Full Disclosure

Exxaro Resources Limited (Exxaro) discloses information regarding its financial provision for environmental rehabilitation in its annual financial statements and in its supplementary report.

The information which is publicly available is:

1. The estimated figures for environmental rehabilitation obligations, at the level of each operation, and the funds and guarantees available to meet those obligations.
2. That “the calculation of these provisions requires management judgment in estimating these future costs.”¹
3. The basic assumptions used in the calculation of the environmental rehabilitation provision, and the accounting treatment of the rehabilitation obligations.
4. That financial guarantees and various environmental rehabilitation trusts are the financial vehicles used to provide for future rehabilitation obligations.

Exxaro is one of very few large players that provides information at an operations level. It also provides detailed management commentary on the changes in its financial provision and rehabilitation funds, and the inputs used in the calculations. Exxaro’s disclosures could still be improved however by providing:

• clear, understandable, comparable information about the type and extent of environmental damage covered by these estimated liabilities;
• detailed information about the experts used to calculate the estimated liabilities;
• sufficient information to enable external verification that the estimated liabilities have been accurately calculated; and
• information about the way in which the funds set aside for rehabilitation are managed and protected.

In its response to the CER’s letter requesting further information and clarity, Exxaro initially stated that it “often” makes use of independent external service providers. In subsequent correspondence, Exxaro clarified that external experts review the estimated costs of rehabilitation every three years.

Exxaro stated that it “will comply with all regulatory requirements” in relation to making independent assessments publicly available.

Exxaro provides useful information in a “supplementary report”, but there was no reference to this in the information dealing with financial provision in the annual financial statements: Exxaro had to specifically draw our attention to it after our first letter to them. In this supplementary report, information is provided about the amount of land disturbed by Exxaro’s operations versus the land it has rehabilitated. It also clearly discloses the rehabilitation and closure cost estimates, as well as trust fund balances, remaining life of mine, and the further contributions required, for each operation.

There is limited information available about the management of the Exxaro Environmental Rehabilitation Fund (EERF) and the Matla and Arnot Environmental Rehabilitation Fund. Further information that would assist stakeholders in assessing the level of protection afforded by these funds includes:

• the identity of trustees and beneficiaries;
• the trusts’ annual financial statements;
• how funds in the trusts are accessed;
• when funds from the trusts have been accessed for rehabilitation and/or closure for any operation; and
• whether the funds are used for concurrent rehabilitation or reserved exclusively for the purposes of closure.