PERTH (miningweekly.com) – Diversified miner South32 has added incentives to get the sale of its South African Energy Coal operations over the line.
The miner earlier this week announced that the sale of the South African Energy Coal division would be completed post the end of the March quarter, but said on Thursday that it had been made aware that key information regarding the negotiations between the company, buyer Seriti Resources and energy provider Eskom, had ceased to be confidential ahead of finalising arrangements to satisfy the final material conditions of the transaction.
South32 on Friday unveiled that the company has committed to provide Seriti with additional support to underpin the sustainability of the South African Energy Coal division, including amending the original share purchase agreement by adjusting the up-front cash payment to a nominal consideration and removing the deferred consideration mechanism.
In addition, South32 has also entered into a $50-million facility with Seriti, which would fund the costs incurred to restructure certain loss-making mining areas, while also providing the buyer with $200-million to fund rehabilitation activities at the South African Energy Coal operations, by way of ten annual installments, with the first $27.5-million expected in July this year.
The restructure facility is expected to be drawn down before the end of the 2022 financial year, and will be repayable over a ten-year period, if the energy coal index prices exceed an agreed-upon threshold.
“Securing the long-term sustainability of South African Energy Coal has been our key objective in transitioning the business to black ownership, consistent with South Africa’s transformation imperative,” said South32 CEO Graham Kerr.
“This additional support package moves us closer to completion of the sale and will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities. For South32, the transaction will significantly simplify our business, substantially reduce our capital intensity, improve the group’s underlying operating margin, and support our strategy to re-shape our portfolio with a bias to base metals.”
In order to fund its working capital requirements and investment into improving the South African Energy Coal operations, Seriti also intends to enter into a five-year working capital facility of up to $120-million with a South African commercial bank, which will be supported by a South32 subsidiary guarantee.