South32 (ASX: S32) announced after the market had closed that it has agreed to sell its South African energy coal assets.
South32 is a mining company that was spun out of BHP in 2015. They produce bauxite, alumina, aluminium, nickel and various other metals through operations in Australia, Southern Africa and South America. South32 shares are listed on the ASX and also have secondary listings on the London and Johannesburg stock exchanges.
South32’s South African Coal Asset Sale
The resources company announced that it has entered into a binding conditional agreement for the sale of its 91.835% holding of its South African Energy Coal (SAEC) business to Seriti Resources and two trusts which will acquire and hold equity on behalf of employees and communities.
The transaction isn’t guaranteed to go through because there a number of conditions still to go through.
There will be an upfront cash payment of approximately 100 million South African Rand (AU$9.81 million). The purchase price also includes a deferred component where South32 will receive 49% of the free cash flow generated by SAEC from the point of the deal completion to March 2024 with payment capped at 1.5 billion South African Rand per year (AU$147 million per year).
South32 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 South Africa’s Energy Coal’s existing domestic and export operations, including its significant untapped resource base.
“The sale of our 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.”
The acquisition requires approval from South African and certain foreign competition authorities as well as various other entities.
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