EXXARO Resources is to sell its ECC (Exxaro Coal Central) coal division, but it will retain the export allocation to Richards Bay Coal Terminal (RBCT) as well as cash held within the business unit reserved for rehabilitation charges.
Exxaro produced 47.2 million tons (Mt) of coal (excluding buy-ins) during its 2020 financial year of which ECC production comprised about eight percent, or 3.8Mt. Of this production, 3.1Mt was exported through RBCT.
The buyer is Overlooked Colliery Proprietary, a company with ambitions to grow production from its current level of 2.4Mt to 4.8Mt by 2022, according to Exxaro’s in its announcement today to the Johannesburg Stock Exchange.
Exxaro expected the transaction to be completed during the second half of this year.
“ECC’s successful sale to a black-owned mining operator with a strong track record such as Overlooked, has confirmed Exxaro’s strategic view that the assets have value and that a different operator is better placed to extract maximum value from these assets,” the company said in its announcement.
It did not detail the cash settlement.
ECC, which consists of the Dorstfontein, Forzando and Tumelo operations, was purchased by Exxaro from Total Group in July, 2014 as part of a major push to grow its coal footprint.
The deal was initially valued at $472m (although the lengthy time to completion resulted in a re-evaluation of the consideration to no more than $382m), and was aimed at increasing Exxaro’s access to RBCT ahead of a major expansion into the Waterberg coal fields in the Limpopo province.
Earlier this year, however, Exxaro said it was embarking on a coal portfolio review of non-core assets, effectively clearing the decks whilst it focuses on expansions of other assets, notably its R5.3bn GG6 expansion and the R3.4bn Matla expansion project.
Another of its non-core assets, Leeuwpan, was still the subject of a sales process. Exxaro said it would provide further details “once finalised”.