Optimum rescuers in talks with a major creditor
Owned by the Guptas, the now idle mine will need a lot of funding to ramp it up, and Covid-19 hasn’t helped an already sluggish market
Addressing the parliamentary portfolio committee on mineral resources and energy on Tuesday, lawyer for Optimum’s business rescue practitioners, Bouwer van Niekerk, said that while there are three bids on the table, the difficulty arises around funding the ramp-up of the mine.
“Optimum is a big mine. It requires a lot of money to ramp up. In the current market there are very limited players who have the capital to acquire an asset of this size, especially if you need to ramp it up,” he said. “Covid-19 has made it more problematic.”
The practitioners are thus looking to kick-start the mine themselves and are now in talks with a major creditor, Centaur Ventures, to find a solution.
Although a proposal is still forthcoming, it could be that Centaur converts a large portion of its debt into equity in Optimum and potentially inject funds into the business to aid its restart.
A revival of the operations would spell good news for another major creditor, Eskom, which has had to source alternative coal supply for its Hendrina power station since operations were halted at the adjacent Optimum mine.
Optimum, which includes a valuable export allocation at the Richards Bay Coal Terminal, was bought from Glencore by the controversial Gupta family’s Tegeta Exploration and Resources in 2016 but went into business rescue in February 2018 when the banking facilities of the family and affiliated businesses were withdrawn by the banks.
Business rescue is a form of bankruptcy protection for distressed entities as provided for in the Companies Act. The rescue process has been frustrated over the years, notably by a barrage of court challenges many of which were launched by Oakbay Investments and other businesses linked to the Guptas.
Optimum was unable to pay salaries in November 2018, and in April 2019 retrenched the workforce. The mine is not operational and is on care and maintenance. As Tegeta and the Gupta family are unlikely to overcome the challenges related to banking facilities in SA, the only way to rescue Optimum is to sell the mine to a new owner.
MPs voiced their concern about the drawn-out nature of Optimum’s business rescue, and others, which appear to never successfully rescue the entity in question.
Van Niekerk pointed out that Koornfontein, another Tegeta-owned coal mine put into rescue with Optimum in 2018 has recently been sold and the transfer of mining rights is underway.
He said continued business rescue efforts are the best option for Optimum. “If you do not succeed in the business rescue process and you liquidate, you lose a substantial amount of value. That would be catastrophic,” Van Niekerk said.
Joint business rescue practitioner Louis Klopper said it is important to note that if Optimum went into liquidation it would lose its mining licence, which is valid until 2028.
The department of mineral resources and energy noted in its presentation that there is a R112m shortfall in the financial provisioning for the environmental liabilities left behind by Optimum. It’s also non-compliant in terms of submitting an updated social and labour plan and an environmental management programme progress report, as required by the National Environmental Management Act.
Klopper said this responsibility falls on the company directors, the duties of which are taken on by the practitioners.
“The problem is that from day one we’ve just never had cash,” he said, noting that a forensic audit showed some R1bn has been squeezed from the mine which, Klopper said, was “barely functioning” when the rescue practitioners took over.