Exxaro Resources Limited

Good morning, ladies and gentlemen. May we please get started? May I ask someone to close the doors at the back, please? Thank you for joining us in the room. I also would like to welcome those that are joining us online, whether you're joining us from LinkedIn or joining us from our webcast and our corpus call. My name is Sonwabi Zemzinyati. I am the Acting Chief Investor Relations and Liaison Officer here at Exaro. and I'm honored to be facilitating today's interim financial results. First off, let me start with our safety briefing here at The Connection, as is our culture here at Exaro. Please note that we have not planned any emergency drilling today. If the alarm is activated, please remain calm and exit the building using the emergency exit doors. The assembly point is located in front of the building where the roll call will be conducted. We will all remain at the assembly point until instructions are issued to re-enter the building. In the event of this situation, please note that visitors should always be accompanied by their host. For our ablation facilities, when you step outside the auditorium to your right, you will find our restrooms. In case of load shedding, which we do not envisage, we've had a good run so far, We have generators on site, which will kick in in three minutes, starting with the emergency lights, plugs, and then the Wi-Fi. Thank you for your attention. On the agenda today, our presentations will come from our CEO, giving us a group performance overview. We will then hear from our Chief Call Operations Officer on the call performance results. We will then be followed by our group financial performance from our FD, and lastly, the outlook will be led again when the CEO comes back to present. On that note, let me hand over to the CEO to kick us off.

A-planes take off against the wind. Adversity reveals diamonds. and else we say leaders are made by hard effort, not born. This is the wisdom from several poets and writers I start with today. Thank you, Sonua, and good morning, ladies and gentlemen. Thank you for your presence here today, and welcome to those joining us on the line. A warm welcome to the fellow board members in attendance today. and recognizing the chairman who is here, Mr. Jeffrey Kerner. I'm also pleased to see the members of the Pensioners Club. I only see two at this stage. One has already been seated, and one just came in just half a minute ago. So thank you for your continued support and presence. We are really grateful. looking at geopolitical events that had shaped the operating context for the first half of this year. After a slow start, global economic growth prospects have improved. However, with 49% of the world's population heading to the polls in this year, including our export markets, a wait-and-see attitude continues to prevail. further complicated by the ongoing conflicts in Russia and the Middle East. In South Africa, the recent results from the elections and subsequent creation of the Government of National Unity have driven positive sentiment towards this country. But uncertainty still lingers in respect of policy execution. Inflation rates have continued to trend downwards, allowing central banks to consider cutting interest rates. We expect the Federal Reserve, the European Central Bank, the Bank of England, and South African Reserve Bank, among others, to start lowering official or policy interest rates during the remainder of this year. The initial policy rate cuts will mark the end of the most aggressive rate-hiking cycle in four decades. With inflation rates retreating and interest rate cuts imminent, the global economy is expected to maintain its momentum throughout the end of this year. However, it is worth noting that although South Africa's CPI has been trending downwards, the mining CPI in this first half was higher than in the second half of last year. on the back of elevated electricity prices, which reflects the NASA's increase of 12.7%, which was effective in April, which is really also complemented by high cost of lending and trade financing due to elevated coke and refined petroleum costs due to the increase in brand crude prices. As Rian elaborates, you will see the impact this has had on our business. Let's now turn our attention specifically to how these markets have impacted the commodities that we're trading in. Following a weak start to the year due to subdued demand in Asia and Europe and lower natural gas prices, thermal coal prices recovered in the second quarter of this half, on the back of tightening sanctions on Russia, the Middle East tensions, disruptions in the U.S. of export calls to India, and then obviously the real issues that we experience here at home in the South African main export corridor to RBCT. Iron ore prices saw a steady decline from January to March as the sentiment was impacted by the fading optimism and uncertainty surrounding the China steel demand. Prices recovered slightly in April and May on the back of the improved demand of steel, both inside and outside of China. However, these gains were short-lived. As we look at the new minerals, in particular copper and manganese, we have been looking at these prices and monitoring the progression of these fundamentals. In the first half, copper remained quite strong as a result of improving investor sentiment and optimism around potential global economic growth, which has obviously been