JSE-listed coal major Exxaro has announced that the purchase price to acquire 100% of Total Coal South Africa has been reduced from US$472 million to $380 million (maximum).

This has been agreed to by both companies, because “in the 12-month period since the acquisition was announced, commodity market conditions have deteriorated significantly. As a consequence, Exxaro and Total have agreed to a reduction in the purchase consideration to take into account the change in market circumstances.”

In terms of the agreement reached, the revised purchase consideration payable by Exxaro to Total will be an upfront cash payment of $262 million, plus a maximum additional amount of $120 million structured as a series of deferred payments.

The deferred payments, if made, will be payable by Exxaro to Total in tranches based on the average Richards Bay API4 coal price realised between now and 2019.

Exxaro also announced that approval in terms of Section 11 of the Mineral and Petroleum Resources Development Act 28 of 2002 has been granted by the Minister of Mineral Resources of South Africa. Accordingly, all conditions precedent to the acquisition has now been fulfilled.

Exxaro has furthermore committed to creating, on arms-length commercial terms, a new black economic empowerment participation in the investment. Exxaro management is considering various options in this regard.

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