REPLACEMENT BEE TRANSACTION Investor presentation and detailed Q&A 9 November 2017
EXXARO’S INDEPENDENT BOARD SUB -COMMITTEE SUPPORTS THE Overview of the Replacement BEE Transaction REPLACEMENT BEE TRANSACTION …and recommends that all shareholders vote in favour of the resolutions STRONG RATIONALE FOR THE REPLACEMENT BEE TRANSACTION INDEPENDENT MARKET SUPPORT The Replacement BEE Transaction is dilutive for non-BEE shareholders Protects the stability of Exxaro’s operations 1 but all-in-all we believe that it is a Reinforces the sustainability of its relationships with key stakeholders robust (and necessary) transaction ; and the residual share overhang is now only ~10%. Positions Exxaro well for growth in South Africa through sector leading empowerment credentials 2 - INDEPENDENT ANALYST #1 Provides significant strategic flexibility and the ability to create long- term value for shareholders Ensures ongoing compliance with customer and industry requirements Retaining empowerment is 3 important for Exxaro Ongoing compliance in a sector which will continue to be actively Replacement regulated BEE Transaction - INDEPENDENT ANALYST #2 Reduces the market overhang impact of the MS333 Unwind In the SA environment we think it is 4 Overhang reduced through enabling the Second Repurchase and appropriate to maintain some level the reinvestment by the MS333 shareholders of BEE ownership (broad-based). Furthers the imperative for economic transformation in South Africa 5 Shareholders within the New Empowerment Structure are significantly broad-based and the empowerment will create true economic - INDEPENDENT ANALYST #3 empowerment 2
THE REPLACEMENT BEE TRANSACTION ENSURES THAT EXXARO REMAINS SA’S LEADING EMPOWERMENT MINING COMPANY Overview of the Replacement BEE Transaction …and will protect its status as a company with one of the largest HDSA shareholdings in SA 30% BEE OWNERSHIP AND INCREASED FREE FLOAT KEY TRANSACTION ELEMENTS After the Second Repurchase and the Specific Issue the New Empowerment Structure will be as follows: • 30% BEE shareholding locked in for up 1 to 10 years • Exxaro free float increased to 70% (up 2 BEE SPV from c.40%) • Sustainably structured with limited debt 52.2% 24.9% 22.9% 3 • BEE partners investing R4.7bn of equity 4 into the structure Independent • 7.3% economic dilution on a value per 5 NewBEECo shareholders share basis (Facilitation cost of 6.8% of post (free float) transaction market cap) ~ below industry 30.0% 70.0% standard for large BEE transactions with long lock-in 6 • Significant broad-based BEE shareholding enabling true economic empowerment of women, youth and community groupings 3
R4.7BN INVESTMENT BY BEE SHAREHOLDERS WHICH UNDERPINS THE Overview of the Replacement BEE Transaction NEW EMPOWERMENT STRUCTURE Sustainable transaction structure with significant black equity which limits debt and cost FUNDING STRUCTURE AND SOURCES KEY CONSIDERATIONS Exxaro Equity BEE equity • R4.7bn equity investment by BEE 1 Investment investment shareholders is the largest funding 37.5% (1) 19.9% component in the New Empowerment Structure – 37.5% • BEE shareholders are investing in excess 2 2.5 of 65% of their unencumbered equity value 4.7 (1) • R2.8bn BEE facilitation cost equates to 3 New Empowerment R280m per year of the structure (0.7% of the Structure Value post transaction market cap per year) 2.5 • Low debt levels (20.0% of the New 4 R12.5bn Empowerment Structure) creates a sustainable long term empowerment transaction in an extremely volatile industry 2.8 • Exxaro’s interest in NewBEECo is being 5 warehoused for further employee and Third Party BEE Facilitation community empowerment ~ subject to Funding Value Exxaro shareholder approval 20.0% 22.6% (1) c.R3.2bn (26.1%) from the MS333 Reinvestment and c.R1.4bn (11.4%) from the IDC Reinvestment 4
