Exxaro to review boosting dividend as it diversifies from coal
South African coal miner Exxaro Resources Ltd. will prioritize a review aimed at boosting investor dividends following its recent move to diversify from coal by adding manganese assets.
One of South Africa’s biggest coal miners, the company completed a transaction to acquire a majority stake in Tshipi é Ntle Manganese Mining, effective from Feb. 27. It would make Exxaro one of the world’s top producers of the steel-making ingredient, marking its latest move to expand beyond mining the dirtiest fossil fuel.
“Obviously the coal prices must dance and the iron ore prices must sing, but from what we can see in the capital requirements of our replacement capital, there may be more for our investors who have been clamoring for it,” chief executive officer Ben Magara said on Tuesday in an interview on the sidelines of the Mining Indaba in Cape Town.
Magara, who took on the role in April, is looking at a revision of the dividend policy along with a strategy to grow the business over the longer term.
Exxaro’s longer-term outlook will depend on working with South Africa’s Transnet SOC Ltd. to improve logistics so that more minerals can be moved by rail. It also plans to potentially triple clean energy generation while keeping coal output going, Magara said.
The firm will will look to draw banks and other producers in to bolster transport corridors and expand the ports of Coega and Saldanha within the next decade to bump up manganese exports, he said, adding that current logistics constraints have even resulted in shipments being sent by road to Namibia for export.
While overall coal demand is forecast to drop 25% by 2035, it’s expected to keep growing in South and Southeast Asia during the same period, BloombergNEF analysts said last year.
The sustained use of coal beyond 2050 “means we can have life extensions on our own mines,” which involves adding more renewable energy generation to reach its net zero goal, Magara said.
The acceleration of Exxaro’s renewable unit more than doubled capacity to about 500 megawatts with stakes it bought last year. The company is aiming for close to 1,500 megawatts in the long term, he said.
The miner’s diversification drive will exclude running copper assets because prices are too high, according to Magara.
“We could invest into an advanced exploration project and take it up the value curve with our expertise and I think that will be a much better place to be.”