Exxaro to buy Namakwa Sands

Exxaro Resources has acquired options to purchase the assets and business of Namakwa Sands and a 26% interest in Black Mountain Mining, which will own the Black Mountain zinc and lead mine as well as the Gamsberg zinc project from Anglo Operations Ltd (AOL), a wholly-owned subsidiary of Anglo American. Exxaro is acting through its wholly-owned subsidiaries, Exxaro Base Metals and Exxaro Sands.

The transaction will position Exxaro as one of the world’s largest suppliers of titanium dioxide feedstock and zircon and strengthen its position in the South African zinc market. Exxaro already has a prominent position in the mineral sands business, with operations in KwaZulu-Natal and a 50% ownership in the Tiwest joint venture, a fully integrated mineral sands and pigment producer in Western Australia. Exxaro currently owns the only zinc metal refinery in South Africa and also holds a controlling interest in the Rosh Pinah zinc mine in Namibia. Exxaro will acquire, through Exxaro Base Metals, Black Mountain for a purchase consideration of R180 million payable in cash.

The mining operations of Namakwa Sands are located at Brand-se-Baai, some 60 km west of Koekenaap on the west coast of South Africa. Its major assets are:

 a mineral sands mine at Brand-se-Baai in the Western Cape Province, consisting of a mineral sands mine, primary concentrator plants and a secondary concentrator plant

 a mineral separation plant, located 7 km west of Koekenaap which is used to separate ilmenite, rutile and zircon products

 the smelter located near Saldanha Bay at which ilmenite is smelted to produce titanium dioxide slag and pig iron.

In 2005, 18.1 Mt or ore was mined with production of 316,000 t of ilmenite and 29,000 t of rutile. 8.7 Mt or ore was mined for the six months to June 30, 2006 and production was 165,000 t of ilmenite and 14,000 t of rutile. In November 2005, AOL announced the approval of a R320 million expansion of Namakwa Sands (project 1000). Any capital expenditure incurred by AOL in respect of project 1000 from January 1, 2006 until the Namakwa Sands effective date will be added to the cash consideration.

The Namakwa Sands acquisition is conditional upon the fulfilment of the following conditions:

 conversion and registration of the old order prospecting and mining rights relating to Namakwa Sands into new order prospecting and mining rights in terms of the MPRDA

 the consent of the Minister of Minerals and Energy in terms of the MPRDA to the cession of the converted new mining rights to Exxaro Sands

 cession of the prospecting and mining rights relating to Namakwa Sands by AOL to Exxaro Sands

 approval by Exxaro shareholders in general meeting

 AOL receiving confirmation from Exxaro’s funders that Exxaro has sufficient funding available to satisfy its obligations in terms of the Namakwa Sands acquisition

 the approvals of the competition authorities in Spain.

The Black Mountain base metal mine, which is located adjacent to the town of Aggeneys in the Northern Cape Province of South Africa, exploits lead, zinc, copper and silver from the mining of ore from various deposits.

The mine produces three concentrates with the zinc concentrate delivered to Exxaro’s zinc refinery located in Springs, Gauteng Province, South Africa. Lead and copper concentrates, from which silver is also extracted, are exported to various smelters worldwide through the port of Saldanha Bay.

The Gamsberg zinc project has an estimated production capacity of up to 300,000 t/y. A small quantity of production from Gamsberg is currently being mined by underground methods and this is being processed at the established Black Mountain process plant. The presence of manganese precludes the possibility of the export of concentrate product. This has necessitated the development of a refinery at the site. The Gamsberg zinc project provides for a possible life-of-mine of some 30 years, which at 300,000 t/y of zinc, would be the largest single mine and concentrator in the world.