Chief executive officer's review

A remarkable first year, characterised by the willingness and ability of all our people to change, and the smooth integration of two sizeable groups.

Exxaro’s first full year of operation was remarkable for a number of reasons: following the conclusion of a
significant black economic empowerment transaction in November 2006, we established the Exxaro brand across southern Africa. In the process, we empowered some 8 000 employees who now own 3% of Exxaro – and who watched the benefits of being shareholders unfold as our share price rose from R58,50 on listing to
R107,00 in December 2007.

The process of integrating the former Kumba Resources and Eyesizwe Coal operations to form Exxaro has been smooth and overwhelmingly positive, although it will take a little more time to fully integrate people, processes and operations. More importantly, what this process has highlighted is the innate ability of all Exxaro’s people to adapt, a vital component of success in an era of ongoing change.

Powering possibility

I believe that the following underscore the potential to power possibility that is becoming the hallmark of this company and its top-calibre professionals:

While we recorded five fatalities this year – four on-mine and one public road incident – excellent
safety performances were achieved at Inyanda, Leeuwpan, FerroAlloys, Alloystream, Research and Development and Durnacol. FerroAlloys, in particular, has had no injuries since May 2006, while Zincor achieved 480 lost-time injury-free days and our Research and Development unit reached its target of 730 lost-time injury-free days. We are creating a safer work environment by implementing systems, processes and standards to ensure safety becomes a habit for every Exxaro employee, and a pervasive awareness of both personal safety and the safety of colleagues. We extend our deepest condolences to the families, friends and colleagues of the deceased.
We received shareholder approval to acquire Namakwa Sands and an interest in the Black Mountain mine Gamsberg project.
The Inyanda mine sod-turning ceremony in July 2007 followed the fast-tracking of that mine’s development to add value and support the New Clydesdale mine after closure of its underground workings. Board approval was received for the R136 million Diepspruit project to produce 1,3Mtpa run-of-mine coal for beneficiation at New Clydesdale to supply the export market.
We achieved an R89-million turnaround of the North Block Complex by mining block C, negotiating better prices with Eskom and increasing sales volumes to key customers.
We secured Phase I of the new Medupi power station off-take agreement with Eskom as the first major building block of our Waterberg development strategy.
We increased our export allocation through Richards Bay Coal Terminal to 6,3Mtpa (effective end 2009) in line with our strategy of diversifying our market.
Exploration at Rosh Pinah has added seven years to the mine’s life.
Cooljarloo mine in Australia successfully replaced the outer shell of the fl oating feed preparation unit in situ: a world first for the industry that took 14 days versus a dry-dock approach that would have taken three months.
Our shareholder structure changed during the year when Anglo American reduced its shareholding to just below 10%, which pleasingly increased our free float to above 34%.
We have made signifi cant progress in enlarging participation by Namibian citizens in our Rosh Pinah mine.
Exxaro’s research and development is at the forefront of innovation in creating excellent competencies in terms of equipment, people and knowledge – our R&D team has implemented the first phase of a highly capable mineralogy facility to support Namakwa Sands and other mineral sands projects and operations.
Grootegeluk’s technicians won a national award for the computer software program they developed for plant automation.
Exxaro’s employee newsletter, xxplore, won a trophy for excellence in communication skills in the publication category of the International Association of Business Communicators’ Africa Quill Awards.
Our first year was, however, not without its challenges:
The closure of the Vaalkrantz South underground operations at New Clydesdale and subsequent production losses that were mitigated by fast-tracking Inyanda.
The reclaimer collapse at Leeuwpan due to structural failure in September, but which was mitigated by excellent contingency plans.
Although we experienced 85% of cold feed capacity at our mineral sands smelter operations in KwaZulu-Natal, this still falls short of design capacity. In addition to existing improvement initiatives, we plan to review technology employed at the furnaces in the year ahead to further improve furnace performance.
– The three-week industrial strike at Rosh Pinah which affected production volumes.
– The shortage of skills, especially artisan and miner categories.
– The process for obtaining new mining rights and conversion into new-order rights, which:
– lowered production volumes and increased costs due to higher stripping ratios as the Weltevreden    reserve extension at Leeuwpan could not be mined.
– reduced mining options and complicated mining activities at Hillendale mine as the Braeburn deposits    could not be accessed.
– delayed planned construction of the Fairbreeze mine required to supply ilmenite to the Empangeni    smelter in future.
The persistent strong Australian dollar affected the profitability of our Australian Sands business.

