Feb. 25, 2011 - Exxaro Resources Ltd. approved construction of the Fairbreeze mineral-sands mine and said 2011 capital spending will jump threefold as demand for its output grows.
"We ve got a very impressive project pipeline, Sipho Nkosi, chief executive officer of the Pretoria-based company, told investors in Johannesburg today. Capital investment will increase to 8.2 billion rand ($1.2 billion) this year from 2.7 billion rand last year, his presentation showed.
Exxaro, which produced 46.7 million metric tons of coal in 2010, is expanding output to meet the rising needs of Eskom Holdings Ltd., South Africa s main power utility, and benefit from the commodity price rally. It s also investing in mineral sands such as ilmenite, used in paints and plastics, and zircon, used in insulation and as a gemstone, as demand climbs.
Earnings from mineral sands may increase significantly this year, Finance Director Wim de Klerk told investors. Exxaro is the world s third-largest producer of the sands.
The Fairbreeze mine in South Africa s KwaZulu-Natal province will cost about 2.4 billion rand and construction will start in the second quarter, according to the presentation. The mine will produce about 500,000 tons of ilmenite and 60,000 tons of zircon on average a year, the company said.
Most of Exxaro s planned investment will be focused on the Grootegeluk coal mine that it s expanding to feed Eskom s Medupi complex, a power station being built in the north of the country. Exxaro is also setting up an energy unit to develop its own electricity plants.
Exxaro fell 3.50 rand, or 2.3 percent, to 147.50 rand by the 5 p.m. close of Johannesburg trading. The FTSE/JSE Africa Mining Index declined 0.2 percent.
Exxaro today posted a fivefold increase in full-year profit as commodity prices gained and a write-off wasn t repeated. Net income rose to 5.21 billion rand in 2010 from 1.02 billion rand a year earlier, Exxaro said in a statement.
The price of coal shipped from South Africa s Richards Bay, the continent s biggest coal terminal, advanced 43 percent to an average $91.93 a ton last year, according to IHS McCloskey data on Bloomberg.
Exxaro also benefits from rising iron-ore prices through its 20 percent stake in Kumba Iron Ore Ltd. s Sishen mine. Export prices for the steelmaking ingredient almost doubled in 2010, according to Kumba.
Diluted earnings excluding one-time items increased to 14.37 rand a share from 7.02 rand a share a year earlier, Exxaro said in the statement.
