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.