The Competition Tribunal has given the green light to South32's sale of its South African coal assets to Seriti Resources, paving the way for the miner to become a key supplier of coal to Eskom.
The transaction, which sees Seriti acquiring some 92% of South32's shareholding in South Africa Energy Coal (SAEC), was announced late in 2019. The remaining 8% interest in SAEC will be held by a black economic empowerment consortium led by the Phembani Group.
The deal – which began with an upfront payment of R100 million last year – will ultimately make Seriti the biggest supplier of coal to troubled state-owned power utility Eskom, which has in the past faced coal supply challenges. Eskom needs over 100 million tons of coal each year to supply its power stations.
South32 said in a notice to shareholders on Wednesday that it welcomed the decision by the Tribunal to approve the sale. The approval includes conditions to be met by Seriti following the close of the deal.
South32 Chief Executive Officer Graham Kerr said the approval of the transaction was an "important step". Progress was on track to seal the transaction during the March 2021 quarter, Kerr said.
Seriti CEO Mike Teke said the deal was part of Seriti's "strategic journey" to securing greater certainty for employees, communities and suppliers for a "sustainable future".
"The transaction remains strategically compelling for South Africa’s energy security, and for Seriti’s desire to participate meaningfully in both the domestic and export coal markets. We are confident that we will be able to make good progress in the final elements of the transaction in the next few months," Teke said.
In a statement on its decision, the Tribunal said the merger would advance greater black ownership and enable employees and communities to benefit from a "free and unencumbered shareholding" in SAEC, as well as a benefit to junior miners through a divesture condition attached to the deal.
The divesture condition relates to the Leandra project, a large thermal coal project approximately 100km east of Johannesburg. The condition states that SAEC must divest any pending or awarded prospecting or mining rights associated with Leandra to a suitable purchaser within a given period.
Other conditions include limiting retrenchments to 25 skilled employees and not sharing competitively sensitive information.