[miningmx.com] – EXXARO Resources’ acquisition of Total Coal SA (Total) is being blocked by Bridgette Radebe’s Mmakau Mining which is the 26% black economic empowerment (BEE) partner in Total’s operating Dorstfontein and Forzando collieries.
That is according to two mining industry sources both of whom spoke on condition of anonymity.
Both sources told Miningmx that Mmakau is opposing the Section 11 transfer of the prospecting and mining rights from Total to Exxaro which must be approved by the Minister of Minerals and Resources.
Radebe could not be contacted despite repeated attempts by phone and email. Total Coal SA CEO, Christa Botes, in a reply to e-mailed questions said: “I cannot confirm if this is correct.”
An Exxaro spokesperson said the group had nothing to add to the comment in the latest results statement which was that all conditions precedent to the deal had been met except the Section 11 transfer.
It’s not clear why Radebe is opposing the deal. One source commented: “Bridgette is being Bridgette. She’s a trouble maker, but she’s a very well-connected trouble maker.”
That’s a reference to the facts that Radebe is the wife of Minister in the Presidency, Jeff Radebe, and the sister of African Rainbow Minerals executive chairman, Patrice Motsepe.
The source added: “But what I don’t understand is why she is going this route. There would seem to be a simple solution which is for Exxaro to buy out Mmakau’s minority stakes in the various Total collieries on the same terms. Exxaro does not need Mmakau because it is already a BEE compliant group.”
The suggestion is it just might suit Exxaro for this deal to fall through because of the deterioration in the state of the export coal market and the drop in value of the rand against the dollar since July last year when the deal was struck.
Exxaro agreed to buy Total for $472m – plus take over debt totalling $85.5m. In return it gets control of the Forzando and Dorsfontein coal mines plus various other coal resources and projects and Total’s 4 million tonnes a year (mtpa) current export allocation through the Richards Bay Coal Terminal (RBCT).
The acquisition was heavily criticised at the time by analysts and fund managers who maintained Exxaro had paid too much for Total.
That was rejected in September by Exxaro executive head for coal, Mxolisi Mgojo, who stressed the strategic need for Exxaro to own greater coal export quotas through the RBCT in its own name.
However, Exxaro finance director, Wim de Klerk, admitted there would likely be an allocation of the purchase price to “goodwill’ instead of the assets acquired when the deal was finally closed.
But, if the deal goes through, there is a risk Exxaro could end up taking an impairment charge against the assets acquired. Such a development would be highly embarrassing given that Exxaro has just taken a R5.8bn impairment charge against the Mayoko iron ore project.
The source added: “Maybe this acquisition made sense at a Richards Bay FOB coal price of around $85/t. At current coal prices around $60/t it does not.”
The terms of the deal specified a “drop dead date” of six months post the signature date for completion which would have been in January this year. But it also provided for two extension periods of six months each which would push the “drop dead date” back to January 2016.
