ANGLO American today unveiled details of a plan to demerge its South African thermal coal export assets – to be named Thungela Resources – into which it will inject R2.5bn in cash ahead of its primary listing on the Johannesburg Stock Exchange.
Thungela Resources, which will also have a standard listing on the London Stock Exchange, is intended to enhance Anglo American’s ESG credentials. The group has targeted 2040 as a zero-net emission target and has been trying to shift its portfolio towards late-cycle commodities such as fertilisers and diamonds as well as minerals crucial to decarbonisation such as copper and nickel.
In terms of the demerger proposal, Anglo American shareholders will own 100% of the issued share capital of Thungela Resources following the proposed de-merger, receiving one Thungela share for every 10 Anglo American shares. The regulatory conditions ahead of the proposed demerger have been fulfilled.
Shareholders will vote on the proposal at a May 5 meeting – 75% acceptance is required -with Thungela shares trading from June 7. The demerger effectively sees Anglo quit its entire South African thermal coal assets after first selling its domestic mines in 2017.
“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,” said Mark Cutifani, CEO of Anglo in an announcement today.
Anglo American produced 16.5 million tons from its South African coal assets during its 2020 financial year, a 7% year-on-year reduction, producing a $15m underlying EBITDA loss, and taking EBITDA losses over two years to $20m.
South African coal contributes 3% of group EBITDA and has a mine life of about 13 years which is less than the average life of mine held by the company of some 25 years).
The current CEO of Anglo Coal, July Ndlovu, would be the CEO of Thungela Resources. He said today Thungela would establish an employee partnership plan and a community partnership plan, each holding a 5% interest in the Thungela thermal coal operations.
In addition to the R2.5bn capital injection, Anglo would also continue to provide financial support to Thungela until end-2022 in the event rand-denominated thermal coal prices fell beneath a certain threshold.
According to a report by RMB Morgan Stanley today, Anglo’s coal price downside protection will be provided if coal prices fall below $80/ton during 2021 and 2022 with maximum financial support of $100m in 2021 and $160 to 170m in 2022. The year-to-date average market price for South African export coal (FOB) is $91/t.
Anglo would also provide marketing support for Thungela for a three-year period and allow for a six month transition towards full independence in this regard.
Thungela means to “ignite” in isiZulu.