expected, and then manganese prices also rebounded significantly due to supply-side constraint, reassuring us that our strategy is on the right track. We have provided further detail in the backup slides in this regard. So please do look at those graphs. Now looking at the home front, we are pleased to report that TFR and industry collaboration have improved. As such, we remain cautiously optimistic for the second half of the year that TFR will perform at the 50 million tons per annum which are levels which are guided by them and will continue to respond with agility. We saw an increase in the cold domestic sales in the second quarter of this year. And this is due to the higher equipment availability at the waterbed power stations. However, this only partly offset the weak demand we saw in the first quarter. And you'll recall this is a problem that we're coming with within you know, the previous year. However, as you can see from the bottom graph, and we want to apologize for the color confusion that you may have in your handbook, but we've since corrected. If I'm correct, I think we have. So if you look at this graph, you can see growth of our export sales on the back of alternative means of evacuating our product offshore. Now, moving on to our operating performance, we're very pleased to report that this week we have achieved two consecutive years of zero fatalities across all our operations. And must I remind you that this had been a break from a long period of five years we had experienced before then. So now this is another trajectory, two years down the line. We're very happy to see this happening again. in the organization. As the chief safety officer in the organization, I recognize our team's focus on the five keys of safety and continue to encourage them to conduct robust root cause analysis for all incidents so that we don't experience repeats. And we also want to see demonstration daily from our teams of hashtag safety always commitments. And we expect to see this across the organization, underground, on surface, in this office every day. We do strive for zero harm. Our call operations team under HABI's leadership has consistently demonstrated resiliency. in navigating a dynamic operating environment. However, due to the low demand, mainly in the first quarter, as I've mentioned as well, coupled with several logical challenges, logistical challenges we have seen, we have experienced 12.7% decline in coal production, from 22 million tons to about 19 million tons in this first half. HABI will give more color in this regard. So now, given these logistical constraints that we've experienced, it is important to remember what I've mentioned the last time, that the design construct of the core business is optimized to perform at 50 million tons, with 8 to 12 million tons per annum of airports by rail to RBCT. So there is, however, a threshold below which even your most stringent of course containment will be rendered ineffective. So now let's look at where we are. Compared to the current operating levels of 42.5 million tons, which is 7.5 million tons below optimal levels, with stockpiles exporting 5 to 6 million tons per annum, Some are railed through RBCT, and we've got growing volume going to alternative ports, which are railed both by truck and also a little bit of railing. So think about that. It has actually fundamentally changed the construct and continues to put pressure on the cost management and cash costs that I think Mellis and team, obviously Khabib being there, has been really cornered under pressure, making it very difficult for us to cushion against the impact of inflation, as we have demonstrated over a couple of years. So you will then see the increase of 23.3% between the two halves in terms of our unit cost from 5.06 to 624 rounds per ton. which is mainly driven by our lower domestic offtake at our hot to collect mine, coupled with distribution costs, because we have railed more and exported more than we have in the previous half. So thanks to our early value strategy and our market to resource optimization approach, which we've worked on over years as well, which is beginning to deliver value, And the team has continued to respond with agility and efficiency to opportunities in the export markets. And I think Saki will tell a good story. This is the most busiest team and uncertain team and frustrated team in this building and in this company because they do not know what is going to happen tomorrow. They may have a train, but something may have changed in the market. So you really need to be very sharp. from an intelligence point of view. So proven by our export sales, which we've already mentioned that we've increased by 22% to 3.3 million tons in the first half. And I think they deserve a round of applause, ladies and gents. Really. So, and as I said with this, any value strategy then allowed us to realize that A good price, you know, 95% against the API4 index, which is in line with our set target we've already communicated with you. Yes, it is 2% below our record high of 97%, which we've achieved in the second half of 2023. But we continue to work hard. Now, turning to our energy business, the Synergy operations have delivered 339 gigawatts hour of wind energy, which is a decrease of 13 and a half percent. This business has strong wind seasonality that we see, whereby the first half of the year is always weaker than the second half, even