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Seriti buys Anglo coal assets

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Johannesburg - Mining company Seriti Resources has set its sights on the New Largo thermal coal project in Mpumalanga after snapping up Anglo American’s New Vaal, New Denmark and Kriel coal mines for R2.3 billion.

Seriti chief executive Mike Teke said New Largo, which is also owned by Anglo American, would allow the black-controlled company an opportunity to achieve its strategic objective of preserving and operating strategic energy assets for the benefit of South Africa and its people.

“Our structure brings together an experienced team capable of operating and developing large-scale thermal coal assets and provides a unique mining opportunity for black women.

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"The team looks forward to managing and growing the operations going forward, with a focus on ensuring their ongoing sustainability, given their strategic importance,” he said.

Anglo yesterday announced the sale of the three Eskom-tied domestic thermal coal operations and four closed collieries to Seriti, a move that makes Seriti the second largest provider of thermal coal to Eskom, supplying almost a quarter of Eskom’s current annual coal requirements.

Prior to yesterday’s announcement, Anglo was widely expected to sell New Largo along with New Vaal, New Denmark and Kriel.

Anglo said the New Largo project would supply approximately 570million tons of coal to Eskom’s Kusile power station in Mpumalanga over a 47 year period.

The sale of the assets is consistent with Anglo’s restructuring in order to focus on diamonds, platinum and copper.

Teke said Seriti was interested in New Largo and had put up a bid for the asset.

He was unfazed about acquiring Kriel just as Eskom has confirmed that the Kriel power station was among the five power stations it intends to close.

“We did due diligence on all the assets,” he said.

Anglo spokesperson Pranill Ramchander said yesterday that the potential sale of New Largo was in progress.

Ramchander said it made sense to package the operating assets of New Vaal, New Denmark and Kriel collieries, along with the four closed collieries.

“The assets are very different,” he said.

Anglo said the sale, which it said was expected to close before the end of this year, was subject to conditions such as regulatory approvals in South Africa, and Eskom’s consent for the transfer to Seriti of the coal supply agreements which govern the operations’ supply of coal to Eskom.

Acting Eskom chief executive Matshela Koko earlier this year said Anglo would have to consult the power utility before finalising any sale of the coal assets. Speaking in January, Koko warned its coal suppliers, Anglo and Exxaro Resources not to proceed with restructuring without Eskom’s input. “(The restructuring) will never happen without us,” he said.

Read also: Anglo sells Eskom-tied coal ops

Eskom has become increasingly assertive on the fate of the coal mines tied to its power stations. Last year Koko said Eskom technically owned part of, “if not the majority” of the Anglo coal mines’ operating assets and the mining infrastructure, “while Anglo owns the mining rights and some of the surface rights.”

At the time, Koko said Eskom had historically financed the coal industry through the cost-plus contract structure where Eskom paid for the actual cost of mining operations, plus an agreed profit margin.

Eskom spokesperson Khulu Phasiwe said yesterday that the utility had noted Anglo’s announcement on the sale of the assets and would seek a meeting “so that we can resolve issues around ownership (of the assets).”

Anglo American said the sale was part of the company’s ongoing commitment “to reshape and upgrade” its global asset portfolio.

Amid the collapse of commodity prices in 2015 and onerous debt, Anglo embarked on the restructuring, which would see the company concentrate on diamonds, platinum and copper.

Deputy chairperson Norman Mbazima said: “We believe that the sale to Seriti supports transformation objectives for the industry as well as the country, while ensuring a sustainable, reliable and cost efficient supply of coal to Eskom.”

Anglo last year moved Mbazima from the Anglo-owned Kumba Iron Ore where he was chief executive to oversee Anglo’s divestment of non-core assets, including coal assets.

BUSINESS REPORT

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