It was a bleak Christmas for nearly 8,000 Optimum Coal mine workers and contractors who were last paid in November.
The former Gupta mine was one of eight Gupta-owned companies placed in business rescue nearly a year ago after local banks withdrew transactional banking facilities, making it impossible to settle creditors and pay workers.
In a statement released on Wednesday, the business rescue practitioners (BRPs) explain the current cash crunch that made it impossible to pay workers for the last two months. The monthly wage bill is about R30 million, but the BRPs say the sale of Optimum and sister mine Koornfontein should be wrapped up in the next two weeks, at which point workers will be paid.
The BRPs have provisionally accepted a combined offer from the Project Halo consortium to purchase three companies (Optimum Coal Mine, Koornfontein Mines and Optimum Coal Terminal) at R3 billion plus post-commencement funding of R600 million. Project Halo also put in separate bids of R200 million for Koornfontein Mines, R2.8 billion plus pre-commencement funding of R600 million for Optimum, plus another R50 million for Optimum Coal Terminal at Richards Bay.
“That being said, the BRPs must emphasise that the decision of accepting the offer contained in the business rescue plans lies solely with the mines’ affected persons,” say the BRPs in a statement.
One of the BRPs, Louis Klopper, says solutions to the current impasse are being considered as a matter of urgency.
Optimum Mine workers staged protests outside Eskom and the mine itself earlier this week, demanding payment of their wages. The National Union of Mineworkers blamed the BRPs for workers going unpaid, saying they had violated the commitment to continue paying workers and creditors so long as there was production.
Klopper replies that a resolution of the cash crunch is imminent.
“What people need to understand is the terrible condition of operations we inherited in February last year when we took over, and the work that had to be done to keep operations going.”
An agreement was concluded in March 2018 with Burgh Group Holdings to provide management assistance and the necessary transactional banking facilities. This was critical, as if this agreement did not come into being, the BRPs would have had no other option but to liquidate the mining companies in April last year.
The rescue practitioners had to defend or institute nearly 50 court cases over the past 10 months against entities that either tried to liquidate the mines (which would have instantly caused thousands of job losses), or entities and individuals linked to the Guptas that tried to frustrate the business rescue process.
The statement issued by the BRPs details how the Guptas nearly wrecked the mine and then diverted R90 million – and possibly much more – in VAT payments to fund operations. The VAT money was recovered after the BRPs obtained a court interdict. The Guptas failed to secure surface rights, drained cash away from essential maintenance in machines and mining operations, and failed to develop underground operations at both Koornfontein and Optimum, resulting in a section of Optimum being closed.
Additional funding of R175 million was obtained from Swiss-based energy and commodity trading company Vitol and SA-based Burgh Group Holdings (in the form of pre-funded coal off-take agreements), without which no mining operations could have taken place. This allowed mining operations to resume, but the challenge every month was producing enough coal to pay all operational expenses.
“The BRPs soon realised that more PCF [post-commencement funding] was needed to ramp up operations to such a level that enough coal would be produced to carry the monthly operational expenses, especially for the payment of salaries, electricity supply from Eskom and contributions to the Richards Bay Coal Terminal to sustain the export allocation at Richards Bay,” says the statement.
“We are employing all legal means necessary to conclude the sale of the mines and the concomitant access to much required funding. That being said, we sincerely hope that all affected persons will have an understanding that this is a statutorily prescribed process, and that we cannot allow the legal process to not follow the prescribed course, as this will jeopardise the legitimacy thereof – something that all stakeholders can ill afford.”
Republished from Moneyweb