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.