EXXARO hopes to make an announcement on developments in its merger and acquisition (M&A) strategy “before the end of the year” according to chief growth officer Richard Lillieke.
But he qualified this – in a reply to questions concerning Exxaro’s interim results for the six months to end-June – by adding “we are looking at some very interesting opportunities in our diversification strategy but, with M&A where it is now globally, it is uncertain as to where prices go and how relevant parties think about their own assets.
“We are actively doing due diligences across a number of commodities in a number of jurisdictions and making good progress. We have a lot of bilateral discussions on the go which don’t follow defined timelines. These things tend to drag out on occasion.”
Exxaro said in 2021 it planned to diversify into copper, manganese or vanadium targeting a deal by 2024. Last year it revised this strategy and broadened it to include other battery minerals such as lithium but put no deadline on doing a transaction.
The group has been holding onto cash on its balance sheet in anticipation of doing a transaction and this amounted to R14bn at end-June – excluding Energy’s net debt of R4.2bn.
According to finance director Riaan Koppeschaar, “we feel that is comfortable for us to implement the growth strategy taking into account that we also have gearing capacity in the group.”
Cash generated by operations in the six months to June dropped 24% to R4.8bn while headline earnings were 37% lower at R15.28 a share and the interim dividend was cut to 796c from the previous interim distribution of 1,143c
Lilleike said the diversification to look at transition metals did not “necessarily mean our lives have been made easier because there are challenges in commodities such as nickel and lithium. “
Asked specifically whether Exxaro had looked at the copper projects being developed by Orion Minerals and Copper 360 in the Northern Cape Lilleike replied, “in our own backyard rest assured we have looked at everything. We are a South African company and so see the advantages of being able to invest into South Africa, but the projects need to meet our investment criteria.
“If an asset is in the fourth quartile of production costs or has not prepared a bankable feasibility study – etc – it makes it harder for us to take a definitive decision. So, while we engage with most parties there are certain criteria we look to see before we make an investment decision.”
