TIDMS32
RNS Number : 4383S
South32 Limited
06 November 2019
6 November 2019
South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
south32.net
AGREEMENT TO DIVEST SOUTH AFRICA ENERGY COAL
South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32)
announces that we have entered into a binding conditional agreement
for the sale of our 91.835% shareholding in South32 SA Coal
Holdings Proprietary Limited
(South Africa Energy Coal, SAEC) (the Transaction) to a
wholly-owned subsidiary of Seriti Resources Holdings Proprietary
Limited (Seriti) and two trusts which will acquire and hold equity
on behalf of employees and communities (jointly referred to as the
Purchasers).
The Transaction remains subject to a number of material
conditions summarised below. Upon those conditions being satisfied,
Seriti (on behalf of the Purchasers) will make an up-front cash
payment of approximately 100 million South African Rand to acquire
South32's shares in SAEC[1]. The purchase price also includes a
deferred consideration component where South32 will receive 49% of
the free cash flow generated by SAEC for a period commencing at the
date of completion to March 2024, with payment capped at a maximum
of 1.5 billion South African Rand per annum.
South32 Chief Executive Officer, 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 Energy Coal's existing domestic and export
operations, including its significant untapped resource base.
"The sale of our interest in South Africa Energy Coal 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."
Seriti Chief Executive Officer, Mike Teke said "This acquisition
is a significant milestone for Seriti in our ambition to become a
black-owned and controlled mining champion. The South Africa Energy
Coal acquisition will enable us to offer further secured, long term
coal supply solutions to Eskom as a demonstrable commitment to
sustainably support South Africa's energy needs. The combination of
our energy coal businesses will realise further operational and
technical efficiencies enabling us to better service our customers
by offering competitive energy solutions.
"We remain fully committed to all of our stakeholders and
welcome the participation of the South Africa Energy Coal employees
and communities in this acquisition."
The Purchasers
The Purchasers comprise Thabong Coal Proprietary Limited, a
wholly-owned subsidiary of Seriti, a community trust and an
employee trust, who will respectively acquire 81.835%, 5% and 5% of
the shares in SAEC. The beneficiaries of the community trust will
be the communities in close proximity to SAEC's operations and
employees will benefit from the employee trust.
Seriti is a broad-based, 91% black-owned and controlled coal
mining company. Seriti, through its operating subsidiary, Seriti
Coal Proprietary Limited, currently operates three large-scale,
opencast and underground thermal coal mines in South Africa namely,
the New Vaal, New Denmark and Kriel collieries, and owns various
resources with life extension potential and closed collieries.
Seriti supplies approximately 24Mtpa of thermal coal to Eskom
SOC Limited's Lethabo, Tutuka and Kriel power stations. Seriti,
together with its partners, also intends to develop the New Largo
project into a large-scale, opencast coal mine capable of providing
up to 12Mtpa over a 50 year period for the base load fuel
requirements of the Kusile Power Station.
SAEC minority owners
The remaining 8.165% interest in SAEC is held by a Broad-Based
Black Economic Empowerment (B-BBEE) consortium led by Phembani
Group Proprietary Limited.
Accounting and tax
SAEC will continue to be reported in the Group's Underlying
results. On completion of the Transaction South32's shareholding in
SAEC, including all associated assets and liabilities, will
transfer to the Purchasers.
Given the current tax base of SAEC, South32 does not anticipate
reporting a taxable profit on the Transaction from either the
upfront or deferred consideration.
Additional key transaction terms including material
conditions
Completion is subject to a number of significant regulatory and
third-party approvals, consents or confirmations being obtained or
waived. These include:
-- approval from South African and certain foreign competition authorities;
-- approval from the South African Minister of Minerals and
Energy under Section 11 of the Mineral and Petroleum Resources
Development Act (No. 28 of 2002);
-- approval from Richards Bay Coal Terminal Proprietary Limited;
-- consent from Eskom SOC Limited (Eskom) for the change of control of SAEC;
-- agreement by Eskom to the Duvha Coal Supply Agreement between
Eskom and SAEC being amended or restated on terms acceptable to
Seriti and South32; and
-- confirmation from the South African Department of Mineral
Resources and Energy that it will accept the substitution of
rehabilitation guarantees provided by South32 with rehabilitation
guarantees provided by Seriti.
Subject to the conditions being satisfied, the Transaction would
be expected to close in 9 to 12 months.
Advisers
Morgan Stanley and Macquarie Capital are acting as joint lead
financial advisers and Edward Nathan Sonnenbergs Inc. (ENSafrica)
as legal adviser to South32.
About South32
South32 is a globally diversified mining and metals company. We
produce bauxite, alumina, aluminium, energy and metallurgical coal,
manganese, nickel, silver, lead and zinc at our operations in
Australia, Southern Africa and South America. We are also the owner
of a high grade zinc, lead and silver development option in North
America and have several partnerships with junior explorers with a
focus on base metals. Our purpose is to make a difference by
developing natural resources, improving people's lives now and for
generations to come, and to be trusted by our owners and partners
to realise the potential of their resources.
Further Information
Investor Relations
Alex Volante Tom Gallop
T +61 8 9324 9029 T +61 8 9324 9030
M +61 403 328 408 M +61 439 353 948
E Alex.Volante@south32.net E Tom.Gallop@south32.net
Media Relations
James Clothier Jenny White
T +61 8 9324 9697 T +44 20 7798 1773
M +61 413 391 031 M +44 7900 046 758
E James.Clothier@south32.net E Jenny.White@south32.net
Further information on South32 can be found at
www.south32.net.
JSE Sponsor: UBS South Africa (Pty) Ltd
6 November 2019
Forward-looking statements
This release contains forward-looking statements, including
statements about currency exchange rates, commodity prices,
production forecasts, plans, development decisions, exploration and
capital expenditure. These forward-looking statements reflect
expectations at the date of this release; however, they are not
guarantees or predictions of future performance. They involve known
and unknown risks, uncertainties and other factors, many of which
are beyond our control, and which may cause actual results to
differ materially from those expressed in the statements contained
in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws
or regulations, South32 Limited does not undertake to publicly
update or review any forward-looking statements, whether as a
result of new information or future events. Past performance cannot
be relied on as a guide to future performance.
This announcement contains inside information.
[1] The up-front cash payment of approximately 100 million South
African Rand is based on an enterprise value of 1.25 billion South
African Rand adjusted for net debt and working capital.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCEAKFKELPNFEF
(END) Dow Jones Newswires
November 06, 2019 02:00 ET (07:00 GMT)
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