Seriti Resources lines up R20bn New Largo project

SERITI Resources, the consortium that is concluding the purchase of Eskom-dedicated coal mines from Anglo American, is set to add to its asset base with an agreement to buy the New Largo project – a development that could see Seriti go public depending on its capital requirements.

According to the last published estimates on the project, New Largo would provide 15 million tonnes a year (Mtpy) to Eskom, primarily to its Kusile power station which is currently under construction. However, the capital required to build the mine is estimated at R20bn.

The project is currently owned by Anglo and its empowerment partner, but the group decided to exit domestic coal productions, partly because Eskom has been asking new suppliers of coal to sell control to black partners, a situation that would lower the attractiveness of low margin, cost plus mines which New Largo may become.

If this transaction materialised, Anglo will have completely exited all domestic coal mine production.

Mike Teke, a member of the Seriti Resources consortium through his Masimong Group Holdings, and it’s CEO, said he did not comment on market speculation. Seriti had not yet concluded the R2.3bn acquisition of the New Vaal, New Denmark and Kriel mines which supply about 24Mtpy to Eskom power stations on a cost plus basis.

Adding New Largo to this mix would, when the project is complete, make Seriti the largest supplier of coal to Eskom. In addition to Teke, the Seriti consortium also includes Thebe Investment Corporation, Zungu Investments Company, led by Sandile Zungu, and Anna Mokogong’s Community Investments Company.

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Mining Charter battle continues

Seriti Resources CEO Mike Teke discusses Mines Minister Mosebenzi Zwane comments at the Joburg Indaba and how it’s navigating things as a coal miner in South Africa right now.

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Anglo Coal’s Ndlovu optimistic about prospects, Seriti deal

WHEN July Ndlovu was appointed CEO of Anglo Coal South Africa, a division of the UK-listed group, the expectation was that his elevation to the 45 Main Street hierachy would be a short-lived one.

Months earlier, Anglo American CEO, Mark Cutifani, has outlined plans to radically restructure the company such that all its bulk mining assets – iron ore and coal – would be sold so that there could be a focus on platinum, copper and diamonds.

This triggered a chain reaction of management changes with Ndlovu moving from Anglo American Platinum where he was head of processing to replace Themba Nkhwanazi who in turn had replaced Norman Mbazima at Kumba Iron Ore. It was Mbazima’s new job to oversee the asset sales.

Ironically no sooner had Cutifani unveiled the restructure that the commodity market staged a remarkable comeback, coal and iron ore in particular. Where speculation thrived on the notion Kumba and the coal assets would be merged and controlled by the Government’s Public Investment Corporation, there was now a new reality. Suddenly, Anglo was not the forced seller of old, cash burning assets, and would manage its formerly non-core mines for cash unless a cracking offer was tabled.

Asked in an interview with Miningmx if he could forsee a time Anglo would eventually sell its coal mines, Ndlovu said – somewhat amused at the crossroads that would then confront him: “As a business unit CEO, quite honestly, I have to run the business as best as I can and make sure it’s the best thermal coal business on the globe”.

“Anyway, a business is owned by somebody so I don’t get bogged down with whether Anglo will sell us or not. I’ve a role to develop the endowment that we’ve got in the most capital efficient way. It generates cash, good returns,” he said.

That it does.

Underlying pre-tax profit for Anglo American’s South African coal mining division in the six months ended June 30 increased 73% to $283m owing to an attributable 46% increase in the export thermal coal price. Total export saleable volumes were in line with the first half of the previous financial year. Total trade production was 11.4 million tonnes (Mt) representing a 3% decline as a result of the planned closure of the Eskom pit at Khwezela.

More broadly, Anglo Coal South Africa is removing Eskom sales out if its business completely once a R2.3bn sale to Seriti Resources, a black-owned consortium which has Mike Teke, Sandile Zungu and Anna Mokokong as its leaders, is completed – a transaction that to some extent relies on Eskom getting its act together. The assets involved are sizeable: Anglo’s Eskom business sold 24Mt in its 2016 financial year and consists of the New Denmark, New Vaal and Kriel mines.

