By Jana Marais - May 4, 2012
BLOOMBERG
Exxaro Resources Ltd. (EXX) is considering fast-tracking development of the Mayoko iron-ore deposit in the Republic of Congo and will finish a new output plan by July, Chief Executive Officer Sipho Nkosi said.
Exxaro, the second-largest South African coal miner, is reviewing the work done on the Mayoko deposit by African Iron Ltd., which it acquired for A$313 million ($321 million) in March, and will start rail and port negotiations with the Congolese government once the new plans are completed, Nkosi said in an interview in Pretoria yesterday. African Iron targeted first production by mid-2013 and output of 5 million metric tons a year, Macquarie First South Securities (Pty) Ltd. said in a research note last month.
“We’re looking at the geology, the plans, the product, the possible start date, the size -- that’s the most important thing,” Nkosi said. Teams are assessing the railway line and port at Pointe-Noire, which will have to be expanded to handle an estimated 40 to 50 million tons of ore annually for Exxaro, Xstrata Plc (XTA) and Equatorial Resources Ltd., he said.
Exxaro, whose bid to acquire Australian iron-ore company Territory Resources Ltd. failed last year, plans to build a “huge” iron-ore business in addition to its 20 percent stake in Kumba Iron Ore Ltd.’s Sishen mine in South Africa, Nkosi said. “We’re going to look beyond this one over a period of time for other opportunities. Australia will always be a very good destination, and so is South America.”
Equatorial Resources Collaboration
The company enjoys a “very good working relationship” and collaborates closely with Equatorial Resources, which is developing the Mayoko-Moussondji project adjacent to Exxaro’s deposit, Nkosi said. “Whether that will result in something else, it’s going to depend on what their long-term view is. Whether they want to be miners, or they want to do something else,” he said.
There is scope for Equatorial and Exxaro to collaborate on rail and port studies and infrastructure development, or to merge their Mayoko projects and get scale benefits, Macquarie said in the report.
“Such consolidation, which we expect would be driven by Exxaro, would also then give Exxaro the next leg of a broader West Africa iron-ore strategy with access to Equatorial’s Badondo project in the northeast of the Congo, leveraging Exxaro into the middle of another emerging iron ore project cluster with export options via Cameroon or Gabon,” it said.
Exxaro is ready to start delivering coal from its Grootegeluk mine to South African state-owned power utility Eskom Holdings SOC Ltd.’s Medupi power plant this month, when a supply contract becomes effective, Nkosi said.
Eskom Talks ‘Critical’
“Our view, and their view, is that we deliver; we start deliveries until we finalize” negotiations, which are at a “critical stage,” Nkosi said. The construction of Medupi has been delayed and the first unit is expected to be commissioned over the next 12 months, South African Public Enterprises Minister Malusi Gigaba said last month.
The company expects a government decision on environmental approval by July for its Fairbreeze mineral-sands mine in South Africa’s KwaZulu-Natal province, which was initially expected to be in production last year, Nkosi said.
The delay will not affect the completion of a transaction with Oklahoma City-based Tronox Inc. (TROX), which will see the companies combine their mineral-sands assets to benefit from economies of scale, Nkosi said. “The transaction doesn’t hinge on that, but ideally it is important that the project gets approved,” he said.
The deal can be completed once Tronox shareholders vote on it this month, Nkosi said. The vote will not be influenced by the applications that have yet to be approved by the South African government to transfer ownership of the assets, he said.
Nkosi is “very hopeful” that the so-called section 11 approval will be granted soon. “Everything is now in Pretoria with the minister.”
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