Management of coal producer Exxaro delivered a pleasant surprise to shareholders on Tuesday by declaring a special dividend of R12.55 a share from the proceeds of the part-sale of its shares in titanium dioxide producer Tronox.
Although Exxaro had already flagged that it would be distributing most of the Tronox proceeds to its shareholders, the shares responded strongly. By early afternoon, the share price had surged R10, or almost 8%, to R148.42, more than offsetting its losses in the past week of turbulent equity markets.
Avior metals and mining analyst Matthew Shields said although some distribution had been expected, the announcement might have offered shareholders some reassurance. In addition, the special dividend could have been declared sooner than shareholders expected, given that the group had not fully exited its investment in Tronox.
“We continue to believe that there is a possibility of another special dividend if Exxaro is successful in selling its remaining stake in Tronox at current levels,” Shields said.
The dividend, which will be paid on March 5, represents R4.5bn of the R6.5bn realised from the sale in October of 22.4-million of Exxaro’s shares in Tronox, which reduced Exxaro’s stake to 24%.
In a recent market update, finance director Riaan Koppeschaar said the Tronox proceeds would be used to fund operations, repay debt and make distributions to shareholders. Exxaro would consider market conditions before selling more of its Tronox shares, he said.
Exxaro acquired its Tronox shares through a deal in 2011 in which Tronox’s Tiwest operations in Western Australia were combined with Exxaro’s 76% stakes in KwaZulu-Natal Sands near Mtunzini and Namakwa Sands on the West Coast.
Exxaro originally held 38.5% of the global entity, which is listed in New York. Its sale of part of its shares was well timed, as the Tronox share has fallen from about $28 a share to about $19.
Exxaro will release its year end results on March 8. At the interim stage it declared a dividend of 300c a share on the back of strong cash generation.
Koppeschaar said Exxaro, which is Eskom’s biggest supplier, sold 2% more coal in 2017 than in 2016 as international and local coal prices remained strong.
Exxaro also owns 20% of Sishen Iron Ore Mine, which is part of the Kumba Iron Ore group. Kumba reported on Tuesday that Sishen mined 10% more iron ore in 2017 than it did in 2016 and Kumba’s average realised iron ore price for all its mines was 11% higher.
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