CAPITAL PROJECT EXECUTION

Exxaro continues to focus on the portfolio of growth and sustaining capital projects. The portfolio is impacted by current financial challenges faced by contractors as well as
COVID-19-related restrictions affecting construction timelines.

Waterberg (Limpopo)

The COVID-19 lockdown delayed the GG6 expansion project schedule by six months and affected contractor performance. This resulted in the initially approved timeline shifting by 12 months. In addition, when Group Five was placed under business rescue, we had to appoint a replacement contractor. The current estimated capital overrun of approximately 10% for the GG6 project is still as per guidance to stakeholders.

On 30 September 2020, Grootegeluk's rapid load-out station project, aligned with the TFR north-west corridor expansion project, was handed over to the Grootegeluk complex. Project close was completed within budget by the end of 2020. The delay in the project completion did not affect the TFR ramp-up schedule.

Mpumalanga

Our Belfast Implementation Project achieved first coal during the third quarter of 2019. Plant acceptance testing was complete during first quarter of 2020. The project was closed at the end of the second half of 2020, within budget.

A programme of infrastructure projects to support Matla to achieve a 10Mtpa production objective, once fully ramped up, is in implementation. Exxaro continues to engage Eskom to obtain release of the required funding to execute the full scope of the programme.

Salient features of our coal capex in 2020 include:

• Capital expenditure decreased by 47% from 2019 to R3 060 million
• R2 110 million (2019: R2 245 million) applied to sustaining and environmental capital (stay-in-business capital)
• R950 million (2019: R3 572 million) invested in new capacity (expansion capital)

Eskom

In terms of three long-term CSAs with the Matimba, Medupi and Matla power stations, Eskom is a key customer. We are also negotiating potential CSAs with Eskom for coal supply from our Leeuwpan and ECC operations. When Eskom declared force majeure on the Matimba and Medupi CSAs in 2020, we defended our position. Eskom continued to offtake its contracted volume at both power stations. In some months, this was above the required volume. On 6 August 2020, Eskom lifted the force majeure on the CSAs.

We continue to renegotiate the Matla cost-plus agreement due to expire in mid-2023.

AMSA stopped production when the COVID-19 lockdown began and shut down its blast furnaces. When lockdown eased, operations resumed and production accelerated to resolve the backlog of almost three months. The second blast furnace at Vanderbijlpark restarted between December 2020 and January 2021.

Exxaro continues to explore additional domestic and international markets for semi-soft coking coal.

Cennergi

Due to the inherent variability of wind, it is important that the wind farm owner takes all reasonable measures to understand the past, current and future wind trends, and thus to build a long-term business case that is pragmatic and realistic. Cennergi has and continues to perform wind energy assessments and operational energy yield assessments to understand any changes in the performance of our assets, or potentially in the wind regime itself. By doing this, Cennergi can proactively manage its assets and make business decisions tailored to maximise benefit in the short, medium and/or long-term.

INNOVATION AND INFORMATION MANAGEMENT

To meet greater demand for digital solutions, our Innovation and Information Management (I&IM) team adapted processes to enable quicker deployment of solutions. We adopted agile delivery methodologies that shorten the systems development lifecycle while ensuring delivery of high-quality software products. We have also developed a benefit realisation framework with defined KPIs that assess technology projects and investments.

Our digital transformation strategy includes the deployment of artificial intelligence in the following areas:

• Core capabilities - successful implementation of value-adding initiatives for mineral resource management and planning, plant, engineering, environmental management, marketing and production management
• Supporting enterprise capabilities supported health and safety, supply chain, human resources and business enablement through an unprecedented pandemic
• Supporting IM capabilities - ensuring data governance in application development and maintenance, solution architecture as well as deployment and release management environment

Exxaro responded quickly, and largely without disruption, when the COVID-19 lockdown was declared in March 2020 as a result of the migration of core infrastructure and applications to the cloud in 2019. Our investment in cloud infrastructure and tools enabled employees to collaborate seamlessly with internal and external stakeholders to ensure business continuity.

Our internet of things programmes and platform-based solutions enable delivery of improvements in predictive modelling, front-end loader integrations with weighbridges, high-precision loading, collision avoidance and advanced process controllers.

Comprehensive data collection and analytics-enabled visualisation of mining value chains at BUs. In 2021, our analytics team, in partnership with Digital@Exxaro, will focus on maturing data sciences capabilities to enable self-service analytics including:

• Democratising big data with self-service analytics for data science tasks
• Empowering business users with access to insights
• Core model development to streamline data exploration, verification, visualisation and reporting so the core data science team can concentrate on critical and complex tasks
• Working together to improve productivity and create value for Exxaro as a whole

CYBERSECURITY

In support of the business digital strategy, we are introducing new innovative technologies which potentially introduce new risks and threats into the environment as it becomes more automated. At the core of our cybersecurity strategy is the protection of Exxaro's information and other digital assets, through the implementation of the cybersecurity programme which focuses on improving these three major capabilities: information security, cloud security and business resilience.

Through this programme, we have reduced the risk of identity theft by implementing a number of initiatives such as multi-factor authentication. To improve our data loss prevention and data protection capabilities, we started the process of classifying company data in 2020, this will continue into 2021.

Cybersecurity awareness campaigns remain paramount to the continuous education of our people on cybersecurity threats. These campaigns will continue into 2021 to further reduce the probability of attacks.

We are also re-evaluating the criticality of existing systems to understand the impact on business better in order to enable periodic service simulations and to verify the adequacy of existing service continuity capabilities.