[Ferro-Alloys.com]  Exxaro seeks more manganese and copper to drive diversification

Exxaro Resources plans to expand its manganese business and remains on the lookout for advanced copper projects as it seeks to have energy and future-facing metals contribute more than half of group earnings by 2030.

CEO Ben Magara told Business Day on Thursday that the company wanted to build on its manganese position and was still seeking opportunities in future-facing minerals, particularly copper.

“We want more in manganese, we want future-facing minerals,” Magara said. “We have been very clear that we’re still interested in copper. We’re looking for advanced projects in copper.”

Exxaro has about R3bn-R4bn earmarked for the potential acquisition of the remaining interest in Mokala Manganese, a mine in the Northern Cape’s Kalahari Manganese Field. The company’s broader manganese transaction included an interest previously held by Ntsimbintle Holdings, while Glencore remains the other shareholder in Mokala.

Magara said the Mokala opportunity could add 1.5-million to 1.8-million tonnes of manganese production to Exxaro’s portfolio, on top of about 3.5-million tonnes from its Tshipi manganese operation.

Exxaro acquired a 50% interest in Tshipi Borwa earlier this year, marking its entry into manganese as a third major business pillar alongside coal and renewable energy.

Magara said Exxaro wanted to establish itself as a significant player in the Northern Cape’s Kalahari Manganese Field, where it is already the world’s fourth-largest manganese producer.

The diversification strategy does not mean Exxaro is moving away from coal, which remains the foundation of the business.

“We’re not reducing coal but growing the other buckets,” he said during the company’s results presentation.

The renewable energy business is also expected to expand, with Exxaro targeting 1,000MW-1,600MW of renewable generation capacity by 2030/31.

We’re not reducing coal but growing the other buckets.

—  Ben Magara, Exxaro CEO

Magara said the combination of manganese growth, renewable energy and potential investments in copper would provide the earnings diversification Exxaro is seeking.

Alongside portfolio expansion, Magara identified improved rail performance as an important opportunity for Exxaro’s coal business.

The company increased coal exports by 15% to 3.9 million tonnes in the first half of the year, helped by a better rail performance and alternative logistics routes.

Direct railings from Grootegeluk to Richards Bay improved 50% in the first half, according to Magara, reducing Exxaro’s reliance on more expensive road transport. He said the line has capacity for about 4 million tonnes, compared with Exxaro’s present volumes of about 1.2 million tonnes.

“If we can get two to three million tonnes of that, it means that’s a prospect for growth,” he said.

Exxaro is working with Transnet on ways to improve the line and has conducted its own study into how it could move more coal. Magara said private train operators are also interested in using the route, provided sufficient volumes can be secured to make the service viable.

Magara said the weaker contribution from Sishen Iron Ore Company, in which Exxaro has an interest through Kumba Iron Ore, does not change the company’s view of the asset.

Exxaro’s headline earnings were weakened by lower contributions from its equity-accounted investments, particularly Sishen and Black Mountain. The company said the weaker Sishen contribution was largely due to lower realised prices, with the stronger rand weighing on earnings.

Magara said this did not change Exxaro’s view of Sishen as a key long-life asset. “These cycles come and go, so we know it will contribute even more again,” he said.

Black Mountain, meanwhile, remains a noncore asset, and Exxaro is reviewing its options for the operation, Magara said. The Northern Cape base-metals operation produces zinc, lead, copper and silver, and Exxaro holds a minority stake in the business.

• [Editor:tianyawei]