South32 will enter into a $50m restructure facility with a subsidiary of Seriti, and will provide $200m funding for the rehabilitation activity
South32 has announced its plans to provide up to $250m funding to support the divestment of South32 Coal Holdings (South Africa Energy Coal) to Seriti Resources.
The current update follows the company’s announcement on 29 March 2021, and includes amending the original share purchase agreement by adjusting the up-front cash payment and removing the deferred consideration mechanism.
South32 will enter into a $50m restructure facility with a subsidiary of Seriti to primarily fund the costs to be incurred for the restructure of certain loss-making mining areas.
Also, the company will provide $200m funding for the rehabilitation activity at the South Africa Energy Coal operations.
The funding is expected to be provided in 10 annual instalments with the first $27.5m payment is expected in July 20212.
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.
“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.”
The restructure facility is expected to be drawn down before the end of financial year 2022, and is repayable over a period of 10 years, based on energy coal index prices.
Seriti is also planning to enter into a 5-year working capital facility of up to $120m with a South African commercial bank, to address working capital needs and improve the South Africa Energy Coal business.
The 5-year working capital facility will be supported by a South32 subsidiary guarantee.
The transaction is expected to be completed before 30 June 2021.
South32 is a diversified mining and metals company, engaged in producing bauxite, alumina, aluminium, energy and metallurgical coal, manganese, nickel, silver, lead and zinc at our operations in Australia, Southern Africa and South America.