JOHANNESBURG (Business Day) -- The JSE [JSE:KMB] will greet its only listed speciality iron-ore company in the form of a separate Kumba Iron Ore on November 20 after Kumba Resources shareholders yesterday approved proposals to split the company into two.
"It is a hugely important day in our lives," Kumba Resources CE Con Fauconnier (pictured) said after the shareholders' meeting.
"We had the overwhelming support of our shareholders for this transaction."
A smaller Kumba Resources will continue to trade under its present name until November 27, when it will be renamed Exxaro Resources. Exxaro will specialise in coal, base metals and industrial minerals.
Kumba Resources chief financial officer Dirk van Staden said the enterprise value of Exxaro, based on its estimated 29.5% contribution to the present value of Kumba Resources, plus the value of Eyesizwe Coal and options to buy 100% of Namakwa Sands and 26% of Black Mountain from Anglo American [Nasdaq:AAUK; LSE:AAL], would be about R22 billion ($3 billion), giving an indicative price of R54.70 ($7.40) a share.
"On 20 November 2006 Kumba Iron Ore goes onto the JSE as a brand new listing. What is left of Kumba - bearing in mind we will retain a 20% stake in the iron ore assets - those assets plus our coal and mineral sands and base metal assets will be combined with the coal assets of Eyesizwe, and in the revised format of assets Kumba will then on 27 November re-list under the new name of Exxaro Resources Limited," Fauconnier said.
The enterprise value of Kumba Iron Ore would be about R24 billion ($3.25 billion), based on 70.5% of the present value of Kumba Resources, which gives an indicative price of about R69 ($9.34) a share.
But the actual level at which the shares would trade would be determined by the market, van Staden said.
Kumba Iron Ore plans to grow production to about 42-million tons a year by 2009 and 70-million tons a year by 2015 from the present 32-million tons.
CEO designate Ras Myburgh said expansion projects included 13-million tons from the Sishen Expansion Project and another 10-million to 20-million tons in a second phase, together with tonnage that would come on stream from Sishen South, the Phoenix project to extend the life of the Thabazimbi mine and the Zandrivierspoort project in joint venture with Mittal Steel [NYSE:MT].
As far as international expansion was concerned, most of Kumba Iron Ore's attention was focused on west Africa, where it hoped to bring the Fal'em'e project in Senegal into production once ownership issues were resolved.
Exxaro Resources also has plans to expand its interests in coal, base and industrial metals. It produces about 45-million tons of coal a year, which it plans to grow to 70-million tons by 2012.
Sipho Nkosi, who will become CEO next year when Fauconnier steps down, said Exxaro's pipeline of projects included the expansion of Grootgeluk and Matimba coal mines, as well as the R234 million ($32 million) Sintel Char project. Exxaro would also grow production from a new mine at Inyanda, the Igoda joint venture with Sasol Mining, and the Mafube joint venture.
Prospects for the coal industry were excellent, both in South Africa and worldwide, he said. This was evident in the increase in the price of steam coal from $20 a tonne free on board from Richards Bay five or six years ago to $48-$50 a tonne.
Exxaro had a good balance between coal and industrial minerals, Fauconnier said.
Expansion plans in the industrial minerals business included the expansion programme at Namakwa Sands while KZN Sands was ramping up production from its two furnaces. There was a possibility of expanding pigment production in Australia and zinc production from the Gamsberg deposit.
Exxaro could look at expanding into ferromanganese and ferronickel production.
A feasibility study was under way into building a full-scale test plant for ferromanganese production with Samancor as a partner, Fauconnier said.
The company also said on Friday that it plans to pay a special unbundling dividend of 185 cents per share with shareholders registered with the company on the close of November 24. With Classic Business Day.