Safety
Overall, the year 2007 has been a particularly dismal period for safety, with an unacceptable number of
deaths across the industry, resulting in protest action by organised labour and an inquiry commissioned by the President of South Africa.

Health, safety, sustainability and productivity are key challenges facing the mining industry in South Africa which the Chamber of Mines is addressing through a number of initiatives, and to which Exxaro is fully committed.

Safety heads the list of priorities for Exxaro, and one of my key tasks is to ensure that we make tangible progress towards the collective goal of zero fatalities and harm.

Exxaro reviewed its SHE strategy during the year – to integrate the most effective elements of previous plans
into a single strategy for the group and to support its commitment to a working environment that is both
fatality-and injury-free by reducing exposure to workplace hazards. As part of our awareness and continuous
improvement programme, we organise and sponsor a biennial industry-wide SHE conference (2007 was the fourth such conference) during which industry stakeholders, our management and employees interact to advance SHE objectives across the mining industry and share best practices locally and internationally. The outcome was a strategy that prioritised aspects of safety, health and environment. The implementation of each of the legs of this strategy will be monitored quarterly.

Business environment
Robust commodity prices and sustained global economic growth characterised the review period, albeit dampened in the final months by economic developments in the United States and their concomitant impact on global markets.

In South Africa economic growth remained strong, reflected in the unprecedented levels of infrastructural
development and capacity expansions across a range of key sectors.

Arguably the most important of these is energy where South Africa’s power utility, Eskom, is rolling out its
largest infrastructural expansion in decades to meet the country’s spiralling power needs. As one of Eskom’s
largest suppliers, Exxaro has an important role in supplying product for coal-fired power stations, facilitating the development of clean energy technology and helping to solve the energy conundrum South Africa is facing. Transport and logistics are other key sectors underpinning national economic development.
Exxaro fully supports the capacity expansions and infrastructural upgrades under way by the state-owned transport utility, Transnet, and is actively participating in the expansion of export facilities through Richards Bay Coal Terminal.

Legislation
In recent years, South Africa has introduced significant and wide-ranging legislation governing the mining industry, most specifically the Mineral and Petroleum Resources Development Act (MPRDA), the mining charter and its attendant scorecard, and the draft royalty bill which is in the final stages of drafting and comment.

Exxaro fully supports the intent of this legislation to ensure equitable participation in the country’s natural
resources, although the process of implementation has had some impact on day-to-day business and longer-term planning.

During the year, Exxaro secured new-order mining rights for Inyanda and New Clydesdale mines. Following a
productive workshop with the Department of Minerals and Energy, the group has adopted a phased approach to the conversion process, with all applications for rights associated with the former Kumba Resources submitted and those for the conversion of former Eyesizwe Coal mining rights scheduled for submission in April 2008.

Strategy
The essence of our first board-approved strategy is to consolidate in the short term, optimise growth plans over two to five years and innovate in the longer term.

This strategy forms the platform for integrating our assets, people and business approaches. To build solid
foundations for the growth that lies ahead, we need to extract maximum value from our existing operating
asset base, pursue expansion projects already under way and maintain a sound balance sheet structure. At the same time acknowledging the long lead times required for implementation, we must continue to identify growth prospects and selective acquisition opportunities.

Skills
The scarcity of certain skills in the local mining profession is very real, and mirrors the global experience.
While this presents Exxaro with a challenge to attract and retain the required skills sets, we are making tangible progress in developing people to their fullest potential and retaining this talent.

Exxaro exposes its people to multiple commodities while training to industry standards, even though this
makes our trainees extremely attractive to the rest of the industry. In 2007, our company invested almost double the industry average to train more than 10% of all South Africa’s artisans and over 24% of artisans in the mining industry. This underscores our belief that skills development is a valuable investment, one that reflects the confidence we have in our people and their individual and collective worth to our group. For me, this was best summed up by one of our own people when he said, “Exxaro offers more than just training; it offers a future”.

