Thermal coal miner Kangra has signed agreements with labour representatives to place its mine in Mpumalanga on care and maintenance.

Menar, as the operator, initiated the consultations with labour in response to, besides other factors, the damage to local and international markets caused by Covid-19-related lockdowns across the world.

Low thermal coal prices owing to a supply glut and low demand have proved unsustainable for the high-cost underground mine, Menar states.

As a result of placing the mine on care and maintenance, 359 employees have been affected.

Kangra accepted to pay retrenchment payouts in full following an agreement with unions. A recall agreement has also been signed to ensure that, if the mine is reopened, these employees will be given priority during the recruitment process.

Menar MD Vuslat Bayoglu says it was a very difficult decision for the company to take.

“We faced unprecedented difficult choices immediately when customers shut business. One option was to pretend as if operations were ongoing and thus continue to incur expenses until we have expended all the cash reserves. This was obviously an undesirable cul-de-sac,” he notes.

“The other option was to meet our legal obligations to all our employees in terms of paying what’s due to them for service rendered over the years, and stop incurring further costs. This option allows us to preserve the asset with a few employees and to restart operations when the market allows.”

The options were discussed in consultation with the unions and the company agreed to preserve the mine’s future viability.

“Cutting jobs and stopping operations is painful to us and the employees. However, it is better under the circumstances than to allow permanent destruction of potential employment in future,” says Bayoglu.

He notes that Menar appreciates the constructive manner in which the National Union Mineworkers and Solidarity representatives, and Menar COO Bradley Hammond, handled the discussion.

“The outcome of the engagement resulted in a broadly constructive outcome,” Bayoglu notes.

The decision to place Kangra on care and maintenance at this stage allows Kangra to invest in prolonging the life-of-mine of the operations and in future projects.

At its peak, Kangra, which was acquired from Madrid-listed energy company Gas Natural Fenosa in 2018, produced more than two-million tonnes a year of coal.

The remaining life of the current mine is about 12 months, and new developments could prolong the mine’s life to over 30 years. The company is awaiting regulatory approvals for the next phase.