The joint business rescue practitioners (BRP) of Optimum Coal Holdings, Piers Marsden and Peter van den Steen on Friday concluded a conditional transaction with Tegeta Exploration and Resources, which sees Tegeta acquire all the Glencore Optimum Holdings assets.
The assets include Optimum coal mine, Optimum coal terminal and Koornfontein Mines.
Tegeta was formed in 2006 to identify and develop the mining assets of the Oakbay Investments Group, especially coal. Tegeta holds two mining rights for coal – Brakfontein and Brakfontein Extension – in the Delmas area and prospecting rights in Mpumalanga, Free State, KZN and Limpopo directly or through associates.
The transaction will allow the BRPs to concurrently terminate the business rescue proceedings of Optimum Holdings and Optimum Mine. It is expected that following such termination, Optimum mine will continue to operate in the ordinary course of business.
The business rescue proceedings were commenced by the boards of Optimum Holdings and Optimum mine on 4 August 2015, due to the financial distress being suffered by the Mine. Koornfontein Mines was not in business rescue but has a contract with Eskom to supply coal to the Komati power station, which contract is due to expire at the end of December 2015.
Over the past several months, the BRPs have worked with the management of Optimum Holdings and Optimum mine to consider all available options to rescue the companies that may be acceptable to Eskom and other key stakeholders, which include shareholders, creditors, organised labour, employees and regulators.
The BRPs are of the view that the current offer from Tegeta presents the most compelling option for all stakeholders of Optimum Holdings.
Tegeta will pay a consideration of approximately R2.15 billion for the assets of Optimum Holdings, the proceeds of which will be used to part settle the existing bank debt of Optimum Holdings of approximately R2.55 billion.
Glencore Plc has agreed to advance approximately R400 million to Optimum Holdings in order to settle the balance of the bank debt so that the transaction can be implemented.
The transaction will ensure that the operations of Optimum mine will continue under the ownership of Tegeta as a going concern. Importantly, the transaction will preserve approximately 500 permanent jobs at Optimum mine and secure the coal supply to Eskom’s Hendrina power station, in Mpumalanga.
Tegeta has undertaken to honour the existing Coal Supply Agreement with Eskom.
Tegeta will assume responsibility for financing the operations of Optimum mine with effect from 1 January 2016.
The transaction will be included in a business rescue plan for Optimum Holdings which is due to be completed by the BRPs by the end of February 2016.
It is subject to certain conditions precedent, including formal approval from Eskom, the Department of Mineral Resources and the Competition Authorities and the final adoption of a business rescue plan for Optimum Holdings.
The BRPs commented: “We believe this transaction provides the most optimal outcome for stakeholders and importantly preserves the livelihoods of thousands of the mines employees and dependents as well as the uninterrupted coal supply to two of Eskom’s 13 power stations.”