Coal producer Exxaro Resources, which has been talking about a future beyond coal, is in talks for possible acquisitions in renewable energy, water and the food security businesses.
CEO Mxolisi Mgojo said on Thursday that Exxaro, which has coal as the bedrock of its business, had set aside cash to explore these business opportunities, which will not be capital intensive as they will be projects of less than R1bn.
Backed by solid commodity prices in the year, Exxaro posted a net operating profit to end-December of R6bn, up from R5.2bn. The company also paid a final dividend of R3 per share in addition to its March payment of a special dividend of R12.55 per share, after the sale of part of its stake in Tronox, an American business dealing in titanium.
The company is looking into spending about R20bn in the next five years to expand its coal business and to also invest R900m in smaller technological businesses.
Mgojo said the world in the future would be challenged by big things and the need to address socioeconomic issues was going to be an imperative, so Exxaro saw opportunities to create new revenue streams.
"We are not saying we are going to be farmers, we are saying we are going to be catalysts and come up with platforms that can facilitate a new agrieconomy," Mgojo said.
Some investors were worried about the strategy of the business getting into water and food security and the return on their investments.
Exxaro investors were worried about the business when it decided to explore renewable energy in 2011, but the strategy turned out to be the right one and Exxaro had partnered with businesses that had the skill sets. This would be the case in the nonmining businesses it was considering now, said Mgojo.
"Water and food security and energy security are a global issue, which when not resolved will be a serious challenge. It is an opportunity and any company that thinks that it can remain the same will be disrupted."
Exxaro said it would close some deals in 2018. It is also eyeing the Gupta-linked Tegeta Resources Richards Bay Coal terminal allocation owned by the Optimum colliery.
Optimum is in business rescue and there are already several interested buyers such as newly formed Seriti Resources headed by Mike Teke, who was once CEO of the company that owned the colliery.
Exxaro’s interest was only in Optimum’s export allocation at the terminal rather than the mine and the company was keen to buy all or part of the 6-million tonnes a year allocation, Mgojo said.