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Exxaro announces outcome of current business review and trading statement
Date released: 1 December 2009
Diversified resources group Exxaro Resources Limited (Exxaro) announced today that it has completed a review of its existing business, commodity portfolio and growth pipeline.
The review was undertaken against the background of the current economic climate and the need to align existing resources and cost structures with a prioritised commodity strategy best positioned to release optimal value for all stakeholders.
Exxaro and its subsidiaries (“the Group”) plan to reconfigure the Group’s zinc assets with a view to ultimately divest from them in a manner that takes into consideration an optimal timetable allowing for maximum value release for all stakeholders. The current portfolio of zinc assets includes the Zincor refinery in Springs, Gauteng, a 50,04% interest in the Rosh Pinah zinc and lead mine in Namibia, a 26% interest in Black Mountain Mining (Pty) Ltd which owns the Black Mountain zinc and lead mine and the Gamsberg zinc project in the Northern Cape, and an effective 22% interest in the Chifeng zinc smelter in China.
The zinc assets account for some 2% of the Group’s net assets and 10% of revenue respectively. The Group has put in place a programme to effect the above and will accordingly provide regular updates.
As a result of the impact on the Group brought about by the current economic climate, commitments to large capital projects as well as the current medium-term outlook of the mineral sands industry, the Group has decided not to proceed with the planned development of the Fairbreeze mineral sands mine in KwaZulu-Natal. The Group will accordingly plan for the closure of the KZN Sands operations during the next five years while in parallel investigating feedstock alternatives and the continuation of the business should market conditions improve substantially.
This decision not to develop the Fairbreeze mine will necessitate a review of the carrying value of the KZN Sands operation as at 31 December 2009 which will in all probability result in a significant impairment of the carrying value of the asset by up to R1 500 million. This in turn will have a negative impact on attributable and headline earnings per share for the year ending 31 December 2009 which at this stage cannot be quantified with reasonable certainty. Headline earnings will also be impacted by the reversal of previously raised deferred tax assets which cannot be added back in the calculation of headline earnings per share.
The Group’s business strategy remains to focus on achieving operational excellence as a diversified resources business, to streamline management and cost structures, maximise cash flow and ensure availability of sustaining and environmental capital.
“We have undertaken a thorough review and prioritisation of our capital expenditure and project pipeline to optimally position the Group in the current economic climate,” said Sipho Nkosi, Exxaro’s chief executive officer.
The Group will intensify its growth efforts on its carbon-related project pipeline which includes major projects in the Waterberg such as the Grootegeluk mine brownfields expansion to supply Eskom’s new Medupi power station, the Thabametsi greenfields development as well as the Moranbah South joint venture with Anglo Coal in Australia. The Group also intends exploring opportunities in the ferrous, energy and reductants markets.
“The latest measures provide a balance between our commodity and project portfolios and our longer-term growth aspirations. Our ongoing review of the business with particular emphasis on cost and balance sheet structures will ensure that we remain optimally positioned to meet all stakeholder expectations,” said Nkosi.
The information in the above statement has not been reviewed nor reported on by Exxaro’s external auditors.
Ends
Editor’s Note:
Exxaro is one of the largest South African-based diversified resources groups, with interests in the coal, mineral sands, base metals, industrial minerals and iron ore commodities.
www.exxaro.com
Enquiries:
Wim de Klerk
Financial Director
Tel: + 27 (0) 12 307 4848
Mobile: +27 (0) 82 652 5145
Email: wim.deklerk@exxaro.com
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