Liberty Coal plans to dispute Richards Bay Coal Terminal's (RBCT) termination of the 6.5mn t/yr export entitlement of South Africa's Optimum Coal.
The firm is one of six mini-pit contractors that have been mining at Optimum Coal's mine in Mpumalanga province for a fixed royalty per tonne of coal and using Optimum's entitlement to transport coal to RBCT.
It is also a wholly owned subsidiary of investment firm Templar Capital, one of Optimum's creditors that was to acquire the South African firm as part of a proposed 1.3bn rand ($77mn) debt-to-equity conversion intended to rescue it from liquidation.
Optimum received a 60-day notice from RBCT that its export allocation will end on 31 January 2023. In its letter, RBCT alleges that the firm is not currently meeting coal export requirements as outlined in RBCT shareholders' agreement, which it says triggers an automatic suspension.
Optimum went into administration in February 2018 and the mine has been under care and maintenance since November 2018. While the colliery could not make use of its RBCT coal export quota, between December 2018 and January 2022 its entitlement was mostly utilised by Glencore and Anglo Coal (now Thungela Resources), with a small portion used by Exarro. Optimum made no profit from these firms using its entitlement.
More recently, with the help of Liberty Coal, Optimum obtained temporary approval from RBCT for third-party contractors that are mining its site to use its export quota and associated rail to transport their coal to RBCT until its business rescue plan is implemented.
Despite this, RBCT unexpectedly demanded in November to conduct an assessment of these mini-pit operations to ascertain how the coal was exported via Optimum's entitlement, Liberty said.
To this end, RBCT requested "copious amounts" of confidential commercial information, including the volumes of coal being mined at Optimum, revenues and expenditures, the contractual terms between Optimum and its counterparties, the ownership structures of the mini-pit contractors and the names and ID numbers of over 2,000 employees working at the mini pits. RBCT executives also undertook a comprehensive site visit to see all mining activities.
Optimum's administrators and Liberty Coal held a meeting with RBCT to understand the purpose of such an extensive fact-finding mission. They also wanted to know if other RBCT shareholders were similarly being assessed. At the meeting, RBCT's legal counsel, Jeff Buckland, and its CEO, Allan Waller, offered the "rather bizarre" explanation that they needed the names and ID numbers of all 2,000 employees to make sure "there wasn't just one accountant sat there and the employees and volumes of coal being mined were real", according to Liberty.
Letters sent by RBCT to Optimum and labour union the National Union of Mineworkers (NUM) announcing the termination of Optimum's terminal entitlement raise "unproven concerns about money laundering", it added.
According to Liberty, the letter stated that RBCT faces significant risk if the use of Optimum's entitlement by Liberty Coal and others is part of a "grander scheme" to strip money out of South Africa, instead of restoring Optimum coal mine to being fully operational again, for the benefit of the employees and communities involved.
Liberty warned that RBCT's decision will result in a loss of revenue to Optimum of over R45mn per month. It will also bring "devastating job losses" as the contractors collectively employ around 2,000 people, each of whom has around nine dependents, it said.
The mini-pit contractors have been mining at Optimum and paying a royalty fee since September 2020, which has helped the firm to cover its monthly overheads, including security, maintenance, electricity, salaries of key personnel, administrative fees, legal fees and administrators' fees, among others.
Under a planned business rescue and sale of Optimum, Liberty Energy, the holding company of Liberty Coal and also a subsidiary of Templar Capital, agreed to take over the firm's assets and liabilities, including its outstanding debt to RBCT, which by November 2021 stood at R95m.
Optimum's rescue plan was initially expected to be implemented by 31 March 2022, but this was delayed when, in December 2021, South Africa's National Prosecuting Authority launched a lawsuit to block Optimum's sale to Liberty Coal for a nominal amount of 1 rand.
The sale was scheduled to take place on 25 March 2022, but South Africa's High Court ruled that all of Optimum's assets with a combined value of R3.4bn must be preserved as proceeds of crime. The court's preservation order halted the business rescue plan and paved the way for the mine and all of its associated assets to be forfeited to the state.
Liberty Coal argued that RBCT's termination of Optimum's entitlement will be "materially prejudicial" to its administrators' obligation to preserve the firm's value pending finalisation of the NPA's legal proceedings. Moreover, it will potentially expose them to being in material breach of their respective statutory and legal obligations under the Companies Act and the NPA's preservation order.
Optimum belongs to Tegeta Exploration and Resources and it went into administration after its owners, the India-born Gupta family, fled the country. The Guptas were implicated in the alleged fraudulent procurement of government contracts in the public protector's State of Capture report, which investigated their "alleged improper relationship" with ousted president Jacob Zuma.
Templar Capital took over Centaur Ventures' claim of about R1.3bn owed to it by Optimum. Previously, Centaur Ventures was 50pc owned by the Gupta family, while the remaining 50pc was owned by Daniel McGowan, who now runs Templar Capital.
