SOUTH AFRICA – British multinational mining company Anglo American has spun off its South African thermal coal assets into Thungela Resources which will have a primary listing on the Johannesburg Stock Exchange and a standard listing on the London Stock Exchange.
As part of setting up Thungela into a standalone business, Anglo said it would provide a US$171 million initial cash injection and a further contingent capital support until the end of 2022 in the event of thermal coal prices in the dollar falling below a certain threshold.
The demerger comes amid pressure from investors, climate change activists and regulators for mining houses to limit their exposure to fossil fuels.
Anglo chief executive Mark Cutifani told the press that Anglo was confident that Thungela would be a responsible steward of its thermal coal assets in South Africa, benefiting from an experienced and diverse management team and board.
Cutifani said in the end the best option was to do the demerger and make sure the business was set up with no debt.
“We felt that this vehicle and the way we have done it was the best way to set them up for future success and at the same time ensure we stay true to our commitments to our stakeholders,” Cutifani said.
“Some shareholders had indicated they would prefer not to hold thermal coal assets and there were also shareholders who wanted to hold thermal coal assets in a separate vehicle”
Cufitani said in canvassing views over the past few months, some shareholders had indicated they would prefer not to hold thermal coal assets and there were also shareholders who wanted to hold thermal coal assets in a separate vehicle.
Asked by IOL what would make Thungela attractive, Thungela’s chief executive, July Ndlovu, said the company aimed to pay a dividend from 30 percent of free cash flows.
“In thinking about our capital allocation, we intend to pay 30 percent of free cash flow after investing in sustaining our mines and providing for what we are calling a green fund, which is essentially a fund that will ensure that we can manage our future environmental liabilities,” said Ndlovu.
Following the implementation of the proposed demerger, Anglo is expected to continue to support Thungela in the sale and marketing of its products for three-years with an additional six-month transitional period thereafter.
Commenting on the demerger, Sanlam Private Wealth’s investment analyst, Christiaan Bothma, said the coal business had decreased to less than 5 percent of normalised profits and Anglo believed that it could be better run as a standalone entity.
”Although it is quite small, we see the demerger as positive for shareholders as it makes Anglo American more investable within a global market,” Bothma said.
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