Exxaro’s Total Coal Buy Must Benefit Community, Minister Says

Exxaro Resources Ltd.’s $472 million purchase of Total SA’s South African coal unit must benefit local communities if it is to win a mining license, the country’s mines minister said.

“I must be satisfied that those people who are hosts” to the mine are beneficiaries of its output, Minister Ngoako Ramatlhodi told a meeting between government officials and businessmen in Johannesburg on Thursday. According to section 11 of the South Africa’s mining law, companies can’t transfer, assign or dispose of mining rights without the his written consent.

The nation is pushing producers and manufacturers to spread economic benefits to the black majority of the population to help make up for discrimination during the apartheid era. By law, 26 percent of assets must be owned by non-white South Africans. Companies are also being pushed to promote blacks and to buy supplies from companies they own.

Hilton Atkinson, a spokesman for Exxaro, didn’t immediately respond to a call or e-mail seeking comment. In February, he said that all requirements for the transaction had been met other than section 11 approval and once that has been won, Exxaro will take over the operations.

South Africa’s third-largest coal producer agreed to buy the local unit of Paris-based Total in July last year, taking over the nation’s fifth-ranked coal miner and increasing its right to export coal through a terminal owned by mining companies.

Total Mines

Total’s unit controlled the Dorstfontein and Forzando mines, which are east of Johannesburg in the Mpumalanga province, with annual sales of about 4.5 million metric tons, it said last year. Most of the production is exported, mainly to India and China. Exxaro operates seven mines that generate almost 40 million tons annually. Its largest customer is state-owned power utility Eskom Holdings SOC Ltd.

Ramatlhodi said he also insisted on community participation before granting Ivanhoe Mines Ltd. the go-ahead to build one of the world’s biggest platinum mines in South Africa last year.

His ministry is currently in a dispute with the Chamber of Mines, which represents most mining companies in the country, over whether they have complied with laws pertaining to black ownership levels in the industry.

“You’ve heard a bit of a storm this week,” he said. “But it’s in a teacup, it’s not a crisis.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE