[miningmx.com] – FORBES Manhattan Coal Corporation (Forbes Coal), a R124m anthracite miner, is locked in a legal dispute with Riversdale Mining, a company owned by Rio Tinto, the Anglo-Australian mining group.
This follows the aborted R440m acquisition of Zululand Anthracite Colliery (ZAC), a business in South Africa’s KwaZulu-Natal province in which Riversdale Mining has a 74% stake. Forbes Coal said it had terminated the deal in February.
It is now claiming some R45m held in escrow and says that the failure to consummate the transaction was down to a deterioration in the performance of ZAC between signing the agreement and completion conditions precedent.
The deal failure, which would have added 700,000 tonnes of production to Forbes Coal’s existing KwaZulu-Natal anthracite production, also sees Forbes Coal fight a R5.7m claim from Sasfin Capital, a Johannesburg firm claiming advisory fees.
The performance of ZAC was earlier this year discussed in parliament when ZAC met with members of the parliamentary portfolio committee on mineral resources to discuss the anthracite mine’s level of compliance with the Mining Charter.
It emerged there had been a disagreement between ZAC and its empowerment partner, Maweni Mining Consortium over the deteriorating performance of a community and empowerment trust fund.
“Flowing from the cancellation of the agreement between the company and RML two disputes have been declared with the company seeking the return of the R45.5m ($4.68m) held in escrow in the one matter and both the company and RML seeking damages resulting from the cancelation in the other,” Forbes Coal said in announcing its interim and quarterly results today.
The legal problems couldn’t come at a worse time for Forbes Coal which suffered a slide in quarterly and interim profitability, partly owing to a four week strike at its operations. Interim revenues to end-August fell to C$39m (2012: C$44m). Some C$528,000 in cash burn was suffered by Forbes Coal.
Consequently, there has been pressure on the company’s balance sheet. On August 31, Forbes Coal failed its covenant test on a R240m revolving credit facility with Investec, a South African bank, of which R230m had been drawn down.
Investec waived the breache and even agreed to sign over a stockpile of anthracite it was holding in collateral to Forbes Coal’s shareholder, Resource Capital, a Canadian private equity investor which provided Forbes Coal with a C$6m convertible loan facility.
