Anglo American unveils its exit from coal in JSE-listed spin-off

Anglo American has been under pressure from shareholders, including the pension board for the Church of England, to exit from coal. The global mining group also has ambitious targets to be carbon neutral by 2040 as environmental, social and governance (ESG) concerns take centre stage in boardrooms across the industry. Thungela’s CEO will be July Ndlovu, who has been head of Anglo’s thermal coal operations. 

“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,” Anglo CEO Mark Cutifani said in a statement on Thursday. 

“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 JSE and standard listing on the London Stock Exchange,” the company said. 

So the proposed demerger, which is subject to shareholder approval on 5 May, allows Anglo’s shareholders to retain, increase or decrease their stakes in the new entity Thungela. Those who want nothing to do with coal can sell their shares, while others can hold onto them.

Anglo had said in May last year that its “preferred exit option” for its coal assets in South Africa would be a spin-off into a JSE listing. Thermal coal only accounts for 4% of Anglo’s revenues as the group has focused on platinum, iron ore, copper and diamonds. 

“Anglo American is committed to setting up Thungela as a sustainable standalone business, including by providing an initial cash injection of R2.5-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 falling below a certain threshold," the company said. 

Anglo said the gross assets of Thungela were valued at $1,294.5 million as at 31 December 2020, but no profit was earned in the 2020 year from the thermal coal operations.

For the year ended 31 December 2020, no profits were attributable to the assets comprising the thermal coal operations in South Africa.

The operations that will become Thungela exported 16.5 million tonnes of coal in 2020. An employee partnership plan and community partnership plan will collectively hold a 10% stake in the company. 

The move follows South32’s exit from South African coal with the transfer of its coal assets here to Seriti Resources.

Thungela means to “ignite” in isiZulu and it remains to be seen if investor interest is sparked by the new company. Coal is hardly the flavour of the month among investors and bankers because of its well-established links to climate change and pollution — this is why Anglo is getting out of the business. 

It is increasingly difficult to obtain financing for new coal mines or plants. Time will tell if this is a nicely wrapped present for the JSE — which can use some new listings — or merely a lump of coal in its stocking. DM/BM