THE difficulty Richards Bay Coal Terminal (RBCT) finds itself in is that it may prove very costly to preserve its black economic empowerment (BEE) credentials.
That is one of the crucial issues created by Tegeta Exploration & Resources’ proposal to sell its 7.5% stake in the terminal, held through Optimum Coal subsidiary company, Optimum Coal Terminal to Vitol SA.
The concern is that at the terminal’s current 81 million tonne/year capacity, the proceeds of some six million tonnes of coal export entitlement will be moved offshore. Vitol is headquartered in Rotterdam.
RBCT has faced criticism in the past for failing to provide sufficient access to export markets to black-owned coal miners which comprise about a fifth of South Africa’s coal sector. But it has made strides.
Roughly 23%, or 19 million tonnes of its capacity, has been allocated to BEE empowered mining entities which include emerging junior miners created through the mining charter and RBCT’s own empowerment processes.
Selling entitlement to Vitol would reduce this empowerment to 16%; at least that’s the concern. One of the tasks of the RBCT board is to establish exactly whether Vitol is BEE compliant.
Once in the hands of Vitol, there would also be the risk that the entitlement would see emerging black miners having to apply to the Dutch for export exposure.
“There are several enterprising B-BBEE coal mining companies that would love to get their hands on RBCT export capacity,” a coal mining source told Miningmx. “Instead, a non-producer such as Vitol is able to sweep in and take it,” he said.
“The purchase price should be indicative of the margins Vitol expects to make from those B-BBEE miners, who now have no other choice but to sell their export coal at deep discounts to the Vitols of this world because they hold the keys to our export infrastructure,” he added.
According to market speculation, the purchase price of $250m is pretty heavy but taking a long-term view of the coal market the price could be justified. There’s also the Machiavellian thought that the purchase price neutralises RBCT’s pre-emption rights over the sale of entitlement.
There’s also the cost of Vitol not fully utilising its export entitlement. As a company that only trades the coal, it does not have the cost pressure of running a mine.
From a Gupta family perspective this looks exploitative. It will want to supply into the Vitol entitlement without having the cost pressures of running a mine or as an RBCT shareholder of meeting its entitlement target.
And should the Gupta foray into mining eventually fall over, Vitol will still have the right to trade through a terminal it took the South African industry years to build.
