The young Turks of SA’s emerging coal sector
Publication: Miningmx.
Author: David McKay.
ASKED to clarify the pronunciation of his name, Vuslat Bayoglu responded: “Call me Vusi”, normally a short version of a common South African name. This was the amusing riposte to conference host Bernard Swanepoel’s tongue-in-cheek complaint about the Turk, now in his fifteenth year in South Africa’s coal mining industry.
Bayoglu’s first foray ended messily in court following a bust-up with an empowerment partner. His comeback is Canyon Coal, an eminently more successful effort that he puts down to the absence of new investment dollars from companies like Glencore.
“Back in the day, it was very hard to get new business as Glencore was the dominant player in South African coal,” said Bayoglu on the sidelines of the Junior Indaba, a conference set up by Swanepoel’s company in May. “The group [Glencore] is less involved now. It’s provided a lot of room to pick up assets that are available,” said Bayoglu.
The country’s coal sector is in an interesting space, partly because the majors are thinking carefully about their future strategies. It’s not exactly a case of ‘getting the hell out of Dodge [City]’, but it’s cautious of fresh investment. In the case of Anglo American, it is divesting from the coal sector. South32 is pressing ahead with resource extension projects, one of which is related to Eskom coal supply and, therefore, contractual whilst Exxaro Resources has announced plans to sell certain assets.
That has created opportunities. Scinta South Africa, a company in which Seriti Resources’ Sandile Zungu is invested through Zungu Investment Corporation or Zico, recently bought South32’s Davel coal prospect and Ermelo Mines for R187m.
“There’s about four million to five million tonnes of Eskom quality coal in the discards which we can deliver to Camden power station, which is linked by rail and is about 20km away,” said Charl Ferreira, an executive director of Zico Investments. “We have been discussing the purchase of the South32 assets for about seven years.”
The plan is to build a R2.5bn thermal coal mine at Davel. First, though, Scinta hopes to generate short-term cash flow by processing two discard dumps at Ermelo Mines, which also has a plant and infrastructure that will be eventually repurposed for Davel. It’s a nifty piece of entrepreneurism that is becoming typical of business activity in the sector.
For Bayoglu, the plan is to take Canyon’s production to as much as 10 million tonnes a year (Mtpy) from a current base of about 3.5Mtpa through the development of organic or brownfield projects of recently acquired assets and projects.
The largest of these is De Wittekrans, an 118Mt coal resource near Hendrina in Mpumalanga province. Bayoglu thinks it will have run-of-mine production of some 3.2Mtpy. The project was previously on the books of Continental Coal, a now-defunct company that was once listed in Sydney until it experienced cash flow problems amid a price correction for coal. First, though, Bayoglu has to replace tonnes at existing operations.
Most of Canyon Coal’s current production is split between its Singani (1.6Mtpy) and Phalanndwa (1.4Mtpy) operations. Of these, Singani and its third mine – Hakhano – are reaching the end of their economic lives, which is where assets like De Wittekrans come in.
Production from the mines is sold either domestically or into the export market – Bayoglu’s home country, Turkey, takes tonnes as does Pakistan – but none of the fuel is sold to Eskom of which Bayoglu is critical. “There isn’t anybody who isn’t captured in that organisation,” he says.
ONE of the assets Exxaro Resources was considering selling was Matla, a thermal coal mine contracted to sell some 10Mtpy of coal to Eskom’s Matla power station. As a cost plus mine, it is Eskom’s responsibility to pay for the extension of mineable resources. The fact it hasn’t yet – after promising to do so last year – is thought to be one of the reasons the Matla mine was temporarily put on to Exxaro’s non-core asset list. Others on this list include Arnot, the closed Eskom mine, and North Block Complex.
The fact of the matter is that the increasingly unpredictable business environment regarding Eskom is proving catalytic for the mid-size to junior coal mining space. The other is the redraft of the Mining Charter, which has scattered what little regulatory certainty there was in South African mining to the wind.
A potential buyer for Matla, had it to come on to the market, was Wescoal Holdings – a company that has emerged from the damaging executive row in 2015 with a new strategy focused on its 51% black-owned status. The fallout among executives, principally its founding CEO Andre Bojé, was exactly over the black economic ownership. Bojé wanted to sell the company to an international buyer who liked the potential Bojé had created in the business; Robinson Ramaite, Wescoal’s chairman, preferred entrenching the BEE ownership.
Whether Ramaite’s eventual victory in forcing Bojé out will be to the long-term benefit to Wescoal’s shareholders remains a moot point presently. So far, however, Wescoal has made good progress on a recovery, led by CEO Waheed Sulaiman.
