REPORTED RESULTS NOT COMPARABLE

The group’s audited financial results and actual physical information for the 12-month period ended 31 December 2009 includes a proportionally consolidated 50% interest in the Mafube Coal Mining (Pty) Limited (Mafube) from 1 June 2009. The results are not comparable with the corresponding 12-month period in 2008 which only includes the acquisition of Namakwa Sands and a 26% interest in Black Mountain Mining (Pty) Limited (Black Mountain) with effect from 1 October and 1 November 2008 respectively.

Comparable supplementary financial results have not been disclosed therefore comments are based on an analysis of the financial results and physical information compiled for the 12-month periods to 31 December 2009 and 2008 respectively.

OPERATING RESULTS

Group consolidated revenue increased by 8% to R15 billion with net operating profit reducing by R728 million to R1 739 million before the impairment of the carrying value of assets at KZN Sands is taken into account.

Export sales were recorded at weaker average exchange rate levels than in 2008. However, realised currency losses were incurred as foreign currency proceeds on export sales were repatriated at stronger exchange rate levels. Unrealised foreign currency losses were also incurred on the revaluation of monetary items in foreign currency at 31 December 2009.

The coal business reported lower net operating profit as an increase in revenue mainly due to higher export and local power station sales volumes was more than offset by lower international coal prices and above inflationary increases in the cost of electricity, rail tariffs and labour costs as well as realised and unrealised foreign currency losses.

All three units within the mineral sands business reported operating losses on the back of lower demand for their products at softer prices. The two local operations, KZN Sands and Namakwa Sands, were adversely impacted by realised and unrealised foreign currency losses while the Australia Sands operation was affected by the Australian dollar (AUD) persisting at strong levels against the US dollar (USD). The operating results of KZN Sands were also severely impacted by a R1 435 million impairment to the carrying value of the assets following the decision to not proceed with the development of the Fairbreeze mine.

Lower realised zinc prices as well as a lower demand for products resulted in the base metals business recording a small net operating loss.

EARNINGS

Attributable earnings for the period were R1 023 million (297 cents per share). This is significantly lower than the comparable 2008 attributable earnings of R3 405 million (993 cents per share) primarily due to the lower operating results and the impairment of the carrying value of the assets of KZN Sands. Attributable earnings include Exxaro’s 20% share of the after tax profits of Sishen Iron Ore Company (Pty) Limited (SIOC) amounting to R1 762 million, a contribution of R13 million from the effective 22% interest in the Chifeng zinc refinery and an equity accounted profit of R123 million from the 26% interest in Black Mountain.

Headline earnings which exclude the impact of the impairment of the carrying value of assets in KZN Sands, were R2 514 million (729 cents per share), which is 31% lower than the R3 630 million (1 058 cents per share) for the corresponding period in 2008.

CASH FLOW

Cash retained from operations was R2 118 million. This was primarily used to fund net financing charges of R382 million, tax payments of R892 million, dividend payments of R1 050 million and capital expenditure of R1 982 million of which R990 million was invested in new capacity and R992 million applied to sustaining and environmental capital. After the receipt of R1 754 million in dividends, primarily from SIOC, and the R1 082 million outflow to finalise the acquisition of the 50% interest in Mafube, the group had a net cash outflow of R1 620 million for the financial year. The final dividend for payment in April 2010 will amount to a further cash outflow of R357 million offset by the dividend inflow from SIOC of approximately R600 million.

Net debt of R2 381 million at 31 December 2008 accordingly increased to R3 731 million at a net debt to equity ratio of 29% at 31 December 2009.

SAFETY, HEALTH AND ENVIRONMENT

Regrettably, an explosion in the maintenance contractor’s storage area situated at the Zincor business unit occurred on 10 September 2009, resulting in the deaths of three contractors and injuries to 12 others.

The average lost time injury frequency rate (LTIFR) per 200 000 man-hours worked improved by 15% from 0,39 in 2008 to 0,33 in 2009.

Thirteen business units are now ISO 14001 and OHSAS 18001 certified. The business units that did not achieve certification by end of 2009 will ensure that their programmes result in certification in 2010.