Anglo American will sell its Eskom-linked thermal coal operations in South Africa for $166 million, it said on Monday, marking an important step in the mining giant’s strategic overhaul to sharpen its focus on three commodities.
The mines, along with four closed collieries, have a supply agreement with Eskom, under which South Africa’s sole power utility paid for their running costs in exchange for guaranteed coal supply at a pre-set price.
Anglo, which is also listed in Johannesburg, said it will sell the assets — New Vaal, New Denmark and Kriel collieries — to Seriti Resources Holdings, which is led by Mike Teke, president of the Chamber of Mines industry lobby group.
Hit hard by a slump in commodity prices in 2015, Anglo launched a sweeping overhaul to slim down its portfolio and focus on diamonds, platinum and copper.
“This transaction forms part of our ongoing commitment to reshape and upgrade our global asset portfolio,” Chief Executive Mark Cutifani said in a statement.
Shares in the company rose more than 3% and 1% in Johannesburg and London respectively. The stock was among the to performers on Britain’s benchmark FTSE 100 index.
The sale is subject to regulatory approval and consent from Eskom for the transfer of the coal supply agreement, with Anglo saying that it expects the deal to close by year-end.
However, completion could be delayed by negotiations with Eskom, which is likely to want a cut of any sale proceeds, arguing that it owns much of the operating assets and mining infrastructure while Anglo owns the mining permit.
“For Eskom the main issue still remains the ownership of the assets because we believe we are part owners of the mines,” Eskom spokesman Khulu Phasiwe said. “We would like to get finality on the ownership issue.”
Anglo America South Africa’s deputy chairman, Norman Mbazima, said his company would hold discussions with Eskom to finalise some of the issues it has raised but did not specify what the issues were.
Seriti Resources boss Teke, a school teacher by profession, said the proposed sale is an important milestone in his company’s efforts to become a “black-owned South African mining champion”.
The company, which is 79 percent-owned by black stakeholders, has also expressed interest in buying Anglo’s New Largo project. The mine is under development to supply Eskom’s new Kusile power plant over a 47-year period, Teke said.
“We are interested in building a massive mining company in this country. The story doesn’t end here with these assets and if there’s an opportunity that comes beyond this, and Anglo is selling, we will explore that possibility,” he said.