A very good morning to everybody who's joining us online. My name is Sonwabise Mzinyathi. I am the Acting Chief Investor Relations and Liaison Officer here at Exxaro, and it is my absolute pleasure to facilitate the session this morning. As you have seen in the SENS announcement this morning, Exxaro has announced the acquisition of shares and claims in Manganese Assets held by Ntsimbintle Holdings and OM Holdings. We are therefore going to be taking you through the Transaction, the Presentation, and further engage you in any questions you may have on the Transaction. Just to introduce everybody that is in the room, to my right, I have our CEO, Ben Magara. I have our FD, Riaan Koppeschaar. We have our Chief Growth Officer, Richard Lilleike. We have our Group Manager for Growth, Mthwana Magwai. Before we continue, please take note of our notice and disclaimer.
I will now hand over to Ben to take us through the presentation.
Thank you, Sonwabise. Good morning, everyone. It is my absolute pleasure to take you through the details of this Transformational Transaction for Exxaro. This Transaction puts together two strong BEE Companies who are both consistent dividend payers and positions Exxaro as a formidable and diversified mining company of reference in South Africa. I am delighted that we can utilize our strong Coal Resources as an anchor to prudently accelerate our asset portfolio to include transition Minerals and to grow our Energy Solutions businesses. This acquisition provides Exxaro with a strong entry point into the Manganese sector. Manganese is essential to Steelmaking and has a Growing Market in the Battery and Renewable Technology supply chains.
The acquisition will see us deploy our Operational and Commercial Expertise in Bulk Commodities, Logistics, and deep knowledge of the South African Mining Landscape, including our knowledge and insights in the Regulatory Environment to unlock sustained Growth and Stakeholder Value in the Kalahari Manganese Field in South Africa. In line with our Strategic Objective of transitioning at speed and scale into a diversified Resources Company that powers a clean world, we are pleased to announce that Exxaro has entered into binding agreements to acquire shares and claims in Manganese Assets held by Ntsimbintle Holdings and OM Holdings. This is a strategic entry for Exxaro into Manganese. Manganese is identified as a strategic growth Mineral for Exxaro, supported by in-depth fundamental analysis. It has also been identified as a critical Mineral by many countries. While steel dominates demand, the importance of Manganese in green energy is evident.
This acquisition is also an opportunity to unlock value in the Kalahari Manganese Field, which has 80% of the world's known Manganese resources, and it does add to South Africa's economy at large. The assets are well capitalized and are cash generative as we speak, and they have been a consistent dividend payer. They are also in South Africa, a jurisdiction that Exxaro knows and understands and operates very well. As an empowered, proudly South African Miner, we understand the jurisdiction, the regulatory environment, and we bring Exxaro's Bulk Mining capabilities and expertise. Our Balance Sheet, which is an important aspect to highlight in this Transaction, our Balance Sheet remains strong with a Net Cash position even after this Transaction. Furthermore, Exxaro will continue to be a consistent dividend payer, and I'm sure you will be happy to hear that.
In terms of what Exxaro is buying, through the acquisition, Exxaro gains exposure into four Operating Mines in the Kalahari Manganese Field, which includes a 60.1% effective ownership in Tshipi Borwa, including our 50.1% mining rights. We would also own 51% of Mokala, and we would have an ownership of 9% in Hotazel Manganese Mines, which operate both Mamatwan and Wessels. This is indeed a transformational Transaction where Exxaro, through a newly incorporated wholly owned subsidiary, has entered into these two separate agreements with both Ntsimbintle Holdings and OM Holdings to acquire shares and certain corresponding claims in the world-class Kalahari Manganese Field. The target assets to be acquired from Ntsimbintle Holdings consist of the following: 74% of Ntsimbintle Mining, 19.99% of Jupiter, which is listed in Australia, 100% of Ntsimbintle Marketing and Trading, 51% of Mokala, and 9% of Hotazel Manganese Mines.
The target assets to be acquired from OM Holdings comprise the 26% they hold in Ntsimbintle Mining, resulting in Exxaro acquiring 100% of Ntsimbintle Mining through this Transaction. We look forward to working with all the experienced and strong Management Teams in place within our joint venture structures. I will now take you through the key Transaction terms in the next slide. The unadjusted purchase price consideration of ZAR 11.67 billion as per including Ntsimbintle Holdings and OM Holdings is in the Sale Agreement. However, it excludes the potential tag-along rights of Mokala as well as agreed escalations based on the lock box structure. In the event Blue Falcon, who owns 49% of Mokala, exercises their tag-along rights, inclusive of the escalations that we have highlighted, the maximum consideration would go up to ZAR 14.64 billion, which is still well within our available Cash Reserves.
