Exxaro drives sustainability with ambitious ESG goals

Exxaro Resources is forging a path of resilience and sustainability by leveraging its Environmental, Social and Governance (ESG) strategy, board chairperson Geoffrey Qhena announced yesterday.

The South African mining giant is focusing on decarbonisation beyond compliance and diversifying into more resilient minerals, setting ambitious targets to navigate the future’s environmental challenges.

Over the half-year period to June, Exxaro said it was affected by “continued lacklustre rail performance due to locomotive unavailability, cable theft, derailments, (while) vandalism” remained a challenge.

However, collaborations under the Transnet Freight Rail-Industry Recovery Team had brought about some benefits, with the deterioration in Transnet services halting.

Nonetheless, Exxaro is now focusing on decarbonisation, setting targets to achieve carbon neutrality by 2050. The company wants to maximise coal runway through early value strategy and market-to-resource optimisation initiatives.

It is geared to reduce climate-related risks. Exxaro envisions a 40% additional reduction in scope 1 and 2 emissions by 2026 “through self-generation solar PV projects and operational efficiency” programmes.

“Targeting scope 3 emissions reduction through strategic partnerships and engagement with key stakeholder,” said Qhena in a presentation released by the company yesterday.

Further to this, Exxaro is seeking to “diversify towards resilient” minerals.

By 2030, the company wants to contribute a 50% coal earnings before interest, taxes, depreciation, and amortisation (Ebitda) and to grow its renewable energy business to 1.6GW by 2030.

This will be achieved through “disciplined capital allocation that maximises value”and a robust investment process.

The company’s Eyesizwe unit has the option to release up to 40.4 million Exxaro shares in December 2024.

“Shareholders can hold Exxaro shares directly, dispose them through a coordinated sales process. The remaining shares can be released in three equal tranches at the end of 2025, 2026 and 2027,” reads the company’s presentation.

There are ongoing consultations with Eyesizwe RF to determine shareholder preferences while a joint Exxaro/Eyesizwe RF committee has been established to oversee any sales process.

Exxaro’s total capital expenditure for the half-year period to end June increased to R1 billion against R801 million a year earlier. This was comprised of R1bn in sustaining capex and R5m in expansion capex.

As a result of the lower earnings for the period, Exxaro opted to declare an interim dividend of R7.96 per share which is significantly down from the previous contrasting period’s payout by R3.47 per share.

Exxaro received an average benchmark RBCT export price of $101 per ton during the period which was 22% lower compared to the previous contrasting period, resulting in a 24% decrease in the average realised export price for Exxaro of $96 per ton.

Although overall coal production volumes for the period under review decreased by 955 000 tons or by 5%, the decrease in production at Grootegeluk and Leeuwpan was partly offset by higher production at Belfast, Matla and Mafube.

Exxaro’s sales volumes of 276 000 tons for the half-year period were slightly lower by 1% compared to the comparative period last year, mainly due to lower sales to Eskom, offset by an increase in export sales.

Export sales for the period increased by 32% to 794 000 tons as the company was “able to use alternative distribution” channels.