Minister lifts Optimum’s licence halt

Glencore subsidiary still in business rescue

MINERAL Resources Minister Ngoako Ramatlhodi made an about turn last week and conditionally lifted the suspension of Glencore subsidiary Optimum Coal’s operating licence in Mpumalanga.

The decision came a day after President Jacob Zuma was confronted with the suspension in Parliament and said he did not know about the matter.

However, the lifting of the suspension, which was imposed last week on Monday, was largely irrelevant because the mine was placed into business rescue last Tuesday.

It brings little relief, especially if the company cannot renegotiate its supply deal that was signed in 1993 with Eskom for 5.5 million tons a year. The contract requires Optimum to supply coal at a cost significantly less than that of production and has done so for years, which has resulted in the business rescue process.

Worrying signal

If anything, it is a public relations blunder for Ramatlhodi and does little to improve South Africa’s image as an unfavourable investor destination due to regulatory uncertainty.

Stephen Meintjes, a senior researcher at Imara SP Reid, said on Friday the suspension was a double-edged sword.

“If a licence can be suspended by the government that easily, investors are likely to ask how safe their investments are,” he said.

Mining companies plan to cut thousands of jobs after being hurt by rising costs and slower economic growth in China, which has led to less demand and declining commodity prices. In response, the government called on the companies to review their plans to cut jobs and to give thought to national imperatives.

Seeking remedies

Ramatlhodi suspended Optimum’s licence for the way in which it was cutting jobs and for not living up to its social labour plan commitments.

Ramatlhodi’s special adviser, Mahlodi Muofhe, said on Friday that the suspension was lifted after the department “engaged on the issues of concern which resulted in the minister suspending their operating licence”.

“There is consensus to remedy the issues of concern hence the upliftment,” Muofhe said.

Glencore said in a statement on Friday that the withdrawal of the suspension came after talks with the government.

“This follows extensive discussions between the company and the Department of Mineral Resources during which the company demonstrated that it had complied with all legal requirements in respect of the retrenchment process and the conditions of its mining right,” Glencore added.

It said its business rescue practitioners had confirmed their commitment to continue engaging with the government and union on the unsustainable financial position at the mine.

Trade union Solidarity’s deputy general secretary, Johan Kruger, said on Friday that this step would bring huge relief for the workers at the mine.