Eskom’s troubles with leadership is among the most well documented crisis of modern-day South Africa, but Ndlovu thinks the executives currently fulfilling acting roles – such as Eskom CEO, Johnny Dladla – won’t have much difficulty approving the deal since it merely requires the transfer of a sales contract. [The interview was conducted before Dladla was revolved out of the position to be replaced by another acting head, Sean Maritz].

“That’s always going to be an issue. Having said that, there are people in acting positions, there’s an interim board; we work with them on the assumption that they have got the necessary mandates to act in the best interests of the organisation. We haven’t seen anything yet to suggest Eskom wouldn’t be able to make or get a decision,” said Ndlovu.

Ndlovu thinks the deal will take its course; ultimately, it’s out of Anglo’s hands. The same could be said of the coal price but Ndlovu is fairly optimistic. In additon to the extreme weather conditions currently which plays into the hands of coal exporters able to opportunistically capitalise on shortages, there’s also an explosion of new markets, especially in South East Asia notwithstanding the near global antipathy for coal-fired energy.

“Coal is on the comeback because of a number of factors, not just cut-backs in China but also the fact that we’re beginning to see new markets emerging in South East Asia, North Africa, the Middle East. So, you see South Korea and Taiwan building new power stations; in Pakistan there are new stations coming. It’s all beginning to support the price.”

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Anglo American Plc - Anglo American Completes Sale Of Eskom-tied Thermal Coal Operations In South Africa

Anglo American plc (“Anglo American”) confirms completion of the sale of its Eskom-tied domestic thermal coal operations in South Africa (the “Operations”) to Seriti (the “Transaction”). The consideration payable for the Operations as at 1 January 2017 is ZAR2.3 billion (approximately US$164 million).

Mark Cutifani, Chief Executive of Anglo American, said: “We are pleased to have completed the sale of our Eskom-tied domestic thermal coal operations in South Africa to Seriti. This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to
Eskom.”

Norman Mbazima, Deputy Chairman of Anglo American South Africa, commented on the Transaction: “We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector, reinforcing Anglo American’s longstanding
track record, and commitment to, economic empowerment and sustainable transformation.”

The Operations consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries.

For further information, please contact:

Media
UK
James Wyatt-Tilby
james.wyatt-tilby@angloamerican.com
Tel: +44 (0)20 7968 8759

Marcelo Esquivel
marcelo.esquivel@angloamerican.com
Tel: +44 (0)20 7968 8891

South Africa
Pranill Ramchander
pranill.ramchander@angloamerican.com

Investors
UK
Paul Galloway
paul.galloway@angloamerican.com
Tel: +44 (0)20 7968 8718

Trevor Dyer
trevor.dyer@angloamerican.com
Tel: +44 (0)20 7968 8992

Sheena Jethwa
sheena.jethwa@angloamerican.com
Tel: +44 (0)20 7968 8680

Anglo American plc
20 Carlton House Terrace London SW1Y 5AN United Kingdom
Registered office as above. Incorporated in England and Wales under the Companies Act 1985.
Registered Number: 3564138 Legal Entity Identifier: 549300S9XF92D1X8ME43
Tel: +27 (0)11 638 2592

Ann Farndell
ann.farndell@angloamerican.com
Tel: +27 (0)11 638 2786

Notes to editors:

Seriti
Seriti Coal Proprietary Limited, the purchaser, is a wholly owned subsidiary of Seriti Resources Holdings Proprietary Limited (“Seriti”). Seriti is a broad-based, majority HDSA-owned and controlled South African mining company, established with the aim of preserving and operating strategic energy assets for the benefit of South Africa and its people. Seriti is owned jointly by four strategic “anchor” shareholders, namely Masimong Group Holdings Proprietary Limited (“Masimong”), Thebe Investment Corporation (“Thebe”), Zungu Investments Company Proprietary Limited (“ZICO”) and Community Investment Holdings Projects (“CIH Projects”). Seriti’s management team will be led by Mike Teke who has extensive mining experience through the acquisition, operation and development of Optimum Coal Mines and Koornfontein Mines which produced approximately 10Mtpa of saleable domestic and export thermal coal and the development of other large scale thermal coal projects. Seriti intends to provide meaningful equity participation for management, employees and communities in its structure.

