JSE-listed South32 has entered into a binding conditional agreement for the sale of its shareholding in South Africa Energy Coal (SAEC) to a wholly-owned subsidiary of Seriti Resources, and two trusts which will acquire and hold equity on behalf of employees and communities (jointly referred to as the purchasers).
The company will sell 91.835% of its shareholding in the transactions, which remains subject to a number of material conditions.
Upon those conditions being satisfied, Seriti (on behalf of the purchasers) will make an up-front cash payment of about R100 million to acquire South32’s shares in SAEC.
Seriti is a broad-based, 91% black-owned and controlled coal mining company; and through its operating subsidiary, Seriti Coal Proprietary Limited, currently operates three large-scale, opencast and underground thermal coal mines in South Africa. These are the New Vaal, New Denmark and Kriel collieries, and it also owns various resources with life extension potential and closed collieries.
The purchase price also includes a deferred consideration component, where South32 will receive 49% of the free cash flow generated by SAEC for a period commencing at the date of completion to March 2024, with payment capped at a maximum of R1.5 billion a year.
South32’s CEO Graham Kerr said: “I am pleased to announce we have entered into an agreement with Seriti, a black-owned and operated South African mining company. We ran an exhaustive and competitive process and we believe Seriti as an established operator is ideally positioned to unlock the potential of SAEC’s existing domestic and export operations, including its significant untapped resource base.”
Kerr added that the sale of the company’s interest in SAEC will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities, consistent with South Africa’s transformation agenda.
“For South32, this marks an important milestone as we continue to reshape our portfolio. Completion of this transaction will substantially reduce our capital intensity, strengthen our balance sheet and will improve the group’s operating margin.”
Seriti’s CEO Mike Teke said that the acquisition is a milestone for Seriti towards its ambition to become a black-owned and controlled mining champion.
“The SAEC acquisition will enable us to offer further secured, long-term coal supply solutions to Eskom as a demonstrable commitment to sustainably support South Africa’s energy needs. The combination of our energy coal businesses will realise further operational and technical efficiencies enabling us to better service our customers by offering competitive energy solutions.”
The purchasers comprise Thabong Coal Proprietary Limited, a wholly-owned subsidiary of Seriti, a community trust and an employee trust, who will respectively acquire 81.835%, 5% and 5% of the shares in SAEC. The beneficiaries of the community trust will be the communities in close proximity to SAEC’s operations and employees will benefit from the employee trust.