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 significant
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
fulfilling its mission to create unrivalled value for
all stakeholders.
SIPHO NKOSI
Chief executive officer
13 March 2008 |
