Exxaro eyes niche in energy security sector

There is something wholly refreshing about Exxaro Resources’ new strategy. By far SA’s largest coal producer, the company has been fairly unsuccessful in diversifying beyond coal mining (and its lucrative stake in Kumba’s Sishen Iron Ore company).

But now, as the world makes moves away from fossil fuels, the timing is right for Exxaro to redefine its business.

As such, it announced a strategic decision to secure its role in not just renewable energy but energy security more generally.

For too long the energy argument has been highly polarised, and companies and individuals that were for coal had to be against green power. But Exxaro wants to do both. In a way it already is.

The company is the largest supplier of coal to Eskom, which intends to run coal-fired power stations well beyond 2050.

Exxaro is also committed to supplying coal to Thabametsi —a highly controversial new coal project that is facing so much opposition and is unlikely to get off the ground.

In 2019, it bought the remaining 50% stake in a local renewable energy company, which owns two wind farms.

This now forms the platform for Exxaro to move into cleaner energy alternatives, the fastestgrowing part of the energy sector.

Ultimately, it is energy security that Exxaro wants a role in, whatever form that may be. Given the divisive nature of the coal vs renewables debate, the path Exxaro intends to tread will not be easy, but is a worthy and indeed necessary direction for the company to take.

GOLD MINING

SA’s gold miners are missing a bonanza brought on by the very virus that’s causing them to forfeit very high rand prices for their metal.

Big companies such as Sibanye-Stillwater have shut their deep-level mines and plants entirely, while others that have tailings retreatment projects and open cast mines such as Harmony Gold and Pan African Resources are able to take limited advantage of a price well in excess of R900,000/kg.

Harmony, the largest source of SA gold, has shut all its nine underground mines but it has kept a degree of production going from its open cast Kalgold mine as well as its tailings and waste rock treatment operations.

Underground mines were specifically targeted in the government’s 21-day shutdown of the country to curb the spread of Covid-19. These mines have large workforces to send underground, making them the most likely places in mining for the virus to spread quickly.

However, in operations such as opencast mining, where employees are in machines and far from each other, and processing plants where safe distances can be kept, the government has granted permission for these to continue working.

For Harmony and Pan African, it means they can realise a gold price topping R930,000/kg. Harmony, for example, averaged R683,160/kg in the second half of 2019.

Of course, the backlash these companies will face if any of their employees infected with the virus pass it on to colleagues will be intense.

Some companies such as Sibanye and tailings specialist DRDGold have opted to shut their operations entirely rather than run the risk.