Anglo completes R2.3bn sale of Eskom coal

Publication: Fin24.
Author: Lameez Omarjee.

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

Publication: Miningmx.
Author: David McKay.

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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Seriti announces completion of the acquisition of ESKOM-tied domestic thermal coal mines from Anglo American

 

Johannesburg, 1 March 2018: Seriti is pleased to announce the completion of the purchase of New Vaal, New Denmark and Kriel mines from Anglo American, as well as various mine life-extension projects and closed mines. Signing of the transaction was announced in April 2017, at a purchase price of R2.3 billion.

The three mines supply approximately 24Mtpa of thermal coal to Eskom’s Lethabo, Tutuka and Kriel power stations which collectively account for almost a quarter of South Africa’s current power supply.

Mike Teke, CEO of Seriti, said: “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”.

Dr Anna Mokgokong, chairperson of Seriti, added: “As a responsible corporate citizen, Seriti aims to have a significant socio-economic impact on mining communities and will insist on responsible environmental management”.

The first priority of the Seriti leadership team is 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.

Seriti is an 84% black-owned mining company chaired by Dr Anna Mokgokong who will be leading an experienced board and management team. 90% of Seriti shareholding is equally held between Masimong, Thebe Investment Corporation, Zungu Investments Company and Community Investment Holdings. The remaining 10% is held by employee and community trusts.

Seriti has funded the acquisition through a combination of shareholder equity and acquisition finance raised from the Standard Bank of South Africa Limited.

Queries:

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Eskom approval is last remaining hurdle for R2.3bn Seriti Coal deal

Publication: Engineering News.
Author: Terence Creamer.

The black-empowerment consortium selected as the preferred bidder for Anglo American’s Eskom-tied coal operations is optimistic that the State-owned utility will approve the ceding of three coal supply agreements (CSAs) from Anglo to Seriti Coal by year-end.

The R2.3-billion transaction was announced in April and Eskom’s approval is the last outstanding condition, following the Competition Commission’s sanctioning of the deal and the Department of Mineral Resources’ approval of a Section 11 mining rights transfer.

The transaction involves the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries and will result in Seriti Coal becoming the second largest provider of thermal coal to Eskom and the largest black run, operated, managed and controlled coal supplier.

Seriti Coal will supply 22% of Eskom’s yearly coalrequirement, with the contractual tons to be supplied being 37-million tons per year (Mtpa).

In terms of the CSA the New Vaal colliery is contracted to supply 17.8 Mtpa to the Lethabo power station, New Denmark should supply 10.5 Mtpa to Tutuka power station, while the Kriel colliery is contracted to supply 8.5 Mtpa to Kriel power station. The Lethabo and Tutuka CSAs have a further 11 years to run, while the Kriel CSA expires in two years.

Black-owned groups Thebe Investment, Masimong, Zungu Investments Company and Community Investment Holdingsown 25% apiece of Seriti Resources Holdings, which, in turn, holds, 90% of Seriti Coal. Employees and communities own the 10% balance of Seriti Coal. Seriti Resources is 79% black-owned.

Thebe Energy and Resources CEO Sizwe Mncwango tellsEngineering News Online that as much as Seriti Coal had hoped that all requirements would be met before six months after the April 6 signature date, it remains “hopeful and positive that the transaction should be consummated anytime now and before end of 2017”.

Eskom spokesperson Khulu Phasiwe says the transaction should be approved by “December 2017 subject to the outcome of the due diligence and internal and external approvals that may be required”. He reports that it requires Eskom board approval and may also require external approvals in line with the Public Finance Management Act.

Eskom’s consent is subject to the satisfactory outcome of a due diligence exercise. The due diligence is being overseen by a legal firm that is assessing Seriti’s capability to meet contractual obligations,” Phasiwe adds.

Anglo spokesperson Ann Farndell confirms that the transaction is still in the process of being finalised and that the company is hoping for finalisation before the end of 2017.

The transaction has been funded through equity from the four members of the consortium, as well as through some debt from a banking institution.

Mncwango says that, when the contracts come to an end and the power station being supplied has reached by end of its life, Seriti Coal will commence a process, with Eskom, to achieve mine closure.

“However, if there is still enough coal resource on the ground we would certainly consider other options especially so if the power station has not yet reached its end of it useful life.”

He also confirms that Seriti Coal is “very keen” on New Largo, an Anglo project not included in the transaction. New Largo is seen as important for supplying coal to Eskom’s new Kusile power station, which is currently under construction in Mpumalanga.

“If similar opportunities come along our way, we are definitely eager to make further acquisitions in this space and play an even more significant leadership role in such a strategic sector of the economy. The Seriti transaction is, therefore, just the beginning of many more to come,” Mncwango tells Engineering News Online.

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