Anglo American
Anglo American is a globally diversified mining business. Our portfolio of world-class competitive mining operations and undeveloped resources provides the raw materials to meet the growing consumer-driven demands of the world’s developed and maturing economies. Our people are at the heart of our business. It is our people who use the latest technologies to find new resources, plan and build our mines and who mine, process and move and market our products to our customers around the world.

As a responsible miner – of diamonds (through De Beers), copper, platinum and other precious metals, iron ore, coal and nickel – we are the custodians of what are precious natural resources. We work together with our key partners and stakeholders to unlock the long-term value that those resources represent for our shareholders and for the communities and countries in which we operate – creating sustainable value and making a real difference.
www.angloamerican.com

1 March 2018

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 01/03/2018 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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Anglo concludes R2.3bn sale of Eskom-tied mines to Seriti

JOHANNESBURG (miningweekly.com) – Anglo American has completed the sale of its Eskom-tied thermal coal operations to broad-based, majority black-owned and -controlled South African mining company Seriti Resources, which is led by CEO Mike Teke, for R2.3-billion.

The acquisition includes the New Vaal, New Denmark and Kriel mines, as well as various mine life extension projects.

The three mines supply about 24-million tonnes a year of thermal coal to Eskom’s Lethabo, Tutuka and Kriel powerstations.

“We are very proud to have concluded this defining transaction with Anglo American. Seriti is committed to building a new South African mining champion and to providing Eskom with cost-effective, long-term coal supply solutions,” Teke said at a media briefing on Thursday.

Seriti, which is 84% black-owned and chaired by Dr Anna Mokgokong, funded the acquisition through a combination of shareholder equity and acquisition finance raised from Standard Bank.

“It has been almost a year since the first announcement of the impending transaction was made and it’s been a complex transaction to bed down,” she said, adding that the size of the transaction was also significant.

“It is arguably one of the most important transformational mining transactions in the past decade. Seriti will become a prominent player in this field,” she said, adding that the company would take over the running of operations with immediate effect.

Anglo deputy chairperson Norman Mbazima agreed that the transaction represented a major step change in transformation in the coal sector in the country.

“It also reinforces Anglo American’s longstanding record and commitment to economic empowerment and sustainabletransformation,” he said, adding that the sale represented one of the largest broad-based black empowerment deals in the coal and broader mining sector.

“Today is a big day for the South African mining industry,” he stated.

Anglo CEO Mark Cutifani, meanwhile, said the transaction was a continuation of the reshaping of the group’s global asset portfolio based on value and the optimal deployment of capital, while realising value for its shareholders and ensuring reliable supply of coal to Eskom.

Seriti Coal will supply 22% of Eskom’s yearly coalrequirement from the three mines.

The New Vaal colliery is contracted to supply 17.8-million tons a year of coal to the Lethabo power station, New Denmark is contracted to supply 10.5-million tons a year to the Tutuka power station and the Kriel colliery is contracted to supply 8.5-million tons a year of coal to the Kriel powerstation.

The Lethabo and Tutuka coal supply agreements (CSAs) have a further 11 years to run, while the Kriel CSA expires in two years.

Teke noted that the first priority of the Seriti leadership team would be to engage with operational staff and other stakeholders to achieve a seamless ownership transition.

Around 3 000 former Anglo American employees, including on-mine management and, indirectly, more than 3 000 contractors will now form part of the Seriti team.

Black-owned groups Thebe Investment, Masimong, Zungu Investments Company and Community Investment Holdings own 25% apiece of Seriti Resources Holdings, which, in turn, holds 90% of Seriti Coal. Employees and communities own the 10% balance of Seriti Coal.

OPTIMUM COAL
Meanwhile, Teke said Seriti would be interested in considering acquiring the Optimum coal mine, which is currently under business rescue.

The mine was placed in business rescue last week as a result of the financial difficulties facing its owners Tegeta Resourcesand Exploration. Employees at the mine have also recently embarked on strike action over the alleged nonpayment of their salaries.

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Anglo American sells some collieries and mines to Seriti Resources

Anglo American concluded the R2.3bn sale of three collieries that supply Eskom with coal as well as four shuttered mines, to Seriti Resources.

