February 6, 2018 / 7:12 PM / a year ago

UPDATE 1-South32's S.African coal assets to become separate business within 6 months

(Updates with details)

CAPE TOWN, Feb 6 (Reuters) - South32’s South African coal assets will be set up as its own business within six months, its president and chief operating officer Mike Fraser said.

Fraser said that South32, which was spun out from BHP Billiton in 2015, had received a number of offers for the assets which it up for sale in November last year as part of a shift away from coal.

“After we made the (sale) announcement there was significant interest already from both listed and unlisted entities,” Fraser told Reuters on Tuesday at a mining conference in Cape Town.

Fraser declined to name the bidders for South 32’s coal assets but South African power utility, the main customer for the coal, requires any new contracts to be signed with suppliers that have more than a 50 percent black shareholding.

South32’s black-owned partner Phembani Group has the option of raising its stake in the new coal entity, Fraser said.

South Africa’s government and mining companies have often been at odds over “black economic empowerment” which was established to redress the imbalances of white apartheid rule and Fraser said South32 would rather sell its coal business to a black-owned buyer.

“We recognise that this business is much better placed if it is majority black-owned. There is no doubt about it. Not just because it meets Eskom’s requirements, but also because it’s the right thing to do,” Fraser said.

He said the second reason for the decision to spin off the coal business was that the South32 “did not believe in the commodity”.

Thermal coal is used to power stations has fallen out of favour with some investors as it is highly pollutive.

In January, Anglo American sold the last of its South African domestic coal assets to majority black-owned firm Seriti Resources.

South32 remained committed to its existing operations in South Africa which include aluminium and manganese, Fraser said.

“Our priorities are swinging very much towards base metals”. (Reporting by Zandi Shabalala; editing by Alexander Smith and David Evans)

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