Exxaro Examines Future of Leeuwpan Mine Amid Rising Local Coal Sales

Exxaro Resources is currently reviewing the future of its Leeuwpan open-cast mine in Mpumalanga. The mine continues to operate at a loss, prompting the company to take action. A formal Section 189 consultation process has been launched to assess options for the mine's future.

Section 189 Consultation Process Initiated

CEO Ben Magara confirmed that the mine's financial performance remains unsustainable despite various turnaround attempts. The goal of this consultation is to explore potential solutions that can prevent job losses while ensuring the business becomes viable.

Magara noted that the process began on Monday and could last for up to 90 days. He stressed the importance of input from employees and union representatives during this review period.

“We want to hear suggestions that can help make Leeuwpan sustainable. While no decisions have been made yet, we are prioritizing business stability and employee support,” Magara stated.

Importance of Employee Feedback

The consultation process represents Exxaro's effort to address ongoing losses at Leeuwpan. Engaging with employees is essential as the company considers various strategies to increase profitability. It reflects a commitment to openness and collaboration throughout this potentially challenging time.

The company aims to protect as many jobs as possible while restoring the mine's profitability. Magara reiterated that transparency is vital and promised to keep stakeholders informed of ongoing developments.

Declining Sales to Eskom as Coal Markets Shift

Exxaro reported a notable decline in coal sales to Eskom, which fell by 15% due to extended maintenance at Eskom-operated plants. This reduction in sales has forced Exxaro to redirect more thermal coal to the domestic market.

As a result, local coal sales are projected to grow by 23%. This shift demonstrates Exxaro's flexibility in responding to market demands. Export volumes were adjusted to meet domestic needs, demonstrating the company's commitment to adapting to changes in the coal market landscape.

Meanwhile, steel-making coal is anticipated to drop by 26%. This decrease is attributed to logistical setbacks earlier this year, including rail disruptions and unusual heavy rainfall. Exxaro acknowledged that these supply chain challenges have affected coal movement from various locations, including Leeuwpan.

Infrastructure Challenges Impacting Coal Distribution

Exxaro's financial director, Riaan Koppeschaar, has pointed out persistent challenges with Transnet Freight Rail (TFR). Infrastructure failures, including power outages, cable theft, and shortages of locomotives and wagons have severely impacted coal distribution.

Moreover, a major derailment during the second quarter disrupted operations, causing delays in deliveries and affecting overall coal output. Despite these ongoing issues, Exxaro reported some improvements at the Richards Bay Coal Terminal, with annual volumes increased to 54.45 million tonnes, up from 52 million tonnes the previous year.

Koppeschaar indicated that, while rail challenges persist, the situation is slowly improving.

Progress in Local Rail Operations

Rail movement in the Mpumalanga and Waterberg regions has seen gradual improvements throughout 2025. Exxaro reported that rail services for local coal transport in Mpumalanga have become more stable.

In Waterberg, the frequency of rail services has risen from two trains per week during the first quarter to five per week in the second quarter. This development has effectively alleviated delivery backlogs and supported local coal sales.

Despite these advancements, Exxaro has recognized that rail reliability still remains uncertain. The company is actively adjusting its logistics strategies to minimize delays. Improved local sales along with a reduced dependence on exports are helping to mitigate the impact of existing infrastructure issues.

Export Diversion as a Solution

By diverting export coal volumes to the domestic market, Exxaro has successfully responded to the decline in Eskom purchases. This strategic pivot has helped ensure that thermal coal output continues to be sold, consequently reducing the risk of stockpiling or financial losses.

The adjustment also aligns with South Africa's energy demand as Eskom grapples with supply reliability challenges. Exxaro has swiftly utilized its distribution networks to deliver more resources to local buyers, ensuring ongoing revenue streams.

This shift in focus exemplifies Exxaro's flexible approach to maintaining cash flow and managing potential risks. Furthermore, it supports job preservation and operational viability at mines like Leeuwpan.

Challenges Beyond Leeuwpan Mine

Although Leeuwpan has become a focal point for financial concerns, Exxaro's coal business faces numerous external challenges. The company contends with unreliable rail infrastructure, excessive rainfall, and fluctuating energy demand from Eskom.

Despite these significant hurdles, Exxaro remains committed to progress. By adapting its distribution model and investing in enhanced rail logistics, the company is striving to navigate ongoing challenges effectively.

Additionally, Exxaro seeks to align its workforce needs with overarching business objectives. The review process for Leeuwpan integrates into a broader strategy aimed at ensuring long-term sustainability and operational efficiency.

Strategic Adjustments to Maintain Stability

Exxaro's recent decisions reflect a careful and determined response to the operational and financial pressures it faces. As coal demand patterns shift and logistics issues persist, the company is re-evaluating its mining strategies.

The Leeuwpan review highlights Exxaro's readiness to confront challenging decisions if such actions could safeguard its broader operations. Encouragingly, the growth in local coal sales and improvements in terminal volumes provide a measure of relief.

Meanwhile, rail service recovery and the strategic reallocation of exports furnish Exxaro with vital tools to stabilize its operations. Keeping open lines of communication and encouraging staff involvement are central to maintaining morale during this critical period.

Determining Leeuwpan's Future Direction

As Exxaro navigates the consultation process, decisions regarding Leeuwpan will be driven by goals related to cost recovery, employee contributions, and evolving coal market dynamics. The outcome of the mine's operational status will significantly influence future projections.

Thermal coal continues to be a valuable component of Exxaro's local market strategy. Diverting exports serves to mitigate revenue losses, but ongoing infrastructure and logistics concerns must remain a top priority.

The company aims to discover practical solutions that minimize the need for widespread retrenchments while enhancing sustainability. Continued improvement and stability are crucial as Exxaro focuses on preserving both its workforce and long-term growth prospects.

Conclusion: Navigating the Future of Coal Sales

The coming weeks are critical for Exxaro as it completes the 90-day consultation at Leeuwpan and adapts to the ever-evolving coal market in South Africa. While job reductions have not been confirmed, they remain a possibility if financial conditions do not improve.

Nevertheless, the rise in local demand and enhanced rail performance provide a glimmer of hope. By optimizing resource utilization and striving to prevent mine closures, Exxaro's future will be contingent on identifying sustainable solutions to halt ongoing losses.

The company is committed to keeping stakeholders updated as it assesses its options and prepares for upcoming decisions.