Disgruntled shareholders in Arnot OpCo coal mine have launched arbitration proceedings against JSE-listed Salungano after accusing the junior coal producer of not honouring its funding obligations.
Arnot InvestCo and Salungano (formerly Wescoal) each own 50% of a coal mine in Mpumalanga but their partnership ran into problems after the mine, which supplies coal to one of Eskom’s power stations, was placed into business rescue in early October due to a cash crunch.
Arnot InvestCo argues that Salungano is in breach of the shareholder agreement by not providing funding to the mine and therefore wants to exit the partnership.
In a matter that is scheduled for hearing on Monday, disgruntled investors want the arbitrator to direct Salungano to transfer its shares in Arnot OpCo to Arnot InvestCo in accordance with the existing shareholder agreement.
They also want a fair market value of Salungano shares in Arnot OpCo to be determined by an independent party to effect the transfer of shares.
Salungano, which fully impaired the value of its investment in the joint venture earlier in 2022 due to uncertainty about funding of the operation, has accused the other party of corruption and misappropriation of funds at the mine — an allegation Arnot InvestCo rejects.
Operations at the mine continue as usual, including the supply of coal to Eskom’s Arnot power station.
The mine was established by a group of mineworkers who formed Arnot InvestCo using their retrenchment packages. The Arnot mine was previously owned by Exxaro Resources. It was decommissioned and its workers retrenched in 2015 when a previous coal supply agreement with Eskom was not renewed. In 2019, when Eskom issued a tender for coal supply to the Arnot power station, Arnot OpCo submitted a proposal with a view to revive Arnot colliery. It took over the operation in February 2020 on winning the Eskom contract to reopen and operate the mine.
As part of the new supply agreement, Arnot OpCo delivers coal to Eskom’s Arnot power station through conveyor belts, which are critical to minimise the cost of delivery plaguing the power utility. The delivery of coal to Eskom started in February 2020.
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