EXXARO Resources said on Thursday it hoped to convert “interesting conversations” with South African manganese miners into an investment during this year.
“We have been engaging for more than a year with most of the manganese players in South Africa, the operators,” said Richard Lilleke, head of new business at Exxaro, currently a coal producer with iron ore investment income. “There are well advanced engagements with a number of them.”
The coal miner said last year it intended to invest between R12bn to R15bn on diversifying its production base into manganese. This was after initially targeting a host of other battery metals such as copper, vanadium and nickel.
While some of these other metals remained on the company’s radar, according to Lilleke, manganese appears to be the most likely investment in the short-term. According to former CEO Nombasa Tsengwa, Exxaro saw itself as a consolidating influence in the manganese sector, located in the Northern Cape province.
Asked if he hoped to conclude discussions that had been underway for over a year, Lilleke replied: “I have learned not to put timelines on things but I would sincerely hope so.
“It is a case of unlocking that first deal which we feel could be a catalyst to something bigger. But it is hard work,” he said, adding: “There are no active sales processes”.
“It is all about convincing entities and shareholders that we are the right buyer and now is the right time. So it is an ongoing, exciting series of discussions,” said Lilleke.
Exxaro has been put through the mangle since it emerged last year there had been an exodus of members of its executive committee. The management disruption culminated in the departure of Tsengwa amid claims and counter-claims of bullying and intimidation.
However, Exxaro interim CEO Riaan Koppeschaar said the diversification strategy was undisturbed throughout. “To put it on the table, changes in management did not have impact on our strategy,” he said in an interview today. “Manganese is definitely one of top commodities we are still looking at and we are engaging in interesting conversations.”
Exxaro’s commitment to diversification was underlined by Ben Magara, who was today unveiled as the group’s new CEO, effective from April 1. He would use the group’s coal production “to expand our portfolio towards the critical low-carbon minerals essential for the future,” he said in a statement.
“This is in line with our diversification strategy which I have been part of as Exxaro’s non-executive director and investment committee chairman,” he said.
“I believe this strategy will enable us to deliver enhanced value to all our stakeholders while balancing enduring profitability with environmental and social sustainability.”
Cash boost
Exxaro said previously it was setting aside up to R15bn for an acquisition. As of December 31, the group had net cash of R16.3bn (excluding net debt in its energy division), slightly up from R14.8bn at the same point in 2023.
Reporting its full year results for the 12 months ended December, Exxaro Resources said that at R7.3bn (R30.16/share) headline earnings were 36% lower, partly owing to a decline in export coal prices. However, earnings were boosted by a higher dividend from Kumba Iron Ore – up 10% to R3.7bn – despite lower iron ore prices.
Exxaro receives the Kumba dividend by dint of its 20% stake in the underlying operating company Sishen Iron Ore Company (SIOC).
Group Ebitda fell 22% to R10.4bn.
The outcome for shareholders was a final dividend declaration of R8.66/share. This took the total dividend to R16.62/share including the interim declaration of R7.96/share. Exxaro has a dividend policy of passing through its income from SIOC and 2.5 to 3.5x cover.
Exxaro also announced that Eyesizwe, its founding black-owned shareholder, had agreed to waive an option to liquidate some or all of its investments until 2027. This preserves Exxaro’s direct empowerment status at 30.81%.
