South32 buys remaining stake in Arizona Mining
South32, a globally diverse mining company, wrapped up a $1.3bn cash deal to buy the whole of Arizona Mining in the US. The JSE-listed company is also hiving off its South African coal business.
South32 is another major mining company stepping back from the South African coal sector, particularly if it is linked to Eskom, the state power utility.
Anglo American has already sold all its Eskom-linked collieries to new black-owned Seriti Resources, while BHP, the world’s largest diversified mining company, unbundled assets it did not want into newly created South32, which included all its South African assets, including the collieries.
Much like Anglo CEO Mark Cutifani, South32 CEO Graham Kerr has said the company wished to distance itself from Eskom supply contracts and that the local coal business would be set up and managed as a stand-alone business separate to South32, with a view to a change in control at some point.
Given Eskom’s demands for 51% black-owned coal supplies for its power plants, it is highly probable that this will be the route marking South32’s exit from coal in SA.
South32 has its focus on growth, particularly in base metals, and has wrapped up a $1.3bn cash purchase of the remaining 83% of Arizona it did not already own.
South32 paid for the shares off its balance sheet, with no recourse to third-party funding.
Arizona owns a large base-metals tenement in the US state of the same name.
The latest resource data from the Taylor deposit estimates there are 101 million tons of ore with a grade of 10.4% of zinc-equivalent mineralisation. There is also the central deposit, which contains zinc, manganese and silver and, with Taylor, makes up the Hermosa project.
South32 will now fund a $1bn project on a mine and processing plant at the project, which Kerr described as "one of the most exciting base-metal projects in the industry.
"Work to enhance the design and development of the Hermosa Project will begin in the coming weeks," he said. There is likely to be more detail on South32’s plans when it releases annual results on August 23.
Shares in the R190bn company edged up slightly to close 0.5% higher on Monday. It is trading at R37.21.