DISCOUNT ON THE SPECIFIC ISSUE EXPLAINED Overview of the Replacement BEE Transaction Artificially inflated discount on Specific Issue due to facilitation being transferred through the specific issue (excluding the reinvested Exxaro shares) 3 2 1 CLARIFICATION OF DISOUNT ON SPECIFIC ISSUE COMPONENT 1 COMPONENT 2 TOTAL TRANSACTION @ R96.76 (1) (22.6% Reinvestment @ Specific Issue @ R125.01 (Reference R73.92 (40.9% discount discount to Reference Price) to Reference Price) Price) # of Exxaro shares (m) 28.1 12.3 40.4 24.3 21.4 21.5 107.6 67.2 12 465 • Replacement BEE Transaction 1 implemented at a 22.6% discount to Reference Price (equating to a 7.3% economic dilution, 0.7% per year – see next page) 7 787 2 489 • Exxaro shares reinvested by 2 MS333 (including IDC) at Reference Price of R125.01 (i.e. full 4 678 2 481 value) 1 429 3 249 2 817 • Specific Issue occurs at a 40.9% 3 discount to Reference Price MS333 IDC Reinvestments BEE Faciliation Exxaro Equity Third Party Specific Issue New Reinvestment Reinvestment Value Investment Funding Empowerment Structure Value (1) R10 412m / 107.6m shares. R10 412m calculated as sum of the BEE Shares (excluding the shares attributable to the BEE facilitation) multiplied by the Reference Price. This assumes that all the Replacement BEE Transaction funding is procured at the Reference Price and the BEE Facilitation Value is transferred by issuing free Exxaro Shares (for no value) 5
REPLACEMENT BEE TRANSACTION BENEFITS FAR OUTWEIGH ITS Overview of the Replacement BEE Transaction COSTS Replacement BEE Transaction will result in an economic dilution of 0.7% per year ECONOMIC DILUTION (Rand) KEY CONSIDERATIONS • Through the Replacement BEE Transaction, 1 Exxaro’s market leading empowerment 7.3% economic dilution status is secured for up to another 10 years (9.66) (2) 125.50 125.01 (1) 1 0.49 at an economic dilution cost of 0.7% per year (7.3% in total) 115.83 (3) 1 • Dilution is significantly reduced through the 2 specific repurchases from MS333 at significant discounts to spot and the Reference Price (R6.2bn, c.20% of Exxaro’s outstanding capital repurchased) : − First Repurchase occurred at R80.20 (R3.5bn) which substantially reduces the total economic dilution / cost when taken into account − Second Repurchase to occur at R118.76 (R2.7bn) • Second Repurchase is conditional on 3 implementation of the New Empowerment Reference Price Accretion due to Price post Second Dilution due to Ex-Replcacement Ex-Replacement Structure Second Repurchase Specific Issue BEE Transaction BEE Transaction Repurchase price price The independent expert has considered the terms and conditions of (1) The Reference Price the Replacement BEE Transaction and is of the opinion that the Does not take into account the accretion impact of Exxaro’s 24.9% interest in NewBEECo (2) terms and conditions of the Replacement BEE Transaction are fair (3) Ex Replacement BEE Transaction taking into account the theoretical impact on market capitalisation of the Second and reasonable to the Exxaro shareholders Repurchase and the Specific Issue - INDEPENDENT EXPERT REPORT 6
THE NEW EMPOWERMENT STRUCTURE IS SIGNIFICANTLY BROAD- Overview of the Replacement BEE Transaction BASED, ENABLING TRUE ECONOMIC EMPOWERMENT c.43% of the shareholding in BEE SPV represents the interests of broad-based groupings BEE SPV SHAREHOLDING COMPOSITION (1) KEY CONSIDERATIONS Dynamo Investments shareholder % SA Nkosi 52.1% MDM Mgojo 35.9% H Mathe 11.9% 100.0% Eyesizwe Holdings shareholder % Dynamo Investments 53.6% VZ Mntambo 18.6% D Mashile-Nkosi 17.7% K Motsoene (Estate) 7.8% SA Nkosi 1.4% • Approximately 43% of the 1 MDM Mgojo 0.9% 100.0% shareholding in BEE SPV is held for the benefit of broad-based Eyesizwe Mining shareholder % Eyesizwe Holdings 50.5% National Movement of Rural Women 18.8% HDSA groupings Nehawu 11.5% Eyesizwe Mining Development Trust 10.8% Dynamo Investments 3.8% • This represents more than 2 SA Assoc. of Youth Clubs 3.0% Eyabantu Capital shareholder % Basadi Ba Kopane shareholder % Josudan Holdings 1.6% Eyabantu 33.6% National Movement of Rural Women 34.6% 1million beneficiaries in total 100.0% Eyabantu Development Trust 23.9% Nozala Investments 22.9% Zandile Investment Trust 13.6% Malibongwe Women’s Develop. Org. 14.8% Northern Cape Development Trust 11.2% SA Women in Mining Association 14.8% Xiphemu Investments 6.4% SA Women in Mining Investments 12.6% • Approximately 29% of the 3 SA Women in Mining Investments 6.4% Eyesizwe Xiphemu Investments 0.2% SA Women in Mining Association 4.8% Mining 100.0% shareholding in BEE SPV is held for 100.0% the benefit of broad-based HDSA 100.0% women groupings Basadi Ba Eyabantu Dreamvision Kopane Capital Investments Investments 3.1% 12.7% 84.2% Broad-based grouping BEE SPV Women grouping (1) Shareholders reflected represent effective shareholders in certain instances (i.e. not the legal entity but the individual behind such entity) 7
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