Exxaro sale raises hopes of dividend
The diversified miner says the funds will be used for capital projects, debt repayment and to return capital to shareholders
Diversified miner Exxaro Resources sold R6.54bn worth of shares in New York-listed Tronox, raising hope among analysts of a special dividend payment at the end of its financial year.
Exxaro, once the dominant shareholder in the US-based mineral sands miner and chemical maker, which has assets in SA and Australia, has clearly flagged its intentions of disposing of its stake in the company.
The disposal of 22.4-million Tronox shares brought Exxaro’s remaining stake to 24%.
The stake is locked in for 90 days after the sale of shares in the unprofitable company.
“[The] management will continue to assess market conditions … for further possible sell-downs in its remaining Tronox investment, and shareholders will be advised accordingly,” Exxaro said.
Exxaro’s shares rose 1% on Wednesday, giving it a market capitalisation of R43.5bn.
Exxaro said that it would use the proceeds from the sale of Tronox, which had a carrying value of R3.2bn at the end of June, towards “future capital commitments, to repay debt and to return capital to its shareholders”.
Exxaro had R4.35bn net debt on its balance sheet at end-June and the cash from the Tronox sale, combined with R1.4bn in dividends received from its 20% stake in Kumba Iron Ore’s Sishen Iron Ore Company, raised expectations of a special dividend, said Standard Bank analyst Tim Clark.
He estimated the special dividend could amount to as much as R3bn based on further sales of Tronox shares after the lock-in period.
In 2016, Exxaro paid altogether R1.6bn in dividends. It declared a R943m interim dividend in June.
Shares in Exxaro, which is primarily a South African coal producer, have increased 55% so far in 2017 and 33% in the past 12 months.