The head of the creditors committee for beleaguered Optimum Coal Mine (OCM), Jaco van der Westhuizen, has alleged that the strategic intent of the mine’s multiple business rescue practitioners (BRPs) and mini-pit contractors is to “sterilise” the mine, stripping it of all its value, while buying time to continue doing so through engaging in drawn out litigation.
Van der Westhuizen tells Mining Weekly there is reason to believe that the BRPs and mini-pit contractors are abusing the legal system, by filing court cases and multiple appeals to extend their mining operations for as long as possible.
The BRPs are Kurt Robert Knoop, Johan Louis Klopper, Kgashane Christopher Monyela and Juanito Martin Damons.
This comes after the Richards Bay Coal Terminal (RBCT) in late November informed the BRPs and contractors that it would terminate the Optimum Coal Terminal (OCT) allocation owing to concerns about potential corruption surrounding OCM’s operations, which RBCT believed were benefitting the mini-pit contractors instead of OCM.
In a letter addressed to the National Union of Mineworkers representative at OCM, Richard Mguzulu, on December 1, RBCT said there was a significant risk of the current and future use of the OCT entitlement being found to be part of a “grander scheme to launder and/or strip money out of South Africa by known/unknown parties for purposes” other than the restoration and rescue of the OCM operations.
“The RBCT shareholders merely took note that the BRPs and the mini-pit contractors are sterilising this mine, while court cases are pending and took their veto rights to stop exports,” Van der Westhuizen says.
He reveals that, following a preservation order issued against OCM by the National Prosecuting Authority to prevent the mine’s sale and a simultaneous forfeiture application by the same, which would see OCM turned over to the State, a curator – Peter van der Steen – was appointed to oversee the multiple BRPs.
However, according to Van der Westhuizen, the BRPs approached the Supreme Court of Appeal to appeal this and allegedly attempted to withhold financial information until the appeal could be heard in March or April next year.
“It is an appeal against the entire preservation order, which order, so the BRPs contend, is not provided for in our law . . . The BRPs were called to defend the vast majority of the court cases that they have been involved in, including an application by the head of the creditors committee for the liquidation of OCM,” legal representative for OCM and its BRPs Smit Sewgoolam Incorporated director Bouwer van Niekerk tells Mining Weekly.
Van der Westhuizen says that “no financial statements and no management accounts from the last five years” were provided to Van der Steen, despite it being required under the Companies Act.
“How does that happen? We've addressed these issues in court but they try and get away with every technical issue in the book,” he says.
Van Niekerk confirms, however, that these documents were relinquished, although only after Van der Steen bemoaned their absence in October.
Van der Westhuizen tells Mining Weekly that what he believes to be “serious misconduct” being committed by the BRPs undermines the purpose for which they were appointed – which was to help realise the successful turnaround of OCM after it was put on care and maintenance in 2019.
Since then, OCM has managed to return to steady-state production, with Van der Westhuizen stating that the mini-pit contractors had managed to export as much as R12-billion worth of coal since November last year – none of which is going towards repaying OCM’s creditors.
“The BRPs’ responsibility is to get some money back to the creditors, first of all, and then try to sell the mine as a going concern. At this moment in time, they are basically trying to sell this mine for about R250-million. It’s worth a lot more than that,” Van der Westhuizen says.
According to Van der Steen’s curator’s report, issued on December 7, the potential profit that OCM could have earned for the preceding seven-month period, had it conducted its own mining activities, equates to about R6.3-billion in total or R902-million a month.
Considering the total value of creditors of OCM, which, according to the BRPs stands at about R4.2-billion, such profits would have been sufficient to settle in full all OCM’s creditors. As a party to the mini-pit contracts, however, OCM’s actual total revenue for the same seven-month period was only about R347-million.
“If OCM were to commence conducting its own mining operations at current coal prices, it would be able to exit business rescue within a number of months,” Van der Steen said in his report.
Van der Westhuizen also points out that the BRPs have managed to accumulate more than R400-million in trust accounts under a care-and-maintenance provision. He says OCM requires about R10-million a month to finance care-and-maintenance activities, which effectively means that the BRPs can continue to receive payments for their services for at least three years if the mine were to go back under care and maintenance once again – a situation which he calls a loophole that somewhat incentivises the keeping of OCM under business rescue.
“This mine could have been taken out of business rescue by now,” he asserts.
The implication is that, as long as the mine remains under business rescue, the BRPs will continue to get paid.
“Were it not for the preservation order obtained by the National Director of Public Prosecutions (NDPP), the adopted business rescue plan – which is essentially the directions given by the creditors to BRPs on how to proceed in the business rescue proceedings – would have been implemented by the BRPs.
“They were mere weeks from substantial implementation of the plan. The fact that it was not implemented is wholly due to the NDPPs’ preservation order,” Van Niekerk retorts.
In an affidavit filed by the BRPs in the Pretoria High Court on December 12, they collectively responded by stating that OCM requires funding to cover its monthly expenses and that the only way for it to do so is through the mini-pit mining contracts.
“They 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,” the affidavit states.
The BRPs assert that the mini-pit contracts are fixed-term contracts and that they were the only means of funding OCM prior to the preparation, adoption and implementation of a business rescue plan.
“We have attempted to renegotiate the contracts, and will continue to do so. The so-called ‘dissipation of value’ through the continuation of the mini-pit mining, is, in fact, a lawful consequence of those contracts. The mini-pit contracts are binding on OCM and cannot be cancelled or restructured unilaterally,” the affidavit states.
The BRPs claim that the revenues generated by the mini-pit mines have enabled OCM to meet its monthly obligations, including its care-and-maintenance obligations, and that, without them, OCM would have been liquidated.
“The revenues generated by the mini-pit mines enabled us to restore electricity to OCM, appoint security contractors, secure OCM's assets, to manage its water usage and keep the mine under 24-hour surveillance,” the BRPs say.
In response to allegations that the mine is being sterilised by mini-pit contractors, OCM COO Michael Cyril Elliot says in an affidavit filed at the Pretoria High Court on December 13 that only about 9.03-million tonnes have been mined by the mini-pit contractors, to date, out of a total estimated 611-million tonnes of coal at OCM – about 1.48% of the total coal resource at OCM.
“The mining of such a small amount of coal resource cannot have a material effect on the economics of the mine and will not sterilise it,” Elliot states.
Litigation in this matter is ongoing.
Edited by: Chanel de Bruyn
Creamer Media Senior Deputy Editor Online
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