though if you look at the two halves, and you see that if you compare the 2024 to 2023, we can see that there's been an increase of 1.2 percent in wind energy delivered, but this variation of first half to second half is what we experience. Now coming to our financial performance and looking at our group EBITDA, which decreased by 10.5% to 5 billion rands, mainly due to our low export prices and lower sales volumes in the domestic market, which we've experienced in this first half. Specifically on the coal EBITDA, a margin which was quite stable at 28%, whilst the energy EBIT margin decreased really slightly due to the previously mentioned seasonality that we've talked about already. We achieved headline earnings per share of R15.28, down 31.7%, including a contribution for SIAC interests, due to the drivers which copies will elaborate on a bit later. On return to capital employed, it is at 27%. This achievement is not only attributable to the high basket price performance, but also our discipline strategy execution and operations efficiency programs that have ensured the resilience of the business. So in light of this performance and taking into account our growth aspirations in addition to the uncertainty of our operating environment, it is my pleasure to announce the interim dividend as declared by the board of R7.96 per share, which copies will unpack later. Isn't that good? So But I must confess, I used to think that we don't have this number on the slides. That's how I used to do my little tricks before and try not to give the number. And I realized that actually all the time the number has always been on the slide. So it just shows. So let's go forward. As a purpose-driven organization, the sustainable impact of our business is at the core of our strategy. We are happy to share just a few examples of how we are creating a lasting impact for beyond our core mining value chain. Exaro contributed just over a billion rands in our social impact direct investment over the first half of the year. And a larger portion of this is from the coal operations that you would imagine and 60 million rands coming from our synergy business. We use this investment to empower our SMEs through capacity development, and revenue opportunity creation. Out of the 177 suppliers that were registered in the first half of the year, over 60% are now doing business with Exara, while over 6,000 individuals benefited from our supply enterprise development and our enterprise development programs, which is really quite good. So during the first half, we had 47 small enterprise owners from our host communities who graduated from Gibbs Exaro Contractor Development Program. We're really proud of this program because what it does, it further empowers contractors with businesses, with business skills, entrepreneurial skills, amongst others, to improve the viability and profitability of these businesses in their surrounding economies. Furthermore, with biodiversity preservation, it remains a very important focus area for our business. And of note, Synergy invested over 2 million rands towards the Cape Vulture Food Management Program to create the Eastern Cape Vulture Free Zone, or Vulture Safe Zone, in partnership with the Endangered Wildlife Trust. Now, looking at our municipality, Capacitation Programme partnerships with the National Business Initiative really resulted in very good results, especially in the improvement of the audit outcomes, with the Waterberg District Municipality receiving accolades for its exemplary performance, among others. We continue to empower the youth through education and also the implementation of our Early Childhood Development Programme. which benefited 1,400 children. Our school development program as well benefited about 11,000 learners and teachers during this reporting period. Now, coming to other critical sustainability matters at the operational level, where we ensure that we invest enough and the right resources and levels of resources to manage. And we do this because it is the right thing to do. and it is in sync with our values. So firstly, the Black Lung class action that you know we've been dealing with is progressing quite well with a dedicated team cooperating with all stakeholders and will keep you up to date if there are any further developments. Regarding the Denacol water treatment plant, we continue to explore alternative solutions, but it is our wish that we focus quite well in making sure that the right quality levels of this decant is on target and stabilized. Additionally, there have been movements regarding the Sundane family relocation, I'm sure it just puts some lights in your head when you think about this. And this is one issue that concerns us, and we want to make sure that we see this family reintegrate quite soon with the community. And we really prefer to handle these matters outside the courts. We are pleased to report that we've regained our position of four out of five rating on the FTSE Russell ESG index. And Exaro currently sits at the top 20% of the ESG performance convened by the FTSE Russell. And this improvement is underpinned by our ability to integrate our ESU principles in the course of doing business. And if you look at the outcomes of this, you will see that in terms of our disclosures on the environmental side, I think the team has done quite well. The work we've done a little bit on the decarbonization plan has also added