Seriti Resources has concluded an exclusive acquisition agreement to acquire a 91.835% stake of South32’s South Africa Energy Coal (SAEC) thermal coal business.

Following a competitive bid process, Seriti first signed exclusive negotiations to acquire the SAEC business in August.

The remaining 8.165% interest in SAEC will be held by a consortium led by the Phembani Group.

Seriti made an up-front cash payment of approximately R100m ($6.7m) to South32.

Furthermore, South32 will receive 49% of the free cash flow generated by SAEC capped at R1.5bn ($0.1bn), which will run from the date the deal is completed until March 2024.

Seriti CEO Mike Teke said: “Finalisation of this transaction will be a significant milestone for Seriti in our ambition to become a black-owned and controlled mining champion.

“The South Africa Energy Coal acquisition will enable us to offer further secured, long-term coal supply solutions to Eskom as a demonstrable commitment to sustainably supporting South Africa’s energy needs.

“The combination of our energy coal businesses will realise further operational and technical efficiencies enabling us to better service our customers by offering competitive energy solutions.”

The transaction is expected to be completed in nine months to one year, subject to approval from South African and certain foreign competition authorities as well as the Minister of Minerals and Energy (DMRE).

It also requires approval from Richards Bay Coal Terminal, and consent from Eskom for the change of control of SAEC with respect to the Duvha coal supply agreement between Eskom and SAEC.

South32 CEO Graham Kerr said: “We ran an exhaustive and competitive process and we believe Seriti as an established operator is ideally positioned to unlock the potential of SAEC’s existing domestic and export operations, including its significant untapped resource base.

“The sale of our interest in SAEC will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities, consistent with South Africa’s transformation agenda.”