ArcelorMittal South Africa, through its wholly-owned subsidiary Oakwood Trading and together with other co-owners of COZA, has entered into an agreement with Afrimat Limited, for the sale of their 100% shareholding in COZA.
COZA’s principal activities are the exploration and prospecting for potential mining of iron ore and manganese in the Northern Cape Province of South Africa focused on three properties.
Since 2018, ArcelorMittal South Africa has, on numerous occasions, indicated that a foundational element of its turnaround strategy is to diversify the supply and cost structure of its strategic raw material supply. This transaction is a contributor to that strategy.
To give effect to this, ArcelorMittal South Africa has also concluded a supply agreement with Afrimat Demaneng for the supply of direct shipping ore on favourable terms for each party.
The effective date of the proposed transaction will be on the first day of the month following the month in which the approval by the Minister of Minerals Resources and Energy is granted for the disposal of a controlling interest in COZA.
The effective date of the transaction is anticipated within the first half of 2021. Demaneng will be appointed by COZA as the mining contractor to conduct the mining at the COZA mines, and to purchase from COZA all iron ore mined.
The proceeds of the sale will be used by ArcelorMittal South Africa to strengthen its financial position. Mining rights need to be obtained over all three properties owned by COZA.
The purchase price for the shares held by Oakwood is R54.15 million, subject to adjustment based on a formula set out in the SPA plus an amount of R81.6 million in respect of the repayment of the loan account, together amounting to R135.75 million, to be settled in three cash tranches.
PROFITS ATTRIBUTABLE TO THE NET PROCEEDS
The disposal of the interest in COZA will result in a profit on sale of investment of R54.15 million, and the settlement of the shareholders’ loan account of R81.6 million being reported in Oakwood. ArcelorMittal South Africa will recognise R54.15 million profit on the Effective Date, which is anticipated to occur during the first half of 2021.