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Exxaro's share price rises nearly 2% as it buys Total's South African coal assets for $472 million

by , 29 July 2014

Yesterday, one of South Africa's biggest coal producers, Exxaro Resources, announced that it acquired Total's coal assets based in South Africa.

The share price rallied on the news and closed firmly higher.

Let's take a closer look at what this means for Exxaro…

Exxaro buys SA’s fifth biggest coal producer

Exxaro will acquire “Total Coal South Africa, South Africa’s fifth largest coal producer,” reports BDLive. The company’s assets consist of two main coal operations near Witbank.

The operations are the “Dorstfontein and Forzando mines,” says Bloomberg. They produce sales of around “4.5 million metric tons a year” mainly to the export market destined for China and India.

Exxaro has agreed to pay $472 million for the acquisition, adds BDLive.

The mines Exxaro will acquire “have lives of more than 20 years and a resource base of 1,498 million tons of coal in the ground and 395 million tons of run of mine coal resources,” reports Mining Weekly. The operations are all nearby to Exxaro’s existing operations in the Witbank area.

The deal also includes export rights

Not only does the deal mean Exxaro acquires Total’s coal operations, it also includes Total’s “export rights at the Richards Bay Coal Terminal [RBCT], the world’s biggest,” says Bloomberg.

Exxaro also has “interests in iron ore and base metals,” notes Fin24. The company suggested earlier this year that a deal could be on the cards with Total to “grow its business”.

The acquisition is still subject to approval from “the competition authorities, the minister of mineral resources, the South African Reserve Bank and the board of directors of RBCT,” adds BDLive.

Exxaro’s share price reacted positively to the news. At market close, shares were 1.95% higher at R144.01.

If given the necessary nods, the acquisition will expand Exxaro’s coal producing potential and volume.

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Exxaro's share price rises nearly 2% as it buys Total's South African coal assets for $472 million
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