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Johannesburg - Diversified miner Exxaro Resources [JSE:EXX] said on Monday it would sell its mineral sands businesses to US-based pigment producer Tronox in return for a 38.5% stake in a new company to be formed after the acquisition.
Exxaro's mineral sands businesses include the KZN Sands and Namakwa Sands operations in South Africa and its 50% stake in the Tiwest joint venture it already runs together with Tronox in Australia.
Exxaro said the deal, which will create an integrated mine-to-processing-to-pigment producer, will help it improve efficiencies and reduce risks.
"The transaction will add security to the future of the KZN Sands and Namakwa Sands operations as it will, to a large degree, limit market cyclicality and surety of demand and will ensure continued ability to operate these assets and protect jobs," Exxaro CEO Sipho Nkosi said in a statement posted on the Tronox website.
Exxaro said a new Australian holding company called New Tronox would be formed after the transaction, in which Exxaro would hold a 38.5% stake.
"The transaction will improve the future potential for South Africa to be chosen as a site for a potential new greenfield pigment plant as the demand increases and growth strategies are formulated," Nkosi said.
The pro-forma equity value of New Tronox is estimated at R27.8bn, which would value Exxaro's mineral sands operations at R10.7bn.
Exxaro will keep a 26% stake in the South African operations to comply with the requirements for black ownership according to the South African Mining Charter.
Should South Africa determine that direct 26% black ownership may no longer be required, Exxaro will have the right to exchange those shares for around 3.2% of additional shares in New Tronox.
Subject to certain conditions, the deal is expected to close in the first half of 2012.
Exxaro's mineral sands businesses include the KZN Sands and Namakwa Sands operations in South Africa and its 50% stake in the Tiwest joint venture it already runs together with Tronox in Australia.
Exxaro said the deal, which will create an integrated mine-to-processing-to-pigment producer, will help it improve efficiencies and reduce risks.
"The transaction will add security to the future of the KZN Sands and Namakwa Sands operations as it will, to a large degree, limit market cyclicality and surety of demand and will ensure continued ability to operate these assets and protect jobs," Exxaro CEO Sipho Nkosi said in a statement posted on the Tronox website.
Exxaro said a new Australian holding company called New Tronox would be formed after the transaction, in which Exxaro would hold a 38.5% stake.
"The transaction will improve the future potential for South Africa to be chosen as a site for a potential new greenfield pigment plant as the demand increases and growth strategies are formulated," Nkosi said.
The pro-forma equity value of New Tronox is estimated at R27.8bn, which would value Exxaro's mineral sands operations at R10.7bn.
Exxaro will keep a 26% stake in the South African operations to comply with the requirements for black ownership according to the South African Mining Charter.
Should South Africa determine that direct 26% black ownership may no longer be required, Exxaro will have the right to exchange those shares for around 3.2% of additional shares in New Tronox.
Subject to certain conditions, the deal is expected to close in the first half of 2012.
