JOHANNESBURG, 07 DECEMBER 2022 – Liberty Coal has said it will take all necessary actions to dispute Richards Bay Coal Terminal’s (RBCT) termination of the Optimum Coal Terminal (OCT) export entitlement.
This follows a letter received by the Business Rescue Practitioners (BRPs) of OCT alleging that Optimum Coal Mine (OCM) is not currently meeting alleged coal exporter requirements pertaining to clauses contained in the RBCT shareholder’s agreement, thus allegedly triggering the automatic suspension and use of its entitlement, together with a notice to cease exporting coal through the terminal by no later than 31 January 2023.
In or around November 2018, OCM (in business rescue) was placed under care and maintenance, and its sister company OCT was in a financial condition whereby it could no longer service the monthly amounts due to RBCT. At this point RBCT issued a Default Notice as OCT was in default of its payment obligations to RBCT.
Between December 2018 and January 2022, the OCT entitlement to coal export terminal facilities and associated rail previously allocated it, was utilised predominantly by RBCT shareholders Glencore and Anglo Coal (now Thungela Resources) with a small volume utilised by Exarro, to their own benefit.
As OCT continued to accrue monthly liabilities to RBCT between December 2018 and November 2021, eventually totalling approximately R95m, while unable to use its entitlement, the company slipped further into indebtedness.
To facilitate the successful implementation of the OCM and OCT business rescue plans, Liberty Energy, the holding company of Liberty Coal, agreed to acquire RBCT’s R95m creditor claims against OCT, and other guarantees. The RBCT Board envisaged Liberty Coal taking over the assets and compromised liabilities of OCM and OCTs RBCT entitlement as part of the restructuring to be approved by the creditors of OCM and OCT in terms of the business rescue plans.
As part of this process, Liberty assisted OCT to negotiate a position with RBCT whereby OCT was entitled to use its RBCT entitlement subject to various conditions which included a Cession of Claims Agreement effectively settling OCT’s debt to RBCT. This effected a temporary approval whereby OCT could utilise its RBCT entitlement until the OCM and OCT business rescue plans were intended to be implemented, which was envisaged would happen by 31 March 2022. OCT’s utilisation of its RBCT entitlement has since then been extended several times until eventually extended to 31 January 2023.
These extensions were necessary as the Preservation Applications granted to the NDPP against Tegeta’s shares in OCM and OCT, the ‘business’ of OCM, and Templar Capital’s creditor claims against OCM of approximately R1.34b essentially stopped the business rescue plans of OCM and OCT from being implemented while, importantly, these plans remained extant.
To gain a financial benefit from its RBCT entitlement while operating under business rescue, OCM/OCT entered into various agreements for the mining and export of coal mined by contractors operating at OCM – of which RBCT had been aware for over a year. Unexpectedly, RBCT demanded in November 2022 that it be entitled to conduct an assessment of these mini-pit operations as to how the coal was exported via OCT’s entitlement.
To this end, RBCT requested copious amounts of confidential commercial information including the names and ID numbers of all 2 000+ employees working at the mini pits, the volumes of coal being mined at OCM, the contractual terms between OCM/OCT and its counterparties, the ownership structures of the mini-pit contractors, a comprehensive site visit of OCM to see all mining activities, and what revenues OCM/OCT had generated and how such had been spent.
A meeting was held between the business rescue practitioners of OCM and OCT, and Liberty Coal, with RBCT to understand the purpose of collating such extensive information and whether its other shareholders were similarly being assessed. At the meeting, Jeff Buckland, RBCT’s legal counsel and Allan Waller, CEO of RBCT, offered a rather bizarre explanation that they needed the name and ID numbers of the 2 000+ employees to make sure “there wasn’t just one accountant sat there and the employees and volumes of coal being mined were real”.
Letters subsequently sent by RBCT to OCM/OCT and labour union NUM announcing the termination of OCT’s terminal entitlement as from 31 January 2023 raises unproven concerns about ‘money laundering’.
Liberty Coal emphasises that to propose precluding OCT/OCM from utilising OCT’s RBCT entitlement while these latter companies remain under business rescue will, on every basis, be directly and materially prejudicial to the obligation imposed on both the business rescue practitioners and OCM’s curator bonis to preserve the value of their respective businesses pending finalisation of the NDPP’s legal proceedings. Should either the business rescue practitioners or OCM’s curator bonis concede to any such attempt by RBCT, this will moreover potentially expose them to being in material breach of their respective statutory and legal obligations under both the Companies Act and the NDPP preservation order.
Furthermore, the notice to cease exporting coal through the terminal will have a direct, negative impact on the seven mini-pit contractors, including Liberty Coal, forcing them to cease all mining activity to ensure that existing stockpiles reach RBCT by the given deadline. Additionally, this action will place severe strain on the 2 000 mini-pit contractor employees, each of whom is responsible for approximately nine dependents, all of whom live in the surrounding communities.