By June, the company was wrapping up its R525m cash and share takeover of Keaton Energy, a transaction that takes Wescoal’s coal production immediately to 6Mtpy with potential to add about 2m more tonnes annually once it develops Moabsvelden, a long-standing project of Keaton’s.
Ultimately, however, Sulaiman hopes to have much larger fish to fry.
“The BEE deal injected new equity into the business and we believe it has really given us a competitive edge over our peers,” said Sulaiman. “From now, we think there can be a significant increase in the asset base and we have plenty of new options around business opportunities. It really positions us well for the next stage of growth.” Wescoal has targeted coal production of 10Mtpy as a medium-term target.
This would be achieved either through small or large transactions, although Sulaiman is cautious regarding taking on too much. “We would look at large transactions but we have to do it in a considered manner,” he said. “Exxaro is one of the things we’re looking at but we have to weigh it up against a deal we know we can do successfully. We need to know we can deliver; make promises we can keep.”
Sulaiman is bound to be pitched against Coal of Africa, led by the savvy and experienced campaigner, David Brown. As with Wescoal, Brown has articulated a growth strategy that is predicated on either small or large acquisitions, recognising in the South African coal industry a fluidity that will throw up opportunities of many stripes.
Whilst Wescoal was inking the Keaton deal, Brown was negotiating the purchase of Uitkomst, a colliery in KwaZulu-Natal province bought from Glencore by Pan African Resources. It was neat business by Cobus Loots, CEO of Pan African, to have bought Uitkomst as it was profit-making, but strategically shareholders didn’t seem overly keen on the asset since Pan African’s mandate was low-cost gold mining.
In selling Uitkomst for R275m, however, Loots pocketed for Pan African shareholders a R157m profit whilst handing CoAL cash flow deemed crucial to its own expansionary plans – the R2.5bn to R3bn Makhado thermal and metallurgical coal project in South Africa’s Limpopo province.
Makhado is a monster of an investment, especially given CoAL’s R1.3bn market valuation: a project that is scoped to produce 2.3Mtpy of coking coal and a further 2.3Mtpy of thermal product over a 16-year life of mine. So far, Brown has used equity in the project and company to raise support and most recently secured a R240m loan from the Industrial Development Corporation to assist with the early stage development of the project.
In terms of project scale, however, few measure up to Resource Generation’s (Resgen’s) Boikarabelo – a prospect also in the Limpopo province, but different to CoAL’s Makhado in that it’s part of the Waterberg coalfields, an area considered the next hub of South African coal production, especially as the riches of the Mpumalanga province are eventually exhausted. So far, only Exxaro Resources has invested substantially in the Waterberg, through its fantastically large Grootegeluk mine and expansion project. But Boikarabelo may well be the very next.
Raising capital for Boikarabelo has been a torturous process. First there was a management coup in which Resgen’s predominantly Australian executive were replaced by South Africans – a move made to align project management with the asset. Resgen had already been toiling with Boikarabelo, raising (and spending) just over R2bn on the project basics, overcoming some (but not all) of the regulatory hurdles, for about five years.
Under the leadership of Rob Lowe, a private equity specialist whose only previous with the coal industry had been on the level of investment manager, Resgen set about the task of pinning down the balance of the capital – a meaty R4bn worth of funds.
A club of lenders including Rand Merchant Bank, HSBC as well as the IDC and Public Investment Corporation, are ready to stump up the capital, but before the credit approval process could begin, there had to be 100% comfort with the setting down of contracts, as well as the business model. Thanks to an improvement in the thermal coal market – where prices appear to be settling between $70 to $75/t – Boikarabelo looks like it may become the next major investment in South Africa’s coal sector.
Lowe says saleable production will be about 6.5Mtpy but with potential to scale up significantly in a phase two development, possibly beyond 20Mtpy. As for coal destination… that would depend. Initially production from Boikarabelo was heading for Eskom, but there’s less certainty now given the ructions at the state-owned power utility.
Commenting in a shareholder update on May 4, Resgen chairman, Denis Gately, said discussions had been held with Eskom that had given Resgen confidence there were “solid grounds” to conclude a coal supply agreement (CSA), but he added: “Further discussions are currently on hold pending the outcome of internal inquiries taking place within Eskom unconnected with the negotiation of this supply agreement.” It wasn’t clear what was meant by “internal inquiries”.
“Eskom’s internal procedures are being held up while people are sent on leave and new people are being appointed,” says Lowe. “But we are not anticipating any issues with the National Treasury because the CSA is vanilla.”
