Anglo American to Sell South African Coal Mines to Seriti

  • Seriti will be second-biggest supplier of coal to Eskom
  • Transaction seen closing by the end of this year, Anglo says

Anglo American Plc agreed to sell a group of South African coal mines to black-controlled Seriti Resources Holdings Ltd. for about 2.3 billion rand ($166 million) 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 SOC Ltd., 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.

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, recognizing 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 2.3 billion rand figure will be adjusted based on cash flow generated by the operations between Jan. 1 and the date on which the sale closes, Anglo said.

The divestment of Anglo’s South African coal operations and its holding in Kumba Iron Ore Ltd. will be key to unlocking value for shareholders, Barclays Plc analysts including Ian Rossouw said in an emailed note. The sale announced Monday, “while not material in size, is another step in the right direction to achieve this,” they 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.

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

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