Exxaro targets iron ore

Brendan Ryan | Fri, 05 Feb 2010 09:42
[miningmx.com] -- EXXARO Resources (Exxaro) has set getting directly into the iron ore mining business as a priority said Ernst Venter, GM for business growth.

Interviewed after a presentation to JSE investors at the Mining Indaba conference in Cape Town on Thursday, Venter said the group hoped to have iron ore operations in place within two years.

That would seem to imply some kind of merger and acquisition activity given the lengthy timelines required to find, evaluate and develop any new mining operation.

Venter declined to provide specifics but commented, “we are looking at iron ore projects in South Africa, the rest of Africa and Australia.”

Exxaro already has passive stakes in the iron ore sector in operations that it does not manage.

The group holds a 20% stake in Sishen Iron Ore - the operating subsidiary of Kumba Iron Ore - which runs the Sishen and Thabazimbi iron ore mines in South Africa.

That resulted from the split of the original Kumba Resources into Exxaro - focussed on coal and various base metals – and Kumba Iron Ore focussed on iron ore and which is controlled by Anglo American.

Kumba Resources’ management team was split between the two new groups.

The possibility that Exxaro might move into iron ore was first raised by CEO Sipho Nkosi at a results presentation in 2008 when he revealed the group was exploring in Turkey for a number of commodities including iron ore.

Venter commented, “we have the necessary skills inside Exxaro to develop and run iron ore mines and there are no constraints on us from doing so.

“We could develop our own iron ore mine right next to Sishen should we want to.”

The importance of the iron ore market and the extent of the control over it held by the three major iron ore exporters was stressed in a prior presentation to the Indaba by strategist Magnus Ericsson, chairman of the Raw Materials Group.

Ericsson said the iron ore sector accounted for 34% of the estimated US$463bn total market value of the global mining business in 2008 as measured at mine level.

The next most important sectors were copper accounting for 18% followed by gold at 14%.

The three major iron ore producers - Vale, Rio Tinto and BHP Billiton – accounted for 75% of the seaborne export trade in the commodity.