“We are far advanced in relation to the Eskom CSA with the quantities, qualities, the power stations to which Eskom would like the coal delivered,” says Lowe. “We have also had a general discussion on pricing pending these inquiries. But the impact on us is that decisions are not being made which is frustrating as we just want to get the mine built.”
Eskom leadership crisis may damage security of coal supply
Publication: Miningmx.
Author: David McKay.
THE management crisis at Eskom, whilst deeply troubling if not entertaining, raises the question as to who’s around to make the executive decisions, especially important ones that are related to primary energy procurement.
The feedback from the South African coal industry is essentially to put a brave face on the matter. There’s no mistaking the difficulties, however.
“When we started talking to Eskom, the CEO changed twice,” said Norman Mbazima, deputy chairman of Anglo American South Africa, a company in the throes of selling some 25 million tonnes/year (Mtpy) of domestic coal to a new black-owned consortium, Seriti Resources, a company in which former Chamber of Mines chairman, Mike Teke is involved.
Said Mbazima: “But there has been proper engagement taking place even before the CFO was appointed [Anoj Singh]”. This was the fact of the matter at the time of Miningmx’s interview with Mbazima. It’s an indication of just how unstable Eskom has become that Singh was put on leave amid pressure from lenders including the Development Bank of Southern Africa which threatened to withdraw a R15bn loan to the power utility.
Mbazima insists the sale of Anglo’s domestic coal mines to Seriti is pressing ahead, but it does involve the transfer of a coal sales agreement (CSA) with Eskom. Anglo has always made it clear that Eskom is no bystander in this arrangement so it remains to be seen how long the process is going to take.
As described in a previous Miningmx article, published in June, there’s some coal mining executives who decline to sell coal to Eskom at all, given the uncertainty and rolling crisis at the organisation. “There’s no-one who isn’t captured at Eskom,” was the view of Vuslat Bayoglu, CEO of unlisted miner Canyon Coal which produces 3.5Mt of coal annually and has ambitions to take this to 10Mtpa.
Growing attitudes of this ilk will eventually pose a risk over the security of Eskom’s primary energy supply – something of which Molefe was fairly sanguine. He didn’t believe Eskom would suffer much of a coal supply deficit. It’s not a view shared by Exxaro Resources CEO, Mxolisi Mgojo, whose company has taken a concerted effort to reduce its exposure to Eskom-related business.
Said Mgojo in an interview: “This deficit [in coal supply to Eskom] is going to continue to increase if the environment is not conducive for any new further investment by big players who are currently supplying Eskom. They may decide that they just can’t put there money there.
“That deficit will continue to increase which means that there’s going to be a continued shortage of coal. Then, of course, some of these resources are being depleted, and so over time we will have this challenge”.
Mgojo has personal experience of this “challenge” having failed to persuade Eskom to reinvest funds in Exxaro’s cost plus Arnot mine which supplied Eskom’s Arnot power station. The mine was eventually closed and arbitration over closure liabilities are currently underway.
The COO of South32’s Southern Africa business, Mike Fraser, acknowledges Eskom has been in a state of near permanent logjam for months, if not years. He thinks, however, South32, the Perth- and Johannesburg-listed diversified group, has a workaround for its problems.
It’s good that it does: South32 is contemplating an extension to its Khutala colliery in Mpumalanga province, an operation that currently supplies 10.2Mt of coal to Eskom’s Kendal power station. However, production is set to fall to 8.6Mtpy in South32’s 2017 and 2018 financial years, hence the project. Eskom is funding the feasibility study for the extension, but there’s been no decision as yet to extend the current reserves which presently stand at nine years.
Fraser said Eskom had provided capital for an open cut mini-pit operation which would provide additional volumes, and a discussion was underway regarding a short-term underground extension whilst South32 studies a larger life extension.
“That life extension project ‘scope of works’ is being defined; we’re in feasibility now,” said Fraser. “We believe that in to 2018 we’ll be ready for an Eskom investment decision which gives us sufficient time to develop that into, say, 2021, when we’ll actually need those additional volumes before we really start tailing off on the current underground production.”
Fraser said it is becoming harder for Eskom to award new CSAs than it is to amend existing ones. “So our go-forward hypothesis is that we’ll use our current CSA and this will be an addendum because it’s essentially an investment under the existing coal supply agreement,” he said. Whilst there may be some slight changes in the agreement – to account for differing coal qualities contained in the expansion project for instance – it’s thought this would be easier for Eskom to do.
