Junior coal producer Arnot Opco says its lawyers are studying the court judgment that placed it into business rescue at the request of its joint venture partner, JSE-listed Salungano, amid a liquidity crunch.
“Our lawyers will give us guidance as to the next step, but we are determined to fight until the end,” board member Mxolisi Hoboyi told Business Day on Tuesday.
The two parties each own 50% of a coal mine in Mpumalanga but their partnership has been steadily unravelling after Salungano (formerly Wescoal) accused Arnot Opco of corruption and misappropriation of funds — allegations it denies.
In the latest twist, the high court in Johannesburg granted Salungano’s application to place Arnot Opco into business rescue.
“Shareholders are reminded that Arnot Opco has been in financial distress for a prolonged period, and the option of business rescue is considered the most appropriate under the circumstances,” Salungano said.
Arnot Opco opposed the application, arguing that it managed to mobilise R250m from an SA bank to maintain operations.
Operations at the mine will continue as usual, including the supply of coal to Eskom’s Arnot power station.
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.
Through a trust, just more than 1,000 retrenched employees now own 50% of Arnot Opco, while Salungano owns the balance.
As part of the new supply agreement, Arnot Opco will deliver coal to Eskom’s Arnot power station through conveyor belts, which are critical to minimise the cost of coal delivery plaguing the power utility. The delivery of coal to Eskom started in February 2020.
The Salungano investment in the joint venture was fully impaired in the year to end-March due to uncertainties around funding of the operation.
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