# ANNUAL # FINANCIAL # STATEMENTS 2022 | | | | --- | --- | | | | | | | | | | --- | | | | | | | | | | --- | --- | --- | | | | | | | | | | | THUNGELA’S 2022 REPORTING SUITE | | | | | | | | This report forms part of our overall suite of reporting documents for the year ended 31 December 2022, all of which should be read together. Our 2022 reporting suite includes the documents as detailed below: INTEGRATED ANNUAL REPORT\* •Balanced assessment of our approach to creating and sustaining value. •Detailed assessment of our Coal Resources and Coal Reserves in line with the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves, 2016 (the SAMREC Code). •Developed in line with the Framework, the Companies Act of South Africa, King IV, the JSE Listings Requirements, the UK Listing Rules and the UK Disclosure Guidance and Transparency Rules. ANNUAL FINANCIAL STATEMENTS •Detailed understanding of the Group’s financial and operational performance. •Prepared in accordance with IFRS, the Companies Act of South Africa, King IV, the JSE Listings Requirements, the UK Listing Rules and the UK Disclosure Guidance and Transparency Rules. ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT\* •Detailed disclosure of the key environmental, social and governance elements that could have a material impact on our performance and business if not effectively managed. •Prepared in accordance with the core requirements of the GRI Reporting Standards, specifically the GRI 12: Coal Sector 2022 Standard, as well as internal safety and sustainable development indicators. CLIMATE CHANGE REPORT\* •Disclosure of Thungela’s approach to climate change, including risks and related management, compiled in accordance with the recommendations of the TCFD. \* available from April 2023. Various acronyms, abbreviations and measures used throughout our 2022 reporting suite have been defined on pages [159](#i7ec60c797ec64d4e899d961e03f501fe_154) – [163](#i7ec60c797ec64d4e899d961e03f501fe_2449). | | | | | | | | | | | | | --- | | | | | | FORWARD-LOOKING STATEMENTS DISCLAIMER AND THIRD-PARTY INFORMATION This document includes forward-looking statements. All statements included in this document (other than statements of historical facts) are, or may be deemed to be, forward-looking statements, including, without limitation, those regarding Thungela’s financial position, business, acquisition and divestment strategy, dividend policy, plans and objectives of management for future operations (including development plans and objectives relating to Thungela’s products, production forecasts and resource and reserve positions). By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Thungela, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Thungela therefore cautions that forward-looking statements are not guarantees of future performance. Any forward-looking statement made in this document or elsewhere is applicable only at the date on which such forward-looking statement is made. New factors that could cause Thungela’s business not to develop as expected may emerge from time to time and it is not possible to predict all of them. Further, the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement are not known. Thungela has no duty to, and does not intend to, update or revise the forward-looking statements contained in this document after the date of this document, except as may be required by law. Any forward-looking statements included in this document have not been reviewed or reported on by the Group’s independent external auditor. The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the market abuse regulation (EU) No. 596/2014 as amended by the market abuse (amendment) (UK MAR) regulations 2019. Upon the publication of this announcement, this inside information is now considered to be in the public domain. | | | | | --- | --- | | | | | | | #### CONTENTS | | | | --- | --- | | | | | About Thungela | 2 | | Directors’ responsibility and approval of the Annual Financial Statements | [3](#i7ec60c797ec64d4e899d961e03f501fe_16) | | CEO and CFO responsibility statement on internal financial controls | [4](#i7ec60c797ec64d4e899d961e03f501fe_789) | | Certificate by the company secretary | [5](#i7ec60c797ec64d4e899d961e03f501fe_2974) | | Review of financial performance | [6](#i7ec60c797ec64d4e899d961e03f501fe_43) | | Review of operational performance | [16](#i7ec60c797ec64d4e899d961e03f501fe_2135) | | Directors’ report | [18](#i7ec60c797ec64d4e899d961e03f501fe_783) | | Report of the audit committee | [22](#i7ec60c797ec64d4e899d961e03f501fe_808) | | Independent auditor’s report | [26](#i7ec60c797ec64d4e899d961e03f501fe_58) | | Consolidated and separate financial statements | | | Consolidated statement of profit or loss and other comprehensive income | [34](#i7ec60c797ec64d4e899d961e03f501fe_61) | | Consolidated statement of financial position | [35](#i7ec60c797ec64d4e899d961e03f501fe_64) | | Consolidated statement of changes in equity | [36](#i7ec60c797ec64d4e899d961e03f501fe_67) | | Consolidated statement of cash flows | [38](#i7ec60c797ec64d4e899d961e03f501fe_70) | | Notes to the consolidated financial statements | [40](#i7ec60c797ec64d4e899d961e03f501fe_76) | | Separate statement of profit or loss and other comprehensive income | [144](#i7ec60c797ec64d4e899d961e03f501fe_988) | | Separate statement of financial position | [144](#i7ec60c797ec64d4e899d961e03f501fe_2748779070977) | | Separate statement of changes in equity | [145](#i7ec60c797ec64d4e899d961e03f501fe_2748779070986) | | Separate statement of cash flows | [146](#i7ec60c797ec64d4e899d961e03f501fe_2748779070994) | | Notes to the separate financial statements | [147](#i7ec60c797ec64d4e899d961e03f501fe_997) | | Annexure 1 – Alternative performance measures | [154](#i7ec60c797ec64d4e899d961e03f501fe_151) | | Annexure 2 – Glossary | [159](#i7ec60c797ec64d4e899d961e03f501fe_154) | | Annexure 3 – Shareholder information | [164](#i7ec60c797ec64d4e899d961e03f501fe_1052) | | Corporate information | IBC | | | | | --- | --- | | | | | | | Annual Financial Statements for the year ended 31 December 2022   1 #### ABOUT #### THUNGELA Thungela, a Zulu word which means ”to ignite”, is a leading South African thermal coal business. It is one of the largest pure-play producers and exporters of thermal coal in South Africa based on aggregate coal reserves and marketable coal production. The Group owns interests in, and produces its thermal coal predominantly from seven mining operations, namely Goedehoop, Greenside, Isibonelo, Khwezela, AAIC (operating the Zibulo Colliery), Mafube Coal Mining (operating the Mafube Colliery) and Butsanani Energy (owning the independently operated Rietvlei Colliery) which consist of both underground and opencast mines located in the Mpumalanga province of South Africa. Thungela’s operations are among the highest quality thermal coal mines in South Africa by calorific value. Thungela, through AAIC, also holds a 50% interest in Phola, which owns and operates the Phola Coal Processing Plant, and a 23% indirect interest in RBCT. The RBCT is one of the world’s leading coal export terminals, with an advanced 24- hour operation and a design capacity of 91Mtpa. Thungela is committed to operating in a sustainable way to ignite value for a shared future, for the benefit of the communities in which it operates, its employees, shareholders and society as a whole. #### DIRECTORS’ DECLARATION | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Thungela Resources Limited (‘Thungela’ or the ‘Group’ or the ‘Company’) board of directors, supported by the audit committee, is ultimately responsible for the preparation, fair presentation and integrity of the consolidated and separate financial statements and related financial information of the Group, as contained in the Annual Financial Statements for the year ended 31 December 2022. The board of directors confirm that they have collectively reviewed the content of the Annual Financial Statements for the year ended 31 December 2022 and approved the same at its meeting on 24 March 2023 for presentation to shareholders at the next AGM. These Annual Financial Statements have been prepared under the supervision of Deon Smith CA (SA), CFO. #### ALTERNATIVE PERFORMANCE MEASURES | | | | | | --- | --- | --- | --- | | | | | | | | | | | The directors consider additional financial and operational measures to assess the results of the operations of the Group, referred to as APMs. These APMs can be identified throughout this document using the △ symbol, and are fully described in Annexure 1. #### LEVEL OF ASSURANCE | | | | | | --- | --- | --- | --- | | | | | | | | | | | The consolidated and separate financial statements have been audited in compliance with the requirements of the Companies Act of South Africa. 2  Annual Financial Statements for the year ended 31 December 2022 #### DIRECTORS’ #### RESPONSIBILITY #### AND #### APPROVAL OF THE ANNUAL FINANCIAL #### STATEMENTS #### For the year ended #### 31 December 2022 The directors are responsible for the preparation, fair presentation and integrity of the consolidated financial statements and related financial information of the Group, as well as the separate financial statements of the Company, in accordance with IFRS, the requirements of the Companies Act of South Africa and the JSE Listings Requirements, as well as with the UK Listing Rules and the UK Disclosure Guidance and Transparency Rules. The consolidated and separate financial statements are based on appropriate accounting policies which have been consistently applied and which are supported by reasonable judgements and estimates made by management. The consolidated and separate financial statements comprise the statements of financial position at 31 December 2022, the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, the notes to the financial statements and other information. The directors, primarily through the audit committee, meet quarterly with the internal and independent external auditors as well as the Group executive committee, and other members of management as appropriate, to evaluate matters concerning the responsibilities below: •Maintaining adequate accounting records and an effective system of risk management. •Developing, implementing and maintaining a sound system of internal control relevant to the preparation and fair presentation of these Annual Financial Statements, that provides reasonable assurance against material misstatement or loss, whether owing to fraud or error. •Selecting and applying appropriate accounting policies. •Making accounting estimates that are reasonable in the circumstances. •Safeguarding shareholders’ investments and the Group’s assets. •Preparing the Annual Financial Statements, including the supplementary annexures. The Group’s internal auditors independently evaluate the internal controls and co-ordinate their audit coverage with the independent external auditor. The Group’s independent external auditor is responsible for reporting on whether the consolidated and separate financial statements are fairly presented in accordance with IFRS. The independent external auditor’s report to the shareholders is set out on pages [26](#i7ec60c797ec64d4e899d961e03f501fe_58) to [31](#i7ec60c797ec64d4e899d961e03f501fe_2455) of these Annual Financial Statements. The Group’s internal auditors and independent external auditor have unrestricted access to all records, property and personnel as well as to the audit committee. The directors acknowledge that they are ultimately responsible for the process of risk management and the internal financial controls established by the Group, and place a strong emphasis on maintaining a strong control environment. Based on the information and explanations given by management, the internal auditors, the independent external auditor and the Group’s risk, compliance and other reporting processes, the directors are not aware of any material breakdown in the functioning of these controls during the year ended 31 December 2022. The directors are of the opinion that the risk management processes and internal financial controls provide reasonable assurance in all key material aspects that the financial records may be relied upon for the preparation of the Annual Financial Statements. The directors are satisfied that the Group’s forecasts, taking into account reasonably possible changes in performance, show that Thungela will continue to operate for the foreseeable future. For this reason, Thungela has adopted the going concern basis in preparing the consolidated and separate financial statements for the year ended 31 December 2022. The Annual Financial Statements have been prepared under the supervision of Deon Smith, CA(SA), CFO. #### APPROVAL OF THE ANNUAL FINANCIAL #### STATEMENTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Annual Financial Statements on pages [4](#i7ec60c797ec64d4e899d961e03f501fe_789) to [165](#i7ec60c797ec64d4e899d961e03f501fe_3556) were approved by the board of directors and are signed on the directors’ behalf by: | | | | | | --- | --- | --- | --- | | | | | | | | | | | Sango NtsalubaJuly Ndlovu Chairman CEO 27 March 2023 | | | | --- | --- | | | | | | | | | | Annual Financial Statements for the year ended 31 December 2022  3 #### CEO AND CFO RESPONSIBILITY STATEMENT #### ON INTERNAL #### FINANCIAL CONTROLS #### For the year ended #### 31 December 2022 Each of the directors, whose names are stated below, hereby confirm that: ◦The Annual Financial Statements set out on pages [34](#i7ec60c797ec64d4e899d961e03f501fe_61) to [158](#i7ec60c797ec64d4e899d961e03f501fe_2462) fairly present, in all material respects, the financial position, financial performance and cash flows of Thungela in terms of IFRS. ◦To the best of our knowledge and belief, no facts have been omitted or untrue statements made that would make the Annual Financial Statements false or misleading. ◦Internal financial controls have been put in place to ensure that material information relating to Thungela and its consolidated subsidiaries has been provided to effectively prepare the financial statements of Thungela. ◦The internal financial controls are adequate and effective and can be relied upon in compiling the Annual Financial Statements, having fulfilled our role and function as executive directors with primary responsibility for the implementation and execution of controls. ◦Where we are not satisfied, we have disclosed to the audit committee and the auditors any deficiencies in design and operational effectiveness of the internal financial controls. No significant deficiencies were identified. ◦We are not aware of any fraud involving directors. | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | July NdlovuDeon Smith CEOCFO 27 March 2023 4  Annual Financial Statements for the year ended 31 December 2022 #### CERTIFICATE BY THE COMPANY SECRETARY #### For the year ended #### 31 December 2022 In terms of section 88(2)(e) of the Companies Act of South Africa, I, Francois Klem, in my capacity as company secretary, confirm that, to the best of my knowledge and belief, Thungela has filed with the Companies and Intellectual Property Commission all such returns and notices for the year ended 31 December 2022, as required of a public company in terms of the Companies Act of South Africa, and that all such returns and notices appear to be true, correct and up to date. | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | Francois Klem Company secretary 27 March 2023 Annual Financial Statements for the year ended 31 December 2022  5 #### REVIEW #### OF FINANCIAL PERFORMANCE #### For the year ended #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | | | | | | Net profit for the year R18.2 BILLION (2021: R6.9 billion) | Headline earnings per share R130.82 (2021: R66.57) | Adjusted EBITDA△ R29.5 BILLION (2021: R10.0 billion) | Net cash△ R14.7 BILLION (2021: R8.7 billion) | | | | | | | FOB cost△ R1,079/tonne (2021: R830/tonne) | FOB cost excluding royalties△ R929/tonne (2021: R803/tonne) | Total dividend of R13.8 BILLION to shareholders of Thungela | Total dividend per share R100 76% of adjusted operating free cash flow△ | | | | | | We are pleased to announce an outstanding set of results for the year ended 31 December 2022. These results were driven by supportive market conditions but tempered by continued rail infrastructure constraints. The further deterioration of the rail performance in 2022 severely constrained export sales, and the resultant impact on already high on-mine stockpiles led to further production curtailments across the business. The poor rail performance seen throughout the year was exacerbated by the impact of a strike by Transnet employees and a significant derailment in the fourth quarter. We implemented a number of actions to mitigate the impact of the poor TFR performance on our business, including optimising our allocated rail capacity to the extent that trains became available by continuing to rail higher-grade products. We were also able to create further rail loading optionality and de-risk train cancellations by trucking coal between our operations and to three additional third-party sidings. We successfully trialled the road haulage of coal from our operations down to Richards Bay, and we continue to evaluate trucking as an alternative to rail transport. The Group recorded export saleable production of 13.1Mt at an FOB cost per export tonne△ of R1,079 (R929 per tonne excluding royalties). The Group realised 12.2Mt of export equity sales and generated adjusted EBITDA△ of R29.5 billion, mostly driven by strong realised export prices. Profit of R18.2 billion for the year includes the fair value loss of R347 million on the derivative asset relating to the capital support agreement, as well as fair value losses of R3.2 billion on the forward coal swap transactions undertaken by the Group. Profit was further impacted by a non-cash charge of R1.1 billion related to an increase in the environmental provisions through the annual assessment performed. The Group recognised impairment losses of R656 million  at Isibonelo as a result of increased costs due to ongoing production and equipment related challenges, which were exacerbated during the year by higher than historical average rainfall in the region, impacting the recoverable amount of the operation. The Group generated adjusted operating free cash flow△ of R18.1 billion for the year after paying income taxes and royalties to SARS of R8.5 billion. At 31 December 2022 the Group had a net cash△ balance of R14.7 billion. Our capital expenditure for the year was R1.9 billion, which comprises sustaining capital of R1.7 billion and expansionary capital of R235 million relating to the Elders production replacement project and feasibility study costs for the Zibulo North Shaft life extension project. We expect the Zibulo North Shaft project to be presented to the board for consideration in 2023. We have contributed R438 million into the green fund this year, which includes a discretionary contribution of R200 million to further improve our environmental liability coverage△ in line with our commitment to driving our ESG aspirations. In light of the continued pressure faced by coal companies in accessing appropriate insurance cover, we have implemented a self-insurance structure which will see the Group gradually reduce its reliance on the traditional insurance market. In 2022 we made an initial contribution of R1.2 billion to this structure. In November 2022 we announced the acquisition of the remaining 27% shareholding in AAIC from Inyosi in exchange for 4,180,777 shares issued by Thungela. This transaction is expected to be earnings and cash flow accretive and will allow us to benefit from the full economics of the most cash generative assets in our portfolio. In February 2023 we secured R3.2 billion in committed facilities with two South African banks with which we have had a long-standing relationship. These facilities were arranged to further strengthen our balance sheet as we continue to migrate our capital structure in a manner that would enhance returns to shareholders over time. In addition this seeks to provide sufficient liquidity to complete our capital projects and to navigate uncertainty across a number of external factors. 6  Annual Financial Statements for the year ended 31 December 2022 | | | --- | | | | The total dividend declared for 2022 amounts to R100 per share, or R13.8 billion in total. This represents 76% of the adjusted operating free cash flow△ for the year. | We also announced the acquisition of a controlling interest in the Ensham Coal Mine and related assets in Queensland Australia. The transaction delivers on our strategy to pursue geographic diversification in a commodity we understand well and in which we can leverage our core skills. The transaction meets our investment evaluation criteria of responsible stewardship, upgrading our portfolio and maximising shareholder value. Geographic diversification is a step towards de-risking our underlying business and bolstering our resilience, recognising the ongoing infrastructure challenges in South Africa. The purchase price for the acquisition is AUD340 million, which consists of AUD267 million to be funded by Thungela, and AUD73 million to be funded by Audley Capital and Mayfair, our co-investors. Thungela will provide loan financing of AUD68 million to our co-investors to fund their investment, which is repayable through earnings generated by the Ensham Coal Mine. The acquisition is subject to the fulfilment of a number of conditions precedent which we expect to be met by mid-2023. The acquisition, including the loan to our co-investors, will be funded from the net cash△ on hand at 31 December 2022. Given our strong results we are pleased to declare a final ordinary cash dividend of R40 per share. The final dividend represents a payment to Thungela shareholders of  R5.6 billion, or 61% of adjusted operating free cash flow△ generated in the second half of 2022. Combined with the 2022 interim dividend of R60 per share, this amounts to a total dividend declared for 2022 of R100 per share. This brings the total payment to Thungela shareholders to R13.8 billion, representing 76% of adjusted operating free cash flow△ for the year. The Sisonke Employee Empowerment Scheme and the Nkulo Community Partnership Trust will each receive a further contribution of R198 million, to add to the R500 million contributed in August 2022. The trust deed of the Sisonke Employee Empowerment Scheme was amended to allow for eligible employees to receive their allocations in the year granted, and we accordingly paid R380 million to eligible employees in December 2022. We remain resolute to deliver on our purpose to responsibly create value together for a shared future and we believe that the path we are taking will create value for our people, our communities and our shareholders. Annual Financial Statements for the year ended 31 December 2022  7 #### REVIEW OF FINANCIAL PERFORMANCE CONTINUED #### For the year ended #### 31 December 2022 #### FINANCIAL OVERVIEW Financial and operational results of the Group | | | | | --- | --- | --- | | | | | | Rand million (unless otherwise stated) | 2022 | 2021 | | Revenue | 50,753 | 26,282 | | Operating costs | (22,420) | (17,322) | | Profit for the reporting period | 18,205 | 6,938 | | Attributable to non-controlling interests | 1,217 | 509 | | Attributable to the equity shareholders of the Group | 16,988 | 6,429 | | Earnings per share (cents/share) | 12,708 | 6,108 | | Headline earnings per share (cents/share) | 13,082 | 6,657 | | WANOS (number of shares) | 133,684,828 | 105,260,339 | | Dividends (Rand/share) | 100 | 18 | | | | | | APMs△ | | | | Adjusted EBITDA | 29,530 | 9,978 | | Adjusted EBITDA margin (%) | 58 | 38 | | FOB cost per export tonne (Rand/tonne) | 1,079 | 830 | | FOB cost per export tonne excluding royalties (Rand/tonne) | 929 | 803 | | Adjusted operating free cash flow | 18,096 | 3,923 | | Net cash | 14,720 | 8,663 | | Capital expenditure | (1,923) | (2,323) | | Environmental liability coverage (%) | 54 | 52 | | | | | | Thermal coal price and exchange rate | | | | Benchmark coal price (US$/tonne) | 270.87 | 124.11 | | Average realised export price (US$/tonne) | 229.21 | 103.82 | | Average realised export price (Rand/tonne) | 3,752 | 1,535 | | Realised price as a % of Benchmark coal price | 85 | 84 | | ZAR:US$ average exchange rate | 16.37 | 14.79 | | | | | | kt | | | | Run of mine | 25,242 | 27,458 | | | | | | Export saleable production | 13,062 | 14,511 | | Domestic saleable production | 6,915 | 10,064 | | Total saleable production | 19,977 | 24,575 | | | | | | Export equity sales | 12,172 | 13,893 | | Third-party export sales | 21 | 967 | | Domestic sales | 6,723 | 10,185 | | Total sales volumes | 18,916 | 25,045 | The table above reflects the financial results as disclosed in the consolidated financial statements for the year ended 31 December 2022, including the APMs as included in Annexure 1 of this document. The internal restructure was completed on 31 March 2021 and accordingly only had an impact on the financial and operational information of the Group in the comparative period. Refer to Note 2A in the consolidated  financial statements for detail related to the internal restructure. 8  Annual Financial Statements for the year ended 31 December 2022 #### OPERATIONAL #### PERFORMANCE | | | | | | --- | --- | --- | --- | | | | | | | | | | | ROM decreased by 8.1% to 25,242kt (2021: 27,458kt) mainly due to the curtailment of export production in response to the continued poor TFR performance. Export saleable production volumes decreased by 10% to 13,062kt (2021: 14,511kt) largely as a result of the decrease in ROM production. Our operations continued to be impacted by the poor and inconsistent rail performance which deteriorated materially in the second half of 2022, placing even greater strain on on- mine stockpiles which were already near capacity. We accordingly continued to actively curtail production at some of our operations during 2022. Export equity sales declined by 12% to 12,172kt (2021: 13,893kt). The decrease in export sales is as a direct result of the poor TFR performance. In 2022, only 21kt of third-party coal was railed, compared to the 967kt in 2021 as export equity volumes were prioritised. Domestic saleable production decreased by 31% to 6,915kt (2021: 10,064kt) mainly as demand from domestic customers reduced. Isibonelo continued to experience operational challenges in 2022 as a result of increased rainfall year-on-year and equipment related challenges. Domestic sales decreased by 34% to 6,723kt (2021: 10,185kt). | | | --- | | | | | #### REVENUE | | | | | | --- | --- | --- | --- | | | | | | | | | | | Revenue increased by 93% to R50.8 billion (2021: R26.3 billion) mainly as a result of the significant increase in the Benchmark coal price and the impact of a weaker US dollar exchange rate. The Group achieved an average realised export price of R3,752 per tonne in 2022 compared to R1,535 per tonne in the comparative period. The realised export price as a percentage of the Benchmark coal price averaged 85% for 2022, an improvement from the 84% in 2021. The narrower discount of 15% is mainly due to premiums achieved on certain products as well as continued optimisation of the Group’s export equity sales mix. The increase in revenue was further supported by the impact of the weaker average US dollar exchange rate of R16.37 (2021: R14.79). | | | --- | | | | | #### OPERATING COSTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | Operating costs increased by 29% to R22.4 billion from R17.3 billion in 2021. Royalties increased year on year by R1.6 billion on the back of the higher realised export prices achieved. Total operating costs increased by R1.6 billion due to inflation and a significant rise in costs across the energy complex. The purchase price on our third-party commodity purchases fluctuates in line with Benchmark coal prices and accordingly increased. As a result of the continued poor TFR performance and the and the continued curtailment of production, selling expenses reduced year on year, however, we continue to incur fixed costs as well as incremental stockpile management costs at all our operations. The Sisonke Employee Empowerment Scheme and the Nkulo Community Partnership Trust benefited from the strong financial performance of the Group and the expense recognised related to contributions made to the trusts amounted to R766 million. These contributions will continue to positively impact our employees and communities. Operating costs were also impacted by a non-cash charge of R1.1 billion related to an increase in the environmental provisions through the annual assessment performed, compared to R306 million in 2021. . Annual Financial Statements for the year ended 31 December 2022  9 #### REVIEW OF FINANCIAL PERFORMANCE CONTINUED #### For the year ended #### 31 December 2022 #### FOB COST PER #### EXPORT TONN E△ | | | | | | --- | --- | --- | --- | | | | | | | | | | | The FOB cost per tonne△ has increased to R1,079 per tonne from R830 per tonne in the comparative period (R812 per tonne on a pro forma basis), mainly due to the impact of lower volumes, higher royalties and inflation on our operating costs. The lower saleable volumes resulted from the poor TFR rail performance. The positive impact on unit costs of the increased domestic revenue is mainly as a result of domestic sales that are linked to the Benchmark coal price. This impact is expected to moderate as Benchmark coal prices soften. The FOB cost per export tonne excluding royalties△ of R929 per tonne, was 16% higher than the comparative period of R803 per tonne. 1  Internal restructure of the Thungela Group before demerger, completed 31 March 2021 | | | --- | | | | | #### ADJUSTED EBITDA △ | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Group generated adjusted EBITDA△ of R29.5 billion for the year ended 31 December 2022 (2021: R10.0 billion). The material increase in earnings was driven by higher realised export prices and the impact of the weaker US dollar exchange rate. This was partially offset by, inter alia, the lower export sales volumes, the impact of higher inflation on operating costs and the non-cash charge relating to the environmental provisions. The adjusted EBITDA margin△ improved to 58%, compared to 38% in 2021. 10  Annual Financial Statements for the year ended 31 December 2022 #### PROFIT FOR THE REPORTING PERIOD | | | | | | --- | --- | --- | --- | | | | | | | | | | | Profit for the reporting period was R18.2 billion (2021: R6.9 billion), as the Benchmark coal price reached record highs in March 2022 and remained elevated for most of the year, although it started to soften in the fourth quarter. Profit attributable to the equity shareholders of the Group is R17.0 billion (2021: R6.4 billion), while R1.2 billion (2021: R509 million) is attributable to non-controlling interests in AAIC and Butsanani Energy. Following the acquisition of the remaining 27% interest in AAIC in November 2022, the proportion of profit attributable to the equity shareholders of the Group is expected to increase. Ahead of the demerger, a capital support agreement was put in place with Anglo American. This agreement ended on 31 December 2022, and did not result in any cash inflow or outflow for the Group for the year. A fair value loss of R347 million (2021: R569 million) was recognised related to this agreement. In line with the principle of securing a firm Benchmark coal price, the board resolved to take advantage of the favourable Benchmark coal price environment. The board accordingly approved a price risk management programme enabling the Group to enter into structured forward coal swap transactions from November 2021. During 2022, the Group settled forward coal swap transactions of 1,515kt, representing 12% of our export saleable production, at a weighted average price of USD153 per tonne. The cash cost to settle these transactions for the year ended 31 December 2022 was R3.0 billion. The fair value loss of R3.2 billion on these transactions was driven by the rapid increase in the Benchmark coal price to record levels from the onset of the conflict in Ukraine. We have achieved a high net margin on these volumes and the Group continues to benefit from higher realised export prices on the remainder of our sales volumes. The price risk management programme remains in place, within the mandate of the board, which is reassessed as market conditions change. At 31 December 2022, we have open positions of 181kt at a weighted average price of USD231 per tonne related to committed sales in the first half of 2023. The mark-to-market gain on these positions as at 31 December 2022 of R124 million is included in the total fair value losses recognised for the year. Given the sustained production and cost challenges faced at Isibonelo, impairment losses of R656 million were recognised based on the reduction in the recoverable amount of this operation. Thungela is exposed to volatility in the US dollar exchange rate as a result of our export sales to AAML. The Group entered into FECs to manage our exposure to the volatility in the US dollar exchange rate throughout the year. The loss recognised on the FECs of R553 million is offset by gains recognised on our closing cash balance in US dollars of R377 million, as well as gains recognised on our US dollar denominated trade receivables of R835 million, included in operating costs. The Group incurred an income tax expense of R5.9 billion for 2022 which results in an effective tax rate of 25%. Due to the sustained increase in the Benchmark coal price and resultant higher taxable income, we have utilised all available tax losses and unredeemed capital deductions by 31 December 2022. The Group has recognised the full impact of previously unrecognised deferred tax assets on this basis which has impacted the effective tax rate for the year. | | | --- | | | | | #### EARNINGS PER SHARE AND HEADLINE EARNINGS #### PER SHARE | | | | | | --- | --- | --- | --- | | | | | | | | | | | Thungela generated earnings attributable to the equity shareholders of the Group of R17.0 billion, equivalent to R127.08 per share, for the period ended 31 December 2022. In the comparative period we generated earnings attributable to the equity shareholders of the Group of R6.4 billion (R61.08 per share). Thungela generated headline earnings attributable to the equity shareholders of the Group of R17.5 billion, equivalent to R130.82 per share, for the period ended 31 December 2022. For the comparative period, we generated headline earnings of R7.0 billion (R66.57 per share). The per share figures above are based on a WANOS of 133,684,828 (2021: 105,260,339). | | | --- | | | | | Annual Financial Statements for the year ended 31 December 2022  11 #### REVIEW OF FINANCIAL PERFORMANCE CONTINUED #### For the year ended #### 31 December 2022 #### ADJUSTED OPERATING FREE CASH FLOW △ #### AND #### CASH AND CASH EQUIVALENTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Group generated adjusted operating free cash flow△ of R18.1 billion for the year ended 31 December 2022 (2021: R3.9 billion). The difference between the adjusted EBITDA△ generated for the year and the adjusted operating free cash flow△ is mainly attributable to income tax payments to SARS of R6.6 billion, settlements of the derivatives related to the forward coal swap transactions and FECs of R3.6 billion, and sustaining capex of R1.7 billion. The Group ended the period with cash and cash equivalents of R15.3 billion, which is reduced by cash held in the Sisonke Trust and the Nkulo Trust of R519 million and loans and borrowings of R60 million, resulting in net cash△ of R14.7 billion. | | | --- | | | | | #### CAPITAL EXPENDITURE | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Group incurred capital expenditure of R1.9 billion for the period (2021: R2.3 billion) comprising both sustaining capex and expansionary capex. Stay-in-business capex of R1.2 billion was spent mainly on machinery overhauls, infrastructure upgrades and mining fleet upgrades or replacements. Stripping and development capex of R455 million was spent on activities to access LOM reserves. Expansionary capex of R235 million includes R205 million spent on the Elders production replacement project and a further R30 million on feasibility study costs for the Zibulo North Shaft project. | | | --- | | | | | 12  Annual Financial Statements for the year ended 31 December 2022 #### NET WORKING CAPITAL | | | | | | --- | --- | --- | --- | | | | | | | | | | | Net working capital at 31 December 2022 was R4.1 billion (2021: R3.4 billion), reflecting an increase of R724 million. The working capital build-up is mainly driven by a further inventory build of R632 million due to the poor TFR rail performance. The increase in trade receivables was driven by higher realised export prices whereas payables increased marginally which reflects cost increases as a result of inflationary movements. | | | --- | | | | | #### ENVIRONMENTAL PROVISIONS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The environmental provisions are comprehensively assessed on an annual basis and determined with assistance from specialist independent environmental consultants. At 31 December 2022 the environmental provisions recognised amount to R7.6 billion (2021: R6.8 billion). The increase in the environmental provisions is based on expected increases in costs to be incurred in future based on global and local inflationary pressures, as well as the impact of illegal mining on our sites which had previously been rehabilitated. The Group has investments ringfenced in the environmental rehabilitation trusts and the green fund of R4.1 billion (2021: R3.5 billion). Environmental liability coverage△ has increased from 52% at 2021, to 54% at 31 December 2022, mainly as a result of our R438 million contribution to the green fund in 2022, well in excess of the required annual contribution. The environmental provisions are determined using the MPRDA Regulations as a base, adjusted for costs the Group is likely to incur until closure is completed. The financial provisioning as required by the current MPRDA Regulations is assessed annually and amounted to R4.4 billion at 31 December 2022 (2021: R4.1 billion). The difference between the financial provisioning required and the environmental provisions recognised is due to additional costs which the Group believes it is likely to incur through a combination of our interpretation of the NEMA Financial Provisioning Regulations as well as actual costs to be incurred in the period up to and following mine closure. These costs are most significantly in relation to costs for the treatment of polluted or extraneous water. We have provided for water treatment costs using a combination of active and passive water treatment methods, based on the activities currently being performed at our operations. The current draft of the NEMA Financial Provisioning Regulations requires the treatment of water to be provided for using the costs for currently available technologies which the DMRE has approved, based on evidence that the technology to be implemented is able to consistently achieve the discharge requirements. We are actively working to prove the efficacy of passive water treatment technologies, and have commissioned a demonstration scale plant to prove that this treatment can manage our water risks post mine-closure in line with the methods included in our environmental provisions. The transition date of the NEMA Financial Provisioning Regulations, previously scheduled for February 2017, has been postponed on a number of occasions and most recently was deferred to 19 September 2023, however there are several regulatory steps that are required to take place before this transition can be effective. An updated draft of these proposed regulations was published for comment on 11 July 2022 however no feedback has been provided by the DFFE on the industry comments provided. Should the NEMA Financial Provisioning Regulations become effective as currently drafted, the level of financial provisioning required to be held is likely to increase, which may be sourced on similar terms to our existing financial provisioning held. | | | --- | | | | | Annual Financial Statements for the year ended 31 December 2022  13 #### REVIEW OF FINANCIAL PERFORMANCE CONTINUED #### For the year ended 31 December 2022 #### CAPITAL ALLOCATION #### AND #### LIQUIDITY | | | | | | --- | --- | --- | --- | | | | | | | | | | | Thungela has a clear and prioritised capital allocation framework which seeks to prioritise returns to shareholders whilst collateralising our environmental liabilities over time and investing in sustaining capital to maintain asset integrity. Our dividend policy is to maintain a dividend payout of at least 30% of our adjusted operating free cash flow△ as a base dividend, followed by the allocation of capital to either projects which will enhance shareholder returns in the long- term, or additional returns to shareholders. Another year of robust cash flow generation allowed the Group to improve the cash collateralisation of our environmental liabilities, fund sustaining capex needs, and end the year with net cash△ of R14.7 billion. As a result, the board has declared a final dividend of R40 per share (R5.6 billion), which represents 61% of the adjusted operating free cash flow△ generated in the second half of the year. The Sisonke Employee Empowerment Scheme and the Nkulo Community Partnership Trust will also receive a further R396 million collectively. Combined with the interim dividend of R60 per share declared in August 2022, the final dividend brings the total dividend declared for 2022 to R100 per share, and R13.8 billion in total. This represents 76% of adjusted operating free cash flow△, well in excess of the Group’s stated dividend policy. The Thungela board has resolved to fund the acquisition of the Ensham Coal Mine and related assets from cash on hand at 31 December 2022. We have accordingly reserved R4.2 billion of the net cash△ balance to fund the acquisition. Given the lock-box mechanism included in the agreements, we expect the Ensham Business to deliver approximately R500 million in cash benefit by the time the transaction is completed in mid-2023. Thus the net cash outflow relating to the investment in the Ensham Business is expected be approximately R3.7 billion. The board has consistently stated that it is appropriate to maintain liquidity of between R5 billion and R6 billion following periods of stronger market conditions. However, the board recognises the softening coal prices we’ve seen in recent months, as well as the need to protect the Group's South African operations from the dire infrastructure challenges it faces. Furthermore, the acquisition of the Ensham Business materially changes the overall structure of the Group, including our liquidity needs. The board is therefore of the opinion that it is prudent to maintain a higher level of liquidity. For this reason Thungela has secured access to R3.2 billion in credit facilities from two leading South African banks. Together with the cash of R5 billion, this results in an enhanced liquidity buffer of R8.2 billion which will enable the appropriate level of balance sheet flexibility. In accordance with its balanced and disciplined approach to capital allocation, the Group will be adequately funded to execute its strategy, including the development of the Elders production replacement project, the funding of our pathway to net zero as well as additional contributions to the self-insurance programme. Most importantly the increased liquidity also reflects the change in the Group structure and the uncertainty relating to the eventual normalisation of TFR performance. 1Reflects the Ensham economics which would accrue to the Group for the period 1 January 2023 to the completion of the transaction, up to a maximum of AUD102 million. This graph does not reflect historical financial information, other than the net cash△ balance at 31 December 2022. This is accordingly a conceptual representation of the intended utilisation of the net cash△ on hand  at the reporting date. 14  Annual Financial Statements for the year ended 31 December 2022 #### OPERATIONAL O #### UTLOOK | | | | --- | --- | | | | | | 2023 | | Export saleable production (Mt) | 10.5 – 12.5 | | FOB cost per export tonne△ (Rand/tonne) | 1,131 – 1,264 | | FOB cost per export tonne excluding royalties△ (Rand/tonne) | 1,047 – 1,180 | | Capital – sustaining (Rand billion) | 1.3 – 1.5 | | Capital – expansionary (Rand billion) | 1.6 – 1.8 | Looking ahead our priority remains executing on our strategy. A key part of this is maximising the value of our existing assets, while continuing to operate safely. Thungela continues to be well positioned for the future as the fundamentals supporting coal demand remain strong. Our ability to create value for shareholders, employees, communities and the South African fiscus is inextricably linked to our ability to move coal from our mines to port, and ultimately to our customers. However, given TFR’s deteriorating performance since 2021, and the especially poor performance in 2022, we have had to reset our production outlook for 2023. Our export saleable production guidance for 2023 is between 10.5Mt and 12.5Mt, as we plan to drawdown on the high on-mine stockpiles to the extent that the rail performance exceeds actual production levels. Our guidance for FOB cost per export tonne△ for 2023 is between R1,047 and R1,180 excluding royalties. Including royalties the guidance range is between R1,131 and R1,264 per tonne using a forecast Benchmark coal price of USD130 per tonne. Our sustaining capital expenditure for 2023 is expected to be between R1.3 billion and R1.5 billion. Expansionary capex is expected to be between R1.6 billion and R1.8 billion, relating primarily to R1.2 billion for Elders and R0.5 billion for Zibulo North Shaft, should the latter be approved by the board. While we will ensure that the business remains capable of continuing to deliver safe production and that we maintain operational flexibility to ramp volumes up should rail performance improve, we have instituted a program to reduce costs across our operations in an effort to manage the unit cost impact of the reduced production guidance. The expected impact of this program has been taken into account in the 2023 FOB cost per export tonne△ guidance. Given the degree of uncertainty regarding TFR performance currently, we are not providing guidance for 2024 and beyond at this stage. We continue to evaluate the potential for near-term improvements. Furthermore, we are actively involved in the collaborative effort between the Transnet board and the Minerals Council focused on stabilising and improving rail performance, and we remain hopeful that this matter of national importance will be resolved. Annual Financial Statements for the year ended 31 December 2022  15 #### REVIEW OF OPERATIONAL PER #### FORMANCE #### For the year ended 31 December 2022 #### UNDERGROUND OPERATIONS GOEDEHOOP COLLIERY | | | | | --- | --- | --- | | | | | | | 2022 | 2021 | | Fatalities | — | 1 | | TRCFR | 1.55 | 2.38 | | Total saleable production (kt) | 3,224 | 5,281 | | Export saleable production (kt) | 2,356 | 2,191 | | Domestic production (kt) | 869 | 3,090 | | FOB cost per tonne△ (Rand/tonne) | 1,271 | 1,001 | | FOB cost per tonne excluding royalties△ (Rand/tonne) | 1,057 | 984 | | Capex (Rand million) | 91 | 257 | Safety Goedehoop recorded a TRCFR of 1.55  compared to 2.38 for the comparative period as a result of a lower number of incidents following a safety campaign on the mine. Performance Export saleable production of 2,356kt at 31 December 2022 was 7.5% higher than the comparative period in line with the plan to mine in higher yielding areas and as a result of increased productivity across all sections. The mine was able to increase stockpile capacity and utilise third-party sidings to alleviate the impact of the poor rail performance. Domestic saleable production reduced by 72% to 869kt as a result of lower domestic demand. FOB cost per tonne excluding royalties△ of R1,057 was 7.4% higher than the comparative period as a result of the impact of inflationary pressure and additional rehabilitation requirements. | | | --- | | | | | GREENSIDE COLLIERY | | | | | --- | --- | --- | | | | | | | 2022 | 2021 | | Fatalities | — | — | | TRCFR | 2.21 | 0.79 | | Total saleable production (kt) | 2,586 | 3,456 | | Export saleable production (kt) | 2,586 | 3,454 | | Domestic production (kt) | — | 2 | | FOB cost per tonne△ (Rand/tonne) | 1,166 | 845 | | FOB cost per tonne excluding royalties△ (Rand/tonne) | 957 | 785 | | Capex (Rand million) | 209 | 355 | Safety Greenside recorded a TRCFR of 2.21 compared to 0.79 for the prior period as a result of an increase in recordable injuries. Performance Export saleable production of 2,586kt at 31 December 2022 was 25% lower than the comparative period as more underground sections were deployed into the more geologically challenging East Block reserves, with moderate improvements recorded in the second half of the year. FOB cost per tonne excluding royalties△ of R957 is 22% higher than the comparative period mainly as a result of the lower production. | | | --- | | | | | ZIBULO COLLIERY | | | | | --- | --- | --- | | | | | | | 2022 | 2021 | | Fatalities | — | — | | TRCFR | 0.21 | 0.98 | | Total saleable production (kt) | 4,479 | 5,553 | | Export saleable production (kt) | 4,318 | 5,553 | | Domestic production (kt) | 161 | — | | FOB cost per tonne△ (Rand/tonne) | 1,177 | 715 | | FOB cost per tonne excluding royalties△ (Rand/tonne) | 1,012 | 682 | | Capex (Rand million) | 664 | 704 | Safety Zibulo recorded a TRCFR of 0.21 compared to 0.98 in the prior period. The mine operated the first three quarters of 2022 injury free. Regrettably, in February 2023 Mr Breeze Mahlangu tragically passed away following complications after an accident in December 2022. Performance Zibulo’s production suffered from the poor rail performance as stockpiling facilities at the Phola Plant are at capacity. Export saleable production of 4,318kt in 2022 was 22% lower than the prior period. The Zibulo opencast pit was materially curtailed as a result of the TFR challenges. Further to being hampered by full stockpiles, the underground production was also impacted by challenging geological conditions in the year. FOB cost per tonne excluding royalties△ of R1,012 is 48% higher than the comparative period mainly as a result of the lower production levels and inflationary pressures. 