Australia's South32 exits South Africa thermal coal business

Australia's South32 Ltd said on Wednesday it would sell its South Africa thermal coal business to Seriti Resources and two trusts for 100 million rand ($6.78 million) upfront and deferred payments of up to 1.5 billion rand per annum.

Under the deal, South32 will receive 49% of the cash flow generated by South32 SA Coal Holdings Proprietary Ltd (SAEC), with payments capped at 1.5 billion rand per year, starting from the completion of the deal to March 2024.

South32 does not anticipate to report a taxable profit on the deal, from either the upfront or deferred consideration, the company said in a statement.

The transaction will "substantially reduce our capital intensity, strengthen our balance sheet and will improve the Group's operating margin", South32 Chief Executive Officer Graham Kerr said.

Johannesburg-based Seriti and the two trusts will acquire South32's 91.84% stake in SAEC with the upfront cash payment, based on an enterprise value of 1.25 billion rand.

South32 is the latest company to get out of energy coal at a time when investor pressure and climate change c
oncerns are prompting businesses to limit their exposure to fossil fuels. (https://reut.rs/2rdaCTq)

($1 = 14.7419 rand)

(Reporting by Niyati Shetty in Bengaluru; Editing by Tom Hogue and Subhranshu Sahu)