Exxaro Resources Ltd. said it finalized the purchase of Total SA’s South African coal unit for at least 19 percent less than first announced amid a slump in prices for the fuel.
Exxaro said on Tuesday it will pay $262 million in cash and make five annual payments totaling as much as $120 million, depending on average prices at South Africa’s Richards Bay Coal Terminal, the world’s largest single facility for the fuel. The Johannesburg-based company said the deal to buy Total Coal South Africa Pty Ltd. would cost $472 million when it was announced last year.
“In the 12-month period since the acquisition was announced, commodity-market conditions have deteriorated significantly,” Exxaro said. “As a consequence, Exxaro and Total have agreed to a reduction in the purchase consideration to take into account the change in market circumstances.”
The price of coal at Richards Bay on the Indian Ocean coast has declined more than 20 percent since Exxaro publicized the deal. Total Coal controls the Dorstfontein and Forzando mines, east of Johannesburg in the Mpumalanga province, with sales of about 4.5 million metric tons a year. Most of the production is exported, mainly to India and China.
Exxaro is considering options to include more black shareholders “on arm’s length commercial terms” in the deal, it said in the statement. South African Minister of Mineral Resources Ngoako Ramatlhodi said in June the transaction has to include a community stake to be granted approval.
South Africa requires mines to be at least 26 percent owned by black investors as a way to redress economic disparities created during apartheid rule. Exxaro is at least 52 percent owned by black shareholders.
Ramatlhodi has since agreed to the transaction, clearing the final hurdle, Exxaro said.