Anglo American to spin off South African coal operations

Anglo American announced the demerger of its thermal coal operations in South Africa on Thursday, subject to the approval of shareholders on 5 May.

The FTSE 100 mining giant said the separation would be implemented through the transfer of its thermal coal operations in South Africa to a new holding company, Thungela Resources, the demerger of Thungela shares to Anglo American shareholders, and the listing of those shares in Johannesburg and London.

It said the proposed demerger would provide shareholders, including those with specified investment criteria, with the choice to act particular views around coal production, and to either retain, increase or decrease their interests in Thungela.

The proposal would also allow Thungela to attract new shareholders, and to access new sources of capital as an independent company offering direct exposure to thermal coal.

Anglo American said it would provide Thungela with an initial cash injection of ZAR 2.5bn (£124.95m), and further contingent capital support until the end of 2022 if thermal coal prices in South African rand fell below a certain threshold.

Following the proposed demerger, Anglo American said its marketing business would continue to support Thungela in the sale and marketing of its products for three years, with an additional six-month transitional period thereafter.

The board said the transitionary arrangement would ensure customers received a consistent service and supply of thermal coal while Thungela concentrated on enhancing its operations, while continuing to receive optimal value for its products in the market.

It said the three-year term, and the additional six-month roll-off period, would also provide time for Thungela to build its own global marketing capabilities.

“Anglo American has been pursuing a responsible transition away from thermal coal for a number of years now,” said chief executive officer Mark Cutifani.

“As the world transitions towards a low carbon economy, we must continue to act responsibly - bringing our employees, shareholders, host communities, host governments and customers along with us.

“Our proposed demerger of what are precious natural resources for South Africa, allows us to do exactly that.”

Cutifani said the company 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.

“While representing just a small proportion of Anglo American today, we are laying the foundation for South Africa's leading coal business, setting it up for success to deliver value for all its stakeholders.

“Looking forward, we believe the prospects for long-term value delivery are greatest as two standalone businesses, each with their own strategy and access to capital.”

Anglo American said shareholder approval would be sought at a general meeting and court meeting, both expected to be held on 5 May following the firm’s annual general meeting.

If approved, the demerger was expected to become effective on 4 June, with Thungela's shares being listed and admitted to trading on the JSE and LSE exchanges on 7 June.

Following completion of the proposed demerger, 100% of the issued share capital of Thungela would be held by Anglo American shareholders, who would each receive one Thungela share for every 10 Anglo American shares held.

Thungela would hold 90% of the thermal coal operations in South Africa, with the remaining 10% held collectively by the employee partnership plan and the community partnership plan.

“Thungela is a leading South African producer of high quality, low cost export thermal coal, well positioned to benefit from improved market conditions, and providing a reliable and affordable energy source to our customers mainly in developing economies,” said Thungela CEO July Ndlovu.

“We have significantly repositioned and upgraded our portfolio in recent years into a highly competitive producer of export products, with established access to world-class export infrastructure.

“As an independent business we will continue to contribute significantly to our host communities and South Africa's development objectives.”

At 0817 BST, shares in Anglo American were up 3.13% at 3,081.5p.