South32 to close South African coal unit sale with Seriti
South32 will pay $200mn across a decade to partly fund costs of the environmental clean up of the mines of its South Africa Energy Coal unit once they close, and a $50mn facility to pay for the costs of restructuring some loss-making mining sites, it said.
The deal would allow South32 to reshape its business by exiting the thermal coal sector at a time when many banks and insurers are scaling back financing for the sector because of global warming concerns, reports Reuters.
Miners typically guarantee a larger portion of funds to cover rehabilitation costs if a buyer is small, to assure governments they won’t have to foot the bill, said analyst Peter O’Connor, at Australian investment firm Shaw and Partners.
“It’s a step backwards to go forward, but the key here is that they (South32) need to do this deal, it has been a burden on them for so long, it makes a cleaner, simpler, leaner business,” O’Connor said.
Coal’s deteriorating demand outlook may play a larger part in future divestment and spin-off plans being considered by majors BHP Group, Anglo American Plc and Glencore, he added.
South32 announced the divestiture in November 2019 with Seriti initially providing a 100 million South African rand ($6.7 million) upfront payment and South32 receiving deferred payments based on future cash flows from the mines until March 2024, capped at 1.5 billion rand ($101.49mn) per year.
However, South32 agreed to drop the deferred payment plan and has downgraded the 100 million rand price to a nominal fee.
The sale to Seriti is expected to close before the financial year end, South32 Chief Executive Graham Kerr told a media call, as talks over terms of a coal supply deal with state-run South African power provider Eskom continue and it waits for approval from the South African Treasury.
Gerald Group resolves iron ore dispute with Sierra Leone
Gerald Group, the US commodity trader, will pay Sierra Leone $20mn and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production, the two sides revealed.
Gerald's wholly-owned subsidiary SL Mining filed for arbitration in August 2019 over a royalty payment dispute and suspended the Marampa mine the following month. Sierra Leone's government responded by cancelling its mining licence.
As part of the agreement signed on Friday, Sierra Leone will take a non-dilutable 10% stake in a new company that will replace SL Mining and resume operations at Marampa by June 1, Gerald said in a statement.
Gerald will make two $10mn payments this year and will have the immediate right to ship its current stockpile of about 707,000 tonnes of iron ore, it said.
Both sides will withdraw their legal claims before the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID), the statement added.
Gerald’s chairman and CEO Craig Dean commented: "I am delighted that we have been able to resolve our differences and have a fresh start and new beginning with the government of Sierra Leone."
Sierra Leone's Mines Minister Timothy Kabba told a news conference on Tuesday that the agreement was a milestone for the country.
"Whatever the pain we may have borne or dreaded throughout these two years ... this outcome justifies our action," he said.
Gerald estimates that Marampa holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.
Back in 2019, Dean spoke with Mining about the development of Marampa and commented: "SL Mining offers a substantial opportunity for Gerald Group as our Marampa mine in Sierra Leone is producing two million tonnes per annum of high grade iron ore in the first phase of development, with expansion possibilities of greater than six million tonnes per annum of high-grade iron ore during its operational life. If you analyse the iron ore market it has transformed, even from a couple of years ago when prices were very low. Now prices have stabilised we’re in a favourable position with our first shipments leaving for China.
"Our goal is to make ‘Marampa Blue’ an internationally recognised premium grade iron ore brand. We intend to expand the delivery of high-grade 65% iron ore concentrate to markets in Europe and Africa.”