South32 has sealed a deal to sell off its South African coal business, as it continues to shed unwanted assets as part of an increased focus on base metals.

The transaction involves an upfront price of nearly $10 million and a deferred consideration whereby South32 will receive 49 per cent of the free cashflow generated by the business until March 2024, capped at $147 million.

South32 Chief Executive Graham Kerr said the agreement with the South African mining company followed an exhaustive and competitive sale process.

“We believe Seriti as an established operator is ideally positioned to unlock the potential of South Africa Energy Coal’s existing domestic and export operations, including its significant untapped resource base,” he said.

“The sale of our interest in South Africa Energy Coal will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities, consistent with South Africa’s transformation agenda.”

He said the divestment marked an important milestone for South32 as it continued to reshape its portfolio.

“Completion of this transaction will substantially reduce our capital intensity, strengthen our balance sheet and will improve the group’s operating margin.”

Seriti Chief Executive Officer Mike Teke said the acquisition is a significant milestone for Seriti in its ambition to become a black-owned and controlled mining champion. 

“The South Africa Energy Coal acquisition will enable us to offer further secured, long term coal supply solutions to Eskom as a demonstrable commitment to sustainably support South Africa’s energy needs,” he said.

“The combination of our energy coal businesses will realise further operational and technical efficiencies enabling us to better service our customers by offering competitive energy solutions.

“We remain fully committed to all of our stakeholders and welcome the participation of the South Africa Energy Coal employees and communities in this acquisition.”

The 91.8 per cent stake sale of the business includes two five per cent stakes to two trusts which will acquire and hold equity on behalf of employees and local communities.

South32 flagged its exit from its South African thermal coal business last year.

Image: South32 Chief Executive Graham Kerr, The West Australian.