JOHANNESBURG (miningweekly.com) – Exxaro wants its growing energy and future-facing metals businesses to account for more than half of group earnings by 2030.

“This is the business we are building for tomorrow,” Exxaro CEO Ben Magara said while displaying a slide showing a diversified natural resources champion not only providing earnings and reducing carbon intensity, but also providing the career opportunities of many young and upcoming people "to make sure that we remain a key driver to our country's economy". (Also watch attached Creamer Media video.)

“We’re anchored by a long-life, high-quality and cash-generative coal business, a growing renewable-energy business, and future-facing metals that are built globally with significant manganese exposure.

“As we look ahead, we’ll continue to anchor our whole business, and we'll continue to drive in line with our prudent and disciplined capital allocation, underpinned by our people and the conviction to achieve zero harm – and to do this ethically.

“These three business pillars of coal, renewable energy, and manganese and future-facing metals position Exxaro continuously as a consistent dividend payer, sustained for growth.”

For the first time, manganese formed part of that picture during the Johannesburg Stock Exchange-listed company’s presentation of 15%-higher half-year cash generation to R6.1-billion on 7% higher revenue inflow.

Coal exports are rising, the renewable-energy business is up 12%, and future-facing metals are no longer a mere heading as manganese adds to income.

The Lephalale solar project (LSP), which reached commercial operation in April, is generating green electrons for Exxaro’s Grootegeluk coal mine, the output of Matla is up 38% year-on-year.

“This is an underground mine with continuous miners, extensive labour, and workforce underground, working safely and delivering a 38% improvement year-on-year - very pleasing,” Magara reported.

Coal export sales increased by 15% to 3.9-million tons as Exxaro was able to switch between domestic sales and export markets to take advantage of considerably higher export prices.

“We continue to see encouraging improvements in rail performance at an industry level. Coal volumes railed to Richards Bay improved, placing this system on an annualised run rate of about 60-million tons.

“Let me move to our next business pillar – Cennergi,” Exxaro’s renewable-energy subsidiary, said Magara, noting it is contributing 30% of Grootegeluk’s energy requirements and reduced the mine’s carbon emissions by 22%. It has also cut electricity costs by R100-million a year.

Wind generation was lower owing to weaker Eastern Cape wind conditions, although plant availability was up and strong at 98%.

With the LSP contributing 66 GWh, total renewable energy generation has increased by 12%.

The benefits of having wind and solar dovetail are continuing to be seen in improved performance in earnings before earnings, taxes, depreciation and amortisation (Ebitda) numbers.

The on-schedule and on-budget Karreebosch wind farm project continues to progress, with commercial operation expected in the first half of 2027.

Exxaro CFO Riaan Koppeschaar said a further R864-million was invested in expansion capital, primarily relating to the completion of the remaining work at the LSP and the continued construction of the Karreebosch wind farm.

R160-million was invested at Lephalale during the first half to complete activities ahead of the commissioning in April, and during the same period, R704-million was spent on Karreebosch.

“Our energy projects are typically funded through a structure comprising 75% project finance and 25% equity funding, optimising returns while maintaining disciplined capital allocation,” Koppeschaar said during the presentation covered by Mining Weekly.

“The project funding is normally drawn from the outset of construction with our equity contributions weighted towards the latter stages of project execution. All the project financing is structured with limited recourse to Exxaro's balance sheet and is hedged through interest rate swaps, providing certainty against any interest rate movement risk,” Koppeschaar explained.

Increased confidence in the group's diversified earnings base, the balance sheet resilience, and long-term cash generation resulted in two enhancements to the dividend policy: the removal of the R12-billion to R15-billion cash buffer, and the revision of the dividend cover, with future growth being financed through internally generated cash flow, supplemented by debt facilities.

A feasibility study to replace the company’s enterprise resource planning (ERP) system and look at all the options is under way.

ERP is software that connects core business processes such as finance, human resources, manufacturing, supply chain, and sales into one unified platform.

During the six months to June 30, Exxaro created R10-billion value for employees, shareholders, government, and financiers, alongside the R1.4-billion in social impact spend on host communities and labour-sending areas.