16  Annual Financial Statements for the year ended 31 December 2022 #### OPENCAST OPERATIONS KHWEZELA COLLIERY | | | | | --- | --- | --- | | | | | | | 2022 | 2021 | | Fatalities | — | — | | TRCFR | 0.42 | 1.10 | | Total saleable production (kt) | 2,150 | 3,207 | | Export saleable production (kt) | 1,597 | 1,963 | | Domestic production (kt) | 553 | 1,244 | | FOB cost per tonne△ (Rand/tonne) | 2,174 | 1,240 | | FOB cost per tonne excluding royalties△ (Rand/tonne) | 2,146 | 1,204 | | Capex (Rand million) | 268 | 302 | Safety Khwezela recorded a TRCFR of 0.42 in compared to 1.10 in the prior period. Performance Export saleable production decreased by 19% to 1,597kt as the operation was curtailed due to the impact of the poor rail performance. Equipment and resources were redeployed to perform rehabilitation and other activities to alleviate the pressure on on-mine costs while maintaining the optionality to ramp-up production, which commenced in the second half of 2022. Domestic saleable production at 553kt reduced by 56% due to the depletion of reserves from the Umlalazi pit and lower demand from domestic customers. The FOB cost per tonne excluding royalties△ of R2,146 has increased by 78% compared to the prior period. Unit costs were mainly impacted by lower production and higher than inflation price increases on petroleum products and explosives. | | | --- | | | | | MAFUBE COLLIERY (ATTRIBUTABLE) | | | | | --- | --- | --- | | | | | | | 2022 | 2021 Pro forma | | Fatalities | — | — | | TRCFR | 2.53 | 1.09 | | Total saleable production (kt) | 1,834 | 1,796 | | Export saleable production (kt) | 1,834 | 1,796 | | Domestic production (kt) | — | — | | FOB cost per tonne△ (Rand/tonne) | 955 | 786 | | FOB cost per tonne excluding royalties△ (Rand/tonne) | 793 | 745 | | Capex (Rand million) | 150 | 218 | Safety Mafube recorded a TRCFR of 2.53 in 2022 compared to 1.09 in the prior period mainly as a result of an increase in reportable injuries recorded in the first half of 2022. Performance Export saleable production at 1,834kt was in line with the prior year (on a pro forma basis). The stockpiles remain full and road hauling to other sidings ensured that production was not severely impacted by the poor rail performance. FOB cost per tonne excluding royalties△ of R793 increased by 6.4% mainly due to higher than inflation price increases on petroleum products and explosives. | | | --- | | | | | ISIBONELO COLLIERY | | | | | --- | --- | --- | | | | | | | 2022 | 2021 | | Fatalities | — | — | | TRCFR | 1.83 | 2.99 | | Total saleable production (kt) | 3,674 | 4,153 | | Export saleable production (kt) | — | — | | Domestic production (kt) (incl. coal purchases) | 3,674 | 4,153 | | FOR cost per tonne (Rand/tonne) | 527 | 380 | | Capex (Rand million) | 133 | 173 | Safety Isibonelo recorded a TRCFR of 1.83 in 2022 compared to 2.99 in the prior year. Performance Saleable production was 12% lower at 3,674kt in 2022. This year has seen higher rainfall than the prior year which has impacted production. In addition, equipment availability has further impacted performance. An improvement plan has been concluded and we expect a gradual improvement in mine performance. The FOR cost per tonne of R527 increased by 39% mainly due to higher than inflation price increases on explosives and petroleum products as well transportation costs related to coal purchases required to meet the contractual obligations. Annual Financial Statements for the year ended 31 December 2022  17 #### DIRECTORS’ REPORT #### For the year ended #### 31 December 2022 The directors have pleasure in presenting the Annual Financial Statements of Thungela for the year ended 31 December 2022. #### NAT #### URE #### OF BUSINESS | | | | | | --- | --- | --- | --- | | | | | | | | | | | Thungela is a public company incorporated in South Africa. Thungela is a leading South African thermal coal business, focused exclusively on thermal coal production. It is one of the largest pure-play producers and exporters of thermal coal in South Africa based on aggregate coal reserves and marketable coal production. #### FINANCIAL RESULTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The consolidated and separate financial statements, including the annexures to these financial statements, can be found on pages [34](#i7ec60c797ec64d4e899d961e03f501fe_61) to [165](#i7ec60c797ec64d4e899d961e03f501fe_3556). A detailed analysis of the financial and operational performance of the Group can be found on pages [6](#i7ec60c797ec64d4e899d961e03f501fe_43) to [17](#i7ec60c797ec64d4e899d961e03f501fe_3743). #### COMPLIANCE AND ACCOUNTING POLICIES | | | | | | --- | --- | --- | --- | | | | | | | | | | | Thungela was duly incorporated on 5 January 2021 in compliance with the provisions of the Companies Act of South Africa and has been operating in conformity with the Thungela MOI and all relevant regulatory requirements since incorporation. The Thungela board is responsible for ensuring that the Group complies with all of its statutory obligations as specified in the Thungela MOI, the Companies Act of South Africa, the JSE Listings Requirements, the UK Listing Rules, as applicable to a Standard Listing, the UK Disclosure Guidance and Transparency Rules, and all other relevant regulatory requirements. The directors endorse King IV and recognise the need to conduct the affairs of the Group with integrity and in accordance with generally accepted corporate practices. In discharging this responsibility, the intention is to apply the principles of King IV in both letter and spirit. The directors recognise that they are ultimately responsible for the financial performance of the Group. The directors have proactively taken steps to ensure full compliance with all relevant regulatory requirements. The consolidated and separate financial statements have been prepared in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa, the JSE Listings Requirements, the UK Listing Rules and the UK Disclosure Guidance and Transparency Rules. A number of amendments to accounting standards were effective for the first time for financial years beginning on or after 1 January 2022. None of these amendments had a material impact on the Group. Refer to note 3 for detail of the new accounting standards adopted in the year. #### SUBSIDIARIES, JOINT OPERATIONS AND #### ASSOCIATES | | | | | | --- | --- | --- | --- | | | | | | | | | | | The detailed analysis in respect of investments in the subsidiaries, joint operations and associates of Thungela is disclosed in note 39. #### AUTHORISED AND ISSUED SHARES AND STATED #### CAPITAL | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Company’s authorised shares of 10,000,000,000 remained unchanged from 2021. The Company issued 4,180,777 shares for the acquisition of the 27% interest in AAIC previously held by Inyosi. The shares were issued at a reference price of R306.76 on 30 November 2022. No other shares have been issued in the year ended 31 December 2022. For the year ended 31 December 2021, the Group issued 136,311,808 shares as part of the demerger and listing process. Further detail on the stated capital is disclosed in note 32. #### GOING CONCERN | | | | | | --- | --- | --- | --- | | | | | | | | | | | The financial position of Thungela, its cash flows, net current asset position and net cash△ position are set out in the consolidated financial statements. The Group’s net cash△ at 31 December 2022 is R14,720 million (2021: R8,663 million). The Group’s net current asset position of R18,449 million (2021: R12,113 million) continues to be robust, bolstered by the strong Benchmark coal price environment experienced throughout the year ended 31 December 2022, despite the poor rail performance impacting our ability to rail product to the RBCT for export. The Group has no significant external debt at 31 December 2022. The directors have considered Thungela’s cash flow forecasts for the period to the end of March 2024, under reasonably expected and stressed scenarios, with consideration given to the uncertainty of the current economic environment, as well as the Group’s operations. In all of the scenarios assessed, the Group maintains sufficient liquidity throughout the period of assessment. The directors are satisfied that the Group’s forecasts, taking into account reasonably possible changes in performance, show that Thungela will continue to operate for the foreseeable future. For this reason, Thungela has adopted the going concern basis in preparing the consolidated and separate financial statements. 18  Annual Financial Statements for the year ended 31 December 2022 #### DIVIDENDS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The board recognises the importance of maintaining a consistent dividend policy and will endeavour to deliver high-quality medium-term strategic and financial planning in order to enhance returns to shareholders. Any dividend proposed by the board in respect of any financial period will be dependent on and influenced by, among other considerations, the Group’s operating results, financial condition, investment strategy, capital requirements and strategic initiatives. The Group will seek to ensure that there is sufficient cash available and cash is generated by the Group in order to fund sustaining capital expenditure and selective production replacement opportunities, without resorting to excessive leverage, recognising the nature of the Group’s assets and single commodity price exposure. Refer to note 34 for detail related to the dividend policy applied by the Group. The board declared a final gross ordinary dividend of R40 per share from retained earnings, which will be paid in April 2023 to shareholders on the South African register and May 2023 to shareholders on the UK register. #### EVENTS AFTER THE REPORTING #### PERIOD | | | | | | --- | --- | --- | --- | | | | | | | | | | | On 3 February 2023, Thungela announced that we have entered into an agreement with Audley Capital and Mayfair in terms of which, inter alia, Thungela will acquire a controlling interest in the Ensham Coal Mine and related assets. The acquisition is subject to the fulfilment of a number of conditions precedent before becoming effective. Refer to note 40 for further detail. All events occurring after the reporting date which are considered material to the consolidated and separate financial statements have been considered in note 40. #### COMPANY SECRETARY | | | | | | --- | --- | --- | --- | | | | | | | | | | | The company secretary of Thungela is Francois Klem. The business and postal address of the company secretary are set out on the inside back cover. The board conducted its annual review of his performance as per paragraph 3.84(h) of the JSE Listings Requirements and did not note any areas of concern. #### INDEPENDENT EXTERNAL AUDITOR | | | | | | --- | --- | --- | --- | | | | | | | | | | | PricewaterhouseCoopers Inc. was re-appointed as the Group’s independent external auditor at the AGM held on 24 May 2022 in accordance with section 90 of the Companies Act of South Africa in respect of the year ended 31 December 2022. In accordance with the Companies Act of South Africa, it will be proposed at the next AGM that PricewaterhouseCoopers Inc. be reappointed as auditor for the year ending 31 December 2023. #### ANNUAL GENERAL MEETING | | | | | | --- | --- | --- | --- | | | | | | | | | | | Thungela’s next AGM will be held on or around 31 May 2023. Annual Financial Statements for the year ended 31 December 2022  19 #### DIRECTORS’ REPORT CONTINUED #### For the year ended #### 31 December 2022 #### DIRECTORS | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | The table below lists the names and position of the directors of the Group, including any changes in the year. There have been no changes in directors between the reporting date and the date of this report. | | | | --- | --- | | | | | Director | Position | | SS Ntsaluba | Chairperson | | J Ndlovu1 | CEO | | GF Smith | CFO | | BM Kodisang | Independent non-executive director | | KW Mzondeki | Independent non-executive director | | TML Setiloane | Independent non-executive director | | SG French2 | Independent non-executive director | | YN Jekwa3 | Independent non-executive director | 1South African, Zimbabwean. 2Irish. 3Appointed on 12 August 2022. #### DIRECTORS’ INTERESTS IN THUNGEL #### A SHARES | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | The directors’ beneficial interests in Thungela’s issued ordinary shares are shown below: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Director | Direct | Indirect | Total | | SS Ntsaluba | 1,642 | — | 1,642 | | J Ndlovu | 963,587 | — | 963,587 | | GF Smith | 425,136 | — | 425,136 | | BM Kodisang | — | — | — | | KW Mzondeki | 788 | — | 788 | | TML Setiloane | — | — | — | | SG French | — | 26,487 | 26,487 | | YN Jekwa | — | — | — | | Total | 1,391,153 | 26,487 | 1,417,640 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Director | Direct | Indirect | Total | | SS Ntsaluba | — | — | — | | J Ndlovu | 1,150,092 | — | 1,150,092 | | GF Smith | 578,407 | — | 578,407 | | BM Kodisang | — | — | — | | KW Mzondeki | 8 | — | 8 | | TML Setiloane | — | — | — | | SG French1 | — | 40,868 | 40,868 | | Total | 1,728,507 | 40,868 | 1,769,375 | 1Seamus French was awarded Thungela shares as part of the demerger scheme of arrangement during 2021 which are indirectly held in a nominee account. The comparative information has been amended to reflect the interest not previously disclosed. 20  Annual Financial Statements for the year ended 31 December 2022 The movements in the directors’ beneficial interests are as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | 2022 | | Number of shares | SS Ntsaluba | J Ndlovu | GF Smith | KW Mzondeki | SG French1 | Total | | Balance at the start of the reporting period | — | 1,150,092 | 578,407 | 8 | 40,868 | 1,769,375 | | Release of shares2 | — | — | — | — | 5,619 | 5,619 | | Disposal of vested shares3 | — | (202,424) | (101,212) | — | — | (303,636) | | Acquisitions4 | 1,642 | — | — | 780 | — | 2,422 | | Disposals5 | — | — | (60,000) | — | (20,000) | (80,000) | | Thungela 2022 DBS awards6 | — | 15,919 | 7,941 | — | — | 23,860 | | Total | 1,642 | 963,587 | 425,136 | 788 | 26,487 | 1,417,640 | 1Seamus French was awarded Thungela shares as part of the demerger scheme of arrangement during 2021 which are indirectly held in a nominee account. The comparative information has been amended to reflect the interest not previously disclosed. 2The shares awarded were previously held but not allocated to Seamus French related to the demerger scheme of arrangement. These shares were released on the resignation of Seamus French from Anglo American. 3The disposal of shares related to the on market disposal of the Thungela milestone shares awards which vested on 4 June 2022. The shares were sold in order to settle the tax obligation of the directors in relation to the vesting. Refer to note 41 for further detail. 4The acquisitions represent on market acquisitions of Thungela shares. 5The disposals represent on market disposals of Thungela shares. 6The Thungela DBS awards granted carry a right to dividends and voting rights. Participants will be entitled to dividends paid on the ordinary shares underlying their awards prior to the vesting date. Refer to note 41 for further details.  The Thungela 2022 DBS awards are forfeitable shares and will vest in equal tranches from 22 March 2023 to 22 March 2025. | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of shares | J Ndlovu | GF Smith | KW Mzondeki | SG French | Total | | Balance at the start of the reporting period | — | — | — | — | — | | Vesting of Anglo American retention awards1 | 247,406 | 127,451 | — | — | 374,857 | | Thungela transitional shares2 | 2,151 | 1,127 | — | — | 3,278 | | Thungela milestone awards granted3 | 899,658 | 449,829 | — | — | 1,349,487 | | Demerger scheme of arrangement4 | 877 | — | 8 | 40,868 | 41,753 | | Total | 1,150,092 | 578,407 | 8 | 40,868 | 1,769,375 | 1These awards vested on demerger and the transfer of the shares occurred on 15 June 2021 after adjusting for shares sold in order to settle the tax obligation of the directors in relation to the vesting. Refer to note 33 for further detail. 2Each award converted into one ordinary share in Thungela upon exercise. These were provided as part of the demerger agreement whereby every shareholder received one Thungela share for every 10 Anglo American shares held. Refer to note 41 for further details. 3The Thungela milestone awards granted carry a right to dividends and voting rights. Participants will be entitled to dividends paid on the ordinary shares underlying their awards prior to the vesting date. Refer to note 41 for further details.  The Thungela milestone awards are forfeitable shares and will vest in equal tranches on 4 June 2022 and 4 June 2023. 4The demerger of the Group from the Anglo American Group was implemented by way of a scheme of arrangement (including an in specie reduction of capital), which is a process that required approval by the UK High Court under the UK Companies Act (the ‘Scheme’). Under the Scheme and pursuant to the reduction of capital, Anglo American transferred all of the issued shares of Thungela to Anglo American shareholders in the ratio of one Thungela share for every 10 Anglo American shares held at the time of the demerger. Details of the awards made to directors and prescribed officers in Thungela shares are disclosed in note 33 and note 41. There were no changes in directors’ shareholding between the end of the reporting period and the date of approval of the Annual Financial Statements. #### DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION | | | | | | --- | --- | --- | --- | | | | | | | | | | | Refer to note 41 for detail of the remuneration paid to directors and prescribed officers. Annual Financial Statements for the year ended 31 December 2022  21 #### REPORT OF THE AUDIT COMMITTEE #### For the year ended #### 31 December 2022 #### INT #### RODUCTION | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Thungela audit committee is pleased to present its report for the year ended 31 December 2022, in terms of section 94 of the Companies Act of South Africa, King IV, and the JSE Listings Requirements, as well as the UK Disclosure Guidance and Transparency Rules. The audit committee has conducted its work in accordance with its written terms of reference approved by the board on 31 March 2021. The terms of reference are annually reviewed, and changes proposed were incorporated and approved by the board on 18 March 2022. The Thungela board of directors has mandated the audit committee to fulfil the duties as the audit committee of all the companies within the Thungela Group with a statutory requirement to have an audit committee. In addition to its statutory responsibilities, the audit committee’s main objective is to assist the board in fulfilling its oversight responsibilities. These are statutory responsibilities in particular with regard to the evaluation of the adequacy and effectiveness of accounting policies, the internal financial controls, the financial and corporate reporting processes, assessing the effectiveness of the CFO and both the internal and external audit functions. #### COMPOSITION | | | | | | --- | --- | --- | --- | | | | | | | | | | | The audit committee, whose members were nominated by the Thungela board in respect of the year ended 31 December 2022, comprised the following independent non-executive directors, all of whom have the requisite financial skills, business acumen and experience to fulfil their duties: •Kholeka Mzondeki (chairperson) •Ben Kodisang •Thero Setiloane Their appointment was approved by the shareholders at the AGM on 24 May 2022. Brief biographies of individual committee members can be found on the Thungela website at [www.thungela.com/](http://www.thungela.com/about-us/who-we-are) [about-us/who-we-are](http://www.thungela.com/about-us/who-we-are). #### MEETING ATTENDEES | | | | | | --- | --- | --- | --- | | | | | | | | | | | In addition to the audit committee members, the chairman of the board, CEO, CFO, head of risk and assurance, head of finance, head of investor relations, the financial accounting manager, assurance manager, compliance and attestation manager, and head of legal attend the meetings by standing invitation, together with representatives of the independent external auditor. #### COMMITTEE MEETING ATTENDANCE | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | During the period under review, the audit committee met four times as required, the details of which are set out below: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | 2022 Meeting dates | | | | | | Member | 17 March | 19 May | 10 August | 16 November | Number of meetings: 4 | | KW Mzondeki (chairperson) | √ | √ | √ | √ | 4/4 | | BM Kodisang | √ | √ | √ | √ | 4/4 | | TML Setiloane | √ | √ | √ | √ | 4/4 | Two additional meetings were set up on an ad hoc basis as to deal with specific matters at hand. In addition, the audit committee chairperson meets separately with management and the internal and independent external auditors prior to committee meetings. #### ROLE AND RESPONSIBILITIES | | | | | | --- | --- | --- | --- | | | | | | | | | | | The audit committee discharged all of its responsibilities as contained in the audit committee terms of reference including, but not limited to: ◦Nominating for appointment the Group's external auditor and ensuring that such auditor is independent of the Group. ◦Determining the independent external auditor’s fees and terms of engagement. ◦Ensuring that the appointment of the independent external auditor complies with the provisions of the Companies Act of South Africa and any other relevant legislation. ◦Determining, from time to time, the nature and extent of non-audit services to be provided by the Group's independent external auditor. ◦Overseeing the independent external audit process, as well as the scope and performance of the internal audit process through the risk and assurance function. ◦Assessing the effectiveness and objectivity of the risk and assurance function and independent external auditor. ◦Preparing a report to be included in the annual financial statements of the Group, in compliance with the Companies Act of South Africa. 22  Annual Financial Statements for the year ended 31 December 2022 ◦Receiving and dealing with any concerns and complaints (whether from within or outside the Group, or on its own initiative) relating to accounting practices, internal or external audits conducted, the content of the Group's financial statements, the financial reporting procedures, controls and related matters. ◦Making submissions to the board on any matter concerning the Group's accounting policies, internal financial controls, records, and reporting. ◦Ensuring that appropriate financial reporting procedures have been established and that those procedures are operating, which includes consideration of all entities included in the consolidated financial statements, to ensure that it has access to all financial information to allow for the effective preparation and reporting on the financial statements. ◦Independently reviewing and monitoring the integrity of the Group's Annual Financial Statements. ◦Assessing the annual financial statements, income tax returns and CIPC annual returns of the Company and all subsidiaries. ◦To the extent delegated by the Thungela board, the management of financial and other risks that affect the integrity of other external reports issued by the Group and the effectiveness of its systems of governance, systems of risk management and internal financial controls. ◦Reporting to the shareholders through this report that the audit committee has executed the responsibilities as set out in paragraph 3.84(g) of the JSE Listings Requirements. ◦Ensuring that the Group's risk and assurance function is appropriately resourced and equipped to perform in accordance with appropriate professional standards for internal auditors. ◦Ensuring compliance with the statutory duties of the committee as contained in relevant legislation and the JSE Listings Requirements. ◦Performing such oversight functions as may be determined by the Thungela board. ◦Reviewing the JSE proactive monitoring reports and responding to queries from the JSE review of the Thungela Annual Financial Statements for the year ended 31 December 2021. Annual Financial Statements for the year ended 31 December 2022  23 #### REPORT OF THE AUDIT COMMITTEE CONTINUED #### For the year ended #### 31 December 2022 #### KEY FOCUS AREAS FOR THE YEAR ENDED #### 31 DECEMBER 2022 | | | | | | --- | --- | --- | --- | | | | | | | | | | | For the year ended 31 December 2022, the audit committee had key focus areas and objectives, including but not limited to: •Considering the relevance of the JSE’s findings from their proactive monitoring of annual financial statements. •Considering the appropriateness of the expertise and experience of the CFO and the finance function. •Considering the appropriateness of the expertise and experience of the risk and assurance function, including the internal assurance plan, reports, and resources. •Reviewing the Group’s significant accounting matters. •Reviewing the Interim Financial Statements, the Annual Financial Statements, the Integrated Annual Report, and the Notice of AGM, along with other required documents for publication and recommending these documents for approval by the Thungela board. •Reviewing the quarterly financial performance against set targets and the impact of decisions on financial statements. •Reviewing for board approval the solvency, liquidity and going concern assessments. •Reviewing the independence of the external audit function, and considering its quality of work. •Evaluating and approving the independent external auditor’s interim and year-end audit plans, reports and fees. •Considering the key audit matters included in the independent external auditor’s report on the consolidated and separate financial statements. •Meeting with the head of risk and assurance independently from management. •Meeting with the external auditor independently from management. •Meeting with management independently from external audit and the risk and assurance function. •Reviewing and approving the 2023 risk and assurance plan, and monitoring progress against the 2022 plan. •Receiving assurance that appropriate accounting records are being kept. •Considering risk and assurance reports on the Group’s systems of internal controls and business risk management. •Reviewing and recommending for board approval the treasury policy, as well as other relevant policies. •Considering the quarterly tax, treasury, accounting and insurance updates. •Considering changes to the JSE Listings Requirements. •Considering and approving non-audit services performed by the independent external auditor. •Reviewing and recommending the 2023 budget for board approval. •Reviewing and recommending for board approval the committee terms of reference. •Reviewing and recommending for board approval the independent auditor’s report for inclusion in the Annual Financial Statements. The objectives of the committee were adequately met for the year ended 31 December 2022. #### INTERNAL AUDIT AND INTERNAL CONTROLS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The audit committee has established that the risk and assurance function, undertaking the internal audit of the Group, was appropriately resourced. The head of risk and assurance has direct access to the audit committee chairperson and has a standing invitation to the audit committee meetings. The risk and assurance function reviews and provides assurance on the adequacy and effectiveness of internal controls including the internal financial controls. During the year ended 31 December 2022, the audit committee: •Reviewed and approved the 2023 internal audit plan. •Monitored progress against the 2022 internal audit plan. •Reviewed the Thungela risk register for appropriateness. •Received assurance that proper and adequate accounting records are being maintained. •Reviewed the CEO and CFO attestation process related to the system of internal financial controls. •Considered internal audit reports on the Group’s systems of internal controls and business risk management. •Met with the head of risk and assurance independently of management. •Assessed the adequacy of the performance of the internal audit function. Nothing came to the attention of the audit committee, through the audits conducted by the risk and assurance function, to indicate a breakdown in the system of internal financial controls nor was there an indication that the internal controls were inadequate in design and implementation. 24  Annual Financial Statements for the year ended 31 December 2022 #### INDEPENDENT EXTERNAL AUDITOR | | | | | | --- | --- | --- | --- | | | | | | | | | | | During the year ended 31 December 2022 the committee: •Requested from the independent external auditor the information detailed in paragraph 22.15(h) of the JSE Listings Requirements in their assessment of the suitability for appointment of the audit firm and designated individual audit partner for each year they are appointed. •Notwithstanding the provisions of Section 90(6) of the Companies Act of South Africa, ensured that the appointment of the auditor is presented and included as a resolution at the AGM pursuant to Section 61(8) of the Companies Act of South Africa. •Satisfied itself that PwC and Andries Rossouw in their individual capacities as the appointed independent external audit firm and lead audit partner respectively were both accredited and independent. •Assessed the independence of the external audit firm. •Approved the PwC terms of engagement and fees for the audit for the year ended 31 December 2022, including the review of the Interim Financial Statements for the six months ended 30 June 2022 in consultation with management. •Provided oversight on the external audit process. •Approved and monitored compliance with the external auditor independence policy. •Reviewed the quality and effectiveness of the external audit process and performance against the external audit plan. •Reviewed the findings and recommendations by the independent external auditor and confirmed there were no material matters to report. •Considered the independent external auditor’s suitability assessment in terms of paragraph 3.84(g)(iii) and section 22.15(h) of the JSE Listings Requirements. Meetings, at which concerns could be raised, were held with the independent external auditor in the absence of management. #### COMMENTS ON THE KEY AUDIT MATTERS #### INCLUDED IN THE INDEPENDENT EXTERNAL #### AUDITOR’S REPORT | | | | | | --- | --- | --- | --- | | | | | | | | | | | The independent external auditor has reported on two key audit matters in respect of their audit for the year ended 31 December 2022, being: impairment of property, plant and equipment and intangible assets, and environmental rehabilitation and decommissioning provisions. These key audit matters related to material financial statement line items which require judgement and estimates to be applied by management. The audit committee assessed the methodology, assumptions and judgements applied by management in dealing with the key audit matters. Furthermore, the audit committee discussed the key audit matters with the independent external auditor to understand their related audit processes and views. Following this assessment, the audit committee was comfortable with the conclusions reached by management and the independent external auditor. #### KEY FOCUS AREAS FOR 2023 | | | | | | --- | --- | --- | --- | | | | | | | | | | | Key areas of focus in the year ending 31 December 2023 will be, among others: ◦Reviewing the financial performance against targets where relevant, including the impact on the financial statements. ◦Continued oversight of the external and internal audit process. ◦Continued focus on the robustness of the internal control framework over financial reporting. ◦Assessing the progress and related risk mitigation of the financial and information management transition away from Anglo American. ◦Continued focus on the tracking and resolving of outstanding tax matters. ◦Monitoring and reviewing the integration and related transition activities of the Ensham Business, post the completion of the transaction. #### EXPERTISE OF THE CFO AND FINANCE FUNCTION | | | | | | --- | --- | --- | --- | | | | | | | | | | | The audit committee has reviewed the current performance and future requirements of the financial management of the Group and concluded that the current CFO and finance team have the appropriate skills, experience and expertise required to fulfil their function. #### GOING CONCERN | | | | | | --- | --- | --- | --- | | | | | | | | | | | The audit committee reviewed and assessed the basis of the going concern assumption applied by management and concurred with the assessment that Thungela is a going concern, and recommended that the Thungela board approve the consolidated and separate financial statements being prepared on this basis. RECOMMENDATION OF THE ANNUAL FINANCIAL STATEMENTS FOR APPROVAL BY THE THUNGELA BOARD | | | | | | --- | --- | --- | --- | | | | | | | | | | | The Annual Financial Statements have been prepared using appropriate accounting policies, which conform to IFRS and other related pronouncements governing financial reporting. The audit committee has recommended the approval of the Annual Financial Statements for the year ended 31 December 2022 to the board. On behalf of the audit committee | | | --- | | | | | Kholeka Mzondeki Audit committee chairperson 27 March 2023 Annual Financial Statements for the year ended 31 December 2022  25 #### INDEPENDENT #### AUDITOR’S REPORT TO THE SHAREHOLDERS OF THUNGELA RESOURCES LIMITED REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS OUR OPINION | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Thungela Resources Limited (the Company) and its subsidiaries (together the Group) as at 31 December 2022, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. #### WHAT WE HAVE AUDITED | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | Thungela Resources Limited’s consolidated and separate financial statements set out on pages [34](#i7ec60c797ec64d4e899d961e03f501fe_61) to [158](#i7ec60c797ec64d4e899d961e03f501fe_2462) comprise: •the consolidated and separate statements of financial position as at 31 December 2022 •the consolidated and separate statements of profit or loss and other comprehensive income for the year then ended •the consolidated and separate statements of changes in equity for the year then ended •the consolidated and separate statements of cash flows for the year then ended •the notes to the financial statements, which include a summary of significant accounting policies. #### BASIS FOR OPINION | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. #### INDEPENDENCE | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | We are independent of the Group in accordance with the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (the IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards). #### OUR AUDIT APP #### ROACH | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | OVERVIEW | | | | --- | --- | | | | | | Overall group materiality •Overall group materiality: R507 million, which represents 1.0% of consolidated revenue. | | Group audit scope •The Group consists of five owner managed operations, three joint operations, an independently managed operation, and a services function. •We performed full scope audits on the five owner managed operations, one joint operation and on the services function. •Specified procedures were performed on the independently managed operation. •We have performed analytical review procedures over the remaining financially inconsequential components. | | Key audit matters •Impairment of property, plant and equipment, intangible assets (including goodwill). •Environmental rehabilitation and decommissioning provisions. | 26  Annual Financial Statements for the year ended 31 December 2022 As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated and separate financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. #### MATERIALITY | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole. | | | | --- | --- | | | | | Overall group materiality | R507 million | | How we determined it | 1.0% of consolidated revenue. | | Rationale for the materiality benchmark applied | We have selected consolidated revenue as the benchmark because, in our view, it best reflects the true operational performance of the Group and it is a benchmark against which the performance of the Group is most commonly measured by its users due to the fluctuation of consolidated profit before income tax. We chose 1.0% which is consistent with quantitative materiality thresholds used for profit- oriented companies in this sector. | #### HOW WE TAILORED OUR GROUP AUDIT SCOPE | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group conducts its business through five owner managed operations, three joint operations, an independently managed operation and a services function (each considered a ‘component’ for purposes of our group audit scope). In determining the type of work that needed to be performed for purposes of the group audit, we identified components that were of financial significance to the Group based on the respective component’s contribution to key financial statement line items (consolidated profit/loss before taxation, consolidated revenue or consolidated total assets), risk associated with the respective component and known accounting matters related to the component. We conducted full scope audits on the components based on their financial significance to the Group. Analytical review procedures were performed over the remaining components that were considered to be financially inconsequential. In establishing the overall approach to the group audit, we determined the type of work that needed to be performed by us, as the group engagement team and component auditors from other firms operating under our instruction. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those components to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. #### KEY AUDIT MATTERS | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no key audit matters to communicate in our report in respect of the separate financial statements. Annual Financial Statements for the year ended 31 December 2022  27 #### INDEPENDENT AUDITOR’S REPORT CONTINUED | | | | --- | --- | | | | | Key audit matter | How our audit addressed the key audit matter | | Impairment of property, plant and equipment, intangible assets (including goodwill) Refer to notes 2B, 7, 12 and 13 of the consolidated financial statements for disclosures in relation to this key audit matter. This key audit matter relates to the consolidated financial statements. The Group assesses property, plant and equipment (‘PPE’) and intangible assets (excluding goodwill) for impairment when indicators are identified. Goodwill is assessed for impairment on an annual basis. Management recognised an impairment of R656 million of which R648 million related to PPE and R8 million related to intangible assets (refer to notes 7, 11, 12 and 13 of the consolidated financial statements respectively). Management performed impairment assessments to determine the recoverable amount of the Goedehoop, Greenside, Isibonelo, Khwezela, Mafube, Rietvlei Mining Company and Zibulo cash-generating units (‘CGUs’). The recoverable amount was determined using a combination of discounted cash flow models and valuation of mineral resources beyond approved mine plans. Based on the approved budget for the Isibonelo CGU, a reduction in forecasted production until 2025 is anticipated. Management have considered the forecasted production to be sufficient to meet the committed production per year, however, due to an increase in the cost profile of the mine there has been a decrease in the recoverable amount of the Isibonelo CGU. The assumptions (inputs) which were used for cash flow forecasts and valuations of mineral resources beyond approved mine plans are based on forecasted results and expected market and economic conditions. The most significant inputs in these forecasts and valuations are: production volumes, costs of production, capital expenditure, forecasts for coal prices, exchange rates and discount rates. The impairment assessment of property, plant and equipment, intangible assets (including goodwill) was considered to be a matter of most significance to our current year audit due to the significant judgement involved in determining the recoverable amount of  the CGUs as well as the magnitude of the impairment recognised in the current year. | Our audit addressed this key audit matter as follows: We assessed the reasonableness of the impairment indicators identified by management by analysing the financial results of the Group, paying particular attention to factors that have negatively impacted the operations. We concurred with management’s assessment. Through discussions with management, we obtained an understanding of management’s processes for assessing impairment indicators across long-lived assets as well as the methodologies and models used in making their assessments. We assessed the reasonableness of the future life-of-mine cash flows and/or mineral resources beyond the approved mine plan valuations and found them to be in accordance with generally accepted methodologies. We assessed the reasonableness of the budgeting process adopted in deriving the strategic plan, by comparing the current year actual results to the 2022 financial year figures included in the prior year forecast to consider whether the forecasts included assumptions that, with hindsight, had been optimistic. We found management’s cash flow forecasts to be mainly consistent with the historical actual results and obtained corroboration from management where the budgeted numbers differed from actuals. In assessing the reasonableness of future cash flows applied in the model, our audit procedures included: •Testing the accuracy of the model used by management by performing an independent recalculation and comparing the results of our calculation with that of management. No material exceptions were noted. •The significant assumptions used by management in the model were subjected to audit procedures as follows: ◦With the assistance of our valuations expertise, we assessed the reasonableness of the coal price forecasts (Benchmark coal price and domestic coal contracted selling price) used to benchmark the price and exchange rates against analysts’ forecasts. Based on the work performed, we found management’s assumption to be within a reasonable range of the total CGU. ◦We agreed long-term coal supply agreement prices used in the fair value less cost to sell models to the underlying agreements. No material exceptions noted. ◦With the assistance of our valuation expertise we independently recalculated the discount rates used in performing the impairment assessments. These calculations included inspection of relevant third-party sources and data such as the cost of debt, risk-free rates in the market, market risk premiums, debt/equity ratios and the beta of comparable companies. We found the discount rate applied in the model to be within a reasonable range. ◦We compared the production volumes per the life-of- mine plan assumption to reserves signed off by the Group’s Competent Person and to existing production volumes and approved budgets. We found this to be within reasonable range. ◦We compared the life-of-mine plan operating costs, capital costs and unit costs to budget for reasonableness. No material exceptions noted. | 28  Annual Financial Statements for the year ended 31 December 2022 | | | | --- | --- | | | | | Key audit matter | How our audit addressed the key audit matter | | Environmental rehabilitation and decommissioning provisions Refer notes 2C and 28 of the consolidated financial statements for disclosure as it relates to this key audit matter. This key audit matter relates to the consolidated financial statements. As of 31 December 2022, the Group’s environmental rehabilitation and decommissioning provisions amounted to R7,566 million. These provisions are based on the estimated rehabilitation, closure and required post-closure monitoring costs per operation on reporting date, inflation and discount rates relevant to the calculation, and the expected date of closure of mining activities in determining the present value of the total environmental provisions. On an annual basis management uses internal and external experts to determine the current costs estimates for the environmental rehabilitation and decommissioning provisions, based on these estimates the current costs will be future valued over the life of mine using long-term inflation and discounted back using risk free rates. We considered the provision for environmental rehabilitation and decommissioning provisions to be a matter of most significance to our current year audit due to: •The significant judgement and estimation applied by management in the determination of the provisions. •The magnitude of the balances in relation to the consolidated financial statements as a whole. | Our audit addressed this key audit matter as follows: Through discussions with management, we obtained an understanding of management’s process of calculating the environmental rehabilitation and decommissioning provisions. With the assistance of our sustainability and climate change expertise, we performed the following procedures: •We assessed the reasonableness of the process applied by management to determine the closure costs by comparing it to industry practice. We found the process followed by management to be reasonable. •We assessed the objectivity, competence and experience of management’s experts by obtaining evidence relating to their qualifications and professional membership. In doing so, we inspected their academic qualifications, service history and field of experience and considered whether the management experts, where applicable, were in good standing with the relevant professional bodies. No aspects requiring further consideration were noted. •We assessed whether the closure costs used by management’s experts considered the requirements of the relevant laws and regulations, such as water treatment costs, in order to identify potential environmental liabilities that were not provided for and process-related omissions on the closure costs estimation that could be of material significance. No material exceptions were noted. We independently recalculated management’s discount rates applied with reference to relevant third-party sources. Where discount rates determined by us differed from that used by management, the impact of the differences was assessed to be immaterial. We tested the mathematical accuracy of the model used by management by performing an independent recalculation and comparing the results of our calculation with management’s calculations. We noted no material differences. | Annual Financial Statements for the year ended 31 December 2022  29 #### INDEPENDENT AUDITOR’S REPORT CONTINUED #### OTHER INFORMATION | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | | The directors are responsible for the other information. The other information comprises the information included in the document titled “Thungela Annual Financial Statements 2022”, which includes the Directors’ Report,  Report of the Audit Committee and the Certificate by the Company Secretary as required by the Companies Act of South Africa, which we obtained prior to the date of this auditor ’s report, the “Thungela Integrated Annual Report 2022”, “Thungela ESG Report 2022” and the “Thungela Climate Change Report 2022”, which is expected to be made available to us after that date. The other information does not include the consolidated or the separate financial statements and our auditor’s report thereon. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not and will not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. #### RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so. #### AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL #### STATEMENTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: •Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. •Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control. •Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. 30  Annual Financial Statements for the year ended 31 December 2022 •Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and / or Company to cease to continue as a going concern. •Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. •Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide  the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. #### REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS | | | | | | --- | --- | --- | --- | | | | | | | | | | | In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that PricewaterhouseCoopers Inc. has been the auditor of Thungela Resources Limited for two years. Prior to the incorporation of Thungela Resources Limited, its operations formed part of the Anglo Coal SA operations of Anglo American plc, of which PricewaterhouseCoopers Inc. has been the auditor for one year. | | | --- | | | | | PricewaterhouseCoopers Inc. Director: AJ Rossouw Registered Auditor Johannesburg, South Africa 27 March 2023 The examination of controls over the maintenance and integrity of the Group’s website is beyond the scope of the audit of the financial statements. Accordingly, we accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. . Annual Financial Statements for the year ended 31 December 2022  31 32  Annual Financial Statements for the year ended 31 December 2022 ### CONS ### OLIDATED ### FINANCIAL ### STATEMENTS Annual Financial Statements for the year ended 31 December 2022  33 #### CONSOLIDATED STATEMENT OF PROFIT OR #### LOSS AND OTHER COMPREHENSIVE INCOME #### For the year ended #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Revenue | 4 | 50,753 | 26,282 | | Operating costs | 5 | (22,420) | (17,322) | | Impairment losses | 7 | (656) | (808) | | Fair value (losses)/gains on derivative financial instruments | 24 | (3,207) | 348 | | Fair value loss on derivative asset – capital support | 24 | (347) | (569) | | Restructuring costs and termination benefits | 8 | (29) | (422) | | Profit before net finance costs and tax | 5 | 24,094 | 7,509 | | Net finance costs | | 49 | — | | Investment income | 9 | 963 | 503 | | Interest expense | 9 | (738) | (680) | | Other net financing (losses)/gains | 9 | (176) | 177 | | | | | | | Profit before tax | | 24,143 | 7,509 | | Income tax expense | 10 | (5,938) | (571) | | Profit for the reporting period | | 18,205 | 6,938 | | Attributable to: | | | | | Non-controlling interests | 36 | 1,217 | 509 | | Equity shareholders of the Group | | 16,988 | 6,429 | | Other comprehensive income/(loss) | | | | | Items that will not be reclassified to the statement of profit or loss | | | | | Remeasurement of retirement benefit obligations | 30 | 71 | 27 | | Fair value losses on financial asset investments | 22 | — | (63) | | Related tax | 10 | (15) | (6) | | Net items that will not be reclassified to the statement of profit or loss | | 56 | (42) | | Total comprehensive income for the reporting period | | 18,261 | 6,896 | | Attributable to: | | | | | Non-controlling interests | 36 | 1,217 | 508 | | Equity shareholders of the Group | | 17,044 | 6,388 | | Earnings per share1 | | | | | Basic (cents/share) | 11 | 12,708 | 6,108 | | Diluted (cents/share) | 11 | 12,487 | 6,087 | 1The earnings per share has been calculated using a WANOS of 133,684,828 (2021: 105,260,339). 