Diversified South African based resources group Exxaro Resources Limited announced that the Exxaro Board of Directors as well as the Board of Exxaro Base Metals (Pty) Limited have taken an in principle decision to permanently cease production of zinc at the Zincor refinery in Springs, Gauteng.
As a result, the retrenchment of employees at the operation is contemplated, in the event that no feasible alternative can be found or there not being sufficient suitable vacant positions available for the redeployment of employees to the rest of the Exxaro Group.
As previously communicated to stakeholders, since 2009 as part of its strategic plan, Exxaro has been considering options to optimise its zinc assets with a view to ultimately divest from them. The decision was made in context of the difficult conditions of the zinc market including its cyclical nature, low margins as well as the significant impact of higher electricity prices and the exchange rate.
Exxaro’s current portfolio of zinc assets includes the Zincor refinery, a 50.04% interest in the Rosh Pinah zinc and leads mine, a 26% interest in Black Mountain (Pty) limited which owns the Black Mountain zinc and lead mine and the Gamsberg zinc project, as well as an effective 22% interest in the Chifeng zinc smelter in China.
Mr Sipho Nkosi CEO of Exxaro said that “We have been investigating a range of options to find a suitable buyer for our zinc portfolio businesses. We have ideally wanted to sell all the zinc assets to a single buyer however, to date we have been unsuccessful in attracting investor interest in Zincor. Issues that have influenced the Board’s decision to take an in-principle decision to permanently cease zinc production at Zincor include the fact that Zincor as a zinc-making operation has proved to be un-saleable to potential investors; continued zinc-making is financially unsustainable with Zincor incurring mounting financial losses and turn around and improvement interventions have proved fruitless and are unlikely to get Zincor on to a sustainable financial performance level.”
Mr Nkosi said that Exxaro has informed its labour unions of the decision today and will start a consultation process in accordance with labour legislation and under the auspices of the CCMA. We are taking all feasible steps to provide the most suitable options to employees and other stakeholders. The sale of Exxaro’s shareholding in Rosh Pinah and Chifeng is ongoing and Exxaro is in discussions with interested parties. Stakeholders will be kept updated at the appropriate time.
