Creditor outrage as Optimum Coal to be sold for a pittance to unknown shelf company
MININGMX / 09 DECEMBER 2018 - 16.11 / DAVID MCKAY
OPTIMUM Coal Mine’s creditors have objected to a proposed sale of the mine to an unknown entity, Halo Projects, which they claim was a shelf company, and have asked the business rescue practitioners (BRP) to postpone a meeting to approve the transaction.
In a letter to the BRPs seen by Miningmx, a representative for the creditors said Halo Projects appeared to be a front company, and that it was unlikely to win a mining licence from the Department of Mineral Resources (DMR) as a result.
Kurt Knoop, one of the BRPs for Optimum Coal Mine, said in a text message to Miningmx that he had not received the creditors’ letter.
Among the creditors’ complaints are that the sale agreement with Halo Projects does not set out payment details for Optimum Coal Mine and that it seems to give preference to certain creditors over others; for instance, service providers appointed to restart the mine will be paid before existing creditors. Even the BRPs’s fee is given preference.
Creditors – who in terms of the business rescue process have the right to vote on the bidder selected by the BRPs – also complain that they have been given less than two days to approve the transaction which they believe is insufficient time.
Critically, the creditors say Optimum Coal Mine, which also includes Koornfontein mine and an allocation at Richards Bay Coal Terminal (RBCT), has been under-valued. All in all, Halo Projects would pay R1 for the shares in Optimum Coal, and then a total of R600m over six months. However, this payment would be treated as post commencement finance which equated to a loan and not a purchase payment.
“There appears to be a gross undervaluation, especially of the Richard Bay [Coal] Terminal, and we would also need to understand why a more lucrative and economically viable offer by a third party was rejected”. Astonishingly, the stake in RBCT has been reduced to only R50m from R3.6bn in less than 24 months, according to the letter.
The third party offer referred to was from the Phakamisa Consortium in which former Harmony Gold CEO, Bernard Swanepoel’s To The Point Growth Specialists is involved. The consortium said in a statement on December 7 that it was surprised by a decision by the BRP to award the purchase of Optimum Coal Mine to ‘Project Halo’ which appeared to be backed by Australian bank, Macquarie.
“We had been led to believe we were the only compliant bid by the BPRs deadline of November 23, so naturally we are disappointed,” said Swanepoel. “The acquisition was to have provided a platform for a new, black South African coal mining champion to become an industry consolidator,” he said.
“By embracing good governance and both the spirit of transformation and compliance with the law laid out in Mining Charter III, we were quite confident that Optimum would have soon shed its legacy issues, delivering to funders, shareholders and the communities where it operates,” he said, adding he wished the winning bidder ‘well’ in its efforts.
Swanepoel told Miningmx in October that in order to recapitalise Optimum Coal Mine, approximately R1bn to R2bn would be needed.
The Phakamisa Consortium had joined forces with Trafigura, a commodity trader, to bid for Optimum Coal Mine. At the time of that interview with Swanepoel, only one other party – Vitol in joint venture with Bergh Group – was thought to have placed a competing bid. Bids have to include an underpin of a R250m guarantee.
The creditors have asked the BRPs to provide evidence of the guarantee provided by Halo Projects. Knoop told Miningmx on December 6 that no award for the control of Optimum Coal Mine had yet been made.
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