Fraser also believes that even whilst it was under the guidance of Molefe, there was a growing realisation – assisted by the work of McKinsey & Co which was providing consulting services – that it was still cheaper putting in Eskom’s own capital than inducing capital from lenders because “… then people have to create risk on top of it”. That’s why he thinks that in some respects, the so-called cost plus mines that Molefe disliked so much – those Eskom paid for in return for exclusive supply – make sense.
Commenting on Exxaro’s relationship with Eskom, Mgojo is philosophical. “My view is that Eskom-Exxaro will be around long after the current leaders of either organisations are there because there’s a 40-year agreement that will need to both honour.
“It is my hope and my wish that if I’ve not been very good in making it work as Mxolisi that the next guy will do a better job than me. You just have to do it because 40 years is a long time still to be in a very rocky and bad relationship,” he said.
How does the mining industry in South Africa attract investment?
Publisher: Mining Review Africa.
Author: Richard Jansen van Vuuren.
I strongly believe mining in South Africa still has a great future. We still employ 460 000 people and touch lots of families who depend on these 460 000 employees.
I have always referred to the mining industry as an industry of long cold winters and short beautiful summers, but I never anticipated it could/would be devastated by storms or tornadoes as well – especially in South Africa.
While the recent retrenchment announcements from the gold and platinum sectors are serious cause for concern, I believe we are still a strong sector of the economy.
The coal mining industry still has decent reserves in the Mpumalanga area and our electricity is 90% generated from this sector.
Beyond Eskom, our domestic coal market, which comprises cement producers, paper mills, chicken producers and others is still generating decent profits for some coal producers.
In 2016, we exported 72 Mt of coal out of Richards Bay Coal Terminal.
Beyond Mpumalanga, we have amazing resources in the Waterberg offering several options for our country.
In fact, we are going to be the energy provider for sub-Saharan Africa if not the entire Africa.
Of course, we also need to be aware of environmental sensitivities that have influenced trends towards different energy mixes around the world, with a greater focus on, for example, solar and wind energy.
We must accelerate our strategy and investment approach to this sector.
The steel industry is still going strong thanks to Kumba Iron Ore and other iron ore producers in the country, followed closely by our manganese mining community.
South Africa is part of the global economy and we are competing with the best in mining and have to take our game to the next levels or we’ll have bid this important industry goodbye
Manganese and zinc will continue to be the life line of the Northern Cape and I am confident that entrepreneurs like Daphne Mashile Nkosi will take this industry to next level of low cost production and technological advancement.
Platinum Group Metals (PGMs) and gold (as I’ve said) still provide great value and huge opportunities – but we all need to appreciate the cost pressures and commodity prices that have not lived up to expectations.
It is time to manage expectations regarding the price of PGMs and of gold as well as global market conditions impacting on these metals.
South Africa is also still a key player in diamond mining, as we recently realised following Anglo American’s recent financial results.
And let’s not forget, we have other great resources which include chrome.
In further support of developing these resources, there is also huge potential to continue developing our junior mining sector which stands to benefit the mining industry moving forward.
I continue to meet great, established and aspiring junior miners who require assistance in many ways.
We must acknowledge that the game has changed
The South African mining industry employs 460 000 people. Image courtesy of www.123rf.com
I am still of a strong view that Anglo American, South32, Glencore and other multinationals operating in South Africa still feel at home here and they do see value in operating assets in this country.
The mostly black-owned mining houses, which include ARM, Exxaro, Liketh and hopefully the recently formed Seriti Resources also believe in the industry and still have the patriotic zeal to operate in South Africa.
They also have aspirations and ambitions to explore opportunities beyond the borders of our country.
What I can vouch for is that the leadership of the industry, often referred to as the ‘captains of industry’, is committed to the country and the creation of value for all.
So! South Africa may be firmly in control of its mining industry from all fronts but must acknowledge that the game has changed!
I am still of a strong view that Anglo American, South32, Glencore and other multinationals operating in South Africa still feel at home here and do see value in operating assets in this country
We must acknowledge that the advent of AMCU and its phenomenal growth has created a different form of dialogue and different rules of engagement.
The industry and all its stakeholders have adjusted well to this change.
The industry faces legacy issues related to retired employees, deceased employees and employees affected by illness or injury sustained whilst they were in the employ of the industry years and decades back.
There are orphans and ex-employees out there without knowledge that they are entitled to monies from our industry, be it their retirement funds or compensation entitlements, and we must accelerate the process of dealing with this.
We must engage with respect and strengthen our partnerships with communities and listen more, rather than instruct and direct.
I am aware that in some instances mining houses have also been treated unreasonably with expectations and entitlements, but it is not always the case. This relationship must improve.
Never have two important matters in the mining industry been so intertwined as health and safety and production.
