Exxaro Resources Limited

A very good morning, ladies and gentlemen. Welcome to Exaro's interim results for the six-month period ended 30 June 2025. My name is Sonagi Zemzinyati, and I look after investor relations and communications for Exaro. Today, I will be facilitating this presentation. As you know, at Exaro, we begin all our sessions with a safety briefing. So with that, allow me to take you through it. We have not planned any emergency drill today, but if for some reason the alarm is activated, please remain calm, stay on your seat, exit the building using the emergency exit doors. The assembly point for Exara is in front of our building. If you are a visitor, we request that you remain with your host at all times. In the event of load shedding, we do have generators on the premises. The generators will go live in about three minutes. For the bathroom facilities, you go out of the auditorium, you turn left and the bathroom facilities will be on your right. Smoking areas are allocated outside of our building. We request you to please take note of our disclaimer. Our content for our presentation today will consist of key highlights. It will be followed by operational performance, financial performance, and then we'll get into the outlook. Our speakers for today, our CEO, Mr. Ben Magara, as well as our finance director, Mr. Rian Koperska. Allow me to welcome Ben to his very first intro or results altogether as Exaro's CEO. Ben, today marks 143 days since you joined Exaro, and we just want to recognize that it has been nothing short of extraordinary, and we have felt your visionary and transformational leadership already. And with that, Ben, I'd like to hand over to you.

Thank you very much, Sonwabise, and very kind words. I have absolutely enjoyed my time at Exara, and I'm so looking forward to doing the best work of our lives with all my fellow employees. And thank you for joining us this morning. Before I start, this is Women's Month. And I have some very special guests in the audience this morning. So please allow me to mention them a little bit. Because in this special Women's Month... So my two sweethearts that I'm going to mention is Mama Solukazi... It's so good to see you here. Please stand up for us. I meet her at the shopping centers all the time, and she looks at my wife and she says, Makoti, take care of my son. So I really thank you for being here with us this morning. And Ma'am Dikapa, you welcomed me to Exaro. Thank you. You welcomed me to Exara when I joined as a non-executive director. And it's been none short of lots of fun. And it's been like homecoming for me at Exara. And I want to thank you for that. There are some non-executive board members who have also joined us this morning and some past. I can say past CEOs, but still shareholders, so I will not mention all of them. But really just to welcome you all and good morning, everyone, and thank you for joining us. It is my great pleasure that I am able to present Exaro's interim results for the period ending 30 June 2025. Alongside our Finance Director, Ian Koperska, who I must commend once again for an excellent work that he has done when he was acting CEO prior to my tenure. As you would have seen already from the numbers, because I'm sure you have read them, Rian's pocket has only gotten deeper. His hands, I'm not so sure if they got any longer. But it's now been over four months since I joined, and in this time we have visited all our operations. and engaged directly with our fellow employees. We have engaged with organized labor. To the extent we actually went to organized labor's offices. I didn't want them to come and see us here. Because generally employers tend to say, come and see me. No. We wanted to go and see them in their workplaces, in resique with NAM, with solidarity. We went up to the coffee there. It was great to see and to engage with them and get the sense of their own expectations of this company. and they had no other expectations but to see Exaro succeed. So we met also with governments, industry bodies, partners, customers, both locally and internationally, and you, obviously, our shareholders and investors. So we welcome you here this morning, and those who are also on virtual platforms. These engagements have deepened my understanding of our stakeholder expectations and their vision for Exaro. Fresh graduate mining engineer in the 90s, young at heart, I began my career in the coal industry. So as I said earlier, Exaro gives me a feeling of homecoming. And not only is coal our foundation, and we can see the longevity of coal demand even post 2050, so we're going to extend the life of our mines because we've got fantastic infrastructure. and we are diversifying into other minerals that give us opportunities to diversify, but also to get into the grid energy space, and as you would have seen some of our announcements. So I have since gained global exposure across multi-commodities in the mining value chain. This has shaped my own leadership approach. I believe