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ANGLO AMERICAN PLC - Anglo American to demerge South Africa thermal coal operations

2021/04/08 08:00:00

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                    Anglo American to demerge South Africa thermal coal operations

Anglo American plc (the 'Company')
Registered office: 20 Carlton House Terrace, London SW1Y 5AN
Registered number: 3564138 (incorporated in England and Wales)
Legal Entity Identifier: 549300S9XF92D1X8ME43
JSE Share Code: AGL
NSX Share Code: ANM

8 April 2021

Anglo American to demerge South Africa thermal coal operations

Anglo American plc ('Anglo American') announces the demerger of its thermal coal operations
in South Africa, subject to the approval of Anglo American’s shareholders on 5 May 2021.

The separation will be implemented through the transfer of Anglo American’s thermal coal
operations in South Africa to a new holding company, Thungela Resources Limited ('Thungela'),
the demerger of the Thungela shares to Anglo American shareholders and the primary listing of
Thungela’s shares on the Johannesburg Stock Exchange (the 'JSE') and standard listing on the
London Stock Exchange (the 'LSE').

Mark Cutifani, Chief Executive of Anglo American, said: 'Anglo American has been pursuing
a responsible transition away from thermal coal for a number of years now. 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.

'We are confident that Thungela will be a responsible steward of our 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.'

July Ndlovu, CEO of Thungela, said: '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. We have significantly repositioned and upgraded our portfolio in recent years into a
highly competitive producer of export product, with established access to world-class export

'As an independent business we will continue to contribute significantly to our host communities
and South Africa’s development objectives. As part of our commitment to creating an enduring
positive legacy, we are establishing an employee partnership plan and a community partnership
plan, with each holding a 5% interest in the Thungela thermal coal operations in South Africa,
thereby enabling employees and communities to share in the financial value that we generate.

'Guided by the high standards set by Anglo American, Thungela is committed to operating
sustainably – continuing to drive safety, health, environmental, governance and social
programmes for the benefit of our employees, host communities and shareholders. The
demerger of Thungela and our listing on the JSE will represent yet another major milestone for
Anglo American’s long-running contribution towards transforming South Africa’s mining industry.'

The proposed demerger recognises the diverse range of views held by Anglo American’s
shareholders in relation to thermal coal and therefore provides Anglo American’s shareholders,
including those with specified investment criteria, with the choice to act on such views and,
following the implementation of the proposed demerger, to either retain, increase or decrease
their interests in Thungela. The proposal also allows Thungela to attract new shareholders and
to access new sources of capital as an independent company offering direct exposure to thermal

Anglo American is committed to setting up Thungela as a sustainable standalone business,
including by providing an initial cash injection of ZAR2.5 billion (approximately $170 million) and
further contingent capital support until the end of 2022 in the event of thermal coal prices in South
African rand (ZAR) falling below a certain threshold.

Following the implementation of the proposed demerger, and in line with Anglo American’s
responsible approach, Anglo American’s marketing business will continue to support Thungela
in the sale and marketing of its products for a three-year period with an additional six-month
transitional period thereafter. This transitionary arrangement ensures that customers receive a
consistent service and supply of thermal coal while Thungela concentrates on enhancing the
performance of its operations while continuing to receive optimal value for its products in the
market. The three-year term, and the additional six-month roll-off period, also provide time for
Thungela to build its own global marketing capabilities should it choose to do so.

Proposed demerger process

In order for the proposed demerger to be implemented, Anglo American shareholder approval
will be sought at a general meeting and court meeting, both expected to be held on 5 May 2021
following Anglo American’s Annual General Meeting. If it is approved, it is expected that the
demerger would be effective on 4 June 2021, with Thungela’s shares being listed and admitted
to trading on the JSE and LSE on 7 June 2021.

Following completion of the proposed demerger, 100% of the issued share capital of Thungela
will be held by Anglo American shareholders who will each receive one Thungela share for every
ten Anglo American shares that they hold. Each Anglo American shareholder will also retain their
existing shareholding in Anglo American. Thungela will 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.

