Johannesburg - In a week characterised by concerns about
shrinking global demand for South African commodities, Exxaro Resources
[JSE:EXX], one of South Africa’s leading diversified mining companies, is
bucking the trend.
Exxaro will nail its colours to the mast tomorrow and list
one of its joint ventures on the New York Stock Exchange (NYSE).
Worth $3.4bn (R29bn), the paintmaking ingredient company,
New Tronox, will be listed in the US for the first time.
Exxaro has caught the attention of shareholders as it
simultaneously initiates three significant moves across three countries: the
New York listing, an acquisition in the Congo and a sale in Namibia.
Exxaro is full of confidence, despite jitters caused by
Europe’s dwindling demand for commodities.
“The company’s main projects are on track,” said Sipho
Nkosi, chief executive of Exxaro.
Nkosi said the company had a vision of becoming a company
valued at $20bn in the next few years.
This is while South African mining companies seek to meet
with Mineral Resources Minister Susan Shabangu to discuss the slide of mining
production in the country.
Exxaro said that New Tronox would create more than 3 500
jobs in about 16 countries, including South Africa, but there might be
headwinds ahead for the company.
Exxaro’s share price went through a slight wobble over the
past three weeks.
This was, however, explained as a function of an oversupply
of coal on the market, leading to a plunge in coal prices, rather than a
reflection of the company’s overall strategy.
Coal miners may have to scale back their output of the
commodity by implementing production cuts, which could lead to job cuts.
This week South African coal prices traded at their lowest
levels since February 2010. This week the price fell to $81.65 a ton free on
board due to the drag on the market caused by oversupply.
Furthermore, there are concerns about the Chinese coal
market. China is the world’s largest importer of coal, but the Chinese economy
is slowing down and decreased Asian demand is expected.
Reuters reported this week that Chinese traders have
renegotiated the price of coal consignments more frequently over the past few
months and other Asian countries have defaulted on coal deals.
But analyst Kamani Moodley of Afrifocus Securities speculated
that the “price will not drop any further and an uptick can be expected in the
next quarter”.
Moodley said: “Exxaro is exposed to some of the good
commodities and has a solid diversified portfolio.”
The Exxaro share price has performed at well above the
average level.
The share price is up by more than 18%, compared with the
average rise of shares in the JSE Top - 40 (Tradeable) [JSE:J200] blue chip
index of 6.8%.
The company is involved in a joint venture between Tata
Power and Exxaro Resources to build a hydroelectric plant in the Republic of
Congo to supply power to Exxaro's Mayoko iron ore project in the country.
It is also developing port capacity in the Congo so that it
can better export ore from Mayoko.
In addition, the company is discussing the extension and
upgrading of rail facilities with the Congolese government so as to transport
the iron ore to that country’s port, Pointe-Noire.
Exxaro has announced a R931m deal with Glencore involving
the disposal of its 50.04% permanent stake in the Rosh Pinah zinc mine in
Namibia.
This is in line with the company’s stated aim of getting rid
of non-core assets, including its zinc operations.
Exxaro earlier this year reported a 40% positive yield in
full-year profit.
South Africans who bought this share four years ago have
enjoyed solid year-on-year returns. Compound annual growth of 20% has been
their bounty.
Headline earnings per share stand at 49%.
The company is liquid and relatively unencumbered as there
is little debt on the balance sheet.
In this year’s annual report, Nkosi announced that the
company had reduced its net debt by R2.5bn and that revenue was up 24% to
R21.3bn.