EXXARO
EXXARO
Coal Giant Targets
Further Growth PRODUCTION: Timothy Reeder
At only 12 years old, Exxaro has worked ceaselessly to establish itself as one of the largest and foremost black-owned, South African-based diversified resources companies. Expansion of its current footprint which currently encompasses South Africa, Europe and the USA looks set to form a key part of its plans for the coming year, as Enterprise Africa discovers.
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INDUSTRY FOCUS: MINING
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Despite its relatively short operational lifetime, Exxaro’s pedigree and skills have been carefully built up over many decades as a company rooted in South Africa, and one consistently respected by its peers for its innovation, ethics and integrity. At the time of its formation in 2006, Exxaro was the largest blackempowered mining company in South Africa, the result of an empowerment transaction involving the unbundling of Kumba Resources’ iron ore assets. The two companies formed through the transaction were Exxaro, whose primary focuses include coal, mineral sands, and base metals and industrial minerals, and Kumba Iron Ore, geared exclusively
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toward iron ore mining. Behind the unbundling was the desire to create a South African company for a new generation, while simultaneously broadening the spread of shareholders in both companies to encompass people from previously disadvantaged backgrounds, employees and the communities in which the company operates. With over a decade having passed since the merging of some of the biggest names in the field, coal remains the dominant force underpinning Exxaro’s business and with the pedigree at its core, it is easy to understand why. It has carried with it into this new era the portfolio of world-class assets that Kumba
// WE ARE REALISING OUR VISION OF CONTRIBUTING TO THE UNLOCKING OF THE WATERBERG // Resources had built up in its short operational lifetime in Africa, Asia and Australia, prior to its unbundling; equally, Eyesizwe Coal, another key building block in the merger, was South Africa’s fourth-largest coal producer with a production capacity approaching 25 Mtpa and coal assets consisting of four operating mines. Naturally, then, it is in this
EXXARO
export coal, of which three million tonnes will come from the Waterberg once all the projects are fully operational and performing at their peak. The R4.8-billion, 1.7-milliontonne-a-year GG6 project at Grootegeluk, in the Waterberg, is the largest of Exxaro’s capital projects, where first production of semisoft coking coal is expected in the company’s 2020 financial year. On the signing of the Agreement, Mxolisi Mgojo, Chief Executive Officer of Exxaro, was effusive in what he believes this will bring both to the company and country as a whole. “Exxaro is proud to be developing the Waterberg area in collaboration with Transnet,” he began. “This is an exciting milestone for Exxaro and is a realisation of our vision of
domain that the company continues to thrive, and where we see perhaps the most concerted efforts from Exxaro to build over the course of 2018. With a view to increasing coal volumes from Waterberg to Richards Bay Coal Terminal, Exxaro recently signed a coal export transportation agreement with Transnet, a giant billed as the largest and most crucial part of the freight logistics chain that delivers goods to each and every South African, every day delivering thousands of tons of goods around South Africa, through its pipelines and to and from its ports. The 10-year contract between Exxaro and Transnet will allow for the transportation of a total of 7,8 million tonnes (Mt) of
contributing to the unlocking of the Waterberg, thus creating jobs and powering economic development in South Africa. As such, we will be investing 50% of our R20bn coal capex programme over the next five years in coal in the Waterberg area.” Transnet, meanwhile, has a proven track record in building rail capacity and expanding export rail performance in the Waterberg area and across South Africa. This agreement will also enable Transnet to increase rail infrastructure capacity to service both domestic and export markets from the Waterberg area, Mgojo added, and comes at the time when Transnet’s Waterberg Programme is fully underway with plans to complete the second phase of the project in March 2019. This will see a growth in export
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INDUSTRY FOCUS: MINING
rail capacity to six million tonnes through incremental upgrades of the existing rail networks and yards. The agreement is a key contribution to the Waterberg expansion programme earmarked in the National Development Plan (NDP) as a strategic coal mining area and national asset to growing the South African economy. Welcoming its signing, Siyabonga Gama, Transnet Group CEO said: “We are pleased with reaching a key milestone with Exxaro to improve rail infrastructure in the Waterberg area which includes the strengthening and expansion of the Waterberg Link (the Lephalale Line).We are a key enabler to growing the South
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African economy and are playing our role in developing more rail capacity and unlocking the capacity of the Waterberg region to domestic and export markets.” Such investment comes as a result of Exxaro’s commitment to implementing a five-year, R20billion capex programme on coal mining projects in Limpopo and Mpumalanga. At present, it has seven coal projects in its portfolio, with four in Limpopo’s Waterberg region and three in Mpumalanga, and the project programme seeks to provide Exxaro with additional export volumes and more power station coal. Also in the Waterberg, capital of R2.8-billion is
earmarked for the development of the first phase of the 3.9-million-tona-year Thabametsi project, where it is continuing to take precautionary steps to protect its mining right in case of delays to the associated Marubeni independent power producer coal-fired power station. “Early works are being done now just to protect the mining right, but also under consideration is arriving at a businesscase for mining, in case we’re without a power station there, and that work is being done right now,” Mgojo clarified. In Mpumalanga, on the other hand, Exxaro is currently executing the R3.3-billion, 2.7-million-tonne-a-year Belfast
EXXARO
// OUR CONTINUED FOCUS ON INNOVATION AND TECHNOLOGY IS DRIVING OUR BUSINESS // project, where production of thermal coal is expected to begin in the first half of 2020. One of the last highquality reserves in the region and presents Exxaro with an opportunity for excellent returns as it looks to produce coal for export and to supply
one of the state-owned power utility plants. As Mxolisi Mgojo concluded at the close of 2017; “it was largely the strong cash generation of the business which enables us to invest capex into growth projects like these mines.” The extent of Exxaro’s efforts over the past 12 months were sufficient to shield it from the wretched performances seen by so many of its competitors, he added. “We had a positive performance under tough trading conditions,” he summed up, “and these encouraging results for the period were driven by strong production and employee performance, as well as improved
commodity prices and proactive management action. Our continued focus on innovation and technology is driving our business, and means that today Exxaro is a more resilient company. This set of robust results was aided by improved coal demand and coal prices, and we have continued to see significant improvements year on year.”
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February 2018
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