Exxaro, a leading coal and energy company based in Johannesburg, anticipates that major financial institutions like the Federal Reserve, European Central Bank, Bank of England, and South African Reserve Bank will begin lowering interest rates later this year. This move would signal the end of the most aggressive rate hikes seen in four decades, according to Exxaro’s CEO, Dr. Nombasa Tsengwa, during the company’s recent half-year results presentation.
With inflation rates starting to decline, Dr. Tsengwa expressed optimism that the global economy will maintain its momentum throughout the year as interest rates decrease. However, she also noted that while South Africa’s overall Consumer Price Index (CPI) is trending down, the mining sector’s CPI has risen due to higher electricity prices and increased costs for coke and refined petroleum, driven by elevated Brent crude prices.
Despite these challenges, Exxaro reported some positive outcomes, including coal export sales of 3.2 million tonnes and a price realization of 95% in line with its target. The company remains on track with its 2024 market guidance and has maintained a robust cash position, allowing the board to approve an interim dividend of R7.96 per share.
Exxaro is also making strides in renewable energy. The company’s first-half green energy generation reached 339 GWh, with an impressive operational EBITDA margin of 79%. Exxaro’s renewable energy projects, such as the 68 MW Cennergi Lephalale solar project, are set to further reduce emissions and provide green energy to the company’s operations.
Leon Groenewald, Exxaro’s MD for Energy, highlighted that the renewable energy business, though seasonal, remains predictable. He emphasized that the company’s wind energy projects are performing as expected, with plans to generate 700 to 720 GWh of green electricity by the end of the year.
Exxaro faced a challenging market environment, particularly in coal production, where volumes declined by 12.7% due to low demand from Eskom and logistical hurdles. However, the company found alternative routes to market, resulting in a 22% increase in export volumes.
Exxaro’s diversification strategy is also paying off, with strong performance in critical minerals like copper and manganese. The company continues to study these minerals as part of its broader growth strategy.
Dr. Tsengwa concluded on a cautiously optimistic note, citing improved collaboration with Transnet Freight Rail and a positive shift in domestic coal sales due to better equipment availability at power stations. She also mentioned that recent South African election results and the formation of a Government of National Unity have boosted investor confidence, though uncertainties remain regarding policy execution.
Source: Mining Weekly
