Thu, Sep 13, 2018 - Page 10 News List

Exxaro, Seriti mulling bids for South32 coal assets

Bloomberg

Exxaro Resources Ltd and Seriti Resources are among companies considering bidding for South32 Ltd’s South African thermal coal operations, which have been valued at almost US$800 million, people familiar with the matter said.

South32’s South Africa Energy Coal unit, the nation’s third-biggest exporter of the fuel, was split into a standalone business earlier this year in preparation for a sale.

South32 is soliciting expressions of interest for the assets and MTN Group Ltd. Chairman Phuthuma Nhleko’s Phembani Group is also considering an offer, said the people, who asked not to be identified because the information is not public.

Potential bids might range from about 8 billion rand to 12 billion rand (US$532.43 million to US$798.64 million), the people said.

The investment arm of non-profit group Mining Forum of South Africa said it plans to make an offer for a 30 percent stake.

Exxaro declined to comment, and Phembani and Seriti did not immediately respond to requests for comment.

South32 said it has “commenced a process” to broaden the ownership of its South African coal unit, “consistent with our commitment to further transform our South African operations.”

Exxaro, Seriti and Phembani are all South Africa-based, black-owned companies, reflecting a changing landscape of mining ownership in the country, as some of the world’s biggest international miners reduce their holdings.

State power utility Eskom Holdings SOC Ltd is the nation’s biggest buyer of the fuel and the government is pushing companies to boost black involvement in the economy to make up for discrimination during apartheid.

Global mining companies are also under growing pressure from investors to divest from the dirtiest fuels.

South32’s energy-coal business in South Africa has three operating mines, which produced almost 29 million tonnes of the fuel last year.

Phembani already controls 8 percent of the mines and might look to increase those stakes, the people said, adding that Exxaro might be interested in a bid as part of a consortium.

Seriti bought coal mines and a large deposit from Anglo American PLC earlier this year.

The deal would give potential buyers access to 18 million tonnes a year of export capacity, or more than one-fifth of the allocation at the Richard Bay Coal Terminal, according to a prospectus that lists Macquarie Group Ltd and Morgan Stanley as advisers to the sale.

Only shareholders have an automatic right to export through the terminal, which accounts for almost all of the nation’s coal-shipping capacity and is the largest on the continent.

South Africa Energy Coal reported 1.4 billion rand of revenue for this fiscal year. It is also the third-largest supplier to Eskom.

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