South32 did not anticipate to report a taxable profit on the deal, from either the up-front or deferred consideration, the company said. Photo: David Gray/Reuters

JOHANNESBURG – Australia’s South32 said yesterday that it would sell its South African thermal coal business to Seriti Resources and two trusts for R100 million up-front and deferred payments of up to R1.5 billion-a-year.

Under the deal, South32 will receive 49 percent of the cash flow generated by South32 SA Coal Holdings Proprietary (SAEC), with payments capped at R1.5bn-a-year, starting from the completion of the deal to March 2024.

South32 did not anticipate to report a taxable profit on the deal, from either the up-front or deferred consideration, the company said in a statement.

The transaction would “substantially reduce our capital intensity, strengthen our balance sheet and will improve the group’s operating margin”, South32 chief executive Graham Kerr said. He said: “We ran an exhaustive and competitive process and we believe Seriti as an established operator is ideally positioned to unlock the potential of SAEC’s existing domestic and export operations, including its significant untapped resource base.

“The sale of our interest in SAEC will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities, consistent with South Africa’s transformation agenda,” he said.

Johannesburg-based Seriti and the two trusts will acquire South32’s 91.84 percent stake in SAEC with the up-front cash payment, based on an enterprise value of R1.2bn

South32 is the latest company to get out of energy coal at a time when investor pressure and climate change concerns are prompting businesses to limit their exposure to fossil fuels.

Seriti chief executive Mike Teke said: “Finalisation of this transaction will be a significant milestone for Seriti in our ambition to become a black-owned and controlled mining champion. The South Africa Energy Coal acquisition will enable us to offer further secured, long-term coal supply solutions to Eskom as a demonstrable commitment to sustainably supporting South Africa's energy needs. 

"The combination of our energy coal businesses will realise further operational and technical efficiencies, enabling us to better service our customers by offering competitive energy solutions," he said.

Teke said Seriti remained fully committed to its stakeholders and was welcoming the participation of the SAEC employees and communities in this acquisition.  I  Reuters

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