Exxaro, a diversified mining company, is seizing the opportunity presented in the latest iteration of SA’s Mining Charter to extract itself from mineral sands miner and processor Tronox, realising billions of rand in value.
Exxaro had already told the market about its exit plans earlier this week, but a briefing by financial director Riaan Koppeschaar on Wednesday gave insight into the company’s thinking about its disposal strategy as agreed with Tronox which will happen in 2019.
As part of a 2012 agreement, Tronox bought mineral sands operations in SA from Exxaro and kept the miner as its black economic empowerment partner. The agreement was that Exxaro would remain locked in until 2022 or until an empowerment partner was no longer required.
The third iteration of the charter gazetted in June, which lays out the transformation requirements mining companies are obliged to meet to secure their mining and prospecting rights, has made an important concession to mining companies regarding past empowerment deals.
In keeping with the once-empowered always-empowered concept, the charter says there would be recognition of past deals that counted towards the black ownership credits companies could claim. The industry is waiting for the underlying guidelines due in November to get a better understanding of how the department of mineral resources would apply the principle.
Exxaro would “trigger its position” once the full implications of the guidelines and the charter were understood, Koppeschaar said.
Under the charter, Exxaro expects to remove itself from the South African mineral sands mines in exchange for either 7-million Tronox shares or cash, while cashing in its holding in Tronox UK for R2bn. This is all before selling its 24% stake in New York-listed Tronox during the course of the year.
Exxaro is essentially a large coal company with interests in other businesses, including iron ore and mineral sands.
It said coal exports from SA’s coalfields and the Richards Bay Coal Terminal were running at an annualised rate of 72-million tons, which was lower than analysts expected because of adverse weather at the port in northern KwaZulu-Natal.