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Anglo American to sell SA coal mines to black controlled Seriti

By Paul Burkhardt and Loni Prinsloo

Bloomberg – Anglo American agreed to sell a group of South African coal mines to black-controlled Seriti Resources Holdings for about R2.3bn ($166m) as it focuses on other commodities.

Seriti, which is led by South African Chamber of Mines President Mike Teke, will buy three thermal coal operations that supply state-owned power utility Eskom Holdings, as well as four closed collieries, Anglo said in a statement Monday. The sale, which is expected to close by the end of the year, will make Seriti the second-biggest provider of energy coal to Eskom, supplying almost a quarter of the utility’s current annual requirements.

A worker walks past a board outside Anglo American offices in Johannesburg. REUTERS/Siphiwe Sibeko

Anglo announced a sweeping asset-sale program in February 2016 following a plunge in commodity prices, and outlined plans to focus on diamonds, platinum and copper and reduce debt accumulated during years of expansion. It’s since scaled back some divestment plans after prices rebounded.

“This transaction forms part of our ongoing commitment to reshape and upgrade our global asset portfolio, recognising appropriate value and further demonstrating Anglo American’s longstanding support for the development and sustainability of South Africa’s mining industry,” Anglo CEO Mark Cutifani said in the statement.

The R2.3bn rand figure will be adjusted based on cash flow generated by the operations between January 1 and the date on which the sale closes, Anglo said.

Black Ownership

The sale still requires regulatory approvals and is conditional on Eskom consenting to the relevant coal-supply agreements being transferred to Seriti, Anglo said. Eskom, South Africa’s top coal buyer, has said it wants suppliers to be black-controlled, as South Africa pushes companies to boost black involvement in the economy to make up for discrimination during apartheid.

Seriti, which is more than 70 percent black owned, continues to look for more growth opportunities, Teke said on a conference call following the announcement. The company’s shareholders include his own Masimong Group Holdings (Pty) Ltd., Zungu Investments Company, Thebe Investment Corporation and Community Investment Holding Projects.

“We are interested in building a massive mining company in this country,” Teke said. “It doesn’t end here with these assets.”

Seriti has expressed interest in Anglo’s New Largo project and also plans to bid on export coal mines as they are put up for sale, he said.

New Largo is located in South Africa’s eastern Mpumalanga province, near Eskom’s Kusile power plant, which will be the utility’s biggest once it’s completed. Anglo will run a separate process to seek buyers for the project, which doesn’t yet have a coal-supply agreement with Eskom, Norman Mbazima, the deputy chairman of Anglo American South Africa, said on the call.

File Photo: Kusile Power Station, Mpumalanga, South Africa, under construction. 

Anglo expects the mine to produce about 570 million metric tons of coal for Kusile over 47 years, it said in a 2014 presentation.

JSE Sens statement from Anglo American

Anglo American announces sale of Eskom-tied thermal coal operations in South Africa

Anglo American plc (“Anglo American”) announces the sale of its Eskom-tied domestic thermal coal operations in South Africa to a wholly owned subsidiary of Seriti Resources Holdings Proprietary Limited (“Seriti”), a company majority owned by historically disadvantaged South Africans (“HDSAs”) and led by a management team with extensive experience of operating and developing large coal mines in South Africa (“the Transaction”).

The Eskom-tied domestic thermal coal operations consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries (the “Operations”). The Transaction will result in Seriti becoming the second largest provider of thermal coal to Eskom, supplying almost a quarter of Eskom’s current annual coal requirements.

The consideration payable for the Operations as at 1 January 2017 is ZAR2.3 billion (approximately US$164 million). Under the terms of the Transaction, the consideration payable will be adjusted for cash flows generated by the Operations between 1 January 2017 and the date on which the transaction is completed in order to determine the final payment to be made by Seriti upon completion.

Mark Cutifani, Chief Executive of Anglo American, said: “We are pleased to have agreed the sale of our Eskom-tied domestic thermal coal operations in South Africa. This transaction forms part of our ongoing commitment to reshape and upgrade our global asset portfolio, recognising appropriate value and further demonstrating Anglo American’s longstanding support for the development and sustainability of South Africa’s mining industry.”

Mark Cutifani, chief executive officer of Anglo American Plc, pauses as he delivers a keynote speech at the LME Week Metals Seminar organized by London Metal Exchange Ltd. (LME) in London, U.K., on Monday, Oct. 31, 2016. Photographer: Jason Alden/Bloomberg

Norman Mbazima, Deputy Chairman of Anglo American South Africa, 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.”

Mike Teke, Chief Executive of Seriti, said: “Seriti is excited about the Transaction which represents a significant step-forward in our vision to become a black-controlled, broad based South African mining champion, and a coal player of significant size and scale. The Transaction allows Seriti 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

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

The Transaction is subject to conditions precedent that are customary for a transaction of this nature, including regulatory approvals in South Africa, as well as Eskom’s consent for the transfer to Seriti of the coal supply agreements which govern the Operations’ supply of coal to Eskom. The Transaction is expected to close by the end of 2017.

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