that safety is core to everything that we do. If it is not safe, we don't do it at all. I believe in strong relationships. And I'm always focused on exceptional performance. On people doing the best work of their lives. And we spend so many years at work. We can make it so fun that it doesn't have to feel like work. But we have to deliver. So our core focus delivering exceptional performance will continue. through operational efficiency, capital discipline, and winning with our people. I have been both impressed and inspired by the depth and expertise and passion and commitment that I have sensed and felt on all our operations and businesses, including even the mines enclosure, because I've been to all of them, be it in Limpopo or KwaZulu-Natal. And I look forward to visiting our energy facilities in September. I will now take you through the key highlights. But that was really just a quick catch-up on just my return to coal and just how much fun we are having. But really, the numbers have to highlight that this fund is not for nothing. And we'll also take you through the early signs of our decisive action in executing our sustainable growth and impact strategy. Because that's what we are here for. So I'm pleased to announce that we achieved some key strategic milestones in this first half. Leon and the energy solution business, Synergy. They achieved financial closure of our 140 megawatts career boss wind farm in February. We're going to spend about $4.7 billion on this project. And this transaction contributes to our portfolio of diversification. Most importantly, it will support our program to reduce scope 3 emissions as we execute on our decarbonization roadmap. In May, six weeks after I'd started, we announced the acquisition in the Manganese area of Simpingia Holdings and OMH, shares and claims in key Manganese assets. I will provide a fuller update a bit later about this. On the safety side, on Friday the 15th last week, We achieved three years fatality free. Thank you, Mondi, for kicking it off. Really, that for me is wonderful news about a company that knows that people confessed. That if it's not safe, we do not do it. Not in my name and not in your name either. In this first half, we delivered way in line with all our guidances, underpinned, as I said earlier, about operational efficiency and marketing excellence. This is despite a challenging macroeconomic environment. We're having also decreased off-tech levels and ongoing logistics constraints. And I'll cover on this a little bit because it might not be very clear. We are seeing very good green shoots about TFR and Transnet's performance. But there's no cigar yet. Because we invested a lot of money into RBCT, which can now deliver 91 million tons. We still want to get there. But Transnet has since improved from about 48, 50 million tons run rate, now to about 54 million. And Exaro has got long life assets, and we're partnering in this private sector participation. We are interested in it because it's good for the country, it's good for the economy, but it will make money for our shareholders. Overall, our coal production increased by 1%, and this seems marginal until you see that our export sales went up by 3% year on year. bolstered mainly by the successful efforts of our operational teams, our Mpumalanga operations improved production by 14% in total, including Liupan. But our sales and marketing teams have done an exceptional job in continuing to drive price realization. Up 1% to 96%. So if you think of API4, the benchmark for RBCT pricing, It means we achieved, if it was $100, we achieved $96. And that's an exceptional industry leading price realization because on average the industry tends to play around 80, 85%. I touched earlier on the wind energy. It was in line with our performance last year at 337 gigawatt hours. Hence, our financial performance in the first half was robust. our revenue went up 8% to 20.6 billion rands. Our group EBITDA is up 10%, year-on-year to 5.6 billion. You can see our EBITDA is higher than, the rate of growth in EBITDA is higher than the rate of growth in revenue, which means there was a robust cost containment program in order to maximize margins, and our net cash position has improved by 27% to $12.4 billion compared to the first half of last year, 2024. Equity investments, particularly from iron ore investments and Black Mountain, the zinc business, and we benefited a lot at Black Mountain because of increased production and sales volumes due to favorable mining conditions and the ramping up of our projects there. Lastly, I'm happy to announce that given this great performance and cash generation, that the board has declared an interim dividend of eight runs, 43 cents per share. Thank you. I can see, I can see, I can see. Thank you. Thank you. We appreciate it. But ladies and gentlemen, let me remind you. This is Exaro's 45th consecutive dividend. Since the listing on the Johannesburg Stock Exchange 19 years ago in 2006, we have not missed a bit for our