South32 to Run South Africa Coal Unit as a Separate Business
27 November 2017 - 5:47PM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia--South32 Ltd. (S32.AU) plans to step back
from its South African energy-coal operations by managing its mines
and plants separately and it may seek a Johannesburg listing for
the operations.
The coal arm will be operated as a standalone business beginning
in April and about US$300 million will be invested in one of the
collieries to extend its life by about 20 years, the Australian
mining company said Monday.
The move will simplify how South32 manages its global portfolio
of assets, while restructuring the South African coal operations
will provide tailored support and systems and governance processes,
the company said. Managing the business separately also will allow
the company to improve competitiveness and ensure the
sustainability of operations that need ongoing investment to
sustain production and meet "take-or-pay" rail and domestic supply
obligations, South32 Chief Executive Graham Kerr said.
The South Africa unit covers three mining operations and
processing plants that, in the last financial year, produced 28.9
million metric tons of coal for domestic and export markets. It
also owns a 21% stake in the Richards Bay coal-export terminal.
Mr. Kerr said the company would seek to increase local ownership
of the coal business. The business is currently 8% owned by a black
economic-empowerment consortium that bought a stake with loans owed
to South32.
Ultimately, the business could be listed on the Johannesburg
Stock Exchange, Mr. Kerr said.
South32 was spun out of BHP Billiton Ltd. (BHP.AU) in 2015.
Listed in Sydney, London and Johannesburg, the company's operations
range from energy coal used to fuel power stations, alumina and
manganese to silver, nickel and zinc. In South Africa, it also has
manganese and aluminium operations.
The South African energy coal business employs about 4,100
full-time employees and another 4,300 contractors, representing
about 35% of South32's workforce. The company has said production
will slip to about 27.5 million tons this financial year before
rebounding to nearly 29.4 million the year after.
As it moves to split off the operation into a separate business,
South32 said it would invest 4.3 billion South African rand
(US$309.6 million) to ensure the future of its Klipspruit colliery
for at least another 20 years, unlocking 616 million tons of
resources. Development work is set to begin before the end of 2017
and first coal from the open-cut operations is set for fiscal 2019,
the company said.
Until there is a change in control of the business, and subject
to regulatory approval, the South African operations will continue
to be consolidated in South32's financial results, the company
said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
November 27, 2017 01:32 ET (06:32 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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