1 year ago

Opportunity Issue 100

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Opportunity magazine is a niche business-to-business publication that explores various investment opportunities within Southern Africa’s economic sectors and looks to provide its readers with first-hand knowledge about South African business. Opportunity also looks to present South African business to international markets that may have interests in investing in South Africa. The publication is endorsed by the South African Chamber of Commerce and Industry (SACCI).


SUSTAINABLE MINING Mining for growth, sustainability and impact The CEO of Exxaro Resources Limited, Mxolisi Mgojo, outlined the company’s strategy for diversified growth, decarbonisation, sustainability and impact management at its shareholder Capital Markets Day. The 70MW Lephalale Solar Project has been built by Cennergi, a subsidiary of resources company Exxaro, to power another of the group’s subsidiarys, Grootgeluk coal mine. Cennergi has commissioned two wind plants in the Eastern Cape which contribute 229MW to the national grid and manages a further nine solar photovoltaic sites. Climate change has become the focal point not only of our business but of society and the global community. The world is under pressure to transition faster and that presents new opportunities. This dynamic environment affirms our approach of maximising the value of our coal assets through the early-value coal strategy, thus minimising stranded coal assets while building a low-carbon and resilient business. The strategy presented to shareholders is anchored on measurable and multi-stakeholder value creation. It is a direct response to climate change within the context of being a key player in South Africa’s economy and energy value chain while continuing to deliver value over the long term through sustainable growth and strategic impact management. Core forces shaping the strategies are energy transition, climate change and the Just Transition in a shift to a low-carbon future. At the core of the strategy is managing the embedded risk of carbon by diversifying earnings away from carbonbased commodities while also reducing the company’s carbon footprint. With a proven ability to outperform value-creation targets, the company is implementing this from a position of strength. In addition, a key consideration is developing alternative economic opportunities that will support the livelihoods of communities who are depending on our coal operations. Dr Nombasa Tsengwa, CEO Designate and MD for Minerals, reflected, “Exxaro embarked on its journey of transformation over a decade ago, gaining a head start in renewable energy through a joint venture in the renewable energy business, Cennergi. This provided a platform for growth and evolution from coal-dominated operations to a diversified minerals producer focusing on manganese, bauxite and copper, as well as a renewable energy business. Our transition to a low-carbon future places us on a pathway that will have a positive impact on our stakeholders and society at large.” The approach is to responsibly manage and maximise the value of the coal business while actively minimising the value at risk from stranded assets. It is economically feasible to optimise our coal reserves and manage the value extraction in a way that provides a stable transition for workers and communities while providing the company with capital to reposition the business for a resilient and sustainable future. Exxaro will remain accountable to its stakeholders in order to ensure financial value creation and to empower people to sustain enduring economic activity. The “Sustainable Impact strategy” will ensure that communities dependent on coal are adequately empowered and are able to transition as well. The future portfolio will consist of renewable energy and minerals, with a focus on wind and solar power, bauxite, copper and manganese. 36 |

SUSTAINABLE MINING Part of the growth strategy and its associated objectives is predicated on aligning to the Task Force on Climate-related Financial Disclosures (TCFD) guidelines adopted in 2020 and aimed at improving the reporting of climate-related financial information. Ultimately, this transparency could improve investment opportunities and further strengthen investor relationships. Roland Tatnall, MD of Energy, said, “It’s important to note that Exxaro is no stranger to clean energy and has been a player in the sector for the past 10 years through its investment in Cennergi, which is the second-largest independent power producer in South Africa. The company currently has nine operating assets, 11 assets under management and three generators under development as plans to grow the existing business continue.” Exxaro’s history with clean energy affirms that management has been cognisant of the increasing anti-coal sentiments and perceived risks across the investor landscape together with the pressure for decarbonisation and resource efficiency. This adds impetus for the company to build a resilient and carbon-neutral portfolio aligned with a Just Transition. Financial Director Riaan Koppeschaar commented, “We have a strong balance sheet and cash-generative coal operations at the core of our business. We are one of the most efficient and lowcost coal producers in the world. However, we have a long-term vision and need to adapt to the dynamics of a low-carbon future. Exxaro will utilise its mining skills to supply minerals that power a cleaner world while providing shareholders with superior returns from the combination of the minerals business representing 50% of expected coal EBITDA within 10 years and the predictable cash generation of the renewable energy business. Our improved governance process, reinforced from the past learnings, will be a key foundation for our success.” He added that within 10 years, 70% of earnings should be noncoal earnings in order to actively reduce the company’s emissions Mxolisi Mgojo, CEO of Exxaro by at least 46%. In doing so, the company would have spread its commodity and financial risk. Mgojo concluded, “We’ve outlined a clear strategy for low-carbon growth, having established a track record of operational excellence, achieving our targets and applying key lessons learnt from our past. Our strategy is anchored on measurable and multi-stakeholder value creation. Going forward we will use innovation and organisational intelligence, plus best-in-class partnerships, to respond to the urgency for adaptation to building a climate-resilient business and communities, as well as contributing to South Africa’s decarbonisation progress.” African Energy Indaba 1-3 March 2022 hybrid event: Virtual conference and physical exhibition (Cape Town) Modern, affordable, reliable and sustainable energy is critical for economic growth and the provision of access to modern energy contributes tremendously to improved healthcare, better education and opens up economic opportunities in both urban and rural areas in Africa. The Africa Energy Indaba is the definitive energy conference for Africa providing an annual programme that shapes energy policy for the African continent. The 14th Africa Energy Indaba Conference will discuss, debate and seek solutions to enable adequate energy generation across the continent. Delegates, drawn from all continents, represent an unrivalled combination of industry experts, project developers, financiers, energy users, government officials and manufacturers. Website: | 37

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