Anglo Said to Receive Bid for New Largo Coal From SeritiBy and
Project part of S. African coal business Anglo plans to sell
Other bidders put off project by lack of Eskom contract
Anglo American Plc has received a bid for its New Largo project in South Africa, as the company continues efforts to exit local operations designed to supply coal to domestic power plants, according to two people familiar with the process.
Seriti Resources Holdings Ltd., which agreed last month to buy thermal coal mines from Anglo for about 2.3 billion rand ($174 million), is among the bidders for New Largo, said the people, who asked not to be identified because the talks are private. MTN Group Chairman Phuthuma Nhleko’s Phembani Group also considered bidding, while separate groups that included Sipho Maseko and Jabu Mabuza have also considered buying Anglo coal assets including a package that previously included New Largo, the people said. The two businessmen are the chief executive officer and chairman of Telkom SA SOC Ltd. respectively.
The bid, and those that were contemplated, was in the range of about 1 billion rand, according to one of the people. The new owners will need to make significant investment to develop the mine, the other person said, without being more specific. Other potential bidders decided not to do so because of the lack of an existing contract with Eskom.
The sale of New Largo would help complete Anglo’s exit from operations that plan to sell coal locally. The miner 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. It’s since scaled back some divestment plans after prices rebounded.
Anglo American continues to progress the potential sale of its interests in the New Largo project, the company said in an emailed response to questions. It declined to comment on specific bidders, citing confidentiality restraints.
Eskom, South Africa’s biggest coal buyer and supplier of almost all of the nation’s power, 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. Still, the company said in a response to questions on Monday it doesn’t expect a contract with New Largo “soon.” Eskom burns coal for 90 percent of its electricity.
Seriti is led by Mike Teke, the president of the South African Chamber of Mines, and is more 70 percent owned by black investors.
New Largo is located in South Africa’s eastern Mpumalanga province, near Eskom’s Kusile power plant, which will be the utility’s biggest at 4,800 megawatts once it’s completed. Anglo considered selling New Largo together with the mines bought by Seriti, which supply Eskom, but separated the project in an attempt to get a better price, according to one of the people.
The sale process is expected to take another three to four months, one of the people said.
(Earlier versions of this story were corrected to show other companies didn’t follow through with formal bids, and to show in headline that Anglo received bids.)