Legal adviser Bouwer van Niekerk expects to have a preliminary business rescue plan for Optimum Coal Mine and Koornfontein Mine submitted for creditor approval by the end of next week, he confirmed to Mining Weekly Online on Wednesday.

The mines’ business rescue practitioners (BRPs) have been in continuous discussions with all stakeholders and creditors to vote on the proposed business rescue plans for the mines.

The most recent meeting, held with power utility Eskom on Friday, resulted in positive outcomes, where Eskom weighed in on suggestions for the plan, said Van Niekerk, adding that the State-owned entity’s focus was on discussing a concrete, long-term coal supply agreement.

Addressing questions of Eskom’s ability to pay for the coal, Van Niekerk noted that it was up to the future majority owner – which is currently proposed to be Project Halo – to handle trading with stakeholders, as the BRPs only prime the project for operation and sale.

Project Halo has already put R600-million of financing at the ready should the business rescue plan for the mines be approved.

Eskom and Project Halo plan to meet again on Thursday for further discussions, after which the BRPs and the legal team will meet with the necessary stakeholders, including Eskom, to bring a final product before the creditors for approval and voting, after which the plan will be made public and implemented.

Project Halo, which is a consortium, was selected as the preferred bidder in a contested purchase of the operations. Project Halo won a bid to buy Optimum Coal Mine, Koornfontein Mine and Optimum Coal Terminal for R3.6-billion.

Project Halo on Tuesday released a statement, distancing itself from allegations that it is linked to the Gupta family, which previously owned the operations, while affirming that the bidding process was fair.

BACKGROUND

Mining Weekly Online previously reported that the failure by the controversial Gupta family to invest in the two coal mines since 2016 had led to a steady decline of the operational capabilities at the mines.

This was further exacerbated by the lack of transactional banking facilities, with the lack of recapitalisation resulting in a failure to acquire surface rights, which are essential for the continued sustainable production from the opencast operations.

The opencast operations at Optimum, the BRPs previously explained, had to revert to alternative measures that had short-term gains, but ultimately compromised efficiency in terms of keeping the draglines productive.

The replacement or refurbishment of mining equipment that had reached the end of its economic life were also not done, resulting in a decline in the reliability and availability of machines essential to sustainable mining operations.

Additionally, the development of the underground operations at the mines, which is essential to provide pit room for the underground sections to mine, was not done. This resulted in a section being closed at the underground operations.

“[As a result of] the fact that the businesses did not have long-term access to transactional banking facilities, it made the application for credit from suppliers and vendors difficult. Many of the suppliers would only consider doing business with the companies on a cash-on-delivery basis, or on very limited credit terms which, given the size of the operations and the concomitant cash requirements, made doing business very difficult,” the BRPs explained.

This, in turn, resulted in, besides others, mining equipment not being repaired or maintained on a regular basis or at all. The knock-on effects included production beginning to lag, and the supply of coal to customers, including Eskom, falling behind.

During September 2017, the Bank of Baroda announced that it was going to close the accounts used by the Gupta-controlled companies, including Optimum and Koornfontein, which are adjacent operations. During the same month, employees were notified that they would receive their salaries late as a result of “issues related to the bank accounts”.

From September onwards, the situation at the mines continued to deteriorate, with creditors not being paid and production continuing to decline. Some of the key production contractors began to de-establish from site as a result of nonpayment.

As a result, both businesses were under huge financial distress and on the brink of being liquidated, prompting the companies to file for business rescue.

Although the companies’ directors assured the BRPs that they only filed for business rescue as a result of the imminent loss of transactional banking facilities, the BRPs told Mining Weekly Online that “it quickly became clear” that the mines were “in a perilous state of disrepair and the companies [were] unable to pay their monthly expenses as they became due”.

The National Union of Mineworkers will on Wednesday hold a protest march, in Pretoria, with union members employed at Optimum and Koornfontein having not received their salaries for two months.