34  Annual Financial Statements for the year ended 31 December 2022 #### CONSOLIDATED STATEMENT OF FINANCIAL #### POSITION As at #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | ASSETS | | | | | Non-current assets | | | | | Intangible assets | 12 | 82 | 118 | | Property, plant and equipment | 13 | 10,656 | 10,568 | | Environmental rehabilitation trusts | 28 | 3,446 | 3,288 | | Investment in associate | 14 | 43 | 63 | | Deferred tax assets | 31 | 503 | 378 | | Financial asset investments | 22 | 755 | 323 | | Investment in insurance structure | 25 | 1,226 | — | | Trade and other receivables | 19 | 1 | 64 | | Other non-current assets | 17 | 65 | 109 | | Total non-current assets | | 16,777 | 14,911 | | Current assets | | | | | Inventories | 18 | 3,181 | 2,546 | | Trade and other receivables | 19 | 4,907 | 4,320 | | Current tax assets | 10 | 231 | 46 | | Financial asset investments | 22 | 31 | 31 | | Derivative financial asset – capital support | 24 | — | 347 | | Derivative financial instruments | 24 | 149 | 348 | | Cash and cash equivalents | 20 | 15,299 | 8,736 | | Total current assets | | 23,798 | 16,374 | | Total assets | | 40,575 | 31,285 | | EQUITY | | | | | Stated capital | | 11,323 | 10,041 | | Contributed capital | | 965 | 965 | | Merger reserve | | 2,606 | 2,606 | | Treasury shares | | (302) | (183) | | Share-based payments reserve | | 83 | 16 | | Other reserves | | 145 | 89 | | Retained earnings | | 11,453 | 3,039 | | Equity attributable to the shareholders of the Group | | 26,273 | 16,573 | | Non-controlling interests | 36 | (114) | 1,901 | | Total equity | | 26,159 | 18,474 | | LIABILITIES | | | | | Non-current liabilities | | | | | Lease liabilities | 29 | 62 | 92 | | Retirement benefit obligations | 30 | 405 | 449 | | Deferred tax liabilities | 31 | 1,421 | 1,400 | | Environmental and other provisions | 28 | 7,179 | 6,609 | | Total non-current liabilities | | 9,067 | 8,550 | | Current liabilities | | | | | Trade and other payables | 21 | 3,997 | 3,499 | | Loans and borrowings | 23 | 60 | 63 | | Lease liabilities | 29 | 31 | 29 | | Environmental and other provisions | 28 | 1,236 | 392 | | Current tax liabilities | 10 | 25 | 278 | | Total current liabilities | | 5,349 | 4,261 | | Total liabilities | | 14,416 | 12,811 | | Total equity and liabilities | | 40,575 | 31,285 | Annual Financial Statements for the year ended 31 December 2022  35 #### CONSOLIDATED STATEMENT OF CHANGES IN #### EQUITY #### For the year ended #### 31 December 2022 | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | Rand million | Notes | Stated capital | Contributed capital | Merger reserve | | Treasury shares | Share- based payments reserve | Other reserves1 | Retained earnings | Total equity attributable to share- holders of the Group | Non- controlling interests | Total equity | | Balance at 1 January 2021 | | — | — | 7,179 | | — | 65 | 411 | (4,894) | 2,761 | 1,395 | 4,156 | | Issue of shares for assumed fair value of SACO | 32 | 4,575 | — | (4,575) | | — | — | — | — | — | — | — | | Issue of shares for cash | 32 | 5,466 | — | — | | — | — | — | — | 5,466 | — | 5,466 | | Purchase of shares by Group companies | 32 | — | — | — | | (183) | — | — | — | (183) | — | (183) | | Acquired through internal restructure | 15 | — | — | 2 | | — | — | — | 1,299 | 1,301 | — | 1,301 | | Total comprehensive (loss)/income for the reporting period | | — | — | — | | — | — | (41) | 6,429 | 6,388 | 508 | 6,896 | | Movements in share-based payments reserve2 | 33 | — | — | — | | — | (49) | — | (76) | (125) | (2) | (127) | | Reclassifications | | — | — | — | | — | — | 9 | (9) | — | — | — | | Transfer of financial asset revaluation reserve on sale of investments3 | | — | — | — | | — | — | (290) | 290 | — | — | — | | Contributed capital – capital support agreement | 24 | — | 916 | — | | — | — | — | — | 916 | — | 916 | | Contributed capital – Anglo American retention awards | 33 | — | 49 | — | | — | — | — | — | 49 | — | 49 | | Balance at 31 December 2021 | | 10,041 | 965 | 2,606 | | (183) | 16 | 89 | 3,039 | 16,573 | 1,901 | 18,474 | | Purchase of shares by Group companies | 32 | — | — | — | | (165) | — | — | — | (165) | — | (165) | | Acquisition of additional interest in subsidiary | 35 | 1,282 | — | — | | — | — | — | 1,909 | 3,191 | (3,191) | — | | Total comprehensive income for the reporting period | | — | — | — | | — | — | 56 | 16,988 | 17,044 | 1,217 | 18,261 | | Dividends paid | 34 | — | — | — | | — | — | — | (10,483) | (10,483) | (42) | (10,525) | | Movements in share-based payments reserve4 | 33 | — | — | — | | — | 67 | — | 46 | 113 | 1 | 114 | | Treasury shares issued to employees on vesting of share awards | | — | — | — | | 46 | — | — | (46) | — | — | — | | Balance at 31 December 2022 | | 11,323 | 965 | 2,606 | | (302) | 83 | 145 | 11,453 | 26,273 | (114) | 26,159 | 1Includes the financial asset revaluation reserve of R3 million (2021: R3 million) and the retirement benefit obligation reserve of R142 million (2021: R86 million). 2Includes movements as a result of share-based payment expenses, vesting of shares and granting of share awards. The individual movements are not considered material, other than the accelerated vesting of the Anglo American share awards on demerger. 3The transfer of financial asset revaluation reserve relates to the disposal of Anglo American shares in relation to the accelerated vesting thereof on completion of the demerger. 4Includes movements as a result of share-based payment expenses of R113 million reduced by the impact of the vesting of shares of R46 million under the Thungela share plan. 36  Annual Financial Statements for the year ended 31 December 2022                                                  Annual Financial Statements for the year ended 31 December 2022  37 #### CONSOLIDATED STATEMENT OF CASH #### FLOWS #### For the year ended #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Cash flows from operating activities | | | | | Profit before tax | | 24,143 | 7,509 | | Net finance costs | 9 | (49) | — | | Profit before net finance costs and tax | | 24,094 | 7,509 | | Impairment losses | 7 | 656 | 808 | | Restructuring costs and termination benefits1 | 8 | — | 174 | | Fair value loss on derivative asset – capital support | 24 | 347 | 569 | | Fair value losses/(gains) on derivative financial instruments | 24 | 3,207 | (348) | | Depreciation and amortisation | 12,13 | 1,197 | 1,018 | | Share-based payment charges | 33 | 113 | 87 | | Increase in provisions2 | | 1,730 | 127 | | Loss/(profit) on sale of property, plant and equipment | 5 | 17 | (8) | | Other adjustments | | 15 | 33 | | Movements in working capital | | (618) | (3,154) | | Increase in inventories | | (632) | (1,352) | | Increase in trade and other receivables | | (381) | (960) | | Increase/(decrease) in trade and other payables | | 395 | (842) | | | | | | | Cash flows from operations | | 30,758 | 6,815 | | Amounts applied to reduce environmental and other provisions3 | 28 | (846) | (502) | | Cash outflow on settlement of derivative financial instruments | 24 | (3,561) | — | | Income tax paid | 10 | (6,567) | (197) | | Net cash generated from operating activities | | 19,784 | 6,116 | | Cash flows from investing activities | | | | | Expenditure on property, plant and equipment | 4 | (1,923) | (2,312) | | Proceeds on sale of property, plant and equipment | | — | 9 | | Expenditure on intangible assets | 12 | — | (11) | | Purchase of financial asset investments | 22 | (443) | (302) | | Investment in insurance structure | 25 | (1,224) | — | | Repayment of loans granted to investees | 22 | 31 | 6 | | Loans granted to investees | 22 | (8) | (69) | | Repayment of quasi-equity loans by associate | 14 | 20 | 26 | | Investment income received | | 707 | 108 | | Acquired through internal restructure | 15 | — | 158 | | Acquisition of joint operation | 16 | — | 8 | | Net cash utilised in investing activities | | (2,840) | (2,379) | | Cash flows from financing activities | | | | | Shares issued for cash | 32 | — | 5,466 | | Interest expense paid | | (33) | (58) | | Capital repayment of lease liabilities | 29 | (26) | (32) | | Repayment of loans and borrowings | 23 | (9) | (3,135) | | Proceeds on loans from Anglo American | 23 | — | 2,570 | | Purchase of shares by Group companies | 32 | (165) | (183) | | Dividends paid to equity shareholders of the Group | 34 | (10,483) | — | | Dividends paid to non-controlling interests | 34 | (42) | — | | Net cash (utilised in)/generated from financing activities | | (10,758) | 4,628 | | Net increase in cash and cash equivalents | | 6,186 | 8,365 | | Cash and cash equivalents at the start of the reporting period | | 8,736 | 194 | | Net increase in cash and cash equivalents | | 6,186 | 8,365 | | Effects of changes in foreign exchange rates | 9 | 377 | 177 | | Cash and cash equivalents at the end of the reporting period | 20 | 15,299 | 8,736 | 1Restructuring costs and termination benefits at 31 December 2021 of R174 million included the accelerated vesting of the Anglo American share awards on demerger and represented the non-cash portion of the expense. 2Increase in provisions includes amounts recognised in the statement of profit or loss and other comprehensive income in respect of environmental and other provisions of R1,302 million (2021: R88 million) and contributions to the Nkulo Trust of R386 million (2021: R6 million). Refer to note 28 for further detail. 3Amounts applied to reduce environmental and other provisions represent cash paid to settle these obligations which is not recognised through the statement of profit or loss and other comprehensive income. 38  Annual Financial Statements For the year ended 31 December 2022 ### BASIS OF ### PREPARATION 39 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS #### For the year ended #### 31 December 2022 1. #### BASIS OF PREPARATION Accounting policies relating to specific underlying transactions and balances have been disclosed in their respective notes. A.Statement of compliance The accounting policies applied by the Group and Company comply with IFRS effective for the Group’s reporting period as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Companies Act of South Africa, the JSE Listings Requirements, the UK Listing Rules and the UK Disclosure Guidance and Transparency Rules. B.Basis of measurement The consolidated and separate financial statements have been prepared on the historical cost basis, except for certain assets and liabilities that are measured at fair value. The consolidated and separate financial statements are prepared on the going concern basis and are presented in South African rand, which is the functional currency of Thungela. The preparation of the consolidated and separate financial statements in conformity with IFRS requires the use of estimates and also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated and separate financial statements, are disclosed in note 2. C. Basis of consolidation The consolidated financial statements include the results and financial position of Thungela, its subsidiaries, joint operations and associates. Subsidiaries are entities which the Group controls through its power over the entities, and in respect of which it is exposed, or has rights, to variable returns from its involvement with these entities, and has the ability to affect those returns through its power over those entities. Joint arrangements are arrangements in which the Group shares joint control with one or more parties. Joint arrangements are classified as either joint operations or joint ventures based on the rights and obligations of the parties to the arrangement. The joint arrangements of the Group are accounted for as joint operations. The Group accounts for joint operations by recognising its share of the joint operations’ assets, liabilities, revenue and expenses, including its share of such items held or incurred jointly. Refer to note 39 for further detail. Associates are investments over which the Group has significant influence, which is the power to participate in the financial and operating policy decisions of the investee, but without the ability to exercise control or joint control. Investments in associates are equity accounted and represent the cost of the investment, the post-acquisition share of any profits or losses and other changes in equity, and the long-term debt interests which in substance form part of the Group’s net investment in the associate. The results of subsidiaries, joint operations and associates acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Changes in the Group’s ownership interest in a subsidiary that do not result in the Group gaining or losing control of the subsidiary are equity transactions. In order to reflect the change in the relative interests in the subsidiary, the carrying amount of the non-controlling interest is adjusted with a corresponding change in equity attributable to the shareholders of the Group. No gain or loss is recognised in the statement of profit or loss and other comprehensive income related to these transactions. Where necessary, adjustments are made to the results of subsidiaries, joint operations and associates to bring their accounting policies into line with those used by the Group. Intra-group transactions, balances, income and expenses are eliminated on consolidation, where appropriate. Unrealised profits or losses that arise between group entities are also eliminated. For non-wholly owned subsidiaries, non-controlling interests are presented in equity separately from the equity attributable to the shareholders of the Group. Profit or loss and other comprehensive income are attributed to the shareholders of the Group and to non-controlling interests even if this results in the non-controlling interests having a negative balance. 40  Annual Financial Statements for the year ended 31 December 2022 D. Forei #### gn currency tran #### sactions The Group’s export revenue is priced using the Benchmark coal price as a basis. This revenue is generated in US dollars, and payments received for export revenue are in US dollars. Foreign currency transactions undertaken by the Group are recognised in South African rand at the exchange rate ruling on the date of the transaction. At each reporting date, monetary items that are denominated in foreign currencies are translated to South African rand at the rates prevailing on the reporting date. Gains or losses arising on translation are included in the statement of profit or loss and other comprehensive income and are classified according to the nature of the monetary item giving rise to them. E. Financial assets Investments, other than investments in subsidiaries, joint arrangements and associates, are financial assets and are initially recognised at fair value. The Group’s financial assets are classified into the following measurement categories: debt instruments at amortised cost, equity instruments designated at FVOCI and instruments at FVPL. Financial assets are classified as at amortised cost only if the asset is held within a business model whose objective is to collect the contractual cash flows and the contractual terms of the asset give rise to cash flows that are solely payments of principal and interest. At subsequent reporting dates, financial assets at amortised cost are measured at amortised cost less a provision for expected credit losses, if appropriate. The Group assesses on a forward-looking basis the expected credit losses, being the difference between the contractual cash flows and the cash flows that are expected to be received, associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in the credit risk of the asset at the reporting date. Increases in the provisions for expected credit losses are recognised in the statement of profit or loss and other comprehensive income. When a subsequent event causes the amount of the provisions for expected credit losses to decrease, the decrease is reversed in the same way. Financial assets at FVPL are measured at fair value at each reporting date, with changes in the fair value recognised in profit or loss. The Group has elected to measure equity instruments, which are not held for trading, at FVOCI as this better reflects the strategic nature of the Group’s equity investments. For equity instruments at FVOCI changes in fair value are recognised in OCI and there is no subsequent reclassification of the fair value gains and losses to profit or loss. Impairment losses relating to equity instruments at FVOCI are not reported separately from other changes in fair value. 2. #### ACCOUNTING JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY The preparation of the consolidated and separate financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of the Group’s accounting policies. These judgements, estimates and assumptions may affect the carrying amounts of assets and liabilities at the date of the consolidated and separate financial statements, and the reported amounts of income and expenses during the reporting periods as set out below. In addition to these items, further detail on other judgements and estimates determined by management is provided, where applicable, in the relevant notes. #### CRITICAL #### ACCOUNTING #### JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY A.Internal restructure of the Thungela Group before demerger An internal restructuring process was undertaken to separate the SA Thermal coal operations and the various non- thermal coal operations within Anglo American in order to prepare the Group for the demerger, which was completed on 31 March 2021. This included consolidating all of the SA Thermal coal operations into a single group of companies and is referred to as the ‘internal restructure’. As part of the internal restructure, a number of key steps were undertaken, which are fully described in the Thungela Annual Financial Statements for the year ended 31 December 2021. After the internal restructure was completed on 31 March 2021, Thungela was demerged from the Anglo American Group with effect from 4 June 2021 through a series of independent steps, which resulted in the Thungela shares being distributed to Anglo American shareholders. Thungela listed on the JSE and the LSE on 7 June 2021. Annual Financial Statements for the year ended 31 December 2022  41 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 2.ACCOUNTING JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY CONTINUED #### CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CONTINUED A.Internal restructure of the Thungela Group before demerger continued The acquisition of SACO by Thungela with effect from 1 June 2021 is considered a group reorganisation as per IAS 27, rather than a business combination, and so the Group is presented as if Thungela has always owned SACO, rather than reflecting the acquisition of SACO by Thungela from 1 June 2021. The equity structure of the Group however reflects Thungela’s capital structure, with shares issued in June 2021. The acquisitions of TOPL, including Butsanani Energy, and Mafube Coal Mining on 31 December 2020 and 31 March 2021 respectively, were business combinations under common control. The Group has elected to account for both acquisitions by applying the predecessor accounting approach using the book values that were previously recognised in the Anglo American Group financial statements. The book values of the net assets of TOPL, Butsanani Energy and Mafube Coal Mining were recognised on the effective date of the business combinations and the comparative financial statements were not restated. The impact of the internal restructure is not material to the statement of profit or loss and other comprehensive income in the reporting periods presented. The impact of the internal restructure on the consolidated financial statements can be illustrated using the diagram below: 42  Annual Financial Statements for the year ended 31 December 2022 The Sisonke Employee Empowerment Scheme and the Nkulo Community Partnership Trust Thungela founded the Sisonke Trust (previously referred to as the EPP), and the Nkulo Trust (previously referred to as the CPP), (collectively the ‘trusts’) in June 2021. The trusts each purchased 5.0% of the issued ordinary share capital of SACO from Thungela immediately before the demerger. The purchase of the shares was funded by Thungela, with no repayment required of the contributed capital, meaning that the trusts were debt free from their inception. The trusts also subscribed for an E and C preference share in SACO respectively for a nominal amount. The trusts are entitled to 10% collectively of the dividends declared on ordinary shares by SACO, which will be made available to beneficiaries in the same way as the dividends on the C and E preference shares. The preference dividends on the C and E preference shares will only be payable to the extent that the dividends declared by SACO on ordinary shares in a reporting period do not exceed the minimum amounts. The trusts are controlled by the Group, and so are consolidated into the financial results as presented, with no non- controlling interests in relation to the trusts reflected in the consolidated financial statements. Refer to note 6 and note 28 for further detail related to the trusts. B.Impairment of assets The Group assesses at each reporting date whether there are any indicators that its assets or CGUs may be impaired, or that an impairment previously recognised may need to be reversed. Operating and economic assumptions, which could affect the valuation of assets using discounted cash flow models, are updated regularly as part of the Group’s planning and forecasting processes. Judgement is therefore required to determine whether the updates represent significant changes in the service potential of an asset or CGU and are therefore indicators of impairment or impairment reversal. The judgement also considers the Group’s long-term economic forecasts, market consensus and sensitivity analyses of the discounted cash flow models used to value the Group’s assets for the purposes of assessing the impairment thereof. Assets (other than goodwill) that have been previously impaired must be assessed for indicators of both impairment and impairment reversal at the reporting date. Such assets are generally carried on the statement of financial position at a value close to their recoverable amount at the last assessment. Therefore, in principle, any change to operational plans or assumptions or economic parameters could result in further impairment or impairment reversal if an indicator is identified. For assets where indicators of impairment or impairment reversal are identified, the Group performs impairment reviews to assess the recoverable amount of its operating assets principally with reference to their fair value less costs of disposal, assessed using discounted cash flow models. Mining operations are large, complex assets requiring significant technical and financial resources to operate, and their value may be sensitive to a range of characteristics. The Group applies judgement in determining the assumptions that are reasonable and consistent with those that would be applied by market participants as outlined in note 7. Annual Financial Statements for the year ended 31 December 2022  43 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 2. #### ACCOUNTING JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY CONTINUED #### CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CONTINUED C. Estimation of environmental #### provisions Estimates are made in determining the liability in relation to the environmental provisions required in relation to the management, rehabilitation and remediation of environmental impacts from mining operations as per various environmental regulations and legislation. These provisions are based on the estimated rehabilitation, closure and required post-closure monitoring costs per operation on reporting date, inflation and discount rates relevant to the calculation, and the expected date of closure of mining activities in determining the present value of the total environmental provisions. Because of the long-term nature of the environmental provisions the greatest uncertainties in estimating the liabilities are the costs that will be incurred and the discount rates applied. Environmental provisions have been recognised based on the current environmental disturbances caused at the reporting date and for our current assessment of the risk of latent or residual environmental impacts that may become known in the future. Assessments are annually updated by an independent third-party for changes in the environmental footprint across our operations, rates used to determine the costs required for closure, regulations, technology and approaches to conduct rehabilitation. These costs have been discounted to present value over the period they are expected to be incurred, which ranges up to 20 years post-closure, and for water treatment costs up to 50 years post-closure, of the operation. Discounting of the costs relating to closure on the reporting date is calculated over the expected closure and rehabilitation plan of each mine, including the impact of concurrent rehabilitation undertaken while mining is ongoing. The closure plan is determined based on the remaining coal reserves per operation, which is assessed on an annual basis. The Group has provided for water treatment costs using a combination of active and passive water treatment methods, based on activities currently being performed at its operations. The NEMA Financial Provisioning Regulations require the treatment of water to be provided for using the costs for currently available technologies which the DMRE has approved, based on evidence that the technology to be implemented is able to consistently achieve the discharge requirements. Thungela is actively working to prove the efficacy of passive treatment technologies in collaboration with academia and the relevant government departments. The Group is expected to transition to the NEMA Financial Provisioning Regulations on the transition date of 19 September 2023, however there are several regulatory steps that are required to take place before this transition can be effective. The Group has continued to provide for our interpretation of the increase in costs required as a result of the NEMA Financial Provisioning Regulations, mostly in relation to the pumping and treatment of polluted or extraneous water. Refer to note 28 for further detail related to the environmental provisions. D. Recognition of #### deferred tax assets Given the significant increase in the Benchmark coal price in the year ended 31 December 2022, the taxable income of TOPL has increased significantly, resulting in all of the unredeemed capital expenditure available at 31 December 2021 being utilised in that entity. On this basis the Group has recognised the full impact of the previously unrecognised deferred tax assets on the unredeemed capital expenditure. The deferred tax assets reflected at 31 December 2022 are primarily driven by deductible temporary differences arising in the normal course of business. The recognition of the full deferred tax asset balance is supported by the budget process which included a detailed calculation of the estimated taxable income per year up to 2024. There is expected to be a substantial taxable income generated in each year, and therefore sufficient future taxable temporary differences against which to utilise these deductible temporary differences. The appropriateness of the deferred tax assets recognised will be assessed at each reporting date and updated as required. Refer to note 31 for further detail on the deferred tax assets recognised. 44  Annual Financial Statements for the year ended 31 December 2022 #### OTHER ACCOUNTING JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY E. #### Estimating the useful life of property, plant and equipment The estimation of the useful life of an asset is a matter of judgement based on the experience of the Group with similar assets. In determining the useful life of items of property, plant and equipment that are depreciated, management considers the expected usage of assets, expected physical wear and tear, legal or similar limits of assets such as mineral rights, as well as obsolescence. The estimate is further impacted by management’s best estimation of coal resources and coal reserves, and the expected future life of each of the mines within the Group. The forecast production could be different from the actual coal mined, which may impact the future life of each mine. F. #### Measurement of retirement benefit obligations For retirement benefit obligations, the Group is required to make estimates and assumptions about the discount rate, future remuneration changes, and employee attrition rates, among other inputs. In making these estimates and assumptions, management considers advice provided by external advisers, such as actuaries. The funding valuations are carried out at least every three years using the projected unit credit method by independent qualified actuaries and impact the measurement of the retirement benefit obligations. Refer to note 30 for further detail on the retirement benefit obligations. 3.ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS Impact of standards issued and effective on 1 January 2022 and adopted by the Group The following amendments to IFRS have been adopted by the Group from 1 January 2022 with no material impact on the Group’s operating results, financial position or disclosures: | | | --- | | | | | | Amendments to IFRS 16 – COVID-19-related rent concessions beyond 30 June 2021 | | Amendments to IAS 37 – Onerous Contracts – cost of fulfilling a contract | | Annual Improvements to IFRS Standards 2018-2020 – the improvements include amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 | | Amendments to IAS 16 – Proceeds before intended use | | Amendments to IFRS 3 – the amendment updates a reference in IFRS 3 to the Conceptual Framework | Annual Financial Statements for the year ended 31 December 2022  45 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 3. #### ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS CONTINUED #### Impact of standards and interpretations not yet adopted At the reporting date the following relevant new accounting standards were in issue but not yet effective: | | | | --- | --- | | | | | | Effective for annual periods commencing on or after | | Amendments to IAS 1 – Classification of liabilities as current or non-current: narrow-scope amendments to IAS 1 to clarify how to classify debt and other liabilities as current or non-current | 1 January 2023 | | Amendments to IAS 8 – definition of accounting estimates to help entities to distinguish between accounting policies and accounting estimates | 1 January 2023 | | Amendments to IAS 1 and IFRS Practice Statement 2 – disclosure of accounting policies with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements | 1 January 2023 | | Amendments to IAS 12 – deferred tax related to assets and liabilities arising from a single transaction that clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations | 1 January 2023 | | IFRS 17 requires insurance liabilities to be measured at a current fulfilment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts | 1 January 2023 | | Amendments to IFRS 17 - addresses concerns and implementation challenges that were identified after IFRS 17 was published in 2017 | 1 January 2023 | | Amendments to IAS 1 – Non-current liabilities with covenants to clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability | 1 January 2024 | | Amendments to IFRS 16 – Lease liability in a sale and leaseback with amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements of IFRS 15 to be accounted for as a sale | 1 January 2024 | The above standards and amendments are not expected to have a material impact on the consolidated and separate financial statements in future periods, however the Group will continue to assess the potential impacts thereof. 46  Annual Financial Statements for the year ended 31 December 2022 ### FINANCIAL ### PERFORMANCE 47 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 4. #### SEGMENTAL INFORMATION Thungela’s segments are aligned to those operations that are evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. The Group executive committee is identified as the CODM of Thungela. #### Accounting policy Reportable segments Operating segments with similar economic characteristics are aggregated into reportable segments. The economic characteristics considered include the performance of key equipment specific to each type of operation, and the productivity of the operations measured in volumes and headcount. Thungela has one principal operating activity which is the operation of opencast and underground thermal coal mines and the processing of coal in South Africa. The reportable segments are aggregated by the nature of the technology applied by the operations either as an opencast or underground mine, and similar economic characteristics as it relates to the capital and operating structure thereof. The following summary describes each reportable segment: | | | | --- | --- | | | | | Reportable segments | Operations | | Opencast | Mining operations undertaken in an opencast mine where coal is extracted include the following mining operations: •Isibonelo •Khwezela •Mafube •Rietvlei | | Underground | Mining operations undertaken in an underground mine where coal is extracted include the following mining operations: •Zibulo •Greenside •Goedehoop | | Services | Operations providing various services to support the ongoing operations of the Group | Revenue Revenue is recognised in a manner that depicts the pattern of the transfer of thermal coal to customers. The amount recognised reflects the amount to which the Group is entitled in exchange for the sale of thermal coal. Sales contracts are evaluated to determine the performance obligations, the transaction price and the point at which there is transfer of control. The transaction price is the amount of consideration due in exchange for transferring thermal coal to the customer and is recognised at a specific point in time. Revenue is comprised of export sales, being sales made to AAML in terms of the offtake agreement, and domestic sales made to various customers in the areas in which the Group mines. Revenue is measured at the fair value of consideration received or receivable, after deducting discounts and VAT. The Group has applied the practical expedient available in IFRS 15, and determined that no significant financing component is included in the consideration received. A sale is recognised when control has been transferred, which is usually when title and significant risks have passed to the customer and the thermal coal has been delivered. Export sales Revenue derived from export sales is recognised when the thermal coal is loaded onto the ship at the RBCT, and the Group is not directly involved in the delivery of thermal coal to its final destination. The transaction price is determined with reference to the average Benchmark coal price in the month of loading, with various adjustments for quality, grade and calorific value, as well as a fee payable to AAML in terms of the offtake agreement. Revenue is not impacted by changes in the Benchmark coal price subsequent to the month of loading during which control transfers. Domestic sales Domestic sales are made to various customers in the areas in which the Group operates and revenue from these sales is recognised when the thermal coal is delivered to a contractually agreed location, either at the customers premises, or at the collection point at the operation. The transaction price is contractually agreed based on various inputs and is not always directly impacted by changes in the Benchmark coal price. 48  Annual Financial Statements for the year ended 31 December 2022 The results of operations by reportable segment can be analysed as follows: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Rand million | Opencast | Underground | Services | Total | | Revenue | 18,366 | 32,387 | — | 50,753 | | Operating costs excluding depreciation and amortisation | (10,003) | (9,526) | (1,694) | (21,223) | | Employee costs | (1,144) | (2,622) | (984) | (4,750) | | Third-party purchases | (2,095) | (19) | — | (2,114) | | Consumables used in production | (1,150) | (812) | (33) | (1,995) | | Maintenance expenditure | (1,244) | (1,534) | (262) | (3,040) | | Production input costs | (3,018) | (1,140) | 218 | (3,940) | | Inventory production movement | (206) | 793 | — | 587 | | Logistics costs | (820) | (1,962) | — | (2,782) | | Royalties | (347) | (1,527) | (81) | (1,955) | | Other | 21 | (703) | (552) | (1,234) | | | | | | | | Adjusted EBITDA△ | 8,363 | 22,861 | (1,694) | 29,530 | | Depreciation and amortisation | (284) | (910) | (3) | (1,197) | | Impairment losses | (613) | — | (43) | (656) | | Fair value losses on derivative financial instruments | — | — | (3,207) | (3,207) | | Fair value loss on derivative asset – capital support | — | — | (347) | (347) | | Restructuring costs and termination benefits | — | — | (29) | (29) | | Net finance costs | (319) | (125) | 493 | 49 | | Investment income | 166 | 73 | 724 | 963 | | Interest expense | (485) | (198) | (55) | (738) | | Other financing losses | — | — | (176) | (176) | | Income tax (expense)/credit | (778) | (5,439) | 279 | (5,938) | | Profit/(loss) after tax | 6,369 | 16,387 | (4,551) | 18,205 | Annual Financial Statements for the year ended 31 December 2022  49 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 4. #### SEGMENTAL INFORMATION CONTINUED The results of operations by reportable segment can be analysed as follows continued: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Rand million | Opencast | Underground | Services | Total | | Revenue | 9,780 | 16,502 | — | 26,282 | | Operating costs excluding depreciation and amortisation1 | (7,212) | (8,759) | (333) | (16,304) | | Employee costs | (984) | (2,331) | (797) | (4,112) | | Third-party purchases | (1,380) | — | — | (1,380) | | Consumables used in production | (881) | (744) | (21) | (1,646) | | Maintenance expenditure | (1,131) | (1,328) | (257) | (2,716) | | Production input costs | (1,621) | (932) | (30) | (2,583) | | Inventory production movement | 437 | 785 | — | 1,222 | | Logistics costs | (980) | (2,255) | — | (3,235) | | Royalties | (105) | (426) | 137 | (394) | | Other | (567) | (1,528) | 635 | (1,460) | | | | | | | | Adjusted EBITDA△ | 2,568 | 7,743 | (333) | 9,978 | | Depreciation and amortisation | (261) | (733) | (24) | (1,018) | | Impairment losses | (757) | — | (51) | (808) | | Fair value gains on derivative financial instruments | — | — | 348 | 348 | | Fair value loss on derivative asset – capital support | — | — | (569) | (569) | | Restructuring costs and termination benefits | (137) | (51) | (234) | (422) | | Net finance costs1 | (191) | (15) | 206 | — | | Investment income | 221 | 153 | 129 | 503 | | Interest expense | (412) | (168) | (100) | (680) | | Other financing gains | — | — | 177 | 177 | | Income tax expense | (163) | (391) | (17) | (571) | | Profit/(loss) after tax | 1,059 | 6,553 | (674) | 6,938 | 1Enhanced disclosure of operating costs and net finance costs has been presented to allow for greater understanding of the costs incurred by the Group. There is no change in the subtotals as previously disclosed. This disclosure does not impact any other lines in the consolidated financial statements. 50  Annual Financial Statements for the year ended 31 December 2022 #### Capital expenditure Capital expenditure encompasses expenditure (including cash capital expenditure and capital expenditure accruals) to sustain the business and to invest in production replacement and life extension projects. The capital expenditure per reportable segment can be analysed as follows: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Rand million | Expansionary | Stay-in- business | Stripping and development | Total capital expenditure | | Property, plant and equipment | 235 | 1,272 | 455 | 1,962 | | Opencast | — | 483 | 77 | 560 | | Underground | 205 | 595 | 378 | 1,178 | | Services | 30 | 194 | — | 224 | | | | | | | | Expenditure on property, plant and equipment | 235 | 1,272 | 455 | 1,962 | | Reconciliation to the statement of cash flows | | | | | | Movement in capital creditors | — | (39) | — | (39) | | Capital expenditure | 235 | 1,233 | 455 | 1,923 | | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Rand million | Expansionary | Stay-in-business | Stripping and development | Total capital expenditure | | Property, plant and equipment | 130 | 1,562 | 511 | 2,203 | | Opencast | 31 | 659 | 2 | 692 | | Underground | 97 | 730 | 509 | 1,336 | | Services | 2 | 173 | — | 175 | | Intangible assets | — | 11 | — | 11 | | Services | — | 11 | — | 11 | | | | | | | | Expenditure on property, plant and equipment and intangible assets | 130 | 1,573 | 511 | 2,214 | | Reconciliation to the statement of cash flows | | | | | | Movement in capital creditors | — | 109 | — | 109 | | Capital expenditure1 | 130 | 1,682 | 511 | 2,323 | 1Capital expenditure consists of expenditure on property, plant and equipment of R2,312 million and expenditure on intangible assets of R11 million. Annual Financial Statements for the year ended 31 December 2022  51 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 4. #### SEGMENTAL INFORMATION CONTINUED #### Revenue The revenue generated by the Group can be analysed as follows: Revenue by product and segment | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Opencast | Underground | Total | | Thermal export | 13,415 | 32,341 | 45,756 | | Industrial and domestic | 4,951 | 46 | 4,997 | | Total revenue | 18,366 | 32,387 | 50,753 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Rand million | Opencast | Underground | Total | | Thermal export | 6,490 | 16,323 | 22,813 | | Industrial and domestic | 3,290 | 179 | 3,469 | | Total revenue | 9,780 | 16,502 | 26,282 | Revenue by destination | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | United Kingdom | 45,756 | 22,813 | | South Africa | 4,997 | 3,469 | | Total revenue | 50,753 | 26,282 | All of the revenue and profit of Thungela is derived from operations based in South Africa. Revenue by customer | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Sales to AAML | 45,756 | 22,813 | | Other – domestic sales1 | 4,997 | 3,469 | | Total revenue | 50,753 | 26,282 | 1No individual domestic customer contributes more than 10% to the total revenue generated by the Group. 5. #### PROFIT BEFORE NET FINANCE COSTS AND TAX Profit before net finance costs and tax represents the results of the ongoing normal operations of the Group. #### Accounting #### policy Operating costs incurred in the ongoing operations of the Group are recognised in the statement of profit or loss and other comprehensive income as incurred. Exploration expenditure is the cost of exploring coal resources other than that occurring at existing operations and projects and comprises of various studies, drilling and developments. Evaluation expenditure includes the cost of conceptual and pre-feasibility studies and evaluation of coal resources at existing operations. Exploration and evaluation expenditure is expensed in the year in which it is incurred. Upon the studies proving that the projects are feasible and commercially viable, subsequent and directly attributable expenditures are capitalised within property, plant and equipment. 52  Annual Financial Statements for the year ended 31 December 2022 5. #### PROFIT BEFORE NET FINANCE COSTS AND TAX CONTINUED Profit before net finance costs and tax can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Revenue | 4 | 50,753 | 26,282 | | Employee costs | 6 | (4,750) | (4,112) | | Depreciation | 13 | (1,169) | (989) | | Amortisation | 12 | (28) | (29) | | Third-party commodity purchases | | (2,114) | (1,380) | | Commodity purchases from Mafube Coal Mining1 | | — | (137) | | Consumables used in production | | (1,995) | (1,646) | | Maintenance expenditure | | (3,040) | (2,716) | | Production input costs | | (3,940) | (2,583) | | Inventory production movement | | 587 | 1,222 | | Logistics costs | | (2,782) | (3,235) | | Demurrage and other expenses | | (216) | (204) | | Increase in provisions for expected credit losses | 19 | (51) | (67) | | Royalties | | (1,955) | (394) | | Exploration and evaluation2 | | (54) | (124) | | Exploration expenditure | | (28) | (27) | | Evaluation expenditure | | (26) | (97) | | Foreign exchange gains | | 835 | 214 | | (Loss)/profit on sale of property, plant and equipment | | (17) | 8 | | Audit fees | | (6) | (9) | | Audit services | | (6) | (9) | | Non-audit services3 | | — | \* | | Professional fees | | (144) | (84) | | Learnership and development expenses | | (254) | (169) | | Information management expenses | | (292) | — | | Temporary staff | | (173) | (138) | | Contributions to the Nkulo Trust | 28 | (386) | — | | Recharged costs from Anglo American | | (256) | (605) | | Administration expenses | | (239) | (331) | | Operating expenses | | (17) | (274) | | Other administration expenses | | (128) | (49) | | Other operating expenses | | (92) | (96) | | Total operating costs | | (22,420) | (17,322) | | Impairment losses | 7 | (656) | (808) | | Fair value (losses)/gains on derivative financial instruments | 24 | (3,207) | 348 | | Fair value loss on derivative asset – capital support | 24 | (347) | (569) | | Restructuring costs and termination benefits | 8 | (29) | (422) | | Profit before net finance costs and tax | | 24,094 | 7,509 | \*Represents amounts less than R1 million. 1Commodity purchases from Mafube Coal Mining for the year ended 31 December 2021 relate to purchases by TOPL in the ordinary course of business prior to the acquisition of Mafube Coal Mining through the internal restructure on 31 March 2021. 2Exploration and evaluation expenditure excludes associated employee costs, which are considered immaterial. 3Fees from the independent external auditor of R20 million for the year ended 31 December 2021 related to work performed to support the demerger are included in restructuring costs and termination benefits. Annual Financial Statements for the year ended 31 December 2022  53 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 6. #### EMPLOYEE COSTS The Group incurs various costs in relation to our employees, including various long-term and short-term benefits. #### Accounting policy Short-term benefits The cost of short-term employee benefits is recognised during the period in which the employees render the related service. Short-term employee benefits are measured on an undiscounted basis. The accrual for employee entitlements to salaries, bonuses and annual leave represents the amount which the Group has a present legal or constructive obligation to pay as a result of the employees’ services provided up to the reporting date. Sisonke Trust The costs in relation to the allocations made through the Sisonke Trust are recognised in the statement of profit or loss and other comprehensive income as they are incurred, in relation to the amount of the allocation that is expected to vest. The employee costs incurred by the Group can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Wages and salaries | | 3,827 | 3,580 | | Social security costs | | 94 | 106 | | Post-employment benefits | | 395 | 386 | | Share-based payments | 33 | 113 | 225 | | Sisonke Trust awards granted | | 380 | 4 | | Termination benefits | | — | 26 | | Total employee costs | | 4,809 | 4,327 | | Less – employee costs capitalised | | (59) | (51) | | Less – accelerated vesting of Anglo American share awards included in restructuring costs and termination benefits | 8 | — | (138) | | Less – termination benefits included in restructuring costs and termination benefits1 | 8 | — | (26) | | Employee costs included in operating costs | 5 | 4,750 | 4,112 | 1 Termination benefits at 31 December 2021 are included in the costs related to placing the Bokgoni pit at the Khwezela Colliery on care and maintenance. Post-employment benefits include contributions to defined contribution pension and medical aid plans, current and past service costs related to medical aid plans and other benefits provided to certain employees during retirement. Refer to note 30 for further detail. The Group founded the Sisonke Trust in June 2021 as disclosed in note 2A, which subscribed for 5.0% of the ordinary shares, as well as an E preference share, issued by SACO. The E preference share entitles the participating employees of the Sisonke Trust to receive a fixed minimum payment of R4,000 per employee per year over the first three years of the plan, a variable payment over the full term of the plan and a potential lump-sum payment at the end of the LOM of the current asset portfolio, at which point the trust will likely be wound up. The variable payment to employees is dependent on the value of the dividend declared by SACO on its ordinary shares, given the shareholding that the Sisonke Trust has in SACO. In the year ended 31 December 2022, the trust deed of the Sisonke Trust was amended to allow for the allocations to eligible employees to vest within three months of the dividend being received by the trust from SACO. Previously the trust deed allowed for the allocations to vest in three years post the date of the demerger. Eligible employees are defined in the trust deed as employees of the specified employer companies on the first day of the month in which SACO declares a dividend. The Sisonke Trust includes rules in relation to good and bad leavers which may impact the payment of the allocations. At a Thungela Group level, the grants made to employees are considered to be part of their remuneration, and recognised within operating costs as they are incurred. In the year ended 31 December 2022, SACO declared ordinary dividends amounting to R386 million (2021: Rnil) to the Sisonke Trust, which vested to the eligible employees in December 2022. Of the total declared, R6 million remains in the Sisonke Trust to be utilised in terms of the trust deed. Employee costs capitalised relate to costs incurred for employees dedicated to work performed on capital projects. 54  Annual Financial Statements for the year ended 31 December 2022 7. #### IMPAIRMENT LOSSES The Group is required to assess whether assets may be impaired, or an impairment previously recognised may need to be reversed, at each reporting date. The impairment losses recognised are determined based on the Group’s judgements around the recoverable amount of each identified CGU. #### Accounting policy Any impairment loss is recognised immediately in the statement of profit or loss and other comprehensive income. Goodwill arising on business combinations is allocated to the CGUs that are expected to benefit from synergies of the combination and represents the lowest level at which goodwill is monitored by the Group’s leadership team for internal management purposes. The CGUs to which goodwill has been allocated are tested for impairment annually, or when events or changes in circumstances indicate that they may be impaired. An impairment of goodwill is not subsequently reversed. At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets are impaired. If such an indication exists, the recoverable amount of those assets is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. The CGUs are determined as the individual operating mines and impairment is assessed at that level. In addition, when assessing assets for impairment, management allocates centrally held assets, which do not generate independent cash flows, to the CGUs on an appropriate basis. The recoverable amount is the higher of the fair value less costs of disposal and the VIU assessed using discounted cash flow models. