Killer Trade: Exxaro Re­sources sell­ing mo­men­tum is slow­ing;

Finweek English Edition - - INSIDE -

Exxaro Re­sources is one of the largest South African di­ver­sif ied re­source groups, with in­ter­ests in coal, min­eral sands, in­dus­trial min­er­als and iron ore. The com­pany is the se­cond-largest South African coal pro­ducer, and the third­largest global pro­ducer of min­eral sands, a class of ore de­posit that is an im­por­tant source of zir­co­nium, ti­ta­nium, tho­rium, tung­sten and rare earth el­e­ments.

Exxaro’s eight man­aged coal mines pro­duce over 40m tons per an­num of power sta­tion, steam and cok­ing coal, as well as char. How­ever, since 2012, Exxaro’s share price has lagged other re­sources stock for many rea­sons, rang­ing from glum f inan­cials to end­less strike ac­tion. Af­ter peak­ing at 21 495c/share in the se­cond quar­ter of 2012, Exxaro grad­u­ally lost ap­prox­i­mately 37% of its value – even break­ing out of its ma­jor bull trend. Not even its 30% buyin op­tion of Coal of Africa’s (CoAL’s) Makhado project in Lim­popo in June 2012, or its an­nounce­ment of zero fa­tal­i­ties from July 2011 could sweeten in­vestor con­fi­dence. Re­port­ing a 40% drop in 2012 head­line earn­ings in Fe­bru­ary 2013 deep­ened losses fur­ther, with Exxaro plung­ing to the 13 480c/ share sup­port level. To add fuel to the fire, the ma­jor­ity of op­er­a­tions were dis­rupted last year at Grootegeluk mine in Lim­popo, and the Mpumalanga-based Matla and Arnot coal mines be­cause of mass strike ac­tion over the non-pay­ment of per­for­mance bonuses. Em­bar­rassed, Exxaro con­firmed that the strike ac­tion at the five op­er­a­tions af­fected sup­plied coal to the State-owned power util­ity Eskom. Eskom had al­ready is­sued a warn­ing prior to the strike of tight over­all elec­tric­ity sup­ply that it strug­gled to meet due to in­creased de­mand – with nar­row­ing sup­ply/de­mand mar­gins. The strike even­tu­ally came to an end af­ter three weeks, with the strik­ers agree­ing to ac­cept Exxaro’s of­fer of a R2 800 firstquar­ter short-term in­cen­tive, which it had pre­vi­ously re­jected.

In se­cond quar­ter of 2013 down­side eased, with Exxaro re­tain­ing sup­port at 13 480c/share. In­vestors seemed to show a glimpse of ap­proval when Exxaro was ranked se­cond in an en­ergy ef­fi­ciency sur­vey. The en­ergy eff iciency mea­sures im­ple­mented by Exxaro in­cluded a

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