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Exxaro Completes Total South Africa Coal Deal After Price Cut

Exxaro Resources Ltd. said it finalized the purchase of Total SA’s South African coal unit after the cost was lowered amid a slump in prices for the fuel.

Exxaro said on Tuesday it will pay $262 million in cash and make five annual payments totaling as much as $120 million, depending on average prices at South Africa’s Richards Bay Coal Terminal, the world’s largest single facility for the fuel. The Johannesburg-based company said the deal to fully acquire Total Coal South Africa Pty Ltd. would cost $472 million when it was announced last year.

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

The price of coal at Richards Bay on the Indian Ocean coast has declined 23 percent since Exxaro publicized the deal. Total Coal controls the Dorstfontein and Forzando mines, east of Johannesburg in the Mpumalanga province, with sales of about 4.5 million metric tons a year. Most of the production is exported, mainly to India and China.

South Africa’s mineral resources minister has agreed to the transaction, clearing the final hurdle, Exxaro said.

source: http://www.bloomberg.com