Our approach to the relentless pursuit for zero harm should be elevated always. At the same time, our competitiveness as an industry needs to have equal priority.
Simply defined, it relates to consistent growth of businesses with sustainable profitability to deliver value to shareholders and all other stakeholders.
This is going to be achieved through technological advances in mining. We are embracing mining 4.0 as the fourth industrial revolution sweeps through the global economy.
Every mining executive is embracing digitisation and the internet of things.
We have to embrace technological advancement for the sake of the industry’s future whilst recognising its impact on jobs.
The scourge of Illegal mining is creating a new set of challenges for mine leadership as well.
Again, I emphasise the power of partnerships amongst different stakeholders to deal with this scourge.
It is not only affecting mining companies but its unhealthy and unsafe and we have do more.
So why are we singing in discord? Why the brinkmanship? Why do we create complexity?
We face issues that if they remain unresolved, our country will lose great investment opportunities and other mining jurisdictions will forcefully take our place and we will be that irrelevant “has been”.
What must we do to ensure a great mining industry?
Our government must acknowledge now and here that the regulatory environment has deteriorated and we must jointly act.
Our industry is not anti-transformation.
I reiterate, the mining industry is not anti-transformation.
The mining industry embraced transformation a long time ago and will continue to do so.
We need to deal directly with the outstanding matters related to legislation and regulation and rekindle investor certainty.
We need a new Mining Charter. But it must be one agreed on by all the main stakeholders arrived at through honest engagement.
Business and labour represent two different constituencies with one common goal of growing the sector and delivering prosperity to the country.
The partnership for growth and prosperity will guarantee our country some jobs.
Common to our agenda is health and safety, productivity, superior corporate citizenship and old fashioned integrity.
Partnering with communities has never been as urgent as it is now.
Both mining houses and communities need each other. It’s all about dialogue to address grievances, clarify expectations and manage them.
Zero harm must be central to our daily agenda as we operate mines, period.
Difficult and sad to state, but whilst we embrace technology and usher digitisation or the forth industrial revolution, the social impact of this might be difficult to fathom and accept.
Our initiatives in this arena must be accelerated.
At the end of the day, mining still contributes to the GDP of our country and it still is a strong catalyst in economic growth and development of our country.
We must accept that other sectors or industries in our economy are becoming stronger and more relevant as technology advances.
We are part of the global economy and we are competing with the best in mining and have to take our game to the next levels or we’ll have to bid this important industry goodbye.
Feature image credit: www.123rf.com
Seriti Resources lines up R20bn New Largo project
Publication: Miningmx.
Author: David McKay.
SERITI Resources, the consortium that is concluding the purchase of Eskom-dedicated coal mines from Anglo American, is set to add to its asset base with an agreement to buy the New Largo project – a development that could see Seriti go public depending on its capital requirements.
According to the last published estimates on the project, New Largo would provide 15 million tonnes a year (Mtpy) to Eskom, primarily to its Kusile power station which is currently under construction. However, the capital required to build the mine is estimated at R20bn.
The project is currently owned by Anglo and its empowerment partner, but the group decided to exit domestic coal productions, partly because Eskom has been asking new suppliers of coal to sell control to black partners, a situation that would lower the attractiveness of low margin, cost plus mines which New Largo may become.
If this transaction materialised, Anglo will have completely exited all domestic coal mine production.
Mike Teke, a member of the Seriti Resources consortium through his Masimong Group Holdings, and it’s CEO, said he did not comment on market speculation. Seriti had not yet concluded the R2.3bn acquisition of the New Vaal, New Denmark and Kriel mines which supply about 24Mtpy to Eskom power stations on a cost plus basis.
Adding New Largo to this mix would, when the project is complete, make Seriti the largest supplier of coal to Eskom. In addition to Teke, the Seriti consortium also includes Thebe Investment Corporation, Zungu Investments Company, led by Sandile Zungu, and Anna Mokogong’s Community Investments Company.
Mining Charter battle continues
Publication: BusinessLIVE.
Seriti Resources CEO Mike Teke discusses Mines Minister Mosebenzi Zwane comments at the Joburg Indaba and how it’s navigating things as a coal miner in South Africa right now.
Anglo Coal’s Ndlovu optimistic about prospects, Seriti deal
Publication: Miningmx.
Author: David McKay.
WHEN July Ndlovu was appointed CEO of Anglo Coal South Africa, a division of the UK-listed group, the expectation was that his elevation to the 45 Main Street hierachy would be a short-lived one.
Months earlier, Anglo American CEO, Mark Cutifani, has outlined plans to radically restructure the company such that all its bulk mining assets – iron ore and coal – would be sold so that there could be a focus on platinum, copper and diamonds.