The transaction announced in 2017 marked the decision by Anglo to cut its exposure to the state-owned power utility, which was insisting on 51% black ownership of its coal suppliers, something the Anglo board would not countenance because it would become a minority partner.

Anglo has also agreed to sell its undeveloped New Largo colliery to a consortium that includes Seriti, leapfrogging the new resources company into the top tier of coal suppliers to Eskom.

Anglo CEO Mark Cutifani and Anglo American SA deputy chairperson Norman Mbazima have both said in 2018 that its sales process in SA had come to an end with the sale of the Eskom-linked mines, and that it remained exposed to export thermal coal, iron ore, platinum group metals, diamonds and manganese from SA.

“This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to Eskom,” Cutifani said on Thursday.

The owners of Seriti, namely Masimong Group, Thebe Investment Corporation, Zungu Investments Company and Community Investment Holdings, which own 90% of the entity, provided funding towards the deal and secured debt from Standard Bank to fund the deal.

Community and employee trusts own the remaining 10% of Seriti, which has Mike Teke, a long-time miner and former president of the Chamber of Mines, as the CEO.

“Seriti is committed to building a new South African mining champion and to providing Eskom with cost-effective, long-term coal supply solutions,” Teke said.

The sale also ticked a box for Anglo in creating a black-owned mining company with a solid set of assets, said Mbazima.

“We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector, reinforcing Anglo American’s longstanding track record, and commitment to, economic empowerment and sustainable transformation.”

The New Vaal, New Denmark and Kriel collieries employing 6,000 people supply Eskom with 24-million tonnes of coal a year, providing coal to three power plants that account for a quarter of Eskom’s annual electricity production.

Seriti would be more than willing to have a look at the Optimum colliery that is at the heart of corruption allegations against the Gupta family and inappropriate behaviour by Eskom.

“We’d love to look at Optimum,” said Teke, who was the CEO of the listed Optimum company that ran the colliery before it was bought by Glencore. “In every calamity there is an opportunity.”

Optimum is one of three large mines the owners Tegeta Resources has put into a business rescue process, unable to pay salaries and suppliers. It’s not clear if the mines are up for sale.

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Anglo American completes sale of Eskom-tied operations

Anglo American confirms completion of the sale of its Eskom-tied domestic thermal coal operations in South Africa (the Operations) to Seriti (the Transaction).

Seriti, the purchaser, is a wholly owned subsidiary of Seriti Resources Holdings.

Seriti is a broad-based, majority HDSA-owned and controlled South African mining company, established with the aim of preserving and operating strategic energy assets for the benefit of South Africa and its people.

The consideration payable for the Operations as at 1 January 2017 is ZAR2.3 billion (approximately US$164 million).

“We are pleased to have completed the sale of our Eskom-tied domestic thermal coal operations in South Africa to Seriti,” comments Anglo American chief executive Mark Cutifani.

“This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to Eskom,” he continues.

“We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector,” notes Anglo American deputy chairman Norman Mbazima.

He adds that it reinforces Anglo American’s longstanding track record and commitment to, economic empowerment and sustainable transformation.”

The Operations consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries.

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Anglo completes R2.3bn sale of Eskom coal

Cape Town – Anglo American [JSE:AGL] has completed the R2.3bn sale of its South African thermal coal operations to black-owned mining company Seriti Resources.

The mining group announced the transaction in a note to shareholders on Thursday.

The sale is part of a strategy to reshape the group’s asset portfolio, according to CEO Mark Cutifani.

The operations which include New Vaal, New Denmark and Kriel collieries supply coal to Eskom’s power stations Lethabo, Tutuka and Kriel. The sale ensures the “reliable supply of coal” to the power utility, he said.

Seriti CEO Mike Teke said the mining company is committed to providing Eskom with “cost-effective, long-term coal supply solutions”.

Seriti also purchased closed collieries from Anglo and is a majority (84%) black-owned company. According to a statement from Seriti, 90% of its shareholding is equally held by black-owned investment companies Masimong and Thebe Investment Corporation, among others. The remaining 10% is held by employee and community trusts.

“We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector,” said deputy chairperson of Anglo American South Africa Norman Mbazima.

No job losses

Seriti will be engaging with operational staff and stakeholders to ensure a seamless ownership transition. It will absorb the Anglo American employees, who number about 3 000, as well as the more than 3 000 contractors.

