Losing bidder Lurco Group feels cheated by irrational conditions imposed on it. Image: Ciaran Ryan
Koornfontein coal miners have been without pay for nearly two years, after the catastrophic involvement of the Guptas brought the company to its knees. It was stripped of cash to the point where underground cables went unserviced and safety gear was almost non-existent.
The mine, along with Optimum and several other Gupta-owned companies, was placed in business rescue nearly two years ago. The adjoining town of Blinkpan in Mpumalanga has been gutted since the mines were placed in rescue. It is reckoned two dozen miners have died, some from stress-related illnesses, since they stopped receiving pay cheques in early 2018.
Blinkpan is the poster child for capitalism’s ugly offspring. Don’t mention the name Gupta in these parts. The dauphins of state capture have wrecked this part of Mpumalanga, but did alright for themselves.
Out-of-work Koornfontein and Optimum miners were collecting food and donations from nearby businesses to feed themselves, in the hope that the mines would be resuscitated within a matter of months rather than years. Now nearly two years later, many have drifted off to surrounding areas to take whatever work they could find. They borrowed from family and friends to pay for water and lights and made deals with school administrators to pay their children’s school fees once the mines reopened.
Back in Johannesburg, the battle for who gets to own and run the mine is far from resolved. There’s no question which bid the miners prefer: Lurco group, a black-owned coal and chrome mining operation, put in a bid of R500 million which would include 94 cents in the rand backpay to workers. This was about R200 million better than the next best bid from Black Royalty Minerals (BRM).
But then the business rescue practitioners (BRPs), acting on instructions from creditors (the largest of which is Eskom), added a strange condition: have the money in a South African bank account within five days. This was an impossibility for Lurco, as the money was overseas and would take at least six weeks to get Reserve Bank approval. This was known to the BRPs and creditors, says Lurco Chief Operating Officer Aubrey Chauke.
Last month Lurco brought an application to interdict the rescue practitioners from selling the mine to BRM, on the grounds that the original business rescue plan was amended to include the impossible five-day payment condition. At a media briefing this week, Lurco CEO Ellington Nxumalo said had the changed condition been known in advance, the company would have amended its bid accordingly.
It’s almost as if the condition was added to torpedo Lurco’s chances of acquiring the mine. Nxumalo says the company has good relations with the other bidders, including BRM, as well as the BRPs. Yet it remains a mystery as to why such a onerous condition was imposed on it.
Says one Koornfontein miner now working as a waiter: “We are aware of the different deals on the table and for us the Lurco deal was the best, because we would receive backpay.”
The BRPs say their hands are tied by creditors, the largest of which is Eskom. This has prompted speculation that Eskom secured a better deal for itself with BRM once the mine reopens. Eskom currently pays R430 a ton for Koornfontein coal according to the business rescue plan, but less than half of that for Optimum coal.
Eskom’s nearby power stations of Arnot and Hendrina are old and due for decommissioning within the next few years, which raises the question why Lurco or anyone else would be interested in purchasing an asset with an uncertain coal market four or five years hence. One of the more interesting options once electricity generation is privatised is for coal mines to acquire and refurbish these old power stations.
A complicating factor for the business rescue process is that Koornfontein creditor Westdawn has applied for the winding up of mine, on the grounds that it cannot pay its debts.
Nxumalo says Lurco has no ties to the Guptas, nor to any politically-connected individuals. It has to bring this up because of ongoing suspicions that the Guptas are trying to sneak back into the country through the side door.
“We were very transparent and open that the source of our funds was overseas, and we presented proof of funds to the BRPs. We have good relations with our overseas funders and they are following this story because there is huge interest in this asset. But the ongoing delays in finalising the sale (of Koornfontein) is creating investor fatigue.”
Lurco is also bidding for the one-time jewel in the Gupta crown, Optimum. The preferred bidder for Optimum will be announced at the end of January.
Complicating things further is another case seeking to stop the sale of any of the former Gupta assets held by Tegeta.
The case is being brought by Amin Al-Zarooni, chairman of Swiss-based company Charles King SA, which claims it has a written agreement signed in 2017 to purchase the Gupta holding company Tegeta for R2.9 billion. It was to secure this right with a down-payment of R66.7 million, but was R2.3 million short when payment fell due on October 22, 2017.
The money that was deposited was used by the Guptas to pay salaries at various Gupta companies, including Optimum. The BRPs cancelled the agreement in April 2018 and the matter went to arbitration. The arbitrators found against Charles King, and that ruling is now being appealed.
Lurco was launched in 2010 as a black-owned minerals company and today has two coal assets in Mpumalanga (Van Dyks Drift and Inyanda) and the Mooinooi chrome operation in Gauteng. It is on the hunt for prime coal assets in Zimbabwe and Eswatini (formerly Swaziland) and in November 2018 signed a 50-50 joint venture with Shumba Energy in Botswana’s Sechaba coal mine.
Adding Koornfontein and possibly Optimum to the stable would catapult it into the mining big league.