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Exxaro managing costs well - CEO

Johannesburg - Exxaro Resources Limited [JSE:EXX] is on firm ground to make great strides in the mining industry because it manages costs diligently, CEO Sipho Nkosi told Fin24 on Thursday at the release of the group's first-half earnings.

The diversified resources group, who deals in coal, titanium dioxide, ferrous and energy markets, reported that revenue for the six month period ended June 30 2014 increased 19% to R7.4m from R6.2m in 2013.
 
Operating profit increased to R792m from R531m, but the group also recorded a net operating loss of R4m from a net operating profit of R844m in 2013.

However, headline earnings per share increased 11% to 793 cents from 712 cents in 2013.

"We are very much pleased with the results ... It comes at a time when the industry is under great scrutiny and there have been quite a lot of challenges."

Nkosi said the group's head office costs were a thorny issue, but it has been curbed.

"We are pleased with the way we have managed to reduce the cost levels within our organisation, particularly the head office costs.

"One of the key things ... in the mining business is that those that will survive are those that are diligent in maintaining or managing their costs very well and this is what we do.

"Out of the total profits or money that we have made in the first half, the bulk of that money went into people, people's pockets in terms of salaries, it went into shareholders and many others and a small portion - just over R2bn - is being utilised just for sustaining our business going forward."

Nkosi said Exxaro's biggest spend over the last few years has been the Medupi power station - the Grootegeluk Medupi Expansion Project (GMEP) - which was about R10.2bn.

"We have been worried about that, but I must tell you that for the last six months, we've seen remarkable progress towards ... delivering coal to Eskom.

"They started taking coal in June of this year and of course with unit number six starting in December, we are now confident that that project will work very well", Nkosi said.

Watch: Exxaro set to make great strides - CEO



He added that the group is also pleased with the acquisition made with Total Coal because it would increase Exxaro’s Richards Bay Coal Terminal (RBCT) export allocation capacity to 10.3 million tonnes a year.

 - Fin24

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