Exxaro on the prowl for new assets as profits rise

JOHANNESBURG (Reuters) - South Africa's Exxaro is looking to invest in platinum group metals or copper to benefit from a favourable market and become a fully diversified miner, a senior executive said on Wednesday.

Exxaro, which posted an 11 percent rise in first-half earnings, has been on a push to diversify beyond its traditional reliance on coal, mineral sands and its 20 percent stake in iron ore miner Kumba Iron Ore.

Ernst Venter, Exxaro's manager for growth, said platinum group metals were currently undervalued and had solid long-term fundamentals. Copper was also a potential target, he said.

"We are diligently weighing our options. If it's not this year, it will be early next year," he told Reuters. "We need to make some sort of move to get one of those two commodities."

South Africa's second-largest coal producer has an extensive pipeline of new projects. It paid 2.7 billion rand this year for African Iron and its Mayoko iron ore project in the Republic of Congo and plans to spend another 1.7 billion rand by next year to fast-track it.

Exxaro sold its mineral sands operations to U.S.-based pigment producer Tronox for a 38.5 percent stake in a new entity called New Tronox, which listed in New York in June.

"Exxaro offers a lot of value, but it's a risky one," said Byron Lotter, a portfolio manager at asset management firm Vestact, pointing to the risks attached to Exxaro's projects, such as the location of its Congo iron ore acquisition.

"That's why the market gives this company a massive discount."

MINERAL SANDS

Exxaro posted an 11 percent rise in first-half headline earnings per share to 11.62 rand, boosted by higher mineral sands prices, and said results for the remainder of the year are likely to be relatively stable.

Headline EPS are the main profit gauge in South Africa and strip out certain one-time items, such as the 5 billion rand impact from the sale of Exxaro's mineral sands and base metals units. Revenue was up 3 percent to 9.76 billion rand.

Exxaro, a big supplier to power utility Eskom, said total coal production fell by 3 percent, while exports declined by 13 percent on rail constraints and challenges at its Mafuba mine.

In the second half of the year, Exxaro expects the coal export price index to remain under pressure, while domestic prices are expected to be marginally higher.

"Overall coal production volumes are expected to be higher in the second half but are likely to be offset by weaker international coal prices," the company said.

Shares in the company, up 2.4 percent this year, were down 2.15 percent to 165 rand by 1304 GMT, compared with a 1.15 percent rise in the JSE Top-40 blue-chip index.

The stock reacted little to Exxaro's own results, which came in line with guidance given last week, but the share fell after Tronox released its own earnings. Analysts said the reaction may be attributed to a muted outlook for mineral sands.

Mineral sands include titanium dioxide feedstock, which is used to make paint, and zircon, needed to produce ceramic tiles.

Exxaro declared an interim dividend of 350 cents per share.

Source: http://news.yahoo.com/exxaro-prowl-assets-profits-rise-142108442--sector.html

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