South32 has amended the sales agreement for South Africa Energy Coal. This includes removing the deferred payment mechanism and providing a US$50m restructure facility as well as the US$200m rehabilitation fund.
The final condition with electricity provider Eskom remains, which is approval of the transfer of the Duvha coal supply agreement.
Macquarie considers this sale will be a major catalyst for South32 once finalised, and notes earnings upgrade momentum has improved because of stronger silver, nickel and manganese prices. Outperform rating and $3.10 target retained.
Target price is $3.10.Current Price is $2.85. Difference: $0.25 – (brackets indicate current price is over target). If S32 meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).