Sustainable development
One of the benefits of being a young company is the ability to forge a new entity that draws on the world’s best practices to tailor a model that suits your particular operating environment.

Sustainable development was at the heart of Kumba Resources and it is no different for Exxaro. By stipulating
leadership in sustainable development as one of the elements of our strategic framework, we have committed
ourselves to setting and achieving targets that will ensure the legacy we leave is positive for today’s children and tomorrow’s leaders.

While the integration of the former Kumba Resources and Eyesizwe Coal has been smooth, it will take a little
longer to completely integrate sustainable development processes and systems within Exxaro. Integrated policies and reporting guidelines are currently being developed and revised in line with the new sustainable development strategy and framework.

Following the external assurance process, a number of reporting matters on data relating to lost-time injuries,
water used, environmental incidents, CO2 emissions and total energy use have been identified for refinement and improvement on a group-integrated basis. Exxaro is committed to ensuring that these issues are resolved and that policies and reporting guidelines are implemented as soon as possible. Explanatory notes are included where data have been reported on these parameters in the body of this report.

Directorate and governance
Best-practice governance is the de facto standard at Exxaro, made possible by directors who bring an array of skills and experience to bear in their deliberations.

On 31 August 2007, Dr Con Fauconnier retired as chief executive and director of Exxaro. His contribution to
the group has been extraordinary in every respect and his legacy will live on in the corporate ethos he helped mould. We thank him and trust that this new phase of his life will be as rewarding, albeit less frenetic.

In March 2007, we welcomed Mavuso Msimang as an independent non-executive director. Regrettably, he resigned after three months to concentrate on his new appointment as director-general of the Department of Home Affairs and we wish him every success.

Subsequent to the year-end, Ms Nonkululeko Nyembezi-Heita resigned from the board effective 29 February 2008. We thank her for her services while in office.

Exxaro was not able to appoint an independent chairman in the review period, but an acting chairman –
independent director, Dr Len Konar – was appointed to ensure continuity in the board’s activities and its effective functioning. We expect to appoint a chairman in the first half of 2008.

Appreciation
Exxaro took many giant steps in its first year, testimony to the calibre, commitment and entrepreneurial spirit
of our people. The energy that permeates this group is both inspiring and humbling and I thank every one of
my colleagues and fellow directors for their contribution and their support as I assume my new role.

Exxaro’s empowerment partners have played a valuable role in the genesis of this group, and we will concentrate on further cementing these mutually beneficial relationships.

Outlook
It has been a year of consolidation and integration – operationally and in terms of people. The setbacks we
did encounter were well managed and appropriate action taken to entrench Exxaro’s position in its chosen
commodities.

In coal, we will continue to diversify our presence in the industry by expanding on our prominent position as a
reliable supplier of power station coal to Eskom, strengthening our entry into metallurgical and export
markets, and maximising downstream opportunities, such as char, market coke and energy-related ventures.

Subsequent to year-end, South Africa has been negatively affected by serious power constraints. We believe it is unlikely that future production at our coal mines will be affected by Eskom’s load-shedding/rationing programme. Most of the group’s coal mines supply some or all their production to Eskom. However, both KZN Sands and Zincor have an agreement with the electricity utility which may result in some 10% of production being lost.

To address coal shortages at its power plants, Eskom has recently requested an additional 45Mtpa to be supplied over two years, beginning immediately. Exxaro has offered to supply approximately 13,5Mtpa of this tonnage to the utility of which 9,6Mtpa has already been contracted.

The mineral sands industry worldwide still faces significant challenges. Given the quality of our mineral sands
operations, the imminent acquisition of Namakwa Sands, our position as one of the largest titanium feedstock
suppliers worldwide, and our focus on enhancing operational efficiencies and new growth, Exxaro will be well
placed to compete aggressively when the market turns.

In our base metals and industrial minerals division, the focus will be on further improving operational efficiencies and refining our product range. In addition, we are examining industry fundamentals worldwide in considering opportunities to expand into other base metals and build on the signifi cant existing capabilities in our group.

