South African fourth largest coal producer Exxaro recently entered into an agreement to buy Total Coal South Africa (TCSA) Pty. Ltd. and its related export marketing rights through the Richards Bay Coal Terminal (RBCT). The transaction is valued at $472 million.
Exxaro gains a valuable share of export capacity at Richards Bay Coal Terminal in South Africa.
TCSA is the fifth largest coal producer in South Africa and has a majority interest in two main operating complexes, Dorstfontein and Forzando, located in the Witbank coal basin in South Africa’s Mpumalanga province.
The company recorded combined sales of approximately 4.5 million metric tons (mt) last year. The majority of which was exported via RBCT to international markets, mainly India and China. TCSA also sells its production into the South African domestic market.
The acquisition provides Exxaro with an opportunity to acquire a large-scale, operating coal business in South Africa, which has an estimated remaining life of more than 20 years. TCSA has a remaining resource base estimated at 1.5 billion mt (in-situ) and 395 million mt of run-of-mine resources. Furthermore, TCSA’s operations are in close proximity to Exxaro’s existing Witbank operations, and Exxaro has a good understanding of geological and mining conditions in the region.
The acquisition will provide Exxaro with access up to an additional 4.1 million mt/y of primary phase 1-3 RBCT entitlement. Exxaro currently leases entitlement from other operators in the industry to meet its export requirements.
“Exxaro is delighted with its success regarding the acquisition and for the growth opportunities it will provide for Exxaro, as well as the contribution to the South African economy in terms of continuing employment and foreign earnings. The consolidation of ownership of coal assets within South Africa is a welcome opportunity,” said Sipho Nkosi, CEO, Exxaro.
Exxaro believes that the acquisition will also allow it to optimize production at its existing operations through the reconfiguration of production to maximize the value of its portfolio. Access to additional allocation could enable Exxaro to reconfigure and expedite its development plans for current brownfields and greenfields projects in the Waterberg region by either increasing the scale of existing operations or changing planned projects to multiproduct mines.
The development of infrastructure in the Waterberg region has been designated a priority in the South African National Development Plan. It is anticipated that coal from the Waterberg can be used to replace the rapidly diminishing thermal coal being supplied to Eskom from existing Mpumalanga coal mines. Development of the Waterberg region coal assets has historically been limited due to, among others, the lack of expansion of rail capacity supplied by Transnet Freight Rail. Exxaro currently owns the only operating coal mine in the Waterberg region, Grootegeluk, and has various other potential greenfields projects that it plans to develop in the region, including its large-scale Thabametsi project.