Anglo American to demerge South Africa coal operations
Anglo American’s plans to separate its coal business in South Africa will be implemented through the transfer of its operational assets to a new holding company, Thungela Resources Limited.
Mark Cutifani, Chief Executive of Anglo American, commented: “Anglo American has been pursuing a responsible transition away from thermal coal for a number of years now. As the world transitions towards a low carbon economy, we must continue to act responsibly – bringing our employees, shareholders, host communities, host governments and customers along with us. Our proposed demerger of what are precious natural resources for South Africa, allows us to do exactly that.
“We are confident that Thungela will be a responsible steward of our thermal coal assets in South Africa, benefiting from an experienced and diverse management team and board. While representing just a small proportion of Anglo American today, we are laying the foundation for South Africa’s leading coal business, setting it up for success to deliver value for all its stakeholders. Looking forward, we believe the prospects for long-term value delivery are greatest as two standalone businesses, each with their own strategy and access to capital.”
Thungela CEO July Ndlovu added: “Thungela is a leading South African producer of high quality, low cost export thermal coal, well positioned to benefit from improved market conditions, and providing a reliable and affordable energy source to our customers mainly in developing economies. We have significantly repositioned and upgraded our portfolio in recent years into a highly competitive producer of export product, with established access to world-class export infrastructure.
“As an independent business we will continue to contribute significantly to our host communities and South Africa’s development objectives. As part of our commitment to creating an enduring positive legacy, we are establishing an employee partnership plan and a community partnership plan, with each holding a 5% interest in the Thungela thermal coal operations in South Africa, thereby enabling employees and communities to share in the financial value that we generate.
“Guided by the high standards set by Anglo American, Thungela is committed to operating sustainably – continuing to drive safety, health, environmental, governance and social programmes for the benefit of our employees, host communities and shareholders. The demerger of Thungela and our listing on the JSE will represent yet another major milestone for Anglo American’s long-running contribution towards transforming South Africa’s mining industry.”
The proposed demerger recognises the diverse range of views held by Anglo American’s shareholders in relation to thermal coal and therefore provides Anglo American’s shareholders, including those with specified investment criteria, with the choice to act on such views and, following the implementation of the proposed demerger, to either retain, increase or decrease their interests in Thungela. The proposal also allows Thungela to attract new shareholders and to access new sources of capital as an independent company offering direct exposure to thermal coal.
Anglo American is committed to setting up Thungela as a sustainable standalone business, including by providing an initial cash injection of ZAR2.5 billion (approximately $170mn) and further contingent capital support until the end of 2022 in the event of thermal coal prices in South African rand (ZAR) falling below a certain threshold.
Following the implementation of the proposed demerger, and in line with Anglo American’s responsible approach, Anglo American’s marketing business will continue to support Thungela in the sale and marketing of its products for a three-year period with an additional six-month transitional period thereafter.
This transitionary arrangement ensures that customers receive a consistent service and supply of thermal coal while Thungela concentrates on enhancing the performance of its operations while continuing to receive optimal value for its products in the market. The three-year term, and the additional six-month roll-off period, also provide time for Thungela to build its own global marketing capabilities should it choose to do so.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.