Optimum may return to Glencore

Mines, coal terminal allocation could be sold separately

● Business rescue practitioners may not yet have executed a business plan for Optimum Coal but the race by potential buyers of the Gupta-owned colliery has begun, with its one-time owner, Glencore, joining the list of interested bidders.

Glencore, the world’s biggest commodity trader and miner, which sold the colliery to Tegeta Resources owned by the Gupta family, in 2015, looks set to bid along with its black empowerment partner Pembani, owned by Phuthuma Nhleko.

Optimum “. . . is aligned with Pembani strategy and has been previously owned by ourselves, therefore we would be open to explore the opportunity”, Pembani spokeswoman Charlene Nyembe said.

“At this stage Glencore and ourselves have expressed interest to explore this opportunity further.”

Pembani acquired Shanduka Resources after President Cyril Ramaphosa had sold his business interests, including a stake in Shanduka, upon becoming deputy president in 2014.

At the time, Shanduka’s coal unit was the black economic empowerment partner of the Ivan Glasenberg-owned Glencore in Optimum.

The 40-year contract between Eskom and Optimum for coal expires in December this year, which means the game changes for the new buyer, who after 2018 will be able to renegotiate a more sustainable price from Eskom for coal.

Glencore sold Optimum to Gupta’s Tegeta because of a dispute with the electricity firm over the pricing of the coal and its quality. Eskom wanted to pay R150 a ton for the fuel, while the miner was said to have wanted to double that.

Analysts said Optimum would interest Glencore because Glencore could renegotiate a better price after the current supply agreement expired.

Glencore declined to comment.

Eskom spokesman Khulu Phasiwe said the state-owned utility would initiate an open tender process before ending the contract to ensure an uninterrupted coal supply to Hendrina, one of Eskom’s biggest power station. Optimum supplies 80% of Hendrina’s coal needs.

Although the power station is due to close in 2020, it could remain operational for up to a decade longer.

Other potential bidders for the colliery, which also exports coal, include the Mike Teke-led Seriti Resources and Exxaro Resources.

Kurt Knoop, one of the business rescue practitioners in charge of Optimum, said there were about 30 interested buyers.

Buyers either want the whole business, which includes two coal mines (Optimum and Koornfontein) and the 6.5 million-ton Optimum export allocation at the Richards Bay coal terminal, or just one of the Optimum businesses.

The Richards Bay coal terminal exports 81 million tons of coal annually.

Exxaro said it was only interested in the Richards Bay terminal, not the coal mines. In past transactions the business has always been sold as a package of its mineral operations as well as the shareholding in the Richards Bay coal terminal. With business rescue practitioners in a tight spot to find the best way forward within six months, the best option might be to split up the businesses.

Optimum has changed hands three times since the mine was last owned by BHP Billiton Coal South Africa. Mike Teke owned it in 2007 and was CEO of the JSE-listed Optimum in 2010, Glencore bought it in 2012 and Tegeta in 2015.

Tegeta paid R2.15-billion for Optimum. When Glencore bought Optimum, the business was valued at R8.6-billion.

Optimum is aligned with Pembani strategy and has been owned by [us] Charlene Nyembe Pembani spokeswoman The 40-year contract between Eskom and Optimum expires in December