The sale is pending approval from the Antimonopoly Commission and the South African Department of Mineral Resources and Energy.
Exxaro, one of the largest mining companies in South Africa, is about to sell three BEE coal mines.
Exxaro sources said they were going to sell the Dorstfontein, Forzando and Tumelo mines, collectively known as Exxaro Coal Central (ECC), to a wholly-owned Black Overlooked Colliery.
The sale of ECC and the Leuwpan mine to Exxaro in Mpumalanga has been on the map for some time after the assets were identified as non-core to the company’s future strategic goal.
Exxaro, the largest coal supplier to Eskom, has embarked on a strategy to gradually diversify away from coal to cleaner alternative energy technologies.
Overlooked is a privately owned, 100% black-owned mining company that operates the Overlooked mines, as well as the Veltevreden and Halfgevonnen mines, which it recently acquired from Sudor Coal.
Overlooked currently produces 2.4 million tonnes of coal per year and plans to double that figure to 4.8 million tonnes per year by 2022.
“The successful completion of the sale of ECC to a reputable black-owned mining operator such as Overlooked confirmed Exxaro’s strategic view that the assets have value and that the other operator has more room to extract the maximum value from these assets,” said Exxaro in the statement.
Exxaro said it applies eligibility criteria, including value maximization, widespread black ownership and resilience of the new operator for asset management, in determining who should acquire the assets, and minimizes the transaction risk for Exxaro.
In addition, the group stated that it is “pleased to play a meaningful role in helping miners gain scale and additional resources to their existing operations.”
The purchase price includes money in the rehabilitation fund, which Exxaro will retain. In addition, Overlooked will take over all the rehabilitation obligations.
Exxaro will retain the right to export coal through the Richards Bay coal terminal.
Exxaro said it received funding assurance from Overlooked lenders to settle its commitments under the ECC deal. Exxaro said Overlooked has received confirmation and sponsor guarantees from Absa and “another South African bank.”
The deal, which is expected to close in the second half of 2021, is awaiting approval from the Competition Commission and the Department of Mineral Resources and Energy.
The cost of the deal was not disclosed, but Exxaro said the funds received will be used in accordance with its capital allocation scheme.
The closure of the transaction is subject to the completion of regulatory approvals and other conditions that Exxaro says are common in this type of transaction.
Exxaro, said the Leeuwpan sale is ongoing and shareholders will be kept informed of the progress of the sale once it is completed.