to this. So as part of our government excellence, we have maintained our BBB level two rating, exceeding our level three target. And this speaks to our commitment towards driving transformation in our industry and the broader economy. So as I've mentioned, progressing very well on the decarbonization efforts for a company like ours is very important that we prioritize these efforts and make sure that we contribute to the much-needed efforts energy solutions through our current business. So we need to manage this very well. We have been proactive in addressing our impact on climate change since 2008 by partnering with research institutions and growing industry collective knowledge and capabilities as we contribute towards South Africa's energy transition. And what is key to this partnership for us is underpinned by the technical skills dedicated towards specific decarbonization needs of Exaro, especially around the issue of scope three emissions reduction, which becomes a challenge for us. So we're very happy to report that between 2019 and 2023, we have reduced our carbon emissions by 12%, resulting in a 7.7% reduction in carbon intensity due to these operational efficiency programs at various operations. So furthermore, we aim to reduce our Scope 1 and Scope 2 emissions by 40% by 2026 through various projects such as self-generation energy and increased operational efficiency, for example. Now, looking at what we've done, for example, in places like Gigi, we had to reconfigure our pit operations to optimize energy efficiencies to ensure that we reduce traveling distances, to reduce diesel consumption and associated emissions. The completion also of our Lipalalu solar plant under construction at Gigi, progressing quite well. And this plant, we believe, will really supplement our energy consumption with this self-generated green energy by the first or second quarter of 2025. So the first half we're looking at getting the benefits, including the cost of electricity or power. Going to the high-caloric value, which is our high-quality coals, which we mine, it further contributes in lowering Scope 3 emissions, especially in export markets. And we're committed to the diversification of our portfolio, which will further contribute to carbon neutrality by 2050. And as such, our board of directors are steadfast in supporting the execution of our plan, making sure that the strategy is clearly laid out and is closely monitored by them against set targets at subcommittee and board plenary level. And with that said, let me hand over to Khabib. to speak to us about your operations.

Thank you, Nombasa. Good morning, ladies and gentlemen. I'm excited to present the COOL performance results for the first half of 2024. We are proud to report that we've improved our safety performance this period. And to me, this is our biggest achievement, sending all our employees back home safely. As I unpack the operational performance, It is evident that volume still remains a major component, but adding business value remains paramount in all our business decisions. We also effectively controlled our total cash costs and continued our focus on value-adding projects in capital execution. You will further notice how the operations responded to the changing business environment. making impactful decisions and enabling operations to continuously and diligently adapt to markets. Deliver the required products to our customers while we continuously looking for ways of improving our business. I will now dive into our performance in more detail. Starting with safety, which remains our priority and underpins how we do business. Even though we are grateful to remain fatality free. I would like to take a moment to convey our deepest condolences to the families and friends who have lost their loved ones in the mining industry during 2024. Improved safety comes across the business remains a continued and collective responsibility. Year to date, we recorded four last time injuries compared to five in the second half of 2023, resulting in a frequency rate of 0.06, an improvement from 2023, where we ended with a frequency rate of 0.08 for the year. This confirms the success of our safety focus drive, as mentioned by Dr. Nombasa, at our operations. We remain committed to zero harm, which is imperative to our business, and we continue to proactively address safety risks at all times. We would like to highlight some noteworthy achievements in our environmental performance, demonstrating our dedication to sustainability. A 5% improvement in carbon intensity due to the energy efficiency projects with an ongoing commitment to achieve our 2026 goals. target of reducing Scope 1 and Scope 2 emissions by 40% from the 2022 baseline. Water intensity came in at 167 liters per run of mine ton, staying well below our target of 180 liters per run of mine ton, and well below the coal mining benchmark of 380 liters per run of mine ton. The main increase in the water intensity was mainly due to the lower runoff mine. Our rehabilitation efforts resulted in the rehabilitated area remaining in line with the previous period. We also maintained zero level two and three environmental incidents with actions in place to remedy the level two incident, which Nomvasa has highlighted, which is the Danakol incident. We had this incident in the second half of 2023, and there are remedies to deal with that, as it was mentioned. Social investment