Wrap Text
South Africa energy coal to become a stand-alone business
South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR:SOUHY
ISIN: AU000000S320
south32.net
SOUTH AFRICA ENERGY COAL TO BECOME A STAND-ALONE BUSINESS
South32 Limited (ASX, LSE, JSE: S32, ADR: SOUHY) (South32) announced today that it
will manage South Africa Energy Coal (SAEC) as a stand-alone business from April 2018
and invest 4.3 billion South African Rand (US$301M)[1] to extend the life of its Klipspruit
colliery by approximately 20 years[2] .
SAEC requires ongoing investment to sustain production and meet its take or pay rail and
domestic supply obligations. To sustainably improve its financial performance, we will
restructure SAEC and manage it separately from the rest of the Group with tailored
functional support, systems and governance processes. This change will also allow the
Group to further simplify the way it manages its global portfolio[3] .
Once SAEC has been established as a stand-alone business and consistent with our
objective to further transform our South African operations, we will commence a process to
broaden ownership of SAEC. This will present opportunities for Broad-Based Black
Economic Empowerment entities, employees and communities, and could lead to a listing of
SAEC on the Johannesburg Stock Exchange.
SAEC will continue to be consolidated in the Group’s financial statements on a 100% basis[4]
until there is a change in control.
South32 Chief Executive Officer, Graham Kerr, said “Establishing South Africa Energy Coal
as a stand-alone business will enable us to improve the operation’s competitiveness and
ensure its ongoing sustainability. This process will also allow us to further simplify our
organisation and unlock additional value for shareholders.”
“We will also seek to increase the local ownership of South Africa Energy Coal, consistent
with our commitment to South Africa’s economic transformation, and may ultimately list the
business on the Johannesburg Stock Exchange.”
About South32
South32 is a globally diversified mining and metals company with high quality operations in
Australia, Southern Africa and South America. Our purpose is to make a difference by
developing natural resources, improving people’s lives now and for generations to come. We
are trusted by our owners and partners to realise the potential of their resources. We have a
simple strategy to maximise the potential of our assets and shareholder returns by
optimising our existing operations, unlocking their potential and identifying new opportunities
to compete for capital.
This announcement contains inside information.
Registered Office: Level 35, 108 St Georges Terrace, Perth Western Australia 6000, Australia
ABN 84 093 732 597 Registered in Australia
FURTHER INFORMATION
INVESTOR RELATIONS
Katie Tovich Alex Volante Rob Ward
T +61 8 9324 9005 T +44 20 7798 1778 T +61 8 9324 9340
M +61 457 542 823 M +44 74 6853 3005 M +61 431 596 831
E Katie.Tovich@south32.net E Alex.Volante@south32.net E Robert.Ward@south32.net
MEDIA RELATIONS
Hayley Cardy James Clothier
T +61 8 9324 9008 T +61 8 9324 9697
M +61 409 448 288 M +61 413 319 031
E Hayley.Cardy@south32.net E James.Clothier@south32.net
Further information on South32 can be found at www.south32.net.
JSE Sponsor: UBS South Africa (Pty) Ltd
27 November 2017
Forward-looking statements
This release contains forward-looking statements, including statements about currency exchange
rates, commodity prices, production forecasts, plans, development decisions, exploration and
capital expenditure. These forward-looking statements reflect expectations at the date of this
release; however, they are not guarantees or predictions of future performance. They involve
known and unknown risks, uncertainties and other factors, many of which are beyond our
control, and which may cause actual results to differ materially from those expressed in the
statements contained in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws or regulations, South32
Limited does not undertake to publicly update or review any forward-looking statements, whether
as a result of new information or future events. Past performance cannot be relied on as a guide
to future performance.
