PERTH (miningweekly.com) – Diversified miner South32’s sale of its South African Energy Coal division has been declared unconditional, after all conditions precedent to the transaction were satisfied.
The miner in November 2019 struck an agreement with a wholly-owned subsidiary of Seriti Resources Holdings, to divest of the South African Energy Coal assets for R100-million.
The purchase price also included a deferred consideration component where South32 would receive 49% of the free cash flow generated by the assets for a period starting at the end of March 2024, and capped at R1.5-billion a year.
In April, the company also revealed that it would 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 upfront 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 $17.5-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.
South32 CEO Graham Kerr on Monday said that when the company made the decision to exit the South African Energy Coal business, it recognised that the business would continue to play an important role in supplying South Africa’s energy needs for years to come.
“With this in mind, our vision was two-fold. First, we wanted to ensure that the business would be sustainable for the long-term, for the benefit of its employees, customers and local communities. Of equal importance was our objective for it to become a black-owned and -operated business, consistent with South Africa’s transformation agenda.
“We believe Seriti is the right owner of South Africa Energy Coal and that the additional financial support package we have provided will underpin the future sustainability of the business.”
Kerr said that for South32, the completion of the divestment was an important milestone that would see the company significantly simplify its business, reduce its capital intensity and improve its underlying operating margins.
“Looking forward, we remain focussed on reshaping our portfolio with a bias to the base metals important for a low carbon future by advancing our development options in North America and continuing to invest in greenfield exploration.”