Exxaro, one of the country’s largest black empowered mining companies, warned that rail bottlenecks could put paid to plans to capitalise on booming coal export prices, becoming the latest resources company to lament freight delays in delivering minerals to the ports.
Exxaro, which unveiled a handsome R7.85bn windfall for shareholders via dividends and a share buyback on Thursday, is among SA suppliers that shipped coal to China for the first time in six years as the world’s biggest coal-consuming nation looks for alternatives to Australia, with which it is in a diplomatic row.
But the company, which benefited from more than one-third higher coal export volumes in the 2020 financial year when it lifted revenue 12% to R28.9bn, said its expectations of another strong showing in 2021 face a “definite risk” as disruptions on the Transnet coal line are impeding exports at a time when prices are booming.
Transnet’s coal line has been plagued by crippling theft incidents, community unrest, and undersupply of locomotives. Additional disruptions were due to damage caused by excessive rains after Cyclone Eloise in January. As a result Transnet is railing 1.3-million tonnes of coal a week on average as opposed to its normal 1.65-million tonnes.
Exxaro joins Merafe Resources, a junior partner in chrome mining in a ferrochrome business with Glencore, in voicing frustration at the state-owned company. Their comments, alongside growth plans from other mining companies such as Anglo American Platinum, could pile pressure on Transnet to grow capacity and improve efficiencies to allow the country’s mining industry to fully benefit from rallying metal prices.
But Exxaro’s head of marketing and logistics, Sakkie Swanepoel, said the issues would not be resolved in the short term as unfortunately “Transnet’s own recovery and ramp-up plan is to return to normal railing volumes only after the half-year”.
Exxaro CEO Mxolisi Mgojo, who will be replaced by company insider Nombasa Tsengwa when he retires in 2023, said a continued global economic recovery and a positive commodity cycle bode well for the SA economy in the year ahead, depending on the success of the Covid-19 vaccine rollout.
However, he said, SA needs further clarity on the government’s economic reconstruction recovery plan, particularly on infrastructure which requires “rather deep reform” especially in relation to rail and port capacity in support of SA exports.
“We believe that if this is done correctly and with speed, it could lend further impetus to the growth of the SA economy.”
Mgojo said he was optimistic that the liberalisation of the SA energy sector would gain momentum this year, opening up new opportunities for the renewable energy sector.
Mgojo was speaking after the company issued its annual earnings report, in which it unveiled the bumper R7.85bn payout to shareholders via dividends worth R6.35bn and share buybacks of R1.5bn.
Shares in Exxaro, which affirmed its commitment to a strategy to diversify away from coal and invest in greener energy alternatives in order to ensure the resilience of the business in a low-carbon economy, closed 3.68% higher at R183.90.
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