As set out in the Exxaro announcement of 20 February 2020 and as part of its sustainable growth approach, Exxaro conducted an internal portfolio review to evaluate and optimise its current coal operations and projects.
Exxaro identified assets which are non-core to its future strategic objectives and decided to dispose of its total equity interest in Exxaro Coal Central and its Leeuwpan Coal Mine operation.
Exxaro resultantly embarked on a divestment process of the Target Assets. It received significant interest in the Target Assets, both on an individual basis as well as a package.
In determining the acquirer of the Target Assets, Exxaro applied selection criteria including value maximisation, broad based black ownership and sustainability of the new operator to operate the Target Assets, whilst also minimising transaction execution risk for Exxaro.
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The divestment process has now culminated in an agreement for the disposal of ECC. Exxaro has signed a definitive sale and purchase agreement with Overlooked Colliery. Overlooked will acquire all of the issued shares in, and shareholder claims against, ECC.
Exxaro has obtained certainty of funding from Overlooked’s lenders towards settlement of its obligations in terms of the ECC Transaction.
This is a voluntary update as the transaction falls below the Category 2 threshold of the JSE Limited Listings Requirements.
The ECC Transaction is classified as a held for sale asset by Exxaro and proceeds received will be used in accordance with Exxaro’s capital allocation framework.
The Leeuwpan Coal Mine operation’s disposal is ongoing, and shareholders will be updated on progress once finalised.
Exxaro will sell all its shares in, and shareholder claims against ECC, to Overlooked Included in the purchase consideration is cash in the rehabilitation trust which Exxaro will retain. In addition,
Overlooked will assume all the rehabilitation liabilities. Exxaro will retain all coal export entitlement through Richards Bay Coal Terminal.
Overlooked is a privately held and 100% black-owned mining entity and successful operator of three mines namely, Overlooked Colliery, Weltevreden Colliery, and Halfgewonnen Colliery.
The former two mines are a recent acquisition from Sudor Coal. Overlooked currently produces 2 400 000t of coal and plans to reach 4,800,000 t per annum by 2022 off its existing portfolio.
The submission of the ECC Transaction to the South African competition authorities and the Department of Mineral Resources and Energy (DMRE) will commence shortly.
The closure of the ECC Transaction will be primarily dependent on the finalisation of these separate regulatory approvals and other conditions precedent customary in a transaction of this nature.
Overlooked has procured funder confirmation and guarantees from Absa Bank and another South African bank in favour of Exxaro in terms of the certainty of funds requirement imposed by Exxaro, subject to fulfilment of the ECC Conditions Precedent to the ECC Transaction.
The closing date of the ECC Transaction will be the last business day of the month in which the final ECC Condition Precedent is fulfilled or waived, provided that if the final ECC Condition Precedent is fulfilled or waived within five business days of the end of any month, then the closing date will be at the end of the following month, with the closing date expected to occur in the second half of 2021.
The SPA provides for warranties, undertakings, indemnities and events of default that are customary for a transaction of this nature.