EXXARO Resources will decide by the end of September whether to buy a 30% stake in a coking and thermal coal project owned by Coal of Africa Ltd (CoAL) as work to finalise the valuation of the project is concluded.
SA imports the bulk of the coal needed in metallurgical processes. This should change once CoAL's Makhado project in Limpopo supplies between 2,4-million and 5-million tons of this coal a year to both the domestic market and offshore customers. The main beneficiary will be ArcelorMittal, which owns a stake in CoAL and which will reduce a major input cost by obtaining coking coal locally.
The market expected a little more from CoAL's statement yesterday on the status of the engagement with Exxaro and the shares ended up 0,4% at R5,37 after touching an intraday low of R5,27. The two companies pushed back the date for a formal decision from mid-June to end-September to accommodate more work to establish the value of the project now that the parties are looking at adding thermal coal to the product line as well as new properties and further testing work to determine yields over the entire mining area.
"I'm very confident Exxaro will come through," CoAL CEO John Wallington said.
"The original agreement was a bit impractical for the way a major deal like this would happen. The next step is we get into the nitty gritty, the commercial agreements and the value of the operation," said Mr Wallington.
"A company like Exxaro will go through all their processes and take their time before they approve an acquisition of this magnitude. I'm a bit disappointed that the market has taken today's announcement negatively. It seems that they were expecting a bit more. I felt it was quite a positive announcement. I'm very pleased with the way the engagement with Exxaro has gone."
Exxaro CEO Sipho Nkosi said: "The development of high quality metallurgical coal assets is fully in line with Exxaro's strategic growth objectives."