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Planned termination of Optimum Coal’s RBCT allocation puts 2 000 jobs at risk, say contractors

The Optimum Coal Mine

Photo by Creamer Media's Donna Slater

Contractor employees are protesting at the Optimum Coal Mine

Photo by Creamer Media's Donna Slater

7th December 2022

By: Darren Parker

Creamer Media Contributing Editor Online

     

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Six mini-pit contractors operating the Optimum Coal Mine (OCM), in Mpumalanga, are faced with having to potentially collectively retrench as many as 2 000 workers before Christmas, owing to the Richards Bay Coal Terminal (RBCT) having issued a notice on December 1 to terminate the Optimum coal terminal (OCT) allocation as from the end of January.

The six contractors, including Liberty Coal, will now no longer be able to mine and use the OCT to transport coal to the RBCT.

OCM GM Howard Pyoos told Mining Weekly on December 7 that, so far, between 1 100 and 1 500 workers from two of the contractors have been issued with Section 189 notices. He added that that number may increase to 2 000 as the remaining contractors take action.

On average, each worker has nine to ten dependants, translating to a potential 20 000 lives being directly affected by the layoffs.

The impact of RBCT’s decision on OCM translates to a loss of revenue to the tune of about R45-million a month.

Affected workers and community members are currently protesting the retrenchments at OCM’s gate.

The six contractors have been mining at OCM since September 2020, paying royalty fees that have been assisting in keeping the mine afloat and keeping jobs alive as the mine undergoes business rescue, which has been ongoing since 2018.

Meanwhile, the office of the National Director of Public Prosecutions (NDPP) has been pursuing the forfeiture of the OCM and OCT to the State. If this takes place, then there is no plan by government to save the mine and its positive contribution to employment and the economy of the surrounding communities.

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.

RBCT cited South Africa’s possible “greylisting” by the Financial Action Task Force in February next year and the global attention on South Africa’s efforts to avoid this, in addition to the NDPP’s efforts to prosecute individuals and companies it believes to be involved in money-laundering criminal activities, the involvement of the notorius Gupta family and Liberty Coal owner Daniel McGowan’s connections to it all, as bringing unwanted local and global attention to the use of RBCT and its terminals.

RBCT said the economic benefit of selling coal in the international market and exporting coal though use of the OCT entitlement was not accruing to OCM as an exporter and would, therefore, not be available to OCM any longer.

RBCT said that, following an extensive assessment process, it was determined that only a fraction of the coal being extracted by contractors from the mini-pits was being sold and exported by them via the OCT entitlement, stating that alternative export and transport routes were available to them.

RBCT claimed that the livelihoods of the 2 000 workers, therefore, did not depend on the entitlement, as evidenced by the information available to it.

BACKGROUND
After going into business rescue, OCM was placed on care and maintenance in May 2019. During this period, with no income to cover its overheads, such as electricity and security, the mine was vandalised and critical infrastructure was damaged and stripped to the extent that it was no longer usable.

To facilitate the successful implementation of the OCM and OCT business rescue plans, Liberty Coal parent company Liberty Energy agreed to acquire RBCT’s creditor claims against OCT in November last year for about R95-million and to provide a further R10-million as a security deposit against OCT’s future obligations to RBCT.

In addition, Liberty agreed to underwrite OCT’s liabilities to RBCT, regardless of whether OCT could use its RBCT entitlement, which was estimated to be valued at about R45-million just for the period between December 2021 and March this year.

OCT accrued liabilities of about R95-million between December 2018 and November this year, while not using the RBCT entitlement.

This was negotiated as part of the approval of the so-called “end game” by the RBCT board, which envisaged Liberty Coal taking over the assets and compromised liabilities of OCM and OCT’s RBCT entitlement as part of the approved restructuring in terms of the business rescue plans.

Liberty Coal’s approach was aimed at reinstating as many jobs as possible during this period, while generating revenue at the mine by focusing on third-party contractors who were already on site.

Liberty’s investments included hundreds of millions of rands to rehabilitate the ailing Pullenshope rail siding, to open up the KNO2 pit and to clear debt owed by OCT to RBCT.

OCM saw a significant improvement in production and sales thanks to these efforts since 2019, which have now been put in jeopardy once more.

The business rescue practitioners of OCM and OCT, as well as Liberty Coal, are currently attempting to negotiate a way forward with RBCT that avoids the potential significant job losses and additional litigation that may lie ahead.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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