JOHANNESBURG (miningweekly.com) – Black-owned JSE-listed coal-mining company Optimum Coal is to go to arbitration over the differing interpretations of a coal supply agreement that it has with Eskom, Optimum CEO Mike Teke told Mining Weekly Online on Monday.
Optimum is contracted to supply 5,5-million tons of the 7,3-million tons of coal that Eskom's Hendrina power station consumes a year.
Teke said that Optimum and Eskom had an interpretation issue over aspects of the agreement, and that these had been referred to arbitration.
Retired judge John Myburgh is expected to commence arbitration in Johannesburg on August 10, for probable conclusion on August 15 or 16.
"I have been advised by my lawyers to say that the aspects we are talking about are sub judice," Teke said.
With Eskom's consent, BHP Billiton Coal South Africa (Becsa) ceded the coal supply agreement to Optimum as part of a black economic-empowerment (BEE) exercise. However, the terms of the agreement were simultaneously amended.
Instead of Optimum supplying 6,5-million of coal a year to Hendrina, the contracted volume was reduced to 5,5-million tons, on the understanding that the one-million tons that would no longer be delivered were coal fines, which Eskom preferred not to receive.
"That was the change," Teke told Mining Weekly Online, adding that there had been no alteration to the price, which remained at R93/t.
Optimum is continuing to supply the coal to Hendrina pending the outcome of the arbitration.
Optimum sold R3,9-billion worth of coal in 2009, when its earnings before interest, tax, depreciation and amortisation (ebitda) were R1,4-billion, giving an ebitda margin of 36%.
Last year's volume totalled 9,3-million tons, of which four-million tons - some 45% - were exported.
Optimum is South Africa's sixth-largest thermal coal producer and its fourth-largest exporter, after Anglo Thermal Coal, Becsa and Xstrata Coal.
It raised R1,5-billion when it listed on the JSE in April, which assisted the company to acquire up to 96% of Koornfontein coal mine.
Besides Hendrina, there is also potential for Koornfontein to supply Eskom's nearby Komati power station.
Optimum's share price was steady at R28 a share at the time of going to press. The share listed at R31,85 a share.