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Exxaro boss, Sipho Nkosi: 'A safe pair of hands'
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Exxaro finds investor favour

Brendan Ryan | Wed, 10 Mar 2010 12:03
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[miningmx.com] -- THE MARKET LIKED the 2009 results put out by Exxaro, pushing its share price up to R110 and closer towards its 12-month high of R114 per share recently.

The reasons are that Exxaro’s earnings have held up well during what was, hopefully, the bottom of the current commodity cycle despite the poor results from its base metals and heavy mineral sands operations.

The group paid a respectable total dividend of 200c, compared with the 375c payout for 2008, and its balance sheet remains in good shape, with debt to equity at 29%.

Management has also shown it’s prepared to take decisive action with the decision to shut down the underperforming KwaZulu-Natal heavy mineral sands business and sell out of Zincor. Though Exxaro will now concentrate on its core coal business, it’s also looking at opening up new ventures into energy and iron ore.

Exxaro is particularly well positioned to benefit from future domestic and export demand for coal due to its dominance of the Waterberg coal field, which is where the future of South Africa’s coal industry lies.

A R9.5bn expansion of the Grootegeluk colliery is under way to feed Eskom’s new Medupi power station, while a similar-sized project is on the cards to develop a greenfields coalmine to supply independent power producer (IPP) stations that may be set up in the Waterberg.

Underpinning the group is its 20% stake in Kumba Iron Ore operating subsidiary Sishen Iron Ore, which contributed R1.9bn during 2009.

Prospects for iron ore look the best in the mining business, meaning Exxaro’s income from its Sishen stake will increase and that’s also why the group appears so keen to move directly into iron ore for its own account.



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