Eskom raises question over Anglo coal deal with Seriti Resources

ESKOM is to seek a meeting with Anglo American regarding the R2.3bn sale to Seriti Resources of three coal mines that exclusively supply the state-owned power utility.

Anglo announced today that it intended to sell its New Denmark, New Vaal and Kriel coal mines, which supplied 24 million tonnes of coal to Eskom in Anglo’s 2016 financial year, to Seriti – a black-controlled company.

Norman Mbazima, deputy chairman of Anglo American South Africa, said Eskom had been consulted on the process but that it was yet to agree to the transfer of coal sales agreements (CSAs) to Seriti.

In a report by Mining Weekly, however, Eskom raised the prospect of a potential stick in the spokes of the transaction saying that it owned the mines as it had paid for their development.

“In a weird kind of way, we owe the dispute over the Arnot colliery with Exxaro Resources because after that we learned that we owned the fixed cost coal mines,” said Khulu Phasiwe, spokesman for Eskom in a telephonic interview with Miningmx.
Fixed cost coal mines are those in which Eskom paid the capital cost in return for exclusive supply at a percentage above the operating cost.

“Given the commitment that Anglo made [to sell to Seriti], we would like a meeting to hear from the horse’s mouth,” said Phasiwe. “The ownership of the mines has not been resolved. Otherwise, we don’t have a problem [with the deal].

“Essentially, if we own those mines, when they are sold we need to be consulted on the sales price and if any economic benefit would come to Eskom’s balance sheet,” he added. Phasiwe acknowledged that the value of the mines it developed in the past were not currently reflected on Eskom’s balance sheet.

Anglo had been in contact with Eskom about the process, said Phasiwe, who added that this was “a final meeting” to conclude the transaction.

Mike Teke, CEO of Masimong Group Holdings which owns 25% of Seriti Resources and is its CEO, said he was unaware of Eskom’s position on the transaction. “I haven’t seen this; I don’t know,” he said.

Anglo American could not be contacted at the time of publication. Miningmx will update this article if Anglo responds to calls and e-mails.

Anglo said earlier today that the transaction was set to close by the end of 2017 and that it required the approval of Eskom for the transfer of the coal sales agreements from Anglo to Seriti.

Seriti will become the second largest supplier of coal to the state-owned power utility which buys about 120 million tonnes a year of coal.

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Source: MiningMx