26 September 2011 12:06 [Source: ICIS news]
(Adds updates: company comments in paragraphs 4-5; financial background in paragraph 8; company comment in paragraph 9)
LONDON (ICIS)--Tronox is to acquire Exxaro’s mineral sands operations, the US-based titanium dioxide (TiO2) producer announced on Monday.
The agreement will see Tronox obtain South African mining firm Exxaro’s stake in the two compainies’ 50:50 Tiwest joint venture in Western Australia, along with 74% stakes in Exxaro’s KZN Sands and Namakwa Sands operations in South Africa, in exchange for around 38.5% of Tronox’s equity.
This will increase Tronox’s production capacity to around 465,000 tonnes/year of TiO2 pigment, and backward integrate it with production capacity of about 95,000 tonnes/year of natural rutile, 380,000 tonnes/year of slag and 220,000 tonnes of synthetic rutile.
With Tronox being the fifth largest TiO2 pigment producer and Exxaro the third largest titanium ore feedstock producer globally, the deal brings together two highly complementary businesses, according to Dennis Wanlass, CEO and director of Tronox.
“We are very excited about this transaction,” Wanlass said. “This will make us the leading global, vertically integrated TiO2 pigment producer, uniquely positioned to take advantage of growth in the industry.”
The move still needs to be approved by the appropriate regulatory bodies, but if successful, the new arrangement will benefit from an assured feedstock supply, something that has blighted TiO2 producers this year.
European TiO2 manufacturers are looking to implement hikes of up to €500/tonne for fourth-quarter contracts because of raw material shortages and subsequent cost hikes. One producer said that titanium slag prices had tripled in the past 15 months.
Exxaro’s earnings before interest, tax, depreciation and amortisation (EBITDA) for the first half of 2011 were $131m (€97m), compared with $57m in the corresponding period of 2010.
Tronox will benefit from enhanced supply of high-grade ore in tight market conditions and assure feedstock availability, providing opportunities to debottleneck and add new pigment capacity, the company said in a statement.
In addition to the TiO2 benefits, Tronox will have the capacity to produce a number of other minerals, including around 265,000 tonnes/year of zircon and 220,000 tonnes/year of pig iron.
Combined, the companies will have around 3,500 employees in 16 locations around the world. Exxaro’s and Tronox’s combined profit for the past 12 months was $2.0bn and EBITDA was $495m (excluding any synergies).
($1 = €0.74)
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