Seriti CEO Mike Teke
Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – Diversified mining company Anglo American on Monday announced the sale of its Eskom-tied domestic thermal coal operations in South Africa to a wholly owned subsidiary of Seriti Resources Holdings, a company majority owned by historically disadvantaged South Africans and led by a management team with extensive experience of operating and developing large coal mines in South Africa.
The Eskom-tied domestic thermal coal operations consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries.
The transaction will result in Seriti becoming the second largest provider of thermal coal to Eskom, supplying almost a quarter of Eskom’s current annual coal requirements.
The consideration payable for the operations as at January 1, 2017, is R2.3-billion ($164-million).
Under the terms of the transaction, the amount payable will be adjusted for cash flows generated by the operations between January 1 and the date on which the deal is completed, which will determine the final payment to be made by Seriti on completion.
Anglo American CEO Mark Cutifani said the transaction formed part of Anglo’s ongoing commitment to reshape and upgrade its global asset portfolio, and described it as one that realised appropriate value while demonstrating the company’s “long-standing support for the development and sustainability of South Africa's mining industry”.
Anglo American South Africa deputy chairperson Norman Mbazima said the sale to Seriti supported transformation objectives for the industry as well as the country, while ensuring a sustainable, reliable and cost efficient supply of coal to Eskom.
Seriti CEO Mike Teke, who is also president of the Chamber of Mines, expressed excitement about the transaction, which he said represented a significant step forward in the company’s vision to become a black-controlled, broad-based South African mining champion, and a coal player of significant size and scale.
He added that it allowed Seriti to achieve its strategic objective of preserving and operating strategic energy assets for the benefit of South Africa and its people.
“Our structure brings together an experienced team capable of operating and developing large scale thermal coal assets and provides a unique mining opportunity for black women. The team looks forward to managing and growing the operations going forward, with a focus on ensuring their ongoing sustainability, given their strategic importance,” he added in a release to Creamer Media’s Mining Weekly Online.
Conditions precedent that must still be met include the customary South African regulatory approvals, as well as Eskom’s consent for the transfer to Seriti of the coal supply agreements that govern the supply of coal to Eskom.
The transaction with Seriti – which is made up of Teke's Masimong, Thebe, Zungu, led by Sandile Zungu, and Community Investment Holdings Projects – is expected to be fully consummated by the end of 2017.
Eskom spokesperson Khulu Phasiwe said the State-owned utility had noted Anglo’s announcement regarding the proposed sale of Eskom-tied mines to Seriti. However, he said ownership of the mines remained a “sticking point” and that Eskom would be seeking an urgent meeting with Anglo to understand how the issue could be resolved.
Interim CEO Matshela Koko said recently that Eskom had received an asset register from Anglo confirming that the utility owned assets at the mines in question, but that these assets were not reflected on Eskom’s balance sheet. The utility had also conducted an audit of all its mining assets, but had not yet disclosed the value or nature of the assets.
“However, we definitely believe we have a right to have a say over what becomes of those assets,” Phasiwe said in a telephonic interview with Mining Weekly Online.
He also stressed that it was the issue of ownership, rather than the nature of the buyer, that would be the main focus of the upcoming “one-on-one meeting" with Anglo. – With reporting by Engineering News Editor Terence Creamer.