Continued buoyant iron ore market conditions should benefit the group in respect of its equity interest in
Sishen Iron Ore Company.

Although a weaker rand will impact positively on US dollar–denominated revenue, continued cost pressure from rising inflation, the skills shortage and rising oil prices will negatively impact the business.

With its focused strategy and project pipeline, the Exxaro group is well positioned to exploit value-adding
opportunities presented by strong commodity markets in fulfi lling its mission to create unrivalled value for all
stakeholders.

SIPHO NKOSI
Chief executive officer
13 March 2008

Financial Review

Introduction
The 2007 year marked Exxaro’s first full year’s financial reporting since its revised listing late in November 2006. Accordingly, comments are for comparable purposes based on an analysis of the group’s audited financial results for the 12 months ended 31 December 2007 compared with the unaudited supplementary
financial results for the corresponding 12-month period ended 31 December 2006.

To ensure comparability, the investment in Sishen Iron Ore Company (Pty) Limited (SIOC) has been equity accounted from 1 January 2006, while Eyesizwe Coal (Pty) Limited (Eyesizwe) has been consolidated from the same date. All non-recurring accounting entries associated with the empowerment transaction in November 2006 and the impairment of the assets of the KwaZulu-Natal mineral sands operation in June 2006 have been excluded. The financial results do not include the Namakwa Sands business and a 26% interest in Black Mountain/Gamsberg as the acquisitions of these interests will only be completed after conversion of the
mining rights and their subsequent cession to Exxaro.

Overview of group operating results
TABLE 1	12 months ended
	31 December
R million	2007	2006
Revenue	10 157	8 814
Operating expenses	8 713	7 553
Net operating profit	1 444	1 261
Net operating profit margin (%)	14	14

The group experienced strong demand at higher commodity prices despite the significant decrease in LME zinc prices in the last quarter of 2007. This, together with a stronger rand of R6,80 to the US dollar on 31 December 2007, resulted in revaluation of stock to net realisable value in the base metals and mineral sands commodity businesses decreasing by
R133 million compared to the end of 2006.

Revenue increased by 15% to above R10 billion with net operating profit R183 million higher at R1 444 million.

An average exchange rate of R7,26 to the US dollar was realised on exports compared with R6,76 for the corresponding 12-month period in 2006. The significant strength of the Australian dollar to the US dollar, at a 23-year high (US$0,83 to the AUD realised against US$0,75 for 2006), however, impacted negatively on the financial results of the mineral sands operations in Australia.

Segmental results
Segmental results are shown in tables 2 and 3.

TABLE 2
	12 months ended
	31 December
R million		2007	2006
Revenue
Coal		5 087	4 433
— Tied operations¹		1 768	1 625
— Commercial operations		3 319	2 808
Mineral sands		2 172	1 859
— KZN Sands		984	817
— Australia Sands		1 188	1 042
Base metals		2 732	2 379
— Rosh Pinah		941	888
— Zincor		2 558	2 234
— Consolidation entries		(767)	(743)
Industrial minerals		159	122
Other		7	21
Total		10 157	8 814

¹Tied operations refer to mining operations that supply their entire production to either Eskom or ArcelorMittal SA Limited in terms of contractual arrangements.

TABLE 3
	12 months ended 31 December
Net operating profit
(Rm)/Margin (%)		2007	%	2006	%
Coal		885	17	620	14
— Tied operations		88	5	105	6
— Commercial operations		797	24	515	18
Mineral sands		(97)	(4)	86	5
— KZN Sands¹		(157)	(16)	(114)	(14)
— Australia Sands		60	5	200	19
Base metals		688	25	609	26
— Rosh Pinah		457	49	404	45
— Zincor		298	12	238	11
— Consolidation entries		(67)		(33)
Industrial minerals		(3)	(2)	(1)	(1)
— Current operations		24		26
— Alloystream™		(27)		(27)
Other		(29)		(53)
Total net operating profit		1 444	14	1 261	14
Non-cash costs		798		620
Earnings before interest, tax, depreciation and
amortisation (EBITDA)		2 242	22	1 881	21

¹Excludes the impact of the impairment of carrying value of assets of a pre-tax amount of R784 million in 2006.

