Empowerment consortium Seriti Resources has bought seven local coal mines from Anglo American for R2.3 billion, Anglo announced on Monday.
The seven coal mines all supply Eskom with coal. The mines are New Vaal, New Denmark, Kriel, as well as four smaller coal mines.
Seriti Resources will be the second largest supplier of coal to Eskom behind Exxaro Resources, which supplied Eskom with almost 30 million tons of coal last year.
Last year the mines that Seriti has bought supplied Eskom with 25 million tons of coal.
The Seriti consortium consists of four empowerment entities: Sandile Zungu’s Zungu Investments Company or Zico, Community Investment Holdings (CIH), which is led by CIH executive chairperson Anna Mokgokong, Thebe Investment Corporation, and Masimong Group which has Chamber of Mines chairman Mike Teke as its chairman and controlling shareholder.
Teke said during a media conference call on Monday that the Seriti consortium would look to include employees of the seven coal mines as well as local communities in the deal by offering them equity.
The Seriti consortium would be 79% black-owned, he added. Eskom has pushed for the power utility’s coal suppliers to be at least 50 percent black owned.
The deal is subject to approvals by Eskom, the Department of Mineral Resources and the competition authorities. The transaction is expected to be completed by the end of 2017.
Norman Mbazima, Anglo American South Africa CEO, said that the process of selling Anglo’s coal mines that supply Eskom started in 2015 and attracted a “very large number of companies”.
Under the terms of the transaction, the sale price will be adjusted for cash flows generated by the seven mines between January 1 and the date on which the transaction is completed.
Mbazima said the company was looking at its options for its remaining local coal mines, which mainly export coal rather than supplying Eskom power stations with coal.
These options included retaining these coal mines or possibly selling them, he added.
Kriel has estimated proved and probable coal resources of 14.7 million tons, New Denmark has estimated 102.5 million tons and New Vaal has estimated 226.9 million tons.
All three coal mines are based in Mpumalanga.
In 2016, Kriel produced 6.3 million tons of coal, New Denmark’s output was 2.5 million tons of coal and New Vaal’s 15.9 million tons of coal for total coal output for the year from the three mines of 24.7 million tons.
Bloomberg last month reported that Phembani Group, founded by MTN Group chairman Phuthuma Nhleko, had also been interested in buying the local AngloCoal mines up for sale.
Royal Bafokeng Holdings was also in the bidding for AngloCoal’s local mines.
However, in an interview in August last year CEO Albertinah Kekana told City Press that Royal Bafokeng was involved in the process to buy Anglo American’s local coal mines, but withdrew.
She declined to give reasons for dropping out.