27 October 2014 Sustainability in the resource industry post 2015 an Exxaro perspective Mzila Mthenjane Executive Head, Strategy and Corporate Affairs
Our business philosophy 2 2
Sustainability = strategic objectives 3 3 Invest Invest in energy, metal & mineral resource commodities that generate sustainable economic returns of 1.5xWACC Develop Develop market insights for our products & appropriate innovations, throughout the value chain for added value & competitive advantage Grow Extract industrial application energy, metal & mineral resource commodities from diverse geographies by using our own capabilities & relevant partnerships
Exxaro group structure 4 4 OWNER-CONTROLLED OPERATIONS NON-CONTROLLED OPERATIONS Coal Third largest coal producer in RSA Three tied operations Six commercial operations Acquisition of TCSA* GMEP** commissioned Ferrous Mayoko Project AlloyStream project FerroAlloys Energy Underground coal gasification 19,98% in SIOC## 44,18% in Tronox 26% in Black Mountain 50:50 JV^ :Mafube JV with Anglo Cennergi JV with Tata Power Secure supply to Eskom Increase domestic supply Manage mines in closure responsibly Increase exports Increase productivity Optimise the operating model Review Mayoko Project Review alloy business Apply UHDMS# in lower grade iron ore beneficiation Explore and integrate opportunities in Africa s energy markets Manage emerging carbon related risks Maintain SIOC investment Analyse and review the long-term fundamentals of the titanium dioxide industry Divest from Black Mountain and Chifeng Enabled by human resources, sustainable development and innovation processes * Total Coal South Africa Pty Ltd ** Grootegeluk Medupi Expansion Project # Ultra high dense medium separation ## Sishen Iron Ore Company Pty Ltd ^ Joint venture
Outlook for mining 5 5 Source: Exxaro Strategy Analysis and Analysts Reports
Emerging trends 6 Mega Regions Mega consumption of steel, copper, iron ore & coal Fully automated and integrated mines Mega Cities Infrastructure Competition for skills Intelligent machinery and equipment Urbanisation New Business Models Mega Corridors Demand for electricity, housing, roads & water Massive infrastructure budgets by government Social license to operate Intelligent logistics and transportation systems Remote Controlled Operations Massive production of automobiles, appliances lndustrialisation Modern transportation solutions Sustainability Technology Increased coal consumption Integrated economies Reduce geopolitical risk Mega-energy projects Commodity Energy and water efficient technologies Beneficiation Environment, health & safety issues Human Capital Impacts Energy Diversified energy mix-renewable & nuclear Geography Diversification Niche markets & stable income streams Coal to Liquids & Power Plants Market char & coke 6
Climate change 7 7 Source: Promethium Carbon 2006
More from less 8 8
Urbanisation 9 9
Emerging shift in economic power 10 2004 2025 2050 China + India = 6% 20% 45% US = 28% 27% 26% EU = 34% 25% 15% Japan = 12% 7% 4% 10 Chindia - Almost half the global economy by 2050
Smart and nano technology 11 11
Innovating to Zero 12 12
Increased life expectancy 13 13
Anticipated impact on commodity life cycles 14 14 Steel (iron ore, coking coal, manganese) Base metals (Al, Cu, Zn, Ni, Pb, Sn) Steam coal Industrial minerals (TiO 2, zircon) Light metals (Al, Ti, Mg) Base metals (Cu) Uranium, Thorium Rare Earths and Metals (incl PGMs) Nano-materials Industrial minerals Carbon Composite materials Organically produced materials Memory materials Molecular engineering Sci-fi materials and energy* * An acknowledged source for foresight thinking Gradual and overlapping evolution
Exxaro s NXXT (New Exxaro Tomorrow) journey 15 15 Exxaro s sustainability plan into the future Innovation is embedded in the strategy Fully resourced with people and budget Multi-dimensional: triple bottom line perspectives INDUSTRY RESEARCH STREAM 1 World in 2030 Global DRIVERS STREAM 2 Resource Industry 2030 Industry DRIVERS STREAM 3 Exxaro NXXT Programme 2030 Exxaro STRATEGIC THRUSTS Benchmarking visits and conferences scouting Update technology thrusts and roadmaps Develop value propositions, priorotise Execute R&D projects
Traits of a future resources extraction industry 16 2013 1. Increasing Shareholder expectations (Profits) 2. Extreme escalation in operating costs 3. Rapid Technological Innovation i.e. IT/Com s.. 4. Increased pressure on Social and Regulatory Compliance. 5. Un-balanced relationship between government, community and mining. 6. Current core processes are sub-optimized (exploration, geology, mining processing and logistics) 7. High levels of waste and discard materials from production. 