South32 boosts support to Seriti in coal deal

Australian mining company South32 has announced additional support for Seriti Resources in the sale of its Energy Coal Business. The move comes as South32 awaits approval from Eskom and the National Treasury for the transaction. South32's Chief Operating Officer, Mike Fraser, explained that the decision to provide further assistance to Seriti was crucial to ensuring the sustainability of the business going forward. As part of the updated agreement, South32 will offer approximately $200 million in support of historical rehabilitation obligations, a working capital facility, and a guarantee to a South African commercial bank to secure additional funding for Seriti's operations. Additionally, changes have been made to the initial share purchase agreement to facilitate a successful transition of ownership. Fraser emphasized that while the coal business has faced challenges in recent years, the long-term viability of the asset remains strong. The sale of the Energy Coal Business to Seriti is part of South32's commitment to transforming its portfolio and focusing on more sustainable assets. Fraser clarified that South32 will continue to operate in South Africa with its remaining businesses in aluminum and manganese mining in the region. The decision to divest from thermal coal aligns with South32's strategic shift towards more environmentally friendly investments. Despite exiting the coal business, South32 will maintain a supportive role in Seriti's future success through the agreed-upon support package. This includes guarantees and commitments to ensure the smooth transition of ownership and the continued operation of the business. The involvement of National Treasury and Eskom in the approval process highlights the significance of the transaction, as the Energy Coal Business supplies a substantial portion of Eskom's coal requirements. Fraser explained that the coal supplied by the business accounts for approximately 10% of Eskom's total needs, underscoring the importance of the deal for the country's energy supply. While South32 will no longer be a shareholder in Seriti, the company remains committed to the success of the new owners through ongoing support and collaboration. The sale to Seriti, a majority black-owned South African company with community and employee participation, reflects South32's commitment to empowering local stakeholders and promoting inclusive growth. The deal represents a strategic step towards reshaping South32's portfolio and aligning its operations with a more sustainable and socially responsible business model. With the additional support provided by South32, Seriti is poised for a successful future in the energy coal sector.