The directors of Optimum Coal are of the view that if the Eskom supply agreement can be renegotiated, there is a reasonable prospect of rescuing Optimum, Glencore said on Thursday.

Optimum Coal announced on 4 August 2015 that it had commenced business rescue proceedings given the continued and unsustainable financial hardship as a result of its agreement with Eskom

This follows attempts to renegotiate an old supply agreement, with Eskom, which the power utility declined to review and which has ended in Eskom asserting its rights to claim significant historical and future penalties from Optimum.

Eskom is seeking a R2 billion penalty from Glencore for its poor quality coal – which will result in Optimum Coal supplying coal to Eskom for an effective price of R1/ t.

Optimum Coal is contracted to supply 5.5Mtpa to Eskom as part of an agreement signed in 1993. This agreement has resulted in Optimum supplying coal to Eskom at significantly less than its cost of production for a number of years.

Despite this, the directors of Optimum Coal are of the view that if the Eskom supply agreement can be renegotiated, there is a reasonable prospect of rescuing Optimum.

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