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Exxaro, Seriti are said to mull bids for South32 coal assets

South32’s coal operations are being valued at almost $800 million.

Exxaro Resources and Seriti Resources are among companies considering bidding for South32’s South African thermal coal operations, which have been valued at almost $800 million, according to people familiar with the matter.

South32’s South Africa Energy Coal unit, the country’s third-biggest exporter of the fuel, was split into a standalone business earlier this year in preparation for a sale. South32 is soliciting expressions of interest for the assets and MTN. Chairman Phuthuma Nhleko’s Phembani Group is also considering an offer, said the people, who asked not to be identified because the information is not public.

Potential bids may range from about R8 billion to R12 billion ($790 million), the people said. The investment arm of non-profit group Mining Forum of South Africa said it plans to make an offer for a 30% stake.

Exxaro declined to comment. Phembani and Seriti didn’t immediately respond to requests for comment. South32 said it has “commenced a process” to broaden the ownership of its South African coal unit, “consistent with our commitment to further transform our South African operations.’

Exxaro, Seriti and Phembani are all South Africa-based, black-owned companies, reflecting a changing landscape of mining ownership in the country as some of the world’s biggest international miners reduce their holdings.

Apartheid redress

State power utility Eskom is the country’s biggest buyer of the fuel and the government is pushing companies to boost black involvement in the economy to make up for discrimination during apartheid. Global mining companies are also under growing pressure from investors to divest from the dirtiest fuels.

South32’s energy-coal business in South Africa has three operating mines, which produced almost 29 million metric tons of the fuel last year.

Phembani already controls 8% of the mines and may look to increase those stakes, according to the people. Exxaro may be interested in a bid as part of a consortium, the people said. Seriti bought coal mines and a large deposit from Anglo American earlier this year.

The deal would give potential buyers access to 18 million tons a year of export capacity, or more than a fifth of the total allocation at the Richard Bay Coal Terminal, according to a prospectus that lists Macquarie Group Ltd. and Morgan Stanley as advisers to the sale.

Only shareholders have an automatic right to export through the terminal, which accounts for almost all of the country’s coal-shipping capacity and is the largest on the continent.

South Africa Energy Coal reported R1.4 billion of revenue for the 2018 fiscal year. It is also the third-largest supplier to Eskom.

© 2018 Bloomberg L.P
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