By Loni Prinsloo and Paul Burkhardt
September 11, 2018 - Exxaro Resources Ltd. and Seriti Resources are among groups considering bidding for South32 Ltd.’s South African thermal coal operations, which have been valued at almost $800 million, according to people familiar with the matter.
South32’s South Africa Energy Coal unit, the country’s third-biggest exporter of the fuel, was split into a standalone business earlier this year in preparation for a sale. South32 is soliciting expressions of interest for the assets and MTN Group Chairman Phuthuma Nhleko’s Phembani Group is also considering an offer, said the people, who asked not to be identified because the information is not public.
Potential bids may range from about 8 billion rand to 12 billion rand ($790 million), the people said. The investment arm of non-profit group Mining Forum of South Africa said it plans to make an offer for a 30 percent stake.
Exxaro declined to comment. Phembani and Seriti didn’t immediately respond to requests for comment. South32 said it has “commenced a process” to broaden the ownership of its South African coal unit.
Exxaro, Seriti and Phembani are all South Africa-based, black-owned companies, reflecting a changing landscape of mining ownership in the country as some of the world’s biggest international miners reduce their holdings.
State power utility Eskom Holdings SOC Ltd. is the country’s biggest buyer of the fuel and the government is pushing companies to boost black involvement in the economy to make up for discrimination during apartheid. Global mining companies are also under growing pressure from investors to divest from the dirtiest fuels.
South32’s energy-coal business in South Africa has three operating mines, which produced almost 29 million metric tons of the fuel last year.
Phembani already controls 8 percent of the mines and may look to increase those stakes, according to the people. Exxaro may be interested in a bid as part of a consortium, the people said. Seriti bought coal mines and a large deposit from Anglo American earlier this year.
The deal would give a potential buyers access to 18 million tons a year of export capacity, or more than a fifth of the total allocation at the Richard Bay Coal Terminal, according to a prospectus that lists Macquarie Group Ltd. and Morgan Stanley as advisors on the sale process.
Only shareholders have an automatic right to export through the terminal, which accounts for almost all of the country’s coal-shipping capacity and is the largest on the continent.
South Africa Energy Coal reported 1.4 billion rand of revenue for the 2018 fiscal year. It is also the third-largest supplier to Eskom.