This triggered a chain reaction of management changes with Ndlovu moving from Anglo American Platinum where he was head of processing to replace Themba Nkhwanazi who in turn had replaced Norman Mbazima at Kumba Iron Ore. It was Mbazima’s new job to oversee the asset sales.
Ironically no sooner had Cutifani unveiled the restructure that the commodity market staged a remarkable comeback, coal and iron ore in particular. Where speculation thrived on the notion Kumba and the coal assets would be merged and controlled by the Government’s Public Investment Corporation, there was now a new reality. Suddenly, Anglo was not the forced seller of old, cash burning assets, and would manage its formerly non-core mines for cash unless a cracking offer was tabled.
Asked in an interview with Miningmx if he could forsee a time Anglo would eventually sell its coal mines, Ndlovu said – somewhat amused at the crossroads that would then confront him: “As a business unit CEO, quite honestly, I have to run the business as best as I can and make sure it’s the best thermal coal business on the globe”.
“Anyway, a business is owned by somebody so I don’t get bogged down with whether Anglo will sell us or not. I’ve a role to develop the endowment that we’ve got in the most capital efficient way. It generates cash, good returns,” he said.
That it does.
Underlying pre-tax profit for Anglo American’s South African coal mining division in the six months ended June 30 increased 73% to $283m owing to an attributable 46% increase in the export thermal coal price. Total export saleable volumes were in line with the first half of the previous financial year. Total trade production was 11.4 million tonnes (Mt) representing a 3% decline as a result of the planned closure of the Eskom pit at Khwezela.
More broadly, Anglo Coal South Africa is removing Eskom sales out if its business completely once a R2.3bn sale to Seriti Resources, a black-owned consortium which has Mike Teke, Sandile Zungu and Anna Mokokong as its leaders, is completed – a transaction that to some extent relies on Eskom getting its act together. The assets involved are sizeable: Anglo’s Eskom business sold 24Mt in its 2016 financial year and consists of the New Denmark, New Vaal and Kriel mines.
Eskom’s troubles with leadership is among the most well documented crisis of modern-day South Africa, but Ndlovu thinks the executives currently fulfilling acting roles – such as Eskom CEO, Johnny Dladla – won’t have much difficulty approving the deal since it merely requires the transfer of a sales contract. [The interview was conducted before Dladla was revolved out of the position to be replaced by another acting head, Sean Maritz].
“That’s always going to be an issue. Having said that, there are people in acting positions, there’s an interim board; we work with them on the assumption that they have got the necessary mandates to act in the best interests of the organisation. We haven’t seen anything yet to suggest Eskom wouldn’t be able to make or get a decision,” said Ndlovu.
Ndlovu thinks the deal will take its course; ultimately, it’s out of Anglo’s hands. The same could be said of the coal price but Ndlovu is fairly optimistic. In additon to the extreme weather conditions currently which plays into the hands of coal exporters able to opportunistically capitalise on shortages, there’s also an explosion of new markets, especially in South East Asia notwithstanding the near global antipathy for coal-fired energy.
“Coal is on the comeback because of a number of factors, not just cut-backs in China but also the fact that we’re beginning to see new markets emerging in South East Asia, North Africa, the Middle East. So, you see South Korea and Taiwan building new power stations; in Pakistan there are new stations coming. It’s all beginning to support the price.”
Anglo American Plc - Anglo American Completes Sale Of Eskom-tied Thermal Coal Operations In South Africa
Publication: Sharenet.
Anglo American plc (“Anglo American”) confirms completion of the sale of its Eskom-tied domestic thermal coal operations in South Africa (the “Operations”) to Seriti (the “Transaction”). The consideration payable for the Operations as at 1 January 2017 is ZAR2.3 billion (approximately US$164 million).
Mark Cutifani, Chief Executive of Anglo American, said: “We are pleased to have completed the sale of our Eskom-tied domestic thermal coal operations in South Africa to Seriti. This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to
Eskom.”
Norman Mbazima, Deputy Chairman of Anglo American South Africa, commented on the Transaction: “We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector, reinforcing Anglo American’s longstanding
track record, and commitment to, economic empowerment and sustainable transformation.”
The Operations consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries.
