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Why the South32 (ASX:S32) share price is climbing

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The South32 Ltd (ASX: S32) share price has climbed higher in early trade following a pre-market open announcement. At the time of writing, the South 32 share price is trading at $2.85, up 1.4%.

The South32 share price is climbing higher this morning on the back of the news in line with the S&P/ASX 200 Index (ASX: XJO).

Why is the South32 share price climbing?

The Aussie mining group this morning provided an update on its South Africa Energy Coal divestment. South32 had previously said it expected to conclude the transfer of its shareholding in South32 SA Coal Holdings Proprietary Limited to Seriti Resources Holdings Proprietary Limited (Seriti) by the end of the March quarter.

Furthermore, South32 has now become aware that key information has ceased to be confidential ahead of finalising transaction terms. The company will also provide additional support to underpin the sustainability of the South Africa Energy Coal business under Seriti’s ownership.

Key elements of that support include:

  • Amending the original share price agreement by adjusting the upfront cash payment and removing the deferred consideration.
  • Entering into a US$50 million facility with a Seriti subsidiary to fund costs incurred for restructuring.
  • Providing US$200 million to fund rehabilitation activity at the South Africa Energy Coal operations.

The restructuring facility is expected to be drawn down before the end of FY22 with a 10-year repayable period. South32 CEO Graham Kerr said, “Securing the long-term sustainability of the South Africa Energy Coal business has been our key objective in transitioning the business to black ownership, consistent with South Africa’s transformation imperative”.

The latest changes move South32 closer to a completed sale, simplifying the business and reducing South32’s capital intensity.

Foolish takeaway

The South32 share price has edged higher in early trade following the latest update. Today’s update indicates South32 is moving closer to a divestment of its SA Energy Coal shareholding. South32 hopes for completion by 30 June 2021.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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