South32 releases update regarding shareholding transaction with Seriti

The transaction is expected to be concluded following the end of the March 2021 quarter.

South32 advises that it has become aware that key information regarding negotiations between South32, Seriti, and Eskom Holdings SOC Ltd has ceased to be confidential ahead of finalising arrangements to satisfy the final material conditions to the transaction.

In this regard, and conditional on Eskom’s final approval, the approval of National Treasury for amendments to the terms of the Duvha Coal Supply Agreement and the completion of the transaction, South32 has committed to providing additional support to underpin the sustainability of the South Africa Energy Coal business under the ownership of Seriti. The key elements include:

• Amending the original share purchase agreement by adjusting the up-front cash payment to a nominal consideration and removing the deferred consideration mechanism.
• Entering into a US$50 million facility with a subsidiary of Seriti that will primarily fund costs to be incurred for the restructure of certain loss-making mining areas.
• Providing US$200 million to fund rehabilitation activity at the South Africa Energy Coal operations, by way of 10 annual instalments with the first US$27.5 million payment expected to be made in July 2021.

The restructure facility is expected to be drawn down before the end of FY22 and is repayable over a 10-year period if energy coal index prices exceed agreed thresholds.

In order to fund working capital requirements and investment in improvements to the South Africa Energy Coal operations, Seriti also intends to enter into a 5 year working capital facility of up to US$120 million with a South African commercial bank, which will be supported by a South32 subsidiary guarantee.

Graham Kerr, South32 Chief Executive Officer, comments:

“Securing the long-term sustainability of South Africa Energy Coal has been our key objective in transitioning the business to black ownership, consistent with South Africa’s transformation imperative. This additional support package moves us closer to completion of the sale and will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers, and local communities. For South32, the transaction will significantly simplify our business, substantially reduces our capital intensity, improves the Group’s underlying operating margin, and supports our strategy to re-shape our portfolio with a bias to base metals.”

Read the article online at: https://www.worldcoal.com/coal/07042021/south32-releases-update-regarding-shareholding-transaction-with-seriti/