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. Subsequent changes to the CGU allocation, to the timing of the forecasted cash flows or to the assumptions used to determine the forecasted cash flows could impact the recoverable amounts of the respective CGUs. There have been no changes in the CGU allocation for the year ended 31 December 2022. #### Impairment losses recognised Impairment losses comprise an impairment in relation to the Isibonelo operation, as well as an appropriate allocation of centrally held assets. Impairment losses recognised in the year can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Property, plant and equipment | 13 | 648 | 786 | | Intangible assets | 12 | 8 | 22 | | Impairment losses | | 656 | 808 | | Tax impact | 31 | (167) | (224) | | Net impairment losses | | 489 | 584 | #### Goodwill impairment testing Goodwill is tested at least annually for impairment by assessing the recoverable amounts of the related CGUs. The recoverable amounts of the CGUs have been determined based on their fair value less costs of disposal using discounted cash flow models. The recoverable amount of Greenside, which is the only operation with a remaining goodwill balance, is determined on the same basis as the remaining export operations. Annual Financial Statements for the year ended 31 December 2022  55 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 7. #### IMPAIRMENT LOSSES CONTINUED #### Assessing impairment indicators for CGUs without goodwill Export operations The mining operations carried out at Goedehoop, Khwezela, Greenside, Mafube and Zibulo represent the export operations of the Group. All export sales are made to AAML as per the offtake agreement. The price realised on export sales is determined using the Benchmark coal price as a base, with specific adjustments made for quality, grade, volume and content. These CGUs do supply limited quantities into the domestic market, but domestic sales are not a key value contributor to the CGUs. Domestic operations The mining operations carried out at Isibonelo and Rietvlei represent the domestic operations of the Group. These operations sell to domestic customers under fixed term offtake agreements. Contractual prices are escalated annually with reference to various input cost indices. Changes in the Benchmark coal price therefore do not directly impact the LOM revenue assumptions at these operations. Centrally held assets Assets that are held centrally are allocated to the CGUs on an appropriate basis. The centrally held assets allocated to CGUs which have been impaired are allocated a proportionate share of that impairment loss. #### Determining recoverable amounts The recoverable amounts are determined on a fair value less costs of disposal basis with reference to the LOM forecasted cash flows and, where relevant, a valuation of in-situ coal resources beyond the current LOM plan. Expected future cash flows used in the discounted cash flow models are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including coal resources and coal reserves and production volumes, together with economic factors such as the forecasted Benchmark coal price, forecasted exchange rates, discount rates, estimates of production costs and future capital expenditure. Where discounted cash flow models based on management assumptions are used, the resulting fair value measurements are at level 3 in the fair value hierarchy as defined in IFRS 13, as they depend to a significant extent on unobservable valuation inputs. Where in-situ coal resources beyond the LOM plan are included in the recoverable amount, an appropriate risk adjustment is made, or alternatively, the fair value is determined on a comparable transaction basis and added to the recoverable amount. The discounted cash flow models are based on the approved financial budgets and LOM plans incorporating key assumptions which can be analysed as follows: Coal prices The estimated coal prices used are based on the latest internal forecasts, benchmarked with external sources of information, to ensure that they are within the range of available external forecasts. The estimated realised price for export operations is calculated using the forecasted Benchmark coal price, with adjustments to reflect the quality and calorific value of the product, to reflect the estimated realised price at each CGU. There has been significant volatility experienced in the Benchmark coal price in the year ended 31 December 2022 based on the conflict experienced in Ukraine and the resultant global energy security crisis. This volatility is likely to continue over the short to medium term. The forecasted Benchmark coal prices in real terms used in the estimation of cash flows over the forecast period range from USD210 per tonne in the short-term and USD91 per tonne in the medium to long-term (2021: USD85 per tonne to USD94 per tonne). In estimating the forecasted cash flows, the Group also considers the expected realised prices from existing contractual arrangements for the domestic operations where relevant, ranging from R450 per tonne to R540 per tonne (2021: R380 per tonne to R540 per tonne) over the forecast period. 56  Annual Financial Statements for the year ended 31 December 2022 Foreign exchange rates Foreign exchange rates are based on the latest internal forecasts, benchmarked with external sources of information. For the year ended 31 December 2022 the estimated foreign exchange rates were based on external forecasts in real terms, in line with the approved budget assumptions. The foreign exchange rates used in the estimation of cash flows over the forecast period range from R14.44:1USD to R15.81:1USD. For the year ended 31 December 2021, the estimated foreign exchange rates utilised were also based on internal forecasts and were kept flat in real terms at R14.75:1USD over the forecast period. Operations supplying solely into the domestic market are not directly exposed to fluctuations in the foreign exchange rate. Discount rate The discounted cash flow models used to determine the recoverable amounts are discounted based on a real post-tax discount rate, assessed annually, of 9.5% (2021: 9.5%). Adjustments to the discount rate are made for any risks that are not reflected in the underlying cash flows, including the risk profile of the CGU. Operating costs, capital expenditure and other operating factors Operating costs and capital expenditure are based on the approved financial budgets. Forecasted cash flows beyond the budget period are based on approved LOM plans and internal forecasts. Cost assumptions incorporate the Group’s experience and expectations, as well as the nature and location of the operation and the risks associated therewith (for example, due to varying geological conditions over time and unforeseen operational issues). Climate change The Group has carefully considered the potential impact of climate related risks in the estimation of the recoverable amounts. The risks considered include the global trends of decreasing demand for coal, the impact on the cost of capital, the impact on forecasted Benchmark coal prices and the increased cost of adhering to applicable regulatory requirements, in addition to physical risks caused by climate change. The LOM models assume that there will be a market for thermal coal over the expected LOM after assessing local and global demand forecasts. The prices and other key assumptions represent the Group’s best estimate of key market factors, including climate change related scenarios. The cost of carbon related emissions has been considered and incorporated into the discounted cash flow models, based on enacted legislation and expectations for carbon prices based on the latest internal forecasts benchmarked with external sources. The DFFE declaration of greenhouse gases as priority air pollutants in 2017 was followed by the promulgation of a regulatory framework for greenhouse gas emission reporting. This formed the basis and input for the promulgation of the Carbon Tax Act on 1 June 2019, which introduced a carbon tax on identified affected sectors based on their greenhouse gas emissions. On 29 July 2022 National Treasury published the draft 2022 Taxation Laws Amendment Bill (the ‘Draft 2022 TLAB’), alongside various other tax bills, which contains tax proposals made in the 2022 National Budget, for public comment. The Draft 2022 TLAB proposes amendments to the Carbon Tax Act to bring into effect the policy set out under South Africa’s climate change response and carbon tax price path as released by National Treasury in February 2022. The proposed amendments include a progressive increase in the carbon tax rate from 2023 to a US dollar based tax of USD20 in 2026 increasing to USD30 by 2030 per tonne of CO2. The proposed amendments seek to align South Africa's carbon tax rate with global carbon prices. The amendments contained in the Draft 2022 TLAB do not materially impact on the applied assumptions at 31 December 2022. The Group has expensed a total of R4 million (2021: R3 million) in relation to carbon tax. A carbon fuel levy was introduced under the Customs and Excise Act, as part of the current South African fuel levy regime. The carbon fuel levy now includes a carbon levy, which applies to stationary and non-stationary mobile emissions resulting from the use of liquid fuels, mostly petrol and diesel. The carbon fuel levy on diesel and petrol, which came into effect on 5 June 2019, is 10c per litre and 9c per litre respectively. In addition, a notice published in the South African Government Gazette on 31 May 2019 provided that the carbon fuel levy was excluded from the diesel refund regime. Annual Financial Statements for the year ended 31 December 2022  57 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 7. #### IMPAIRMENT LOSSES CONTINUED #### Impairment loss assessments Export operations The mining operations carried out at Goedehoop, Khwezela, Greenside, Mafube and Zibulo represent the export operations of the Group. The export operations are largely dependent on the ability to rail coal to the RBCT in order to realise the sales forecast for each of the CGUs, and this has a concomitant impact on the forecasted production of the CGUs. We have not identified any impairment indicators for our export operations at 31 December 2022 based on the improved market conditions, particularly in relation to the increased Benchmark coal price. Throughout 2021 and 2022 the export operations have encountered problems in railing coal to the RBCT due to the continued underperformance of TFR. The rail operator’s performance challenges are attributable to theft of infrastructure, equipment failures mainly related to locomotives, and late in 2022 a strike by Transnet employees and a significant derailment. This has led to some of our operations becoming stock-bound, and impacting forecasted production to manage stockpile capacity. The impact of the rail constrained environment on our operations is expected to continue in the short to medium term. All of our export operations have been affected by the constrained rail capacity, however our continued optimisation of the available rail capacity has ensured continued performance for these operations. As a result, the recoverable amounts of these CGUs are estimated to be higher than the carrying amounts of the non-current assets. The significantly improved Benchmark coal price environment has not led to impairment reversals at other previously impaired operations held within TOPL on the basis of the rail constrained environment, and the resultant risk to the Group’s forecasted production. At 31 December 2021, production at the Khwezela Colliery had been curtailed in response to the rail constrained environment which, combined with placing the Bokgoni pit on care and maintenance, led to an impairment loss of R317 million being recognised on the CGU. The carrying amounts of the CGUs that are not impaired can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Reporting segment | Goodwill | Carrying amounts other than goodwill1 | | Zibulo | Underground | — | 5,290 | | Greenside | Underground | 9 | 2,029 | | Goedehoop | Underground | — | 352 | | Khwezela | Opencast | — | 268 | | Mafube | Opencast | — | 1,853 | | Total | | 9 | 9,792 | 1Carrying amounts other than goodwill comprise other intangible assets and property, plant and equipment. | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Rand million | Reporting segment | Goodwill | Carrying amounts other than goodwill1 | | Zibulo | Underground | — | 4,999 | | Greenside | Underground | 9 | 2,132 | | Goedehoop | Underground | — | 271 | | Mafube | Opencast | — | 1,919 | | Total | | 9 | 9,321 | 1Carrying amounts other than goodwill comprise other intangible assets and property, plant and equipment. 58  Annual Financial Statements for the year ended 31 December 2022 Sensitivities The recoverable amounts, based on the discounted cash flow models, are sensitive to changes in input assumptions, particularly in relation to forecasted Benchmark coal prices and foreign exchange rates. Given the continued impact of the rail constrained environment, the recoverable amounts have become more sensitive to forecasted saleable production in the short to medium term. In addition to the base case valuation, alternative scenarios have been considered to assess the impact of changes in key assumptions. The most significant inputs to the discounted cash flow models are the short to medium-term forecasted Benchmark coal price used to calculate the estimated realised prices across the CGUs, discount rates applied and forecasted saleable production across the CGUs. Due to the volatility experienced in the Benchmark coal price throughout 2022 the sensitivity related to price has been adjusted to reflect a wider range of reasonably possible movement in the Benchmark coal price. The impact on the estimated recoverable amounts, for reasonably possible changes to the key assumptions used, keeping other assumptions constant, can be analysed as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | 2022 | | | 2021 | | Rand million | 10% decrease in saleable production | 10% decrease in estimated prices | 0.5% increase in discount rate | 5.0% increase in estimated prices | 5.0% decrease in estimated prices | 0.5% increase in discount rate | | Zibulo | (1,861) | (3,159) | (80) | 1,050 | (1,053) | (65) | | Greenside | (1,139) | (1,886) | (18) | 518 | (535) | (20) | | Goedehoop | (634) | (1,138) | (18) | 190 | (216) | \* | | Khwezela | (1,113) | (1,748) | 28 | 558 | (581) | (10) | | Mafube | (1,251) | (1,931) | (35) | 357 | (344) | (33) | | Total | (5,998) | (9,862) | (123) | 2,673 | (2,729) | (128) | \*Represents an amount less than R1 million. For the year ended 31 December 2022, the impact of the sensitivities shown above is as follows: •Decrease in saleable production of 10%: this sensitivity would result in an impairment possibly being recognised at Khwezela (limited to its carrying amount), and a reduction of headroom at the remaining CGUs. •Decrease in estimated prices of 10%: this sensitivity would result in an impairment possibly being recognised at Khwezela (limited to its carrying amount), and a reduction of headroom at the remaining CGUs. •Increase in discount rate of 0.5%: this sensitivity would not result in an impairment at any of the CGUs. For the year ended 31 December 2021, the impact of the sensitivities shown above is as follows: •Increase in estimated prices of 5.0%: this sensitivity would result in no impairment being recognised at Khwezela. •Decrease in estimated prices of 5.0%: this sensitivity would result in an impairment possibly being recognised at Greenside, and a reduction of headroom at the remaining CGUs. No additional impairment would be recognised at Khwezela as the CGU was fully impaired. •Increase in discount rate of 0.5%: this sensitivity would not result in an impairment at any of the CGUs. The recoverable amounts are the most sensitive to changes in the estimated prices and production used over the forecast period. The Group has prioritised our operations throughout 2022 to ensure that higher margin products are railed to the RBCT, which has increased the on-mine stockpiles of lower margin products. Should the rail constrained environment not improve, production may need to be further curtailed, which may impact the recoverable amounts of the CGUs. The rail constrained environment, coupled with supply constraints in thermal coal producing regions and the conflict in Ukraine, have led to significant volatility being experienced in the Benchmark coal price throughout the year ended 31 December 2022. On this basis we have determined that the estimated prices used in the determination of the recoverable amounts are appropriate. Annual Financial Statements for the year ended 31 December 2022  59 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 7. #### IMPAIRMENT LOSSES CONTINUED #### Impairment loss assessments continued Domestic operations The mining operations carried out at Isibonelo and Rietvlei represent the domestic operations of the Group. Rietvlei has a fixed-term coal supply agreement in place with its customer, and throughout 2022 it delivered on its contractual commitment. Rietvlei is currently in the process of evaluating alternative markets for coal supply to supplement its fixed-term agreement and increase the optionality at the operation. Isibonelo’s sales are made under a fixed-term offtake agreement with committed production per year. Prices are contractually agreed and impacted by mining inflation and other inputs. Based on the approved budget for Isibonelo, there is a reduction in forecasted production based on the achieved rates of production throughout 2021 and 2022. The forecasted production is sufficient to meet the committed production per year, however, due to an increase in the cost profile of the mine based on geological factors continuing to influence production, there has been a further decrease in the recoverable amount of the CGU. Based on the impairment assessment performed, an impairment loss of R613 million has been recognised on the Isibonelo CGU (2021: R440 million). The carrying amount of the CGU that is not impaired can be analysed as follows: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | 2022 | | 2021 | | | Rand million | Reporting segment | Goodwill | Carrying amounts other than goodwill1 | Goodwill | Carrying amounts other than goodwill1 | | Rietvlei | Opencast | — | 301 | — | 315 | | Total | | — | 301 | — | 315 | 1Carrying amounts other than goodwill comprise other intangible assets and property, plant and equipment. Sensitivities As domestic sales prices are largely fixed with annual input cost inflation adjustments, recoverable amounts are the most sensitive to production volumes and cost increases not catered for in the annual sales price adjustment. The sensitivities applied in 2022 have widened to reflect ongoing cost and production challenges at the CGUs. The impact on the estimated recoverable amounts, for reasonably possible changes to the key assumptions used, keeping other assumptions constant, can be analysed as follows: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | 2022 | | 2021 | | | Rand million | 10% increase in operating expenditure | 10% decrease in saleable production | 5.0% increase in operating expenditure | 5.0% decrease in saleable production | | Isibonelo | (363) | (411) | (114) | (297) | | Rietvlei | (261) | (327) | (154) | (179) | | Total | (624) | (738) | (268) | (476) | For the year ended 31 December 2022, the impact of the sensitivities shown above is as follows: •Increase in operating expenditure of 10%: This would have resulted in an additional impairment at Isibonelo, limited to the carrying amount of the CGU, and a potential impairment at Rietvlei. •Decrease in saleable production of 10%: This would result in an additional impairment at Isibonelo, limited to the carrying amount of the CGU, and a potential impairment at Rietvlei. For the year ended 31 December 2021, the impact of the sensitivities shown above is as follows: •Increase in operating expenditure of 5.0%: This would have resulted in an additional impairment at Isibonelo as the CGU was carried at its recoverable amount, and a reduction of the headroom available at Rietvlei. •Decrease in saleable production of 5.0%: This would have resulted in an additional impairment at Isibonelo as the CGU was carried at its recoverable amount, and a reduction in the headroom available at Rietvlei. #### Cen #### trally held assets The assets held centrally by the Group are allocated to all CGUs on an appropriate proportionate basis. Due to the impairment recognised at Isibonelo, an impairment of R43 million (2021: R51 million) has been recognised on these centrally held assets. 60  Annual Financial Statements for the year ended 31 December 2022 8. #### RESTRUCTURING COSTS AND TERMINATION BENEFITS The Group incurs various costs in relation to restructuring costs and termination benefits, based on changes in the underlying structure of the Group. #### Accounting policy Restructuring costs are recognised as an expense at the earlier of the date the costs are incurred or when the Group is demonstrably committed, without a realistic possibility of withdrawal, to a formal detailed restructuring plan. Benefits that are expected to be wholly settled more than one year after the end of the reporting period are discounted to their present value. Termination benefits are recognised as an expense when the employment of an employee or group of employees is terminated before their normal retirement date, as a result of an offer made to encourage voluntary redundancy. In the case of an offer to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Expenses related to the demerger are incurred directly in relation to the creation of the Group, and the ongoing transition of services away from Anglo American, and are recognised as expenses as incurred. The restructuring costs and termination benefits can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Before tax | Tax | Net | | Other demerger related costs | 29 | — | 29 | | Total restructuring costs and termination benefits | 29 | — | 29 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Rand million | Before tax | Tax | Net | | Bokgoni care and maintenance and other termination benefits | 193 | (54) | 139 | | Accelerated vesting of Anglo American share awards | 138 | (39) | 99 | | Other demerger related costs | 91 | — | 91 | | Total restructuring costs and termination benefits | 422 | (93) | 329 | Other demerger related costs for the year ended 31 December 2022 relate to the ongoing transition of services away from Anglo American in line with the transitional services agreements signed in preparation for the demerger. The Bokgoni care and maintenance costs relate to the costs incurred to place the Bokgoni pit at the Khwezela Colliery on care and maintenance in 2021. The accelerated vesting of the Anglo American share awards was completed based on the demerger becoming effective. Refer to note 33 for further detail. Other demerger related costs for the year ended 31 December 2021 include fees of R20 million for audit services provided by the Group’s independent external auditor as the independent reporting accountant of the Group in relation to the PLS, as well as other costs directly related to the demerger. Annual Financial Statements for the year ended 31 December 2022  61 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 9. #### NET FINANCE COSTS The Group’s net finance costs include various costs relating to the investing activities of the Group, as well as the unwinding of the discount on environmental and other provisions. #### Accounting policy Interest income is recognised in the statement of profit or loss and other comprehensive income using the effective interest rate method. Growth on the environmental rehabilitation trusts’ assets and other environmental investments represents the growth on the unit trusts and other investments held in order to mitigate the Group’s exposure to environmental provisions, and is recognised in the statement of profit or loss and other comprehensive income as it is earned. Interest expenses, other than the unwinding of discount on environmental and other provisions, are recognised in the statement of profit or loss and other comprehensive income in the period in which they are incurred. The unwinding of the discount on environmental and other provisions is recognised in the statement of profit or loss and other comprehensive income over the life of the relevant provision, based on the expected outflow of economic benefits in future periods. Foreign exchange gains and losses relate to the translation of cash and cash equivalents held by the Group denominated in US dollars from the receipt of export revenue. Fair value losses on derivative financial instruments relate to losses on FECs entered into in order to manage the Group’s exposure to exchange rate volatility. The net finance costs can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Investment income | | | | | Interest income on cash and cash equivalents | | 775 | 114 | | Growth on environmental rehabilitation trusts’ assets | 28 | 158 | 385 | | Growth on other environmental investments | 28 | 16 | 4 | | Growth on investment in insurance structure | 25 | 2 | — | | Other interest income | | 12 | — | | Total investment income | | 963 | 503 | | Interest expense | | | | | Interest and other finance expenses | | (35) | (65) | | Net interest costs on retirement benefit obligations | 30 | (48) | (43) | | Interest expense on loans from Anglo American | | — | (35) | | Unwinding of discount on environmental and other provisions | 28 | (655) | (537) | | Total interest expense | | (738) | (680) | | Other financing (losses)/gains | | | | | Foreign exchange gains on cash and cash equivalents | | 377 | 177 | | Fair value losses on derivative financial instruments | 24 | (553) | — | | Total other financing (losses)/gains | | (176) | 177 | | Net finance costs | | 49 | — | 62  Annual Financial Statements for the year ended 31 December 2022 10. #### INCOME TAX EXPENSE The income tax expense comprises current tax charged in line with relevant legislation, and deferred tax determined in line with IAS 12. #### Accounting policy The income tax expense comprises the sum of current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in OCI or in equity. Current tax and deferred tax is recognised in OCI or in equity if the taxation relates to items that are recognised, in the same or a different period, in OCI or in equity. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. #### Analysis of income tax expense | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Note | 2022 | 2021 | | Current tax expense | | (6,057) | (521) | | Charged in respect of the current reporting period | | (6,000) | (504) | | Charged in respect of prior reporting periods | | (57) | (17) | | Deferred tax credit/(expense) | | 119 | (50) | | Credited in respect of deferred tax assets | 31 | 156 | 384 | | Charged in respect of deferred tax liabilities | 31 | (37) | (434) | | | | | | | Total income tax expense for the reporting period | | (5,938) | (571) | Given the significantly higher average Benchmark coal price experienced throughout the reporting period, all entities in the Group have achieved a high level of taxable income. This has led to a significant increase in the income tax expense and resultant provisional tax payments in the year ended 31 December 2022. Refer to note 31 for further detail related to the deferred tax assets recognised as a result of the improved market conditions. Annual Financial Statements for the year ended 31 December 2022  63 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 10. #### INCOME TAX EXPENSE CONTINUED #### Factors affecting income tax expense The income tax expense has been impacted by various transactions and can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Profit before tax | 24,143 | 7,509 | | Tax at the applicable rate (South African corporation tax rate) of 28% | (6,760) | (2,103) | | Adjusted for the tax effects of: | | | | Items non-deductible for tax purposes | (383) | (226) | | Depreciation of mineral rights | (8) | (4) | | Impairment on mineral rights and land | (10) | (2) | | Legal and professional fees | — | (3) | | SARS penalties and interest | — | (3) | | Royalty and carbon tax prior year adjustment | (10) | — | | Fair value loss on biological assets | (5) | (1) | | Fair value loss on derivative asset – capital support | (97) | (159) | | Non-deductible items considered capital in nature | (26) | (38) | | Expenses related to contributions to the Sisonke Trust and the Nkulo Trust | (214) | — | | Expenses not incurred in the production of income | (7) | (4) | | Acquisition of joint operation | — | (12) | | Accounting adjustments not deductible | (6) | — | | Items non-taxable for tax purposes | 15 | 23 | | Contribution to other environmental investments | 1 | 1 | | Accounting adjustments not taxable | 14 | — | | Royalty and carbon tax prior year adjustment | — | 22 | | Other items | 1,206 | 1,594 | | Donations | — | 30 | | Effect of higher tax rates for trusts | (1) | — | | Tax rate change | 31 | — | | Deferred tax assets previously not recognised | 1,177 | 1,569 | | Other | (1) | (5) | | Prior year adjustments | (16) | 141 | | Current tax | (57) | (17) | | Deferred tax | 41 | 158 | | | | | | Total income tax expense | (5,938) | (571) | The effective tax rate for the year of 25% (2021: 7.6%) is lower than the applicable statutory rate of corporation tax in South Africa of 28%. On 23 February 2022, the South African corporate tax rate was reduced from 28% to 27% with effect from 1 January 2023. The prior year tax adjustments relate to adjustments required to align with the final tax returns as submitted to SARS. 64  Annual Financial Statements for the year ended 31 December 2022 #### Tax #### amounts included in other comprehensive income/(loss) The tax impact of the individual items presented in other comprehensive income/(loss) can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Tax expense on items that will not be reclassified to profit or loss | | | | Remeasurement of retirement benefit obligations | (15) | (7) | | Fair value losses on financial asset investments | — | 1 | | Total income tax expense recognised in other comprehensive income/(loss) | (15) | (6) | #### Current tax assets/(liabilities) The current tax assets/(liabilities) are only offset to the extent that the Group has the ability and intention to settle these amounts simultaneously. The current tax assets/(liabilities) can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Current tax assets | 231 | 46 | | Current tax liabilities | (25) | (278) | | Net current tax assets/(liabilities) | 206 | (232) | #### Income tax paid The income tax paid for the year can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | (232) | 122 | | Income tax – current tax charge | (6,057) | (521) | | Acquired through internal restructure | — | (19) | | Non-cash movements | — | (11) | | Interest capitalised | 3 | — | | Reclassification | (75) | — | | Balance at the end of the reporting period | (206) | 232 | | Income tax paid | (6,567) | (197) | 11. #### EARNINGS PER SHARE AND HEADLINE EARNINGS PER SHARE Earnings per share has been calculated in line with the requirements of IAS 33. Headline earnings has been determined in line with SAICA Circular 1/2021 and the JSE Listings Requirements, and reconciled to the profit attributable to the equity shareholders of the Group in each reporting period. #### Accounting policy The Group calculates and presents basic and diluted earnings per share and basic and diluted headline earnings per share for its ordinary shares. Headline earnings is calculated by adjusting the profit attributable to the equity shareholders of the Group for all separately identifiable remeasurements which are excluded from headline earnings as defined in SAICA Circular 1/2021, net of related tax (both current and deferred) and related non-controlling interests. The headline earnings is then divided by the WANOS to calculate headline earnings per share. Disclosure of headline earnings is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa that is more closely aligned to the operating activities of an entity. Diluted earnings per share and headline earnings per share are determined by adjusting the basic and headline earnings attributable to the equity shareholders of the Group and the WANOS for the effects of all dilutive potential ordinary shares at the reporting date, which comprise share awards granted to employees. Annual Financial Statements for the year ended 31 December 2022  65 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 11. #### EARNINGS PER SHARE AND HEADLINE EARNINGS PER SHARE CONTINUED #### Number of shares The WANOS used in the calculation of earnings per share and headline earnings per share can be analysed as follows: | | | | | --- | --- | --- | | | | | | Number of shares | 2022 | 2021 | | Net shares in issue at the start of the reporting period | 133,599,202 | 62,110,182 | | Adjusted for the weighted average impact of shares: | | | | Issued in the reporting period | 366,534 | 43,504,515 | | Acquired in the reporting period1 | (673,262) | (354,358) | | Vested in the reporting period | 392,354 | — | | WANOS at the end of the reporting period | 133,684,828 | 105,260,339 | | | | | | Adjusted for dilutive potential ordinary shares relating to: | | | | Conditional share awards | 1,547,889 | 171,790 | | Forfeitable share awards | 812,771 | 184,861 | | Diluted WANOS at the end of the reporting period | 136,045,488 | 105,616,990 | | | | | | Number of shares in issue2 | 140,492,585 | 136,311,808 | | Treasury shares held by Group companies | (2,943,136) | (2,712,606) | | WANOS2 | 133,684,828 | 105,260,339 | | Diluted WANOS2 | 136,045,488 | 105,616,990 | 1Shares acquired in the reporting period relate to shares purchased in line with the requirements of the Thungela share plan. Refer to note 33 for further detail. 2 Refer to note 32 for details of the stated capital issued, and judgement applied to the calculation of WANOS for the year ended 31 December 2021. #### Earnings per share Earnings per share can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million (unless otherwise stated) | 2022 | 2021 | | Profit attributable to the equity shareholders of the Group | 16,988 | 6,429 | | Profit used in the calculation of diluted earnings per share1 | 16,988 | 6,429 | | | | | | Earnings per share | | | | Basic (cents/share) | 12,708 | 6,108 | | Diluted (cents/share) | 12,487 | 6,087 | 1There were no adjustments to the profit attributable to the equity shareholders of the Group used in the calculation of diluted earnings per share relating to the potential ordinary shares. 66  Annual Financial Statements for the year ended 31 December 2022 #### Headline earnings per s #### hare Profit attributable to the equity shareholders of the Group has been reconciled to headline earnings as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million (unless otherwise stated) | Notes | 2022 | 2021 | | Profit attributable to equity shareholders of the Group | | 16,988 | 6,429 | | Adjusted for: | | | | | Excluded remeasurements | | 673 | 800 | | Impairment of property, plant and equipment | 7 | 648 | 786 | | Impairment of intangible assets | 7 | 8 | 22 | | Loss/(profit) on sale of property, plant and equipment | 5 | 17 | (8) | | Tax effects of excluded remeasurements | | (172) | (222) | | Impairment of property, plant and equipment | 7 | (165) | (218) | | Impairment of intangible assets | 7 | (2) | (6) | | (Loss)/profit on sale of property plant and equipment | | (5) | 2 | | | | | | | Headline earnings1 | | 17,489 | 7,007 | | Headline earnings used in the calculation of diluted headline earnings per share2 | | 17,489 | 7,007 | | | | | | | Headline earnings per share | | | | | Basic (cents/share) | | 13,082 | 6,657 | | Diluted (cents/share) | | 12,855 | 6,634 | 1There were no adjustments to headline earnings that had an impact for the non-controlling interests. 2There were no adjustments to headline earnings used in the calculation of diluted headline earnings per share relating to the potential ordinary shares. Annual Financial Statements for the year ended 31 December 2022  67 ### CAPITAL BASE 6869 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 12. #### INTANGIBLE ASSETS Intangible assets comprise goodwill and other intangible assets, being a servitude related to the Zibulo Colliery, and software implemented by the Group in previous years. #### Accounting policy Goodwill is subsequently measured at cost less accumulated impairment losses. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, and any impairment is recognised as an expense in the statement of profit or loss and other comprehensive income. Other intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortised on a straight-line basis over their estimated useful lives of between five and 20 years. The amortisation period is determined as the period over which the Group expects to obtain benefits from the asset, taking account of all relevant facts and circumstances including contractual lives and expectations about the renewal of contractual arrangements without significant incremental costs. Amortisation methods, residual values and estimated useful lives are reviewed at least annually. Intangible assets can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Goodwill | Other | Total | | Cost | | | | | Balance at the start of the reporting period | 98 | 311 | 409 | | Balance at the end of the reporting period | 98 | 311 | 409 | | | | | | | Accumulated amortisation and impairment losses | | | | | Balance at the start of the reporting period | (90) | (201) | (291) | | Amortisation charge | — | (28) | (28) | | Impairment losses1 | — | (8) | (8) | | Balance at the end of the reporting period | (90) | (237) | (327) | | | | | | | Carrying amount | | | | | Balance at the start of the reporting period | 8 | 110 | 118 | | Balance at the end of the reporting period | 8 | 74 | 82 | 1The impairment of other intangible assets relates to an impairment recognised on computer software. Refer to note 7 for further detail. 70  Annual Financial Statements for the year ended 31 December 2022 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 12. #### INTANGIBLE ASSETS CONTINUED | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Rand million | Goodwill | Other | Capital work-in- progress | Total | | Cost | | | | | | Balance at the start of the reporting period | 98 | 300 | — | 398 | | Additions | — | — | 11 | 11 | | Transfers of capital work-in-progress | — | 11 | (11) | — | | Balance at the end of the reporting period | 98 | 311 | — | 409 | | | | | | | | Accumulated amortisation and impairment losses | | | | | | Balance at the start of the reporting period | (90) | (150) | — | (240) | | Amortisation charge | — | (29) | — | (29) | | Impairment losses1 | — | (22) | — | (22) | | Balance at the end of the reporting period | (90) | (201) | — | (291) | | | | | | | | Carrying amount | | | | | | Balance at the start of the reporting period | 8 | 150 | — | 158 | | Balance at the end of the reporting period | 8 | 110 | — | 118 | 1The impairment of other intangible assets relates to an impairment recognised on computer software. Refer to note 7 for further detail. The goodwill of R8 million relates to Greenside which arose through historical transactions. All other goodwill balances were fully impaired in previous years. The servitude is amortised over a useful life of 20 years. The remaining useful life is 11 years. The computer software is amortised over a useful life of five years. The remaining useful life is three years. Annual Financial Statements for the year ended 31 December 2022  71 13. #### PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment comprises tangible assets which are critical to Thungela’s operations. These include acquired mineral rights, capitalised waste stripping and mine development costs, processing plant and infrastructure, vehicles and other equipment. #### Accounting policy Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. Cost is the fair value of the consideration required to acquire and develop the asset and includes the purchase price, acquisition of mineral rights, costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and the initial estimate of any decommissioning provisions. Gains or losses on the disposal of property, plant and equipment are determined by comparing the proceeds from the disposal with the carrying amount of the assets disposed. The gains or losses are recognised in the statement of profit or loss and other comprehensive income when the disposal becomes effective. Deferred stripping The removal of rock or soil overlying a mineral deposit, overburden, and other waste materials is often necessary during the initial development of a mine site, in order to access the orebody. The process of removing overburden and other mine waste materials is referred to as stripping. The directly attributable cost of this activity is capitalised in full within mining properties if the stripped area will only commence production in more than one year after the stripping costs are incurred. All amounts capitalised in respect of waste removal are depreciated using the unit of production method for the component of the orebody to which they relate, consistent with depreciation of property, plant and equipment. The removal of waste material after the point at which mining properties are available for use is referred to as production stripping. When the waste removal activity improves access to ore extracted in the current period, the costs of production stripping are charged to the statement of profit or loss and other comprehensive income as operating costs in accordance with the principles of IAS 2. Right-of-use assets Right-of-use assets are included within property, plant and equipment, and on commencement of the lease are recognised at the amount of the corresponding lease liability, adjusted for any lease payments made on or before the lease commencement date, plus any direct costs incurred, an estimate of costs for dismantling, removing, or restoring the underlying asset and less any lease incentives received. Refer to note 29 for detail related to the leasing activities of the Group. Depreciation Mining properties and items of plant and equipment for which the consumption of economic benefits is linked to production are depreciated to their residual values using the unit of production method based on proved and probable coal reserves. Land is not depreciated. Buildings and items of plant and equipment for which the consumption of economic benefits is linked primarily to utilisation or to throughput rather than production, are depreciated to their residual values at varying rates on a straight-line basis over their estimated useful lives, or the reserve life, whichever is shorter. Estimated useful lives normally vary from up to 20 years for items of plant and equipment to a maximum of 50 years for buildings. Right-of-use assets are depreciated on a straight-line basis over the term of the lease, or, if shorter, the useful life of the asset. Capital work-in-progress is measured at cost less any impairment losses. Depreciation commences when the assets can operate in the manner intended by management, at which point they are transferred to the appropriate asset class. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components). Depreciation methods, residual values and estimated useful lives are reviewed at least annually. 72  Annual Financial Statements for the year ended 31 December 2022 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 13. #### PROPERTY, PLANT AND EQUIPMENT CONTINUED The property, plant and equipment can be analysed as follows: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | | | | | 2022 | | Rand million | Mining properties | Land and buildings | | | Plant and equipment | | Capital work-in- progress | | | Owned | Right-of- use | | Owned | Right-of- use | Total | | Cost | | | | | | | | | | Balance at the start of the reporting period | 6,863 | 1,305 | 58 | | 25,577 | 107 | 5,606 | 39,516 | | Additions | — | — | — | | — | — | 1,962 | 1,962 | | Disposals | (9) | — | — | | (524) | — | — | (533) | | Transfers of capital work-in- progress | 281 | 23 | — | | 1,896 | — | (2,200) | — | | Reclassifications | (46) | 28 | — | | 25 | — | 1 | 8 | | Adjustments to decommissioning assets | — | — | — | | (83) | — | — | (83) | | Other | — | — | (3) | | — | — | — | (3) | | Balance at the end of the reporting period | 7,089 | 1,356 | 55 | | 26,891 | 107 | 5,369 | 40,867 | | Accumulated depreciation and impairment losses | | | | | | | | | | Balance at the start of the reporting period | (4,856) | (820) | (31) | | (19,725) | (24) | (3,492) | (28,948) | | Depreciation charge | (240) | (16) | (4) | | (898) | (11) | — | (1,169) | | Impairment losses | (71) | (37) | (1) | | (539) | — | — | (648) | | Disposals | 9 | — | — | | 506 | — | — | 515 | | Reclassifications | 18 | — | — | | 22 | — | (1) | 39 | | Balance at the end of the reporting period | (5,140) | (873) | (36) | | (20,634) | (35) | (3,493) | (30,211) | | Carrying amount | | | | | | | | | | Balance at the start of the reporting period | 2,007 | 485 | 27 | | 5,852 | 83 | 2,114 | 10,568 | | Balance at the end of the reporting period | 1,949 | 483 | 19 | | 6,257 | 72 | 1,876 | 10,656 | Annual Financial Statements for the year ended 31 December 2022  73 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | | | | | 2021 | | Rand million | Mining properties | Land and buildings | | | Plant and equipment | | Capital work-in- progress | | | Owned | Right-of- use | | Owned | Right-of- use | Total | | Cost | | | | | | | | | | Balance at the start of the reporting period | 6,831 | 1,315 | 55 | | 22,519 | 107 | 5,485 | 36,312 | | Acquired through internal restructure | 730 | 57 | — | | 1,445 | — | 480 | 2,712 | | Acquisition of joint operation | — | — | — | | — | — | 81 | 81 | | Additions | — | — | — | | — | — | 2,203 | 2,203 | | Disposals | (913) | (34) | — | | (1,007) | — | — | (1,954) | | Transfers of capital work-in- progress | 190 | — | — | | 2,386 | — | (2,576) | — | | Reclassifications | 25 | (33) | — | | 291 | — | (67) | 216 | | Adjustments to decommissioning assets | — | — | — | | (57) | — | — | (57) | | Other | — | — | 3 | | — | — | — | 3 | | Balance at the end of the reporting period | 6,863 | 1,305 | 58 | | 25,577 | 107 | 5,606 | 39,516 | | Accumulated depreciation and impairment losses | | | | | | | | | | Balance at the start of the reporting period | (5,129) | (831) | (23) | | (18,313) | (21) | (3,559) | (27,876) | | Acquired through internal restructure | (317) | (26) | — | | (692) | — | — | (1,035) | | Depreciation charge | (236) | (18) | (5) | | (727) | (3) | — | (989) | | Impairment losses | (62) | (12) | (3) | | (709) | — | — | (786) | | Disposals | 913 | 34 | — | | 1,007 | — | — | 1,954 | | Reclassifications | (25) | 33 | — | | (291) | — | 67 | (216) | | Balance at the end of the reporting period | (4,856) | (820) | (31) | | (19,725) | (24) | (3,492) | (28,948) | | Carrying amount | | | | | | | | | | Balance at the start of the reporting period | 1,702 | 484 | 32 | | 4,206 | 86 | 1,926 | 8,436 | | Balance at the end of the reporting period | 2,007 | 485 | 27 | | 5,852 | 83 | 2,114 | 10,568 | 74  Annual Financial Statements for the year ended 31 December 2022 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 14. #### INVESTMENT IN ASSOCIATE The Group holds an investment in RBCT, over which it is considered to exercise significant influence. #### Accounting #### policy Associates are investments over which the Group has significant influence, which is the power to participate in the financial and operating policy decisions of the investee, but without the ability to exercise control or joint control. Investments in associates are equity accounted and represent the cost of the investment, the post-acquisition share of any profits or losses and other changes in equity, and the long-term debt interests which in substance form part of the Group’s net investment. The carrying values of associates are reviewed on a regular basis and if there is objective evidence that a sustained decline in value has occurred as a result of one or more events during the period, the investment is impaired. The investment in associate can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 63 | 89 | | Repayment of quasi-equity loans | (20) | (26) | | Balance at the end of the reporting period | 43 | 63 | The Group holds a 23% (2021: 23%) ownership interest in RBCT. The principal business activity of RBCT is the export of coal and it operates on the basis that all costs incurred are recovered from shareholders, in proportion to their throughput through the terminal; hence no profit or loss is recognised under the equity method of accounting. The Group’s total investment in associate includes loans of R23 million (2021: R43 million) which in substance form part of Group’s net investment in the associate. The Group has assessed these loans for impairment based on the expected repayment of the loan and risk of default by RBCT, taking into account both forward-looking and historical information available and determined that no impairment is required. 15. #### ACCOUNTING FOR THE INTERNAL RESTRUCTURE As described in note 2A, Mafube Coal Mining was acquired by the Group on 31 March 2021 as part of the internal restructure. The transaction took place at the fair value of the Group’s interest in the business and the consideration was settled by the issue of shares by SACO to ASA. The Group applied predecessor accounting to the acquisition. #### Accounting policy The Group’s share of the assets and liabilities of Mafube Coal Mining were recognised in the consolidated financial statements at their book values as previously included in the Anglo American Group financial statements. Thungela has not adopted the financial history of Mafube Coal Mining and thus the comparatives included in the consolidated financial statements have not been restated to reflect the impact of the internal restructure. If the internal restructure had been completed on 1 January 2021, the total comprehensive income for the period would have increased by R36 million. The acquisition date book values of the assets and liabilities of the Mafube Coal Mining business can be analysed as follows: | | | | --- | --- | | | | | Rand million | 2021 | | Total non-current assets | 1,700 | | Total current assets1 | 458 | | Total assets | 2,158 | | Total non-current liabilities | (588) | | Total current liabilities | (271) | | Total liabilities | (859) | | Total book value of the net assets acquired | 1,299 | 1Current assets include cash and cash equivalents of R158 million. Annual Financial Statements for the year ended 31 December 2022  75 16. #### ACQUISITION OF JOINT OPERATION On 30 November 2021, the Group, through its wholly owned subsidiary TOPL, acquired a 49% interest in Pamish, which is classified as a joint operation. The acquisition of Pamish does not constitute a business combination as defined in IFRS 3, as Pamish was not considered to be a business as defined at the time of the acquisition. #### Accounting policy The Group’s share of the results of joint operations acquired during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of the acquisition. The Group’s share of the assets and liabilities of Pamish have been recognised in the consolidated financial statements at their fair values on the date joint control was obtained. TOPL has entered into various agreements with the Nasonti Group, which is the joint operator of Pamish. Pamish owns a plant, which is used to beneficiate existing discard coal at our Goedehoop South site, which is part of the Goedehoop Colliery. The structure of the contractual agreements is such that TOPL and the Nasonti Group have joint control of Pamish, and it is considered to be a joint operation. The contractual agreements result in the Nasonti Group, through Pamish, beneficiating pre-existing discard product at the Goedehoop South site, for a pre-determined fixed fee, along with their variable production and other costs incurred. TOPL has the right to a minimum of 85% of the saleable product beneficiated through Pamish over the life of the agreements. The fair value of the net assets acquired on obtaining joint control of Pamish is considered to be zero. Should the acquisition of the Pamish have been effective from 1 January 2021, there would have been no impact on the total comprehensive income for the Group, as Pamish was not operational before acquisition date. In order to establish Pamish, and to increase the capacity of the plant to meet the contractually agreed throughput, TOPL had funded a total of R227 million into Pamish through various mechanisms in the year ended 31 December 2021, including an investment in equity. Additional funding of R50 million has been provided in the year ended 31 December 2022. Of this total funding, only R170 million (2021: R120 million) is repayable to TOPL over 18 months, which bears interest at prime plus 3.0%. The portion of this loan that is deemed to be held by the other joint operator of Pamish is included in financial asset investments per note 22. The contractual agreements result in the Group obtaining 85% of the economic benefits of the operations of Pamish, and so the assets and liabilities of Pamish are accounted for to reflect the economic benefits obtained rather than the legal ownership of 49%. The plant produced first coal in March 2022, and reached steady state capacity in October 2022. The acquisition date fair values of the Groups’ share of the assets and liabilities of Pamish can be analysed as follows: | | | | --- | --- | | | | | Rand million | 2021 | | Total non-current assets | 98 | | Total current assets1 | 125 | | Total assets | 223 | | | | | Total non-current liabilities | (142) | | Total current liabilities | (81) | | Total liabilities | (223) | | Total fair value of the net assets acquired | — | 1Current assets include cash and cash equivalents of R8 million. 