JOHANNESBURG - South32 yesterday set in motion the process of a partial exit from the country amid plans to manage its South African Energy Coal (SAEC) business as a stand-alone by April that will see the possible listing of the asset on the JSE.
The JSE, London and Australian-listed mining and metals company, which was spun out of mining giant BHP Billiton in 2015, also said yesterday that it would invest R4.3billion to extend the life of the Klipspruit colliery by 20 years.
SAEC will now be managed separately from the rest of the group in line with a plan to help improve the way the business managed its global portfolio and improve competitiveness, the company said.
“Once SAEC has been established as a stand-alone business and consistent with our objective to further transform our South African operations, we will commence a process to broaden ownership of SAEC,” said Graham Kerr, the South32 chief executive.
“This will present opportunities for broad-based black economic empowerment entities, employees and communities, and could lead to a listing of SAEC on the Johannesburg Stock Exchange,” Kerr said.
SAEC is located in the Mpumalanga coalfields and its assets comprise the Khutala Colliery, Klipspruit Colliery and the Wolvekrans Middelburg Complex, as well as three processing plants.
Kerr said on a conference call to journalists yesterday that investor concerns regarding the impact of coal on climate change had contributed to the decision.
Committed
Kerr said the company remained committed to South Africa through its Hillside Aluminium Smelter and the manganese assets in the Northern Cape.
“This is not an exit from South Africa. It is about finding the right model to operate the company; we are making the right call,” he said.
Kerr also said that the company had operated in South Africa for many decades with the Hillside smelter in KwaZulu-Natal being a world-class asset and that its manganese business in the Northern Cape has been profitable.
The spin-off comes after Anglo American sold its South African coal assets in April to Seriti Resources for R2.3billion. The mining charter, which was gazetted in June and is now being challenged in court, has been a stumbling block for investment in the mining industry.
In terms of extending the life of the mine of Klipstruit, development activity is expected to commence in the current quarter, with first coal expected from the open-cut operation in the 2019 financial year.
Kerr said that approval of the R4.3bn extension project would secure the future of the colliery for at least another 20 years, ensure employment for 740 people and create 4000 jobs during construction.
“The investment is expected to generate an internal rate of return on investment of more than 20percent by unlocking 616million tons of resource at the Klipspruit South and Weltevreden deposits, and fulfilling around half of our current rail obligations with Transnet.”
The National Union of Metalworkers of South Africa led 600 members in a week-long strike at South32’s aluminium smelter in September, which ended when it accepted wage hikes of between 5.1percent and 5.6percent in the first year with increases in the second year linked to inflation, currently running at 4.8percent.
South32 shares closed lower 2.59percent on R34.64 on the JSE yesterday.