28 July 2014, Comments Comments Off on Exxaro to acquire Total’s South African coal mines for $472m

Although a fledgling industry, biofuels in South Africa looks promising, owing to the high volumes of waste being produced that need to be managed and South Africa’s electricity constraints, says power technology, systems and solutions, equipment and aftermarket service provider Clyde Bergemann Africa.

“There is definitely a place for biofuels in South Africa as a future industry because it can enable companies to fill the gap in the case of a power shortage so that the business can continue,” highlights Clyde Bergemann Africa executive director Jeremy Kirsch.

Exxaro will fund the dollar-based acquisition by making use of its existing corporate debt facilities.

“The consolidation of ownership of coal assets within South Africa is a welcome opportunity,” said Nkosi.

The mines and undeveloped coal assets, which will be bought for $472-million, are all located in the Witbank coal basin in Mpumalanga.

Last year Total sold 4.5-million tons of coal to India and China from the Richards Bay Coal Terminal (RBCT) as well as into South Africa’s domestic market.

While Exxaro will be buying 74% of Dorstfontein and Forzando, the remaining 26% is owned by the black-controlled Mmakau Mining, which will render the mines far more black controlled should the deal be ratified.

Total also owns 49% of the currently non-operative Tumelo coal mine, with the remaining BEE shareholding also held by Mmakau.

In the mix, too, is 51% of the undeveloped Eloff thermal coal resource.

Total’s mines have lives of more than 20 years and a resource base of 1 498-million tons of coal in the ground and 395-million tons of of run-of-mine coal resources, all close to Exxaro’s existing Witbank operations.

Exxaro sees its investment in coal assets as a core part of its diversified mining portfolio and believes that it will be able to leverage its extensive experience in coal mining to unlock additional value from the existing Total operations and the Eloff greenfield project.

Exxaro is currently the fourth-largest exporter of coal from South Africa and the acquisition will provide it with access to an additional 4.09-million tons a year of primary phase one-to-three RBCT entitlement.

Exxaro currently leases entitlement from other operators in the industry in order to meet its export requirements.

Access to additional allocation could enable Exxaro to reconfigure and expedite its development plans for current brownfield and greenfield projects in the Waterberg region by either increasing the scale of existing operations or changing planned projects to multi-product mines.

It is anticipated that coal from the Waterberg can be used to replace the rapidly diminishing thermal coal being supplied to Eskom from existing Mpumalanga coal mines.

Exxaro currently owns the only operating coal mine in the Waterberg region, Grootegeluk, and has various other potential greenfield projects that it plans to develop in the region, including its large-scale Thabametsi project.

Having access to additional primary RBCT export allocation will facilitate Exxaro’s commitment to the development of these projects, potentially as multi-product mines.

All risk and reward will transfer to Exxaro retroactively from January 1 this year.

Exxaro has agreed to pay $386.5-million for the issued share capital with the equity consideration increased 3% a year from January 1 next year until the closing date of the acquisition.

Implementation is subject to the Competition Authorities’ and Mineral Resources Ministry’s consent in terms of Section 11 of the Mineral and Petroleum Resources Development Act, No 28 of 2002.

The South African Reserve Bank must okay the foreign exchange and the RBCT board approve the changed port allocation.

The drop-dead date of six months after the date of signature can be extended twice.

Rand Merchant Bank, legal adviser Norton Rose Fulbright South Africa and Deutsche Securities are facilitating the transaction.

Ref: http://www.engineeringnews.co.za/article/exxaro-to-acquire-totals-south-african-coal-mines-for-472m-2014-07-28