76  Annual Financial Statements for the year ended 31 December 2022 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 17. #### OTHER NON-CURRENT ASSETS Other non-current assets comprise biological assets and assets relating to employee benefits. #### Accounting #### policy Biological assets are measured at fair value less cost to sell, with any changes recognised in profit or loss. Other non-current assets can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Biological assets | 65 | 83 | | Other employee benefits | — | 26 | | Total other non-current assets | 65 | 109 | #### Biological assets Biological assets include different species such as Buffalo and Sable within the Waterberg and Limpopo estates of the Group that are actively managed and bred. The carrying amount of the biological assets can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 83 | 86 | | Fair value loss | (18) | (3) | | Balance at the end of the reporting period | 65 | 83 | The fair value of the biological assets is measured based on auction prices (level 1 in the fair value hierarchy) obtained at each reporting date. There is no reasonably possible change in the inputs into the fair value calculation that would have a material impact on the consolidated financial statements. Annual Financial Statements for the year ended 31 December 2022  77 ### WORKING ### CAPITAL 7879 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 18. #### INVENTORIES Inventories comprise consumables to be used in the production process and finished products being processed coal stockpiled at the mine or awaiting export at the RBCT. #### Accounting policy Inventory is measured at the lower of cost and NRV. The production cost of inventory includes an appropriate proportion of depreciation and production overheads. Cost is determined on the following basis: •Consumables are measured at cost on a FIFO basis. •Finished products, being coal stock held at the mine or awaiting export at the RBCT, are measured at production costs and transport costs where relevant, on a weighted average cost basis. •Inventory is not valued until it has been processed, and so ROM stockpiles are not included in the inventory value. This is due to the fact that the costs required to convert the ROM into finished products are significant, and the product is not saleable until these are incurred. Inventory is recognised as a current asset as it is consumed within the normal business cycle. The estimation of volumes of stock on hand, and the measurement of production costs are calculated by engineers using available industry, engineering and scientific data based on average costs in line with the production period. These are periodically reassessed considering ongoing technical analysis and historical performance. The NRV per product is estimated using actual realised prices for the month, based on the quality, grade and calorific value of the finished products, and deducting costs to sell including transport costs from the mine to the RBCT, where relevant. Any write down to NRV is recognised in profit or loss in the month incurred. Inventories can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Consumables | 654 | 593 | | Finished products | 2,527 | 1,953 | | Total inventories | 3,181 | 2,546 | The cost of inventories recognised as an expense and included in operating costs amounted to R17,519 million (2021: R12,635 million). The write-down of inventories to NRV recognised throughout the reporting period amounted to Rnil (2021: R60 million). The Group’s ability to rail coal to the RBCT continues to be severely hampered by the inconsistent and poor performance of TFR throughout the past two years. Throughout 2021 and 2022, the South African coal industry has continued to engage TFR in an effort to improve performance, however the availability of rail capacity remains constrained. Thungela continues to work closely with TFR in order to resolve these challenges. The Group will continue to maintain our focus on utilising the available rail capacity as efficiently as possible to manage stockpile capacity across our operations, along with the higher costs incurred in relation to the management of these stockpiles. 80  Annual Financial Statements for the year ended 31 December 2022 19. #### TRADE AND OTHER RECEIVABLES Trade receivables comprise amounts due from Thungela’s customers for the sale of thermal coal. Other receivables include amounts receivable for VAT and other indirect taxes, prepaid expenses and amounts receivable for other transactions not related to the sale of thermal coal. #### Accounting policy Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost. Expected credit losses For trade receivables only, the simplified expected credit loss approach included in IFRS 9 is applied, which requires expected lifetime losses to be recognised from the initial recognition of the receivables. Expected credit losses are in general recognised where there is a failure to make contractual payments for a period of greater than 60 days, along with an appropriate assessment of forward-looking information. The Group will write-off trade and other receivables where there is information indicating that the customer is in severe financial difficulty and there is no realistic prospect of recovery of the asset, for example, when the customer has been placed under liquidation or entered into bankruptcy proceedings. Trade receivables are written off at the earlier of management receiving legal confirmation that the outstanding amount is irrecoverable, or when a partial settlement has been reached with the customer, or where the cost of recovery procedures outweighs the benefit of recovering the outstanding amount. Trade and other receivables can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Net trade receivables | 3,216 | 2,982 | | Trade receivables | 3,339 | 3,081 | | Provision for expected credit losses | (123) | (99) | | Other tax receivables1 | 1,105 | 966 | | Prepayments | 314 | 325 | | Net other receivables | 273 | 111 | | Other receivables | 359 | 170 | | Provision for expected credit losses | (86) | (59) | | | | | | Total trade and other receivables | 4,908 | 4,384 | | Classified as: | | | | Current | 4,907 | 4,320 | | Non-current | 1 | 64 | 1Other tax receivables include VAT receivables and diesel rebates receivable from SARS. The Group applies the simplified expected credit loss model to its trade receivables, and the lifetime expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience and credit rating, adjusted as appropriate for future observable data. Trade receivables include R2,496 million (2021: R2,569 million) due from AAML, which represents 75% (2021: 83%) of the total trade receivables balance outstanding. As per the contractual terms with AAML, all trade balances should be settled within 15 days of invoicing. There have historically been no defaults on payments from AAML, hence it is assessed that the credit risk of the AAML trade receivable is low. Given the nature of the domestic customers, the amounts due from these customers are considered recoverable. The historical level of customer default is low and as a result the credit quality of the trade receivables is considered to be high. Annual Financial Statements for the year ended 31 December 2022  81 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 19. #### TRADE AND OTHER RECEIVABLES CONTINUED Prepayments include, among other items, insurance premiums of R79 million (2021: R114 million), ordinary course deposits to secure supply of critical consumables of R128 million (2021: R47 million) and a payment made in relation to educational development activities in host communities of R7 million (2021: R61 million). Other receivables include various amounts receivable by the Group which are not related to the sale of thermal coal. No items included in other receivables are considered individually material, however agreements with relevant counterparties are made in relation to repayment terms. A provision for expected credit losses has been recognised on these receivables as considered appropriate in relation to the specific circumstances applicable to each counterparty. Refer to note 27 for further detail on our exposure to credit risk. Trade receivables do not incur any interest, are principally short-term in nature and are measured at their nominal value, net of the appropriate provision for expected credit losses. The provision for expected credit losses on trade receivables can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Gross carrying amount – trade receivables | Expected loss rate (%) | Provision for expected credit losses | | Current | 3,043 | 0.3 | (9) | | Between 1 – 2 months | 157 | 8.3 | (13) | | Between 3 – 4 months | 10 | 10 | (1) | | Between 5 – 12 months | 84 | 68 | (57) | | Greater than 12 months | 45 | 96 | (43) | | Total trade receivables | 3,339 | 3.7 | (123) | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Rand million | Gross carrying amount – trade receivables | Expected loss rate (%) | Provision for expected credit losses | | Current | 2,897 | 0.3 | (10) | | Between 1 – 2 months | 85 | 13 | (11) | | Between 3 – 4 months | 1 | 100 | (1) | | Between 5 – 12 months | 54 | 61 | (33) | | Greater than 12 months1 | 44 | 100 | (44) | | Total trade receivables | 3,081 | 3.2 | (99) | 1The increase in the expected loss rate on receivables greater than 12 months is on the basis of one customer being placed into business rescue in the year ended 31 December 2021. The movement in the provisions for expected credit losses can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | (158) | (91) | | Increase in provisions for expected credit losses | (51) | (67) | | Trade receivables | (24) | (8) | | Other receivables | (27) | (59) | | | | | | Balance at the end of the reporting period | (209) | (158) | 82  Annual Financial Statements for the year ended 31 December 2022 20. #### CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash held in bank and short-term investments held with the primary purpose of managing the short-term liquidity requirements of the Group. #### Accounting policy Cash and cash equivalents comprise cash held in bank and short-term investments. Cash and cash equivalents are measured at amortised cost. Cash and cash equivalents can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Short-term investments | 11,918 | 7,082 | | Cash held in bank | 2,862 | 1,644 | | Cash held in the Sisonke Trust and the Nkulo Trust | 519 | 10 | | Total cash and cash equivalents | 15,299 | 8,736 | #### Short-term investments Short-term investments are held with the primary purpose of managing the short-term liquidity requirements of the Group. Liquidity is a key consideration when selecting appropriate investment options for the funds to ensure they can be readily accessed for operational activity. The investments are held in low-risk interest bearing instruments, across three of the five largest South African banks, with an appropriate liquidity spread to support the Group’s requirements. The spread of funds between banks was done in order to partially mitigate counterparty risk and the global credit ratings for these investments range between AA- and AA+. The investments earn interest at rates of between 6.8% – 7.9% (2021: 3.9% – 4.5%). #### Cash held in bank Included in cash held in bank is R2,202 million (2021: R1,247 million) held in US dollars, related to proceeds on export revenue which is settled in US dollars. This cash, along with the cash held in South African rand of R660 million (2021: R397 million) is held across two of the major South African banks with global credit ratings of AA+. #### Cash held in Trusts Cash held in the Sisonke Trust and the Nkulo Trust relates to cash held by the trusts, which is not available for the general use of the Group and so is considered restricted cash for the Group. As described in note 2A, the trusts are entitled to 10% collectively of the dividends declared on ordinary shares by SACO. For the year ended 31 December 2022, SACO declared ordinary dividends of R773 million to the trusts. A total of R265 million was paid to the eligible employees through the Sisonke Trust in December 2022, excluding tax at the beneficiaries’ marginal tax rates, and R519 million remains in the trusts at 31 December 2022. The cash balances in the trusts are to be used at the discretion of the trustees, as specified in the underlying trust deeds, for the benefit of the relevant beneficiaries. Annual Financial Statements for the year ended 31 December 2022  83 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 21. #### TRADE AND OTHER PAYABLES Trade and other payables include amounts owed to suppliers, tax authorities and other parties that are typically due to be settled within one year of the reporting date. #### Accounting policy Trade and other payables are initially measured at fair value. Trade and other payables are not interest bearing, are subsequently measured at nominal value, and are derecognised when the associated obligation has been discharged, cancelled or has expired. Trade and other payables can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Trade payables | 2,089 | 1,713 | | Accruals | 946 | 867 | | Other tax and employee related payables | 838 | 749 | | Other payables1 | 124 | 170 | | Total trade and other payables | 3,997 | 3,499 | 1No items included in other payables are considered individually material. Included within other payables is deferred income of R23 million (2021: R25 million) which represents monies received from customers but for which the associated performance obligation has not yet been satisfied. These amounts will be recognised as revenue as the performance obligations are satisfied. 84  Annual Financial Statements for the year ended 31 December 2022 ### FINANCIAL ### INSTRUMENTS 85 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 22. #### FINANCIAL ASSET INVESTMENTS Financial asset investments comprise numerous investments which do not give the Group control, joint control or significant influence over the investees. These assets also include instruments held with various financial institutions. #### Accounting policy Investments, other than investments in subsidiaries, joint arrangements and associates, are financial assets and are initially recognised at fair value. The Group’s financial assets are classified into the following measurement categories: debt instruments at amortised cost, equity instruments designated at FVOCI and instruments at FVPL. Financial assets are derecognised when the right to receive cash flows from the asset has expired, the right to receive cash flows has been retained but an obligation to on-pay them in full without material delay has been assumed or the right to receive cash flows has been transferred together with substantially all of the risks and rewards of ownership. Financial assets at amortised cost comprise loans to various investees from which the Group will collect payments of solely principal and interest. Financial assets at FVPL comprise investments held in relation to the ongoing environmental obligations of the Group, and the fair value movements on these investments are reinvested to further improve the environmental liability coverage△. Refer to note 28 for further detail. Financial assets at FVOCI comprise equity investments in various investees. Financial asset investments can be analysed as follows: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Rand million | At amortised cost | At FVPL | At FVOCI | Total | | Balance at the start of the reporting period | 122 | 199 | 33 | 354 | | Additions1 | — | 443 | — | 443 | | Repayment of loans by investees | (31) | — | — | (31) | | Loans granted to investees | 8 | — | — | 8 | | Fair value gains | — | 16 | — | 16 | | Interest capitalised | 10 | — | — | 10 | | Reclassifications | (14) | — | — | (14) | | Balance at the end of the reporting period | 95 | 658 | 33 | 786 | | Classified as: | | | | | | Current | 31 | — | — | 31 | | Non-current | 64 | 658 | 33 | 755 | 1The additions to the financial asset investments at FVPL include the investment in other environmental investments, through the green fund of R438 million as detailed in note 28. 86  Annual Financial Statements for the year ended 31 December 2022 | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Rand million | At amortised cost | At FVPL | At FVOCI | Total | | Balance at the start of the reporting period | 71 | 3 | 287 | 361 | | Acquisition of joint operation | (17) | — | — | (17) | | Additions1,2 | — | 192 | 110 | 302 | | Disposals3 | — | — | (301) | (301) | | Repayment of loans by investees | (6) | — | — | (6) | | Loans granted to investees | 69 | — | — | 69 | | Fair value gains/(losses) | — | 4 | (63) | (59) | | Interest capitalised | 5 | — | — | 5 | | Balance at the end of the reporting period | 122 | 199 | 33 | 354 | | Classified as: | | | | | | Current | 31 | — | — | 31 | | Non-current | 91 | 199 | 33 | 323 | 1The additions to the financial asset investments at FVPL relate to the investment in other environmental investments, through the green fund as detailed in note 28. 2The additions to the financial asset investments at FVOCI relate to the purchase of Anglo American shares in relation to the Anglo American share awards as detailed in note 33. 3The disposals of financial assets at FVOCI are as a result of the vesting of the awards under the Anglo American share plans as detailed in note 33. The financial asset investments at amortised cost comprise various loans granted to investees in the normal course of business, with counterparties which the Group has long standing relationships. The Group has assessed the provisions for expected credit losses required for these loans based on the expected repayment thereof and risk of default by the counterparties, taking into account both forward-looking and historical information available. Included in the financial asset investments at amortised cost is an amount of R30 million (2021: R18 million) in relation to the external portion of loans granted to Pamish. Refer to note 16 for detail related to the Pamish structure. These amounts will be repaid through proceeds on contractually committed saleable product to be purchased by TOPL, and thus the credit quality of this loan is considered to be high. No provision for expected credit loss has been recognised on this loan on this basis. No other amounts included in this balance are individually material. Based on the assessment performed, it has been determined that any potential expected credit loss on these loans granted is not material to the Group. Annual Financial Statements for the year ended 31 December 2022    87 NO #### TES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 23. #### LOANS AND BORROWINGS Loans and borrowings comprise of loans in relation to specific capital investment activities where required. Before the demerger, loans were held with Anglo American to fund the operations of the Group. #### Accounting policy Loans and borrowings are initially measured at fair value, net of transaction costs incurred. Loans and borrowings are interest bearing and are subsequently stated at amortised cost, using the effective interest rate method. Loans and borrowings are derecognised when the associated obligation has been discharged, cancelled or has expired. The loans and borrowings held by the Group can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 63 | 582 | | Cash movements | (9) | (565) | | Loans advanced | — | 2,570 | | Loans repaid | (9) | (3,135) | | Non-cash movements | 6 | 46 | | Interest capitalised | 6 | 46 | | | | | | Balance at the end of the reporting period | 60 | 63 | Loans and borrowings are short-term in nature, have no fixed terms of repayment and attract interest at prime plus 1.0%. These loans are held through Butsanani Energy and were used for the initial investment into the Rietvlei Colliery. As part of the internal restructure detailed in note 2A, the balance of the loan to TOPL from AASAF at 31 May 2021 was settled, through cash paid from ASA to the Group, and then used by TOPL to settle the outstanding loan balance with AASAF in cash. The loan balance at this date, inclusive of interest capitalised, amounted to R2,966 million. The settlement of this loan signalled the start of the economic and operational independence of the Group, as before this date all benefit and risk in the business accrued to Anglo American through the loan account. The loan to TOPL from AASAF attracted interest at a variable interest rate between 5.2% – 5.6%  before the settlement thereof, and was effectively used to fund the operations of the Group before the demerger. 88  Annual Financial Statements for the year ended 31 December 2022 24. #### DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments consist of assets and liabilities related to the capital support agreement, forward coal swap transactions entered into with the intention for settlement net in cash and contracts for the forward sale of foreign currency. #### Accounting policy Derivative financial instruments are classified as at FVPL. The fair value gains and losses on subsequent measurement are recognised in profit or loss at each reporting date. All derivatives are held in the statement of financial position and they are classified as current or non-current depending on the contractual maturity of the derivative. #### Capital support agreement As part of Anglo American’s commitment to provide financial assistance to Thungela over the post demerger period, on 6 March 2021 the Group and ASA entered into a capital support agreement. It was arranged as a free-standing contract to provide financial assistance by way of minimum price support for all export sales made to AAML from 1 June 2021 until 31 December 2022, up to a maximum amount of R1,500 million in 2021 and R2,500 million in 2022. The Group would only have been required to repay any capital support received should the price recover, and thus is not limited in the benefits to be received from the sustained recovery of the Benchmark coal price. The derivative asset was fair valued using the Clewlow and Strickland pricing model for the valuation of average rate commodity options. The fair value movements were mainly impacted by differences between the Benchmark coal price forwards, the assumed Benchmark coal price volatility and the ZAR discount factor assumed for the purposes of determining the fair value of the derivative, as well as the realised price in South African rand over the duration of the capital support agreement. The fair value was determined by independent experts using external sources of information with reference to the forecasted quoted Benchmark coal prices and exchange rates. A fair value loss of R347 million (2021: R569 million) on the derivative asset has been recognised in profit or loss on the basis of the recovery in the Benchmark coal price to 31 December 2022. No amount of the available capital support has been utilised by the Group and the contract came to an end on 31 December 2022. Inputs into the Clewlow and Strickland pricing model for the valuation dates are as set out below: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | At 31 December 2022 | | At 31 December 2021 | | At initial recognition | | | | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | | Benchmark coal price forwards (Rand/tonne) | — | — | 2,174 | 1,512 | 1,238 | 1,253 | | Benchmark coal price volatility (%) | — | — | 47 | 47 | 24 | 24 | | ZAR discount factor | — | — | 1.00 | 0.95 | 0.98 | 0.92 | Annual Financial Statements for the year ended 31 December 2022    89 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 24. #### DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED #### Forward coal swap tran #### sactions The Group is exposed to volatility in the Benchmark coal price due to the significant volume of export sales made to AAML. In order to manage our exposure to the volatility in the Benchmark coal price, particularly at our higher-cost operations, the Group has continued our price risk management programme, consisting of forward financial coal swap transactions. The Thungela board approved a mandate in relation to this price risk management programme which commenced in November 2021 and specifies the volume allowed to be financially traded, the minimum margin to be targeted per transaction, and the type of instruments which can be used to manage our risk in this area. These transactions are settled net in cash, in US dollars, with no intention for the counterparty to take physical delivery of the coal. The forward coal swap transactions are derivative instruments and are measured at FVPL. The fair value is determined on the basis of comparing the pre-determined price at which the forward coal swap transactions were entered into, and the forward curve of the Benchmark coal price at the reporting date. The fair value is determined in conjunction with the counterparties to the transactions, using external sources of information. Forward coal swap transactions have been entered into using both the Benchmark coal price, as well as a Secondary index price, which is closely correlated to the Benchmark coal price. Fair value losses of R3,207 million (2021: fair value gains of R348 million) have been recognised on the forward coal swap transactions. These losses are based on fluctuations in the forward curve of the Benchmark coal price from the date the transactions were entered into, to the settlement date of the transactions or to the reporting date for open transactions. Following the onset of the unfortunate conflict in Ukraine, the Benchmark coal price increased significantly, to an average of USD271 per tonne (2021: USD124 per tonne) leading to a significant loss being realised on the forward coal swap transactions. The forward coal swap transactions undertaken post the significant increase in the Benchmark coal price have been committed to at a higher average price, which has led to the fair value losses on these instruments reducing as they matured. The Thungela board continues to monitor the approved mandate in line with current market conditions, as well as production levels which have been impacted by the ongoing rail constraints. Details of the forward coal swap transactions settled in the year can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | | Benchmark coal price swaps | Secondary index price swaps | Total | | Volume settled (kt) | 640 | 875 | 1,515 | | Weighted average committed price (US$/tonne) | 155 | 151 | 153 | | Settlement dates (2022) | January – November | January – November | January – November | | Weighted average actual price on settlement (US$/tonne) | 277 | 296 | 288 | | Cash outflow on settlement (Rand million) | (1,209) | (1,774) | (2,983) | 90  Annual Financial Statements for the year ended 31 December 2022 Details of the open forward coal swap transactions at the reporting date can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | | Benchmark coal price swaps | Secondary index price swaps | Total | | Volume committed (kt) | 76 | 105 | 181 | | Weighted average committed price (US$/tonne) | 269 | 204 | 231 | | Settlement dates | December 2022 – June 2023 | December 2022 – March 2023 | December 2022 – June 2023 | | Weighted average Benchmark coal price forward curve at the reporting date (US$/tonne) | 181 | 199 | 192 | | Fair value gains on derivative financial instruments (Rand million) | 118 | 6 | 124 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | | Benchmark coal price swaps | Secondary index price swaps | Total | | Volume committed (kt) | 194 | 725 | 919 | | Weighted average committed price (US$/tonne) | 126 | 131 | 130 | | Settlement dates | January – June 2022 | January – June 2022 | January – June 2022 | | Weighted average Benchmark coal price forward curve at the reporting date (US$/tonne) | 103 | 106 | 105 | | Fair value gains on derivative financial instruments (Rand million) | 73 | 275 | 348 | #### Forward sales of foreign currency The Group is exposed to fluctuations in the US dollar exchange rate as our export revenue to AAML is settled in US dollars. The Group’s expenses are predominantly in South African rand, meaning the US dollars are required to be converted to South African rand to fulfil our ongoing liquidity requirements. In order to manage our risk exposure on these conversions, various contracts are entered into to convert US dollars to South African rand at future dates. The conversions are predominantly done through FECs which will settle at a future date. These contracts are considered to be derivative instruments and are measured at FVPL, with the fair value movements being recognised in net finance costs. The fair value is determined by comparing the contractual rate at which the transaction was entered into, to the forward exchange rate curve as at the reporting date for open positions, or at the settlement date. These contracts are short-term in nature, and may be extended before settlement date based on market conditions at the time. A fair value loss of R553 million (2021: Rnil) has been recognised on these contracts based on the volatility of the South African rand against the US dollar throughout 2022. Details of the forward sales of foreign currency settled in the year can be analysed as follows: | | | | | --- | --- | --- | | | | | | | | 2022 | | Total currency contracted (US$ million) | | 845 | | Contractual conversion rate (ZAR:US$) | | 15.71 – 18.54 | | Spot rate on settlement (ZAR:US$) | | 16.54 – 18.28 | | Settlement dates (2022) | | July – November | | Cash outflow on settlement (Rand million) | | (578) | Annual Financial Statements for the year ended 31 December 2022    91 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 24. #### DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED #### Forward sales of foreign currency continued Details of the open forward sales of foreign currency at the reporting date can be analysed as follows: | | | | | --- | --- | --- | | | | | | | | 2022 | | Total currency contracted (US$ million) | | 55 | | Contractual conversion rate (ZAR:US$) | | 17.25 – 17.81 | | Forward exchange rate at the reporting date (ZAR:US$) | | 17.02 | | Settlement dates (2023) | | January | | Fair value gains on derivative financial instruments (Rand million) | | 25 | #### Impact of derivative financial instruments The amounts recognised in the statement of profit or loss and other comprehensive income in relation to the derivative financial instruments can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | | 2022 | 2021 | | Amounts included in profit before net finance costs and tax | | (3,554) | (221) | | Fair value loss on capital support agreement | | (347) | (569) | | Fair value (losses)/gains on forward coal swap transactions | | (3,207) | 348 | | Amounts included in net finance costs | | (553) | — | | Fair value losses on forward sales of foreign currency | | (553) | — | | | | | | | Total fair value losses on derivative financial instruments | | (4,107) | (221) | The amounts recognised in the statement of financial position in relation to the derivative financial instruments can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | | 2022 | 2021 | | Derivative financial asset - capital support | | — | 347 | | Derivative financial instruments | | 149 | 348 | | Forward coal swap transactions | | 124 | 348 | | Forward sales of foreign currency | | 25 | — | | | | | | | Total derivative financial instruments | | 149 | 695 | The amounts recognised in the statement of cash flows in relation to the derivative financial instruments can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | | 2022 | 2021 | | Cash outflow on settlement of forward coal swap transactions | | (2,983) | — | | Cash outflow on settlement of forward sales of foreign currency | | (578) | — | | Total cash outflow on settlement of derivative financial instruments | | (3,561) | — | 92  Annual Financial Statements for the year ended 31 December 2022 25. #### INVESTMENT IN INSURANCE STRUCTURE The Group has invested in a self-insurance structure with an independent financial institution through a cell captive mechanism. This has been completed through an investment in preference shares in an identifiable cell captive with the financial institution. #### Accounting policy The Group does not have control of the insurance cell captive arrangement, referred to as the ‘cell’, based on the rights conferred by the preference shares and underlying agreements. The results of the cell have not been consolidated on this basis. The terms of the agreements related to the cell do not result in the Group being exposed to insurance risk, as cover is limited to a maximum of the amount contributed, adjusted for movements in the fair value of the cell. The transaction is thus considered an investment in preference shares and is a financial asset measured at FVPL. The investment in preference shares is measured at fair value at each reporting date, with changes in the fair value recognised within net finance costs. Details of the investment in the insurance structure can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | | 2022 | | Balance at the start of the reporting period | | — | | Investment in the reporting period | | 1,224 | | Growth on investment | | 2 | | Balance at the end of the reporting period | | 1,226 | In December 2022, Thungela, through its wholly owned subsidiary TTPL, entered into a self-insurance arrangement through an investment into the preference shares of a separately identifiable cell captive structure. The cell is managed by an external financial institution and provides insurance cover for first-party risks, up to a maximum amount of the initial contribution, adjusted for changes in the fair value of the underlying investment. An amount of R1,224 million was contributed to the cell in December 2022, for a minimum period of insurance of three years, which can be extended at the end of the current term. Each year the Group, along with the financial institution, will assess the value of assets held in the cell against the required levels of insurance cover, and make additional contributions as needed. Additional contributions may also be required to the extent that claims are made. If the value of claims made exceed the total assets held in the cell, the Group will have the option to either recapitalise the cell, or to unwind the structure. The investment into the cell was made to reduce the Group’s exposure to the traditional insurance market, and to reduce the cost of insuring our operating assets in the long-term. The cell may enter into re-insurance agreements to cover potential losses, which will either impact the fair value of the investment, or be expensed as incurred by the Group. The amount contributed by the Group into the cell is pooled by the financial institution with other available funds to maximise the return on investment. Fair value movements on the investment may comprise interest, dividends and capital growth, and are externally confirmed at the reporting date. These fair value movements are recognised within net finance costs as incurred. #### Sensitivity analysis The Group’s investment in the insurance structure is exposed to interest rate fluctuations and other market factors linked to the contributed funds that are pooled by the financial institution. The initial contribution was made in December 2022, therefore a reasonably possible change in the inputs used to value the investment would not be considered to have a significant impact on the amounts recognised in the statement of financial position and the statement of profit or loss and other comprehensive income for the year ended 31 December 2022. Annual Financial Statements for the year ended 31 December 2022    93 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 26. #### FINANCIAL INSTRUMENTS #### Accounting policy Financial instruments held by the Group have been disclosed in notes 19 to 25, 28 and 29 as well as in the note below. For financial assets and liabilities that are traded on an active market, such as listed investments, fair value is determined by reference to the market price. For non-traded financial assets and liabilities, fair value is calculated using discounted cash flows, considered to be reasonable and consistent with those that would be used by a market participant and based on observable market data that is readily available (for example, forward exchange rates, interest rates or commodity price curves). Where discounted cash flow models based on the Group’s assumptions are used, the resulting fair value measurements are considered to be at level 3 in the fair value hierarchy, as defined in IFRS 13, as they depend to a significant extent on unobservable valuation inputs. The financial instruments held by the Group can be analysed as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | 2022 | | | | Financial assets | | | Financial liabilities amortised at cost | Total | | Rand million | Notes | Amortised cost1 | FVPL | FVOCI | | Financial assets | | | | | | | | Environmental rehabilitation trusts | 28 | — | 3,446 | — | — | 3,446 | | Financial asset investments | 22 | 95 | 658 | 33 | — | 786 | | Investment in insurance structure | 25 | — | 1,226 | — | — | 1,226 | | Derivative financial instruments | 24 | — | 149 | — | — | 149 | | Trade and other receivables2 | 19 | 3,489 | — | — | — | 3,489 | | Cash and cash equivalents | 20 | 15,299 | — | — | — | 15,299 | | Total financial assets | | 18,883 | 5,479 | 33 | — | 24,395 | | Financial liabilities | | | | | | | | Lease liabilities | 29 | — | — | — | (93) | (93) | | Loans and borrowings | 23 | — | — | — | (60) | (60) | | Trade and other payables3 | 21 | — | — | — | (3,136) | (3,136) | | Total financial liabilities | | — | — | — | (3,289) | (3,289) | | Net financial assets | | 18,883 | 5,479 | 33 | (3,289) | 21,106 | 1The carrying amounts of the financial assets held at amortised cost are deemed to approximate their fair values. 2Trade and other receivables exclude prepayments and other tax receivables. 3Trade and other payables exclude other tax and employee related payables, and deferred income. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | Financial liabilities amortised at cost | 2021 | | | | Financial assets | | | Total | | Rand million | Notes | Amortised cost1 | FVPL | FVOCI | | Financial assets | | | | | | | | Environmental rehabilitation trusts | 28 | — | 3,288 | — | — | 3,288 | | Financial asset investments | 22 | 122 | 199 | 33 | — | 354 | | Derivative asset – capital support | 24 | — | 347 | — | — | 347 | | Derivative financial instruments | 24 | — | 348 | — | — | 348 | | Trade and other receivables2 | 19 | 3,093 | — | — | — | 3,093 | | Cash and cash equivalents | 20 | 8,736 | — | — | — | 8,736 | | Total financial assets | | 11,951 | 4,182 | 33 | — | 16,166 | | Financial liabilities | | | | | | | | Lease liabilities | 29 | — | — | — | (121) | (121) | | Loans and borrowings | 23 | — | — | — | (63) | (63) | | Trade and other payables3 | 21 | — | — | — | (2,725) | (2,725) | | Total financial liabilities | | — | — | — | (2,909) | (2,909) | | Net financial assets | | 11,951 | 4,182 | 33 | (2,909) | 13,257 | 1The carrying amounts of the financial assets held at amortised cost are deemed to approximate their fair values. 2Trade and other receivables exclude prepayments and other tax receivables. 3Trade and other payables exclude other tax and employee related payables, and deferred income. 94  Annual Financial Statements for the year ended 31 December 2022 #### Fair value hierarchy IFRS 13 defines a fair value hierarchy to be applied to financial instruments measured at fair value based on the inputs used to measure their fair value. The financial assets carried at fair value can be analysed in terms of the fair value hierarchy as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Level 2 | Level 3 | Total | | Financial assets | | | | | Environmental rehabilitation trusts | 3,446 | — | 3,446 | | Financial asset investments at FVOCI | — | 33 | 33 | | Financial asset investments at FVPL | 658 | — | 658 | | Investment in insurance structure | — | 1,226 | 1,226 | | Derivative financial instruments | 149 | — | 149 | | Total financial assets carried at fair value | 4,253 | 1,259 | 5,512 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Rand million | Level 2 | Level 3 | Total | | Financial assets | | | | | Environmental rehabilitation trusts | 3,288 | — | 3,288 | | Financial asset investments at FVOCI | — | 33 | 33 | | Financial asset investments at FVPL | 199 | — | 199 | | Derivative asset – capital support | 347 | — | 347 | | Derivative financial instruments | 348 | — | 348 | | Total financial assets carried at fair value | 4,182 | 33 | 4,215 | There were no transfers of financial instruments between level 2 and level 3 in any of the reporting periods presented. The fair value hierarchy as included in IFRS 13 is as follows: | | | | --- | --- | | | | | Fair value hierarchy | Valuation technique | | Level 1 | The fair value is based on quoted prices in active markets for identical financial instruments | | Level 2 | The fair value is determined using directly observable inputs other than level 1 inputs | | Level 3 | The fair value is determined on inputs not based on observable market data | The movements in the fair value of the level 3 financial assets can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 33 | 33 | | Additions | 1,224 | — | | Fair value gain | 2 | — | | Balance at the end of the reporting period | 1,259 | 33 | For the level 3 financial assets at FVOCI, changing certain estimated inputs to reasonably possible alternative assumptions does not change the fair value significantly in any of the reporting periods presented. For the investment in insurance structure, refer to note 25 for further detail. Annual Financial Statements for the year ended 31 December 2022    95 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 27. #### FINANCIAL RISK MANAGEMENT The Thungela board and the Group executive committee approve and monitor the risk management processes, including documented treasury policies, counterparty limits and reporting structures. The types of risk exposure, the way such exposure is managed and quantification of the level of exposure in the statement of financial position is monitored by the Group on an ongoing basis. #### Credit risk Credit risk is the risk that a counterparty to a financial asset will cause a loss to the Group by failing to pay its obligation. The Group’s maximum exposure to credit risk from its financial assets can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Environmental rehabilitation trusts | 28 | 3,446 | 3,288 | | Financial asset investments at FVPL | 28 | 658 | 199 | | Financial asset investments at amortised cost | 22 | 95 | 122 | | Investment in insurance structure | 25 | 1,226 | — | | Trade and other receivables1 | 19 | 3,489 | 3,093 | | Cash and cash equivalents | 20 | 15,299 | 8,736 | | Total financial assets exposed to credit risk | | 24,213 | 15,438 | 1Trade and other receivables exclude prepayments and other tax receivables. The environmental rehabilitation trusts’ assets are managed by a reputable fund manager under an agreed mandate. The mandate is formulated to be consistent with the Group’s risk management policies and hence investments are only made in high quality instruments and adequate diversity is maintained. Refer to note 28 for further detail. Financial asset investments at FVPL, being the other environmental investments, relate to long-term investments held through two financial institutions. These are held in order to secure the guarantees required to further fund the financial provisioning requirements of the DMRE in relation to the environmental provisions. Refer to note 28 for further detail. The investment in insurance structure relates to Thungela’s subscription to preference shares issued by a financial institution, in a separately identifiable cell captive structure. Refer to note 25 for further detail. Thungela has a level of concentration risk on its trade and other receivables balance, as a result of its exposure to one major customer, being AAML. The amount outstanding from AAML of R2,496 million (2021: R2,569 million) represents 75% (2021: 83%) of the total outstanding trade receivables balance of R3,339 million (2021: R3,081 million). However, amounts owed by AAML are due for payment 15 days after invoice date, and there has been no historical default on payments due from AAML. The credit risk of the AAML receivable is considered to be low, and thus the concentration risk does not increase the overall credit risk exposure of the Group. The Group does not have significant concentration of credit risk in respect of domestic trade receivables. No individual customer, other than AAML, represents more than 10% of the trade receivables balance at 31 December 2022 (2021: none). The historical level of default on both export and domestic customers has been low, and the credit quality of the trade receivables is considered to be high. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience and credit rating, adjusted as appropriate for future observable data. Details of the credit quality of trade receivables and the associated provision for expected credit losses are disclosed in note 19. 96  Annual Financial Statements for the year ended 31 December 2022 #### Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Thungela’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. We review the cash flow forecasts of the Group on a regular basis, including under stressed scenarios impacted by Benchmark coal price and foreign exchange rate volatility, TFR rail and infrastructure performance levels and other reasonably possible risk scenarios. The ultimate responsibility for liquidity risk management rests with the Thungela board of directors, which has built appropriate liquidity risk management tools for the management of the Group’s short, medium and long-term liquidity management requirements. The Group has no long-term external borrowings, given its robust financial position at 31 December 2022. The Group is exposed to liquidity risk through its financial liabilities including trade and other payables, loans and borrowings and lease liabilities, as follows: •All trade and other payables are due within one year. The remaining contractual cash outflows are the same as the carrying amount at the reporting date. •The loans and borrowings relate to Butsanani Energy and have no fixed repayment terms. The carrying amount of R60 million (2021: R63 million) reflects the remaining contractual cash outflows. •The detailed maturity analysis, the carrying amount and undiscounted cash outflows related to lease liabilities are provided in note 29. #### Commodity risk Export revenue is recognised once thermal coal is loaded onto the vessel at the RBCT, and is based on the average Benchmark coal price for the month of loading, adjusted for specific grade and quality discounts. Pricing is not adjusted post the month of sale, and thus trade receivables are not subject to changes in value based on subsequent changes in the Benchmark coal price. In order to manage the Group’s exposure to volatility in the Benchmark coal price, a number of  forward coal swap transactions were entered into. These transactions are intended to be settled net in cash, and represent a targeted approach to manage the commodity risk the Group is exposed to, particularly at higher-cost operations. These forward coal swap transactions do not adjust the export revenue earned on sales to AAML, and are treated as free standing derivative contracts. The Group does not apply hedge accounting to these transactions. Refer to note 24 for further detail. Annual Financial Statements for the year ended 31 December 2022    97 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 27. #### FINANCIAL RISK MANAGEMENT CONTINUED #### Foreign exchange risk The Group is principally exposed to fluctuations in the US dollar exchange rate as a result of revenue, trade receivables balances, cash and cash equivalents balances, and to a lesser extent, capital expenditure that is not denominated in South African rand. Payments from AAML are received in US dollars, and the US dollars received are sold as required in line with the liquidity requirements of the Group. In order to manage our risk exposure to fluctuations in the exchange rate on these conversions, the Group enters into various contracts to convert US dollars to South African rand at future dates. The conversions are predominantly done through FECs which will settle at a future date. Refer to note 24 for further detail. The Group’s exposure to foreign currency risk can be analysed as follows: | | | | | --- | --- | --- | | | | | | US$ million | 2022 | 2021 | | Trade receivables | 147 | 161 | | Cash and cash equivalents | 129 | 78 | | Net foreign currency exposure | 276 | 239 | Sensitivity analysis The following analysis is intended to illustrate the sensitivity of the Group’s financial instruments at 31 December to changes in the US dollar exchange rate, with the impact on the statement of profit or loss and other comprehensive income being as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | +10% USD:ZAR | 469 | 381 | | – 10% USD:ZAR | (469) | (381) | The above sensitivities are calculated with reference to a single moment in time and are subject to change due to a number of factors including fluctuating trade receivables, cash and trade payables balances. #### Offset of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. There were no material amounts offset in the statement of financial position or associated with enforceable master netting agreements. #### Capital management The capital structure of the Group consists of cash and cash equivalents, equity attributable to the shareholders of the Group, which comprises stated capital, retained earnings and other reserves disclosed in the consolidated statement of changes in equity, and debt, consisting of lease liabilities and loans and borrowings. The Group’s capital management objective is to safeguard our ability to meet our liquidity requirements (including commitments in respect of capital expenditure) and continue as a going concern. On an annual basis Thungela updates our long-term business plan and these outputs are then incorporated into the budget process. The Group’s capital expenditure included in the budget process is targeted to be funded from cash generated from operations. No entities in the Thungela Group are subject to externally imposed capital requirements. Any capital that exceeds the operational and liquidity buffer requirements will be assessed against all available opportunities by applying our investment evaluation criteria and where appropriate, we may make additional distributions to shareholders. These decisions will be evaluated through Thungela’s internal decision-making structures before being approved by the board where required. Refer to note 34 for detail related to the dividend policy. 98  Annual Financial Statements for the year ended 31 December 2022 ### LIABILITIES 99 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 28. #### ENVIRONMENTAL AND OTHER PROVISIONS The Group has raised several provisions in relation to our exposure to legal or constructive obligations at the reporting date. These comprise environmental provisions in relation to our obligation to perform rehabilitation and decommissioning activities, restructuring provisions in relation to formal restructuring activities undertaken by the Group, and various other provisions in relation to contractual obligations. #### Accounting policy Environmental provisions An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when environmental disturbances are caused by the development or ongoing production of a mining asset. Costs for the restoration of site disturbances, rehabilitation, remediation and environmental monitoring activities, including water treatment costs, are estimated using the work of external consultants in conjunction with internal experts. Such costs arising from the decommissioning of infrastructure and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are recognised in the statement of profit or loss and other comprehensive income over the life of the operation, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for the restoration of subsequent site disturbances which are created on an ongoing basis during production are provided for at their net present values and recognised in the statement of profit or loss and other comprehensive income as extraction progresses. The amount recognised as a provision represents the Group’s best estimate of the cost required to complete the restoration and rehabilitation activities, the application of the relevant regulatory framework and the timing of expenditure. These estimates are inherently uncertain and could materially change over time. Changes in the measurement of the provision relating to the decommissioning of infrastructure or other site preparation work are added to or deducted from the cost of the related asset in the current period. If a decrease in the provision exceeds the carrying amount of the asset, the excess is recognised immediately in the statement of profit or loss and other comprehensive income. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed on the asset. Environmental rehabilitation trusts Contributions have historically been made to dedicated environmental rehabilitation trusts to fund the estimated cost of rehabilitation and restoration activities for premature closure and end of life closure of the relevant mine and as required thereafter. The Group exercises full control of these trusts and therefore the trusts are consolidated. The trusts’ assets are disclosed separately on the statement of financial position as non-current assets. The trusts’ assets are held through unit trusts through a reputable investment manager and are classified as at FVPL. Fair value gains and losses are recognised in the statement of profit or loss and other comprehensive income within net finance costs. Other environmental investments The Group has agreements with financial institutions to provide financial guarantees dedicated to funding the costs of rehabilitation and restoration activities. A portion of the premium contributions made under these agreements is invested and held as collateral against the financial guarantees. These contributions are largely invested in money market funds and are classified as at FVPL. The other environmental investments are recognised in the statement of financial position within financial asset investments, as disclosed in note 22, and fair value gains and losses are recognised in the statement of profit or loss and other comprehensive income within net finance costs. 100  Annual Financial Statements for the year ended 31 December 2022 Nkulo Community Partnership Trust The Group founded the Nkulo Trust in June 2021 as disclosed in note 2A, which subscribed for 5.0% of the ordinary shares, as well as a C preference share, issued by SACO. The C preference share entitles the trust to a preference dividend of a minimum of R6 million per annum up to 2024, subject to the availability of cash flows in SACO. The Nkulo Trust is also entitled to 5.0% of the dividends declared by SACO on ordinary shares. The Group recognises a provision for the constructive obligation it has to the beneficiaries of the Nkulo Trust at the point that the dividends on ordinary shares or preference dividends are declared by SACO. Restructuring provisions Restructuring costs are recognised as a liability at the earlier of the date the costs are incurred or when the Group is demonstrably committed, without a realistic possibility of withdrawal, to a formal detailed restructuring plan to either terminate employment before normal retirement date, or as a result of an offer made to encourage voluntary redundancy. In the case of an offer to encourage voluntary redundancy, the restructuring costs are measured based on the number of employees expected to accept the offer. Restructuring costs that are expected to be wholly settled more than one year after the end of the reporting period are discounted to their present value. Other provisions Other provisions in relation to contractual obligations are recognised when the Group has an obligation as a result of past events. Other provisions are recognised at the best estimate of the expenditure required to settle the present obligation at the reporting date taking into account the time value of money where relevant. Environmental and other provisions can be analysed as follows: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2022 | | | Environmental provisions | | | | | | Rand million | Environmental rehabilitation | Decommissioning | Nkulo Trust contributions1 | Other2 | Total | | Balance at the start of the reporting period | 6,049 | 702 | — | 250 | 7,001 | | Amounts charged3 | 1,201 | (108) | 386 | 209 | 1,688 | | Adjustments to decommissioning assets | — | (83) | — | — | (83) | | Unwinding of discount | 583 | 68 | — | 4 | 655 | | Amounts applied4 | (846) | — | — | — | (846) | | Reclassifications | — | — | 6 | (6) | — | | Balance at the end of the reporting period | 6,987 | 579 | 392 | 457 | 8,415 | | Classified as: | | | | | | | Current | 470 | 54 | 392 | 320 | 1,236 | | Non-current | 6,517 | 525 | — | 137 | 7,179 | 1Contributions to the Nkulo Trust represent amounts contributed to the trust, but not yet distributed to beneficiaries. 2Other provisions include provisions raised for contractual obligations. 3Amounts charged to provisions relate to amounts recognised through the statement of profit or loss and other comprehensive income in relation to changes in the provisions in the reporting period. 4Amounts applied to provisions relate to cash paid to settle these obligations which reduces the provision, but is not charged through the statement of profit or loss and other comprehensive income. Annual Financial Statements for the year ended 31 December 2022    101 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 28. #### ENVIRONMENTAL AND OTHER PROVISIONS CONTINUED Environmental and other provisions can be analysed as follows continued: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | | Environmental provisions | | | | | | Rand million | Environmental rehabilitation | Decommissioning | Restructuring1 | Other2 | Total | | Balance at the start of the reporting period | 5,386 | 798 | 208 | 234 | 6,626 | | Acquired through internal restructure | 228 | 40 | — | — | 268 | | Acquisition of joint operation | — | — | — | 51 | 51 | | Amounts charged3 | 452 | (146) | (204) | (20) | 82 | | Adjustments to decommissioning assets | — | (57) | — | — | (57) | | Unwinding of discount | 463 | 67 | — | 7 | 537 | | Amounts applied4 | (480) | — | — | (22) | (502) | | Reclassifications | — | — | (4) | — | (4) | | Balance at the end of the reporting period | 6,049 | 702 | — | 250 | 7,001 | | Classified as: | | | | | | | Current | 265 | 22 | — | 105 | 392 | | Non-current | 5,784 | 680 | — | 145 | 6,609 | 1The restructuring provision relates to a decision taken to place the Bokgoni pit at the Khwezela Colliery on care and maintenance effective from the first quarter of 2021. The restructuring process has been completed and no further costs are expected. 2Other provisions primarily relate to provisions raised for contractual obligations and servitudes. 3Amounts charged to provisions relate to amounts recognised through the statement of profit or loss and other comprehensive income in relation to changes in the provisions in the reporting period. 4Amounts applied to provisions relate to cash paid to settle these obligations which reduces the provision, but is not charged through the statement of profit or loss and other comprehensive income. #### Environmental provisions Thungela is obliged to undertake decommissioning, rehabilitation, remediation, closure and ongoing post-closure monitoring activities when environmental impacts are caused by the development or ongoing production of a mining property, as well as the decommissioning of infrastructure established on our operating sites. A provision is recognised for the present value of such costs, based on the Group’s best estimate of the legal and constructive obligations that exist at the reporting date. It is anticipated that most of these costs will be incurred over a period of up to 20 years, with water treatment costs incurred up to 50 years, post closure of the mines. These provisions are collectively referred to as the ‘environmental provisions.’ The environmental provisions are determined per operating site, with the assistance of specialist independent environmental consultants, and taking account of the current land disturbances and the expected costs of rehabilitation. The disturbed areas and expected costs are reassessed in each year and any required change in the environmental provisions is recognised on the completion of the assessment. An amount of R1,093 million (2021: R306 million) has been recognised in the statement of profit or loss and other comprehensive income, and a credit to the decommissioning assets of R83 million (2021: R57 million) has been recognised related to the annual assessment performed by the independent consultants, and other factors influencing the provisions. The increase in the environmental provisions in the year ended 31 December 2022 is as a result of the following key considerations: •Increases in the expected costs to be incurred based on inflationary pressures, particularly related to energy complex costs, as well as a refinement of the required costs based on ongoing remediation activities. •The impact of illegal mining on our sites, some of which had previously been rehabilitated, where additional work is now required. 102  Annual Financial Statements for the year ended 31 December 2022 The environmental provisions have been determined based on the legal obligations under the existing MPRDA Regulations, as well as the Group’s interpretation of the likely increase in costs required to transition to the NEMA Financial Provisioning Regulations, for example costs related to the ongoing pumping and treatment of polluted or extraneous water. The Group’s environmental provisions are in line with currently enforceable laws and regulations. The 2015 NEMA Financial Provisioning Regulations have been subject to numerous amendments, and drafts of the replacement regulations were published in November 2017, May 2019, August 2021, and finally in July 2022 and the transition date has again been deferred until 19 September 2023. The fourth draft of the updated set of proposed replacement NEMA Financial Provisioning Regulations was published on 11 July 2022 for public comment, but no feedback has been received on comments submitted by industry. The current draft of the NEMA Financial Provisioning Regulations intends to alter the way companies calculate the financial provisioning required for environmental obligations, and it is likely that compliance with these regulations will substantially increase the required quantum of financial provisioning to be made by mining right holders with existing operations. This likely increase is mainly attributable to the change that specifies that latent (or residual) environmental impacts that may become known in the future will include the pumping and treatment of polluted or extraneous water. It is important to note that financial provisioning as specified in the NEMA Financial Provisioning Regulations, as well as the existing MPRDA Regulations, does not translate into the environmental provisions as recognised by the Group, but rather the level of cash or other funding required to be made available to fund the closure of operations should the Group not be able to do so. The environmental provisions are calculated using the MPRDA Regulations, and the accompanying Guideline for Financial Provision (2005), as a base, adjusted for costs the Group is likely to incur over the period until closure is completed. The financial provisioning as required by the current MPRDA Regulations amounts to R4,413 million (2021: R4,108 million), compared to the total environmental provisions recognised by the Group of R7,566 million (2021: R6,751 million). This difference is due to additional costs which the Group believes we are likely to incur through a combination of our interpretation of the NEMA Financial Provisioning Regulations as well as actual costs to be incurred in the period up to, and post mine closure, most significantly in relation to water treatment costs. The Group has provided for water treatment costs using a combination of active and passive water treatment methods, based on activities currently being performed at our operations. The NEMA Financial Provisioning Regulations require the treatment of water to be provided for using the costs of currently available technologies which the DMRE has approved, based on evidence that the technology to be implemented is able to consistently achieve the discharge requirements. Thungela is actively working to prove the efficacy of passive water treatment technologies in collaboration with academia and the relevant government departments. In the year ended 31 December 2022, the Group commissioned a 50,000 litre per day demonstration plant to prove that passive treatment can effectively manage coal’s water risks post-mine closure. The demonstration plant uses bacteria to remove sulphates, neutralise water and remove metals to create a fit-for-purpose end-product that can be used in agriculture. The process requires minimal, if any, electrical power, minimal chemicals and infrequent but regular operational input and maintenance. The study will continue to treat different water qualities to optimise process parameters and inform the design of a full-scale plant that will be constructed at our closed Kromdraai site and later expanded to other operations. The Group’s long-term post-closure water management strategy includes phytoremediation, a biological process that decontaminates soil or water using plants and trees to absorb or break down pollutants. The initiative has been rolled out at areas of the Goedehoop Colliery, and is the forerunner to a much larger initiative that will involve the planting of a million trees over the next three years. The NEMA Financial Provisioning Regulations, as well as the MPRDA Regulations, require the Group to make financial provisioning available which is set aside purely to fund the rehabilitation and decommissioning activities required, to undertake the agreed work programmes and rehabilitate the mining areas. This financial provisioning can be put aside through a number of vehicles, and cannot be accessed for the general use of the Group. Thungela currently maintains the required financial provisioning through two mechanisms, being the environmental rehabilitation trusts, as well as holding financial guarantees with financial institutions for the benefit of the DMRE. Annual Financial Statements for the year ended 31 December 2022    103 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended 31 December 2022 28. #### ENVIRONMENTAL AND OTHER PROVISIONS CONTINUED #### Environmental provisions continued Environmental rehabilitation trusts The investments held in the environmental rehabilitation trusts can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Investments in unit trusts | 3,446 | 3,288 | | Total environmental rehabilitation trusts | 3,446 | 3,288 | | | | | | Balance at the start of the reporting period | 3,288 | 2,880 | | Acquired through internal restructure | — | 23 | | Growth on assets | 158 | 385 | | Balance at the end of the reporting period | 3,446 | 3,288 | The rehabilitation trusts aim to achieve their objectives by investing in a diversified portfolio of equity and debt securities of predominantly South African listed companies as well as South African sovereign and corporate debt through unit trust investments. Each mine’s portfolio is managed separately according to each individual mine’s risk and LOM profile. The fair value of the environmental rehabilitation trusts is determined based on an externally provided investment statement reflecting the market performance of the respective instruments which the funds are invested. Investments in the unit trusts are recognised at FVPL. The movement in the environmental rehabilitation trusts’ assets includes fair value movements as well as dividend and interest income, where applicable. This movement is recognised in net finance costs. These funds are not available for the general use of Thungela and can only be accessed to the extent of actual rehabilitation costs incurred with approval from the DMRE. All income from these assets is reinvested to further increase the level of financial provisioning held as required by the MPRDA Regulations. Other environmental investments The Group also holds a significant value of guarantees to further contribute to the financial provisioning as required by the MPRDA Regulations. These guarantees are primarily held with two financial institutions, and a portion of the annual fee payable on these guarantees is invested in the green fund. These investments are included in financial asset investments as detailed in note 22. The fair value of the other environmental investments is determined based on externally provided investment statements reflecting the market performance of the money market funds in which the funds are invested. The other environmental investments can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 199 | 3 | | Contributions during the reporting period1 | 443 | 192 | | Growth on assets | 16 | 4 | | Balance at the end of the reporting period | 658 | 199 | 1 Includes contributions to the green fund of R438 million (2021: R188 million). The Group has invested an additional R438 million (2021: R188 million) in long-term investments, referred to as the green fund, through two financial institutions to secure the guarantees required to further fund the financial provisioning as required by the MPRDA Regulations. These investments are held as collateral in favour of the financial institutions for the guarantees provided to the Group. The green fund requires an investment of 5.8% and 6.7% of the guarantee amounts annually into the respective funds to reduce the value of the unfunded guarantees over the LOM. Of the annual investment amount required, 0.8% and 0.7% respectively is related to fees which are not considered part of the investment. 104  Annual Financial Statements for the year ended 31 December 2022 The annual requirement for funding is expected to decrease as the investment value increases, however the Group is able to contribute to these funds in excess of the required annual investment amount in order to increase our financial provisioning held, and to maximise our return on these investments. In the year ended 31 December 2022, an additional R200 million was contributed to the green fund, above the required annual investment amount, in order to further fund the environmental provisions. These funds are not available for the general use of Thungela and can only be accessed to fulfil mine closure obligations, or to the extent that the growth on these funds has exceeded the required annual investment amount. The growth on the funds is reinvested to further increase the level of financial provisioning held as required by the MPRDA Regulations. Thungela’s exposure to our environmental obligations can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Environmental provisions | (7,566) | (6,751) | | | | | | Environmental rehabilitation trusts | 3,446 | 3,288 | | Other environmental investments | 658 | 199 | | Guarantees | 3,102 | 3,153 | | Total financial provisioning available | 7,206 | 6,640 | | Real pre-tax discount rate (%) | 4.0 - 4.8 | 3.6 - 4.3 | The guarantees of R3,102 million (2021: R3,153 million) are primarily in place to meet any immediate closure obligations under the existing MPRDA Regulations, and are issued in favour of the DMRE. Once Thungela has to comply with the NEMA Financial Provisioning Regulations by the current transition date of 19 September 2023, it is expected that the level of guarantees required to be held as financial provisioning will increase, which if required, may be sourced from the existing providers on the market at similar terms to the Group’s current guarantees. Sensitivity analysis The Group has determined that the expected cash flows and the discount rates used to value the environmental provisions have a significant impact on the amounts recognised in the statement of financial position and the statement of profit or loss and other comprehensive income. The impact that reasonably possible changes in these inputs would have on the statement of profit or loss and other comprehensive income can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | 5.0% increase in expected cash flows | 411 | 468 | | 0.5% increase in discount rate | (238) | (256) | #### Contingent liabilities Thungela is subject to various claims which arise in the ordinary course of business. Additionally, Thungela has provided indemnities against certain liabilities as part of agreements relating to sales or other disposals of business operations in the past. Having taken appropriate legal advice, the Group believes that any material liability arising from the indemnities provided is remote. Total financial guarantees amounting to R3,128 million (2021: R3,268 million) have been issued in favour of the DMRE and other counterparties where relevant, including the amount identified for rehabilitation purposes noted above. No contingent liabilities were secured against the assets of Thungela for any of the reporting periods presented. Annual Financial Statements for the year ended 31 December 2022    105 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 29. #### LEASE LIABILITIES The Group has entered into various agreements which are considered to be leases, and is currently a lessee in the following lease agreements: •Through its investment in Butsanani Energy, a contract related to the build and usage of a processing plant at the Rietvlei Colliery for a period of five years from 3 June 2019. •Through its investment in Butsanani Energy, a contract related to the usage of the farm for mining purposes at the Rietvlei Colliery for a period of 20 years from 1 June 2019. •Through TOPL, a contract for the exclusive use of the leased premises located at 25 Bath Avenue, Rosebank for a period of five years from 1 November 2020. Right-of-use assets have been disclosed as part of property, plant and equipment as per note 13. #### Accounting policy At the inception of a contract, the Group assesses whether a contract is, or contains, a lease by assessing whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease liabilities are initially measured at the present value of the future lease payments, discounted at the applicable incremental borrowing rates. Variable lease payments are not included in the measurement of lease liabilities and are charged to operating costs as they are incurred. Subsequent to initial recognition, lease liabilities are measured at amortised cost using the effective interest rate method. Lease liabilities are remeasured when there is a change to the contractual lease payments or the lease term, with an adjustment also being made to the corresponding right-of-use assets. Leases with a term of less than one year, or committed payments of less than R75,000, are not recognised in the statement of financial position. The Group continues to recognise payments for these leases as an expense on a straight- line basis over the lease term within operating costs. The contractual payments due under lease arrangements can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Contractual undiscounted cash flows Maturity analysis of lease payments due: | | | | Within 1 year | 37 | 36 | | Between 2 – 5 years | 53 | 71 | | Over 5 years | 40 | 41 | | Total undiscounted lease payments | 130 | 148 | | Impact of discounting | (37) | (27) | | Total discounted lease liabilities | 93 | 121 | | | | | | Classified as: | | | | Current | 31 | 29 | | Non-current | 62 | 92 | 106  Annual Financial Statements for the year ended 31 December 2022 The movement in the lease liabilities can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 121 | 151 | | Interest capitalised | 10 | 11 | | Repayment – interest | (10) | (11) | | Repayment – capital | (26) | (32) | | Other | (2) | 2 | | Balance at the end of the reporting period | 93 | 121 | The lease liabilities were calculated by discounting contractually escalated lease payments over the lease term at the incremental borrowing rate derived from a market related borrowing rate at the inception of the lease contracts. The range of incremental borrowing rates used is 8.6% to 9.0% (2021: 8.6% to 9.0%). The amounts recognised in the statement of profit or loss and other comprehensive income in relation to the leasing arrangements can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Interest expense on lease liabilities | 10 | 11 | | Expenses relating to variable lease payments not included in the measurement of the lease liabilities | 14 | 13 | | Depreciation of right-of-use assets | 15 | 8 | | Impairment losses | 1 | 3 | Some of the leases in which the Group is the lessee contain payments that are linked to a variable monthly feed to plant rate. The variable payments of R14 million (2021: R13 million) constitute 28% of the Group’s total lease payments of R50 million (2021: R56 million) and this proportion is expected to remain consistent in future. The amounts recognised in the statement of cash flows in relation to the leasing arrangements can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Lease liabilities – capital repayment | 26 | 32 | | Lease liabilities – interest repayment (included in interest expenses paid) | 10 | 11 | | Variable lease payments (included in profit before tax) | 14 | 13 | | Total cash outflow for leases | 50 | 56 | The Group is exposed to a total potential future cash outflow of R61 million (2021: R71 million) related to payments for mining and other equipment on contracts that are not considered to contain a lease. Annual Financial Statements for the year ended 31 December 2022    107 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 30. #### RETIREMENT BENEFIT OBLIGATIONS The Group operates both defined benefit and defined contribution pension fund plans and medical aid plans for its employees as well as post-employment medical aid plans. The post-employment medical aid plans provide health benefits to retired employees and certain dependants as incurred. #### Accounting policy The contributions paid or payable in the year in relation to defined contribution plans are recognised in profit or loss. For post-employment medical aid plans, full actuarial valuations are carried out at least every three years using the projected unit credit method and updates are performed for each year. Remeasurements comprising actuarial gains and losses are recognised in OCI and are not recycled to profit or loss. Any increase in the present value of the plan obligations expected to arise from employee services during the year is included in operating costs. The net interest income or expense on the defined benefit obligations is included in net finance costs. Past service costs are recognised immediately in profit or loss to the extent that the benefits are already vested and otherwise amortised on a straight-line basis over the average period until the benefits vest. Employer contributions are made in accordance with the terms of each plan and vary each year. The retirement benefit obligations are unfunded and are recognised on the statement of financial position at the present value of the deficit in the defined benefit plans. #### Defined contribution plans The costs of the defined contribution pension fund plans and medical aid plans represent the actual contributions payable by the Group to various plans. The charge for the year for defined contribution pension fund plans (net of amounts capitalised) was R251 million (2021: R244 million) and for defined contribution medical aid plans (net of amounts capitalised) was R138 million (2021: R134 million). Defined contribution plans are governed by the South African Pension Fund Act and the Medical Schemes Act of South Africa as regulated by the Council for Medical Schemes. #### Defined benefit medical aid plans and post-employment medical aid plans The assets of these plans are held separately from those of the Group, in independently administered funds, in accordance with statutory requirements. The responsibility for the governance of the medical aid plans, including investment and funding decisions, lies with the trustees of each plan. Employer contributions are made in accordance with the terms of each plan and may vary from year to year. Benefits of R24 million (2021: R25 million) were paid in relation to the medical aid plans in the year ended 31 December 2022, and the Group expects to contribute R32 million to these medical aid plans in 2023. The amounts recognised in profit or loss in relation to the post-employment medical aid plans can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Amounts included in employee costs | (6) | (8) | | Interest expense | (48) | (43) | | Total | (54) | (51) | The pre-tax amounts recognised in OCI relating to the post-employment medical aid plans can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Actuarial gains on plan obligations | 71 | 27 | | Remeasurement of defined benefit obligations | 71 | 27 | Actuarial gains on plan obligations comprise movements in the obligations arising from changes in financial and demographic assumptions as well as experience on plan liabilities. 108  Annual Financial Statements for the year ended 31 December 2022 The movements in the retirement benefit obligations can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | (449) | (455) | | Actuarial gains from changes in assumptions | 71 | 27 | | Current service costs | (3) | (3) | | Benefits paid | 24 | 25 | | Interest expense | (48) | (43) | | Balance at the end of the reporting period | (405) | (449) | The medical aid plans are closed to new members and future benefit accrual, however there are still active employees which benefit from the plans. The obligations are applicable to active employees and pensioners as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Active employees | (76) | (87) | | Pensioners | (329) | (362) | | Total retirement benefit obligations | (405) | (449) | #### Actuarial assumptions The principal actuarial assumptions used to determine the present value of retirement benefit obligations are as follows (shown as weighted averages): | | | | | --- | --- | --- | | | | | | % | 2022 | 2021 | | Average discount rate for plan obligations | 12 | 11 | | Average rate of inflation | 7.5 | 7.2 | | Expected average increase in healthcare costs | 9.9 | 9.6 | The weighted average duration of the plans is 11 years (2021: 12 years). This represents the average period over which future benefit payments are expected to be made. Mortality assumptions are determined based on standard mortality tables with adjustments, as appropriate, to reflect experience of conditions locally. In South Africa, the PA90 and SA85-90 tables are used. The mortality tables used imply that a male or female aged 60 at the reporting date has the following future life expectancy (shown as weighted averages): | | | | | --- | --- | --- | | | | | | Years | 2022 | 2021 | | Male | 18.7 | 18.7 | | Female | 23.4 | 23.4 | The defined benefit plans are exposed to risks such as longevity, investment risk, inflation risk and interest rate risk. The Groups’ provision of anti-retroviral therapy to HIV positive staff does not significantly impact the post-employment medical aid plan obligations. Annual Financial Statements for the year ended 31 December 2022    109 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 30. #### RETIREMENT BENEFIT OBLIGATIONS CONTINUED #### Actuarial assumptions continued Sensitivity analysis The significant actuarial assumptions for the determination of the post-employment medical aid plan obligations are the discount rate, inflation rate and life expectancy. The sensitivity analysis below has been provided by local actuaries on an approximate basis based on changes in the assumptions occurring at the end of the year, assuming that all other assumptions are held constant and the effect of all interrelationships is excluded. The impact on the retirement benefit obligations can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | 0.5% decrease in discount rate | (19) | (23) | | 0.5% increase in inflation rate | (19) | (23) | | 1 year increase in life expectancy | (14) | (17) | Actuarial assumptions are set after consultation with independent experts and before the valuations of the plan obligations are completed. While management believes the assumptions used are appropriate, a change in the assumptions used would impact the profit or loss and OCI of the Group. 31. #### DEFERRED TAX The Group has recognised deferred tax assets and liabilities based on the underlying nature of various transactions throughout the year and the related tax treatment, which may be different to the accounting treatment thereof. #### Accounting policy Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or of an asset or liability in a transaction (other than in a business combination) that affects neither taxable income nor accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint arrangements and associates except where the Group can control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax is recognised in profit or loss, except when it relates to items recognised directly in OCI or in equity, in which case the deferred tax is recognised in the same way. Deferred tax assets and liabilities are offset by legal entity. 110  Annual Financial Statements for the year ended 31 December 2022 #### Deferred tax assets The movement in the deferred tax assets can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Note | 2022 | 2021 | | Balance at the start of the reporting period | | 378 | \* | | Credited to profit or loss | 10 | 156 | 384 | | Charged to other comprehensive income/(loss) | 10 | (15) | (6) | | Reclassification | | (16) | — | | Balance at the end of the reporting period | | 503 | 378 | \*Represents an amount less than R1 million. At 31 December 2021, only a portion of the available unredeemed capital expenditure was recognised as a deferred tax asset, on the basis of the expected utilisation thereof at old order mines, combined with the pairing back of production at our higher-cost operations. This resulted in the Group not recognising deferred tax assets of R1,177 million at 31 December 2021. The unrecognised deferred tax assets related to the Group’s wholly owned subsidiary, TOPL. Given the sustained increase in the Benchmark coal price in 2022, the taxable income for TOPL has increased significantly, resulting in all of the available unredeemed capital expenditure being utilised at our old older mines. On this basis the Group has recognised the full impact of the previously unrecognised deferred tax assets. There is no available unredeemed capital expenditure for the Group at 31 December 2022. The deferred tax assets at 31 December 2022 are primarily driven by deductible temporary differences arising from the environmental and other provisions. These deductible temporary differences are expected to reverse in the normal course of operations of the Group. The recognition of the full deferred tax assets balance is supported by Thungela’s budget process which included a detailed calculation of the estimated taxable income for each financial year up to 2024. The budget reflects a substantial taxable income being generated, and therefore sufficient future taxable temporary differences against which to utilise these deductible temporary differences. The budget tax calculation does not result in any capital expenditure being unredeemed over the next two years and no additional tax losses have been carried forward or created in the year ended 31 December 2022. The deferred tax assets recognised in the statement of financial position can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Environmental and other provisions | 2,177 | 1,829 | | Retirement benefit obligations | 110 | 127 | | Tax losses | 2 | 1 | | Other temporary differences | 24 | (1) | | Share-based payments | (11) | (1) | | Fair value adjustments | (24) | (98) | | Capital allowances in excess of depreciation | (863) | (577) | | Environmental rehabilitation trusts | (912) | (902) | | Total deferred tax assets | 503 | 378 | Annual Financial Statements for the year ended 31 December 2022    111 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 31. #### DEFERRED TAX CONTINUED #### Deferred tax assets continued The deferred tax credited/(charged) to the statement of profit or loss and other comprehensive income can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Environmental and other provisions | 298 | (65) | | Retirement benefit obligations | (2) | 7 | | Tax losses | (1) | 1 | | Other temporary differences | 26 | (78) | | Share-based payments | (10) | 17 | | Fair value adjustments | 74 | (43) | | Capital allowances in excess of depreciation | (386) | 427 | | Environmental rehabilitation trusts | (10) | (106) | | Impairment losses | 167 | 224 | | Deferred tax credited to profit or loss | 156 | 384 | | Deferred tax charged to other comprehensive income/(loss) | (15) | (6) | | Deferred tax credited to total comprehensive income | 141 | 378 | #### Deferred tax liabilities The movement in the deferred tax liabilities can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Note | 2022 | 2021 | | Balance at the start of the reporting period | | (1,400) | (581) | | Acquired through internal restructure | | — | (385) | | Charged to profit or loss | 10 | (37) | (434) | | Reclassification | | 16 | — | | Balance at the end of the reporting period | | (1,421) | (1,400) | The deferred tax liabilities recognised in the statement of financial position can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Capital allowances in excess of depreciation | (1,788) | (1,788) | | Other temporary differences | (25) | (68) | | Environmental rehabilitation trusts | (19) | (19) | | Tax losses | 202 | 240 | | Environmental and other provisions | 209 | 235 | | Total deferred tax liabilities | (1,421) | (1,400) | 112  Annual Financial Statements for the year ended 31 December 2022 The deferred tax charged to the statement of profit or loss and other comprehensive income can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Capital allowances in excess of depreciation | 22 | (610) | | Other temporary differences | 8 | (60) | | Environmental rehabilitation trusts | — | (3) | | Tax losses | (10) | (63) | | Environmental and other provisions | (57) | 2 | | Fair value adjustments | — | 302 | | Share-based payments | — | (2) | | Deferred tax charged to profit or loss | (37) | (434) | | Deferred tax charged to total comprehensive income | (37) | (434) | On 23 February 2022 a change in the South African corporate tax rate from 28% to 27% was announced. The current tax impact of this rate change for the Group will only take effect from 1 January 2023. However deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the reporting date. Consequently, the impact of the change in the statutory tax rate on deferred tax has been recognised as a credit to profit or loss of R31 million. Annual Financial Statements for the year ended 31 December 2022    113 ### EQUITY 114115 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 32. #### STATED CAPITAL Thungela has one class of authorised and issued shares, being ordinary shares. Thungela’s ordinary shares were issued on completion of the demerger, and began trading on the JSE and LSE from 7 June 2021. In the year ended 31 December 2022, Thungela issued 4,180,777 additional ordinary shares. #### Accounting policy Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any group entity purchases Thungela’s issued shares, reflected as treasury shares for the Group, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the shareholders of the Group, until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the shareholders of the Group. The shares issued by the Group and resultant stated capital can be analysed as follows: | | | | | --- | --- | --- | | | | | | Number of shares | 2022 | 2021 | | Authorised | | | | Ordinary no par value shares | 10,000,000,000 | 10,000,000,000 | | Issued | | | | Ordinary no par value shares | 140,492,585 | 136,311,808 | | | | | | Reconciliation of shares in issue | | | | Shares in issue at the start of the reporting period | 136,311,808 | — | | Issue of ordinary no par value shares | 4,180,777 | 136,311,808 | | Shares in issue at the end of the reporting period | 140,492,585 | 136,311,808 | | | | | | Adjusted for: | | | | Treasury shares held by Group companies | (2,943,136) | (2,712,606) | | Net shares in issue at the end of the reporting period | 137,549,449 | 133,599,202 | | | | | | Rand million | | | | Balance at the start of the reporting period | 10,041 | — | | Issue of ordinary no par value shares | 1,282 | 10,041 | | Balance at the end of the reporting period | 11,323 | 10,041 | | | | | | Adjusted for: | | | | Treasury shares held by Group companies | (302) | (183) | | Net balance at the end of the reporting period | 11,021 | 9,858 | 116  Annual Financial Statements for the year ended 31 December 2022 As detailed in note 2A, and fully described in note 2A of the Thungela Annual Financial Statements for the year ended 31 December 2021, although Thungela is considered a continuation of the SACO Group, the Company was only incorporated in January 2021, and issued shares in June 2021. The capital structure of Thungela reflects the structure of the legal entity, and thus no shares are reflected as issued for the Group until 2021. The value of the SACO Group was reflected in the merger reserve until the date the shares were legally issued, when it was transferred into stated capital. For the purpose of determining the WANOS in the year ended 31 December 2021, Thungela applied judgement in determining how many shares were issued in substance for no corresponding increase in the economic value of the Group. Of the total stated capital of R10,041 million issued in June 2021, R5,466 million was received in cash from ASA. The issue of these 74,201,626 shares (as a proportion of the total shares issued based on the proportion of cash consideration to total consideration received) reflect a direct increase in the economic value of the Thungela Group. The remaining stated capital issued amounting to R4,575 million (reflective of 62,110,182 shares, as a proportion of non- cash consideration to total consideration received) is considered in substance to have been issued in consideration for the pre-existing SACO Group. The WANOS at 31 December 2021 has been calculated to reflect the issue of these shares as if it occurred at the start of the earliest comparative period presented. This has not impacted the WANOS at 31 December 2022. In the year ended 31 December 2022, 909,155 (2021: 2,712,606) treasury shares were purchased by subsidiaries of the Group at an average price of R181.49 per share (2021: R67.42 per share) in relation to share awards granted under the Thungela share plan. The purchase was made in terms of Thungela’s MOI and the shares are held in separate broker accounts of the Group for employees in terms of the rules of the Thungela share plan until vesting date. A total of 678,625 share awards vested in the year ended 31 December 2022, which reduced the number of treasury shares held by the Group. Of the treasury shares held by the Group, 1,955,113 (2021: 1,363,119) are held directly by subsidiaries and so do not carry voting rights. The total number of ordinary shares in issue which carry voting rights amounts to 138,537,472 (2021: 134,948,689). The shareholders, at the AGM held on 24 May 2022, approved that the unissued shares, limited to 5.0% of the number of shares in issue at that date, or 6,815,590 shares, be placed under the control of the board at their discretion. The approval is subject to compliance with the MOI, the Companies Act of South Africa, the JSE Listings Requirements and the UK Listing Rules, and this authority is valid for the shorter of 15 months or until the next AGM. For the year ended 31 December 2022, Thungela issued 4,180,777 shares in terms of this authority as fully described in note 35. 33. #### SHARE-BASED PAYMENTS The Group operates equity settled shared-based payment arrangements which allow certain employees of the Group to receive Thungela shares. Prior to the demerger, the employees of the Group were entitled to receive Anglo American shares under equity settled share-based payment arrangements. #### Accounting policy The Thungela share plan consists of two components: •The award of conditional shares, the vesting of which is conditional upon the fulfilment of certain performance conditions and an employment condition as approved by the Thungela remuneration and nomination committee. •The award of forfeitable shares, the vesting of which is subject to an employment condition as approved by the Thungela remuneration and nomination committee. All share awards are issued for no consideration, with no exercise or strike price applicable on the vesting date, and each share award will convert into one ordinary share in Thungela on vesting. The Thungela share plan is accounted for as an equity settled share-based payment arrangement and the grant date fair value of the awards is recognised as an expense, with a corresponding increase in equity, over the vesting period. The amounts recognised as expenses are adjusted to reflect the number of awards that are expected to vest based on the likely outcomes of the non-market performance conditions and the employment conditions. Annual Financial Statements for the year ended 31 December 2022    117 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 33. #### SHARE-BASED PAYMENTS CONTINUED #### Accounting policy continued For conditional share awards, which are subject to market and non-market vesting conditions, the fair value is determined using a Monte Carlo model at the grant date, taking into account the market vesting conditions. For forfeitable share awards which are subject to non-market vesting conditions only, the fair value is determined based on the unconditional fair value of the shares at the grant date. Employees participating in the conditional share awards are also entitled to receive additional share awards in lieu of dividends declared on Thungela shares over the vesting period, which are added to the total number of conditional shares awarded and subject to the same vesting conditions. The potential impact of the dividend equivalent shares are included in the grant date fair value of the awards and so are not separately expensed. Employees participating in the forfeitable share awards are entitled to dividends paid on Thungela shares on the dividend payment dates throughout the vesting period. Should the awards be forfeited, dividends already paid to employees will not be required to be paid back to the Group. The early vesting of share awards is permitted at the discretion of the Thungela remuneration and nomination committee based on reasons deemed as constituting good leaver status as set out in the rules governing the Thungela share plan. The aggregate number of shares which may be allocated under the Thungela share plan may not exceed 7,024,629 shares, which equates to 5.0% of the number of issued shares of Thungela. At 31 December 2022, a total of 2,615,718 (2021: 2,712,606) shares are considered to be allotted and held as treasury shares in line with the rules of the Thungela share plan, leaving 4,408,911 (2021: 4,102,984) shares available for allocation in relation to future grants. #### Thungela share plan The share awards that have been granted to eligible employees in the year ended 31 December 2022 consist of the Thungela 2022 LTIP awards and the Thungela 2022 DBS awards as approved by the Thungela remuneration and nomination committee. Thungela 2022 and 2021 LTIP awards – conditional share awards The Thungela 2022 LTIP awards were granted on 7 March 2022, in relation to performance for the year ended 31 December 2021. These awards will vest on 7 March 2025 in accordance with the achievement of specific performance conditions over a performance period from 1 January 2022 to 31 December 2024. Once vested, these awards are subject to a further two-year holding period for executive directors and prescribed officers. A total of 434,844 awards were granted as the Thungela 2022 LTIP awards, with a grant date fair value of R167.12. The Thungela 2021 LTIP awards were granted on 16 November 2021, in relation to performance for the year ended 31 December 2020. These awards will vest on 16 November 2024 in accordance with the achievement of specific performance conditions over a performance period from 1 January 2021 to 31 December 2023. Once vested, these awards are subject to a further two-year holding period for executive directors and prescribed officers. A total of 1,363,119 awards were granted as the Thungela 2021 LTIP awards, with a grant date fair value of R60.46. The conditional share awards do not carry voting rights. Employees participating in the these awards are entitled to receive additional share awards in lieu of dividends declared on Thungela shares over the vesting period, which are added to the total number of conditional shares awarded and subject to the same vesting conditions. A total of 492,667 share awards were added to the Thungela 2022 and 2021 LTIP awards related to the dividend equivalents for the dividends declared by Thungela in the year ended 31 December 2022. 118  Annual Financial Statements for the year ended 31 December 2022 The weighted average of the vesting outcomes for each measure will determine the overall vesting percentage for the awards. This will be applied to the number of awards outstanding on the vesting date. The performance conditions and their weightings, that will be applied at the vesting date to both the Thungela 2022 and  2021 LTIPs, are as follows: | | | | | --- | --- | --- | | | | | | Condition | Weighting (%) | Market vs non- market condition | | Relative TSR peer (Local) | 7.5 | Market | | Relative TSR peer (Global) | 7.5 | Market | | Carbon emissions | 10 | Non-market | | Cash margin per export saleable tonne | 20 | Non-market | | Dividend yield | 10 | Non-market | | Inclusion and diversity | 10 | Non-market | | Life of business | 15 | Non-market | | Lifex capital intensity | 10 | Non-market | | Water usage – fresh water import | 2.5 | Non-market | | Water usage – potable water usage | 2.5 | Non-market | | Water usage – water reuse/recycle | 2.5 | Non-market | | Water usage – water treatment | 2.5 | Non-market | Achievement of the non-market conditions will be determined independently of the market performance conditions. Thungela 2022 DBS awards – forfeitable share awards The Thungela 2022 DBS awards were granted on 22 March 2022 in relation to performance for the year ended 31 December 2021. The number of awards that will vest is conditional upon the participants remaining in the employment of the Group for the vesting period, and there are no performance conditions attached to this grant. The Thungela 2022 DBS awards will vest in equal tranches from 22 March 2023 to 22 March 2025. A total 331,300 share awards were granted as the Thungela 2022 DBS awards, with a grant date fair value of R155.67. The awards carry voting rights and the employees are entitled to dividends paid on Thungela ordinary shares throughout the vesting period. Thungela milestone awards – forfeitable share awards In order to incentivise, reward and retain the CEO and CFO in preparation for the demerger, and to stabilise the business post the demerger, a retention award of 899,658 shares and 449,829 shares was granted to the CEO and CFO respectively – referred to as the Thungela milestone awards. The Thungela milestone awards were granted on 11 November 2021 and give the CEO and CFO the right to obtain a number of ordinary shares in Thungela, subject to satisfying the employment condition. The awards carry voting rights and the employees are entitled to dividends paid on Thungela ordinary shares throughout the vesting period. Should the employment condition be achieved, the awards shall vest in two equal tranches on 4 June 2022, and 4 June 2023, being the first and second anniversary of the demerger becoming effective. There are no performance conditions attached to the Thungela milestone awards. Tranche 1 of these awards vested in full on 4 June 2022 based on the achievement of the employment condition, and was settled using Thungela shares owned by the Group. A total of 674,743 share awards vested, with 303,636 shares being sold on vesting to compensate employees for the tax incurred by them on the vesting of the shares. Annual Financial Statements For the year ended 31 December 2022    119 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 33. #### SHARE-BASED PAYMENTS CONTINUED #### Thungela share plan continued The number of share awards granted in terms of the Thungela share plan can be analysed as follows: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Number of awards | Thungela LTIP awards | Thungela DBS awards | Thungela milestone awards | Total | | Balance at the start of the reporting period | 1,363,119 | — | 1,349,487 | 2,712,606 | | Awards granted in the reporting period | 434,844 | 331,300 | — | 766,144 | | Dividend equivalent awards granted in the reporting period | 492,667 | — | — | 492,667 | | Awards vested in the reporting period | — | (3,882) | (674,743) | (678,625) | | Awards forfeited in the reporting period | (172,346) | (14,139) | — | (186,485) | | Balance at the end of the reporting period | 2,118,284 | 313,279 | 674,744 | 3,106,307 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Number of awards | Thungela LTIP awards | Thungela milestone awards | Total | | Awards granted in the reporting period | 1,363,119 | 1,349,487 | 2,712,606 | | Balance at the end of the reporting period | 1,363,119 | 1,349,487 | 2,712,606 | The inputs used in the measurement of the fair values at grant date for awards granted in terms of the Thungela share plan are as follows: | | | | | --- | --- | --- | | | | | | | | 2022 | | | Thungela 2022 LTIP awards | Thungela 2022 DBS awards | | Grant date | 7 March | 22 March | | Fair value at grant date (Rand/share) | 167.12 | 155.67 | | Share price at grant date (Rand/share) | 170.85 | 155.67 | | Expected volatility (%) | 70.62 | — | | Expected life (years) | 3 | 1 / 2 / 3 | | Expected dividend yield (%) | 3.82 | 8.94 / 5.99 / 4.22 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | | Thungela 2021 LTIP awards | Thungela milestone awards – tranche 1 | Thungela milestone awards – tranche 2 | | Grant date | 16 November | 11 November | 11 November | | Fair value at grant date (Rand/share) | 60.46 | 62.92 | 62.92 | | Share price at grant date (Rand/share) | 60.82 | 62.92 | 62.92 | | Expected volatility (%) | 45 | — | — | | Expected life (years) | 2.5 | 0.7 | 1.7 | | Expected dividend yield (%) | 15 | 42 | 21 | Expected volatility is based on historic volatilities using a proxy company over a period of time commensurate with the expected life of the Thungela 2022 and 2021 LTIP awards given the short time that the Thungela shares have been listed. 