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South32 to spin off South African coal assets within 6 months

South32 Ltd.'s South African coal assets will be spun out as an independent business within six months, Reuters reported, citing Mike Fraser, president and COO of the company's African operations.

Previously, Fraser said at the Mining Indaba in Cape Town that the company has no plans to withdraw from the South African market, following speculation that the creation of South Africa Energy Coal as a stand-alone business might be part of an exit strategy.

The miner, created as a spin off from BHP Billiton Group, has received interest from multiple prospective buyers for the assets that it put up for sale in late 2017 as part of a shift away from coal.

According to the report, South African power utility requires any new contracts to be signed with suppliers that have more than 50% black shareholding, a measure enacted as part of the country's remedies for the imbalances during apartheid rule.

"We recognize 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.

In addition, South32 "did not believe in the commodity" as its second reason for the company's decision to spin off.

South32's energy coal output in the second quarter of fiscal 2018 declined to 7 million tonnes, from 7.5 million tonnes in the year-ago quarter, due to scheduled maintenance at South African projects and reduced demand from local power stations.