Additional information

A shareholder circular setting out further detail in relation to the demerger, including expected
key dates has been published on www.angloamerican.com/products/thermal-coal/demerger.

In respect of the JSE and LSE listing, a Thungela combined pre-listing statement and prospectus
is expected to be published on Anglo American’s website (www.angloamerican.com) and
Thungela’s website (www.thungela.com) later today.

In accordance with UK Listing Rule 9.6.1, a copy of the circular has been submitted to the
Financial Conduct Authority (FCA) and will shortly be available for inspection via the National
Storage Mechanism.

Anglo American will host a virtual investor and analyst presentation at 09:00 UK time / 10:00
South Africa time today. Access and registration instructions are available on Anglo American’s
website (www.angloamerican.com/investors).

Thungela will host a virtual investor and analyst presentation at 08:00 UK time / 09:00 South
Africa time on 6 May 2021. Access and registration details will be provided nearer the time.

Notes to editors:

Thungela Resources will be the listed holding company for the demerged thermal coal
operations in South Africa, constituting a strong and attractive business with high quality well-
located assets and with access to established export infrastructure. These operations provide a
wide range of economic and social benefits for host communities and for South Africa, including
significant employment, tax revenues, export earnings, and the provision of many essential
community services. Thungela means to 'ignite' in isiZulu.

At the 2021 year to date average FOB South Africa market price of $91 per tonne, Thungela is
well positioned to capitalise on improved and more stable market fundamentals. In 2018, when
the average FOB South Africa price was $98 per tonne and FOB costs were c.$61 per tonne, the
assets produced 18.4 million tonnes of export saleable production and generated $558 million of
operating cash flow(1). 2020 FOB costs were $51 per export tonne and are expected to be similar
in real terms in local currency in 2021. The gross assets of Thungela that are the subject of the
proposed demerger were valued at $1,294.5 million as at 31 December 2020. For the year ended
31 December 2020, no profits were attributable to the assets comprising the thermal coal
operations in South Africa.

The Thungela Board will comprise Sango Ntsaluba as independent Non-Executive Chair, July
Ndlovu as Chief Executive Officer, Deon Smith as Chief Financial Officer, Kholeka Mzondeki as
Chair of the Audit Committee, Ben Kodisang and Thero Setiloane as Independent Non-Executive
Directors and Seamus French as a Non-Executive Director.

Thungela value proposition:

-  A leading South African thermal coal exporter, with 16.5 million tonnes of attributable
   export saleable production in 2020;
-  Well positioned on established rail network with secure access to export markets via the
   Richards Bay Coal Terminal;
-  Low cash-cost assets, well positioned to benefit from a favourable thermal coal market
-  Strong suite of life extension and replacement options;
-  Robust ESG framework underpins licence to operate;
-  Right-sized organisational model focused on safety and business improvement;
-  Experienced executive management team led by July Ndlovu as CEO and Deon Smith
   as CFO;
-  Seasoned, highly qualified board of directors led by Sango Ntsaluba as Chair and
   Kholeka Mzondeki as Chair of the Audit Committee.

(1)   $558 million of operating cash flow represents the ZAR7,387 million of net cash (outflow) / inflow from operating
      activities before income taxes, as reported in 2018, converted to US$ using the 2018 average ZAR:USD FX
      rate of 13.25.

Anglo American is a leading global mining company and our products are the essential
ingredients in almost every aspect of modern life. Our portfolio of world-class competitive
operations, development projects and undeveloped resources, provides many of the metals and
minerals that enable a cleaner, greener, more sustainable world and that meet the fast growing
consumer-driven demands of developed and maturing economies. With our people at the heart
of our business, we use innovative practices and the latest technologies to mine, process, move
and market our products to our customers – and to discover new resources – safely and

As a responsible producer of diamonds (through De Beers), copper, platinum group metals, the
steelmaking ingredients of iron ore and metallurgical coal, and nickel – with crop nutrients in
development and thermal coal operations planned for divestment – we are committed to being
carbon neutral across our operations by 2040. We work together with our business partners and
diverse stakeholders to unlock sustainable value from precious natural resources for the benefit
of the communities and countries in which we operate, for society as a whole, and for our
shareholders. Anglo American is re-imagining mining to improve people’s lives.


