Exxaro will support any ‘sustainable’ plan for restarting Arnot

Mining group Exxaro says it will be guided by Eskom on the future of the Arnot coal mine, in Mpumalanga, which was closed after Eskom’s contentious December 31, 2015, decision not to renew a 40-year coal supply agreement (CSA) with Arnot, an Eskom-tied mine operated by Exxaro.

The termination of the agreement triggered a series of events that resulted in the now well-publicised R650-million prepayment to the Gupta-family-linked Tegeta, which was held up as suspicious by former Public Protector Thuli Madonsela in her ‘State of Capture’ report.

The report “observed” that the sole purpose of awarding contracts to Tegeta to supply Arnot power station was to fund Tegeta and enable it to purchase all shares in Optimum Coal Holdings (OCH) – a company that had been placed into business rescue by previous owner Glencore after a stand-off with Eskom over the price the utility was paying for coal being supplied to the Hendrina power station from the Optimum mine. The hastily approved R650-million prepayment to Tegeta by Eskom, the report said, appeared to have been used by Tegeta to buy all the shares in OCH shortly after bank funding was refused.

Exxaro executive for stakeholder affairs Mzila Mthenjane reaffirmed Exxaro’s position that Arnot was indeed an Eskom asset, as outlined in a 2015 statement relating to the termination of the CSA, which stated that the power utility was responsible for the capital to fund sustaining and expansion expenditure and the operating expenses at the mine, as well as mine closure costs.

Mthenjane told Engineering News Online that Exxaro will support a sustainable solution in view of the utility’s recent proposal that the mine be reopened to provide ongoing employment opportunities and ownership of the mine by employees. “Engagement between Eskom and Exxaro in this regard has been initiated by our CEO, Mxolisi Mgojo.”

Eskom interim CEO Matshela Koko, who admitted to being surprised at Eskom’s ownership of Arnot, recently outlined a proposal for selling Arnot to a joint venture (JV) – comprising a trust made up of former Arnot employees and an unnamed mining company – and entering into a long-term supply agreement with the JV.

“We think doing that is something radically different and when people look back,

they will look at this leadership that, for once, it has done something that is radically different. It has used the leverage of Eskom and the asset that Eskom owns and has pushed for a structure in the coal-mining industry that has brought back the employees of the mines who have been retrenched,” Koko stated at a briefing.

Koko also reiterated his view that Exxaro’s unwinding of an empowerment structure that would reduce its black shareholding from 50% to 30% was a “slap in the face” to the utility, which had actively supported the company largely owing to its ownership structure. He made specific reference to Eskom’s decision to locate the Medupi power station in Lephalale, so as to ensure that the new power station bought its coal from a black-owned company.

“To read in the newspapers that they will be reducing black shareholding from 50% to 30% after what we have done to support them is a slap in the face – it’s a slap in the face,” Koko averred, arguing, in addition, that Eskom had a right – given that it owned part of Exxaro’s assets – to expect to be consulted.

“Who knows, if we were consulted and we understood, we might have said to them: we understand you have legacy arrangements, do that. But in the future let’s do this – we then have a sunrise clause, not a sunset clause. I think it’s wrong, I think Eskom is being taken for a ride. I think going forward we will be assertive, we will demand our assets in the mines – they will come to Eskom.”

Mthenjane said a meeting would take place in the coming days with Eskom, to discuss, amongst others, this issue further.

He confirmed, however, that Exxaro was awaiting confirmation of Eskom’s approval of R1.8-billion for the opening of a new shaft at the Matla mine, also in Mpumalanga, so as to extend production until 2023.

The Matla operation comprises three mines, but Matla 1 has been discontinued, owing to safety and efficiency issues, which arose owing to the distance from the original shaft access point to the coalface. The new shaft would be sunk in the midpoint of the remaining reserve, lowering the cost of production and improving safety and efficiency.

“The board of Eskom decided in November to ‘prepay’ [Exxaro] R1.8-billion to sink a shaft on the contract that ends in 2023. We think it’s the right thing to do – the decision is made,” Koko said.