ranking in the top 10 is higher compared to the previous year
	Ranking in the top 10 remained unchanged compared to the previous year
	Ranking in the top 10 reduced compared to previous the year
	New

Top 10 heat map

Exxaro's top 10 risks are plotted inherently (before controls) and residually (after controls) on the heat maps below, followed by an outline of our key identified risks, their main drivers, their potential impacts, controls and mitigating treatments. We considered internal and external risks. Our mitigation strategies depend on the severity of impact and likelihood of occurrence.

Inherent risk

Residual risk

	Likelihood	Impact
1% – 10%	Rare	Insignificant
11% – 35%	Unlikely	Minor
36% – 60%	Possible	Moderate
61% – 80%	Likely	Major
81% – 100%	Almost certain	Extreme

Managing our risks

Various risk treatment strategies are evaluated, including risk avoidance, reduction, sharing, acceptance or transferring. When selecting risk treatment options, we consider the values and perceptions of stakeholders and the most appropriate ways to communicate them.

The decision to implement a treatment is based on risk tolerances, the effect the treatment will have on the impact and likelihood ratings, and the results of the cost versus benefit evaluation. Once a risk treatment is implemented, Exxaro develops ongoing mechanisms to monitor the implementation and effectiveness of the risk treatment.

Lines of defence

1	Management of risk (risk owner)
2	Management support and oversight
3	Independent assurance (internal audit and other assurance providers)
4	Independent assurance (external audit and regulators)
5	Governance structures (board and board sub-committees)

Risk trend

	Residual risk increased compared to the previous year
	Residual risk decreased compared to the previous year
	Residual risk remained unchanged compared to the previous year
	New

1Unavailability of rail capacity (2024 risk ranking: 1)

Drivers

TFR challenges include availability of locomotives, inadequate maintenance regime, financial difficulties and security issues
Country risk (political) – government not addressing root causes
Cable theft and derailments
Renegotiation of rail agreements
Transnet's financial viability

Impacts

Operational stoppages
Financial loss
Inability to meet contractual agreements and 2024/25 budget
Inability to grow and execute the early value strategy

Controls

Continuous engagement with TFR to understand issues and provide assistance via RBCT (security, spares support, derailment recovery)
Marketing and logistics team exploring options to evacuate export coal with domestic sales
Industry participation and support to influence National Rail Policy reforms and funding secured from National Treasury
Maputo port capacity unlocked, focus shifted to optimisation
The mining industry is providing financial support to TFR to obtain spares and other parts

Future treatments

Support and assistance to TFR
Optimisation of Maputo flows

Outlook

Weekly railed tonnages have improved slightly since the beginning of 2024. Operational and maintenance challenges are expected to continue to have a significant impact on Exxaro, as TFR's recovery will be slow. However, TFR's new leadership will likely bring stability, aided by improved engagements between Transnet and the mining industry.

Policy/legislative changes concerning an open rail regime are encouraging. The reforms have resulted in the division of TFR into two functions – infrastructure management and operations. This opens rail network access to private operators.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

2Fatal risk incidents (2024 risk ranking: 2)

Drivers

Challenges with applying safety standards including operational risk management (including adequacy of standards and training)
Lack of reporting, investigating and correctly classifying incidents, which prevents correct root causes from being identified and effectively benefiting from lessons learnt
Lack of integration of health and safety requirements in the sourcing process for mining equipment and services (business partners)

Impacts

Fatalities and serious safety incidents
High insurance premiums
Loss of productivity (deaths, medical incapacity or sick leave)
Decrease in quality of life
Fines and penalties (section 54(a))
Reputational risk

Controls

Continued implementation of the safety improvement plan aligned with the five focus areas across all BUs
Reinvigorate the visible felt leadership (VFL) programme to proactively manage safety by coaching employees on safe working practices and extracting leading indicators to inform safety initiatives
Employee engagement platforms such as annual CEO safety summit and safety leadership day
Improve understanding of safety policies and procedures through newly launched AI solution, XXoro

Future treatments

Develop a long-term safety strategy underpinned by a safety framework
Review Exxaro health and safety policies and standards (including operational risk management, critical control management, incident management, VFL, fatal risk protocols and zero tolerance rules)
Roll out the refreshed safety strategy, framework, standards, fatal risk protocols and zero tolerance rules

Outlook

We remain committed to improving the safety of our operations and expect the revised safety strategy, framework and standards to enhance our safety performance.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

