17/05/2021 - 15:45

South32 closes on African coal sale

17/05/2021 - 15:45

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South32 is expecting to book a loss of up to $US175 million this financial year, in relation to the sale of its South African coal operations to local mining company Seriti Resources.

South32 closes on African coal sale
South32 is selling its South African coal operations to Seriti Resources. Photo: Attila Csaszar

South32 is expecting to book a loss of up to $US175 million ($A226 million) this financial year, in relation to the sale of its South African coal operations to local mining company Seriti Resources.

Today, South32 said it had met all conditions precedent to the sale of its South Africa Energy Coal operations, now expected to complete on June 1.

As announced in April, the company will pay $US200 million ($A258 million) to Seriti to fund rehabilitation activity at SAEC through annual instalments, with the first payment – $US27.5 million – to be made in July.

South32 is also providing a $US50 million ($A64.5 million) restructure facility to Seriti.

As a result, Perth-based South32 expects to book a full-year loss on the sale of between $US125 million and $US175 million, while its net cash balance is expected to reduce by about $US180 million.

The loss will be excluded from the company’s underlying earnings and SAEC will be presented as a discontinued operation.

“For South32, completion of the divestment is an important milestone that will see us significantly simplify our business, reduce our capital intensity and improve our underlying operating margins,” chief executive Graham Kerr said.

“Looking forward, we remain focussed on reshaping our portfolio with a bias to the base metals important for a low carbon future by advancing our development options in North America and continuing to invest in greenfield exploration.”

He said the financial support package to be provided to Seriti would underpin the future sustainability of SAEC.

The companies had first entered the sale agreement in November 2019.

Under the deal, Seriti will make an upfront cash payment of about 100 million South African Rand ($9.1 million) to South32, which will receive 49 per cent of the free cash flow generated by SAEC up until March 2024. 

Payment will be capped at 1.5 billion ZAR ($A137 million) per annum.

Shares in South32 closed up 1 per cent on Monday to trade at $2.96.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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