Exxaro has warned shareholders that it will write down its R5.36 billion investment in the Mayoko Iron Ore project in the Republic of Congo (RoC).
The Concept Study on the revised 12 Mt Mayoko Project was concluded during June 2014. However, to date, Exxaro has not been successful in concluding the definitive port and rail agreements for the Mayoko Project as was communicated to the market during the results announcement on 06 March 2014.
As a result of these delays as well as higher project development costs following the outcome of the Concept Study, Exxaro believes that there will be an impairment of the company’s investment in the Mayoko Project which has resulted in the company having to write down the value of the investment.
The impact of this write-down will be a pre-tax write-off of an amount up to the original acquisition cost of the company’s investment in the Mayoko Project as well as the project related costs capitalised to date amounting to R5 362 million in total. The exact quantum of the impairment loss will be communicated as soon as calculations have been finalised.
“Exxaro will actively liaise with the government of the RoC with regards to the future of the Mayoko project,” the company said, adding that it has no plans at present to sell the project.
“We believed there were some good reasons why wanted to be a first mover. We realised there would be risk and the board took an informed decision to put some capital to that risk. We have now lost two years of not been able to conclude the definitive agreements,” said Exxaro CFO Wim de Klerk in a media conference call.
“We wish to assure you that Exxaro continues to work with the RoC government and will maintain the support to the surrounding Mayoko community. We are committed to a new rail and port deal that will make the project viable,” added Exxaro CEO Sipho Nkosi.
“If the agreement is favourable, then Exxaro will be in position to consider the next steps regarding the future. Therefore, the way forward is for Exxaro to finalise all definitive agreements as soon as possible. We will engage the RoC government as this remains an important project for Exxaro and the economy of the RoC,” he concluded.
Exxaro facing write down on R5.36bn Mayoko investment
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