EXXARO RESOURCES LIMITED

Date: January 12, 2026 Subject: Investment Analysis: Exxaro Resources Limited (JSE: EXX)

Step 1: Data Gathering & Source Verification

Reporting Periods Used:

• Latest Audited Annual Financial Statements (FY24): Year ended 31 December 2024.

• Source: Exxaro Integrated Report 2024

• Latest Interim Results (H1 25): Six months ended 30 June 2025.

• Source: Exxaro Interim Results 2025

• Recent Trading Update: Pre-close Finance Director's Message (December 2025) regarding FY25 guidance.

Step 2: Metric Extraction

• Market Cap: ~R64.62 Billion (ZAR)
• Dividend Yield (L12M): 9.04%

• Calculation: Interim 2025 (843 cps) + Final 2024 (866 cps) = 1709 cps on a share price of ~R189.00.

• Liquidity Check: Pass (High Liquidity).

• Average daily volume exceeds 300,000 shares. The stock is a Top 40 constituent and highly liquid.

• P/E Ratio: 5.9x

• Calculation: Price (18900c) / TTM HEPS (~3215c).

• Note: The stock trades significantly below the JSE average, typical for coal miners due to ESG discounting and cyclicality.

• Price to NAV: 0.92x

• The share is trading at a discount to the value of its net assets.

Step 3: Operational & Strategic Analysis

Business Overview Exxaro is a diversified resources company. Its core cash cow is Coal (Waterberg and Mpumalanga assets), supplying Eskom (domestic) and the export market. It is aggressively diversifying into Renewable Energy (via its 100% owned subsidiary Cennergi) and Future Minerals (recently announcing a manganese acquisition).

Performance Trend (H1 2025 vs H1 2024)

• Revenue: Expanded. Group revenue increased 8% to R20.6bn, driven by higher sales volumes despite softer global prices.
• Profitability: Improved. EBITDA rose 10% to R5.6bn. Headline Earnings Per Share (HEPS) increased by 13% to 1,724 cents.
• Operational Health: The company achieved a milestone of 3 years fatality-free production. Cash generation remains robust (R5.3bn from operations in H1).

Sector Context

• Macro Factor: Logistics (Transnet). While Transnet Freight Rail (TFR) performance has stabilized slightly in 2025, it remains the primary bottleneck for export volumes. Exxaro has mitigated this by trucking coal to alternative ports (Maputo/Richards Bay), but this squeezes margins.
• Pricing: Global thermal coal prices (API4) have cooled significantly from the 2022/23 highs, averaging ~$89/t in 2025 compared to ~$105/t in 2024.

Step 4: The Verdict

Bull Case (Buy Rationale) Cash Generation & Yield: Exxaro is a cash-printing machine. Even with lower coal prices, it maintains a massive dividend yield (~9%) and holds a net cash position (approx. R12bn-R18bn depending on recent acquisition outlays). The diversification into Manganese and clean energy (Cennergi) reduces long-term "dirty coal" risk, potentially triggering a rating re-rate in the future.

Bear Case (Sell Rationale) Structural Decline of Coal: The long-term thesis for thermal coal remains negative due to the global energy transition. Furthermore, the company is heavily reliant on Eskom (a risky counterparty) and Transnet (unreliable logistics). If Transnet's rail performance deteriorates again, Exxaro cannot export its high-margin product efficiently.

Fair Value Estimate R215.00 – R230.00

• Rationale: Valuation based on a conservative 7x P/E multiple on normalized earnings and a sum-of-the-parts analysis including the Cennergi energy assets.

Final Rating: BUY

• Justification: The market is pricing Exxaro for a disaster that isn't happening. Trading at a P/E of ~6x with a 9% yield and a pristine balance sheet offers a significant "margin of safety." It is an excellent income stock with optionality on its energy transition strategy.