APRIL 10, 2017 by: Joseph Cotterill in Johannesburg
Anglo American said on Monday it had agreed to sell coal operations in South Africa that supply domestic power stations to a black-owned company, in a sign that the mining group is pressing ahead with a strategy to exit some assets in the country.
Seriti Resources, a company controlled by four black-owned investment groups, will pay about R2.3bn ($164m) for the Anglo assets, and is due to become the second-largest supplier of coal to Eskom, the state-owned power utility.
Mark Cutifani, Anglo’s chief executive, said the sale was “part of our ongoing commitment to reshape and upgrade our global asset portfolio”.
Last year, amid pressure to reduce its debt load following the commodities slump, Anglo announced plans to shrink from nine products to just three: diamonds, platinum and copper.
The company also sought to reduce its exposure to South Africa by proposing to sell coal and manganese mines in the country, as well as Kumba, a large iron ore business.
South Africa has become a tough environment in recent years for mining companies, due to spiralling costs and regulatory uncertainty.
But a rebound in commodity prices during the past year, which has helped push Anglo’s share price up 300 per cent, prompted the company to consider retaining some of the unwanted South African assets, including Kumba.
Anglo pressed ahead with selling the Eskom-linked coal mines as the electricity monopoly has been pressing for suppliers to be 51 per cent black-owned, under measures to reduce economic inequality in the mining industry.
“We continue to believe that the unbundling of the [South African] bulk commodities business [Kumba and the coal mines] will be key to the value-unlock for Anglo shareholders,” said Barclays analysts.
“The announcement today, while not material in size, is another step in the right direction to achieve this.”
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Anglo has cut its net debt by a third during the past year, to $8.5bn at December 31, although the company has yet to resume paying dividends.
The company has come under pressure from its largest shareholder, the Public Investment Corporation, which manages a pension fund for South African government employees, to spin off its operations in the country as one entity rather than dispose of them piecemeal.
Mike Teke, the head of Seriti who also chairs South Africa’s chamber of mines, the industry representative body, said the Anglo deal would help create “a black-controlled, broad-based South African mining champion, and a coal player of significant size and scale”.
The collieries to be bought by Seriti supply 25m tonnes a year, or about one-quarter of Eskom’s needs.
Anglo will continue to own South African coal mines that export overseas, although Mr Teke said that Seriti would be interested in bidding for these if they were also put up for sale.
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