Sipho Nkosi, CEO Exxaro Resources
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Coal to buoy Exxaro in 2008
Allan Seccombe
Posted: Thu, 21 Feb 2008

[miningmx.com] -- EXXARO Resources could shed 10% of its refined zinc and South African mineral sands output because of the power crisis in the country, but the company expects increased profits from its coal business because of higher output and prices.

Power utility Eskom declared force majeure on its electricity supply on 25 January, leading to many mines shutting down for a week. Power has subsequently been restored to 90% of normal demand in line with an agreement with the mining and industrial sector.

“Both KZN Sands and Zincor have an agreement with the electricity utility which may result in some 10% of production being lost,” Exxaro said in its full-year results for the period to end-December 2007 in which net operating profit shot up 15% to R1.4bn.

KZN Sands produced a record 186,600 tonnes of titanium slag in 2007.

Overall, the mineral sands business will take a knock from a planned reline shut of Furnace 2 at Empangeni at KZN Sands, “a continued strong Australian dollar and the mining of lower grade mineral sands deposits.”

At Zincor, refined zinc increased by 11,000 tonnes to 101,000 tonnes in the year because of improved grades of imported zinc concentrates and a better plant performance.

At Chifeng, the Chinese zinc refinery in which Exxaro holds a 22% stake, output more than doubled to 110,000 tonnes. However, reduced demand for zinc alloys in the Chinese market and lower zinc prices meant Exxaro recorded a loss of R18m for its investment in the year.

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A feasibility study is underway at Chifeng to increase capacity by 130,000 tonnes. “The outcome of this study is expected to be completed by mid 2008 after which Exxaro will review its participation in the expanded operation,” Exxaro said.

Coal is going to be a key earnings driver for the diversified miner in the coming year, the company said.

“Strong local and export demand for coal products at increased prices linked to higher sales volumes from the current project developments coming on stream, is expected to increase the profit contribution from the group’s commercial coal operations,” it said.

Exxaro produced 353,000 tonnes less power station coal in 2007 than the previous year because of delays in securing permission to divert a river and tricky geological conditions at the Matla and Arnot mines. Overall, Exxaro sold Eskom 439,999 tonnes less coal.

Coking coal output was up 466,000 tonnes in the year.

Coal exports fell by a quarter after Exxaro closed its New Clydesdale Colliery because of unsafe mining conditions. The Inyanda mine has been fast-tracked to offset the decline in export-quality coal.