Mining firm South32 has agreed to pay $250m in cash to mining group Seriti Resources to complete the sale of South African Energy Coal (SAEC) business.

To support the sustainability of the SAEC business under Seriti ownership, South32 will make a payment of $200m to Seriti for the rehabilitation of coal assets, with the first instalment planned to be made in July this year.

Additionally, South32 signed a $50m facility with Seriti to primarily fund the costs of restructuring certain loss-making mining areas.

Seriti is also planning to sign a five-year working capital facility with a South African commercial bank to rise up to $120m to fund improvements to the South Africa Energy Coal operations.

South32 CEO Graham Kerr said: “Securing the long-term sustainability of South Africa Energy Coal has been our key objective in transitioning the business to black ownership, consistent with South Africa’s transformation imperative.

“This additional support package moves us closer to completion of the sale and will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities.

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“For South32, the transaction will significantly simplify our business, substantially reduces our capital intensity, improves the Group’s underlying operating margin and supports our strategy to re-shape our portfolio with a bias to base metals.”

The move follows signing of deal in November 2019 by South32 to sell its SAEC business to Seriti by providing ZAR100m ($6.7m) upfront payment.

Based on the mines’ future cash flows until March 2024, South32 was to receive deferred payments from Seriti.

South32, however, dropped the deferred payment plan at a later stage. It has also downgraded the ZAR100m price to a nominal fee, reported Reuters.

South32 expects the deal to reshape its business by exiting the thermal coal sector, the news agency reported.