Exxaro Resources is planning to build a cash stockpile to fund acquisitions in clean energy minerals.  

The company’s cash stockpile is currently estimated at around ZAR7.2Bn (US$380M) at the end of H1 2023, with Exxaro looking to build this up to ZAR12-15Bn (US$630-790M). The South African company generates over 90% of its revenue from coal mining and the executive team has set a target for 30% of revenue to be generated by a diversified portfolio by 2026.  

Coal operations continue to thrive, with the price of coal still up around double its pre-COVID-19 average, this despite falling over 65% in 2023 so far. Prices spiked in Q2 2021, soaring to record highs over 3-times its normal ceiling. China effectively placed a ban on imports of Australian coal in October 2020, which ended coal’s latest floor price, fuelled by souring political relations between the two countries. While China is looking to mature is coal power and steelmaking industries, coal remains in high demand and the country accommodated the exclusion of its largest coal source through domestic supply ramp ups and imports from other countries, including South Africa. 

South African coal miners scrambled to move materials to port and with soaring prices maintaining record high levels for much of 2022 coal miners and traders mopped up capacity for rail, truck and shipping out of the mineral-export dominated country. This caused a squeeze on supply for other key materials imported from South Africa, including chromium and manganese – both key ingredients for China’s steel industry.  

The import ban on Australia’s coal was eased and finally phased out over H1 2023. In South Africa, export routes from coal mines are struggling with a deteriorating rail network shaving off the country’s ability to maintain the recent market opportunity. While Exxaro has not announced which critical materials it hopes to target, another South African coal miner, Thungela Resources (Anglo American spin off), is planning to expand its coal business but with a regional diversification outside of South Africa through the acquisition of 85% in the Australian Ensham coal mine.