South32 May List South Africa Coal as $305 Million Boost Planned

JOHANNESBURG (Capital Markets in Africa) – South32 Ltd. will manage its South African energy-coal assets separately from April and spend 4.3 billion rand ($305 million) extending the life of its Klipspruit operation, as it seeks to include more black shareholders into the business before possibly listing it in Johannesburg.

“South African Energy Coal requires ongoing investment to sustain production and meet its take-or-pay rail and domestic-supply obligations,” the Perth, Australia-based company said in a statement on Monday. The “take-or-pay” arrangements with state rail operator Transnet SOC Ltd. see producers pay the transport company for allocations on trains even if they aren’t used.

South32 will also restructure the unit, which will have “tailored” support processes, it said. The plan to find more black investors will start after this, as would the potential listing. The company owns 92 percent of South Africa Energy Coal, with the rest held by a group of black investors led by Pembani Holdings.

South32 owns four coal operations, including the opencast Klipspruit mine in South Africa’s eastern Mpumalanga province, employing about 4,100 full-time workers and 4,300 contractors. They supply state-owned power producer Eskom Holdings SOC Ltd., which uses the fuel to generate about 80 percent of its electricity and which is the nation’s top buyer.

Eskom has said it wants suppliers to be black-controlled as South Africa pushes companies to increase black involvement in the economy to make up for discrimination during apartheid.

The Klipspruit investment will extend its life by 20 years, South32 said.

South Africa Energy will continue to be fully consolidated in the group’s financial statements until there is a change in control, South32 said. The company also owns part of two manganese mines and an alloy smelter in South Africa’s Kalahari Basin in the Northern Cape, as well as the Hillside aluminium smelter at Richards Bay on the east coast.

Source: Bloomberg Business News