- Anglo American CEO Mark Cutifani says the proposed entity, Thungela Resources, would lay the foundation for the country's leading coal business.
- The demerger would be effective on 4 June, with Thungela’s shares listed on the JSE and LSE on 7 June 2021.
- Anglo has committed additional financial support to the new business, in the event of a drop in coal prices.
Anglo American says it will offload its thermal coal assets in South African into a new entity called Thungela Resources, which will be set up with a capital injection of R2.5 billion.
The proposed vehicle, which is subject to shareholder approval, will be listed in Johannesburg and London and led by July Ndlovu, the current CEO of Anglo Coal.
The diversified mining giant announced the plan this year as part of its transitions towards a low carbon economy and says the demerger would allow Thungela to attract new shareholders and to access new sources of capital as an independent company offering direct exposure to thermal coal.
Anglo American CEO Mark Cutifani said although coal formed a small part of the company business, he was confident that the move would lay the foundation for the country's "leading coal business" and set it for success to deliver value for stakeholders.
"Anglo American has been pursuing a responsible transition away from thermal coal for a number of years now," he said.
In 2018, Anglo sold its Eskom coal supplying mines, Kriel, New Denmark and New Vaal to Seriti Resources.
Shareholders are expected to vote on the demerger at a meeting on 5 May.
"We believe the prospects for long-term value delivery are greatest as two standalone businesses, each with their own strategy and access to capital," said Cutifani.
If it is approved, the demerger would be effective on 4 June 2021, with Thungela’s shares listed on the JSE and LSE on 7 June 2021.
"Following completion of the proposed demerger, 100% of the issued share capital of Thungela will be held by Anglo American shareholders who will each receive one Thungela share for every 10 Anglo American shares that they hold," the company said.
Apart from the initial cash injection of R2.5 billion, Anglo has committed a further contingent capital support until the end of 2022 in the event of thermal coal prices in rand terms "fall below a certain threshold".
Coal, which is the biggest emitter of greenhouse gases in South African is largely used in electricity production by Eskom and exported to large markets such as India and China. Pressure has been mounting for companies to adopt cleaner sources of energy, as part of commitments to global Climate Change agreements.
A number of local and international financial institutions have also adopted guidelines for funding of coal projects, with Standard Bank stating that it would provide support under strict guidelines, with an emphasis on the use of technology to reduce carbon emissions. Despite the environmental challenges associated with companies, companies still see a future in coal mining, and energy from coal-fired power station still forms a significant part of the country's energy mix, as outlined in the government's Integrated Resource Plan.
Ndlovu said Thungela is "well positioned to benefit from improved market conditions and providing a reliable and affordable energy source to our customers mainly in developing economies".
Thungela will hold 90% of the thermal coal operations in South Africa with the remaining 10% held collectively by the employee partnership plan and the community partnership plan.