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Exxaro is contemplating cessation of production at its New Clydesdale Colliery (NCC) situated near eMalahleni in Mpumalanga.

This is subject to the consultation and engagement processes as stipulated and required in terms of the Labour Relations Act 66 of 1995 (LRA), as amended, and the Mineral and Petroleum Resources Development Act 28 of 2002, as amended.

Prior to the announcement, in November 2012, Exxaro had approved the potential sale of NCC through a tender sale process. The decision to dispose of NCC was made after Exxaro completed an internal review on its coal assets, from which it was established that NCC is no longer strategically aligned to Exxaro’s group strategy. The misalignment is mainly due to NCC being a negative-margin operation with a shorter life-of-mine.

Exxaro’s strategy has a focus on high-margin operations with longer life of mine timeframes. Furthermore, Exxaro had also received a number of expressions of interest from parties with operations adjacent to NCC as well as other parties who indicated possible benefit from the usage of NCC’s infrastructure and thus extend NCC’s life-of-mine. It is Exxaro’s opinion that a third party may be better placed to extract optimal value from this unique asset.

A divestment process started in April 2013 and interested parties were asked to submit expressions of interests. However, shortly thereafter, it became apparent that NCC’s operations were under significant and unanticipated stress as revised 2013 forecasts for the operation indicated a substantial decrease in operating profit. The main contributors to the negative forecast are reduced coal prices and exchange rate movements, mining difficulties which are incurring increased mining costs at lower yields, and a shortfall of sales due to unique characteristics of the NCC siding. The in-principle decision was therefore taken to contemplate the cessation of production at NCC while in parallel allowing the tender sale process to continue.

As Exxaro is contemplating cessation of production at NCC, the group has informed the relevant trade unions in line with Section 189 of the LRA and a minimum 60-day consultation process is now underway.

NCC employs 402 people. In 2012 the mine produced 717kt of steam coal, primarily for the export market. Coal is mined using both open-pit and underground methods.

 

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