[miningmx.com] — Any proposed transaction linking the titanium and mineral sands division of Exxaro Resources (Exxaro) with Richards Bay Minerals (RBM) would not get past the competition regulatory authorities.
That’s according to Exxaro finance director Wim de Klerk, answering questions at a media conference on Tuesday over Exxaro’s proposed Tronox transaction.
Exxaro is proposing to vend its mineral sands business into an Australian holding company – “new Tronox” – in return for a 38.5% stake in that company and the right to “creep” its shareholding up to just under 50% over three years.
At that point Exxaro may opt to go for 100% ownership. De Klerk said Exxaro’s strategy was to aim for management control and 100% ownership but added, “we will have to see if that strategy still makes sense in three years time”.
RBM is currently controlled by Rio Tinto and BHP Billiton. The two groups each hold a 37.5% stake following the deal struck in December 2009 through they which placed 24% in the hands of a BEE consortium led by Blue Horison Investments.
The remaining 2% is held by RBM’s employees through a share participation scheme.
De Klerk said Exxaro did hold discussions with RBM at the time of the BEE transaction but realised it would not work because of the dominant positions held by Exxaro and Rio Tinto in both the heavy mineral sands feedstock and titanium dioxide slag businesses.
There has been persistent speculation – consistently denied by Rio Tinto – that the group is looking to divest from South Africa.
Rio Tinto last year sold its major Chapudi coal deposit to Coal of Africa for a bargain basement price of $75m and, in September, the group announced it would sell its controlling 57.7% stake in copper producer Palabora Mining.
Asked if this meant any kind of deal between Exxaro and RBM was impossible Exxaro CEO Sipho Nkosi replied: “nothing can be ruled out completely”.
“Assets can be moved around and restructured. I am not aware that Rio Tinto is looking to get out of RBM but, if they are, let them come to me and we’ll talk.
“But first let me get the new Tronox deal in place.”
The Tronox deal is subject to a number of conditions precedent including approval by the competition regulatory authorities in six countries and votes in favour by 50% of the existing Tronox shareholders.
Exxaro’s last corporate transaction – a takeover bid for Australian iron ore junior Territory Resources – failed when it was trumped by a superior offer from the Noble group.
Asked whether a competing bid for Tronox might derail this proposed deal De Klerk replied “we feel comfortable we have put a very good deal on the table for Tronox shareholders to consider”.
De Klerk highlighted the numerous synergies between the two companies which would create a global, integrated business running all the way up the value chain from mining the feedstocks to producing and selling the titanium pigment end-product.
Closing of the deal is required by the end of June next year. De Klerk said Exxaro would not get involved in convincing Tronox shareholders to vote in favour.
“We believe it is good governance to leave it to the Tronox management team and board to sell the deal to their shareholders,” he said.
