The acquisition agreement between Southern Africa-focused coal producer Forbes & Manhattan Coal and mining major Rio Tinto subsidiary Riversdale Mining was not cancelled because of Zululand Anthracite Colliery’s (ZAC’s) performance, says ZAC black economic-empowerment partner Maweni Mining Consortium (MMC) CEO Fred Arendse.

Forbes & Manhattan Coal announced in February that it had cancelled the R440-million agreement, according to which Forbes & Manhattan Coal would have acquired a 74% stake from Riversdale Holdings in each of the currently producing ZAC and the undeveloped Riversdale anthracite colliery after the takeover targets at ZAC had underperformed.

Deterioration

The company says in a statement that the performance of ZAC “deteriorated to a material extent”, which Forbes & Man-hattan Coal believes is a breach of certain provisions of the acquisition agreement.

However, Arendse does not believe that this is the reason for the cancellation of the agreement.

“I believe that the agreement was cancelled because MMC partner SSC Group raised some serious concerns about the trans- action and has publicly objected to any plans of Forbes & Man-hattan Coal to leverage ZAC or its related shareholding for debt to acquire Riversdale Holdings,” Arendse tells Mining Weekly.

In February, Mining Weekly reported that SSC Group, in a letter to Forbes & Manhattan Coal, expressed concerns regarding the coal producer’s financial capability to undertake the transaction and make the necessary future capital investments.

SSC Group also stated that labour represented the biggest component of the total fixed cost and that any motion or suggestion to retrench any member of the workforce to optimise profits would be fiercely opposed.

MMC states that it is pleased with the cancellation and hopes that it will be given a fair chance to buy out ZAC’s majority partner, adding that it submitted an expression of interest letter to Rio Tinto on February 19.

Performance

Meanwhile, Rio Tinto states in a media release that Riversdale Mining believes that the claims over performance do not consititute a breach of the sale agreement that would entitle Forbes & Manhattan Coal to withdraw from the contract and, therefore, “Forbes & Manhattan Coal’s action repudiates the agreement without valid reason”.

Riversdale Mining is reserving its right to seek damages suffered as a result of the action by Forbes & Manhattan Coal.

How- ever, Forbes & Manhattan Coal said it would not be liable for any damages suffered as a result of the cancellation of the contract, Min-ing Weekly reported in February.

“The parties have attempted to reach agreement on a mutually beneficial way forward in respect of the acquisition, but such discussions have, to date, been unsuc- cessful,” Forbes & Manhattan Coal added.

“I am deeply disappointed that Forbes & Manhattan Coal has chosen to take this course of action, which has necessitated us to cancel the sale,” Riversdale Mining CEO Eric Finlayson said in a media statement.