Anglo American has agreed to demerge its thermal coal operations in South Africa to a new holding company called Thungela Resources Limited.
The separation deal, which is subject to the approval of Anglo American’s shareholders on May 5, 2021, will be implemented through the transfer of Anglo’s South Africa thermal coal operations to Thungela, the demerger of the Thungela shares to Anglo American shareholders and the primary listing of Thungela’s shares on the Johannesburg Stock Exchange (JSE) and standard listing on the London Stock Exchange (LSE).
Thungela had 16.5 Mt of attributable export production to its name in 2020, with its operations close to an established rail network with secure access to export markets via the Richards Bay Coal Terminal. It has 137 Mt of reserves and 756 Mt of resources, along with seven operations (four open-pit and three underground).
Anglo’s operations, meanwhile, are derived from three wholly owned and operated mines – Goedehoop, Greenside and Khwezela; Zibulo (73% owned, pictured); as well as from Mafube colliery, a 50:50 joint operation. It supplies around 19 Mt/y of export thermal coal from these mines.
Mark Cutifani, Chief Executive of Anglo American, said: “Anglo American has been pursuing a responsible transition away from thermal coal for a number of years now. As the world transitions towards a low carbon economy, we must continue to act responsibly – bringing our employees, shareholders, host communities, host governments and customers along with us. Our proposed demerger of what are precious natural resources for South Africa allows us to do exactly that.”
He added: “We are confident that Thungela will be a responsible steward of our thermal coal assets in South Africa, benefiting from an experienced and diverse management team and board. While representing just a small proportion of Anglo American today, we are laying the foundation for South Africa’s leading coal business, setting it up for success to deliver value for all its stakeholders. Looking forward, we believe the prospects for long-term value delivery are greatest as two standalone businesses, each with their own strategy and access to capital.”
July Ndlovu, CEO of Thungela, said: “Thungela is a leading South African producer of high quality, low cost export thermal coal, well positioned to benefit from improved market conditions, and providing a reliable and affordable energy source to our customers mainly in developing economies. We have significantly repositioned and upgraded our portfolio in recent years into a highly competitive producer of export product, with established access to world-class export infrastructure.
“As an independent business we will continue to contribute significantly to our host communities and South Africa’s development objectives. As part of our commitment to creating an enduring positive legacy, we are establishing an employee partnership plan and a community partnership plan, with each holding a 5% interest in the Thungela thermal coal operations in South Africa, thereby enabling employees and communities to share in the financial value that we generate.”
The proposed demerger recognises the diverse range of views held by Anglo American’s shareholders in relation to thermal coal and therefore provides Anglo American’s shareholders, including those with specified investment criteria, with the choice to act on such views and, following the implementation of the proposed demerger, to either retain, increase or decrease their interests in Thungela, Anglo explained. The proposal also allows Thungela to attract new shareholders and to access new sources of capital as an independent company offering direct exposure to thermal coal.
Anglo American says it is committed to setting up Thungela as a sustainable standalone business, including by providing an initial cash injection of ZAR2.5 billion (~$170 million) and further contingent capital support until the end of 2022 in the event of thermal coal prices in South African rand falling below a certain threshold.
Following the implementation of the proposed demerger, and in line with Anglo American’s responsible approach, Anglo American’s marketing business will continue to support Thungela in the sale and marketing of its products for a three-year period with an additional six-month transitional period thereafter, the company said.
“This transitionary arrangement ensures that customers receive a consistent service and supply of thermal coal while Thungela concentrates on enhancing the performance of its operations while continuing to receive optimal value for its products in the market,” Anglo said. “The three-year term, and the additional six-month roll-off period, also provide time for Thungela to build its own global marketing capabilities should it choose to do so.”
For the proposed demerger to be implemented, Anglo American shareholder approval will be sought at a general meeting and court meeting, both expected to be held on May 5 following Anglo American’s Annual General Meeting. If it is approved, it is expected the demerger would be effective on June 4, 2021, with Thungela’s shares being listed and admitted to trading on the JSE and LSE on June 7, 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 they hold. Each Anglo American shareholder will also retain their existing shareholding in Anglo American. 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.