Miners vs villagers — again
Complaints may delay Coal of Africa’s mining rights bid
THE government has been hauled in to resolve a dispute between Coal of Africa and the Mudimeli community that could throw into disarray the small coal miner’s bid for a mining licence at Makhado in Limpopo.
This tussle over the Makhado project, near Musina and about 100km from the border with Zimbabwe, is yet another high-profile clash between communities and coal miners seeking to dig up enough coal to satisfy their investors and powerhungry Eskom. There have been complaints from communities around Glencore Xstrata’s collieries in Mpumalanga, claiming that the mining giant is trampling on their rights in its efforts to mine the area.
The Makhado project is one of three main pillars of Coal of Africa’s plan to revive its fortunes. Its share price plunged 54% in the past year, and a series of disasters, including a cash squeeze, forced it to retrench workers.
The shareholders, including ArcelorMittal SA and Investec, were holding thumbs that the new-order mining rights for Makhado would be granted this financial year.
Coal of Africa’s plan was to dig a huge openpit coal mine only metres away from where the Mudimeli people have lived since 1965, when they were dumped there by the apartheid government.
The angry Mudimeli community held meetings with the Department of Mineral Resources in the past two weeks on this issue, dampening the prospect of Coal of Africa getting the licence for Makhado soon.
Sources close to the licensing process said the department was on the verge of granting the company a neworder mining licence for Makhado, but the community’s meetings with department officials indicated that there was now a need for further consultation.
“We have been promised that there will be additional meetings with the department, and there was even talk that the project could not go ahead if the Mudimeli chief was not satisfied with the process,” said the source.
Asked for comment, Coal of Africa said it was not aware of the meetings between the community and the government, and reiterated that its public-participation process for Makhado had been adequate.
Documents seen by Business Times show that Coal of Africa arranged an election for the Mudimeli people in 2012.
However, Thomas Tshilongo, one of the leaders of the Mudimeli community, said he believed the company did this only so that it could ensure that its preferred people were in leadership positions.
That 2012 election was overseen by one of Coal of Africa’s larger shareholders, and not by the Independent Electoral Commission.
Critics say this created a conflict of interest because Manlakayise Mchunu was in charge of the election, but at the same time chaired Eyesizwe Coal, which holds a 20% stake in Coal of Africa’s Vele Project.
Coal of Africa said it was not aware of Mchunu’s interest in the Vele colliery. It said the Makhado Colliery Community Consultative Forum, which was formed through the election, represented all seven of the affected communities.
However, it has emerged that only a small number of community members voted — only 311 of the 2 000 who make up those communities.
Tshilongo said the larger part of the Mudimeli community did not recognise the election or the forum that it created. “That forum does not belong to the royal council structure,” said Tshilongo.
This last-minute tussle over Makhado is yet another blow to the company’s turnaround plan, adding to its headaches over cash, which forced it to retrench staff and sell assets.
Coal of Africa CEO David Brown told investors recently that the Makhado project was a “game changer” for the troubled company.
One of its biggest challenges was when it tried to build six coal mines close to a World Heritage site, Mapungubwe, in a waterscarce area. Vele, the company’s first attempt to mine the area, was closed down twice because of regulatory problems.
Coal of Africa is now trying to produce the correct quality and mix of coal, and is rebuilding the processing plant at Vele at a cost of R450-million.
But money is tight, especially as the company is not producing at the moment. It has tried to cut overheads through retrenchment, moving its head office and selling what it calls its “noncore” assets. But its results for the six months to December, released last week, show that Coal of Africa is still running at a loss of nearly R500million.
An even bigger threat to the company is that it has to pay Rio Tinto $30-million (R326-million) for a project it bought. Brown said the company was in discussions with Rio Tinto to consider Coal of Africa’s current position in the light of the magnitude and timing of the payment that had to be made.
To build Makhado, Coal of Africa will need about R5-billion.
Brown said the company was talking to a strategic partner and to financial institutions to raise funding. Coal of Africa is also considering taking on a black economic empowerment partner.