JOHANNESBURG – South African diversified miner Exxaro Resources could sell or close some of its coal assets as part of a strategic review to cope with a slump in commodity prices, its finance director said on Tuesday.
A plunge in the prices of commodities globally has triggered a fight for survival even among heavyweight miners, forcing companies to sell assets, cut dividends and investment spending to preserve cash and pay down debt.
Exxaro would consider closing or selling some coal assets whose profit margins were not robust enough to withstand low prices, outgoing Financial Director Wim de Klerk said.
The company has already closed several mines, including Arnot, which supplied coal exclusively to South African power utility Eskom’s 2,100 megawatt power plant of the same name.
The mine, which employs about 1,800 people, was shut in December after the cash-strapped utility refused to renew a supply agreement under which it paid for the operation’s running costs in exchange for guaranteed coal supply at a pre-set price.
De Klerk, who will be replaced by company veteran Riaan Koppeschaar from next month, said Exxaro was in talks with Eskom to obtain funds from the utility to develop its Matla thermal coal mine to meet its contractual obligations of supplying the power firm with 10.1 million tonnes of coal a year.
Matla is expected to produce 8.5 million tonnes in the 2016 financial year and would supply Eskom under an agreement in which the utility pays for the running and development costs.(Reuters)
