Our Sustainable Growth and Impact strategy

We are determined to create a future aligned with our vision: resources powering a clean world. Our Sustainable Growth and Impact strategy lays the foundation for a sustainable future, enabling Exxaro to continue unlocking, creating and preserving value in an evolving global landscape while protecting against value erosion. Our strategy addresses South Africa's immediate energy security needs while proactively positioning our business for long-term success in a low-carbon economy. We are committed to going beyond compliance by prioritising material ESG and impact areas to build our resilience and create meaningful, positive impact for our stakeholders.

Where we are going

In line with our purpose of powering better lives in Africa and beyond, our ambition is to provide resources (people, minerals, energy and capital) critical to ensuring the energy transition and low-carbon future.

Forces shaping our way forward

Climate change

Energy transition

Low-carbon transition

Stewardship

Refer to our operating context and our outlook for more information.

What success looks like

Sustainable

Be carbon neutral by 2050
Maximise value from coal through early value and market to resource optimisation strategies
Reduce climate-related risks
Deliver positive impact through our Social Impact strategy

Growth

Diversify into resilient energy transition minerals and energy solutions, ensuring a significant EBITDA contribution in these areas by 2030
Grow energy solutions business to 1.6GW (net) by 2030
Ensure disciplined capital allocation to maximise value, supported by a robust investment criteria and process

Impact

Deliver social, economic and environmental benefits
Contribute to sustainable livelihoods
Strengthen our contribution to a low-carbon energy transition
Go beyond compliance to achieve sustainable impact

How we will achieve this – our Sustainable Growth and Impact strategy

The Sustainable Growth and Impact strategy is an integrated, multi-stakeholder approach to positioning the business for a resilient and sustainable future.

Strategic inputs

Enablers

Operating model: We refined our operating model to enhance efficiency and agility, ensuring alignment with strategic objectives and responsiveness to market dynamics to support long-term value creation
Partnerships: Collaborating with stakeholders, suppliers and industry partners is pivotal for success as these partnerships facilitate growth, innovation and broader impact
Capital, portfolio and risk management: We employ a disciplined capital allocation model to guide investment decisions, ensuring financial robustness and the ability to invest strategically while managing risks effectively
Technology and innovation: We leverage technological advancements and foster innovation to drive improvements across our business, supporting a low-carbon future and unlocking long-term competitiveness and value
Leadership: Effective leadership and governance are central to our strategy, ensuring alignment of organisational goals with our vision and purpose
ESG excellence: We are committed to the highest ESG standards, going beyond compliance and embedding responsible practices into core operations to build reputation, stakeholder trust and long-term resilience

Strategic objectives

Transition at speed and scale

We aim to transition our business with measured urgency given the growing need for the low-carbon transition. We will do this through disciplined capital allocation while creating a positive social impact. We will leverage our innovative organisational intelligence and ensure we take our people with us as we navigate this transition.

Make our minerals and energy businesses thrive

We will enhance our focus on our core delivery areas of minerals and energy by increasing our footprint while divesting non-core assets and ensuring continued operational and digital excellence.

Empower people to create impact

We strive to ensure our people and partners have the capabilities, skills, mindset, environment and passion to achieve our purpose while we contribute to sustainable livelihoods.

Be carbon neutral by 2050

Our goal is to reduce our carbon footprint and become carbon neutral by 2050. We will achieve this through our focused portfolio decarbonisation and social impact initiatives to deliver positive social, economic and environmental contributions.

Become a catalyst for economic growth and environmental stewardship

We aim to positively impact our ecosystem during and after our operations in minerals and energy, contributing to community projects and building thriving, sustainable businesses through our impact programmes, which are designed to lead to sustainable, scalable socio-economic upliftment and prosperity, independent of our continued operations and involvement in these environments.

Delivering a resilient, diversified resources business capable of powering better lives in Africa and beyond

We seek to supply minerals that power a clean world and provide our shareholders with superior returns while driving decarbonisation ambitions.

Our energy solutions business

We aim to be a leading energy solutions provider by 2030.

Our minerals business

Coal

Our coal business continues to deliver value for Exxaro and is critical in providing South Afric's primary energy requirements and grid stability.

Why

Manage coal assets responsibly, recognising they do not belong to us
Ensure that we do not leave high-value assets sterilised and stranded on our way to a low-carbon future

How

Ensure a robust coal asset portfolio, which includes divestment from resources that do not suit our future portfolio
Optimise our market to resource capability and value extraction
Digitalise our operations with a focus on value creation
Optimise capital deployment, supported by our capital excellence programme
Minimise emissions at our existing operations

Energy transition minerals

We will diversify into energy transition minerals vital for a low-carbon future, such as manganese and copper, among others.