8. High Impact on Environment and insufficient Rehabilitation 9. Fossil Fuel based Economy / Carbon Emissions 10. Energy Supply / Cost constraints 11. Limited focus on downstream beneficiation 12. Current workforce ill-equipped for the future (High levels of semi-skilled employees and shortage of highly skilled employees) 13. Communities dependant on Mining Activities 10 Strategic Thrusts Smart Exploration New Mining Technologies New Processing Technologies Asset Management/Logistics Clean Coal Technologies Innovation to Zero Harm Social Responsibility Sustainable Energy Automation Integrate/Redefine Value Chain 2030 16 1. Sustainable License to Operate (LTO): Creating inclusive wealth for all Stakeholders Balanced and sustainable partnership between government, community and resources industry Small footprint / limited environmental impact Self-sustaining economically viable community > Beyond a Life of Mine (LOM) 2. Smart Exploration: Accurate, predictable, instant, information and models 3. 100% resource extraction 4. Zero Waste 5. Zero Harm - safety/health 6. Energy, carbon and water neutral 7. Workforce equipped to support the 2030 business 8. Hybrid/renewable/alternative energy solutions 9. Capitalise on trend of advanced / light Materials /Metals 10.Integrated, optimised and redefined value chain
Thrust 1: Smart exploration 17 Drone exploration Solar powered drones can fly for long durations without major maintenance UAVs can be fitted with magnetometers or multispectral equipment. Titan Aerospace Drone Next generation geophysics technologies Will make geology more effective and accurate, reducing costs, increasing yields and enabling full extraction of the reserve s potential. Geometallurgy Integration of geology and metallurgy data for optimum plant design. Next generation drilling technologies 17 Sonic Drilling Intense vibration/liquefaction Automated resonance (waterless and energy efficient) Oil & Gas industry technologies applied in exploration drilling Automated, multidirectional drilling Real-time ore characterisation influencing drill plan in real-time Integrated geological, mining, environmental and survey data for improved interpretation of geological conditions
Thrust 2: New mining technologies 18 Autonomous hauling Trucks are controlled entirely using a supervisory computer at an operations centre, contributing to surface collision avoidance, fuel savings, increased safety, less maintenance and uninterrupted production. Fully autonomous mining Geology to market data used to integrate planning and control for effective resource and asset management. Selective mining will allow optimal extraction of the reserve and in turn realise less waste. New blasting technologies. Wireless equipment. In-pit crushing and beneficiation Eliminates truck haulage. Less sensitive to commodity prices. Less dependant on human factor. Reduce operating costs. Increase productivity. Improve safety. Reduce environmental impact. 18 Minestar Automation by CAT
Thrust 3: New processing technologies 19 AlloyStream TM Ultra High Dense Medium Separation (UHDMS) 19 Continuous surface miner In-house developed technology to process certain alloys at lower costs and with lower feed grades than conventional furnaces. Patented and tested for commercial viability in 2012/2013. Fines processing Utilisation of fines in power stations and reductants markets through briquetting/agglomeration of fines material. In-house developed technology enabling iron ore separation at RD >4. Project is in demonstration phase Dry processing Waterless processing offers significant environmental and cost benefits in a water scarce future scenario. For slimes handling, drying technology, paste technology, electro-kinetic drying, absorbent polymers and hgh density slurry pumping. Extract, crush and load material in one continuous process. Selective mining of coal and interburden results in: Increased calorific value and lower ash contents. Improved ROM quality Reduced processing effort Reduced volume of overburden
Thrust 7: Societal responsibility & accountability 20 20 Social License to operate Community involvement Environment: stewardship through effective rehab & mine closure Health & Safety Protect & promote health, safety & wellbeing of living organisms Water & energy consumption Energy efficient equipment Source: Frost & Sullivan
The challenge - innovate to remain relevant 21 Tweaking existing processes cannot deliver the massive shifts mining companies need in today s capital-constrained environment. To build true competitive advantage, companies must look beyond incremental performance improvement to determine how they can revise their systems to embrace the broad theme of innovation. ~ Jürgen Beier, Mining Leader, Canada We, as an industry, are woefully underspending on innovation and businessimprovement programmes given the state of extraction challenges. On a revenue to revenue basis, the mining industry spends 80 per cent less on technology and innovation compared to the petroleum sector. Exxaro will be required to enhance its internal innovation and project execution capabilities in the coming yearsin order to meet stakeholder expectations ~ Sipho Nkosi, CEO Exxaro Resources Limited ~ Mark Cutifani, Anglo American (WRC)
Exxaro s vision of the future 22 22
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