Tuesday 19th Dec, 2017

South32 prepares to spin-off South African coal

Coal. Photo: Shutterstock.
Photo: Shutterstock.

ASX-listed miner South32 has announced it will operate its South Africa Energy Coal business as a stand-alone entity from April next year, and will invest $396 million to extend the life of its Klipspruit colliery by roughly two decades.

The diversified miner said the SAEC business “requires ongoing investment to sustain production and meet its take or pay rail and domestic supply obligations”.

South32 plans to isolate the business from the rest of its operations by April 2018, at which point it will look to “broaden ownership” of SAEC, in a process which may eventually see the business listed on the Johannesburg Stock Exchange.

Chief executive Graham Kerr said establishing SAEC as a stand-alone business would help improve the operation’s competitiveness and ongoing sustainability.

“This process will also allow us to further simplify our organisation and unlock additional value for shareholders,” Kerr said.

“We will also seek to increase the local ownership of SAEC, consistent with our commitment to South Africa’s economic transformation, and may ultimately list the business on the Johannesburg Stock Exchange.”

Kerr said the announcement of a 4.3 billion South African Rand (A$396 million) extension project for SAEC secured the future of the Klipspruit colliery for at least another 20 years, ensuring employment for 740 people and creating 4,000 jobs during development.

“The investment is expected to generate and internal rate of return on investment of more than 20% by unlocking 616mt of resource at the Klipspruit South and Weltevreden deposits, and fulfilling around half of our current rail obligations,” Kerr said.

South32 is itself comprised of a range of former BHP assets that were spun off in a major restructure in 2015.