EXXARO Resources is in advanced discussions regarding a potential copper investment which it hopes to advance in the next 12 months, the group’s head of business development said on Monday.
The JSE-listed coal miner, which last year invested about R11.67bn diversifying into manganese, has a stated intention of further expanding its mineral production. In a capital markets presentation today, the group said it wanted 60% of earnings to be from non-coal mines by 2030.
In 2023, Exxaro was outbid for Khoemacau Copper, a 130,000 tons a year copper project in Botswana, when China’s MMG bought it for $1.6bn. As a result, Exxaro had turned its sights on a copper exploration asset, said Richard Lilleke. “Over the last year, we have increasingly focused on earlier-stage projects, where there is naturally increased risk … [but] … lower investment outlays,” he said. A budget of $10m to $30m is planned.
Lilleke said the company had “decades of institutional knowledge” mapping and assessing in Southern Africa. “We have a very strong geological understanding of the copperbelt, spanning the DRC, Zambia, Botswana, and Namibia,” he said. “We have promising opportunities that have progressed to advanced discussions, and we are hoping to advance these select opportunities further over the course of the next year.”
Later in the presentation, Exxaro CEO Ben Magara said Exxaro would like to develop a 50,000 to 100,000 ton a year copper mine, possibly in the Congo, Zambia or Botswana, but it had to be with a partner. “We are looking for something to give us lessons, rather than something where we just go on a big bang and produce,” Magara said.
“It’s opportunistic, and we’re not desperate for it. When I think of investors’ money, I have a duty of care to my investors.”
Consolidation
Exxaro also said it wanted to become one of the three largest manganese producers in South Africa by consolidating the industry. The acquisition of Ntsimbintle Holdings’s 50.1% stake in the Tshipi Borwa manganese mine in the Northern Cape province gives the group attributable production of about 1.7 million tons a year.
“Yes, there is a number, but I don’t think I’m minded to tell you what it is,” said Lilleke when asked for a long-term production target. “If we are not top three, we would not be happy,” he added.
“We said when we announced this [Ntsimbintle acquisition] that it’s a foot in the door,” said Magara. “If there’s anything that can be added to give us that competitive position of low cost and drive the logistics as well — [that is] … attractive.”
Magara said there were five or six mines in the province competing in selling the same product. “So how do we change the dynamics in the market? There’s a lot that we can do better in this space,” he said.
In addition to buying control of Tshipi Borwa, Exxaro is also in line to buy Ntsimbintle’s 51% of Mokala Manganese in which the Swiss-headquartered mining and marketing group Glencore has a tag-along right; in other words, it can ask Exxaro to make an offer on the same terms as provided to Ntsimbintle.
One complication, however, is that Glencore is hoping to acquire marketing rights to the manganese from Mokala. If applied in terms of the tag-along, Exxaro would be required to buy Mokala for about R3bn or a total consideration for the manganese assets of about R14.6bn. Said Lilleke when asked about progress on the deal: “The point is, we said to the market the total transaction size would not exceed R14.6bn.
“And there’s no world in which we are prepared to pay more than that. So yes, that would be our price expectation on Mokala.”
