South32’s transfer of coal assets to Sereti expected at month end
JOHANNESBURG - SOUTH32, the Australia-headquartered mining company, expects to settle the sale of its South African coal assets to Seriti Resources by the end of the month.
South32 told shareholders yesterday in a note that the transfer of its shareholding in South African Energy Coal (SAEC) to Seriti was now expected at the end of the March quarter.
“Work is progressing between South32, Seriti and Eskom to finalise arrangements that will underpin the sustainability of the SAECl business under the ownership of Seriti and allow for the satisfaction of the final material conditions to the transaction,” said South32.
South32 is scheduled to update the market at the conclusion of this work. In August 2019, Seriti announced it had entered into exclusive negotiations regarding the acquisition of the SAEC business.
SAEC is located in the Mpumalanga coalfields and includes four collieries – Khutala Colliery, Klipspruit Colliery, Middelburg Colliery and Wolvekrans Colliery – as well as three processing plants, producing energy coal for the domestic and export market.
At the time of the transaction, South32 chief executive Graham Kerr said the group had run an exhaustive and competitive process, and it believed Seriti, as an established operator, was ideally positioned to unlock the potential of SAEC’s 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.
“For South32, this marks an important milestone as we continue to reshape our portfolio. Completion of this transaction will substantially reduce our capital intensity, strengthen our balance sheet and will improve the group’s operating margin,” Kerr said.
As part of the transaction, Seriti was expected to make an upfront payment of R100 million to acquire South32’s shares in SAEC.
The purchase price included a deferred consideration component, where South32 would receive 49 percent of the free cash flow generated by SAEC for a period commencing at the date of completion to March 2024, with payment capped at a maximum of R1.5 billion a year.
Commenting on the transaction at the time, Seriti chief executive Mike Teke said the SAEC acquisition would enable the group to offer further secured long-term coal supply solutions to Eskom as a demonstrable commitment to support 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.” Teke said.
South32’s shares closed 1.41 percent higher at R32.45 on the JSE yesterday.