The NPA and RBCT are ignoring facts to suit ulterior motives whilst ignoring the plight of over 2000 + jobs.
This is an urgent appeal to the President of South Africa, the Minister of Mineral Resources and Energy, the Minister of Justice and the Management and Board of RBCT to intervene and save the imminent job losses of more than 2,000+ people in the mining sector in Mpumalanga.
In his keynote address to the 2023 Mining Indaba in Cape Town on 7 February 2023, Mr Ramaphosa stressed the importance of the mining sector as a vital contributor to the growth of South Africa’s economy as well as to job creation and retention, accounting for close on to half a million direct jobs and close on a million indirect jobs. He went on to lament that despite record mining revenues achieved in 2022, South Africa was far from realising the full potential of its mining industry and confirmed that as government “we are determined however to remove all impediments, everything that stands in the way and create an environment that will drive sustained growth in mining.”
With the current energy crisis and an ailing economy, including over 43% unemployment, allowing more job losses would be reckless and against the mandate adopted by the ANC.
As the President stated in his opening address at the 6th ANC Policy Conference (2022): “The glaring reality is that there are nearly 12 million South Africans of working age who are un- employed, including discouraged work-seekers. Unemployment not only deepens poverty and inequality, but it also contributes to several other social ills, such as crime, substance abuse and other destructive behaviour.”
This letter also decries the unscrupulous tactics of the National Prosecuting Authority (NPA) and the management and board of Richards Bay Coal Terminal (RBCT), who are pushing a false, prejudiced and defamatory narrative still to be tested by the courts that can only result in further unemployment.
Liberty Coal, as the purchaser of the assets and business of Optimum Coal Mine (Pty) Limited (OCM), has been involved in OCM’s business rescue process. Liberty Coal remains committed to investing in Optimum Mine to bring it back into full scale production, including the refurbishment of critical infrastructure to be able to ramp up operations, reinstate jobs and generate revenue from coal sales to trade the mine back into profitability.
The intention is, and always has been, to acquire the mine, as was detailed in the business rescue plan adopted by its creditors (including Eskom) in September 2020, as well as the RBCT export allocation nominally held for OCM’s benefit and use by its sister company, Optimum Coal Terminal (Pty) Limited (OCT). Over two years later and due to no fault of their own, OCM, OCT and Liberty Coal are still unable to implement the adopted business rescue plans of OCM and OCT due to the legal actions taken by the NPA.
Since then, however, OCM, OCT and Liberty Coal have been the target of anti-competitive behaviour, in apparent active collusion between the NPA and the management of RBCT, to derail the business rescue of Optimum Mine.
The Board of RBCT acts like a cartel. OCM, OCT and Liberty Coal have been singled out for treatment that no other RBCT shareholder has had to endure. The ultimate goal appears to be to justify stopping OCM/OCT from using its RBCT port allocation and associated rail allocation from TFR, so that the cartel of Glencore, Seriti, Thungela and Exarro get the benefit themselves of using such rail and port allocations, to the detriment of OCM/OCT, Liberty Coal and the 2000+ employees who work at Optimum Mine.
The board of RBCT comprises representatives of the shareholders who together directly or indirectly own and control the RBCT coal cartel. Glencore owns circa 19% of RBCT, and its CEO, Murray Houston, sits on RBCT’s board; Seriti owns circa 21% of RBCT, and its appointees to RBCT’s board include its CEO, Mike Teke and Doug Gain, chairman of one of its major shareholder; Thungela own circa 23% of RBCT and has appointed Bernard Dalton, its head of marketing, to the RBCT board; whilst Exxaro, as owner of 12% of RBCT, is represented by its senior logistics and marketing manager, Sakkie Swanepoel.
Most of RBCT directors have either board or senior management positions with one or other RBCT shareholder. Such directors have in principle a conflict of interest in voting to support any outcome that materially and directly benefits the shareholders they represent. The decision to suspend OCM/OCT’s ability to export coal through RBCT in the present circumstances can only be described as anti-competitive and unfairly oppressive to OCM/OCT as a minority RBCT shareholder.
Ultimately, the NPA wants Optimum Mine to be forfeited to the State, a move that will prove fruitless. It is improbable that another business rescue plan could be adopted should the current adopted plan ever be set aside by the courts. Despite the NPA’s public assertions over the past year that it will find another buyer for OCM, no offers have been forthcoming.
Despite OCM/OCT’s manifest reliance on utilising its export allocation to sustain itself financially pending finalisation of the current legal proceedings by the NPA, and despite its being in all respects in good financial standing with RBCT, the board of RBCT voted to terminate OCT’s export entitlement solely to prevent OCM’s contract miners from being able to sell coal via the terminal to the export market.
OCT is nevertheless expected to continue paying its share of the substantial monthly charges due to RBCT for the privilege of not being able to export coal from RBCT. This defies logic.
OCM/OCT, Liberty Coal and the other mini-pit contractors have been vilified to suit the NPA’s agenda. The fact is that the mini-pit contracts are and have always been a short-term solution to generate revenue for OCM during its business rescue, without depleting its life-of-mine resources; the contractors have taken significant commercial risks which have benefited both OCM/OCT and RBCT; they have created over 2000+ jobs with significant spin-off benefits in the local communities surrounding the mine, with the end game in mind of Liberty Coal acquiring the business and assets of OCM.
As part of the business acquisition, given the short-term nature of the mini-pit contracts, Liberty Coal agreed to those third-party contractors already on site continuing to mine in accordance with their existing agreements with OCM, to protect their businesses and employees. Liberty Coal’s own contract with OCM would simply terminate by operation of law upon acquiring OCM’s business.