for the six-month period amounted to 1,045,000 rent, which is higher than a billion which we spent in the second half of 2023. The local procurement spent on black, small, medium, and micro enterprises constitute 77% of the social investment. Combined, this initiative have supported 372 SMMEs through local procurement as well as enterprise and supplier development. We continue to invest in our mineral succession and education program to ensure we have sustainable communities. We currently support 63 black farmers and three ESD businesses, which consolidates into 47 projects under this initiative. Next, I will focus on our operational performance. Looking at our production, we are 12.7% down, about 2.8 million tons. The 2023 volume impacts continued, mainly from lower offtake at our Kuta Halak mine, resulting in a decrease of 1.8 million tons for the six months of 2024. Despite an improvement of about a million tons in the second quarter of 2024, the team has done a lot of work, the ESCOM team and the team led by Lars at Kuta Halak, to ensure that these improvements are realized. We expect a continuation on this improved trajectory assisting in all possible ways to continue realizing this improvement. Mpumalanga production was mainly impacted by Leopan, where we continued with our strategy to focus on delivering value and not volume, as mentioned before. This resulted in 400,000 tons lower production. Our sales volumes were 11.7% down, negatively impacted by lower off-take production due to unit outages and equipment breakers at our off-takers, and this occurred in the first quarter of this year. We have started to see an improvement in the second quarter for the first half of 2024. Lower product availability from Luopan, as highlighted in the comments on production, also impacted us. We were successful in developing alternative logistics channels, resulting in an increase of 600,000 tons, which we've moved through the ports. And this is equivalent to 22%, as it was mentioned by Nombasa. This impacted the domestic offtake somewhat, as available volume was allocated to the markets based on the financial availability and our market resource optimization strategy. Looking forward to the second half of 2024, we forecast production for the second half of 2024 to increase by 1.8 million tons, which is about 9.3%, and sales to increase by 10.6%, mainly due to the following. An increase at Kootenai Lake based on the expected 2.3 million tons increased offtake due to the improvement seen and based on the contracted volumes. A 13% 0.8% decrease in input malanga production is mainly driven by MATA decreasing by 42% as expected and highlighted previously with a mine two short haul which is stopped in May and the subsequent transition to mine one. We did receive all the capital from ESCOM to finish the project. This was offset somewhat by Leopold's optimization value drive initiatives which are now established. Furthermore, We are expected to build on this foundation, which will enable a new market avenue in a sustainable domestic market, resulting in a production increase of 500,000 tons, which is about 45%. We continue to manage the Mbumalanga mines on a portfolio level. And this is important that we don't look at each operation as a unit, but we look at it as a portfolio. where management decisions on our operations and distribution of our products only solve for the maximum return for Exaro. We are planning to maintain the improved export sales of 3.3 million tons into the second half of 2024. I'll move to our market slides. Our market to resource optimization strategy continues to add value to our portfolio and ultimately delivering into our financial performance. There is a great collaboration between our marketing team and operations team to execute our strategy. Starting with our export sales destination at the top right-hand corner. With Europe relating to a normalized proportion of our sales, we have seen India back in the market as coal prices came down. Nearly 50% of our export coal was sold to Indian customers during this period. Our marketing team was able to successfully play into the decarbonization and environmentally cleaner imperatives in delivering to the market and also supporting our customers with high-quality products. Moving to the bottom left corner, we show our progress towards optimizing our export product mix the tandem strategies of ELU value and market-to-resource optimization continue to guide us to sell the highest value product mix. As per our previous guidance to the market, the RB1 portion of the mix, now at 70%, will see short-term pressure as we export higher volumes of lower-quality coal via other channels. During this period, 25% of our exports took place via channels other than Richards Bay Cold Terminal. We continue to develop mechanisms to optimize the sales mix across the portfolio, also via the other export channels. Moving to the right, we talk about the average realized prices. We are still experiencing significant pressure on pricing dynamics, both domestically and and internationally, with a lower API4 price of $101 per ton versus $112 per ton in the second half of 2023. With increased export volumes via alternative channels, we have guided previously that there will be temporary pressure on our price realization performance, now sitting at 95%. We still view this as a benchmark price realization performance. We believe that we have