Coal
Revenue from the coal commodity business increased by 15% to R5 087 million due to significantly higher free-on-rail export prices, increased selling prices to ArcelorMittal SA Limited (ArcelorMittal) based on higher international coking coal prices, and stronger power station coal prices to Eskom.

Despite a lower net operating income at the tied operations brought about by a non-recurring R30 million
payment from Eskom in 2006 to the Arnot mine for committed reserves, Exxaro Coal achieved a record net
operating profit of R885 million, 43% higher than in 2006.

The higher revenue, profitable turnaround at the North Block Complex and savings realised from integrating
the Kumba Coal and Eyesizwe Coal corporate offices, offset inflationary pressures primarily in respect of labour and diesel costs.

Mineral sands
KZN Sands
The KZN mineral sands operation reported revenue of R984 million, up R167 million from 2006 due to increased chloride slag and LMPI sales. However, net operating loss increased by R43 million which includes a R45 million write down of the crude ilmenite stockpile from cost to net realisable value as a result of the stronger rand at the end of the financial year.

Australia Sands
Although revenue increased 14% primarily as a result of substantially higher synthetic rutile sales and
modest increases in zircon and pigment prices, net operating profit decreased by R140 million caused by the
20% strengthening of the Australian dollar to the US dollar, and continued cost increases in energy consumables.

Base metals
Revenue increased by 15% to R2 732 million with a net operating margin of 25% as a result of the 2%
increase in the rand zinc price for the year to R22 824/tonne, compared with R22 311/tonne in the corresponding period in 2006. The increased revenue was partially offset by inflationary production cost increases and a write down to net realisable value of zinc metal stocks in the amount of R88 million due to the decline in LME zinc prices converted to rand terms at the end of the current reporting period.

Industrial minerals
Despite an increase in revenue at the Glen Douglas dolomite mine and FerroAlloys plant, net operating profit
declined attributable to higher maintenance expenditure and lower offtake of higher premium metallurgical
dolomite products by ArcelorMittal.

Expenditure on the Alloystream™ technology was incurred in respect of the Furnace 1 feasibility study which allows for the demonstration of the furnace’s beneficiation of manganese ore.

The following graph reconciles net operating profit for the 2006 year to the R1 444 million reported for 2007:
Operating profits

The pro forma comparable EBITDA contribution of the various businesses, on the assumption that 100% of the Namakwa Sands business, 26% of the Black Mountain/Gamsberg interest, 20% of Sishen Iron Ore Company (Pty) Limited (SIOC) held by Exxaro and the 22% effective interest in Chifeng are included in EBITDA, are shown in the respective pie charts:

EBITDA

Attributable earnings
TABLE 4
	12 months ended
	31 December
R million		2007	2006
Net operating profit		1 444	1 261
Income from investments		2
Net financing cost		(215)	(315)
Equity-accounted income		728	638
Taxation		(512)	(595)
Minority interest		(20)	(27)
Comparable attributable earnings		1 427	962
Weighted average number of shares		341	313
Comparable attributable earnings (cents per share)		418	307

Net financing costs
An analysis of the composition of the disclosed comparable net financing cost is:

	12 months ended
	31 December
R million		2007	2006
Interest expense and loan costs		153	241
Finance leases (IAS 17 and IFRIC 4)		59	39
Interest income		(96)	(12)
		116	268
Interest adjustment on non-current provisions		99	47
Total		215	315

Income from equity-accounted investments
TABLE 5
	12 months ended
	31 December
R million		2007	2006
SIOC		746	598
Chifeng Zinc		(18)	40
Total		728	638

MANAGEMENT TEAM
Rian Strydom (42)
General manager: financial accounting
Riaan Koppeschaar (37)
General manager: corporate finance and treasury
Sakkie Prinsloo (54)
Group manager: taxation

Kumba Iron Ore – the holding company of SIOC in which Exxaro holds a 20% interest in iron ore – increased revenue by 33% to R11,5 billion for 2007 on the back of record production, higher sales volumes, increased benchmark prices and quality premiums on certain products. Kumba’s operating margin increased to 52% and profit for the year was R3,9 billion. Headline earnings increased 44% to R3,1 billion.

