EXXARO: Transitioning and Decarbonising with Long-Term Sustainability the Goal

At Exxaro, the South African mining powerhouse, an identity shift is underway. As longstanding CEO Mxolisi Mgojo handed the reins to Dr Nombasa Tsengwa in 2022, there has been a notable change in rhetoric from the business that has always had a deep focus on coal.

Of course, this won’t change entirely anytime soon, and Mgojo’s retirement was not the spark that started the change, but 2023 saw more commitment to an alternative way forward.

However, today, the company’s operations are across coal, iron ore and ferrous, and zinc. Major coal mines exist in Mpumalanga and Limpopo. The Grootegeluk, Leeuwpan, and Belfast mines are major suppliers to domestic and export markets, and JV’s at Mafube and Matla are also critical for the markets they serve. A Ferroalloys Ferrosilicon Plant in Gauteng processes materials for domestic and export, and Exxaro also owns a stake in Sishen Iron Ore Company and Black Mountain Mining, which it is looking to divest from.

In the Eastern Cape, Exxaro has laid foundations for its future with two wind energy farms that generate 239MW for the national grid.

Renewable energy is a key focus for the company going forward and, whether to power its own operations or to feed into a strained electricity supply for the benefit of the country, this unavoidable transition is gathering pace.

“We are building Exxaro into a sustainable and impactful business that catalyses economic growth, environmental stewardship, and positive change,” the company states as part of its vision.

The strategy includes transforming the business, over the next decade, from a coal business to a minerals business and a renewable energy company that can thrive in a low-carbon future.

 PAVING THE WAY

As part of the commitment, in December 2023, the company signed a MOU with the Council of Geoscience (CGS) to intensify its sustainability and decarbonisation progress. Mandated with ownership of geological information in South Africa, the CGS partnered with Exxaro to explore carbon capture, utilisation and storage (CCUS) initiatives that can reduce greenhouse gas emissions in heavy industry.

“This collaboration comes at the right time where we have made tremendous strides on the technical front in implementing this scientific intervention, the CCUS, and the geological characterisation has progressed exponentially to confirm the suitability of the targeted reservoir to the pilot carbon dioxide sequestration project,” said CGS CEO, Mosa Mabuza. “The CCUS project is a co-funded initiative by the South African Government and the World Bank and its partners and is intended to contribute significantly to the climate mitigation programme as well as energy security trajectory.”

Mongezi Veti, Exxaro Chief of Sustainable Impact Officer, was equally happy with the agreement, highlighting the need for collaboration.

“Our strategy also aims for an integrated, multi-stakeholder approach to positioning the business for a resilient and sustainable future. We cannot act alone to create the impact we are aiming for, hence strategic partnerships such as the one with the Council of Geoscience, are key to ensure that our carbon neutrality goal become a reality.”

Exxaro CEO Dr Nombasa Tsengwa added: “We aim to draw upon the Council of Geoscience’s knowledge and expertise to promote positive, solutions-driven approaches to climate change mitigation and adaptation and to highlight transformational climate action. We have a long way to go, but the first steps are the most valuable as they help us gain momentum in this journey towards reducing our climate impacts.”

LEPHALALE SOLAR

In November 2023, the company was already taking steps to further diversify its renewable energy portfolio when it held a sod turning ceremony for the Lephalale Solar Project (LSP) – a 68 MW development that will generate 176 Gigawatt hours of clean energy annually in South Africa’s north.

Located close to the mighty Grootegeluk mine, this project is led by Cennergi, the renewable energy division of Exxaro, acquired in 2019.

At the event, an excited Limpopo Premier, Chupu Stanley Mathabatha, said: “We have been following the developments which have today led to this successful sod turning, from the signing of Memorandum to develop wind farms in 2009; to the bidding of Renewable Energy Independent Power Producer Procurement Programme; until Cennergi become a full subsidiary of Exxaro which today we are here with you witnessing the mission fulfilled.”

Leon Groenewald, Managing Director of Energy at Exxaro, added: “Our mission goes beyond profit; we also aim to be stewards of the environment in which we operate. We are actively engaging with the local community, and during the peak of construction, we aim to employ between 300 to 400 individuals, with a significant emphasis on sourcing local talent. We will contribute towards economic growth within this region.”

Tsengwa was unequivocal in her call for ongoing transformation, aligning the company’s growth with the environment.

“We aim to grow from the exceptional business we have built over the past 17 years,” she said. “Together, we can power possibility as we take advantage of the abundant renewable resources of our country, in the form of sunlight, wind and strategic minerals, and build shared prosperity and sustainable development because we know that there is a better place to be tomorrow, than where we are today.”

While in the early stages, no one at Exxaro is denying a strategic transition that will see the company more and more involved in renewable energy, with an environmental focus, but with a strict concentration of returning shareholder value.

In the company’s interim financial results for the year ending 30 June 2023, several headwinds were identified that will impact the business from a coal perspective. But performance remained robust, with both CEO and CFO pointing to a more diversified portfolio than ever before as a key driver behind Exxaro’s ability to weather storms.

“We are steadfast in our commitment to grow your business and diversifying the portfolio to contribute to the global energy transition,” said Tsengwa.

While the future remains uncertain, one thing is abundantly clear – South Africa’s biggest coal miner is changing course, and is doing so collaboratively, involving partners at every turn to ensure long-term sustainability. Perhaps the energy transition well underway in other parts of the world is not as far behind in South Africa as many expect.