3Cybersecurity attacks impacting business (2024 risk ranking: 3)

Drivers

Sophistication of global cyberattacks given the drive in using digital business solutions
Implementing updated cybersecurity frameworks aligned with global current and new threats
Large number of devices connected to the Exxaro network that need to be managed
Vulnerability due to lack of awareness – people exposing Exxaro to cyberattacks
Ability to protect and detect global and local cyberattacks

Impacts

Revenue loss and reputational damage
Exposure of confidential information
Business interruption
Legal and regulatory impacts (Protection of Personal Information Act, 2013 (Act 4 of 2013) (POPIA) implications)

Controls

Enhanced governance and compliance: robust cybersecurity governance frameworks are in place, ensuring adherence to regulatory requirements and continuous monitoring of compliance
Strengthened security posture: stricter security practices have been implemented and identified vulnerabilities are being remediated to minimise potential risks
Ongoing security awareness: regular security awareness programmes are conducted to educate employees on emerging threats and promote a culture of security
Business continuity and disaster recovery: continuous business continuity management planning and disaster recovery testing ensure the organisation's resilience in the face of disruptions
Endpoint protection enhancements: the current antivirus solution has been assessed and improvements have been made to detect threats such as malware and ransomware on endpoints
Operating system security hardening: security settings have been strengthened to prevent unauthorised software execution on endpoints, with approved programs whitelisted
USB port management: USB ports have been blocked, with exceptions managed by the information management governance team
Privileged access management: a privileged access management tool has been implemented, with ongoing onboarding of accounts
Network segmentation: IT and OT networks have been segmented to reduce potential attack surfaces
Cloud migration: the organisation has successfully migrated from a public cloud to a private cloud, enhancing data security and control

Future treatments

Implement extended detection and response tool to monitor and block malware on endpoints
Implement the backup and recovery solution to ensure reliable data backup and recovery and boost disaster recovery capabilities (Project Vault)
Establish a comprehensive cybersecurity training and development programme to enhance information management employee skills and knowledge, reducing the risk of security breaches and data losses
Enable data loss protection

Outlook

The prevalence of cybersecurity attacks, specifically ransomware attacks, is expected to increase. Exxaro will continue to improve the robustness of the cybersecurity posture through a multi-layered security program and benchmark our cybersecurity profile to enhance prevention, detection, response and recovery efforts through vulnerability identification and management.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

4Country risk (geopolitical) (2024 risk ranking: 4)

Drivers

Uncertain, inhibiting and inadequate policies for economic development and investment
Crime and corrupt practices (private and public sector)
High unemployment and poverty
Lack of government service delivery
Country credit rating (BB-; stable outlook)
Constrained economic growth and limited tax base
Global macro-economics and geopolitics
Infrastructure constraints and supply chain disruptions
Uncertainty around GNU
Lack of innovation/research and development
Rand volatility
Exxaro's delivery on commitments

Impacts

Community unrest
Less opportunities for public-private partnerships
Increased compliance burden
High cost of capital
Breakdown in government relationships with Exxaro
Reduced investment opportunities
Higher expectations from society and government for Exxaro to invest more in social issues and service delivery
Stock devaluation

Controls

Implement the strategic stakeholder engagement plan
Continue to support a thriving democracy through deliberate and strategic donations and sponsorships
Leverage industry bodies to contribute to solutions to national and global agenda and to shape economic policy (Minerals Council of South Africa, National Logistics Crisis Committee, Business Leadership South Africa, Engineering Council of South Africa, World Economic Forum, and others)
Continue anti-bribery and corruption programmes/policies and communicate outcomes internally and externally
Deliver and communicate social impact strategies to build understanding of Exxaro's contribution to socio-economic development, education and employment challenges
Political risk insurances in place where applicable (for example, in other jurisdictions)
Utilise media/social media monitoring and analyst inputs to identify risks and develop a system to escalate impacts
Support communication of cybersecurity risk prevention (see risk 3)
Monitor and report on the impact of changing legislation
Contribute to national investment narrative and investor conferences to build confidence in South Africa
Develop and implement an internal and external communications strategy that enhances Exxaro's reputation
Enable cross-functional alignment to protect Exxaro's interests

Future treatments

Develop policies for social media, investor relations, strategic sponsorships, political donations, stakeholder engagements and strategic partnership to mitigate risks to Exxaro

Outlook

Social tensions and insecurity persist amid high levels of poverty, income inequality and endemic unemployment. Sentiment towards South Africa’s coalition government is cautiously optimistic. The country’s sovereign rating of BB-/B was revised to BB+ from stable on the back of expected potential stronger growth, alongside government debt stabilisation. There is also a positive reputational narrative stemming from the G20 presidency.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

5Customer concentration risk (2024 risk ranking: 5)

Drivers

Realisation of approved funding for capital requirements (Matla capital project programme)
Eskom liquidity risk
Commercial risk attached to long-term contracts
Less offtake at Medupi and Matimba due to environmental pressures
Infrastructure challenges at power stations results in reduced offtake

Impacts

Operational constraints at Grootegeluk due to pit liberation impacts as a result of low volume offtake from the power utility
Cash flow constraints at Eskom resulting in late or no payments
Cost of coal production becomes uncompetitive at Matla (lack of capital)
Loss of revenue
Reputational damage
National grid failure

Controls

Continuous engagement with Eskom to understand where Exxaro can assist, to better understand offtake disruption risks and to coordinate planned downtime
Enforce coal supply agreements (CSAs)
Debt relief package for Eskom and new management appointed
National Energy Crisis Committee (NECOM) is effectively managed

Outlook

Eskom’s financial challenges will remain a concern in the short to medium term as government continues to reform South Africa’s electricity sector and Eskom implements its turnaround strategy and restructuring. The NECOM is anticipated to improve engagement with the industry. Developments in Eskom indicate more reforms to be introduced.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

6Adverse threat to licence to operate (2024 risk ranking: 6)

Drivers

Not achieving SLP targets as approved (annual and five-year projects)
Poor stakeholder communication about Exxaro’s achievements
High community expectations for social investments and procurement opportunities
Delays in approval of licences and authorisations
Inability to meet legislative targets, such as Mining Charter and B-BBEE
Unwind of BEE transaction

Impacts

Production stoppages
Reputational impacts (loss of business opportunities)
Financial loss
Community unrest
Suspension/cancellation of mining right or directive issued by DMRE
Regression in B-BBEE level

Controls

Fulfil regulatory requirements within reasonable cost/expenses
Structured engagement with regulators
Supervision and performance reporting on execution of projects (SLPs)
Monitor SLP and B-BBEE compliance performance management
BEE transaction unwind project ongoing

Future treatments

Board committees overseeing unwind of BEE transaction considering regulatory and financial aspects

Outlook

We remain committed to implementing our Social Impact strategy to deliver impact in our communities and protect our licence to operate.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

7Community unrest (2024 risk ranking: 7)

Drivers

Delayed implementation of SLPs and transformation (local economic development, human resource development, local procurement, among others)
Lack of capability or capacity of local community companies and youth
Influence of local community business forums on allocation of opportunities
High unemployment rate
Low economic growth
Lack of municipal service delivery
Increased climate change activism in host communities

Impacts

Potential harm to mine employees, contractors and community members
Disruptions to operations (preventing access to workplace)
Reputational damage
Financial loss

Controls

Enhanced monitoring of SLP implementation
Ongoing engagement with DMRE, Minerals Council of South Africa and local and district municipalities, among others
Strike emergency response plans
Regular community stakeholder engagement
Develop post-mining economies and skills through programmes such as the minerals succession programme (MSP)
Ongoing communication of business opportunities and support, such as incubation and ESD programme
Leverage partnerships to increase social impact
Leverage and repurpose Exxaro land to benefit communities
Continue to implement the Social Impact strategy beyond compliance through an ecosystem approach to create greater impact

Outlook

We will continue to engage with community stakeholders and resolve issues proactively to avoid unrest and create tangible impact.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

8Inability to achieve growth objectives (2024 risk ranking: 8)

Drivers

Volatile economic and market conditions
Regulatory/policy uncertainty in South Africa and destination target countries
Competition for desired mineral assets increases valuation of opportunities and restricts access to some opportunities
Exxaro’s ability to respond effectively and timeously to potential opportunities (internal skills and processes)
Shareholder pressure to return excess cash
Lack of municipal service delivery
Capital allocation considerations and JSE transaction category criteria (execution risk)

Impacts

Reputational damage
Inability to transition from coal to other minerals
Undervalued/declining/volatile share price and market value
Inability to integrate new assets effectively or realise synergies post-deal execution

