'Transformative milestone': South32 says it set out to sell coal assets to black-owned entity

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South32 says the sale of its thermal coal assets to Seriti Resources fits the country's transformation agenda.
South32 says the sale of its thermal coal assets to Seriti Resources fits the country's transformation agenda.
  • South32's sale of local coal assets Tasmanian Electro Metallurgical Company will have it halve its Scope 3 emissions.
  • The sale of the assets to Seriti was in line with the country's transformation agenda.
  • South32 has its sights on a number of base metal projects, including in North America.

South32, the Australian miner that has offloaded its thermal coal assets to Seriti Resources, says it was deliberate about seeking out a black-owned entity to take over the mines as the group now prepares to focus on low-carbon base metals.

The company described the divestment, which is expected to be concluded in June, as a "transformative milestone" for the company, as it fits South Africa's transformation agenda.

"We were seeking a black-owned and operated company to acquire South Africa Energy Coal, consistent with South Africa's transformation agenda. We are pleased to have achieved that vision through the transaction with Seriti Resources," said Simon Collins, the company's chief development officer, on Tuesday.

On June 1, Seriti is expected to take ownership of South32's South Africa Energy Coal (SAEC), in a transaction that would boost the company's exposure to the lucrative Eskom market and improve its share in the local mining activity.

Thermal coal mining has in the recent past seen an increase in change of ownership structures, as international firms curb their exposure to the carbon-intense resource, which is the country's main source of energy production. South32's SA Energy Coal currently supplies most of Eskom's 2 875 MW Duvha power station's coal requirements.

But the mining group, which was spun out of BHP Billiton in 2015, now has its sights on nickel, zinc, lead and silver deposits in different regions across the world, including North America, where work was charging ahead in its Hermosa Project in Arizona.

Halve emissions

The Hermosa project consists of two mineral deposits, Taylor and Clark. 

"In Arizona, the Hermosa team are nearing completion of the pre-feasibility study for the Taylor Zinc, lead and silver deposit," said Collins in a business update.

The company is planning to capitalise on the growing global shift for electric vehicle batteries and Clark is being touted as a potential source for manganese to be used in vehicle batteries.

With the exit of the local thermal coal operations, together with the January 2021 sale of the Tasmanian Electro Metallurgical Company (TEMCO), South32 says it is poised to halve its Scope 3 emissions and substantial reduce its capital intensity, increase group margins and have greater balance sheet flexibility.

Collins said there were also several regional targets being tested in the 2021 exploration program. 

Mining companies are increasing diversifying into based metals, which are now termed "new precious metals" and sparked a new investment wave, due to the rising global demand. Metals such as manganese, lithium and cobalt are used in batteries, with nickel used in stainless steel production and to some degree in batteries.

The Democratic Republic of Congo is the world's largest source of cobalt, which is most widely used in the lithium-ion batteries and the country accounts for nearly two-thirds of the world's supply.

A 2020 Battery Metals Market report stated projected that the demand for electric vehicle or hybrid electric vehicle was going to drive growth for the battery metal market from 2020 to 2027. The sector would also benefit from the renewable energy industry, which is expected to boost the demand for batteries.

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