seen the lows in the transnet freight rail performance and are cautiously optimistic for incremental improvements in export rail performance to Richards Bay coal terminal. We are strongly encouraged by the approach taken by the new management under Michel and Russell. We are focused on continued optimization of routes to market, and I'm confident that we will in time show even more success in this regard. I'll now move to the course slides. During our financial results presentation to the market, we highlighted the fact that we have installed capacity to produce 50 million tons. And Dr. Nomas has spent a lot of time explaining the importance of us operating at 42.5 while we've designed for 50%. So that is quite important in terms of what it does to our business. We also indicated that offtake and logistics constraints will add additional cost pressure. And our guidance of remaining within coal mining inflation on a cost per ton basis is at risk, Here I'm in front of you telling you the same story. It's what I told you earlier in the FD pre-close also. We are therefore pleased to report that our cost of production has decreased by 147 million rand and even including the additional investment of 614 million rand in logistics options. Our total cash cost only increased by 5.2%. well below the mining inflation of 7.2% for the first half of 2024. This was made possible by continued cost efficiency and improvement initiatives remaining true to our commitment to produce at benchmark cost levels. This commitment remains relevant to ensure we proactively minimize all impacts on our business. As discussed in our production performance, The offtake at Rotorola continues to impact this operation, and the higher volumes through alternative channels does come at a premium. The lower offtake impacted the operational reading, and again, requires us to pivot regarding our mining value chain processes. We are designed to move coal via conveyor or rail. Now we're tracking coal also on top of that, so that is that requiring us to pivot. Previous anomalies. we mentioned have been concluded and strip ratios will return to long-term averages in line with the life of mine designs. In the first half of 2024, we continue to utilize opportunities to prepare our operations to be more responsive to this changing reality. Focusing on equipment maintenance, exposing cold, and ensuring that we are prepared for the increased demand. as we have indicated in the second half of 2024, embedding our alternative logistics channels while continuously optimizing. The reduced production volume amounting to 2.8 million tons, or about 12.7%, resulted in an increase of 12.8% in our production cost per ton and an export logistics cost increase of 10.5% per ton. The latter investment has resulted in an additional 600,000 tons, which we sold through alternative logistics channels. I will now unpack the key contributors to our production cost pattern as indicated by the shaded area in the bottom right graph. Firstly, the increased equipment and plant maintenance, as discussed above, accounted for which contributes to 5%. Employee costs increased by 4% due to normal labor increases of 2% and a structural change due to the technical support services moving into coal. Increased contractor costs of about 3%. This was mainly at Belfast, moving additional volumes in the first half of 2024. to increase cold inventory and enabling product flexibility. The rehabilitation costs reduced mainly due to the impact on the liability as a result of the change in PPI and the discount rates. In conclusion, we remind you again that cost containment remains our highest priority, especially when impacted by decrease of take and below normal logistic channels or performance. We pride ourselves in that despite all what has been mentioned, we are still able to remain within the second production cost quota on aggregate as example. Having said all of this, we continue to challenge ourselves to keep our production costs within the mining inflation. As mentioned, I remind you that we will continue to maintain our operation resilience and responsiveness to changing external factors that may impact our business. This is supported by our commitment to driving digital programs targeted at obtaining insights from our data analytics. Finally, we move to our capital expenditure. We are still within the 5% guidance provided to the June 2024 of the FD pre-close. with the actual expenditure at 2% below the forecasted value. We remain committed to our capital excellence journey and spend our cash prudently focusing on the investments to effectively sustain our business. Our spend is also aligned with the normal project execution plans, which reflects an increase in the second half of 2024. Looking ahead, we forecast our 2024 capital expenditure to remain in line with our overall guidance, which is between 2.5 to 3 billion per year in real terms. Key areas of focus include equipment strategies and license to operate infrastructure, as indicated in the table above. Now I would like to take this opportunity and express my gratitude to the operations team, and our colleagues here at The Connection for their exceptional agility and resilience demonstrated through the year. Their efforts have played a significant role in our finance and operational achievements. Now I will hand over to Khopis, who will provide a detailed overview of the financials. Thank you.