JOHANNESBURG (Business Day) -- Exxaro Resources is getting a new chief executive in the form of Sipho Nkosi. Classic Business Day speaks to both incoming and outgoing chief executives on the release of the company's interims.
LINDSAY WILLIAMS: Exxaro's interim numbers came out earlier today - headline earnings per share came in at 246 (South African) cents, a dividend was declared of 60 (South African) cents, revenue was up 23%, and net operating profit is R891million (US$118.56 million). In the studio is outgoing - and I don't mean he's fun at parties, he is actually leaving the company - chief executive Dr. Con Fauconnier, and incoming chief executive Sipho Nkosi is also with us. Con, you're handing over a healthy looking company.
CON FAUCONNIER: Yes, certainly we are. We're quite chuffed with this first set of results - that now represent a full half-year - that we can report on, and we're very pleased with the result.
LINDSAY WILLIAMS: Just remind us exactly what Exxaro is now after the unbundling and the empowerment issues now the dust has settled - what exactly have we got here?
CON FAUCONNIER: What we did at the time - you will recall at Kumba as a part of the empowerment transaction, we did a deal with Sipho Nkosi and Eyesizwe. We spun out the iron ore assets as Kumba Iron Ore and listed that as a new entity on 20 November 2006. The remaining assets of Kumba - i.e. the non-iron ore assets which were largely coal, mineral sands, base metals and industrial minerals - we then combined with the Eyesizwe coal company to form Exxaro. The only outstanding part of the transaction is we've also had an option, which we've exercised, to acquire Namaqua Sands from Anglo American [NASDAQ:AAUKD]. We're just waiting for government approval on that one, and then Namaqua Sands will become part of our group, making our mineral sands business bigger.
LINDSAY WILLIAMS: Sipho, congratulations on your forthcoming appointment. I think you take over on 1 September? Some big shoes to fill - but a good company, a solid company and some good numbers to fall back on. Tell us about the last six months in terms of the coal side of things, which I think is probably the most exciting part of the business?
SIPHO NKOSI: I think Con's shoes are quite big - they're very ugly - but we're having a great time together. We're having an exciting time in the coal business. As you know, we have been given the first phase of Medupi Power Station by Eskom, where we are going to be supplying them with 8.5 million tonnes of coal in phase one. We're in the process of negotiating with them for phase two of that one - and if the two of them are put together and combined, you're looking at a total of about 17 million tonnes of sales that will be coming out of our mine going into the power station, and that's quite exciting. But over and above that there are quite a number of projects that we've been working on. One of them is a joint venture that we have with Anglo Coal called Mafube Colliery where we are busy with that mine now, and the plant will be commissioned towards the end of this year. That mine when it's in full production will produce a total of about 5 million tonnes of coal, 3 million tonnes of that being exports. We've got 50% of that. We have just done a sod-turning ceremony at Inyanda - one of our projects - where we are producing in excess of about 1 million tonnes for export. We're quite pleased and excited about what's going on - and there's quite a number of other projects that are still at feasibility stage that we're pursuing right now. So one inherits a great company - that's why I'm saying Con has done a superb job, and I hope I could emulate him. Of course he's taught me a couple of tricks, and I'm sure we will make it work.
LINDSAY WILLIAMS: I'm sure you will, having been under his stewardship for a while now. Just going back to that Eskom deal that I think was signed in March of this year - that's a long-term deal for millions of tonnes. Have you fixed a price as well, or does it float with the international price?
SIPHO NKOSI: No. The whole thing is priced on a more commercial basis. We've given them our prices in terms of what it is that we think would give the organisation a good return - as well as give Eskom a good return for what they are doing - and all of us have agreed that the numbers that we've got would satisfy both parties. It's a very good contract for the organisation - unfortunately I can't give you the numbers and how we got there simply because we're still in the process of negotiating the second part of the contract.
LINDSAY WILLIAMS: Sure. Con, it's your last chat that you're going to have on this show. Looking at the other side of the business, the base metals and zinc is doing extremely well. The commodities are coming into focus at the moment because of what's happening on the international markets, but are you still hopeful that commodity prices will stay high for Exxaro and other companies in the future?
CON FAUCONNIER: If one looks at the fundamentals, they certainly underpin a view that there's still mileage left in the commodity business - the demand from China is still there. I think the turmoil we're seeing in the markets worldwide at the moment for me is a reaction to factors that I don't fully understand, but if I look at my own business just from a fundamental point of view, the demand is there, there's isn't sufficient supply in many areas and that normally bodes well for pricing in those markets. We've seen that - coal prices have remained strong; iron ore prices have remained extremely strong. We anticipate further improvements in those prices. The one area of our business that's probably lagged a bit behind the rest of the market has been the mineral sands side, and specifically the titanium dioxide slag. Zircon has been actually quite strong, and then zinc has been at all-time high levels as has lead. So if I look at those fundamentals and I look at what is driving the demand out of China - you probably know as well as I do this year they're looking towards 11.5% growth there. The Chinese have been battling to slow their economy down - and that normally translates into high demand for most of the products that we deliver to the market.
LINDSAY WILLIAMS: Con, good luck in the future with whatever you're going to do. I hope you have a good rest to start with. Sipho, very good luck in the future - you start that job on 1 September, and we will be speaking a lot in the future.
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