EXXARO Resources intends to diversify into the production of manganese, copper and bauxite with the aim of cutting its reliance on earnings from coal.
This would be through merger and acquisition activity, some outside of South Africa if it was successful buying bauxite. It said “… deal movement [was] underway”.
According to a presentation by CEO-designate Nombasa Tsengwa on the firm’s website “… Our new Exxaro Minerals business could represent 50% of expected coal EBITDA (earnings before interest, tax, depreciation and amortisation) within 10 years”.
The balance of the firm’s earnings would be from coal production and providing power to the small-scale mining sector as it expands its Cennergi business. It did not mention what it intended to do with its in direct one fifth stake in Kumba Iron Ore.
This strategy development is part of a restricted-access Capital Markets Day (CMD) that Exxaro is holding with its shareholders today.
Exxaro has had mixed success with business diversification. In 2018 it announced a plan to move into food and water security but didn’t provide details. The company’s shares were hard hit as a result. Before that it impaired an investment in an iron ore deposit in Central African Republic for R5.4bn, eventually selling the prospect.
“The plan to diversify into manganese bauxite and copper is the biggest surprise from the CMD preview, in our view,” said analysts at RMB Morgan Stanley. “In the past, whenever Exxaro’s management has spoken about...
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