Financial Mail - Investors Monthly - - Opening Bell -

Share price: R54,07 JSE code: EXX

HOLD CON­SID­ER­ING THE PLIGHT OF re­source groups, Exxaro is not do­ing badly. It mines just about ev­ery­thing, from coal to strate­gic min­er­als, in­clud­ing zinc, that are mainly ex­ported. But coal is the fo­cus.

It mines at sev­eral sites around SA and is in­volved in in­fra­struc­ture projects. The lat­est fi­nan­cial re­sults, in­ter­ims to June 30, show coal pro­duc­tion vol­umes were up 1% at 19 Mt.

Exxaro is of­ten ac­cused of be­ing a ma­jor pol­luter but it does try to limit the pol­lu­tion it causes and to re­ha­bil­i­tate min­ing sites.

Exxaro has been hit re­cently in its coal ex­ports, down 12% to 2,4 Mt. This is a fairly small amount of to­tal coal pro­duc­tion but is strate­gi­cally im­por­tant. The fu­ture of coal ex­ports is not look­ing too bright. The coal ex­port price, at US$56/t, is down 18%.

In­terim re­sults were hor­ri­ble. Heps col­lapsed by 62% to 303c. CE Sipho Nkosi came up with the reg­u­lar ex­cuses such as ex­po­sure to re­sources.

Exxaro has con­cluded one deal, with Univer­sal Coal Plc to sell its prospect­ing right agree­ment, for R89,7m. That looks use­ful, but the deal has not been con­cluded as the last con­di­tion re­mains out­stand­ing.

Exxaro did pay a div­i­dend, 0,65c on Au­gust 20. With a for­ward PE of 11,5 and div­i­dend yield of 4,6% that makes the share look worth­while. But it’s a hold be­cause Nkosi warns that it may not pay a fu­ture div­i­dend due to cash flow pres­sure from not re­ceiv­ing div­i­dends it­self.

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