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Exxaro reviews zinc operations

Iron ore being loaded
onto rail wagons at
the Sishen mine
Johannesburg, South Africa — MININGREVIEW.COM — 12 May 2009 – Exxaro Resources Limited (Exxaro) – the South African-based, JSE-listed mining group with a diverse and world-class commodity portfolio in coal, mineral sands, base metals, industrial minerals and iron ore – is reviewing the future of its zinc operations, and says the unit had a “very positive” first quarter this year.

Speaking after the company’s annual general meeting, chief executive Sipho Nkosi said: “We’ve been pleasantly surprised by the uptick in prices, and as a result the business in the first quarter has been very positive, as opposed to last year. Exxaro will make a decision on the future of the unit after a board meeting in August,” he added.

Zinc producers have closed mines in Peru and the United States in the past year, after prices tumbled as demand collapsed. The metal, which is mostly used to protect steel against corrosion, slumped 49% on the London Metal Exchange in 2008. Global production exceeded use last year for the first time since 2003, according to Swiss producer Xstrata Plc.

Exxaro posted an operating loss of R172 million last year for its metals operations, which also include ferro-alloys used in steelmaking. In 2007 it had made an operating profit in base metals of R688 million.

Coal is Exxaro’s largest business, accounting for 50% of sales in 2007, according to data compiled by Bloomberg News. The company sells most of its coal to South Africa’s state-owned electricity supplier Eskom Holdings Limited, and also supplies South Africa’s largest steelmaker, ArcelorMittal.

“Exxaro will produce 3.3 million tonnes of coal for export this year, in line with last year,” Nkosi said. “We will not be as profitable as last year because of lower prices,” he added.

The price of coal shipped from South Africa’s Richards Bay Coal Terminal has dropped 26% this year.