In accordance with the deal, Rio will transfer ownership of its 74% owned Riversdale coal assets in the country’s coastal Kwa-Zulu Natal province, 24% owned by local black economic empowerment partners.
Forbes’ Aviemore operations in Kwa-Zulu Natal are about 230km west of the Riversdale acquisitions and are expected to be synergized together in common operations.
Completion of the acquisition will bring Forbes’ total number of shafts in the country to six and is projected to lift coal production capacity 39% to 2.5 million tonnes.
Forbes says the acquisition will also increase its rail siding facilities by 80% and its consolidated earnings before interest, taxes, depreciation and amortization 114% to up to $47 million.
Forbes president and chief executive Stephan Theron said the acquisition accelerated the miner’s goal of becoming a 3-4Mt producer.
“Our original timeframe was to complete this within the next 18 months and with the acquisition we expect to be producing almost 2.5 million tonnes in less than a year’s time,” he said.
“We also recognize that there is a shortage of mid-tier, premier quality producers in the coal market in South Africa, and this acquisition is likely to provide the company with both short and long-term positive benefits.”
The deal, to be financed through a South African bank, will entail an initial transfer of $38 million via a fixed payment. The remainder is to be paid in two tranches based on saleable production levels and an annual 10% revenue share.