The Company has a primary listing on the Main Market of the London Stock Exchange and
secondary listings on the Johannesburg Stock Exchange, the Botswana Stock Exchange, the
Namibia Stock Exchange and the SIX Swiss Exchange.

RAND MERCHANT BANK (A division of FirstRand Bank Limited)


For further information, please contact:

 Media                                                Investors
 UK                                                   UK
 James Wyatt-Tilby                                    Paul Galloway
 james.wyatt-tilby@angloamerican.com                  paul.galloway@angloamerican.com
 Tel: +44 (0)7817 735 337                             Tel: +44 (0)7584 267 361

 Marcelo Esquivel                                     Robert Greenberg
 marcelo.esquivel@angloamerican.com                   robert.greenberg@angloamerican.com
 Tel: +44 (0)7818 529 638                             Tel: +44 (0)7826 943 836

 Katie Ryall                                          Emma Waterworth
 katie.ryall@angloamerican.com                        emma.waterworth@angloamerican.com
 Tel: +44 (0)7513 134 971                             Tel: +44 (0)7843 069 912

 South Africa
 Nevashnee Naicker
 Tel: +27 (0)71 164 5719

 Sibusiso Tshabalala
 Tel: +27 (0)63 684 7470
 Nomonde Ndwalaza
 Tel: +27 (0)66 311 1133

Forward-looking statements:
This announcement includes forward-looking statements. All statements other than statements of historical
facts included in this announcement, including, without limitation, those regarding Anglo American’s
financial position, business, acquisition and divestment strategy, dividend policy, plans and objectives of
management for future operations (including development plans and objectives relating to Anglo American’s
products, production forecasts and Ore Reserves and Mineral Resource estimates), are forward-looking
statements. By their nature, such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of Anglo
American, or industry results, to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding Anglo American’s present
and future business strategies and the environment in which Anglo American will operate in the future.
Important factors that could cause Anglo American’s actual results, performance or achievements to differ
materially from those in the forward-looking statements include, among others, levels of actual production
during any period, levels of global demand and commodity market prices, mineral resource exploration and
development capabilities, recovery rates and other operational capabilities, the effects of global pandemics
and outbreaks of infectious diseases, the availability of mining and processing equipment, the ability to
produce and transport products profitably, the availability of transport infrastructure, the impact of foreign
currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects
of inflation, political uncertainty and economic conditions in relevant areas of the world, the actions of
competitors, activities by governmental authorities such as permitting and changes in taxation or safety,
health, environmental or other types of regulation in the countries where Anglo American operates, conflicts
over land and resource ownership rights and such other risk factors identified in Anglo American’s most
recent Annual Report. Forward-looking statements should, therefore, be construed in light of such risk
factors and undue reliance should not be placed on forward-looking statements.

These forward-looking statements speak only as of the date of this announcement. Anglo American
expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on
Takeovers and Mergers (the 'Takeover Code'), the UK Listing Rules, the Disclosure and Transparency
Rules of the Financial Conduct Authority, the Listings Requirements of the securities exchange of the JSE
Limited in South Africa, the SIX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock
Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-
looking statement contained herein to reflect any change in Anglo American’s expectations with regard
thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing
in this announcement should be interpreted to mean that future earnings per share of Anglo American will
necessarily match or exceed its historical published earnings per share.

Certain statistical and other information about Anglo American included in this announcement is sourced
from publicly available third-party sources. As such, it has not been independently verified and presents the
views of those third parties, though these may not necessarily correspond to the views held by
Anglo American and Anglo American expressly disclaims any responsibility for, or liability in respect of, such
third-party information.

Legal Entity Identifier: 549300S9XF92D1X8ME43

Date: 08-04-2021 08:00:00
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