Optimum eyes bid from Macquarie-backed BEE firm

Administrators of South Africa's Optimum Coal have elected a 3bn rand ($211mn) bid from black economic empowerment (BEE) consortium Project Halo, backed by Australian bank Macquarie, as their preferred offer for the financially distressed mine.

Optimum Coal includes the Optimum Coal and Koornfontein collieries in Mpumalanga, along with its 8mn t/yr Richards Bay Coal Terminal (RBCT) export concession. The South African arm of commodities trading firm Vitol and a consortium called Phakamisa are the other bidders.

The plan was to present Project Halo's takeover proposal to Optimum's creditors today, rescuer Louis Klopper told Argus. For the deal to go through it needs their stamp of approval.

But Eskom asked for the meeting to be postponed to allow its board to consider a proposed partial write-off of R2.6bn that Optimum still owes it for not meeting its contractual obligations, Klopper said.

The state-owned utility also wanted to discuss coal supply arrangements with Project Halo, given that Optimum used to supply the Hendrina power plant, said Bouwer Van Niekerk, a lawyer who represents the rescuers.

The deal is subject to statutory requirements such as competition law and the mining minister's consent for the transferral of mining rights as stipulated under Section 11 of the Mineral and Petroleum Resources Development Act.

As soon as Optimum's creditors and other stakeholders accept the takeover proposal the colliery will receive R600mn as a post-commencement payment within 48 hours, which will ease its immediate financial burden.

The mine's rescuers aim to conclude the deal as quickly as possible so that regular payment of employees and suppliers can be resumed, Van Niekerk said.

Last month, production was halted because of cash flow problems that rendered Optimum unable to buy the consumables necessary to operate the colliery. Mineworkers' salaries also were not paid on time.

The liquidity crunch was triggered when Vitol postponed paying the financially distressed colliery as it undertook a reconsolidation of the trains that deliver Optimum coal for export at RBCT.

Optimum has a 12-month offtake agreement with Vitol whereby it has to deliver a minimum of 200,000 t/month to the commodities trading firm. But the mine has been unable to meet this obligation, so that deal is also being renegotiated as part of the overall takeover package.

Optimum belongs to Tegeta Exploration and Resources, which is part of the India-born Gupta family's Oakbay Investments. Optimum and Tegeta are among seven Gupta-owned entities that went into business administration in February after their owners fled the country to avoid prosecution over the alleged fraudulent procurement of government contracts, among other offences.

source: Argus Media