For further information, please contact:
Media
UK
James Wyatt-Tilby
james.wyatt-tilby@angloamerican.com
Tel: +44 (0)20 7968 8759
Marcelo Esquivel
marcelo.esquivel@angloamerican.com
Tel: +44 (0)20 7968 8891
South Africa
Pranill Ramchander
pranill.ramchander@angloamerican.com
Investors
UK
Paul Galloway
paul.galloway@angloamerican.com
Tel: +44 (0)20 7968 8718
Trevor Dyer
trevor.dyer@angloamerican.com
Tel: +44 (0)20 7968 8992
Sheena Jethwa
sheena.jethwa@angloamerican.com
Tel: +44 (0)20 7968 8680
Anglo American plc
20 Carlton House Terrace London SW1Y 5AN United Kingdom
Registered office as above. Incorporated in England and Wales under the Companies Act 1985.
Registered Number: 3564138 Legal Entity Identifier: 549300S9XF92D1X8ME43
Tel: +27 (0)11 638 2592
Ann Farndell
ann.farndell@angloamerican.com
Tel: +27 (0)11 638 2786
Notes to editors:
Seriti
Seriti Coal Proprietary Limited, the purchaser, is a wholly owned subsidiary of Seriti Resources Holdings Proprietary Limited (“Seriti”). Seriti is a broad-based, majority HDSA-owned and controlled South African mining company, established with the aim of preserving and operating strategic energy assets for the benefit of South Africa and its people. Seriti is owned jointly by four strategic “anchor” shareholders, namely Masimong Group Holdings Proprietary Limited (“Masimong”), Thebe Investment Corporation (“Thebe”), Zungu Investments Company Proprietary Limited (“ZICO”) and Community Investment Holdings Projects (“CIH Projects”). Seriti’s management team will be led by Mike Teke who has extensive mining experience through the acquisition, operation and development of Optimum Coal Mines and Koornfontein Mines which produced approximately 10Mtpa of saleable domestic and export thermal coal and the development of other large scale thermal coal projects. Seriti intends to provide meaningful equity participation for management, employees and communities in its structure.
Anglo American
Anglo American is a globally diversified mining business. Our portfolio of world-class competitive mining operations and undeveloped resources provides the raw materials to meet the growing consumer-driven demands of the world’s developed and maturing economies. Our people are at the heart of our business. It is our people who use the latest technologies to find new resources, plan and build our mines and who mine, process and move and market our products to our customers around the world.
As a responsible miner – of diamonds (through De Beers), copper, platinum and other precious metals, iron ore, coal and nickel – we are the custodians of what are precious natural resources. We work together with our key partners and stakeholders to unlock the long-term value that those resources represent for our shareholders and for the communities and countries in which we operate – creating sustainable value and making a real difference.
www.angloamerican.com
1 March 2018
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 01/03/2018 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
Anglo concludes R2.3bn sale of Eskom-tied mines to Seriti
Publication: Engineering News.
Author: Annie Kilian.
JOHANNESBURG (miningweekly.com) – Anglo American has completed the sale of its Eskom-tied thermal coal operations to broad-based, majority black-owned and -controlled South African mining company Seriti Resources, which is led by CEO Mike Teke, for R2.3-billion.
The acquisition includes the New Vaal, New Denmark and Kriel mines, as well as various mine life extension projects.
“We are very proud to have concluded this defining transaction with Anglo American. Seriti is committed to building a new South African mining champion and to providing Eskom with cost-effective, long-term coal supply solutions,” Teke said at a media briefing on Thursday.
“It has been almost a year since the first announcement of the impending transaction was made and it’s been a complex transaction to bed down,” she said, adding that the size of the transaction was also significant.
“It is arguably one of the most important transformational mining transactions in the past decade. Seriti will become a prominent player in this field,” she said, adding that the company would take over the running of operations with immediate effect.
Anglo deputy chairperson Norman Mbazima agreed that the transaction represented a major step change in transformation in the coal sector in the country.
“It also reinforces Anglo American’s longstanding record and commitment to economic empowerment and sustainabletransformation,” he said, adding that the sale represented one of the largest broad-based black empowerment deals in the coal and broader mining sector.
“Today is a big day for the South African mining industry,” he stated.
Anglo CEO Mark Cutifani, meanwhile, said the transaction was a continuation of the reshaping of the group’s global asset portfolio based on value and the optimal deployment of capital, while realising value for its shareholders and ensuring reliable supply of coal to Eskom.
Seriti Coal will supply 22% of Eskom’s yearly coalrequirement from the three mines.
The New Vaal colliery is contracted to supply 17.8-million tons a year of coal to the Lethabo power station, New Denmark is contracted to supply 10.5-million tons a year to the Tutuka power station and the Kriel colliery is contracted to supply 8.5-million tons a year of coal to the Kriel powerstation.
The Lethabo and Tutuka coal supply agreements (CSAs) have a further 11 years to run, while the Kriel CSA expires in two years.
