Exxaro may consider Anglo zinc buy

[miningmx.com] — EXXARO Resources is busy evaluating its zinc assets and the market so it’s too soon to say whether it would be interested in buying Anglo American’s zinc properties, said Trevor Arran, the executive manager of Exxaro’s base metals division.

Anglo told the market on Thursday that it had identified more assets deemed non core and put these up for sale to raise around $6bn. The assets include its zinc mines, which comprise Black Mountain mine and the Gamsberg project in South Africa, the Skorpion mine in Namibia and Lisheen mine in Ireland.

In 2008, Anglo American’s zinc businesses produced 340,500 tonnes of zinc, generating EBITDA of $209m. UBS values the zinc portfolio at around $700m.

A logical buyer for some, if not all, of the assets is JSE-listed Exxaro, which is headed by Sipho Nkosi.

“It’s probably premature to talk about that at this stage, bearing in mind we are still evaluating our own assets,’ Arran told Miningmx. “The first step is to complete our process before we make any attempt to look at what’s potentially on the table.’

Exxaro is a 26% partner in the Black Mountain project and owns the Rosh Pinah zinc mine near Skorpion. The assets are very different though, with Rosh Pinah being an underground sulphide mine and Rosh Pinah an opencast oxide operation.

Exxaro owns the 105,000 tonnes/year Zincor smelter in South Africa, the country’s only such plant. It receives concentrate from Rosh Pinah and Black Mountain and imports about 25% of its annual concentrate requirements.

“Zinc is a commodity that is under evaluation to see whether it does fit into our portfolio. It’s an evaluation of the commodity and our commodity base,’ Arran said. The evaluation, which began six months ago, should be completed by year-end.

“The zinc fundamentals in this point in the cycle are not attractive to us as a business. It certainly is a typical boom-bust cycle,’ he said. “The assets we have, although commanding a dominant South African position, are not large by any stretch of the imagination from a global perspective.’

The zinc price is currently trading around $2,240/tonne, half the price it was two years ago following a steady slide downwards since then. Among zinc’s uses is to coat steel to stop it rusting.

To compete internationally, Exxaro will have to grow the business.

Growth in the South African market is limited, with annual demand capacity seen at around 120,000 tonnes a year.

The Gamsberg, which is described as a top-class zinc deposit, is an undeveloped ore body and would require a large amount of money to develop a sizeable mine.