Anglo American, South32 walk away from thermal coal

Anglo American plans to demerge its thermal coal operations in South Africa and establish a new holding company called Thungela Resources to hold the assets.

The company intends to support Thungela with a cash injection of ZAR2.5 billion ($225 million) on top of ongoing capital support until 2022 to guard Thungela against any drop in thermal coal prices.

This has been part of Anglo American’s plan to transition away from thermal coal for a few years.

The company has reduced its portfolio to largely focus on export markets, supplying around 19 million tonnes of thermal coal a year to the European and Asian markets.

“As the world transitions towards a low carbon economy, we must continue to act responsibly – bringing our employees, shareholders, host communities, host governments and customers along with us,” Anglo American chief executive Mark Cutifani said.

“Our proposed demerger of what are precious natural resources for South Africa, allows us to do exactly that.

“We are confident that Thungela will be a responsible steward of our thermal coal assets in South Africa, benefiting from an experienced and diverse management team and board.”

Thungela chief executive July Ndlovu said Thungela would provide affordable energy source to developing countries.

“We have significantly repositioned and upgraded our portfolio in recent years into a highly competitive producer of export product,” she added.

Anglo American’s thermal coal portfolio comprises three mines and a joint venture operation.

Both Thungela employees and community will each hold a 5 per cent interest in the operations.

The demerger is subject to Anglo American shareholder approval, which if granted would lead to its execution in June.

Meanwhile, South32 is transferring its interest in the South Africa Energy Coal to Seriti Resources.

The transaction is anticipated to complete after the March quarter.

This will cost South32 $US250 million as it bears the costs of rehabilitation activity and restructuring loss-making mining areas.

South32 chief executive Graham Kerr said the support package moved the company closer to completion of the sale.

“For South32,” Kerr said, “The transaction will significantly simplify our business, substantially reduces our capital intensity, improves the group’s underlying operating margin and supports our strategy to re-shape our portfolio with a bias to base metals.”

South Africa Energy Coal includes four collieries and three processing plants.