Exxaro latest firm to offload thermal coal amid environmental concerns
JOHANNESBURG - EXXARO Resources, Eskom's biggest coal supplier, has become the latest company to offload thermal coal assets as pressure mounts for mining houses to reduce exposure to fossil fuels amid climate change concerns.
Exxaro on Friday announced the sale of its Exxaro Coal Central (ECC) to black-owned and private mining operator Overlooked, without disclosing the value of the transaction.
Exxaro said the sale was part of playing a meaningful role in helping black mining operators obtain scale and additional resources.
“ECC's successful sale to a blackowned mining operator with a strong track record such as Overlooked, has confirmed Exxaro's strategic view that the assets have value and that a different operator is better placed to extract maximum value from these assets,” said Exxaro.
Exxaro's disinvestment in ECC, the owner of the Dorstfontein, Forzando and Tumelo mines came a day after global diversified mining giant Anglo American plc confirmed the spinning off of its South African thermal coal assets into an entity called Thungela Resources.
Exxaro informed shareholders over a year ago that ECC and its Leeuwpan operations would not meet its requirements and expectations for resilience in the climate scenarios and the journey to a zero-carbon environment.
Exxaro's decision followed a strategic review aimed at reducing the value of its coal business by reducing the potential for stranded high-quality coal reserves.
Closure of the transaction was expected in the second half of 2021 pending regulatory approvals by the Department of Mineral Resources and Energy and the Competition Commission.
Overlooked, which operates three collieries, had ambitions to double its coal output off its existing portfolio to 4.8 million tons by 2022 from current 2.4 million tons, Exxaro told shareholders.
Exxaro said as part of the transaction, it would retain all coal export entitlement through Richards Bay Coal Terminal, and that also included in the purchase consideration as well as cash for rehabilitation charges.
Old Mutual Investment Group's head of responsible investment, Jon Duncan, said given global climate change concerns it was not surprising that international miners were looking to sell local coal assets.