Kumba Iron Ore expects to increase production from 32Mt to 40Mt in 2008 as the first of its expansion projects begin to deliver.

The results of SIOC are fully reported on by Kumba Iron Ore Limited in its publication of the financial results to 31 December 2007.

The significant decline in the demand for zinc, especially zinc alloys, in the local Chinese market as well as the sharp decline in zinc prices at year-end, combined with higher operating expenditure during the ramp-up of the expanded operation of the Chifeng refinery in inner-Mongolia, resulted in Exxaro’s equity accounted interest reducing by R58 million to an R18 million loss in 2007.

Taxation
The corporate rate of 29% is reduced to an effective rate of 26,1% primarily due to:

	• Share of associates and joint ventures differences	- 10,8%
	• Secondary tax on companies (STC) on the deemed dividend
	in respect of the share buy-back	+2,9%
	• Tax rate differences on offshore entities	+2,1%
	• Disallowable expenditure, mainly IFRS 2 share-based payments	+2,1%

Headline earnings
The 15% increase in net operating profit and R90 million higher equity-accounted income from that reported for the comparative 12-month period in 2006, together with lower net finance charges resulting from lower debt levels, and a lower taxation charge, resulted in profit attributable to ordinary shareholders increasing by 48% to R1 427 million. Headline earnings were R1 448 million at 425 cents per share, 49% higher than the comparable period’s 285 cents per share.


TABLE 6
	12 months ended
	31 December
R million		2007	2006
Comparable net profit attributable to equity
holders of the parent		1 427	962
— Impairment of property, plant and equipment (PPE)		23
— Share of associate’s gain on disposal of PPE		(3)	(1)
— Share of associates recycling of re-measurements to profit or loss		(7)
— Excess of acquirer’s interest in the net fair value
of the acquiree’s net assets and contingent liabilities over cost			(36)
— Gains or losses on disposal or scrapping of PPE		17	(3)
— Gain on disposal of associate or joint ventures			(39)
— Investment impairment reversal		(6)
— Taxation effect of adjustments		(3)	10
Comparable headline earnings		1 448	893
Headline earnings per share		425	285

Dividends
Exxaro intends progressing to the distribution of 50% of attributable earnings to shareholders. Dividend declarations in the medium term may, however, be lower to adequately provide for funding the current growth pipeline of projects, comply with contractually agreed loan covenants, and maintain healthy key financial metrics.


Since the creation of Exxaro in November 2006, the following dividends have been declared:
	Period ended	Dividend (cps)	R million	R million incl STC¹	Date declared	Date paid/ payable
	30 June 2007	60	211	211	15 August 2007	10 September 2007
	31 December 2007	100	353	353	20 February 2008	17 March 2008

¹No STC is payable due to the utilisation of STC credits arising from the dividend receipts from SIOC.

Total dividends declared in respect of the 2007 financial year of R564 million equate to a dividend covered 2,5 times by attributable earnings and are paid or payable to the shareholders as follows:
	Total	Final	Interim
	Rm	Rm	Rm
Gross dividend declared	564	353	211
BEE Holdco	297	185	112
Anglo	58	37	21
Public	192	120	72
Exxaro empowerment scheme (MPOWER)	17	11	6

Cash flow
TABLE 7
	12 months ended
	31 December
R million		2007	2006
Net cash retained from operations		2 308	1 980
Net financing cost, taxation and dividends		(801)	(2 983)
Cash used in investing activities
• New capacity		(727)	(283)
• Sustaining and environmental capital		(569)	(640)
• Investments acquired		(257)	(40)

Dividends received		379

Proceeds on sale of non-core assets and investments		50	239

Other		5	(6)
Cash inflow/(outflow)		388	(1 733)
Share issue		114
Increase in net debt on acquisition of a subsidiary		(25)
Other movements in net debt		(39)
Decrease in net debt		438

Cash retained from operations of R2 308 million was mainly applied to taxation payments of R461 million, capital expenditure of R1 296 million, an investment of R239 million in the Richards Bay Coal Terminal to secure 2,5Mtpa export entitlement, and the interim dividend payment of R211 million in September 2007. The group had a net cash inﬂow of R388 million for the year.

