Exxaro announced plans to acquire manganese, copper and bauxite assets – key minerals in the clean energy transition – as part of its move away from coal, widely considered the dirtiest fossil fuel.
Investing in minerals that support clean energy technologies has become “more urgent” given expected long-term supply shortfalls, Tsengwa told a conference call about the results.
The war between Russia and Ukraine has heightened geopolitical tensions and aggravated global inflation, leading to higher borrowing costs and political instability that has delayed investment in these vital minerals, she added.
“The bottom line is that the world needs significant investment in these minerals to support the energy transition we so badly need. Failure to invest today in view of the expected growth in demand for these minerals will threaten the long-term energy situation,” Ms. Tsengwa said.
Exxaro said it would seek acquisition targets in South Africa, the world’s largest manganese producer.
Falling supply in China, the largest bauxite producer and market, is also creating an opportunity for new investment to fill the production gap.
“The current manganese and bauxite price environment is conducive to entry through acquisitions. The long-term fundamentals of these three chosen commodities remain attractive and we are focused on continued acquisitions,” Tsengwa said. .
Exxaro expects the targeted non-coal mineral assets to generate the equivalent of 30% of its 2021 coal revenues, or R10.7 billion ($6.40 billion) from 2026.
On Thursday, Exxaro reported a 26% rise in half-year profit on higher coal prices, although South Africa’s rail capacity issues have limited its ability to tap into strong European demand.
Coal demand in Europe began to surge in late 2021, as part of a shift from expensive natural gas to coal, and intensified after Russia invaded Ukraine in February, ahead of the Russian coal ban, comes into force this month.
Europe’s share of Exxaro’s exports increased fivefold in the second half of 2021 to reach 32% in the first half of 2022.
Sales of South African coal to Europe were up eightfold in the first half of 2022 compared to last year, major exporter Thungela Resources said on Monday.
However, the export capacity of South African coal miners has been limited by deteriorating rail infrastructure.
The state-owned Transnet rail network has been crippled by poor maintenance, a lack of locomotives and theft of copper cables, which has diminished its ability to transport minerals to ports.
Despite rising export prices, Exxaro exported 2.5 million tonnes of coal in the first half, compared to 4.1 million tonnes a year earlier.
However, the average export price rose from $117 to $262 per tonne, resulting in a 48% jump in revenue to R22.3 billion ($1.34 billion).
Exxaro’s net earnings per share – the main measure of profit for South African companies – rose from 27.22 to 34.26 rand ($2.05).
Exxaro declared an interim dividend of R15.93, returning $334.09 million to shareholders. Its shares were up 2.30% at 1115 GMT.
($1 = R16.6542)