Earlier this week Anglo also completed the sale of its Australian coal mine Drayton. The terms of the transaction were confidential.

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SA coal entrant Seriti interested in buying Gupta mine, Optimum

SERITI Resources, the black-owned consortium that today concluded the R2.3bn purchase of thermal coal mines from Anglo American, said it would be interested in buying Optimum Coal Mine, the Gupta family-owned colliery that has been put into business rescue.

“We are interested in looking at it,” said Mike Teke, CEO of Seriti. Asked if the mine had been harvested, Teke responded: “There is coal in the ground there”.

Said Anna Mokgokong, chairwoman of Seriti: “This guy [Teke] owned Optimum. What did he see there? The answer lies in that. But I can’t say more than that as we have to understand the assets that we have (currently) got. Other things may emerge, but I can’t talk about those now,” she added.

Optimum Coal Mine, situated in South Africa’s Mpumalanga province, supplies Eskom’s Hendrina power station. However, under the control of the Gupta-owned Tegeta Resources, the mine has struggled to meet the coal qualities required of Eskom. The mine was last week placed into business rescue while mine employees have staged a strike claiming they have not been paid for the last month.

Teke helped run Optimum and the Koorfontein coal mines after they were split out from BHP Billiton as it was then called. Glencore then bought the two operations before having to place it into business rescue several years later under pressure from Eskom. The utility’s then management had allegedly spied an opportunity for the Gupta family to whom former president Jacob Zuma was close. Tegeta Resources subsequently bought Optimum Coal, partly using funds allegedly for the pre-payment of coal from Eskom.

Teke was commenting following the finalisation of the purchase by Seriti of three Eskom dedicated coal mines – New Vaal, Kriel and New Denmark – from Anglo American, a deal that was first unveiled in April last year. The mines supply some 24 million tonnes a year (Mtpa) of thermal coal to Eskom’s Lethal, Tutuka and Kriel power stations comprising a quarter of South Africa’s coal generating capacity.

Seriti consists of Teke’s Masimong Holdings, Thebe Investment Corporation, Zungu Investments Company, led by Sandile Zungu and Community Investment Holdings, owned by Mokgokong. It was also announced in January that Seriti is buying Anglo American’s shares in New Largo, an undevelopment thermal coal project that will supply coal to Eskom’s Kusile power station, currently under construction. That transaction has been valued at R850m.

“This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to Eskom,” said Mark Cutifani, CEO of Anglo American.

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Anglo American concludes sale of three coal mines in South Africa

Anglo American (LON:AAL) has completed the sale of three Eskom-tied thermal coal operations in South Africa to Seriti Resources, a group of black-controlled companies for R2.3 billion (about $164 million).

The deal includes the New Vaal, New Denmark and Kriel mines, as well as various mine life extension projects, which supply about 24 million tonnes a year of coal to Eskom Holdings’ Lethabo, Tutuka and Kriel power stations.

The deal includes the New Vaal, New Denmark and Kriel mines, as well as various mine life extension projects, which supply about 24 million tonnes a year of coal to Eskom.

Collectively, those three plants account for almost 25% of the country’s current power supply.

“We believe the conclusion of the sale to Seriti represents a major step change in transformation in the coal (and broader mining) sector,” Norman Mbazima, Deputy Chairman of Anglo American South Africa, said in the statement.

Eskom, South Africa’s biggest coal buyer and provider of almost all of the nation’s power, has repeatedly said it wants suppliers to be black-controlled, as part of government push to boost black involvement in the economy to make up for discrimination during apartheid.

Partly because of that pressure, Anglo has been selling coal assets that exclusively supply the state-owned power utility, including the New Largo mine, also bought recently by Seriti, which is led by Mike Teke, chairman of South Africa’s Chamber of Mines.

Thanks to the massive assets sale kicked off in 2016, Anglo — which was founded in South Africa in 1917 — came out in very good shape from the recent and sharp rout in metal prices that hurt the mining industry since late 2015 until early last year.

Only last week, it announced it had doubled its net profit in 2017, slashed debt and said it would pay its highest dividend in a decade, thanks mainly to rising commodity prices and lower costs.

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