Exxaro to sell mineral sands ops

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.