Exxaro deems 2019 the right time for Tronox sale

SA’s Exxaro Resources agreed to terminate its relationship with mineral sands company Tronox during 2019 by selling its remaining shares, amounting to a 24% stake, to the New York-listed group or to third parties.

Exxaro, which has been a major shareholder in Tronox since 2012, has already reduced its stake in the mineral sands miner and processor, and CEO Mxolisi Mgojo has repeatedly made it clear the investment was no longer deemed core, but that Exxaro was waiting for the right time to sell its remaining shares.

Exxaro sold nearly 29-million shares in October 2017, resulting in a R4.5bn special dividend for shareholders after a R6.5bn sale of the stake in late 2017.

Tronox and Exxaro said on Monday and Tuesday respectively that they’d reached an agreement for Exxaro to sell its 24% stake in the company in a “controlled and scheduled manner”. This would remove an unwelcome overhang of shares from the Tronox register as investors waited for Exxaro’s exit.

“Exxaro has also granted Tronox the option, but not the obligation, to directly repurchase any shares Exxaro elects to sell,” the companies said, adding the South African diversified miner would support a shareholder vote to move Tronox’s domicile to the UK from Australia before June 2019.

Exxaro would dispose of its 26% stake in Tronox UK, an existing subsidiary, to Tronox as soon as possible. The price tag is R2bn.

Under the new version of the Mining Charter, past empowerment deals are recognised and this would allow Exxaro to exit the business as the empowerment partner. The department of mineral resources is drawing up guidelines on how the charter will be implemented, and these should be issued in November.

Clarity around the historical ownership or BEE transactions is keenly anticipated.

Jeff Quinn, CEO of Tronox, said at a third-quarter results presentation that Exxaro had an “obligation continuing for a number of years” to ensure Tronox’s South African assets at Namakwa and northern KwaZulu-Natal were empowered.

Resolving the empowerment status was a “a long-term strategic issue in SA, especially as we look at development of new resources there and new projects continuing to be BEE-certified will be important for us as we move forward there and we continue to plan on being a significant presence in SA for some time to come,” Quinn said.

Mineral resources minister Gwede Mantashe has said there had to be a tangible transfer or creation of value to the empowerment partner when historic deals were considered.

Exxaro said it would use the money raised from the sale of the shares during 2019 to “focus on core activities, fund capital commitments, repay debt and make distributions to shareholders”.

“The transactions provide Exxaro with greater certainty regarding the process and timing for Exxaro's monetisation of its interest in Tronox and its English and South African subsidiaries,” it said.

Exxaro had a carrying value of Tronox UK of R1.735bn and Tronox SA, the South African subsidiary, of R1.966bn as at end-June 2018.

Mineral sands include titanium and zircon. Titanium dioxide is used in paint, paper and plastics to make them brighter and tougher.

seccombea@bdfm.co.za