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Report: Anglo American's South African coal mine sales face 'huge hurdles'

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Report: Anglo American's South African coal mine sales face 'huge hurdles'

Uncertaintysurrounding off-take agreements between the potential new owners of 's South African coalmines and local power utility Eskom Holdings SOC Ltd. could see the sale processpushed out into 2017.

BloombergNews quoted "two people with knowledge of the matter" in an April 26 reportas saying that the suggestion by a senior Eskom executive last week that Anglo shouldcede its mining rights to the state and uncertainty over what sort of new off-takeagreements the utility would give the new owners will draw out the sale process.

Accordingto the sources, Pembani Group (Pty)Ltd., Sibanye Gold Ltd.and Royal Bafokeng Holdings (Pty)Ltd. are among the short-listed bidders for the operations that supplyEskom with more than a quarter of its coal.

LiberumCapital analyst Ben Davis told Bloomberg that uncertainty over who Eskom can buycoal from and how much Black EconomicEmpowerment ownership companies have to have could make this a drawn-outprocess.

"Thereare huge hurdles to the sale," he said.

Eskomwill reportedly be involved in the sale process because of its part ownership ofAnglo's South African coal assets.

Anglohas already appointed advisers, prepared due diligence information and engaged withpotential buyers.

SpokesmanMoeketsi Mofokeng told Bloomberg that Anglo is progressing discussions, includingissues surrounding Black Economic Empowerment ownership, with key stakeholders likeEskom and the government as well as potential interested parties in order to exitfrom its "Eskom-tied mines."

Meanwhile,Sibanye spokesman James Wellsted told the news service that the company is "assessingopportunities" that could include coal assets, though the process with Anglois at an early stage.

"Itdoes seem as if it's not just going to involve engagement with Anglo Coal, it lookslike it's going to involve engagements with Eskom as well and we don't know whattheir requirements are right now," he said.