JOHANNESBURG – Anglo American has received bids for its New Largo project, in South Africa, as the company continues efforts to exit operations in the country that supply coal to local power plants, according to two people familiar with the process.
Seriti Resources, which agreed last month to buy thermal coal mines from Anglo for about R2.3-billion ($174-million), is among the bidders for New Largo, said the people, who asked not to be identified because the talks are private. MTN Group chairperson Phuthuma Nhleko’s Phembani Group also considered bidding, while separate groups that included Sipho Maseko and Jabu Mabuza have also considered buying Anglo coal assets including a package that previously included New Largo, the people said. The two businessmen are the CEO and chairperson of Telkom respectively.
The bid, and those that were contemplated, was in the range of about R1-billion, according to one of the people. The new owners will need to make significant investment to develop the mine, the other person said, without being more specific. Other potential bidders decided not to do so because of the lack of an existing contract with Eskom.
The sale of New Largo would help complete Anglo’s exit from operations that provide coal to State power utility Eskom, although the companies have yet to sign a supply agreement for the project. The miner announced a sweeping asset-sale programme in February 2016 following a plunge in commodity prices, and outlined plans to focus on diamonds, platinum and copper. It’s since scaled back some divestment plans after prices rebounded.
Anglo American continues to progress the potential sale of its interests in the New Largo project, the company said in an emailed response to questions. It declined to comment on specific bidders, citing confidentiality restraints.
Eskom, South Africa’s top coal buyer, has said it wants suppliers to be black-controlled, as South Africa pushes companies to boost black involvement in the economy to make up for discrimination during apartheid.
New Largo is located in South Africa’s eastern Mpumalanga province, near Eskom’s Kusile power plant, which will be the utility’s biggest at 4 800 MW once it’s completed. Anglo considered selling New Largo together with the mines bought by Seriti, which supply Eskom, but separated the project in an attempt to get a better price, according to one of the people.
The sale process is expected to take another three to four months, one of the people said.
Edited by: Bloomberg
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