South32’s sale of Illawarra Metallurgical Coal is now unconditional after all conditions precedent to the deal have been satisfied.
The sale of Illawara to an entity owned by Golden Energy & Resources and M Resources was expected to be complete on September 2, South32 said in a statement on Monday.
South32, which is valued at about R164bn on the JSE and A$13.7bn on the Australian Securities Exchange, is selling Illawarra for up to $1.65bn, making headway in its strategy to simplify and reduce capital intensity.
The deal will involve the buyer assuming economic and operating control of Illawarra, including all current and future liabilities.
Illawarra produces premium-quality, hard coking coal for steelmaking. Its buyers are established participants in the Australian metallurgical coal industry.
South32 will receive an upfront cash consideration of $1.05bn less the deposit of $40m already paid on completion. The deferred cash consideration of $250m, payable in 2030, and the contingent price-linked cash consideration of up to $350m would be recognised in the group’s financial statements as a non-current other receivable and a non-current other financial asset, respectively, it said.
The upfront cash consideration will be allocated in accordance with South32’s capital management framework and commitment to an investment grade credit rating.
South32 CEO, Graham Kerr said the sale of Illawarra was a significant milestone in the transformation of the group’s portfolio towards commodities critical to a low-carbon future.
“The transaction will simplify our business, strengthen our balance sheet and reduce our capital intensity, unlocking capital to invest in our high-quality development projects in copper and zinc.
“Looking forward, our strategy and disciplined approach to capital allocation is unchanged. We remain focused on delivering our development projects and advancing our portfolio of earlier stage options to further increase our exposure to commodities critical to a low-carbon future and realise substantial value for our shareholders,” Kerr said.
The Perth-based miner, which was spun off from BHP in 2015, is the world’s biggest producer of manganese. It also produces bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel and metallurgical coal from its operations in Australia, Southern Africa and South America.
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