Why

Become a business that thrives in a low-carbon future
Diversify revenue for Exxaro's sustainable growth
Clearly defined investment supporting the right opportunities
Enhance the value of our assets while upholding our ESG standards, wherever we operate

How

Take a minerals business approach that enables a transition to a low-carbon world while leveraging our core competencies and technical expertise in bulk and underground commodity mining, sales, marketing and logistics
Apply robust screening criteria to continuously review and identify priority minerals aligned with our future growth ambitions
Leverage our robust balance sheet, mining capabilities and expertise to maintain a competitive advantage

Competitive advantage

Specialised skills: With roots as a diversified miner, we possess recognised specialised skills in open-pit and underground mining methods, processing, sales, marketing, logistics, strategic finance and mergers and acquisitions, and have a strong project development and execution track record. These capabilities enable the efficient and effective evaluation of potential growth opportunities
Project execution excellence: Delivering digital innovation through our Innovation strategy and continued operational excellence from our high-performing coal operations while reducing costs, improving productivity and safety
Recognised for our ESG performance, brand and culture

Our energy solutions business

Renewable energy

We aim to be a leading energy solutions provider by 2030

Our goal is to be a significant contributor of energy solutions (energy assets and value-integrated services), with a broader market focus. We are targeting the following energy pillars:

Distributed and utility generation:

Our growth in energy will be internally led by providing our existing operations with self-generation, providing a similar service to mines and other industrial customers as well as participating in public auctions
We have two large windfarms in operation, and the LSP is under construction
We will determine markets for focus through investment-driven selection criteria

Services:

We will build our integrated energy services business by growing our existing energy business and augmenting our generation business with complementary services to facilitate in various aspects of the energy value chain

Why

Transition Exxaro to a carbon-neutral future, aligned to our strategy
Provide diversification and long-term sustainability to Exxaro’s cash flow, including providing cost-competitive value chain-integrated energy solutions
Become a prominent player and contributor to energy security

How

Leverage Exxaros advantage, which includes our internal energy requirements, a healthy balance sheet, resource evaluation skills, excellence in project management and optimisation, and experience in the project lifecycle
Invest in energy solutions with an acceptable risk profile, targeting a portfolio return of 15% equity internal rate of return over time
Strategic acquisition of skills, resources and market entries to grow at scale
Optimise capital deployment, supported by our capital excellence programme
Partnering to improve skills, credibility and growth

Competitive advantage

Renewable pedigree and scale: We are a significant independent power producer in South Africa and have had exposure to the energy industry since 2009
Strong Exxaro brand: Includes a strong balance sheet to back this strategic pillar
Adjacency advantage: All our operations require decarbonisation and are often located in clusters with other mining peers, who may also require solutions
Partnerships: Our partnerships enable growth and contribute key offtake opportunities

Enabling capital allocation

We will realise our ambition to be a diversified, carbon-neutral minerals company with a significant energy business and capabilities, through our capital allocation model. This model enables us to continue delivering stakeholder value and build a sustainable, resilient and robust business capable of withstanding dynamic market shifts. We will approach this transition with a clear understanding of the risks and rewards. This framework ensures strategic decision making between competing business investment interests and aligns with our broader objectives.

To ensure disciplined, data-driven capital allocation that supports our goals, we apply the following criteria:

Strategic fit: We assess investments using metrics such as financial performance, ESG alignment, and diversification across products, geographies and customer bases
Pacing: We prioritise timing to ensure value realisation, considering factors like time to earnings, Exxaro’s organisational readiness, and stakeholder impacts

Our capital excellence programme reflects our commitment to optimising financial resources to create sustainable value. Our capital allocation is guided by enterprise KPIs, including growth in mineral earnings, decarbonisation, ROCE, increase in energy generation, and maintaining our ESG licence to operate.

Capital allocation model

Cash inflow: We maintained strong cash generation, with revenue of R40.7 billion and a net cash position of R12 billion. This solid cash base enables us to support strategic investments and sustain our operations in a volatile market.

Excess cash: We manage excess cash prudently, reinvesting in highreturn opportunities or returning it to shareholders. This approach ensures we maintain flexibility.

Growth: Our growth strategy focuses on diversification beyond coal, emphasising a focus towards renewables and energy transition mineral opportunities. This includes advancing our decarbonisation initiatives to position us as a sustainable, diversified enterprise.

Debt service: Maintaining financial resilience is a key priority. Our target net debt to EBITDA ratio of less than 1.5 times supports financial flexibility and stability, positioning us to respond with agility to market changes while pursuing long-term growth.

Sustaining capex: Sustaining capital expenditure decreased by 12.6% year on year, primarily at Grootegeluk for the Backfill phase 3 and the timing of the haul track replacement strategy. This disciplined approach is central to our capital allocation model and ensures we can sustain production in core areas.

Expansion capex: In line with Exxaro’s strategic intent, we will not spend capital on coal expansion projects. Our capital allocation prioritises growth in renewable energy, including the 68MW LSP at Grootegeluk. This transition supports our goal of carbon neutrality by 2050, positioning us for a shift towards a low-carbon portfolio.

Dividends: In keeping with our commitment to shareholder returns, we paid R5.7 billion (2023: R5.5 billion) in dividends to external shareholders and R1.9 billion (2023: R1.8 billion) to BEE Parties. This reflects a balanced approach, providing immediate returns to shareholders while we actively pursue our growth ambitions.