120  Annual Financial Statements for the year ended 31 December 2022 #### Anglo American share plans Anglo American operated a number of employee share plans, which Thungela employees were eligible for prior to the demerger, including the Anglo American BSP and the Anglo American LTIP. Awards under the Anglo American share plans were in the form of either conditional share awards or forfeitable share awards. Participants in the Anglo American share plans who moved to Thungela were treated, for the purposes of their Anglo American share plan awards, as leaving employment as good leavers on completion of the demerger. As such, and subject to the award terms, the Anglo American remuneration committee determined that all awards under the Anglo American share plans held by participants who moved to Thungela vested on completion of the demerger. Awards under the Anglo American BSP vested in full in accordance with their terms. Awards under the Anglo American LTIP vested as to a portion that reflects the time elapsed from the grant date of the awards to the completion of the demerger and an assessment, on a basis determined by the Anglo American remuneration committee, of the extent to which the performance conditions had been met. The below considerations are related to the share-based payment expenses recognised for the year ended 31 December 2021 only. Anglo American BSP Awards under the Anglo American BSP were accelerated and vested in full on completion of the demerger. The accelerated portion of the 2019, 2020 and 2021 Anglo American BSP awards, amounting to R110 million, vested in full. The effect of the acceleration of the vesting period was charged to the statement of profit or loss and other comprehensive income and was recognised within restructuring costs and termination benefits. These awards were settled in Anglo American shares held by Thungela before the demerger and included in financial asset investments per note 22. Anglo American LTIP Awards under the Anglo American LTIP vested in proportion to the time elapsed from the grant date to the completion of the demerger, at an assumed performance level as determined by the Anglo American remuneration committee. In respect of the early settlement of the 2019 and 2020 grants an amount of R28 million was expensed on the basis that the grants under the Anglo American LTIP vested as to a portion that reflects the time elapsed from grant date to the completion of the demerger, however these costs were previously not included in the Group results based on an allocation of expenses from Anglo American. This cost was recognised within restructuring costs and termination benefits. No grant was made in 2021 in relation to the performance for the year ended 31 December 2020 under the Anglo American LTIP. Anglo American retention awards In order to incentivise, reward and retain the CEO and the CFO in the preparation for the demerger, Anglo American granted a retention award to the CEO over 449,829 Thungela shares and a retention award to the CFO over 231,730 Thungela shares. The shares were granted by Anglo American on 1 June 2021 and vested in full on 4 June 2021 using Thungela shares they received as part of the demerger. The value of this award, amounting to R49 million was recognised as a direct equity contribution from Anglo American as the parent at the time of the transaction. Annual Financial Statements For the year ended 31 December 2022    121 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 33. #### SHARE-BASED PAYMENTS CONTINUED #### Anglo American share plans continued The number of share awards granted in terms of the Anglo American share plans can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Number of awards | LTIP and BSP awards | Retention awards1 | Total | | Balance at the start of the reporting period | 523,369 | — | 523,369 | | Awards granted in the reporting period | 236,748 | 681,559 | 918,307 | | Awards vested in the reporting period | (608,986) | (681,559) | (1,290,545) | | Awards forfeited in the reporting period | (151,131) | — | (151,131) | | Balance at the end of the reporting period | — | — | — | 1These awards were granted by Anglo American and settled using Thungela shares. The fair value of the LTIP awards has been measured using a Monte Carlo simulation taking into account the TSR performance conditions. The inputs used in the measurement of the fair values at grant date for awards granted in terms of the Anglo American share plans were as follows: | | | | | --- | --- | --- | | | | | | | | 2021 | | | LTIP and BSP awards | Retention awards1 | | Grant date | 12 March | 1 June | | Fair value at grant date (Rand/share) | 623.33 / 531.95 | 71.50 | | Share price at grant date (Rand/share) | 609.25 | — | | Expected volatility (%) | 35 | — | | Expected life (years) | 3 | — | | Expected dividend yield (%) | 3.5 | — | 1These awards were granted by Anglo American and settled using Thungela shares. Expected volatility is based on historic volatilities over a period of time commensurate with the expected life of the LTIP awards. The amounts recognised in the statement of profit or loss and other comprehensive income in relation to the Thungela share plan and the Anglo American share plans can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Thungela 2021 LTIP awards | 16 | 3 | | Thungela 2022 LTIP awards | 11 | — | | Thungela milestone awards | 63 | 14 | | Thungela 2022 DBS awards | 23 | — | | Anglo American BSP | — | 131 | | Anglo American LTIP | — | 28 | | Anglo American retention awards | — | 49 | | Total share-based payment expenses included in employee costs | 113 | 225 | | Less: amounts included in restructuring costs and termination benefits | — | (138) | | Net share-based payment expenses included in employee costs | 113 | 87 | 122  Annual Financial Statements for the year ended 31 December 2022 34. #### DIVIDENDS Thungela declared and paid ordinary dividends to shareholders in the year ended 31 December 2022 from retained earnings. #### Accounting policy Dividends are recognised in the period in which the dividends are declared directly in the statement of changes in equity. Dividends proposed or declared subsequent to the reporting date are not recognised as dividends paid in the reporting period. Treasury shares are held by subsidiaries in respect of awards granted in terms of the Thungela share plan as detailed in note 33. Dividends declared on shares held in relation to the forfeitable share awards are paid to the employees on payment date. Dividends declared on shares held in relation to the conditional share awards will be paid to the subsidiary holding the share in line with the rules of the Thungela share plan. #### Dividend policy Any dividend proposed by the board in respect of a financial period will be dependent on and influenced by, among other considerations, the Group’s operating results, financial condition, investment strategy, capital requirements and strategic initiatives. The Group will seek to ensure that there is sufficient cash available in order to fund sustaining capital expenditure and life extension opportunities without resorting to excessive leverage, recognising the nature of the Group’s assets and single commodity price exposure. The Group’s dividend policy is to target a dividend pay-out of a minimum of 30% of adjusted operating free cash flow△. The board is committed to delivering attractive shareholder returns, while maintaining disciplined capital allocation. Therefore, in any given financial year, the Group might declare dividends above the targeted minimum 30% pay-out ratio, subject to the board being satisfied that subsequent to the dividend declaration, the Group has adequate balance sheet flexibility and sufficient funding available to withstand market and coal price volatility, as well as infrastructure constraints. The Thungela board believes it is appropriate to maintain a liquidity buffer of between R5,000 million and R6,000 million during and following periods of stronger market conditions, and all else being equal, between R2,000 million and R3,000 million during and following periods of weaker market conditions. The board will continue to review the required level of liquidity in line with changes in the overall context of the Group, including the acquisition of the Ensham Business and continued infrastructure constraints. #### Dividends paid Dividends paid can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Dividends paid to the shareholders of the Group | 10,483 | — | | Dividend declared on 22 March 2022 of R18 per ordinary share | 2,448 | — | | Dividend declared on 15 August 2022 of R60 per ordinary share | 8,035 | — | | Dividends paid to non-controlling interests | 42 | — | | Total dividends paid | 10,525 | — | #### Dividend declaration A final ordinary cash dividend relating to the year ended 31 December 2022 of R40 per share (2021: R18 per share), was declared by the board on 27 March 2023. The dividend, amounting to a return of R5,620 million to shareholders has not been recognised as a liability in these consolidated financial statements. The final dividend was declared from retained earnings and will be paid in April 2023 to shareholders on the South African register and May 2023 to shareholders on the UK register. Together with the interim dividend of R60 per share, this equates to a total dividend of R100 per share for the year ended 31 December 2022. Annual Financial Statements For the year ended 31 December 2022    123 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 35. #### ACQUISITION OF ADDITIONAL INTEREST IN SUBSIDIARY The Group, through its wholly owned subsidiary TRH, acquired the remaining 27% shareholding in AAIC, an existing subsidiary of the Group, from Inyosi. The transaction resulted in AAIC becoming a wholly owned subsidiary of the Group, although it does not represent a change in control of AAIC. The acquisition was completed through the issue of 4,180,777 Thungela shares. The 27% interest was previously held by Inyosi on the basis of an empowerment transaction undertaken in 2010. Thungela and Inyosi reached agreement on 30 November 2022 in relation to the purchase of the AAIC shares through the issue of Thungela shares, thereby allowing Inyosi to obtain an interest in Thungela while simultaneously transforming its interest into a more liquid position in a publicly traded entity. The transaction was undertaken through TRH, a direct subsidiary of Thungela. The Thungela shares were admitted to trading on the JSE and the LSE on the effective date of 30 November 2022. A reference price of R306.76 per share issued was calculated using the closing Thungela share price on 29 November 2022, the day before the shares were admitted to trading on the JSE and the LSE. This represents purchase consideration for the transaction R1,282 million. At the effective date of the transaction, the value of the non-controlling interest held by Inyosi was R3,191 million representing their historical proportion of earnings in AAIC, excluding the impact of equity loans from the Thungela Group. The value of the non-controlling interest on the effective date of the transaction can be analysed as follows: | | | | --- | --- | | | | | Rand million | 2022 | | Balance at the start of the reporting period | 1,983 | | Total comprehensive income attributable to non-controlling interest1 | 1,247 | | Dividends paid to non-controlling interest1 | (40) | | Movement in share-based payments reserve1 | 1 | | Balance at 30 November 2022 | 3,191 | 1Represents movements up to the effective date of 30 November 2022. The difference between the carrying value of the non-controlling interest at the effective date of the transaction and the value of the consideration amounts to R1,909 million, which has been recognised directly in retained earnings. This results in the relative interest of the Group in AAIC being correctly reflected. 36. #### NON-CONTROLLING INTERESTS There are various non-controlling interests held throughout the Group, as further detailed in note 39. The material non- controlling interests are considered to be held in AAIC, up to 30 November 2022, and in Butsanani Energy, including their investment in RMC, on the basis of the contribution of these entities to the Group. #### Accounting policy Non-controlling interests represent the profit or loss, OCI and equity in a subsidiary not attributable, directly or indirectly, to the equity shareholders of the Group. For non-wholly owned subsidiaries, non-controlling interests are presented in equity separately from the equity attributable to the shareholders of the Group. Profit or loss and OCI is attributed to the shareholders of the Group and to non-controlling interests, even if this results in the non-controlling interests having a negative balance. In the year ended 31 December 2022, Thungela purchased the remaining 27% interest in AAIC, previously held by Inyosi, as detailed in note 35. The carrying value of the non-controlling interests has been reduced on this basis. 124  Annual Financial Statements for the year ended 31 December 2022 The material non-controlling interests can be analysed as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | 2022 | | | 2021 | | Rand million | AAIC1 | Butsanani Energy | Total | AAIC | Butsanani Energy | Total | | Profit/(loss) for the reporting period attributable to non-controlling interests | 1,247 | (30) | 1,217 | 463 | 46 | 509 | | Other comprehensive loss attributable to non- controlling interests | — | — | — | (1) | — | (1) | | Dividends paid to non-controlling interests | (40) | (2) | (42) | — | — | — | | Equity attributable to non-controlling interests | — | (114) | (114) | 1,983 | (82) | 1,901 | 1AAIC has been reflected for the 11 months up to 30 November 2022, based on the purchase of the remaining interest in this entity. Refer to note 35 for further detail. The summarised financial information of the entities in which material non-controlling interests are held can be analysed as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | 2022 | | | 2021 | | Rand million | AAIC1 | Butsanani Energy | Total | AAIC | Butsanani Energy | Total | | Statement of profit or loss and other comprehensive income | | | | | | | | Revenue | 10,741 | 1,099 | 11,840 | 6,301 | 1,014 | 7,315 | | Profit/(loss) for the reporting period | 4,026 | (40) | 3,986 | 1,339 | 76 | 1,415 | | Total comprehensive income/(loss) for the reporting period | 4,026 | (40) | 3,986 | 1,334 | 76 | 1,410 | | Statement of financial position | | | | | | | | Non-current assets | — | 338 | 338 | 6,232 | 318 | 6,550 | | Current assets | — | 213 | 213 | 1,631 | 217 | 1,848 | | Non-current liabilities | — | (425) | (425) | (9,438) | (395) | (9,833) | | Current liabilities | — | (235) | (235) | (992) | (203) | (1,195) | | Net assets/(liabilities) | — | (109) | (109) | (2,567) | (63) | (2,630) | | Statement of cash flows | | | | | | | | Cash flows from operating activities | 4,842 | 83 | 4,925 | 1,975 | 221 | 2,196 | | Cash flows from investing activities | (647) | (10) | (657) | (779) | (26) | (805) | | Cash flows from financing activities | (3,025) | (65) | (3,090) | (1,185) | (194) | (1,379) | | Net increase in cash and cash equivalents | 1,170 | 8 | 1,178 | 11 | 1 | 12 | 1 AAIC has been reflected for the 11 months up to 30 November 2022, based on the purchase of the remaining interest in this entity. No information related to the statement of financial position has been presented as there this no non-controlling interest in this entity at 31 December 2022. Refer to note 35 for further detail. Annual Financial Statements For the year ended 31 December 2022    125 ### OTHER ### INFORMATION 126127 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 37. #### COMMITMENTS The Group is subject to a number of commitments which have not been accounted for at the reporting date, as services have not yet been received for these commitments. The Group’s commitments can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | | | | 2022 | | Rand million | Contracted but not provided | Rail commitments | Total | | Due within 1 year | 990 | 2,356 | 3,346 | | Between 1 – 2 years | — | 633 | 633 | | Total commitments | 990 | 2,989 | 3,979 | | | | | | | --- | --- | --- | --- | | | | | | | | | | 2021 | | Rand million | Contracted but not provided | Rail commitments | Total | | Due within 1 year | 592 | 2,846 | 3,438 | | Between 1 – 2 years | — | 2,995 | 2,995 | | Between 2 – 5 years | — | 789 | 789 | | Total commitments | 592 | 6,630 | 7,222 | #### Contracted but not provided Commitments contracted but not provided for are related to capital projects which have been contracted for at the reporting date, but for which goods and services have not been received. #### Rail commitments Rail commitments are related to the existing rail entitlement agreement with TFR, where the Group has committed to a minimum annual quantity of tonnes railed over the contractual period. The committed annual volumes were adjusted in the year ended 31 December 2022 based on the deed of amendment to the original contract which was signed in the year. The entitlement agreement with TFR will be renegotiated in line with the contractual provisions and the renegotiations will cover the period beyond March 2024. Budgeted railed volumes are in excess of the adjusted committed volumes capacity. 128  Annual Financial Statements for the year ended 31 December 2022 38. #### RELATED PARTY TRANSACTIONS The Group has a number of related party relationships with other companies and individuals. The related party relationships which have been identified are noted below, and transactions with these related parties are assessed on a consistent basis. Although the demerger was effective from 4 June 2021, and Anglo American no longer holds any interest in the Group, transactions with Anglo American were still considered to be related party transactions in the year ended 31 December 2021. A number of agreements were signed with Anglo American prior to the demerger in order to support the operations of Thungela in the medium-term post demerger, and transactional activity is continuing. However, Anglo American is no longer considered a related party for the year ended 31 December 2022, and transactions with Anglo American are no longer disclosed as related party transactions. Direct subsidiaries South Africa Coal Operations Proprietary Limited Thungela Treasury Proprietary Limited Thungela Resources Holdings Proprietary Limited Thungela International Proprietary Limited Indirect subsidiaries Thungela Operations Proprietary Limited Anglo American Inyosi Coal Proprietary Limited Butsanani Energy Investment Holdings Proprietary Limited Rietvlei Mining Company Proprietary Limited Ingagane Colliery Proprietary Limited Springfield Collieries Limited Thungela Inyosi Coal Sercurityco Proprietary Limited Newshelf 1316 Proprietary Limited Main Street 1756 (RF) Proprietary Limited Blue Steam Investments Proprietary Limited Indirect associates Richards Bay Coal Terminal Proprietary Limited Colliery Training College Proprietary Limited Indirect joint operations Mafube Coal Mining Proprietary Limited Phola Coal Processing Plant Proprietary Limited Pamish Investments No. 66 Proprietary Limited Indirect trusts Nkulo Community Partnership Trust Sisonke Employee Empowerment Scheme Trust Anglo American Thermal Coal Environmental Rehabilitation Trust Mafube Rehabilitation Trust Directors July Ndlovu (chief executive officer) Deon Smith (chief financial officer) Sango Ntsaluba (chairman)# Ben Kodisang# Kholeka Mzondeki# Thero Setiloane# Seamus French# Yoza Jekwa# #Independent non-executive Prescribed officers Johan van Schalkwyk Carina Venter Lesego Mataboge Leslie Martin Mpumi Sithole Bernard Dalton Annual Financial Statements For the year ended 31 December 2022    129 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 38. #### RELATED PARTY TRANSACTIONS CONTINUED The Group enters into various sale and purchase transactions with related parties in the ordinary course of business. These transactions are subject to terms that are no less, nor more favourable than those arranged with independent third parties. #### Transactions and balances with related parties The transactions with related parties in the reporting period, and outstanding balances at the reporting date, can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Loans to related parties | | | | | Zimele1 | | — | 29 | | Pamish2 | 22 | 30 | 18 | | RBCT3 | 14 | 23 | 43 | | Derivative asset – capital support | | | | | Anglo American | 24 | — | 347 | | Trading balances | | | | | Trade and other receivables4 | 19 | — | 2,569 | | Trade and other payables5 | | — | (55) | | Transactions recognised in the statement of profit or loss and other comprehensive income | | | | | Anglo American | | | | | Export revenue | 4 | — | 22,813 | | Expenses for services provided | 5 | — | (605) | | Fair value loss on derivative asset – capital support | 24 | — | (569) | | RBCT | | | | | Expenses for services provided | | (414) | (391) | | Pamish | | | | | Expenses for services provided | | (33) | — | | Investment income | | 6 | — | 1The loan to Zimele was granted for the purposes of funding small business enterprises. The loan was non-interest bearing and had no fixed repayment terms. This loan was partially settled, with the remaining amount being reclassified to trade and other receivables as Thungela will now be responsible for collection of these amounts directly from the small businesses rather than Zimele. 2The loan to Pamish earns interest at prime plus 3.0% and has a repayment term of 18 months. 3The loan to RBCT is deemed part of the equity investment in RBCT. 4Trade and other receivables include trade receivables for export sales to AAML at 31 December 2021. 5Trade and other payables at 31 December 2021 were due within one year, consistent with the external trade and other payables. No transactions have been entered into with key management in the reporting period other than their fixed and variable remuneration, which has been disclosed in note 41. 130  Annual Financial Statements for the year ended 31 December 2022 39. #### INVESTMENTS IN SUBSIDIARIES, JOINT OPERATIONS AND ASSOCIATES The Group has a number of investments in subsidiaries, joint operations, associates and trusts. #### Accounting policy Investments in subsidiaries The results of subsidiaries are consolidated for the duration of the period in which the Group exercises control over the subsidiary. All intercompany transactions and resultant profits or losses between group companies are eliminated on consolidation. The Company carries its investments in subsidiaries at cost, including transaction costs less accumulated impairment losses. Investments in joint operations Joint arrangements are arrangements in which the Group shares joint control with one or more parties. Joint control is the contractually agreed sharing of control of an arrangement and exists only when decisions about the activities that significantly affect the arrangement’s returns require the unanimous consent of the parties sharing control. Joint arrangements are classified as either joint operations or joint ventures based on the rights and obligations of the parties to the arrangement. In joint operations, the parties have rights to the assets and obligations for the liabilities relating to the arrangement, whereas in joint ventures, the parties have rights to the net assets of the arrangement. Joint arrangements that are not structured through a separate vehicle are always joint operations. Joint arrangements that are structured through a separate vehicle may be either joint operations or joint ventures depending on the specific facts and circumstances of the arrangement. In these cases, consideration is given to the legal form of the separate vehicle, the terms of the contractual arrangement and, when relevant, other facts and circumstances. When the activities of an arrangement are primarily designed for the provision of output to the parties, and the parties are substantially the only source of cash flows contributing to the continuity of the operations of the arrangement, this indicates that the parties to the arrangements have rights to the assets and obligations for the liabilities. The joint arrangements of the Group, being Mafube Coal Mining, Phola and Pamish, are accounted for as joint operations. These arrangements are primarily designed for the provision of output to the parties sharing joint control, indicating that the parties have rights to substantially all the economic benefits of the assets. The liabilities of the arrangements are in substance satisfied by cash flows received from the parties; this dependence indicates that the parties effectively have obligations for the liabilities. It is primarily these facts and circumstances that give rise to the classification as joint operations. The Group accounts for joint operations by recognising our share of the assets, liabilities, revenue and expenses of the joint operation, including our share of such items held or incurred jointly. Annual Financial Statements For the year ended 31 December 2022    131 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 39. #### INVESTMENTS IN SUBSIDIARIES, JOINT OPERATIONS AND ASSOCIATES CONTINUED The investments in other entities held by the Group can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Legal entity name | Nature of business | Operation | Shareholding % | | Direct subsidiaries | | | | | South Africa Coal Operations Proprietary Limited1 | Investment holding company | | 100 | | Thungela Resources Holdings Proprietary Limited2 | Investment holding company | | 100 | | Thungela Treasury Proprietary Limited3 | Investment holding company | | 100 | | Thungela International Proprietary Limited4 | Dormant | | 100 | | | | | | | Indirect subsidiaries | | | | | Thungela Operations Proprietary Limited | Mining company | | 100 | | | Mining operation | Isibonelo | | | | Mining operation | Goedehoop | | | | Mining operation | Greenside | | | | Mining operation | Khwezela | | | Anglo American Inyosi Coal Proprietary Limited2 | Mining company | | 100 | | | Mining operation | Zibulo | | | | Production replacement project | Elders | | | Butsanani Energy Investment Holdings Proprietary Limited | Investment holding company | | 67 | | Rietvlei Mining Company Proprietary Limited5 | Mining company | | 51 | | | Mining operation | Rietvlei | | | Ingagane Colliery Proprietary Limited6 | Liquidated | | — | | Springfield Collieries Limited6 | Liquidated | | — | | Thungela Inyosi Coal Sercurityco Proprietary Limited | Dormant | | 100 | | Newshelf 1316 Proprietary Limited | Dormant | | 100 | | Blue Steam Investments Proprietary Limited | Dormant | | 100 | | Main Street 1756 (RF) Proprietary Limited | Investment holding company | | 100 | | | | | | | Indirect joint operations | | | | | Mafube Coal Mining Proprietary Limited7 | Mining company | | 50 | | | Mining operation | Mafube | | | Phola Coal Processing Plant Proprietary Limited8 | Mining company | | 50 | | | Processing operation | Phola | | 132  Annual Financial Statements for the year ended 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Legal entity name | Nature of business | Operation | Shareholding % | | Pamish Investments No. 66 Proprietary Limited9 | Mining company | | 49 | | | Processing operation | Pamish plant | | | | | | | | Indirect associates | | | | | Richards Bay Coal Terminal Proprietary Limited | Port logistics | Richards Bay Coal Terminal | 23 | | Colliery Training College Proprietary Limited10 | Training provider for companies in the mining industry | | 23 | | | | | | | Indirect trusts | | | | | Nkulo Community Partnership Trust | Community Trust | | 100 | | Sisonke Employee Empowerment Scheme Trust | Employee Trust | | 100 | | Anglo American Thermal Coal Environmental Rehabilitation Trust | Rehabilitation Trust | | 100 | | Mafube Rehabilitation Trust7 | Rehabilitation Trust | | 50 | 1Thungela purchased 100% of the shares in SACO on 1 June 2021 as part of the internal restructure. Thungela sold 10% of its interest in SACO to the Sisonke Trust and the Nkulo Trust on 2 June 2021, which are controlled by the Group. Effectively, Thungela owns 100% of SACO. 2Thungela subscribed for 100% of the shares in TRH on 17 October 2022. Thungela, through TRH acquired the 27% interest in AAIC previously held by Inyosi. Effectively, Thungela owns 100% of AAIC. Refer to note 35 for further detail. 3Thungela subscribed for 100% of the shares of TTPL on 13 October 2022. TTPL holds the investment in the insurance structure of the Group. Refer to note 25 for further detail. 4Thungela subscribed for 100% of the shares of TIPL on 12 October 2022. 5Butsanani Energy legally owns 51% of RMC. However, Butsanani Energy economically owns only 45% of RMC based on various contractual arrangements. Effectively, Thungela owns 34% (being 67% of 51%) of RMC. The results of RMC are however reflected at an effective ownership of 30% (being 67% of 45%) to reflect the underlying contractual agreements. 6The Group’s application to liquidate Ingagane and Springfield was served on 21 January 2022. 7Acquired as part of the internal restructure with effect from 31 March 2021. 8The interest in Phola is held through AAIC. 9The interest in Pamish is held through TOPL. Although TOPL legally owns 49% of Pamish, the contractual agreements result in TOPL obtaining 85% of the benefits related to the operations of Pamish. TOPL’s share of the assets, liabilities, revenue and expenses of Pamish is consolidated at 85%. 10The investment in Colliery Training College is considered immaterial to the Group and has not been equity accounted. The place of business and county of incorporation for all subsidiaries, joint operations, associates and trusts is South Africa. 40. #### EVENTS AFTER THE REPORTING PERIOD The Group monitors activity between the end of the reporting period and the date of the approval of the Annual Financial Statements to ensure that any events that may impact the Group are considered. #### Accounting policy The Group assesses relevant events that occur between the end of the reporting period until the Annual Financial Statements are authorised for issue. An assessment will be performed to determine if the event is an adjusting or non- adjusting event, and adjustments or disclosure may be made if required. #### Acquisition of controlling shareholding in the Ensham Coal Mine and related assets On 3 February 2023, we announced that we have entered into an agreement with Audley Capital and Mayfair (collectively the ‘co-investors’) in terms of which, inter alia, Thungela, through its wholly owned subsidiary Thungela Australia, will acquire a controlling interest in Sungela Holdings and will loan fund a portion of the co-investors equity contributions (the ‘transaction’). Sungela Holdings will, in turn, through its wholly owned subsidiary Sungela, acquire an 85% interest in the Ensham Joint Venture from Idemitsu, as well as Idemitsu’s 85% shareholding in Ensham Coal Sales, its 100% shareholding in Ensham Resources (the operator of the Ensham coal mine) and its 85% shareholding in Nogoa Pastoral and Nogoa Pastoral Joint Venture (collectively, the ‘Ensham Business’) (the’acquisition’). Annual Financial Statements For the year ended 31 December 2022    133 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 40. #### EVENTS AFTER THE REPORTING PERIOD CONTINUED #### Acquisition of controlling shareholding in the Ensham Coal Mine and related assets continued The transaction is subject to the fulfilment of a number of conditions precedent before becoming effective, including, among others: •The Treasurer of the Commonwealth of Australia has exercised its powers in terms of the Foreign Acquisitions and Takeovers Act 1975 and has not objected to the acquisition. •The Australian Competition Consumer Commission has not objected to the acquisition or provided notification of its intent to restrain or prevent completion of the acquisition. •Approval of the acquisition by the relevant regulatory authority in terms of the Queensland Mineral Resources Act 1989 and the Queensland Mineral and Energy Resources (Common Provisions) Act 2014. •Receipt of a notification from the scheme manager in terms of section 33(2) of the Queensland Mineral and Energy Resources (Financial Provisioning) Act 2018. •Waiver of pre-emptive rights by the co-shareholder in Bowen of its pre-emptive right to acquire Idemitsu’s interest in the Ensham Business. •The receipt of all necessary governmental and regulatory approvals or consents including the Financial Surveillance Department of the South African Reserve Bank. #### Securi #### ng of banking facilities In February 2023 Thungela secured access to banking facilities of R3.2 billion with two leading South African banks. The facilities have not been drawn on at the date of authorisation of the Annual Financial Statements for issue. #### Dividend declarati on The board declared a final ordinary cash dividend of R40 per share, or R5,620 million, from retained earnings on 27 March 2023. Combined with the interim divided for 2022, this represents a total dividend payment of R13,799 million to shareholders, amounting to 76% of the adjusted operating free cash flow△ generated in the year ended 31 December 2022. The dividend will be paid in April 2023 to shareholders on the South African register, and in May 2023 to shareholders on the UK register. 134  Annual Financial Statements for the year ended 31 December 2022 ### REMUNERATION 135 #### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 41. #### DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION The remuneration of the directors and prescribed officers has been approved by the Thungela remuneration and nomination committee. Details regarding the directors’ direct and indirect interests in Thungela shares are disclosed in the directors’ report on pages 20 and 21. #### Executive directors and prescribed officers The remuneration of the executive directors and prescribed officers can be analysed as follows: | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | Rand thousand | Basic salary | Retirement and benefits1 | Other2 | STI Cash3 | | STI Deferred Bonus4 | Anglo American LTIP | Thungela retention and milestone awards5,6 | Other LTIs | Total remuneration | | Executive directors | | | | | | | | | | | | J Ndlovu | 7,671 | 1,203 | 30 | 5,414 | | 2,736 | — | 112,403 | — | 129,457 | | GF Smith | 4,953 | 799 | 26 | 3,182 | | 1,591 | — | 56,202 | — | 66,753 | | Total executive directors’ remuneration | 12,624 | 2,002 | 56 | 8,596 | | 4,327 | — | 168,605 | — | 196,210 | | Prescribed officers | | | | | | | | | | | | JPD Van Schalkwyk | 3,862 | 628 | 46 | 2,110 | | 1,055 | — | 1,484 | — | 9,185 | | L Martin | 3,354 | 559 | 25 | 1,833 | | 916 | — | 1,381 | — | 8,068 | | LE Mataboge | 2,383 | 410 | 24 | 1,416 | | 708 | — | 1,042 | — | 5,983 | | N Sithole | 2,383 | 389 | 150 | 1,416 | | 708 | — | 1,018 | — | 6,064 | | C Venter | 2,383 | 369 | 72 | 1,302 | | 651 | — | 990 | — | 5,767 | | BM Dalton | 2,856 | 488 | 35 | 1,698 | | 849 | — | — | — | 5,926 | | Total prescribed officers’ remuneration | 17,221 | 2,843 | 352 | 9,775 | | 4,887 | — | 5,915 | — | 40,993 | 1Retirement and benefits include pension fund contributions, medical aid contributions and other allowances. 2Other payments such as UIF, leave encashments and long service awards. 3Thungela cash component of the STI which is attributable to the 2022 financial year, but to be paid in the 2023 financial year. 4Thungela deferred bonus component of the STI which is attributable to the 2022 financial year, but awarded in the 2023 financial year. 5Thungela milestone awards granted to the executive directors on 11 November 2021. Tranche 1 of these awards vested in full on 4 June 2022 based on the achievement of the employment condition, and was settled using Thungela shares owned by the Group. 6Prescribed officers received a cash-based incentive that is aimed at retaining key employees to ensure the stabilisation of Thungela as a separate entity. 136  Annual Financial Statements for the year ended 31 December 2022 #### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 41. #### DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION CONTINUED #### Executive directors and prescribed officers continued | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | Rand thousand | Basic salary | Retirement and benefits1 | Other2 | STI Cash3 | | STI Deferred Bonus4 | Anglo American LTIP5 | Anglo American retention awards6 | Other LTIs7 | Total remuneration | | Executive directors | | | | | | | | | | | | J Ndlovu | 7,340 | 1,152 | 30 | 5,059 | | 2,556 | 24,846 | 33,737 | 100 | 74,820 | | GF Smith | 4,368 | 709 | 27 | 2,537 | | 1,268 | 10,695 | 17,039 | 53 | 36,696 | | Total executive directors’ remuneration | 11,708 | 1,861 | 57 | 7,596 | | 3,824 | 35,541 | 50,776 | 153 | 111,516 | | Prescribed officers | | | | | | | | | | | | JPD Van Schalkwyk | 3,406 | 612 | 24 | 1,995 | | 998 | 6,736 | — | 2,926 | 16,697 | | L Martin | 3,070 | 519 | 43 | 1,782 | | 891 | 10,695 | — | 31 | 17,031 | | LE Mataboge | 2,228 | 384 | 22 | 1,294 | | 647 | 4,370 | — | 28 | 8,973 | | N Sithole | 2,217 | 360 | 122 | 1,287 | | 644 | 4,370 | — | 25 | 9,025 | | C Venter | 2,184 | 346 | 130 | 1,268 | | 634 | — | — | 5 | 4,567 | | BM Dalton (appointed 1 April 2021) | 2,045 | 330 | 16 | 1,195 | | 598 | — | — | 3,999 | 8,183 | | Total prescribed officers’ remuneration | 15,150 | 2,551 | 357 | 8,821 | | 4,412 | 26,171 | — | 7,014 | 64,476 | 1Retirement and benefits include pension fund contributions, medical aid contributions and other allowances. 2Other payments such as UIF, leave encashments and long service awards. 3Thungela cash component of the STI which is attributable to the 2021 financial year, but to be paid in the 2022 financial year. 4Thungela deferred bonus component of the STI which is attributable to the 2021 financial year, but awarded in the 2022 financial year. 5The value of the Anglo American LTIPs which vested in the 2021 financial year due to the demerger from Anglo American. 6Anglo American retention awards granted in June 2021, as set out in the PLS. These are reflected in full on award at the listing price because no company performance conditions are applicable. 7The value of the Thungela shares provided to individuals that owned Anglo American shares under the rules of the demerger. This category also includes the vesting of a retention award for Johan van Schalkwyk and a sign-on award for Bernard Dalton. Annual Financial Statements For the year ended 31 December 2022    137 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 41. #### DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION CONTINUED #### Non-executive directors Fees for non-executive directors have been approved by the Thungela remuneration and nomination committee. On 12 August 2022, Yoza Jekwa was appointed as an independent non-executive director. All other non-executive directors were appointed in 2021. The remuneration of the non-executive directors can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand | 2022 | 2021 | | Non-executive directors | | | | SS Ntsaluba | 1,567,500 | 1,602,000 | | BM Kodisang | 1,097,300 | 909,000 | | KW Mzondeki | 1,180,900 | 1,137,833 | | TML Setiloane | 1,097,300 | 943,000 | | SG French | 1,039,850 | 571,102 | | YN Jekwa | 268,161 | — | | Total non-executive directors’ remuneration | 6,251,011 | 5,162,935 | All non-executive directors’ fees were paid to the individuals in their personal capacity. Seamus French donated his remuneration to the communities in which the Group operates for the reporting period ended 31 December 2021. #### Share awards granted to executive directors and prescribed officers Details regarding share awards are disclosed in note 33. The share awards granted to executive directors and prescribed officers of the Group under the Thungela share plan can be analysed as follows: Thungela LTIP awards | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2022 | | Number of awards | Opening balance | Granted1 | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | 201,962 | 132,340 | — | — | 334,302 | | GF Smith | 84,668 | 62,607 | — | — | 147,275 | | Total executive directors’ awards | 286,630 | 194,947 | — | — | 481,577 | | Prescribed officers | | | | | | | JPD Van Schalkwyk | 67,613 | 49,285 | — | — | 116,898 | | L Martin | 63,247 | 44,130 | — | — | 107,377 | | LE Mataboge | 47,458 | 32,087 | — | — | 79,545 | | N Sithole | 46,872 | 31,915 | — | — | 78,787 | | C Venter | 45,109 | 31,399 | — | — | 76,508 | | BM Dalton | 60,162 | 39,423 | — | — | 99,585 | | Total prescribed officers’ awards | 330,461 | 228,239 | — | — | 558,700 | 1The awards granted include a total of 235,715 awards added to the Thungela 2022 and 2021 LTIP awards as dividend equivalent share awards granted related to the dividends paid by Thungela in the year ended 31 December 2022. 138  Annual Financial Statements for the year ended 31 December 2022 | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | — | 201,962 | — | — | 201,962 | | GF Smith | — | 84,668 | — | — | 84,668 | | Total executive directors’ awards | — | 286,630 | — | — | 286,630 | | Prescribed officers | | | | | | | JPD Van Schalkwyk | — | 67,613 | — | — | 67,613 | | L Martin | — | 63,247 | — | — | 63,247 | | LE Mataboge | — | 47,458 | — | — | 47,458 | | N Sithole | — | 46,872 | — | — | 46,872 | | C Venter | — | 45,109 | — | — | 45,109 | | BM Dalton | — | 60,162 | — | — | 60,162 | | Total prescribed officers’ awards | — | 330,461 | — | — | 330,461 | Each award converts into one ordinary share in Thungela upon vesting. The vesting of these shares is conditional on the achievement of approved performance conditions. The awards carry neither a right to dividends nor voting rights, however participants are entitled to dividend equivalents accrued over the vesting period, to be converted into additional shares and added to the overall number of awards that will vest. The awards are subject to a two-year holding period after vesting. There is no option for cash settlement of the awards. Thungela milestone awards | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2022 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | 899,658 | — | (449,829) | — | 449,829 | | GF Smith | 449,829 | — | (224,914) | — | 224,915 | | Total executive directors’ awards | 1,349,487 | — | (674,743) | — | 674,744 | | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | — | 899,658 | — | — | 899,658 | | GF Smith | — | 449,829 | — | — | 449,829 | | Total executive directors’ awards | — | 1,349,487 | — | — | 1,349,487 | Each award converts into one ordinary share in Thungela upon vesting. The awards carry both dividend and voting rights. Participants will be entitled to dividends paid on the ordinary shares underlying their awards prior to the vesting date. Should the awards lapse for any reason, dividends already received by participants will not be required to be paid back. Dividends are paid to the award holders on dividend payment dates. Tranche 1 of these awards vested in full on 4 June 2022 based on the achievement of the employment condition, and was settled using Thungela shares owned by the Group. A total of 674,743 share awards vested, with 303,636 shares being sold on vesting to compensate employees for the tax incurred by them on the vesting of the shares. Annual Financial Statements For the year ended 31 December 2022    139 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 41. #### DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION CONTINUED #### Share awards granted to executive directors and prescribed officers continued The share awards granted to executive directors and prescribed officers of the Group under the Thungela share plan can be analysed as follows continued: Thungela DBS awards | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2022 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | — | 15,919 | — | — | 15,919 | | GF Smith | — | 7,941 | — | — | 7,941 | | Total executive directors’ awards | — | 23,860 | — | — | 23,860 | | Prescribed officers | | | | | | | JPD Van Schalkwyk | — | 6,247 | — | — | 6,247 | | L Martin | — | 5,580 | — | — | 5,580 | | LE Mataboge | — | 4,050 | — | — | 4,050 | | N Sithole | — | 4,030 | — | — | 4,030 | | C Venter | — | 3,970 | — | — | 3,970 | | BM Dalton | — | 3,742 | — | — | 3,742 | | Total prescribed officers’ awards | — | 27,619 | — | — | 27,619 | Each award converts into one ordinary share in Thungela upon vesting. The awards carry both dividend and voting rights. Participants will be entitled to dividends paid on the ordinary shares underlying their awards prior to the vesting date. Should the awards lapse for any reason, dividends already received by participants will not be required to be paid back. Dividends are paid to the award holders on dividend payment dates. Anglo American retention awards | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | — | 449,829 | (449,829) | — | — | | GF Smith | — | 231,730 | (231,730) | — | — | | Total executive directors’ awards | — | 681,559 | (681,559) | — | — | In order to incentivise, reward and retain the CEO and the CFO in preparing for the demerger, Anglo American granted a retention award of 449,829 shares to the CEO and 231,730 shares to the CFO which vested during the year ended 31 December 2021, through ordinary shares in Thungela obtained by Anglo American as part of the demerger. 140  Annual Financial Statements for the year ended 31 December 2022 Thungela Resources transitional shares | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | — | 2,151 | (2,151) | — | — | | GF Smith | — | 1,127 | (1,127) | — | — | | Total executive directors’ awards | — | 3,278 | (3,278) | — | — | | Prescribed officers1 | | | | | | | JPD Van Schalkwyk | — | 809 | (809) | — | — | | L Martin | — | 668 | (668) | — | — | | LE Mataboge | — | 594 | (594) | — | — | | N Sithole | — | 534 | (534) | — | — | | C Venter | — | 101 | (101) | — | — | | Total prescribed officers’ awards | — | 2,706 | (2,706) | — | — | 1Bernard Dalton did not participate in the award based on his appointment date. Each award converted into one ordinary share in Thungela upon vesting. These were provided as part of the demerger agreement whereby every shareholder received one Thungela share for every 10 Anglo American shares held. These shares were granted based on the number of shares held as part of the Anglo American BSP on demerger. Anglo American LTIP | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | 66,900 | — | (39,572) | (27,328) | — | | GF Smith | 27,400 | — | (17,098) | (10,302) | — | | Total executive directors’ awards | 94,300 | — | (56,670) | (37,630) | — | | Prescribed officers1 | | | | | | | JPD Van Schalkwyk | 20,900 | — | (10,598) | (10,302) | — | | L Martin | 27,400 | — | (17,098) | (10,302) | — | | LE Mataboge | 13,600 | — | (6,876) | (6,724) | — | | N Sithole | 13,600 | — | (6,876) | (6,724) | — | | Total prescribed officers’ awards | 75,500 | — | (41,448) | (34,052) | — | 1Carina Venter and Bernard Dalton did not participate in the award based on their appointment dates. Each award converted into one ordinary share in Anglo American upon vesting. The vesting of these shares is conditional on the achievement of the performance conditions approved by the Anglo American remuneration committee. Share awards were forfeited as a result of the level of achievement of performance conditions associated with the grants as well as the pro-rata vesting based on the accelerated vesting of these awards on demerger. Refer to note 33 for further detail. Annual Financial Statements For the year ended 31 December 2022    141 #### NOTES TO THE CONSOLIDATED #### FINANCIAL STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 41. #### DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION CONTINUED #### Share awards granted to executive directors and prescribed officers continued Anglo American BSP | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | 2021 | | Number of awards | Opening balance | Granted | Vested | Forfeited | Total | | Executive directors | | | | | | | J Ndlovu | 21,374 | 4,605 | (25,979) | — | — | | GF Smith | 12,986 | 2,658 | (15,644) | — | — | | Total executive directors’ awards | 34,360 | 7,263 | (41,623) | — | — | | Prescribed officers1 | | | | | | | JPD Van Schalkwyk | 6,464 | 1,633 | (8,097) | — | — | | L Martin | 7,422 | 1,483 | (8,905) | — | — | | LE Mataboge | 4,802 | 1,146 | (5,948) | — | — | | N Sithole | 4,218 | 1,124 | (5,342) | — | — | | C Venter | — | 1,021 | (1,021) | — | — | | Total prescribed officers’ awards | 22,906 | 6,407 | (29,313) | — | — | 1Bernard Dalton did not participate in the award based on his appointment date. Each award converted into one ordinary share in Anglo American upon vesting. These shares were granted under the Anglo American BSP as forfeitable shares. These were vested on an accelerated basis under the rules of the demerger. Refer to note 33 for further detail. 