About South Africa Energy Coal
South Africa Energy Coal consists of three primary coal mining operations and processing plants
producing energy coal for the domestic and export market:
• The 8.6Mt [4,5] Khutala Colliery consisting of an underground bord and pillar mine and truck
and shovel mini pit, with coal delivered to Eskom on a ‘cost plus’ basis;
• The 6.5Mt[4,5] Klipspruit Colliery consisting of a single dragline, multi seam open-cut mine and
a truck and shovel mini pit, with coal sold into the export and domestic markets; and
• The 13.8Mt[4,5] Wolvekrans Middelburg Complex (WMC) consisting of open-cut mines using
draglines as well as truck and shovel operations, with coal sold into the export market as well
as to Eskom under a long-term contract.
South Africa Energy Coal had a Coal Resource of 4,940Mt and a Coal Reserve of 346Mt as at
30 June 2017[6] . The operation owns a 21.0% interest in Richards Bay Coal Terminal Pty Ltd
(RBCT) and a port capacity entitlement of 17.3Mtpa. This is matched by a rail capacity
entitlement for export coal sales from Klipspruit and the WMC with Transnet Freight Rail of
16.4Mtpa (inclusive of 15.64Mtpa take or pay obligation).
South Africa Energy Coal employs approximately 4,100 full-time employees and 4,300
contractors (approximately 35% of South32).
The operation had closure and rehabilitation provisions of US$746 million (South32 share) as at
30 June 2017 (2016: US$616 million).
South Africa Energy Coal historical and estimated production
Upstream production (South32’s share[4])
FY16 FY17 FY18e[a] FY19e[a]
Total energy coal production (kt) 31,681 28,913 27,500 29,350
Domestic coal production (kt) 16,825 16,717 16,000 15,850
Export coal production (kt) 14,856 12,196 11,500 13,500
(a) The denotation (e) refers to an estimate or forecast year.
Notes:
1. The project’s costs are primarily South African Rand based and the capital expenditure conversion to USD is
predicated on an average USD: ZAR exchange rate of 14.36 (average of daily spot rate from 13 to 17 November
2017 inclusive.
2. In accordance with the market announcement “South32 approves Klipspruit Life Extension project” disclosed 27
November 2017.
3. Subject to any necessary regulatory approvals.
4. 8% of South Africa Energy Coal is owned by a Broad-Based Black Economic Empowerment (B-BBEE) consortium.
The interests owned by the B-BBEE consortium were acquired using vendor finance, with the loans repayable to
South32 via distributions attributable to these parties’ pro rata to their share in South Africa Energy Coal. Until these
loans are repaid, South32’s interest in South Africa Energy Coal is accounted for at 100%.
5. FY17 saleable production.
6. Coal Resources and Coal Reserves, shown as Marketable Coal Reserves, as disclosed as part of South32’s Annual
Resource and Reserve declaration in the FY17 Annual Report on 14 September 2017 (www.south32.net). The
Competent Persons responsible for resources were: Khutala - G Gemmell (Pri. Sci. Nat., SACNASP), Klipspruit - H
Strauss (MGSSA), Wolvekrans Middelburg Complex - S Kara (Pri. Sci. Nat., SACNASP), L Visser (Pri. Sci. Nat.,
SACNASP), Davel, Pegasus, and Weltevreden - P Maseko (Pri.Sci.Nat., SACNASP), Leandra and Naudesbank – S
Nzama (Pri.Sci.Nat., SACNASP). The Competent Person responsible for reserves for Khutala, Klipspruit and
Wolvekrans Middelburg Complex was P Mulder (MSAIMM). All the named Competent Persons are full time
employees of South32. South32 is not aware of any new information or data that materially affects these Resource
and Reserve estimates and that all material assumptions and technical parameters underpinning the estimates
continue to apply and have not materially changed. The company confirms that the form and context in which the
resource and reserve estimates are presented have not been materially modified from the original market
announcements.
South Africa Energy Coal FY17 Resource and Reserves
For the release containing the Coal Resources and Reserves tables please refer to National
Storage Mechanism, available for inspection at http://www.morningstar.co.uk/uk/NSM, or
otherwise available on South32's website at http://www.south32.net.
Date: 27/11/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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