EXXARO RESOURCES LIMITED - EXX - Voluntary announcement: Disposal of the equity interest in Exxaro Coal Central Proprietary Limited

EXX - Voluntary announcement: Disposal of the equity interest in Exxaro Coal Central Proprietary Limited

 EXXARO RESOURCES LIMITED
 Incorporated in the Republic of South Africa
 (Registration Number: 2000/011076/06)
 JSE share code: EXX
 ISIN code: ZAE000084992
 ADR code: EXXAY
 (“Exxaro” or “the Company”)

 VOLUNTARY ANNOUNCEMENT – DISPOSAL OF THE EQUITY INTEREST IN EXXARO COAL CENTRAL
 PROPRIETARY LIMITED

 1.      Introduction and rationale

         As set out in the Exxaro announcement of 20 February 2020 and as part of its sustainable growth
         approach, Exxaro conducted an internal portfolio review to evaluate and optimise its current coal
         operations and projects. Exxaro identified assets which are non-core to its future strategic objectives and
         decided to dispose of its total equity interest in Exxaro Coal Central Proprietary Limited (“ECC”) and its
         Leeuwpan Coal Mine operation (“Target Assets”).

         Exxaro resultantly embarked on a divestment process of the Target Assets. Exxaro received significant
         interest in the Target Assets, both on an individual basis as well as a package. In determining the acquirer
         of the Target Assets, Exxaro applied selection criteria including value maximisation, broad based black
         ownership and sustainability of the new operator to operate the Target Assets, whilst also minimising
         transaction execution risk for Exxaro.

         The divestment process has now culminated in an agreement for the disposal of ECC. Exxaro has signed
         a definitive sale and purchase agreement (“SPA”) with Overlooked Colliery Proprietary Limited
         (“Overlooked”). Overlooked will acquire all of the issued shares in, and shareholder claims against, ECC
         (“ECC Transaction”). Exxaro has obtained certainty of funding from Overlooked’s lenders towards
         settlement of its obligations in terms of the ECC Transaction.

         This is a voluntary update as the transaction falls below the Category 2 threshold of the JSE Limited Listings
         Requirements.

         The ECC Transaction is classified as a held for sale asset by Exxaro and proceeds received will be used in
         accordance with Exxaro’s capital allocation framework.

         The Leeuwpan Coal Mine operation’s disposal is ongoing, and shareholders will be updated on progress
         once finalised.

2.       The ECC Transaction

         Salient transaction terms:

         Exxaro will sell all its shares in, and shareholder claims against ECC, to Overlooked Included in the
         purchase consideration is cash in the rehabilitation trust which Exxaro will retain. In addition, Overlooked
         will assume all the rehabilitation liabilities. Exxaro will retain all coal export entitlement through Richards
         Bay Coal Terminal.

         Overlooked is a privately held and 100% black-owned mining entity and successful operator of three mines
         namely, Overlooked Colliery (Pty) Ltd, Weltevreden Colliery (Pty) Ltd, and Halfgewonnen Colliery. The
        former two mines are a recent acquisition from Sudor Coal. Overlooked currently produces 2 400 000t of
        coal and plans to reach 4 800 000t per annum by 2022 off its existing portfolio.

        The submission of the ECC Transaction to the South African competition authorities and the Department
        of Mineral Resources and Energy (“DMRE”) will commence shortly. The closure of the ECC Transaction
        will be primarily dependent on the finalisation of these separate regulatory approvals and other conditions
        precedent customary in a transaction of this nature ("ECC Conditions Precedent”).

        Overlooked has procured funder confirmation and guarantees from Absa Bank Limited and another South
        African bank in favour of Exxaro in terms of the certainty of funds requirement imposed by Exxaro, subject
        to fulfilment of the ECC Conditions Precedent to the ECC Transaction.

        The closing date of the ECC Transaction will be the last business day of the month in which the final ECC
        Condition Precedent is fulfilled or waived, provided that if the final ECC Condition Precedent is fulfilled or
        waived within 5 business days of the end of any month, then the closing date will be at the end of the
        following month, with the closing date expected to occur in the second half of 2021.

        The SPA provides for warranties, undertakings, indemnities and events of default that are customary for a
        transaction of this nature.

        Details of the ECC asset:

        ECC comprises the Dorstfontein, Forzando and Tumelo operations.

        The Dorstfontein complex is located north-east of the town of Kriel, in South Africa’s Mpumalanga province
        and comprises Dorstfontein West (“DCMW”), an underground mine, and Dorstfontein East (“DCME”), an
        opencast and planned underground operation. DCMW and DCME’s mining rights expire in December and
        October 2036 respectively.

        The Forzando complex lies South East of the Dorstfontein complex and comprises two underground mines,
        Forzando North (“FZON”) and Forzando South with both mining rights expiring in November 2027. Forzando
        accessed some historical workings at FZON (under care and maintenance since 2014) successfully in the
        2018 financial reporting year resulting in increased product mix production and quality.

        Tumelo, a company owned by ECC and Mmakau Mining Proprietary Limited, with mining rights expiring in
        2025, was recommissioned and commenced operations in Q2 2019 following technical and financial
        evaluations.

3.      Conclusion

        ECC’s successful sale to a black owned mining operator with a strong track record such as Overlooked,
        has confirmed Exxaro’ s strategic view that the assets have value and that a different operator is better
        placed to extract maximum value from these assets. Exxaro is pleased to play a meaningful role in assisting
        black mining operators in obtaining scale and additional resources to their existing operations.

        Shareholders will be updated as to the fulfilment of the ECC Conditions Precedent as and when these are
        fulfilled.

Karen Mare
ACTING GROUP COMPANY SECRETARY

9 April 2021


Financial Advisor and Transaction Sponsor               Financial Advisor
Absa Bank Limited, acting through its                   Proximity Advisory
Corporate and Investment Banking Division

Joint Equity Sponsor                                    Legal Advisor
Tamela Holdings Proprietary Limited                     CMS RM Partners

Legal Advisor                                           Legal Advisor
Inlexso Proprietary Limited                             Tshisevhe Gwina Ratshimbilani Inc.

Competition Law Advisor
Herbert Smith Freehills

Date: 09-04-2021 07:05:00
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