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The Competition Court has given the green light to South32’s sale of its South African coal assets to Seriti Resources, paving the way for the miner to become a key supplier of coal to Eskom.
The transaction, in which Seriti acquires around 92% of South32’s stake in the South Africa Energy Coal (SAEC), was announced at the end of 2019. The remaining 8% stake in SAEC will be held by an economic empowerment consortium black led by the Phembani Group.
The deal, which started with an upfront payment of R100 million last year, will ultimately make Seriti the largest coal supplier to state-owned power company Eskom, which has faced coal supply challenges in the past. . Eskom needs more than 100 million tons of coal each year to supply its power plants.
South32 said in a notice to shareholders Wednesday that it appreciated the court’s decision to approve the sale. The approval includes the conditions that Seriti must meet after closing the deal.
South32 CEO Graham Kerr said approval of the transaction was an “important step”. Progress was on track to seal the transaction during the March 2021 quarter, Kerr said.
Seriti CEO Mike Teke said the agreement was part of Seriti’s “strategic journey” to ensure greater certainty for employees, communities and suppliers for a “sustainable future.”
“The transaction remains strategically attractive to South Africa’s energy security and to Seriti’s desire to participate meaningfully in the export and domestic coal markets. We are confident that we will be able to make good progress on the final elements of the transaction in the next few months, “Teke said.
In a statement on its decision, the Court said that the merger would promote greater black ownership and allow employees and communities to benefit from a “free and duty-free participation” in SAEC, as well as a benefit for junior miners through a divestiture condition attached to the agreement.
The divestment condition relates to the Leandra project, a large thermal coal project approximately 100 km east of Johannesburg. The condition states that SAEC must sell any pending or awarded prospecting or mining rights associated with Leandra to a suitable buyer within a specified period.
Other conditions include limiting layoffs to 25 qualified employees and not sharing competitive-sensitive information.