142  Annual Financial Statements for the year ended 31 December 2022 ### SEPARATE ### FINANCIAL STATEMENTS ### OF THUNGELA ### RESOURCES LIMITED 143 #### SEPARATE STATEMENT OF PROFIT OR LOSS #### AND OTHER COMPREHENSIVE INCOME #### For the year ended #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Revenue | 2 | 6,954 | — | | Operating costs | 3 | 81 | (15) | | Profit/(loss) before net finance costs and tax | 3 | 7,035 | (15) | | Net finance costs | | 1 | — | | Investment income | | 1 | — | | | | | | | Profit/(loss) before tax | | 7,036 | (15) | | Income tax expense | 4 | (21) | — | | Profit/(loss) for the reporting period | | 7,015 | (15) | | Total comprehensive income/(loss) for the reporting period | | 7,015 | (15) | #### SEPARATE STATEMENT OF FINANCIAL #### POSITION As at #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | ASSETS | | | | | Non-current assets | | | | | Investments in subsidiaries | 5 | 7,753 | 6,404 | | Total non-current assets | | 7,753 | 6,404 | | Current assets | | | | | Loans to related parties | 6 | 2,319 | 5,924 | | Cash and cash equivalents | | — | 5 | | Total current assets | | 2,319 | 5,929 | | Total assets | | 10,072 | 12,333 | | | | | | | EQUITY | | | | | Stated capital | | 11,323 | 10,041 | | Merger reserve | | 2,271 | 2,271 | | Share-based payments reserve | | 83 | 16 | | Retained losses | | (3,632) | (15) | | Total equity | | 10,045 | 12,313 | | | | | | | LIABILITIES | | | | | Current liabilities | | | | | Trade and other payables | | 6 | \* | | Loan from related parties | 6 | — | 20 | | Current tax liabilities | 4 | 21 | — | | Total current liabilities | | 27 | 20 | | Total liabilities | | 27 | 20 | | Total equity and liabilities | | 10,072 | 12,333 | \*Represents an amount less than R1 million. 144  Annual Financial Statements for the year ended 31 December 2022 #### SEPARATE STATEMENT OF CHANGES IN #### EQUITY #### For the year ended #### 31 December 2022 | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | Rand million | Notes | Stated Capital1 | Merger reserve | Share- based payments reserve | Retained losses | Total equity | | Balance at 5 January 2021 | | — | — | — | — | — | | Issue of shares for assumed fair value of SACO | | 4,575 | — | — | — | 4,575 | | Issue of shares for cash | | 5,466 | — | — | — | 5,466 | | Acquired through internal restructure | 5 | — | 2,271 | — | — | 2,271 | | Total comprehensive loss for the reporting period | | — | — | — | (15) | (15) | | Movements in share-based payments reserve | 8 | — | — | 16 | — | 16 | | Balance at 31 December 2021 | | 10,041 | 2,271 | 16 | (15) | 12,313 | | Acquisition of additional interest in subsidiary | 7 | 1,282 | — | — | — | 1,282 | | Total comprehensive income for the reporting period | | — | — | — | 7,015 | 7,015 | | Dividends paid | 9 | — | — | — | (10,632) | (10,632) | | Movements in share-based payments reserve2 | 8 | — | — | 67 | — | 67 | | Balance at 31 December 2022 | | 11,323 | 2,271 | 83 | (3,632) | 10,045 | 1Note 32 of the consolidated financial statements is an integral part of these separate financial statements and details the treatment of the shares issued by the Company. 2Includes movements as a result of share-based payment transactions in terms of the Thungela share plan of R113 million reduced by the impact of the vesting of shares of R46 million. Annual Financial Statements for the year ended 31 December 2022    145 #### SEPARATE STATEMENT OF CASH FLOWS #### For the year ended #### 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Cash flows from operating activities | | | | | Profit/(loss) before tax | | 7,036 | (15) | | Net finance costs | | (1) | — | | Profit/(loss) before net finance costs and tax | | 7,035 | (15) | | Movements in working capital | | 6 | — | | Increase in trade and other payables | | 6 | — | | | | | | | Net cash generated from/(utilised in) operating activities | | 7,041 | (15) | | | | | | | Cash flows from investing activities | | | | | Investment income received | | 1 | — | | Loans granted to related parties | 6 | (155) | (5,466) | | Repayment of loans to related parties | 6 | 3,760 | — | | Net cash generated from/(utilised in) investing activities | | 3,606 | (5,466) | | | | | | | Cash flows from financing activities | | | | | Dividends paid | 9 | (10,632) | — | | Shares issued for cash1 | 7 | — | 5,466 | | Proceeds on loans from related parties | 6 | — | 20 | | Repayment of loans from related parties | 6 | (20) | — | | Net cash (utilised in)/generated from financing activities | | (10,652) | 5,486 | | Net (decrease)/increase in cash and cash equivalents | | (5) | 5 | | | | | | | Cash and cash equivalents at the start of the reporting period | | 5 | — | | Net (decrease)/increase in cash and cash equivalents | | (5) | 5 | | Cash and cash equivalents at the end of the reporting period | | — | 5 | 1Note 32 of the consolidated financial statements is an integral part of these separate financial statements, and details the treatment of the shares issued by the Company. 146  Annual Financial Statements for the year ended 31 December 2022 #### NOTES TO THE SEPARATE FINANCIAL #### STATEMENTS #### For the year ended #### 31 December 2022 1. #### BASIS OF PREPARATION The basis of preparation and principal accounting policies are disclosed in the respective notes to the consolidated financial statements for the year ended 31 December 2022. The accounting policies are aligned with the consolidated financial statements. Thungela was incorporated on 5 January 2021 to operate as the holding company of the Group. 2. #### REVENUE The Company’s revenue consists of dividends received from its investments in subsidiaries. #### Accounting policy Dividend income for the Company, from its investments in subsidiaries, is recognised when the shareholder’s right to receive payment has been established and the amount of income can be measured reliably. Revenue can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | | 2022 | 2021 | | Dividends received from SACO | | 6,954 | — | | Total revenue | | 6,954 | — | 3. #### PROFIT/(LOSS) BEFORE NET FINANCE COSTS AND TAX Profit/(loss) before net finance costs and tax represents the results of the ongoing normal operations of the Company. #### Accounting policy Operating costs incurred in the ongoing operations of the Company are recognised in the statement of profit or loss and other comprehensive income as incurred. Profit/(loss) before net finance costs and tax can be analysed as follows: | | | | | | --- | --- | --- | --- | | | | | | | Rand million | | 2022 | 2021 | | Revenue | | 6,954 | — | | Foreign exchange gains | | 75 | — | | Dividends waived by shareholders | | 27 | — | | Non-executive directors’ fees | | (6) | (5) | | Professional fees | | (8) | (5) | | Other administration expenses | | (7) | (5) | | Total operating costs1 | | 81 | (15) | | Profit/(loss) before net finance costs and tax | | 7,035 | (15) | 1 Enhanced disclosure has been provided in relation to the total operating costs incurred to provide a greater understanding of the nature thereof. Annual Financial Statements for the year ended 31 December 2022    147 #### NOTES TO THE SEPARATE FINANCIAL #### STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 4. #### INCOME TAX EXPENSE Income tax expense comprises current tax. #### Accounting policy Income tax is recognised in profit or loss. The Company’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. #### Analysis of income tax expense | | | | | | --- | --- | --- | --- | | | | | | | Rand million | | 2022 | 2021 | | Current tax expense | | | | | Charged in respect of the current reporting period | | (21) | — | | | | | | | Total income tax expense | | (21) | — | #### Factors affecting income tax expense The income tax expense for the reporting period has been impacted by various transactions and can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Profit/(loss) before tax | 7,036 | (15) | | Tax at the applicable rate (South African corporation tax rate) of 28% | (1,970) | 4 | | Adjusted for the tax effects of: | | | | Items non-deductible for tax purposes | (6) | (4) | | Expenses not incurred in the production of income | (6) | (4) | | Items non-taxable for tax purposes | 1,955 | — | | Dividends received from subsidiary | 1,947 | — | | Accounting adjustment not taxable | 8 | — | | | | | | Income tax expense | (21) | — | The effective tax rate for the year of 0.3% (2021: 0.0%) is lower than the applicable statutory rate of corporation tax in South Africa of 28%. 5. #### INVESTMENTS IN SUBSIDIARIES The Company is the listed holding company of the Thungela Group, and holds investments in various entities as disclosed in note 39 of the consolidated financial statements. #### Accounting policy The Company carries its investments in its subsidiaries at cost, including transaction costs less accumulated impairment losses. #### Internal restructure of the Thungela Group before demerger As described in note 2A of the consolidated financial statements, a restructuring process was undertaken to separate the SA Thermal coal operations and the various non-thermal coal operations within Anglo American in order to prepare the Group for the demerger, which was completed on 31 March 2021. This included consolidating all of the SA Thermal coal operations into a single group of companies and is referred to as the internal restructure. As part of the internal restructure, a number of key steps were undertaken, which are fully described in the Thungela Annual Financial Statements for the year ended 31 December 2021. After the internal restructure was completed on 31 March 2021, Thungela was demerged from the Anglo American Group with effect from 4 June 2021 through a series of independent steps, which resulted in the Thungela shares being distributed to Anglo American shareholders. Thungela listed on the JSE and the LSE on 7 June 2021. 148  Annual Financial Statements for the year ended 31 December 2022 The acquisition of SACO by Thungela with effect from 1 June 2021 is considered a group reorganisation as per IAS 27, rather than a business combination, and so the Group is presented as if Thungela has always owned SACO, rather than reflecting the acquisition of SACO by Thungela from 1 June 2021. The full transaction price can be separated between the value considered to have been paid for the existing SACO business of R4,575 million, and cash paid by Anglo American of R5,466 million. The difference between the equity value of SACO at the date of the reorganisation, being R6,846 million, and the transaction price for the pre-existing business has been recognised in equity as a merger reserve. #### Investments in subsidiaries Thungela holds a 90% investment in SACO as detailed in note 39 of the consolidated financial statements. The Company, through TRH acquired the 27% interest in AAIC previously held by Inyosi on 30 November 2022. Refer to note 35 of the consolidated financial statements for further detail. The Company subscribed for shares in TRH to settle the purchase consideration for the AAIC shares of R1,282 million. The investment in TOPL relates to the share-based payment transactions in terms of the Thungela share plan, as detailed in note 33 of the consolidated financial statements. TOPL is considered the employer company in the transactions, with the awards to be settled in Thungela shares. The investments in subsidiaries can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 6,404 | — | | Direct – TRH | 1,282 | — | | Acquisition of ordinary shares | 1,282 | — | | Direct – SACO | — | 6,388 | | Acquisition through internal restructure | — | 6,846 | | Disposal to the Sisonke Trust and the Nkulo Trust | — | (458) | | Indirect – TOPL | 67 | 16 | | Additions relating to the Thungela share plan | 67 | 16 | | | | | | Balance at the end of the reporting period | 7,753 | 6,404 | The value of the investment in SACO is intrinsically linked to the value of the other operating entities in the Group, being TOPL, Butsanani Energy, Mafube Coal Mining and AAIC, as SACO is the holding company of these operating entities. On this basis, we have assessed the value of the SACO investment held by Thungela on the basis of the valuations performed on these operating entities to determine whether the investment may be impaired. From the valuations performed, we have not identified an indicator of impairment related to the investment held in SACO. The value of the investment in TRH is intrinsically linked to the value of AAIC, as TRH holds a 27% interest in AAIC. On this basis, we have assessed the value of the TRH investment held by Thungela on the basis of the valuation performed on AAIC to determine whether the investment may be impaired. From the valuation performed, we have not identified an indicator of impairment related to the investment held in TRH. The inputs and assumptions used for the impairment assessment of the investments in SACO, TRH and TOPL are consistent with the details disclosed in note 7 of the consolidated financial statements. Annual Financial Statements for the year ended 31 December 2022    149 #### NOTES TO THE SEPARATE FINANCIAL #### STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 6. #### LOANS TO/(FROM) RELATED PARTIES The Company has entered into loans with its related parties in the normal course of business. #### Accounting policy The loans to related parties are initially recognised at fair value and are classified as debt instruments at amortised cost. At subsequent reporting dates, the loans to related parties are measured at amortised cost less any provision for expected credit losses. The Company has granted loans to related parties in relation to expenses paid by SACO and TOPL in the normal course of business, including dividends received. The loan to related parties granted during 31 December 2021 was granted in relation to the demerger and funds received from Anglo American as part of the internal restructure. The loans to/(from) related parties can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Balance at the start of the reporting period | 5,904 | — | | Cash movements | (3,585) | 5,446 | | Loan (repaid by)/granted to SACO | (3,760) | 5,466 | | Loan granted to TOPL | 155 | — | | Loan repaid to/(granted by) TOPL | 20 | (20) | | Non-cash movements | — | 458 | | Loan to SACO for shares purchased by the Sisonke Trust and the Nkulo Trust | — | 458 | | | | | | Balance at the end of the reporting period | 2,319 | 5,904 | | Classified as: | | | | Loans to related parties | 2,319 | 5,924 | | Loan from related parties | — | (20) | The Company entered into various transactions with related parties in the normal course of business. These transactions are undertaken on terms no more or less favourable than those with third parties. All loans are denominated in South African rand, interest free, unsecured and have no fixed repayment terms. There has been no significant increase in the credit risk relating to the loans granted to SACO and TOPL since the loans were granted. No provision for expected credit losses has been recognised on the loans due to there being no uncertainty regarding the recoverability of the outstanding amounts, given that the recoverability of these loans is based on the performance of the underlying operating entities in the Group. Thungela has a reasonable expectation that these loans will be settled within one year of the reporting date from cash and cash equivalents held within those entities. 150  Annual Financial Statements for the year ended 31 December 2022 7. #### STATED CAPITAL Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. | | | | | --- | --- | --- | | | | | | Number of shares | 2022 | 2021 | | Authorised | | | | Ordinary no par value shares | 10,000,000,000 | 10,000,000,000 | | Issued | | | | Ordinary no par value shares | 140,492,585 | 136,311,808 | | | | | | Reconciliation of number of shares in issue | | | | Shares in issue at the start of the reporting period | 136,311,808 | — | | Issue of ordinary no par value shares | 4,180,777 | 136,311,808 | | Shares in issue at the end of the reporting period | 140,492,585 | 136,311,808 | | | | | | Rand million | | | | Balance at the start of the reporting period | 10,041 | — | | Issue of ordinary no par value shares | 1,282 | 10,041 | | Balance at the end of the reporting period | 11,323 | 10,041 | Note 32 of the consolidated financial statements for the year ended 31 December 2022 is an integral part of these separate financial statements and details the shares issued by the Company in the current and prior year. The shareholders, at the AGM held on 24 May 2022, approved that the unissued shares, limited to 5.0% of the number of shares in issue at that date, or 6,815,590 shares, be placed under the control of the board at their discretion. The approval is subject to compliance with the MOI, the Companies Act of South Africa, the JSE Listings Requirements and the UK Listing Rules, and this authority is valid for the shorter of 15 months or until the next AGM. For the year ended 31 December 2022, Thungela issued 4,180,777 shares in terms of this authority as fully described in note 35 of the consolidated financial statements. 8. #### SHARE-BASED PAYMENT TRANSACTIONS The Group has undertaken a number of share-based payment transactions with its employees through the Thungela share plan in the year ended 31 December 2022. Full details of these transactions have been disclosed in note 33 of the consolidated financial statements. #### Accounting policy The expenses relating to the share-based payment awards granted in accordance with the Thungela share plan are accounted for in the operating costs of the relevant subsidiaries of the Company on the basis of the subsidiary being the employer of record for the beneficiaries to whom the awards are granted. The share-based payment transactions will be settled using Thungela ordinary shares, either based on shares held in treasury by the Group, or by purchasing Thungela ordinary shares on the market at the vesting date. In the separate financial statements, the value of the share-based payments is considered to be an additional investment in the relevant employer company by Thungela, with the resultant share-based payment reserve recognised in equity. Annual Financial Statements for the year ended 31 December 2022    151 #### NOTES TO THE SEPARATE FINANCIAL #### STATEMENTS CONTINUED #### For the year ended #### 31 December 2022 9. #### DIVIDENDS Thungela declared and paid ordinary dividends to shareholders in the year ended 31 December 2022 from retained earnings. #### Accounting policy Dividends are recognised in the period in which the dividends are declared directly in the statement of changes in equity. Dividends proposed or declared subsequent to the reporting date are not recognised as dividends paid in the reporting period. Treasury shares are held by subsidiaries in respect of awards granted in terms of the Thungela share plan as detailed in note 33 of the consolidated financial statements. Dividends declared on shares held in relation to the forfeitable share awards are paid to the employees on payment date. Dividends declared on shares held in relation to the conditional share awards will be paid to the subsidiary holding the share in line with the rules of the Thungela share plan. Di #### vidend policy Full details of the dividend policy have been disclosed in note 34 of the consolidated financial statements. #### Dividends paid Dividends paid can be analysed as follows: | | | | | --- | --- | --- | | | | | | Rand million | 2022 | 2021 | | Dividends paid to the external shareholders of the Group | 10,483 | — | | Dividend declared on 22 March 2022 of R18 per ordinary share | 2,448 | — | | Dividend declared on 15 August 2022 of R60 per ordinary share | 8,035 | — | | Dividends paid to TOPL on treasury shares held | 149 | — | | Total dividends paid | 10,632 | — | #### Dividend declaration A final ordinary cash dividend relating to the reporting period ended 31 December 2022 of R40 per share (2021: R18 per share), was declared by the board on 27 March 2023. The final dividend, amounting to a return of R5,620 million to shareholders has not been recognised as a liability in these separate financial statements. The final dividend was declared from retained earnings and will be paid in April 2023 to shareholders on the South African register, and May 2023 to shareholders on the UK register. Together with the interim dividend of R60 per share, this equates to a total dividend of R100 per share for the year ended 31 December 2022. 10. #### EVENTS AFTER THE REPORTING PERIOD The Company monitors activity between the end of the reporting period and the date of the approval of the Annual Financial Statements to ensure that any events that may impact the Company are considered. #### Accounting policy The Company assesses relevant events that occur between the end of the reporting period until the Annual Financial Statements are authorised for issue. An assessment will be performed to determine if the event is an adjusting or non- adjusting event, and adjustments or disclosure may be made if required. #### Acquisition of controlling shareholding in the Ensham Coal Mine and related assets As fully described in note 40 of the consolidated financial statements, the Group has announced that we have entered into an agreement to acquire a controlling interest in the Ensham Business. #### Dividend declaration The board declared a final ordinary cash dividend of R40 per share, or R5,620 million, from retained earnings on 27 March 2023. Combined with the interim divided for 2022, this represents a total dividend payment of R13,799 million to shareholders, amounting to 76% of the adjusted operating free cash flow△ generated in the year ended 31 December 2022. The dividend will be paid in April 2023 to shareholders on the South African register, and in May 2023 to shareholders on the UK register. 152  Annual Financial Statements for the year ended 31 December 2022 ### ANNEXURES 153 #### ANNEXURE 1 #### ALTERNATIVE PERFORMANCE MEASURE S△ #### For the year ended #### 31 December 2022 #### INTRODUCTION | | | --- | | | | | When assessing and discussing Thungela’s reported financial performance, financial position and cash flows, the directors may make reference to APMs of historical or future financial performance, financial position or cash flows that are not defined or specified under IFRS. These financial measures are usually derived from the consolidated financial statements, prepared in accordance with IFRS. Certain financial measures cannot be directly derived from the consolidated financial statements as they contain additional information, such as operational information and specific metrics as monitored by the directors. The accounting policies applied when calculating APMs are the same as those applied in the consolidated financial statements. #### PURPOSE | | | --- | | | | | Thungela uses APMs to improve the comparability of information between reporting periods, either by adjusting for uncontrollable factors or items such as impairments, restructuring costs and other transactions which impact upon IFRS measures or, by aggregating measures, to aid the user of the consolidated financial statements in understanding the activity taking place across Thungela’s portfolio. The APMs are the responsibility of the Thungela directors and have been assessed consistently in each reporting period, other than as noted below. The APMs should be considered in addition to, and not as a substitute for, or as superior to, measures of financial performance, financial position or cash flows reported in accordance with IFRS. APMs are not uniformly defined by all companies, including those in the Group's industry. Accordingly, they may not be comparable with similarly titled measures and disclosures used by other companies. APMs are used by the Group for planning and reporting purposes. A subset is also used by the Group in setting director and management remuneration. The financial APMs used by Thungela are as follows: | | | | | | --- | --- | --- | --- | | | | | | | APM | Definition | Adjustments to reconcile to primary statements | Rationale for adjustments | | Statement of profit or loss and other comprehensive income | | | | | Adjusted EBITDA (note A) | EBITDA adjusted for the impacts of once-off transactions, or transactions which are outside the core operations of the Group | Profit before net finance costs and tax, adjusted for: •Impairment losses •Restructuring costs and termination benefits •Fair value (losses)/gains on derivative financial instruments •Fair value loss on derivative asset – capital support •Depreciation and amortisation | •Exclude the effect of once-off transactions or transactions outside the core operations of the Group | | Adjusted EBITDA margin (note B) | Adjusted EBITDA as a percentage of revenue | •None | •None | | Statement of financial position | | | | | Net cash (note C) | Cash and cash equivalents less cash held in the Sisonke Trust and the Nkulo Trust, and loans and borrowings | •None | •None | 154  Annual Financial Statements for the year ended 31 December 2022 | | | | | | --- | --- | --- | --- | | | | | | | APM | Definition | Adjustments to reconcile to primary statements | Rationale for adjustments | | Statement of cash flows | | | | | Capex (note 4) | Cash expenditure on property, plant and equipment and intangible assets, including the movement on capital creditors in the reporting period | •None | •None | | Sustaining capex (note D) | Stay-in-business capex, stripping and development capex and capex on intangible assets | •None | •None | | Adjusted operating free cash flow (note E) | Net cash flows from operating activities less sustaining capex | •None | •None | | Other APMs | | | | | FOB cost (Note F) | Direct cash cost incurred in producing one unit of saleable export product and delivering the product to the vessel for export | •Industrial and domestic revenue •Administrative costs •Contributions to the trusts1 | •Exclude costs incurred not attributable to delivering the coal to the vessel for export | | FOB cost per export tonne (Note G) | FOB cost calculated per export saleable tonne | •None | •None | | FOB cost excluding royalties (Note H) | FOB cost as defined, excluding royalties | FOB cost as defined, adjusted for: •Royalties | •Exclude royalties, which are directly impacted by the movement in the Benchmark coal price | | FOB cost per export tonne excluding royalties (Note I) | FOB cost excluding royalties calculated per export saleable tonne | •None | •None | | Environmental liability coverage (Note J) | The percentage of investments held to fund future rehabilitation, decommissioning and water treatment expenditure | •None | •None | 1Contributions to the trusts are excluded from the determination of FOB cost as these costs are not direct costs incurred in producing thermal coal. The contributions to the trusts for the reporting period ended 31 December 2021 are immaterial and the APM has not been restated to reflect this. Annual Financial Statements for the year ended 31 December 2022    155 #### ANNEXURE 1 #### ALTERNATIVE PERFORMANCE MEASURES △ CONTINUED #### For the year ended #### 31 December 2022 The APMs used in the consolidated financial statements have been reconciled as below: A. #### Adjusted EBITDA | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Profit before net finance costs and tax per the statement of profit or loss and other comprehensive income | 5 | 24,094 | 7,509 | | Add – depreciation | 5 | 1,169 | 989 | | Add – amortisation | 5 | 28 | 29 | | Add – impairment losses | 7 | 656 | 808 | | Add/(less) – fair value losses/(gains) on derivative financial instruments | 24 | 3,207 | (348) | | Add – fair value loss on derivative asset – capital support | 24 | 347 | 569 | | Add – restructuring costs and termination benefits | 8 | 29 | 422 | | Adjusted EBITDA | | 29,530 | 9,978 | B. #### Adjusted EBITDA margin | | | | | | --- | --- | --- | --- | | | | | | | Rand million (unless otherwise stated) | Notes | 2022 | 2021 | | Adjusted EBITDA | A | 29,530 | 9,978 | | Revenue | 4 | 50,753 | 26,282 | | Adjusted EBITDA margin (%) | | 58 | 38 | C. #### Net cash | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Cash and cash equivalents | 20 | 15,299 | 8,736 | | Less – cash held in the Sisonke Trust and the Nkulo Trust | 20 | (519) | (10) | | Less – loans and borrowings | 23 | (60) | (63) | | Net cash | | 14,720 | 8,663 | D. #### Sustaining capex | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Stay-in-business capex | | 1,233 | 1,682 | | Property, plant and equipment | 4 | 1,233 | 1,671 | | Intangible assets | 4 | — | 11 | | Stripping and development capex | 4 | 455 | 511 | | Sustaining capex | | 1,688 | 2,193 | E. #### Adjusted operating free cash flow | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Note | 2022 | 2021 | | Net cash generated from operating activities | | 19,784 | 6,116 | | Sustaining capex | D | (1,688) | (2,193) | | Adjusted operating free cash flow | | 18,096 | 3,923 | 156  Annual Financial Statements for the year ended 31 December 2022 F. #### FOB cost | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | Operating costs | 5 | 22,420 | 17,322 | | Less – industrial and domestic revenue | 4 | (4,997) | (3,469) | | Less – depreciation | 5 | (1,169) | (989) | | Less – amortisation | 5 | (28) | (29) | | Less – third-party commodity purchases | 5 | (2,114) | (1,380) | | Less – commodity purchases from Mafube Coal Mining | 5 | — | (137) | | Add – inventory production movement | 5 | 587 | 1,222 | | Less – demurrage and other expenses | 5 | (216) | (204) | | Less – exploration and evaluation | 5 | (54) | (124) | | Add – foreign exchange gains | 5 | 835 | 214 | | (Less)/add – (loss)/profit on sale of property, plant and equipment | 5 | (17) | 8 | | Less – recharged costs from Anglo American – administration expenses | 5 | (239) | (331) | | Less – fair value loss on biological assets1 | 17 | (18) | (3) | | Less – expenses related to contributions to the Sisonke Trust and the Nkulo Trust2 | 6,28 | (766) | — | | Less – other administration expenses | 5 | (128) | (49) | | FOB cost | | 14,096 | 12,051 | 1The fair value loss on biological assets is included in other operating expenses. 2Expenses related to contributions to the trusts include contributions to the Nkulo Trust of R386 million, as well as expenses recognised for the Sisonke Trust based on services rendered by employees of R380 million. The contributions to the trusts in the year ended 31 December 2021 are immaterial, and the APM has not been restated to reflect this. G. #### FOB cost per export tonne | | | | | | --- | --- | --- | --- | | | | | | | Rand million (unless otherwise stated) | Note | 2022 | 2021 | | FOB cost | F | 14,096 | 12,051 | | Export saleable production (kt) | | 13,062 | 14,511 | | FOB cost per export tonne (Rand/tonne) | | 1,079 | 830 | H. #### FOB cost excluding royalties | | | | | | --- | --- | --- | --- | | | | | | | Rand million | Notes | 2022 | 2021 | | FOB cost | F | 14,096 | 12,051 | | Less – royalties | 5 | (1,955) | (394) | | FOB cost excluding royalties | | 12,141 | 11,657 | Annual Financial Statements for the year ended 31 December 2022    157 #### ANNEXURE 1 #### ALTERNATIVE PERFORMANCE MEASURES △ CONTINUED #### For the year ended #### 31 December 2022 The APMs used in the consolidated financial statements have been reconciled as below continued: I. #### FOB cost per export tonne excluding royalties | | | | | | --- | --- | --- | --- | | | | | | | Rand million (unless otherwise stated) | Note | 2022 | 2021 | | FOB cost excluding royalties | H | 12,141 | 11,657 | | Export saleable production (kt) | | 13,062 | 14,511 | | FOB cost per export tonne excluding royalties (Rand/tonne) | | 929 | 803 | J. #### Environmental liability coverage | | | | | | --- | --- | --- | --- | | | | | | | Rand million (unless otherwise stated) | Note | 2022 | 2021 | | Environmental provisions | 28 | 7,566 | 6,751 | | Investments held to fund closure activities | | 4,104 | 3,487 | | Environmental rehabilitation trusts | 28 | 3,446 | 3,288 | | Other environmental investments | 28 | 658 | 199 | | | | | | | Environmental liability coverage (%) | | 54 | 52 | 158  Annual Financial Statements for the year ended 31 December 2022 #### ANNEXURE 2 #### GLOSSARY #### For the year ended #### 31 December 2022 A number of terms have been used in the Annual Financial Statements, using the definitions as detailed below: | | | | --- | --- | | | | | Term used | Definition | | AAIC | Anglo American Inyosi Coal Proprietary Limited | | AAML | Anglo American Marketing Limited | | AASAF | Anglo American South Africa Finance Limited | | AGM | Annual general meeting | | Anglo American | The Anglo American plc Group, and its subsidiaries | | AOPL | Anglo Operations Proprietary Limited, also referred to as TOPL | | APM | Alternative performance measure | | ASA | Anglo South Africa Proprietary Limited | | Audley Capital | Audley Energy Limited | | Benchmark coal price | Benchmark price reference for 6,000kcal/kg thermal coal exported from the RBCT | | Bowen | Bowen Investment (Australia) Proprietary Limited | | BSP | Bonus share plan | | Butsanani Energy | Butsanani Energy Investment Holdings Proprietary Limited | | Capital support agreement | The agreement concluded between ASA and Thungela regulating the terms and conditions upon which ASA will support the thermal coal sales of the Group | | Carbon Tax Act | Carbon Tax Act 15 of 2019 | | CA (SA) | Chartered Accountant South Africa | | CEO | Chief executive officer | | CFO | Chief financial officer | | CGU | Cash generating unit | | CIPC | Companies and Intellectual Property Commission | | Circular 1/2021 | Circular 1/2021: Headline earnings, issued by SAICA detailing the requirements for determining headline earnings | | Coal reserves | Modified indicated and measured coal resources, including consideration of modifying factors that affect extraction. This represents the economically extractable material | | Coal resources | The in-situ coal for which there are reasonable prospects for eventual economic extraction | | CODM | Chief operating decision maker | | Colliery Training College | Colliery Training College Proprietary Limited | | Conditional shares | Shares or share awards granted to participants under the Thungela share plan which are subject to certain performance conditions and employment conditions | | Customs and Excise Act | Customs and Excise Act 91 of 1964 | | DBS | Deferred bonus shares | | Demerger | The process to separate Thungela from Anglo American, as fully described in the PLS | | DFFE | Department of Forestry, Fisheries and the Environment | | DMRE | Department of Mineral Resources and Energy | | EBITDA | Earnings before interest, tax, depreciation and amortisation | | Employment condition | The conditions of employment to be satisfied in order for awards under the Thungela share plan to vest on the vesting date | | Employment period | A specified period of employment over which the employment conditions must be met in relation to the Thungela share plan | Annual Financial Statements for the year ended 31 December 2022    159 #### ANNEXURE 2 #### GLOSSARY CONTINUED #### For the year ended #### 31 December 2022 A number of terms have been used in the Annual Financial Statements, using the definitions as detailed below continued: | | | | --- | --- | | | | | Term used | Definition | | Ensham Coal Sales | Ensham Coal Sales Proprietary Limited | | Ensham Resources | Ensham Resources Proprietary Limited | | Environmental provisions | The Group’s obligations to undertake decommissioning, rehabilitation, remediation, closure and ongoing post-closure monitoring activities when environmental disturbances are caused by the development or ongoing production of a mining property, as well as the decommissioning of infrastructure established on the operating sites | | EPS | Earnings per share | | ESG | Environmental, social and governance | | EU | European Union | | FCA | The Financial Conduct Authority of the UK or its successor from time to time | | FEC | Foreign exchange contract | | FIFO | First in, first out | | FMA | The South African Financial Markets Act 19 of 2012 (as amended from time to time) | | FOB | Free on board | | FOR | Free on rail | | Forfeitable shares | Shares or share awards granted to participants pursuant to the Thungela share plan, the vesting of which is subject to the fulfilment of an employment condition over the employment period | | FSMA | The UK Financial Services and Markets Act 2000 (as amended from time to time) | | FVOCI | Fair value through other comprehensive income | | FVPL | Fair value through profit or loss | | GRI | Global Reporting Initiative | | Group | Thungela and its subsidiaries, joint arrangements and associates | | HEPS | Headline earnings per share | | IAS | International Accounting Standard, referencing a specific standard to be applied | | IAS 1 | Presentation of Financial Statements | | IAS 2 | Inventories | | IAS 8 | Accounting Policies, Changes in Accounting Estimates and Errors | | IAS 12 | Income Taxes | | IAS 16 | Property, Plant and Equipment | | IAS 27 | Separate Financial Statements | | IAS 33 | Earnings per Share | | IAS 37 | Provisions, Contingent Liabilities and Contingent Assets | | IAS 41 | Agriculture | | IASB | International Accounting Standards Board | | IBC | Inside back cover | | IFRS | International Financial Reporting Standards as issued by the IASB and the IFRS Interpretations Committee (previously known as the IFRIC). When used before a number this references a specific standard to be applied | | IFRS 1 | First-time Adoption of International Financial Reporting Standards | | IFRS 3 | Business Combinations | | IFRS 9 | Financial Instruments | | IFRS 13 | Fair Value Measurement | | IFRS 15 | Revenue from Contracts with Customers | 160  Annual Financial Statements for the year ended 31 December 2022 | | | | --- | --- | | | | | Term used | Definition | | IFRS 16 | Leases | | IFRS 17 | Insurance Contracts | | IFRS Practice Statement 2 | Making Materiality Judgements | | Idemitsu | Idemitsu Australia Proprietary Limited and its subsidiary, Bligh Coal Limited | | Internal restructure | The internal restructuring of the Group undertaken in preparation for the demerger, as fully described in note 2A of the Thungela Annual Financial Statements for the year ended 31 December 2021 | | Inyosi | Inyosi Coal (RF) Proprietary Limited | | JSE | Johannesburg Stock Exchange Limited | | JSE Listings Requirements | The listings requirements issued by the JSE under the FMA to be observed by issuers of equity securities listed on the JSE | | Kcal/kg | Kilocalories per kilogram | | King IV | The King IV Report on Corporate GovernanceTM for South Africa, 2016. Copyright and trademarks are owned by the Institute of Directors in Southern Africa NPC and all of its rights are reserved | | kt | A measure representing 1,000 tonnes | | LOM | Life of mine | | LOM plan | A design and financial/economic study of an existing operation in which appropriate assessments have been made of existing geological, mining, social, governmental, engineering, operational, and all other modifying factors, which are considered in sufficient detail to demonstrate that continued extraction is reasonably justified | | LSE | London Stock Exchange | | LTI | Long-term incentive | | LTIP | Long-term incentive plan | | LXI | LX International | | Mafube Coal Mining | Mafube Coal Mining Proprietary Limited | | Mainstreet 1756 | Main Street 1756 (RF) Proprietary Limited | | MAR | Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse and the delegated acts, implementing acts, technical standards and guidelines thereunder as modified and as such legislation forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, and as modified by UK domestic law from time to time | | Mayfair | Mayfair Corporations Group Proprietary Limited | | Medical Schemes Act | Medical Schemes Act 131 of 1998 | | Minerals Council | The Minerals Council of South Africa is a mining industry employers’ organisation that promotes the interests of the South African mining industry and provides strategic and advisory support | | MOI | Memorandum of incorporation | | MPRDA | The South African Mineral and Petroleum Resources Development Act 28 of 2002 | | MPRDA Regulations | Mineral and Petroleum Resources Development Regulations, 2004, published under the Mineral and Petroleum Resources Development Act 28 of 2002 | | Mt | Million tonnes | | Mtpa | Mt per annum | | Nogoa Pastoral | Nogoa Pastoral Proprietary Limited | | Nasonti Coal | Nasonti Coal Proprietary Limited | | Nasonti Group | Nasonti Trust including wholly owned subsidiaries Nasonti Technical and Nasonti Coal | | Nasonti Technical | Nasonti Technical Services Proprietary Limited | Annual Financial Statements for the year ended 31 December 2022    161 #### ANNEXURE 2 #### GLOSSARY CONTINUED #### For the year ended #### 31 December 2022 A number of terms have been used in the Annual Financial Statements, using the definitions as detailed below continued: | | | | --- | --- | | | | | Term used | Definition | | NEMA | The South African National Environmental Management Act 107 of 1998 (as amended from time to time) | | NEMA Financial Provisioning Regulations | Financial Provisioning Regulations, 2015, published under the National Environmental Management Act 107 of 1998 | | Nkulo Trust | The Nkulo Community Partnership Trust, also referred to as the Community Partnership Plan (CPP) | | NRV | Net realisable value | | OCI | Other comprehensive income | | Offtake agreement | The offtake agreement between the Company, TOPL and AAML, dated 6 March 2021 | | Old order mines | Old order mines reference to Goedehoop, Isibonelo and Khwezela, which are separately ring- fenced for tax purposes in line with relevant tax legislation applicable to mining companies in South Africa | | Pamish | Pamish Investments No. 66 Proprietary Limited | | Pension Fund Act | Pension Fund Act 24 of 1956 | | Performance condition | A performance condition to be satisfied in order for conditional awards to vest under the Thungela share plan | | Phola | Phola Processing Plant Proprietary Limited | | PLS | Combined prospectus and pre-listing statement of Thungela, published on 8 April 2021 | | Pro forma financial information | The pro forma consolidated statements of profit or loss for the years ended 31 December 2021 and 31 December 2020, along with supporting pro forma analyses of profit/(loss) before net finance costs and tax, and pro forma APMs | | Proved and probable coal reserves | Proved coal reserves are modified measured coal resources, including consideration of modifying factors that affect extraction. It is the economically extractable material. Probable coal reserves are modified indicated or measured coal resources, including consideration of modifying factors that affect extraction | | PwC | PricewaterhouseCoopers Inc. | | RBCT | Richards Bay Coal Terminal Proprietary Limited or the Richards Bay Coal Terminal | | RMC | Rietvlei Mining Company Proprietary Limited | | ROM | Run of mine, representing the product extracted from mining operations before it is processed into saleable product | | SACO | South Africa Coal Operations Proprietary Limited | | SACO Group | SACO and its subsidiaries, joint arrangements and associates | | SAICA | South African Institute of Chartered Accountants | | SAMREC Code | South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves, 2016 Edition | | SARS | The South African Revenue Service | | SA Thermal coal operations | Anglo American’s South African thermal coal operations which were the subject of the demerger, as defined in the PLS | | Secondary index price | Benchmark price reference for 6,000kcal/kg thermal coal at point of discharge in Northwest Europe | | Sisonke Trust | The Sisonke Employee Empowerment Scheme Trust (previously the SACO Employee Partnership Plan Trust), also referred to as the Employee Partnership Plan (EPP) | | STI | Short-term incentive | | Sungela | Sungela Proprietary Limited | 162  Annual Financial Statements for the year ended 31 December 2022 | | | | --- | --- | | | | | Term used | Definition | | Sungela Holdings | Sungela Holdings Proprietary Limited | | TCFD | Task Force on Climate Related Financial Disclosures | | The Companies Act of South Africa | The Companies Act 71 of 2008 (as amended) | | TFR | Transnet Freight Rail, a division of Transnet SOC Limited | | Thungela or the Company | Thungela Resources Limited | | Thungela Australia | Thungela Resources Australia Proprietary Limited | | Thungela share plan | The long-term share incentive plan adopted by Thungela to attract, retain, incentivise and reward high-calibre employees | | TIPL | Thungela International Proprietary Limited | | TOPL | Thungela Operations Proprietary Limited (known as AOPL until the name was formally changed on 1 March 2022) | | TRH | Thungela Resources Holdings Proprietary Limited | | Trusts | The Sisonke Trust and the Nkulo Trust, collectively | | TRCFR | Total recordable case frequency rate per million man hours | | TSR | Total shareholders’ return | | TTPL | Thungela Treasury Proprietary Limited | | UIF | Unemployment insurance fund | | UK | The United Kingdom of Great Britain and Northern Ireland | | UK Disclosure Guidance and Transparency Rules | The rules relating to the disclosure of information made in accordance with section 73A(3) of FSMA | | UK Listing Rules | The listing rules relating to admission to the UK Official List made under section 73A(2) of FSMA | | UK Officials List | The official list of the FCA | | US | United States | | USD | United States dollar | | VAT | Value added tax | | VIU | Value in use | | WANOS | Weighted average number of ordinary shares outstanding | | ZAR | South African rand | | Zimele | Anglo American Zimele Loan Fund Proprietary Limited | Annual Financial Statements for the year ended 31 December 2022    163 #### ANNEXURE 3 #### SHAREHOLDER INFORMATION #### For the year ended #### 31 December 2022 #### THUNGELA’S PUBLIC AND NON-PUBLIC SHAREHOLDING 2022 Ordinary shares The Thungela share register at 31 December 2022 can be analysed as follows: | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Shareholder spread | Number of shareholders | % of total shareholders | Number of shares | % of issued share capital | | 1 to 1,000 shares | 50,696 | 93.81 | 3,898,788 | 2.78 | | 1,001 to 10,000 shares | 2,391 | 4.42 | 7,359,333 | 5.24 | | 10,001 to 100,000 shares | 741 | 1.37 | 23,242,509 | 16.54 | | 100,001 to 1,000,000 shares | 193 | 0.36 | 49,931,076 | 35.54 | | 1,000,001 shares and above | 24 | 0.04 | 56,060,879 | 39.90 | | Total | 54,045 | 100.00 | 140,492,585 | 100.00 | | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Shareholder spread | Number of shareholders | % of total shareholders | Number of shares | % of issued share capital | | 1 to 1,000 shares | 48,932 | 95.32 | 3,757,716 | 2.76 | | 1,001 to 10,000 shares | 1,743 | 3.40 | 5,156,013 | 3.78 | | 10,001 to 100,000 shares | 473 | 0.92 | 15,549,949 | 11.41 | | 100,001 to 1,000,000 shares | 157 | 0.31 | 48,095,543 | 35.28 | | 1,000,001 shares and above | 27 | 0.05 | 63,752,587 | 46.77 | | Total | 51,332 | 100.00 | 136,311,808 | 100.00 | | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Distribution of shareholders | Number of shareholders | % of total shareholders | Number of shares | % of issued share capital | | Banks and nominee accounts | 273 | 0.51 | 7,450,265 | 5.30 | | Brokerage accounts | 168 | 0.31 | 24,657,056 | 17.55 | | Individuals and private trusts | 49,983 | 92.49 | 18,459,988 | 13.14 | | Insurance and assurance companies | 153 | 0.28 | 2,659,089 | 1.89 | | Investment companies | 93 | 0.17 | 2,972,460 | 2.12 | | Mutual funds | 721 | 1.33 | 43,306,976 | 30.82 | | Other corporations | 368 | 0.68 | 517,470 | 0.37 | | Pension and provident funds | 1,177 | 2.18 | 29,325,142 | 20.87 | | Private corporations | 1,097 | 2.03 | 10,827,532 | 7.71 | | Sovereign wealth funds | 12 | 0.02 | 316,607 | 0.23 | | Total | 54,045 | 100.00 | 140,492,585 | 100.00 | | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Distribution of shareholders | Number of shareholders | % of total shareholders | Number of shares | % of issued share capital | | Banks and nominee accounts | 187 | 0.37 | 9,392,513 | 6.89 | | Brokerage accounts | 138 | 0.27 | 27,766,133 | 20.37 | | Individuals and private trusts | 48,431 | 94.35 | 18,514,209 | 13.58 | | Insurance and assurance companies | 299 | 0.58 | 1,973,946 | 1.45 | | Investment companies | 71 | 0.14 | 1,388,204 | 1.02 | | Mutual funds | 556 | 1.08 | 41,872,288 | 30.72 | | Other corporations | 406 | 0.79 | 359,306 | 0.26 | | Pension and provident funds | 799 | 1.56 | 18,710,431 | 13.72 | | Private corporations | 438 | 0.85 | 15,536,386 | 11.40 | | Sovereign wealth funds | 7 | 0.01 | 798,392 | 0.59 | | Total | 51,332 | 100.00 | 136,311,808 | 100.00 | 164  Annual Financial Statements for the year ended 31 December 2022 | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2022 | | Shareholding type | Number of shareholders | % of total shareholders | Number of shares | % of issued share capital | | Non-public shareholders | | | | | | Directors and prescribed officers | 11 | 0.02 | 1,483,237 | 1.06 | | Treasury shares held by Group companies | 1 | 0.00 | 1,955,113 | 1.39 | | Public shareholders | 54,033 | 99.98 | 137,054,235 | 97.55 | | Total | 54,045 | 100.00 | 140,492,585 | 100.00 | | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | | | 2021 | | Shareholding type | Number of shareholders | % of total shareholders | Number of shares | % of issued share capital | | Non-public shareholders | | | | | | Directors and prescribed officers1 | 9 | 0.02 | 1,808,261 | 1.33 | | Treasury shares held by Group companies | 1 | 0.00 | 1,363,119 | 1.00 | | Public shareholders | 51,322 | 99.98 | 133,140,428 | 97.67 | | Total | 51,332 | 100.00 | 136,311,808 | 100.00 | 1Seamus French was awarded 40,868  Thungela shares as part of the demerger scheme of arrangement in 2021 which are indirectly held in a nominee account. The comparative information has been amended to reflect the indirect interest not previously disclosed. Major shareholders According to Thungela’s share register at 31 December, the following shareholders held shares equal to or in excess of 5.0% of the issued ordinary share capital of the Company: | | | | | --- | --- | --- | | | | | | | | 2022 | | Beneficial shareholding of more than 5.0% | Number of shares | % of issued share capital | | Government Employees Pension Fund | 17,380,912 | 12.37 | | Total | 17,380,912 | 12.37 | | | | | | --- | --- | --- | | | | | | | | 2021 | | Beneficial shareholdings of more than 5.0% | Number of shares | % of issued share capital | | Anglo American1 | 10,855,155 | 7.96 | | Government Employees Pension Fund | 10,520,984 | 7.72 | | Total | 21,376,139 | 15.68 | 1Anglo American's interest in Thungela is held through Tarl Investment Holdings (RF) Proprietary Limited, Epoch Two Investment Holdings (RF) Proprietary Limited and Epoch Investment Holdings (RF) Proprietary Limited. Annual Financial Statements for the year ended 31 December 2022    165 ## CORPORATE ## INFORMATION THUNGELA RESOURCES LIMITED (Incorporated in the Republic of South Africa) Registration number: 2021/303811/06 JSE share code: TGA LSE share code: TGA ISIN: ZAE000296554 Tax number: 9111917259 (‘Thungela’ or the ‘Group’ or the ‘Company’) REGISTERED OFFICE Thungela Resources Limited 25 Bath Avenue Rosebank Johannesburg 2196 South Africa Tel: +27 12 638 9000 POSTAL ADDRESS PO Box 1521 Saxonwold 2132 This report is available at: www.thungela.com DIRECTORS Executive July Ndlovu (CEO) Gideon Frederick (Deon) Smith (CFO) Independent non-executive Sango Siviwe Ntsaluba (chairperson) Kholeka Winifred Mzondeki Thero Micarios Lesego Setiloane Benjamin Monaheng (Ben) Kodisang Seamus Gerard French (Irish)1 Yoza Noluyolo Jekwa (appointed 12 August 2022) 1Seamus Gerard French resigned from Anglo American on 31 December 2021 and is independent from 1 January 2022. PREPARED UNDER THE SUPERVISION OF Gideon Frederick (Deon) Smith CA (SA) GROUP COMPANY SECRETARY Francois Klem INVESTOR RELATIONS Ryan Africa Email: ryan.africa@thungela.com MEDIA CONTACTS Tarryn Genis Email: tarryn.genis@thungela.com SA TRANSFER SECRETARIES Computershare Investor Services Proprietary Limited Rosebank Towers 15 Biermann Avenue Rosebank, 2196 Private Bag X9000 Saxonwold, 2132 Email: Web.Queries@computershare.co.za Tel: +27 11 370 5000 UK TRANSFER SECRETARIES Computershare Investor Services (Jersey) Limited Queensway House Hilgrove Street, St Helier Jersey, Channel Islands Email: WebCorres@computershare.co.uk Tel: +44 03 7070 2000 SPONSOR Rand Merchant Bank (a division of FirstRand Bank Limited) Tel: +27 11 282 8000 Email: sponsorteam@rmb.co.za UK FINANCIAL ADVISER AND CORPORATE BROKER Liberum Capital Limited Tel: +44 20 3100 2000 | | | | --- | --- | | | | | | |