Optimum Coal Mine ‘depends on mini-pit contractors’

The business rescue practitioners of Optimum Coal Mine (OCM) have defended the use of mini-pit contractors, whom they say provide a lifeline for the operation.

The view is contained in court papers filed this week in support of their case to have preservation orders over the assets of the mine suspended pending an appeal. The NPA, which was granted the preservation orders, is opposing the application.

The NPA obtained the preservation orders under the Prevention of Organised Crime Act on the grounds that the mine was obtained unlawfully by the Guptas in the course of their business dealings with the administration of former President Jacob Zuma. The NPA wants the mine forfeited to the state so that it can be sold at market value.

In a presentation to parliament’s justice and correctional services committee Monday, NPA deputy national director of public prosecutions Ouma Rabaji-Rathabatha expressed concern at the erosion of the mine’s value. She said the curator of the mine, Peter van den Steen of Metis Strategic Advisors, had reported the mini-pit contractors earned R6.3bn in the seven months from March while OCM had earned only R28.5m in royalties.

In an affidavit filed on Monday, business rescue practitioner Kurt Knoop said on behalf of the three other practitioners — Johan Klopper, Kgashane Monyela and Juanito Damons — that the income from the mini-pit contractors was crucial for OCM to keep operating. The NPA’s claim that value was being dissipated was hollow, he added.

“In relation to the curator’s concerns regarding the mini-pit contracts the unavoidable truth of the matter is that OCM requires funding to cover its monthly expenses,” Knoop said.

“The only way for it to do so is through the mini-pit mining contracts. The need for funding arose, and the mini-pit contracts were concluded, well before the preservation application was launched and the order granted, and before the coal price surged.”

The revenue generated by the mini-pit mines had enabled OCM to meet its monthly obligations, including its care and maintenance obligations. Without them, OCM would have been liquidated, Knoop said.

“Upon our appointment, the business rescue practitioners found the mine and assets in a state of neglect and disrepair owing to the lack of maintenance and capital investment by the Guptas, Knoop says in the affidavit.

“There was ongoing vandalism of the property and the business rescue practitioners had no funds or electricity with which to secure it. This is what led to the BRPs commencing the mini-pit mining operations as a vital source of funding.”

Knoop said the mini-pit contracts were and remain the only viable way of funding OCM.

“Without them, OCM would fall back into the state of rack and ruin (as it was when we were first appointed in February 2018), and all our efforts to arrest that degradation would have been in vain. If the funding from the mini-pits is cut off, OCM’s property will not be preserved, and the purpose of the preservation order will be defeated.”

The business rescue practitioners had acknowledged that the pricing in the mini-pit mining contracts does not reflect the current market-related rates, Knoop said.

“However, this is not because of anything untoward by us or the mini-pit contractors. It is only because the contracts were concluded before the coal price escalated so dramatically. At the time they were concluded, the rates were market-related.”

Knoop said the contracts are valid, binding and enforceable against OCM and could not be changed unilaterally, though the business rescue practitioners were trying to restructure them and had made some progress in this regard.

“The contracts were validly concluded at rates that were correctly calculated at the time,” he said.

ensorl@businesslive.co.za