The fixed royalty paid to OCM during this period has provided the mine with working capital via the mini-pit operators. The BRPs have repeatedly stated that Optimum never had the funds or resources to mine independently, and the mine still requires circa R2bn to bring it back into full scale production, which Liberty Coal will have to provide.
The mini-pit contractors’ operations at the mine are based on legally binding arm’s-length agreements signed by all relevant parties and were deliberately structured to limit any market risk to OCM. If the market went down, Optimum did not suffer, and if the market went up, there would be no price increase due to OCM. A simple and standard commercial structure which all coal traders can utilise and can understand if they wish to hedge price volatility.
The coal price soared as a direct result of the war in Ukraine, an event which could not have been predicted. Yet the narrative that the contractors are abusing the arrangement continues. This is both unfair and unbalanced.
The NPA and RBCT seemingly expect the BRPs to have foreseen future events, including the NPA’s interference in the implementation of the business rescue plans and the Ukraine war. Duly armed with such foresight, and notwithstanding OCM’s legal and contractual obligations arising from the adopted business rescue plan, the BRPs by all accounts should have planned during 2021 a completely different business model for OCM/OCT, even though the adopted plan is and remains legally binding on OCM and its creditors, and its BRPs are obliged to implement same.
Again, no one could have predicted the coal price increase in early 2022. RBCT and the curator of the mine (appointed by the NPA) believe however that OCM should be making more money. The reality is that, had OCM not undertaken these short-term mining operations in 2019 and 2020, Optimum Mine would have come to a complete standstill and OCM likely liquidated. With no source of income, all employment would have ceased, as it did in December 2018 when the mine went into care and maintenance. 2000+ jobs would not have been created.
Liberty Coal hasn’t just undertaken to restore the Optimum Mine; it has invested substantially into its operations. Prior to Liberty’s involvement, in addition to the lack of capital investment in the mine by its owners, the mine was ruthlessly vandalised and its infrastructure severely damaged after it went into business rescue.
To date, Liberty Coal has spent over R1 billion in setting up and/or funding the operations of OCM/OCT to ensure OCM/OCT remain in good standing with RBCT and TFR and to prepare for its eventual acquisition of the mine. It has also settled OCT’s historical debt to RBCT. Since December 2021, Liberty has paid approximately R163 million on behalf of OCT to RBCT. These payments have been happily accepted by RBCT while RBCT now belatedly makes defamatory allegations against Liberty Coal, including unwarranted accusations of money laundering.
If Liberty Coal was involved in money laundering (which is emphatically denied, nor has RBCT provided a single piece of evidence to back up these baseless, vexatious and defamatory allegations), RBCT itself would be the beneficiary of such alleged money laundering scheme to the tune of hundreds of millions of rands.
RBCT’s affidavit repeatedly impugns the intentions of Liberty Coal, suggesting that it is a front for “unnamed nominees” in Dubai and accusing it of siphoning money from OCM to “take it offshore”.
These allegations are vexatious, defamatory and, more importantly, untested and unproven. Despite Liberty Coal consistently refuting any knowledge of the Guptas’ unlawful schemes when they were in control of OCM, it is the only narrative the NPA is pushing. RBCT has jumped on board and has used these unproven allegations and speculative media reports to further justify its decision to terminate the OCM/OCT export allocation.
In addition to the slurs and insinuations against Liberty Coal, RBCT in September 2022 unexpectedly demanded an assessment of the mini-pit operations. RBCT requested vast amounts of confidential commercial information, including the names and ID numbers of all 2,000+ employees working at the mini pits, the volumes of coal being mined, the contractual terms between OCM/OCT and its counterparties, the ownership structures of the mini-pit contractors, a comprehensive site visit to see all mining activities, and what revenues OCM/OCT had generated and how much had been spent.
A sober consideration of RBCT’s request for this information suggests that the real purpose was to find some basis on which it could justify terminating the mini-pit operations, as well as to distance RBCT from being seen as in any way facilitating the ability of the BRPs to defend OCM and OCT against the NPA’s forfeiture application, contrary to the NPA’s declared wish to set aside both adopted business rescue plans and claim their respective assets for the State. This clearly played a role in RBCT’s subsequent decision to terminate OCT’s export entitlement.
The question must be asked: at a time when load shedding is crippling the country, the unemployment rate is increasing, and RBCT’s exports are at an historical low last seen in 1993, why are efforts to save this mine being quashed? It makes no sense unless there are other hidden agendas by other vested interests.
Liberty Coal’s continued financial support of OCM and OCT depends on the ability to export coal through OCM/OCT’s RBCT allocation via Transnet’s rail network. With export prices currently falling, moving coal on the road is not economically viable, in addition to the numerous other issues trucking vast quantities of coal causes.
As RBCT’s CEO, Alan Waller, has himself openly acknowledged recently, some 16 million tons of South African coal is unlikely to find a home this year and could result in OCM’s imminent closure and the knock-on impact that, without long-term access to RBCT, OCM and OCT’s business rescue plans will fail.
The impact on the economy will be massive. The potential job losses in the coal industry and consequent impact on people’s livelihoods are the most concerning – at Optimum Mine alone, each of the 2,000 workers at risk has approximately nine dependents.
Liberty Coal and the other contractors haven’t only saved and created jobs through the mini-pit operations. They’ve also created a sense of hope in the community that one-day, once under the ownership of Liberty Coal, the Optimum Mine will provide thousands of jobs, which will, in turn, uplift the community and benefit the economy.
This is no small feat in what has become a tense, highly politicised situation. What matters however is that people’s livelihoods are at stake. Many legal battles are ahead, but Liberty Coal stands firm in its commitment to Optimum Coal Mine.
