Anglo American shares edge up as it says it will sell its South African thermal coal operations

Courtney Goldsmith
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Seriti is a company that's majority-owned by historically disadvantaged South Africans (Source: Getty)

Anglo American is set to sell its Eskom-tied domestic thermal coal operations in South Africa for for 2.3bn South African Rand (£134m) as it turns its focus to three core commodities.

Shares in the miner lifted more than one per cent in morning trading, and it was among the top performers in the FTSE 100 index. The firm's Johannesburg-listed stock lifted more than three per cent.

The miner sold its New Vaal, New Denmark and Kriel mines along with four closed collieries to Seriti Resources, a company majority-owned by historically disadvantaged South Africans and led by Mike Teke, president of the chamber of mines industry lobby group.

The mines have a supply agreement with Eskom under which South Africa's sole power utility paid for their running costs in exchange for guaranteed coal supply at a pre-set price.

Subject to regulatory approval and consent from Eskom, the deal is expected to close by the end of the year.

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"This transaction forms part of our ongoing commitment to reshape and upgrade our global asset portfolio," said Mark Cutifani, chief executive of Anglo American. The firm has been condensing its portfolio of assets to focus on core commodities of platinum, copper and diamonds, although the group has said asset disposals for the purposes of deleveraging are no longer required.

Yuen Low, analyst at Shore Capital, said: "We are not surprised that AAL is 'pleased' to have agreed this sale and have no doubt that it will be very much hoping that completion occurs ASAP, or certainly, as far as possible ahead of South Africa’s 2019 general elections. Thermal coal provision to Eskom has increasingly been becoming a politically-charged hot potato, a situation which we think could otherwise have intensified."

The transaction will make Seriti the second-largest provider of thermal coal to Eskom, supplying almost a quarter of the utility's current annual coal requirements.

Mike Teke, chief executive of Seriti, said: "The transaction allows Seriti to achieve its strategic objective of preserving and operating strategic energy assets for the benefit of South Africa and its people.

"The team looks forward to managing and growing the operations going forward, with a focus on ensuring their ongoing sustainability, given their strategic importance."

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