One of the country’s major coal miners, Exxaro Resources, is in search of new projects as it seeks to diversify its assets beyond fossil fuel.
Exxaro’s new business director, Richard Lilleike, told reporters at the group’s presentation for the year ended December that mergers and acquisitions (M&A) were unpredictable.
“Yes, we are aiming to do a deal in the next financial year, but a lot of this is outside of our control with the competition. Yes, we are actively looking at M&A deals across the chosen commodities, when we can announce a deal, we will let you know.”
The company previously announced it was searching for commodities beyond coal, including copper, manganese and bauxite that will be crucial for the transition to green energy. However, competition is tight as countries such as China snap up green metals in line with their green energy ambitions.
Exxaro, whose revenue took a dive in the reporting period after being hit by lower coal prices, welcomed the appointment of permanent executive leadership at Eskom and Transnet.
CEO Nombasa Tsengwa said the group was “comfortable” with the appointment of Dan Morokane as Eskom Group CEO and Michelle Phillips as Transnet Group CEO.
“Dan has made it clear to us that they are trying to fix their challenges in the Waterberg which have caused them not to take some amount of coal from us. I think [he] understands the work of Eskom as much as Michelle understands the work of Transnet. We are comfortable with their leadership”.
Transnet has also appointed Nosipho Maphumulo as group CFO and Russell Baatjies as the head of its largest division, Transnet Freight Rail. Coal and iron miners have constantly said weaknesses at TFR were responsible for their downturn in earnings.
Kgabi Masia, Exxaro’s MD for minerals, said Transnet needed stability.
“If I look at Transnet, it is great news what has happened there because you need leadership stability. We know Michelle and Russell very well; they are operators and they have been with the business for more than 20 years.
“We have engaged with them extensively as an industry. Where we are sitting, we don’t think it is going to get worse because of the support from industry, and the government,” Masia said.
Exxaro, which exports coal through the Richards Bay Coal Terminal, resorted to trucking 500,000 tonnes through other ports in 2023 as the crisis at TFR and Transnet-run ports worsened — even though such routes were far more expensive.
“We continue trucking where it makes sense for us. The volumes we have moved make business sense for Exxaro, so we are comfortable in that space. Trucking is almost three to four times what we pay when we utilise rail, hence we must focus on the efficiencies of doing it,” he said.
Exxaro said operational challenges and equipment failures at Eskom power stations had affected the offtake of coal in the Waterberg region. The group’s coal production volumes fell 2% compared to a year earlier as volumes were lower at its Grootegeluk, Mafube, and Matla mines.
Its overall sales volumes were 4% lower due to weakened demand from Eskom. Group revenue declined 17% to R38bn, down from R46bn in 2022, as coal prices declined steeply to $121 a tonne from $271 a year earlier.
Group manager for marketing and logistics Sakkie Swanepoel said there was a backlog in rail infrastructure maintenance on the coal and iron ore lines, but Exxaro expected to see improvements as an independent infrastructure manager post was being created.
“It is going to take a lot of capital and time to fix that. I think with the interim infrastructure manager being appointed and TFR being split into an operating company and an infrastructure company, that is a good start. We are on the journey towards that, but it will take time.”
He said additional capacity from third-party operators would help.
“Research has shown across the world, whether you are talking about Brazil or India, from the time the government takes a decision to open up the rail line it will be two to three years before you see the first trains from third-party operators on the line because it is not just about infrastructure, it is about all protocols between different rail operating companies that have to be sorted out.
“By the end of the year, we will have other people running on the rail line.”
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