South32 to spin off energy coal business, mulls listing


South32 to spin off energy coal business, mulls listing

Published Date: 2017-11-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

South32 to spin off energy coal business, mulls listing

The group wants to broaden black ownership of the asset and introduce communities and workers as shareholders

South32 says it will manage South Africa Energy Coal (SAEC) as a stand-alone business from next April and will invest R4.3 billion to extend the life of its Klipspruit colliery by about 20 years. It's also considering listing the business separately on the JSE to broaden its ownership and introduce black economic empowerment partners, communities and employees as shareholders.

The mining and metals company says SAEC needs ongoing investment to sustain production and meet its take or pay rail and domestic supply obligations. South32 plans to restructure the business to sustainably improve its financial performance. The move will also make it easier to manage its global portfolio.

Related article: Coal on a roll as it plans name change, share consolidation

Development activity is expected to start in the next couple of months at the Klipspruit Life Extension project, with first coal expected from the open-cut operation in 2019. The investment will ensure employment for 740 workers and create 4 000 jobs during construction. Kerr says the investment is expected to generate an internal rate of return of more than 20% by unlocking 616 million tons of resource at the Klipspruit South and Weltrevreden deposits and fulfilling around half of its current rail obligations with Transnet.

South32's shares fell 2.6% to R34.64 yesterday.

Similar Stories