shareholders. This is a clear testament of our business model and our commitment to delivering consistent and sustainable shareholder returns. And we are vested with a great asset and great people. And as a new leadership from the announcement we made yesterday, we're looking forward to driving this growth. So let me now share a bit of a backdrop about what drove Exaro's stable delivery. amidst all the shifting macro and market challenges. The first half of 2025 set an unprecedented tone stemming from the unpredictable markets and geopolitical activities that we've all seen. And at the World Economic Forum in Davos 2018, the former Canadian Prime Minister Justin Trudeau coined a very insightful phrase. That's proving to be even more relevant and was very relevant in this half of the year. He said in that quote, the pace of change has never been this fast. Yet, it will never be this slow again. It will never be this slow again. Indeed, this uncertainty is here and is our new norm. Great companies will be those that can serve with elegance like Exaro. Because these waves of unpredictability and uncertainty are here to stay. We might as well enjoy them. We saw a sluggish GDP of 2.2%, which dampened demand for bulk commodities like iron ore and coal, affecting our pricing power and export volumes. We saw cautious optimism with regards to investor sentiment, underpinned mainly by the formation of the government of national unity in our country. And that optimism continues. We are continuously seeing the green shoots in some of the ministries, including our own Minister of Transport, particularly on the logistics side. This effort to include and involve public participation and public sector involvement, of which Exaro is ambitious to be part of, because we have long-term assets and long-life assets. So we continue to have good engagements with TFR and the whole management. And as part of my program of induction, I did meet with Michelle in this office, in this building, Again, to emphasize our wish to continue to work together and collaborate and improve the logistics so critical to South Africa and, of course, to Exaro. And we make no bones about us wanting to make more money out of it because it grows our economy. And that's the only way we can all grow. So I've met them during my tenure already, and I acknowledge their great efforts to Michelle towards all these reforms. So this half we saw CEB on thermal coal prices soften a little bit prior to compared to last year, mainly because of the dropping of stock levels in Europe. They focused on reducing their stocks in some mild weather patterns. In this, however, the prices remain higher than the pre-2021 averages. Australia saw benchmark oil prices fall to a four-year low at $90 per tonne, while our API4 benchmark at RBCT averaged $92 per tonne. Iron ore prices were volatile and weaker, linked mainly to the lower than expected Chinese construction activity. So enough of the backdrop. Now back to why we're here, because excuses don't put dividends on the table. And I'll share with you our operational performance before Rian shares the full financial details. I stand for safety, and at Exaro, we believe zero harm is achievable. And we believe that all incidences are preventable. Following the launch of our one voice safety strategy at our annual CAO Safety Summit in April, we rolled out the refreshed safety strategy. This is a refreshed strategy. It doesn't mean we are veering from our base of the way we do things. It's we are topping up on it because we can never be complacent with all this good performance. We have to continue to work hard. This refresh safety strategy is anchored on five pillars, as you see on the slides, which aim to ensure that our people, systems, processes, workplaces are integrated to power our goal to achieve zero harm. Safety is a state of mind, and we'll continue to focus on making sure we work safely. And everyone at Exaro knows this, as I've already explained earlier. Total production was 19.4 million tons from 19.3 in the first half of last year. And I focus on comparing with first half of last year. because that removes the seasonality impact of our results. But Rian will focus on how the financial results have to be presented. The drop in the sequential halves is in line with seasonality, as the second half of 2024 tends to have less rains and therefore better production. Krutkalak remains stable, despite extraordinary rainfall and a partial rail wash away in the first quarter. which impacted both rail and road performance. Our operations in Mpumalanga excelled. And thanks to Chris Ballo, I think I saw him here, and I saw quite a number of our general managers from the mines. And Tamara, where's Tamara? Tamara, welcome. She's our first, please stand up. She's our first general manager mining engineer at Mafudeh. And she sent an article that I really have now copied going forward, which says, we are qualified, we are competent, we are capable, we are worth it. Well done. Our Pumalanga