Q&A: Exxaro Resources - JSE MAGAZINE

Q&A: Exxaro Resources

Mongezi Veti, Exxaro Resources’ executive head of sustainability, on the company’s ‘just-transition’ journey

Q&A: Exxaro Resources

Q: How does Exxaro define its sustainability-leadership profile within the sector?
A: Our leadership is defined by taking a collaborative approach in matters of sustainability and climate change. Our objective is to ensure that no one is left behind in these efforts as we transition to a low-carbon world. This approach requires the company to be clear on its path to sustainability excellence and our decarbonisation journey, as we make our portfolio climate-change resilient, and work towards our aspirational target of becoming carbon neutral by 2050 for Scope 1 and Scope 2 GHG emissions. Our transition to having a climate-resilient portfolio and other sustainability imperatives began in 2010. At that time we took a strategic decision to balance our business’ financial performance with SA’s economic-development needs, ecosystem protection and societal adaptive capacity in the face of climate change. This involves making Exxaro’s existing coal business resilient to the physical and transitional risk of climate change while we grow our existing renewable-energy business and build a new minerals core focused on copper, manganese and bauxite.

We recognise that such a transition is ongoing and cannot be rushed as it must be based on ‘just transition’ principles. Exxaro’s board-approved sustainable growth and impact strategy dictates that we operate in minerals that support a low-carbon world, while ensuring that we continue to contribute to the decarbonisation of the SA grid and in support of our communities, suppliers and customers, who transition along with us. We still retain our role as the largest supplier of quality coal to Eskom while we optimise our coal resources to focus on realising maximum value to support SA’s energy security. Winning a prestigious award such as Best Sustainable Mining Leadership reinforces that we are doing all the right things and setting benchmarks for other mining houses to aspire to, for a just transition that is inclusive, collaborative and progressive.

Q: What climate disclosures and commitments have Exxaro made, particularly with regard to decarbonisation and net zero carbon?
A: We have been the SA pioneer in the CDP since 2009. Our participation covers climate change, water security and supplier-engagement disclosures. Since our participation, we have maintained A and B ratings, consistently above the sector average. In 2020 we presented our Task Force on Climate-related Financial Disclosure (TCFD) climate-change alignment report to the market. We unequivocally stated that we accept the science-based evidence that the use of fossil fuels is the primary driver of GHG emissions and concentration in the atmosphere. We have also declared our support for and alignment with the TCFD and the 2016 Paris Agreement. We have announced that we will establish a multi-stakeholder climate change technical advisory committee to improve our mitigation and adaptation efforts, and directly address climate-change issues throughout all our business processes. These are but a few of the commitments Exxaro has made in recent years, with many more to follow. Climate-change mitigation imperatives require ongoing and ever-changing strategies. We also continue to leverage and consider all climate-change opportunities for the greater good of every citizen.

Q: What investment has Exxaro made in renewables, and why the diversification?
A: In 2010 our coal exports to Europe began to decline, and we realised that we needed not just to ensure that our future was resilient to climate change transitional and physical risks, and the need to maintain, sustain and create employment opportunities, but also build sustainable growth in the clean-energy sector. So in the same year, we invested R1.5 billion in establishing Cennergi, a wholly owned Exxaro wind project that we operate jointly and equally with Tata Power. The project manifested, in 2016, in two wind farms in the Eastern Cape – the Amakhala Emoyeni and Tsitsikamma Community wind farms. Together these wind farms supply 230 MW of green energy to the SA grid. This investment is part of our ‘just transition’ journey to our climate-resilient business portfolio but is also in anticipation of the global energy transition to low-carbon energy sources. Our objective is to become a catalyst for economic growth while generating reliable, affordable and clean energy for society. This can also be interpreted as a commitment to a low-carbon world while still responding to the dual-energy needs of the country. It also has to be borne in mind that SA’s 2019 Integrated Resource Plan indicates that the share of coal in the energy mix will remain at around 50% until 2030. Hence, we have to prepare our businesses and communities for life beyond that.

Q: Please expand on Exxaro’s minerals-diversification programme, and what core competencies the company has in place to build this growth programme?
A: We are targeting manganese, copper and bauxite. Our approach is anchored on our proven competencies, including our good track record of open-pit and bulk-commodity experience, and our experience operating within the sectors of base metals, mineral sands and industrial minerals. Over the years, we’ve developed and maintained a strong portfolio of quality operating assets that have the flexibility to respond to market shocks and opportunities. Another consideration is that Exxaro has a particular strength in project, cost and capital management, and has used these successfully in its operations across diverse geographies.

Q: How does Exxaro address the balance between securing returns for shareholders, attracting new investors and remaining relevant in the transition to new energies?
A: Exxaro’s transition is based on the principle that no one should be left behind, inclusive of investors, employees, communities, suppliers, customers, labour and regulators. Continuous engagement, therefore, takes place through multiple forums to discuss and outline our strategic approach, risks and opportunities, and investment business case. This collaborative and engaging approach ensures that our stakeholders, including shareholders, stay abreast of our strategic performance, risks and opportunities, and it removes any uncertainty and fear of the unknown, enhancing our ability to stay relevant and engaged. Our dual-energy portfolio of high-quality coal and renewable-energy assets enhances our prudent capital management and investment-grade solid credit rating. Our history of transparent climate disclosure helps investors evaluate their risk exposure. We also believe that, regardless of being rooted in SA, our purpose is to ‘power possibilities in Africa and beyond’. For Exxaro, it’s not simply about presenting excellent financial returns but proving we have the vision, values and culture of a progressive, future-proof organisation that is focused broadly on ensuring the well-being of society.

Q: What lies ahead in terms of value for investors?
A: Investors will continue to find value in supporting Exxaro given that it continues to respect its ongoing commitment to innovation, ethics and integrity. Also, since its inception, when Kumba Resources and Eyesizwe Coal merged, it has become one of the country’s largest black-empowered diversified mining companies. Our imperatives during our ‘just transition’ journey are to develop portfolio-investment and -divestment scenarios that consider climate-change issues and streamline those processes. We’ve increased our emission-reduction technology and presented new financial instruments – and, currently, we are reviewing our approach to leverage critical competencies while securing the intended new low-carbon-aligned revenue streams. As we do so, we have created – and will continue to develop – new markets for Exxaro. Our board of directors remains accountable for governance and performance, carefully balancing the company’s interests as a responsible corporate citizen with the legitimate interests and expectations of stakeholders. The board also has oversight of the pathways Exxaro should follow to remain sustainable within SA’s climate-policy framework, and which will assist the country’s transition to a low-carbon country.

Q: What peculiarities are associated with safety and health within coal mining, and how does the organisation approach those?
A: We see safety and health as anchored to zero-harm principles, so we have entrenched the principle of ‘hire and retire safe and healthy employees’. In achieving this, we set strategic safety pillars that include (in)credible leadership; zero tolerance; safety training for life; daily safety conversations; and if an employee has not embraced hazard identification and risk assessment principles, no work will be allowed. These have contributed significantly to Exxaro celebrating five years without loss of life, a milestone in the mining industry.

Q: How will Exxaro’s beneficiation programmes be impacted in the transition from coal to other mineral/energy goals?
A: If anything, Exxaro’s beneficiation competencies will be enhanced by our diversification strategy. Our Grootegeluk mine is acknowledged as one of the world’s most efficient mining operations, running one of the leading and largest coal-beneficiation complexes. Our experience in creating this high-value beneficiation complex will stand us in good stead during our mineral diversification, and is tagged to become our competitive edge.

By Kerry Dimmer