Exxaro is looking to dispose of its ferroalloys business
Exxaro Resources said on Wednesday it planned to sell its ferroalloys unit to a black-owned business by the end of June 2024.
The Johannesburg-based coal miner, which has diversified into renewable energy and is looking for battery metal assets, has said the ferroalloys unit does not fit into its long-term strategy. The unit produces ferrosilicon, mostly used in steelmaking.
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The company said:
Exxaro aims to enhance the economic participation of black-owned companies in the South African economy
“In line with this intent, Exxaro has earmarked the ferroalloys disposal process to target black ownership. The sales process is anticipated to be concluded in the second quarter of 2024,” the company said in a statement.
Exxaro, a major supplier of thermal coal to South Africa’s power utility Eskom, is itself a majority black-owned business in line with South Africa’s broad-based Black economic empowerment policy and regulations that seek to redress historic economic inequalities created by apartheid.
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Exxaro expects its coal production to be flat at 43 million metric tons in the year to December 31, in line with previous guidance. Export sales are also seen flat this year at just over 5 million tons, amid persistent freight rail logistics challenges.
The miner said the API4 coal export price was expected to average $122 per ton this year, compared with $271 per ton in 2022 due to lower demand due to sufficient gas and coal stocks in Europe, Japan, Korea and Taiwan.
Exxaro said:
The coal price decrease was exacerbated by warmer than usual winter temperatures, robust performance in renewables and nuclear, and significantly lower gas prices
There was, however, a resurgence in Indian demand this year compared to 2022, due to lower coal prices.
Exxaro said it had a net cash balance of R13.5 billion at the end of October.
The company added that it is expanding its search for critical mineral assets to greenfield projects as it pursues its strategy to diversify away from coal.
Exxaro, one of the country’s top coal producers, also has interests in iron ore and renewable energy. The company plans to acquire manganese and copper assets, both minerals considered vital for the global transition from polluting fossil fuels to cleaner energy.
The miner was among several firms that were interested in buying Botswana’s Khoemacau copper mine, which holds one of Africa’s largest copper deposits. The $1.88 billion mine was eventually sold to Chinese miner MM.
Exxaro’s chief growth officer Richard Lilleike, who is leading the miner’s mergers and acquisitions drive, told analysts that while the company was still interested in producing assets, it would also consider development projects in light of current elevated asset prices.
“In the wake of Koemacau … we certainly are seeing a lot of investment opportunities mostly on the earlier stage capital raising. I think capital markets are quite tough right now and therefore our balance sheet stands out as a partner to new assets or assets under development,” Lilleike said.
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