operations excelled and produced 14% year-on-year. Better. And we have made up for the decrease in the water break area. Belfast increased production by 6%. and through a deep bottlenecking project and is now delivering at its Nemplate capacity, which is really exceptional performance. Mafube continues to outperform, improving by 25% year on year. And I was the CEO at Anglo-American Coal, when together with the former CEO of Exaro, the Big Bear, Sipong Kosi, we approved the start of the Mafube Greenfields project. which is now one of our valued mines, and I'm proud of its success. And to come back to it and see it continue really gives me a good feeling. And it continues to deliver. Matla is down 12% compared to the first half of last year because we have decommissioned the short wall, which produced last year and is out of our production numbers this year. This was the last short-wall mine in South Africa because there isn't enough coal deposits that are flat enough, long enough, wide enough for this kind of technology to be used. However, Matla delivered exceptional performance, and it's worth mentioning that the ramp-up of Matla is going on very well. We are spending $5.2 billion to build up Matla for calling to the power station. And we have seen a massive improvement way in line with that. So we'll have almost a new mind there. I'll provide more details of this later, just for those excited to come back to the coalface. It's early days, but our Leupan turnaround is yielding results. Lupin improved by 18% due to the modified mine plan pit consolidation as well as our sales and marketing team driving and processing teams driving an optimized product mix focusing on restoring the profitability of this mine. This is a mine that has operated for 35 years and it has never had a fatality. It takes a lot of work And we upload that because we know it doesn't happen without leadership. It doesn't happen without employees working hard every day and believing they can go home safely every day. We achieved excellent sales volumes. And this was due to exceptional efforts from our marketing teams, particularly through our market to resource optimization strategy and the logistics teams who mitigated the rail wash away I spoke about at Crude Clark. by placing trains which we would have lost and placed all those trains into the Pumalanga operations because those mines were outperforming on the expectations we had. And that has helped us to step up the production better than last year and maintain our customer commitments. These were not just tactical adjustments. They were decisive actions that protected our market share and revenue. So our total sales increased by 1%. mainly on other domestic thermal cores driven by Mafube and Liupan. Moving to our international markets and exports, we delivered a strong performance indicating our continued proactiveness to market dynamics. The Indian market was negatively impacted by local production in India and weaknesses in their steel sector. Despite this, ladies and gentlemen, XR is progressing well in developing this niche market for the whole of South Africa and the rest of Africa. We saw growth into Africa of about 18%. and that is helpful to our volumes. Similarly, our progress in the market development efforts in other Asia is encouraging, and Exaro's brand is well recognized for consistency in quality and in deal execution, and this is something I am very proud of, and I found it at Exaro. Having been in the coal industry for many years, I know what consistency and quality means to our customers, especially in Japan. I spoke about price realisation earlier, really driving our market to resource optimisation. And RBCT, where we have entitlement, remains our most optimal value route, even though we take advantage of alternative coal evacuation methodologies and multi-modal logistic systems. when we feel that there is potential to make more margins and more profits in those areas. We minimize road where we realize that the margins are not good enough. At current prices, it's possibly not very helpful to be on the road with your call. So we continue to monitor that, and our teams are exceptional in delivering on that space. So where margins justify it, we do it. Synergis operating wind assets generated 337 gigawatt hours of electricity in the first half. As I said, almost flat from last year. And this was supported by good plant availability, which is higher than last year with about 1% to about 98%. Revenue increased by 3.5% in the synergy business to 675 million and really on the back of stable generation and increased annual tariff escalations. with operational EBITDA improving to $537 million from our wind energy business. And this drive is not just about money, but about reducing emissions, and this is our contribution to the world. Let me now hand over to my buddy, Copis, as we call him, to take us through all the financial performance results, and I'll be back again to share with you our outlook and guidance. Thank you.

