14.   MINING ASSETS VALUATION

14.1  

Introduction

The following section presents discussion and comment on the valuation of the Material Properties. Specifically, comment is included on the methodology used to generate the FMs and to establish the Equity Values for Kumba and Eyesizwe individually, and for Exxaro as presented in Section 15 of this CPR for the two valuation Scenarios and Operating Options.

In complying with Section 12.14 of the Listings Requirements, specifically the non-technical requirements of 12.14(b), SRK has relied upon Kumba and Eyesizwe for certain inputs to the FMs. These inputs (discussed in Section 1.0 of this CPR) are duly acknowledged by SRK. Further in reproducing the results of the FMs in this CPR, SRK provides assurances to the Directors of Exxaro, that the technical-economic inputs: Listings Requirements Sections 12.14(b) (i, ii, iii, v, vi and vii) including operating expenditures, capital expenditure and saleable product profiles of the Material Properties, as provided and reviewed and modified where appropriate by SRK, are accurately incorporated into the FMs. SRK also duly acknowledge Exxaro’s opinion that the remaining inputs to the FMs required in compliance with the Listings Requirements: Sections 12.14(b) (iv, vii, ix, xi, xii, xiii, xiv, xv, xvi, xvii and xviii) are accurately reflected in the FMs.

14.2

Limitations and Reliance on Information

14.2.1

Limitations

Kumba and Eyesizwe have agreed that, to the extent permitted by law, they will indemnify SRK and its employees and officers in respect of any liability suffered or incurred as a result of or in connection with the preparation of this report. This indemnity will not apply in respect of any gross negligence, wilful misconduct or breach of law. Kumba and Eyesizwe have also agreed to indemnify SRK and its employees and officers for time incurred and any costs in relation to any inquiry or proceeding initiated by any person except where SRK or its employees and officers are found liable for, or guilty of, gross negligence, wilful misconduct in which case SRK shall bear such costs.

Kumba and Eyesizwe have confirmed in writing to SRK that to their knowledge the information provided was complete and not incorrect, misleading or irrelevant in any material aspect. SRK has no reason to believe that any material facts have been withheld and Kumba and Eyesizwe have confirmed in writing that they believe they have provided all material information.

The achievability of LoM Plans, budgets and forecasts are neither warranted nor guaranteed by SRK. The forecasts as presented and discussed herein have been proposed by Kumba’s and Eyesizwe’s management and adjusted where appropriate by SRK and cannot be assured; they are necessarily based on economic assumptions, many of which are beyond the control of management. Future cash flows and profits derived from such forecasts are inherently uncertain and actual results may be significantly more or less favourable.

14.2.2

 Reliance on Information

SRK believes that its opinion must be considered as a whole and that selecting portions of the analysis or factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the opinions presented in the CPR. The preparation of a CPR is a complex process and should not be subjected to partial analysis or summary.

SRK’s Equity Value for Exxaro is effective at 1 January 2006 and is based on information provided by Kumba and Eyesizwe throughout the course of SRK’s investigations, which in turn reflect various technical-economic conditions prevailing at the date of this report. In particular, the Equity Value is based on expectations regarding commodity prices and exchange rates prevailing at the date of this report. These and the underlying TEPs can change significantly over relatively short periods of time. Should these change materially the Equity Value could be materially different in these changed circumstances. Further, SRK has no obligation or undertaking to advise any person of any change in circumstances which comes to its attention after the date of this CPR or to review, revise or update the CPR or opinion.

14.3 

Valuation Methodology

The valuation methodology for arriving at the Equity Value of Exxaro is based on the sum of the parts approach comprising the following:

  • The Enterprise Value defined as the sum of the NPVs of Material Properties reflected therein;
  • The value of Mineral Rights, Exploration Properties and non-LoM Mineral Resources; and
  • Valuation Adjustments.

The sum of the Enterprise Values and the value of Mineral rights, Exploration Properties and non-LoM Mineral Resources is defined as the NAV of the Material Properties. The sum of the NAV of the Material Properties and the valuation adjustments is defined as the Equity Value of the Company.



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