Teke noted that the first priority of the Seriti leadership team would be to engage with operational staff and other stakeholders to achieve a seamless ownership transition.
Around 3 000 former Anglo American employees, including on-mine management and, indirectly, more than 3 000 contractors will now form part of the Seriti team.
Black-owned groups Thebe Investment, Masimong, Zungu Investments Company and Community Investment Holdings own 25% apiece of Seriti Resources Holdings, which, in turn, holds 90% of Seriti Coal. Employees and communities own the 10% balance of Seriti Coal.
OPTIMUM COAL
Meanwhile, Teke said Seriti would be interested in considering acquiring the Optimum coal mine, which is currently under business rescue.
The mine was placed in business rescue last week as a result of the financial difficulties facing its owners Tegeta Resourcesand Exploration. Employees at the mine have also recently embarked on strike action over the alleged nonpayment of their salaries.
Anglo American sells some collieries and mines to Seriti Resources
Publication: Business Day.
Author: Allan Seccombe.
Anglo American concluded the R2.3bn sale of three collieries that supply Eskom with coal as well as four shuttered mines, to Seriti Resources.
The transaction announced in 2017 marked the decision by Anglo to cut its exposure to the state-owned power utility, which was insisting on 51% black ownership of its coal suppliers, something the Anglo board would not countenance because it would become a minority partner.
Anglo has also agreed to sell its undeveloped New Largo colliery to a consortium that includes Seriti, leapfrogging the new resources company into the top tier of coal suppliers to Eskom.
Anglo CEO Mark Cutifani and Anglo American SA deputy chairperson Norman Mbazima have both said in 2018 that its sales process in SA had come to an end with the sale of the Eskom-linked mines, and that it remained exposed to export thermal coal, iron ore, platinum group metals, diamonds and manganese from SA.
“This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to Eskom,” Cutifani said on Thursday.
The owners of Seriti, namely Masimong Group, Thebe Investment Corporation, Zungu Investments Company and Community Investment Holdings, which own 90% of the entity, provided funding towards the deal and secured debt from Standard Bank to fund the deal.
Community and employee trusts own the remaining 10% of Seriti, which has Mike Teke, a long-time miner and former president of the Chamber of Mines, as the CEO.
“Seriti is committed to building a new South African mining champion and to providing Eskom with cost-effective, long-term coal supply solutions,” Teke said.
The sale also ticked a box for Anglo in creating a black-owned mining company with a solid set of assets, said Mbazima.
“We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector, reinforcing Anglo American’s longstanding track record, and commitment to, economic empowerment and sustainable transformation.”
The New Vaal, New Denmark and Kriel collieries employing 6,000 people supply Eskom with 24-million tonnes of coal a year, providing coal to three power plants that account for a quarter of Eskom’s annual electricity production.
Seriti would be more than willing to have a look at the Optimum colliery that is at the heart of corruption allegations against the Gupta family and inappropriate behaviour by Eskom.
“We’d love to look at Optimum,” said Teke, who was the CEO of the listed Optimum company that ran the colliery before it was bought by Glencore. “In every calamity there is an opportunity.”
Optimum is one of three large mines the owners Tegeta Resources has put into a business rescue process, unable to pay salaries and suppliers. It’s not clear if the mines are up for sale.
Anglo American completes sale of Eskom-tied operations
Publication: Mining Review Africa.
Author: Sascha-Lee Solomons.
Anglo American confirms completion of the sale of its Eskom-tied domestic thermal coal operations in South Africa (the Operations) to Seriti (the Transaction).
Seriti, the purchaser, is a wholly owned subsidiary of Seriti Resources Holdings.
Seriti is a broad-based, majority HDSA-owned and controlled South African mining company, established with the aim of preserving and operating strategic energy assets for the benefit of South Africa and its people.
The consideration payable for the Operations as at 1 January 2017 is ZAR2.3 billion (approximately US$164 million).
“We are pleased to have completed the sale of our Eskom-tied domestic thermal coal operations in South Africa to Seriti,” comments Anglo American chief executive Mark Cutifani.
“This transaction continues the reshaping of our global asset portfolio based on value and the optimal deployment of capital, while realising value for our shareholders and ensuring reliable supply of coal to Eskom,” he continues.
“We believe the conclusion of the sale to Seriti, a broad-based, majority black-owned and controlled South African mining company, represents a major step change in transformation in the coal (and broader mining) sector,” notes Anglo American deputy chairman Norman Mbazima.
He adds that it reinforces Anglo American’s longstanding track record and commitment to, economic empowerment and sustainable transformation.”
The Operations consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries.