SOUTH32 LIMITED - South Africa energy coal divestment update

South Africa energy coal divestment update

South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
south32.net
1 April 2021                                          




                                          SOUTH AFRICA ENERGY COAL DIVESTMENT UPDATE

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) is pleased to provide the following update regarding
the transfer of our shareholding in South32 SA Coal Holdings Proprietary Limited (South Africa Energy Coal) to Seriti
Resources Holdings Proprietary Limited (Seriti) (the Transaction) 1.
Further to our release on 29 March 2021 that we now expect to conclude the Transaction following the end of the March
2021 quarter, we advise that we have become aware that key information regarding negotiations between South32,
Seriti and Eskom Holdings SOC Limited (Eskom) has ceased to be confidential ahead of finalising arrangements to
satisfy the final material conditions to the Transaction.
In this regard and conditional on Eskom’s final approval, the approval of National Treasury for amendments to the terms
of the Duvha Coal Supply Agreement and the completion of the Transaction, we have committed to provide additional
support to underpin the sustainability of the South Africa Energy Coal business under the ownership of Seriti. The key
elements include:
     •     amending the original share purchase agreement by adjusting the up-front cash payment to a nominal
           consideration and removing the deferred consideration mechanism;
     •     entering into a US$50M facility with a subsidiary of Seriti that will primarily fund costs to be incurred for the
           restructure of certain loss-making mining areas (Restructure Facility); and
     •     providing US$200M to fund rehabilitation activity at the South Africa Energy Coal operations, by way of
           10 annual instalments with the first US$27.5M payment expected to be made in July 20212.
The Restructure Facility is expected to be drawn down before the end of FY22 and is repayable over a 10-year period
if energy coal index prices 3 exceed agreed thresholds.
In order to fund working capital requirements and investment in improvements to the South Africa Energy Coal
operations, Seriti also intends to enter into a 5 year working capital facility of up to US$120M4 with a South African
commercial bank, which will be supported by a South32 subsidiary guarantee.
South32 Chief Executive Officer, Graham Kerr said “Securing the long-term sustainability of South Africa Energy Coal
has been our key objective in transitioning the business to black ownership, consistent with South Africa’s transformation
imperative. This additional support package moves us closer to completion of the sale and will enable the business to
continue to operate safely and sustainably into the future for the benefit of its employees, customers and local
communities. For South32, 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.”




1
  Refer to the market announcement “Agreement to divest South Africa Energy Coal” dated 6 November 2019. Final material conditions include
approval from Eskom Holdings SOC Limited for the transfer of our shareholding and amendments to the terms of the Duvha Coal Supply Agreement,
with the latter also subject to National Treasury consent. Purchaser includes Thabong Coal Proprietary Limited, a wholly-owned subsidiary of Seriti
and two trusts for the benefit of employees and communities.
2
  Rehabilitation activity to be funded by way of 4 annual instalments of US$27.5M followed by 6 annual instalments of US$15M.
3
  Argus McCloskey API4 Coal index 6,000Kcal NAR (FOB Richards Bay, South Africa).
4
  Facility will be based in South African rand and entered into by South Africa Energy Coal as a subsidiary of Seriti.

Registered Office Level 35 108 St Georges Terrace Perth WA 6000 Australia
ABN 84 093 732 597 Registered in Australia                                                                                                  1
Accounting treatment

If the transaction completes before 30 June 2021 South Africa Energy Coal will be presented as a discontinued operation
in our June 2021 full year results, with earnings from the business included within Underlying earnings. Any gain/(loss)
recognised on the sale of South Africa Energy Coal will be excluded from Underlying earnings.



Conference call

South32 will hold a conference call at 7.00am Australian Western Standard Time on 1 April 2021 to provide an update
on the divestment of South Africa Energy Coal, the details of which are as follows:

Conference ID: 10013361

Please pre-register for this call at link



About South32

South32 is a globally diversified mining and metals company. Our purpose is to make a difference by developing natural
resources, improving people’s lives now and for generations to come. We are trusted by our owners and partners to
realise the potential of their resources. We produce bauxite, alumina, aluminium, energy and metallurgical coal,
manganese, nickel, silver, lead and zinc at our operations in Australia, Southern Africa and South America. With a focus
on growing our base metals exposure, we also have two development options in North America and several partnerships
with junior explorers around the world.




 Further Information

 Investor Relations
 Alex Volante                                Tom Gallop
 T +61 8 9324 9029                           T +61 8 9324 9030
 M +61 403 328 408                           M +61 439 353 948
 E Alex.Volante@south32.net                  E Tom.Gallop@south32.net

 Media Relations
 Rebecca Keenan                              Jenny White
 T +61 8 9324 9364                           T +44 20 7798 1773
 M +61 402 087 055                           M +44 7900 046 758
 E Rebecca.Keenan@south32.net                E Jenny.White@south32.net


Further information on South32 can be found at www.south32.net.



                                                             Approved for release by Nicole Duncan, Company Secretary
                                                                              JSE Sponsor: UBS South Africa (Pty) Ltd
                                                                                                           1 April 2021




SOUTH AFRICA ENERGY COAL DIVESTMENT UPDATE                                                                            2

Date: 01-04-2021 07:22:00
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