(Alliance News) - South32 Ltd on Thursday said it has changed the terms of its South Africa energy coal divestment agreement after key information regarding negotiations with Seriti Resources Holdings Pty Ltd and Eskom Holdings SOC Ltd ceased to be confidential.
On Monday, South32 said it now expects the transfer of its shareholding in South32 SA Coal Holdings Pty Ltd to Seriti to complete following the end of the March quarter. Previously, South32 said it was on track to close the transaction during the March quarter.
The deal was agreed back in November of last year, when South32 said it would sell its 92% holding in the coal subsidiary for an upfront payment of ZAR100 million. The consideration also included a deferred payment, with South32 expecting to receive a portion of the cash flow generated by the unit, capped at ZAR1.5 billion.
In addition, South32 would earn 49% of cash generated between the completion of the transaction and March 2024.
On Thursday, South32 said it has amended the original agreement by adjusting the up-front cash payment to a nominal consideration and removing the deferred consideration. The terms related to the 49% of earnings from operations were not changed.
The Perth, Western Australia-based mining company said it also has entered into a USD50 million facility with a subsidiary of Seriti that will primarily fund costs to be incurred for the restructure of some loss-making mining areas. In addition, South32 has agreed to provide USD200 million to fund rehabilitation activity. The facility is expected to be drawn down before the end of 2022 and is repayable over a ten-year period.
Seriti, meanwhile, said it intends to enter into a five year working capital facility of up to USD120 million with a South African commercial bank, which will be supported by a South32 subsidiary guarantee.
South32 Chief Executive Officer, Graham Kerr said: "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."
Kerr added: "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."
South32 shares closed 1.4% higher in Sydney on Thursday at AUD2.85 each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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South32 (S32)