Good morning, ladies and gentlemen. Once again, a pleasure to present our financial results for the six-month period ended 30 June. I'm sure you will all agree that as his buddy, I gave Ben a very good induction, eh? Laughter More serious stuff. The financial results will be compared to the second half of 2024. So to ensure comparability, the figures presented in this section are based on IFRS results adjusted for headline earnings adjustments detailed in the additional slides. This high-level overview of the group result depicts performance of our managed operations in the first two graphs at the top. As you can see, revenue decreased by 5%, contrasting with a 6% increase in EBITDA. Income from our equity-accounted investments is highlighted in the top right graph, indicating an increase mainly due to SIOC's contribution, increasing by almost $500 million compared to the second half of 2024. Equity income per investment is available in the additional slides. So despite operating in dynamic and challenging market conditions, we generated 5.3 billion in cash to end in a net cash position of 12.4 billion Rand at the end of June, which will be discussed in more detail later on. This translated into headline earnings per share of 17.24 Rand. Now let's look closer at the EBITDA analysis, firstly starting with the price impact. So in line with the decline in the benchmark API4 coal price, export prices were 16% lower than in the second half of 2024. but offset by our local price realization relative to the API4 index, which improved by 1%. The higher prices realized in the domestic market also provided support to the overall revenue. If you look at the volumes, export volumes decreased by 8% following the road and rail damage caused by severe rainfall in the first quarter. And distribution to the ports only ramped up in the second quarter after repairs to these channels were completed. Domestic sales volumes declined by 1 million ton with the lower offtake from the Waterberg power stations, which experienced maintenance outages and coal stacking and reclaiming challenges. Next, we faced inflationary pressure across the mining industry. which also contributed to an increase in costs. So you can see electricity costs rose by 6.4%, labor costs by 1.2%, and other costs in line with PPI at 1.3%. Our diesel cost, however, decreased by 0.5%, helping to limit the overall inflationary impact. Beyond inflation, other costs also impacted EBITDA. We had higher buying volumes from Almofube, JV, albeit at lower prices. We had a positive impact of $548 million relating to inventory movements with net realizable value adjustments in the second half of last year not occurring again and higher production than sales volumes in the first half of this year. Operational costs decreased by $442 million as a result of lower expert tonnage at Groote Geluk and also lower stripping ratios at Lieupon and Belfast in the first half of this year. Adjustments to the rehabilitation liability rate. had a negative impact on profit in the second half of last year due to higher post-water treatment cost and a sharp decrease in the discount rates. Although the discount rates declined further in the first half of this year, the movement was much lower than in 2024. On the logistical front, our logistics cost decreased by 190 million rand due to the lower export volumes and thus also moving less tons through Maputo, which is the more expensive route. The positive impact of the weaker rand dollar exchange rate on revenue was offset by realized and unrealized losses on foreign debtor and cash balances. So finally, looking at the general costs, which mainly consist of returns on our rehabilitation trust fund, the revaluation resulted in it to be $41 million higher in the first half of this year. On the next slide... we look at the performance of the Waterberg and Mapumalanga coal operations. So although the revenue from both regions decreased from the second half of last year, EBITDA in total increased by 8%. So firstly, looking at Waterberg, so although the Waterberg revenue decreased by 153 million, driven by lower offtake and decreased export volumes, This was offset by higher prices realized in the domestic market. EBITDA increased by R400 million despite inflation adding about R98 million to the cost base. The operational cost, as mentioned on the previous slide, reduced by R215 million, while the negative impact on export volumes resulted in lower logistical costs of R183 million. Another factor impacting EBITDA was the combination of lower domestic offtake and road and rail damage restricting our export sales. This led production to exceed sales volumes and resulted in elevated inventory levels at the end of June with a positive EBITDA impact of $322 million. Shifting focus to Pumalanga. So although the revenue decreased by $746 million, the EBITDA only declined by $55 million. This decline in revenue was largely due to constraints on export volumes and lower prices realized in line with the lower coal index price. Cost pressure also played out. with inflation adding about $45 million to the cost base. As indicated earlier, operational costs at the Mopumalanga operations were $282 million lower, mitigating the impact of the decrease in revenue. On a positive note, we had higher buy-in volumes from Afube at lower prices, and that provided some relief contributing a R121 million EBITDA uplift, together with inventory write-off to net realizable value in the second half of last year, amounting to R141 million, which did not recur again in 2025. The combination of discount rate movements as well as a lower increase in closure costs at Liupan resulted in a lower increase in our rehabilitation liability in the first half, which impacted EBITDA positively by 104 million. The EBITDA for Matla remains stable. Overall, these dynamics resulted in an EBITDA margin of 28% for the coal business. On slide 18, we look at our cost performance and we are delivering on our promise to the market. We have stabilized the unit cost despite softer production volumes resulting from the continued offtake constraints we are experiencing. Cash cost per tonne remained flat at R651 a tonne, despite a 3.4% coal mining inflation rate. That means we effectively absorbed inflation, a clear demonstration of cost discipline. So total production costs decreased by 8% from 10.9 billion rand in the second half of 2024 to 10.1 billion rand in the first half. We counted the lower volumes with various cost-saving initiatives across the business. Key drivers of the savings include this focused profitability and cost-improvement projects at all the operations areas, We are starting to see the benefits of the Lupon turnaround project, and there's business optimization, top five focus areas at all our operations. Logistic cost optimization and improved channel utilization resulted in us exporting 290,000 lower sales via Maputo and only 45,000 lower export sales via RBCT. So looking at the specific cost component, indicated in the bottom right graph. So the employee cost as a fixed cost remains flat in absolute terms, but the unit cost impacted by the lower volume increased the unit cost by R11 a tonne. Maintenance is also largely a fixed cost and was executed in line with the normal life cycle plans, resulting in an increase of R7 a ton. General expenses were mainly impacted by a once-off credit in 2024, which did not recur again in 2025. We have improved contractor performance of 6 rand a tonne based on bench liberation stability and operational efficiency. Rehabilitation cost decreased by 17 rand a tonne as a result of the discount rate movements between the relevant periods, and also lower volume increases in the first half of this year. So this shows we can maintain a unit cost below mining inflation, even under operational and market challenges, and with cost-saving initiatives, control, Focus projects, we remain committed to continuously improving our cost performance in line with the guidance that we've given the market previously. So focusing on our cash generation and capital allocation strategy, our capital allocation framework remains focused on maintaining our net debt EBITDA ratio below 1.5 times, excluding any project financing, providing stability for future growth while also maintaining a strong balance sheet. For the first half of this year, our cash inflows totaled $5.6 billion, which included $3.9 billion from our owner-controlled operations, as well as a $1.7 billion dividend from our investment in SCIOC. In line with the capital allocation framework, We directed funds towards key areas. $872 was allocated to sustaining operations and support functions, ensuring the ongoing efficiency and reliability of our assets. $3 billion was paid in dividends rewarding shareholders for their continued support. This included a $1.7 billion pass-through of the SIOC dividend and $1.3 billion from our own managed operations. $382 million of shares were repurchased up to the end of June as part of the share repurchase program. Expansion capital of 1.1 billion was spent on the ongoing Lepelale solar project as well as the new Karierbos wind farm which reached financial close in the first quarter of this year. Under other allocations we accounted for R180 million related to development costs associated with the Karierbos transaction. and also R163 million for acquiring shares to settle vested share based payment schemes. As a result, our closing net cash position at the end of June stood at R18.3 billion, excluding the energy segment's net debt of R5.8 billion. Finally, we ensured that our economic value creation was shared equitably with all the stakeholders. We contributed $3.6 billion to employees, reflecting our investment in human capital. $2.7 million was paid in taxes and royalties, supporting national economic development. And $2.8 billion was distributed as dividends to external shareholders, reinforcing confidence in our business. Additionally, $78 million was allocated to community initiatives, ensuring meaningful socio-economic impact beyond our operations. Looking at CAPEX, firstly coal, our capital performance remains disciplined and aligned with the long-term sustainability of the business. Total capital is well within our guidance, and our spend is aligned with our capital execution plan, avoiding both over as well as under investment. We are on track. with our target capital spent range of 2.5 to 3 billion rand per annum in real 2022 terms, ensuring our business remains well capitalized and with the necessary intensity. We are confident in our capital discipline and remain committed to delivering the right investment at the right time for the right outcomes. The last one there, energy expansion capital of 1.1 billion, and that was spent on the LSP project as well as the new career boss wind farm, which reached financial close in the first quarter. As Ben already alluded to, I'm pleased to announce that the board has resolved to pay an interim dividend of 8.43 at an overall group cover ratio of two times. This is a pass-through of the SIOC dividend and a cover of 2.5 times on Exaro adjusted group earnings. Since implementation of the share repurchase program that we announced earlier the year of $1.2 billion, a total of 2.6 million shares have been repurchased at a total value of R382 million as at the end of June. In July, another 1.7 million shares were repurchased at a total consideration of R280 million. As previously stated, our cash buffer of $12 to $15 billion will not be retained post the acquisition of the manganese assets, and we are currently reviewing our capital allocation framework to ensure it continues to deliver competitive and sustainable shareholder returns while preserving the strength of our balance sheet. So with this, I also want to thank everybody at the operation, at the connection that made these results possible. Also, the finance team for the long nights and the hard effort. Really appreciate it, and I hand back to my buddy.