In the scenario in which the parties tag along, this Transaction still remains affordable and is a category two per the JSE listing requirements. The Transaction is still subject to conditions precedent normal to the Transaction of this nature, which include, among others, a Section 11 from the Minister of Minerals and Petroleum Resources in South Africa, and secondly, the approval from the Competition Commission and the Competition Tribunal. We already have irrevocable support, well in excess of 75% of the Ntsimbintle Holdings Shareholders, indicating a very strong support for this Transaction. Subject to these key approvals, we hope to conclude this Transaction by the first quarter of 2026. Now, let me turn on to the Manganese market. We are confident of the Manganese outlook supported by very attractive fundamentals. Manganese demand or demand is expected to perform strongly in the focus period up to 2030.
Steel remains the primary driver for Manganese demand. As we know, in Steel, Manganese makes a strong alloy with Steel, both for Building, for Roads, and all the Urbanization Infrastructure expected Globally, mainly from India and China. Manganese Ore consumption is expected to grow in response to reaching up to about 23 or 22.7 million tons of contained Manganese by 2029. The current pricing environment presents an attractive entry point for us, and Manganese ore and ferroalloys are expected to reflect strong demand going forward. We have used in this valuation and in thinking through the process of attractiveness, given the current spot prices of somewhere around FOB price of around $3.90 per DMTU. Our long-term price is marginally just about the same, and we used a real price of $4.20 FOB per DMTU.
Increasingly, Manganese Chemicals are experiencing rapid demand growth in Electric Batteries, where high-purity Manganese Sulfate is an important component for both Nickel and Lithium Iron Phosphate Batteries, and mainly in Cathode Chemistries. While Steel will dominate demand volumes, the importance of Manganese Chemicals to Electrification is attracting attention Globally. As such, South Africa's Kalahari Manganese Field, through its meaningful endowment, is expected to play a critical role in the growth of Manganese demand globally, and Exxaro is proud to be making its first entry into this world-class field. We are also confident in the Assets' ability to meet the growing demand of Manganese demand. To highlight some of these high-quality Assets, the Assets include long-life Assets well above our own Exxaro target for a minimum of 10 years' life of Mine. Number two, they are producing assets adding to Exxaro's commodity portfolio strength right from day one.
Number three, the assets have long-term contracts and a stable customer base, predominantly in China and India. With upside Brownfield Expansion, we are proud that we are entering through Assets that have a long life and substantial Mineral resource base with high potential for growth and expansion. The Mines are in an established mining hub with good infrastructure. Lastly, the bulk and open-pit Mining Methods used at these operations are well within Exxaro's core strength and capabilities, providing all the technical synergies that we would expect. We are indeed looking forward to entering into the new partnerships with established and reputable mining companies in this region and our strong management team as we look, as we saw in this area, and the employees of Kalahari Manganese Field.
What I want to highlight with this slide is really the position of these four Assets on the Industry Cost Curve, well within the first half. As you can see, they are favorably placed within the second quartile of the Industry Cost Curve, making them cost competitive, providing margin protection against any commodity price volatility. These are well-capitalized, self-sustaining Mines and have further optimization opportunities for Exxaro given our mining and technical capabilities. I will now hand over to Riaan so he could take us through the Financials. Thank you.
Thank you, Ben. Our prudent capital allocation ensures that the purchase consideration is well within our available cash resources. Post the Transaction, we will remain within our targeted net debt to EBITDA Ratios.
As pointed out, we have sufficient cash and undrawn facilities, and even in the maximum consideration scenario, we still have ample headroom to conclude the Transaction. Exxaro's existing and new business will give us ample headroom to remain a consistent dividend player, and the current pricing environment presents an attractive entry point, and Manganese ore and ferroalloys are expected to reflect demand growth going forward. In summary, our balance sheet remains strong and retains flexibility to be able to execute on our future growth aspirations. Due to the structure of the various joint venture arrangements, the acquisition will result in equity accounting of the select assets. This is very common in the Manganese sector in South Africa as all the assets are being held through joint ventures. The assets are producing and cash generative contributing earnings from day one.
The assets are also well-capitalized, requiring no significant capital expenditure post the Transaction. The Transaction Returns are in excess of Exxaro's cost of capital, and since 2017, Tshipi has been a consistent dividend player and will call up by the maiden dividend in 2025. On a see-through basis, although we're not consolidating it, if you do an EBITDA multiple analysis over the past three years, it results in a normalized basis that we're paying eight times EBITDA and on a PE basis just over 10 PE. Average Historical Earnings after Tax also demonstrate value accretive properties of the business in a normalized operating environment and are materially higher than what we saw in 2024. I will now hand back to Ben to take us through the rest of the presentation.
Thank you, Riaan. As you can see and hear from Riaan now, these assets now add to Exxaro's robust portfolio of diversified resources, really driving our growth journey in line with our purpose of powering better lives in Africa and beyond. Through this acquisition, we are now delivering on our diversification strategy. Exxaro's next phase of growth is here and is strongly rooted in our birthplace, South Africa. As we come to a close, I would like to recognize firstly our roots in ASIZO and the strong contribution they have had in our growth story. Today, we are a proudly Black-empowered South African company listed on the JSE with core markets in Europe and Asia, including Japan, South Korea, Taiwan and Southeast Asia, India, and Africa. This is a truly and proudly South African story.
Let me also recognize our partners in this venture, who are also proudly South African and have a great proudly South African story. The founders of Ntsimbintle Holdings, Saki Macozoma and Moss Hwasheng, whose vision built these high-quality assets in the Manganese field. We have spoken about this all through this presentation. Your empowerment story is one for the records. We are building a legacy underpinned by the creation of Ntsimbintle Holdings, a legacy that will not only benefit our organization, but also our employees, the communities for which we serve, our shareholders, and our beautiful country, South Africa. Now, as Exxaro enters this next growth phase, our focus remains creating value for our Stakeholders.
Anchored by our strong core resources as a base, we will continue to execute on our diversification strategy to prudently accelerate our portfolio to include these Energy Transition Minerals and grow our Energy Solutions business. As I conclude, I think I should just continue to highlight a little bit about the real benefits of Manganese to the world, mainly in four areas. One is Steel Production. Manganese is a crucial Alloy Agent in Steel Production, enhancing the strength and toughness and wear resistance. Therefore, it is used in construction, automotive, and other industries. Manganese is also used in Aluminum Alloys. So anyone who possibly drives a car, Manganese is used in the manufacturing of Aluminum Alloys, which are lightweight and Corrosion Resistant. We have already spoken about Batteries, and Manganese is used in the Battery production, particularly in the Lithium-ion Batteries.
We believe that this Renewable Energy direction is extremely attractive for Exxaro. It is also used in chemicals, including Manganese Oxide Dioxide, which is used in Alkaline Batteries and all the smart gadgets that we own today. As I conclude, I would like to say this would not have been possible without the heart of our people at Exxaro. To them, I say thank you for delivering on your promise to the market and for your passion for this organization that we all love and your earnest contributions. I want to thank my team here, starting off with Richard, who has driven us in this strategic direction, and I'm really proud of the efforts that you and your team have put together.
To Riaan, I think your deep pockets have come at the right time, and we appreciate and look forward to embedding this opportunity as Exxaro goes to the next era. May we continue to deliver on the best work of our lives. Thank you, and thanks everybody for joining us.
Thank you. Thank you, Ben and Riaan. We will now be getting into the Q&A session. If we can please just post our questions on the webcast, and then we'll be able to phrase them in the room. Supporting us with answering the questions will be Richard and Mohloana. The first question comes from William from Bloomberg. He wants to know whether or not we will be considering buying a stake in Tshipi Borwa and whether we've had any discussions around that.
Thank you very much. Tshipi Borwa is the Mine that is owned currently by Ntsimbintle Holdings and OM Holdings. Therefore, that Mine will now become, on completion of this Transaction, will be 100% owned by Exxaro.
No, sorry, Ben, to correct, we will be owned 50.1% directly and 10% indirectly.
Indeed.
We will be partnering with the Australian-listed Jupiter Mines on Tshipi Borwa.
Indeed.
I think perhaps the question then to think what he is trying to say is, will we be buying the majority, the Jupiter stake?
I think Richard, if you can come in here, because I think if your question is about, are you considering to go further and buy Jupiter?
Yes.
I think that is an important question to have, and Richard can come in here.
Certainly our intentions right now are to bed down the Ntsimbintle Transaction. We look forward to working with Jupiter in the joint venture agreement going forward and looking at unlocking strategic value for both our organizations in whatever form that may take. Right now, I think the focus is in bedding down this Transaction, and we take it one day at a time.
Right, thank you. I think the next question then, so Brian Morgan from RMB, Morgan Stanley, has a few questions, which I think we'll note and then we'll answer them one by one. There are about four. The first one is around just elaborating more around the synergies we have. The second one is if we can provide more details on the EBITDA numbers. The third one is whether or not we've had engagements with Sakkie Swanepoel and Glencore on preemptive and tag-along rights, and if we're able to share those discussions, and then how much reallocation does Tshipi have?
Okay, I think in terms of synergies, I think Richard just highlighted right now that our main aim right now is to integrate. We have a very clear integration framework that we would implement on completion of this Transaction, which is expected quarter one 2026. In that integration process, we believe that there is a lot of optimization to do, and there's a lot of working together with the strong management teams on the ground. We believe, however, as well that we would be bringing Exxaro's Mining and Commercial expertise to realize value for all stakeholders.
I think that really is an entry point for us, and it's an area that we think would improve. I will possibly ask Richard to cover the tag-along issues with us and the engagements with Sakkie Swanepoel, which have not happened in the nature of this Transaction, have not happened, but I think Richard can cover a little bit more on that and the EBITDA multiples. Riaan can come in.
All right. In order for us to have conducted our due diligence, there had to be permission from the joint venture partners to share information with Exxaro. From that perspective, both entities were aware that Exxaro was in the process of conducting due diligence, and there had been high-level discussions as to progress, etc., without going into the details. Both companies now have to evaluate based on the respective offers we've made for the businesses.
One has 30 days, one has 30 calendar days in order to respond to the offers and determine whether to preempt or tag on those two offers. We have not had formal discussions as to their positions, but are aware that they now have a period in which to make up their minds.
Coming to the EBITDA multiples, as pointed out, we will be equity accounting the investment, hence we are not disclosing the EBITDA numbers. Should you derive an EBITDA number, as we pointed out for the past three years, it results in a multiple of about eight times. Also during that period, just take into account that, for instance, the Mokala Mine was ramping up, and also during that three-year period, the Manganese prices were in a down cycle environment. That is just a color on how we will account for the asset.
Thank you, Riaan. I think, yes, I'll combine it. Let me combine it to Mpumelelo from Absa's question because he's asking broadly around Hotazel , Tshipi, and Mokala's reallocation, all three Mines. Yeah.
Mthwana will answer that one.
Okay.
Yeah, thank you for that. If we loo k at Tshipi, it produces in the region of 3-3.6 million tons of Manganese ore. The reallocation, it gets the product out in really four different forms. One is through Saldanha, second through Touws River, and then third through the Lüderitz port, which is in Namibia. Maybe fourth, a little bit that goes through road. The split in terms of reallocation is 1.8 million roughly for Tshipi. Then about 700,000 to 1 million tons goes through the Lüderitz route where they truck it to the border and then it is railed to the port. The trucks is less than 10% of the total volumes that is evacuated through trucks.
Thank you. I think I'll just sum up a lot of the financial questions that are coming up. Ayesha from MMG just wants to understand, Riaan, how we came about the EV/EBITDA multiple, normalized multiple of eight times and PE 10 times. Are we using an average earnings or how did we come up with that figure? The other cash question comes from Nick Stein. He's asking from Coronation. He's asking at what level do we expect to set the maximum cash buffer? Just checking if there's any other finance. Yeah. Okay.
Yeah, so the EBITDA multiple, as pointed out there, how we calculated it was our effective interest in each investment and then the underlying EBITDA of that operation.
The normalized EBITDA, how we calculated it was the EBITDA from 2022 up until 2024, the average of those three years. Obviously, as a multiple of the divided by the purchase price. The question around the maximum purchase consideration, the purchase consideration cannot be more than ZAR 14.68 billion. That number is determined to have reference to the should there be a tag-along, and also the escalation that is on the purchase price. Although there is an escalation on the purchase price, it is a lock box Mechanism. All the cash flows that the business will deliver from the 1st of January this year will accrue to Exxaro.
Thanks. While we have you on the floor, Riaan, the last question is from Garth from Ashburton. He just wants to know the impact on the share buyback.
No, look, I mean, this is independent from the share buyback. Okay. As pointed out, our dividend policy and capital allocation framework has not changed.
Okay. Shawab from ALUWANI wants to know, does this Transaction satisfy our ambition to consolidate South African Manganese or should the market expect further acquisitions?
Thank you. This is a new era for Exxaro to get into the Manganese field. We really believe our main focus will immediately be in integrating these assets and optimizing them and working with our joint venture partners. It is a great entry point for us into the Kalahari Manganese Field. I think we will focus on that for now. We are well entrenched to delivering on our growth strategy and diversifying our natural resources. Thank you.
Thank you, Ben. Mlelo is asking the margins for the assets, CapEx guidance for Tshipi, Mokala if we have.
I think on margin guidance, we have provided the cost curve. As you can see, through the cycle, these assets are cash flow positive. You can do the analysis from that. In terms of CapEx requirements, the businesses are, as Ben mentioned, fully capitalized. Apart from stay-in-business capital, there are no major CapEx requirements, no large expansions, pushbacks, etc. There will be no foreseeable capital requirements from Exxaro into these businesses. They really are standalone, profitable, and hugely cash generative.
Okay. Shashi from Sitsi just wants to understand how the tag-along rights and preemptive rights work. At what point, how do we reach that maximum price consideration?
Yes, Richard. The only real tag-along right is at Mokala. There is no tag-along right at Hotazel Manganese Mines, but both entities have preemptives.
If both entities preempt, that's how we get to our lower number in the range. If Glencore tags, then we've disclosed the tag plus the escalation on Glencore. In addition to the overall escalation, that gets us to the maximum ZAR 14.6 billion number. Hopefully that's clear.
The minimum number, if they're preemptive, is somewhere around ZAR 9 billion. The price we have offered is the ZAR 11.67 billion, assuming the assumptions we have made. As Richard puts it, if the preemptives are exercised, then it's a much lower number, which is around ZAR 9 billion. If the tag-along is exercised, then the number goes up to about ZAR 14.64 billion.
Yeah, that's correct. Just a reminder that if you do have any questions, please post them on the webcast. The next question is from Conrie from IDC. It's specifically directed to you, Ben, and he'd like to know whether or not we now get operational control over Tshipi.
We would have 60.1% ownership rights. We would operate this Mine with our joint venture partners through joint venture structures, which is quite a common process in the industry as a whole, whether it's platinum or Manganese as we have it now. I think Exxaro would most likely be the one single biggest shareholder in this region. We would operate with our joint venture partners, and it has worked up to now. We have seen it working very well. When we did our due diligence process, we were very pleased with the way they were working. Yes, we have an ownership interest of 60.1%, and we will be working through our joint venture structures.
The benefit for the structure and for everybody in it is that Exxaro has got great expertise in mining, commercial, and we would be bringing all those to the table in our joint venture structures to make sure we maximize value for all stakeholders.
We also can appoint three of the five directors on the board. On the Tshipi board. On the Tshipi board, yeah.
Yes, indeed. Three of the five directors we would appoint. As you also are aware, we would have ownership through Jupiter, who is the other shareholder. We will have a 19.99% of Jupiter through the current ownership. That's correct.
Thank you. On Jupiter, Nick from Senture just wants to know, based on his calc, the value paid for Tshipi implies a 30 CPS on Jupiter Mines' share price, which is a 100% premium. Why don't we just consider putting a bid first on the listed entity at a lower premium?
Nick, it's an aspect that you can be assured we discussed with our advisors at Nosium. Strategically, we felt unlocking the Transaction through an empowered deal with a strong empowerment partner gives us the footprint that we wanted. The deal with Tshipi would only give us the stake into, sorry, the deal with Jupiter would have only given us the stake into Tshipi and not into the portfolio. We believed acquiring a portfolio significantly improves our positioning in the Manganese field, in the Kalahari Manganese Field. Hence the discussions and the relationships at that very senior levels, we were able to unlock that side of the Transaction as our preferred route.
Okay.
Maybe it might be useful there, Richard, to add that if you look at the Manganese spot prices I said earlier and our long-term pricing, and I think when you do an acquisition, you really have to believe in the long-term fundamentals, and you have to believe in a certain long-term pricing. At our long-term pricing in this modeling of $4.20 FOB, we definitely believe that this is an attractive acquisition. Also acquiring it at a time when the Manganese prices are possibly at one of their lowest ends. We have not priced in any price increase. It's mainly because we are not dependent, this Transaction is not dependent on any price recovery because the assets we are acquiring are within, as I say, the first half of the cost curve, which really means that we are able to provide benefit and to provide good margins through the cycles.
Okay. So Brian, you've asked a similar question, and I think Richard and Ben have covered you quite nicely. The last question that we have is from Shawab from ALUWANI and Riaan. He just wants to know what the net cash balance will be at close and whether we are looking at rebuilding the cash levels to the previous range, so to the ZAR 15 billion.
No, it's not the intention to rebuild it. As pointed out, depending whether we pay the minimum or the maximum consideration, that will determine the cash balance. We said we're sitting with ZAR 15 billion of cash. If we pay the maximum consideration, we would have depleted the cash balance. If we only pay ZAR 11.67 billion, then we're still in a cash position as set out on that specific slide.
Okay. With that, we do not have any other questions that are coming in from the webcast. As always, management is available to engage. Should you have further questions, you can email us on investorrelations@exxaro.com. We thank you for joining this call, and we wish you a good day further. Good.