[miningmx.com] – GLENCORE has placed Optimum Coal Holdings in business rescue after failing to re-negotiate a coal sales agreement with Eskom which buys the fuel from the Mpumalanga province mine for its Hendrina power station.
In terms of business rescue proceedings, an independent practitioner has to find a way of saving the company, or shutting it – an event that would affect about 1,500 jobs.
The practitioner can also involve a sale of the mine which supplies 5.5 million tonnes of thermal coal to Eskom annually.
Glencore clearly placed the blame for the ongoing failure of the company at Eskom’s door which it said was unwilling to renegotiate the agreement.
Following years of negotiations, Eskom decided in June to terminate a framework agreement which provided the basis for the renegotiation process and the continued supply of coal to Hendrina, said Glencore. During this renegotiation period, Glencore said it had pumped R3.4bn into keeping Optimum afloat, including R900m in the last nine months.
In a short response, Eskom said it had not received notification from Optimum Holdings of its intention it be placed in business rescue and that it was waiting for “… formal notification as per the prescripts of the law.
“Eskom has an existing coal supply and offtake agreement with Optimum and we expect the terms to be honoured, it said.
Glencore announced in January that it intended to shut the open-pit section of Optimum Coal Mine which supplies about 5 million tonnes/year to the export markets with the loss of about 380 jobs – a development that stirred the ire of the National Union of Mineworkers (NUM), the majority union at the mine.
Glencore said Eskom further tightened the screws on Optimum by enforcing penalties both retrospectively and into the future. The penalties relate to the coal not meeting the correct specifications and sees Eskom place a claim for coal it has already paid for an burned at Hendrina.
“Eskom is enforcing specifications in the supply agreement which Optimum is unable to meet on a sustainable basis and which were the subject of the recent renegotiation discussions,” said Glencore in its statement.
“The penalties sought would result in Optimum supplying coal to Eskom for an effective price of R1 per ton,” it said. International coal markets currently buy coal from Richards Bay at about R600 to R700/t.
“The directors are of the view that if the Eskom supply agreement can be renegotiated, there is a reasonable prospect of rescuing Optimum,” the mining group said.
“Glencore is willing to extend certain post commencement funding to Optimum to afford the business rescue practitioners an opportunity to assess the company and time to prepare a business rescue plan for Optimum,” it added.
In a separate statement, Glencore said that it had complied “… with all legal requirements in respect of the retrenchment process [at the open pit mine] and the conditions of its mining right …”. This follows criticism by the NUM that it and the South African government had acted alone in sanctioning the retrenchments.
This was after Reuters cited South African mines minister, Ngoako Ramatlhodi, as saying Glencore should shut Optimum mine because it had dealt with the retrenchment of employees from the open pit poorly.
“The retrenchments … were inhumanely conducted and disregarded all the legal prescripts which govern the process of retrenchments,” a statement said from the Department of Mineral Resources.
“Out of an expected 1,067 employees to be retrenched, approximately 359 employees have been retrenched. About 267 opted for voluntary severance packages and 86 were redeployed to other Glencore operations,” said Glencore.