A net surplus of R91 million was realised on the repurchase of 10 million shares from Anglo South Africa Capital (Pty) Ltd and the subsequent market placement of the same number of new shares. After taking into account the cash dividends of R373 million from SIOC, R502 million of cash and cash equivalents was available for the repayment of borrowings.

Net debt of R921 million at 31 December 2006 decreased by R438 million to R483 million at a net debt to equity ratio of 5% on 31 December 2007.

	Debt structure and financial covenants
	Compliance with the group's financial loan covenants with its external financiers is as follows:

	Ratio	Covenant
• Net debt to equity (%)	5	<125
• EBITDA interest cover (times)	10	>4
• HDSCR¹	1,85	>1,3
• CHDSCR²	3,86	>1,5
¹Historical debt service cover ratio (HDSCR) being cash earnings, less unfunded capital expenditure and taxation paid, plus dividends received (collectively referred to as free cash flow), divided by mandatory capital and interest payments on financing facilities.
²Cumulative HDSCR being cash and cash equivalents at the beginning of the period, plus free cash flow, less dividends paid, divided by mandatory capital and interest payments on financing facilities. Dividend payments may not result in this ratio being less than 1,5.

The group’s debt structure at 31 December 2007 is:
Debt structure
R million	Drawn	Undrawn	Repayment profile
Long term	1 333	2 858	74	2008
– Corporate	923	2 450	100	2009
– Australia Sands	410	408	44	2010
Short term	–		43	2011
Total debt	1 333		1072	After 2011
Cash and cash equivalents	(850)		1 333
Net debt	483

Net debt of R483 million at 31 December 2007 will increase with the payment commitment of R2 353 million, subject to the disclosed price adjustments, for the acquisition of Namakwa Sands and a 26% interest in Black Mountain/Gamsberg on conversion and subsequent cession of their mining rights. Exxaro has sufficient committed term facilities for its intended growth aspirations as well as adequate short-term standby facilities.

Organisational structure
Exxaro will divest 43,8% of its current investment in Rosh Pinah Zinc Corporation (Pty) Ltd (Rosh Pinah) to Namibian shareholder groupings planned for the first half of 2008. The divestment will reduce Exxaro’s shareholding in Rosh Pinah to 50,04%. Exxaro will continue to manage the mine in terms of a management agreement.

In anticipation of the divestment and in order to accommodate the stand-alone funding structure arranged, hedging of up to 60% of Rosh Pinah’s zinc and lead production over a 42-month period has commenced. A total of 13kt, representing 30% of the projected lead sales was hedged by 31 December 2007, at forward prices ranging from US$1 700 to US$940 per tonne while a further 30% of the intended 60% of the projected zinc sales up to mid 2011 was hedged subsequent to year-end at prices ranging from US$2 098 to US$2 435 per tonne.

Details of hedging concluded to date are as follows:

	2008	2009	2010	2011
Zinc sales tonnes hedged (’000)	15	16	16	9
Lead sales tonnes hedged (’000)	4	4	2
Hedged zinc price (US$/tonne)	2 356	2 335	2 293	2 265
Hedged zinc price (ZAR/tonne)	17 929	19 193	19 568	20 889
Hedged lead price (US$/tonne)	1 509	1 181	939
Hedged lead price (ZAR/tonne)	11 890	10 038	8 235

Capital expenditure

Table 8 compares capital expenditure for the 12-month periods ended 31 December 2007 and 2006 together with an estimate for the 2008 financial year. Investment in the Waterberg coal fields will dominate our capital expenditure programmes on new production capacity over the next two calendar years. Sustaining and environmental capital in 2008 includes the reline of Furnace 2 and the development of the Fairbreeze mine at KZN Sands, primary equipment replacements at the coal operations, and two small roaster rebuilds together with major maintenance on the cell house at the Zincor refinery.


TABLE 8
Capital expenditure	Financial	12 months ended
	year 2008	31 December
R million	Estimate¹	2007	2006
Sustaining and environmental	1 168	569	640
Expansion