Controls

Board mandate to increase scope of minerals beyond manganese, bauxite and copper, and earlier stage investment opportunities
Maintain critical skills and capability to effectively source, originate, shape and execute deals
Build a pipeline of investment opportunities
Improve networking opportunities to gain insights into potential transactions and financing
Funds earmarked for the Sustainable Growth and Impact strategy
Regularly communicate with investors regarding strategy, capital allocation and returns against targets
Consider and incorporate appropriate post-deal strategies
Utilise strategic partnerships in deal making, when appropriate, to effectively reduce execution risk and deal size
Apply investment criteria to ensure value-accretive deals are considered (more flexible elements)

Future treatments

Disclosure of target and performance against strategy and capital allocation

Outlook

Exxaro’s primary growth lever is inorganic growth through acquisition. We will continue to pursue opportunities for growth through mergers and acquisitions. Expanding exploration will provide longer-term alternatives for the Sustainable Growth and Impact strategy.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

9Decarbonisation challenges (2024 risk ranking: 10)

Drivers

International and local investor sentiment against fossil fuels
Increased stringent local and international carbon legislation
Competition for water resources between operations and communities
Lack of implementation of national climate policies, resulting in failure to meet the national climate goals linked to the Paris Agreement (negative environment and social impacts)

Impacts

Increased cost of doing business
Community protest
Non-compliances associated with GHG emissions
Energy security and supply
Loss of production
Natural disasters
Equipment/infrastructure damage
Possible fatalities and increased occupational incident rate
Restriction in allocation of water
Legal claims against heavy polluters
Unable to secure insurance cover for operations

Controls

Established an ESG portfolio management office, with an ESG steering committee appointed to monitor its activities
Established a decarbonisation committee
Diversify the portfolio into other minerals, in line with Exxaro’s strategy
Engage government and other stakeholders to create partnerships to resolve scope 3 matters
Signed an MOU with the Council for Geoscience on scope 3 partnership
Invested in decarbonisation initiatives through the ESG portfolio management office
Reduce carbon intensity per tonne of product to reduce carbon emissions
Reduce our water intensity per tonne of product produced
Stay abreast of developments on carbon pricing
Established public-private partnerships
Assessment/study of operational adaptive capacity and resilience to inform mitigation measures

Future treatments

Capital allocation for decarbonisation and other ESG projects to be approved
Execution of decarbonisation roadmap
Annual review of financial model to cost the impact of carbon tax (ongoing)
Costing of individual projects that will contribute towards decarbonisation

Outlook

Changes proposed in National Treasury's Draft Phase Two Carbon Tax Discussion Paper will lead to higher carbon tax liabilities for Exxaro in 2026. We are optimistic that our decarbonisation roadmap and plan will assist in mitigating our carbon tax liabilities over time.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend

10Financial targets not met (2024 risk ranking: 11)

Drivers

Macro-economic factors (commodity prices, exchange rates and inflation)
Counterparties not meeting contractual obligations (Eskom, TFR and AMSA)
Renewal of TFR agreement which might impact tonnage available and cost associated with rail exports
Unable to reduce costs and optimise operations
Position of operations on cost curve
Above-inflation cost pressure and supply chain disruptions
Acquisitions not meeting the financial return targets in terms of investment criteria

Impacts

Lower production and revenue
Increased cost of production
Increased head office costs
Lower cash generation
Inability to achieve budgeted returns
Acquisitions not meeting hurdle rates

Controls

Target for cost increases of mines to be below mining inflation and for Exxaro to be in the first quartile of the cost curve
Operational excellence and digitalisation initiatives to reduce cost per tonne
Monitor supplier financial health (critical and strategic suppliers)
Annually determine cost, production and capex through target-setting process
Quantifying and simulating the impact of drivers in the financial model and forecasts
Enforcing Eskom take-or-pay provision
Investment criteria for acquisitions with sensitivity analysis

Future treatments

Engage with TFR to negotiate amendments to existing agreement and new contracts
Aim for head office costs following operational excellence process to be in line with 2024 official budget
Optimise costs at Grootegeluk
Optimise Leeuwpan mine

Outlook

Future financial performance will largely be influenced by logistical performance, Eskom’s ability to meet its contractual commitments and the performance of our investment in SIOC.

Material theme

Capitals impacted

Strategic objectives impacted

Line of defence

Risk ranking trend