A view to a sell: Optimum’s R400m rescue plan
Burgh presents its proposals for the Guptas' coal mine. Now's just to wait and see if they'll be accepted
The light at the end of the tunnel for Gupta-owned Optimum Coal Mine finally has a price tag.
Business rescue practitioners estimate a cost of R400-million to get the mine fully operational, which includes fixing or replacing broken equipment and purchasing protective clothing for workers.
This is part of a new deal presented by business rescue practitioners and Burgh Group Holdings. The deal within the next three to six months will see the mine, described as one of the jewels of the South African coal mining industry, fully refurbished.
Details of the deal concluded by newly appointed business managers for the mine, Burgh Group Holdings – owned by billionaire businessman Quinton van der Burgh – has emerged in Optimum’s business rescue plan which was sent to the company’s creditors on Monday.In the next 12 months, the mine is expected to have produced 50 million tons of export-quality coal, for which it will receive R1,000 a ton – roughly equating to a cash injection of around R200-million a month for the embattled mine.
The foreign buyer is, however, not named.
The deal is potentially worth R5-billion – if shareholders vote to accept it. The meeting is expected to take place on May 8.
Optimum was among eight Gupta businesses placed under voluntary business rescue in February.
As part of the business rescue plan, Burgh was brought on board for 12 months to manage Optimum and Koornfontein mine and brought the deal to the table.
Business rescue practitioner Louis Klopper is confident that, at the end of the 12-month management agreement, he will have two fully operational and extremely lucrative mines, which will be sold to the highest bidder.
“The primary purpose of concluding the agreement was to obtain access to transactional banking facility … numerous attempts were made to obtaining banking facilities; however no South African bank was willing to assist us,” the business plan reads.
Business rescue practitioners are also in negotiations with Eskom to reduce its current monthly coal delivery requirements for Hendrina Power Station from 400,000 to 200,000 tons a month, and at a higher price per ton – R430 a ton as opposed to the current R200 a ton.Of the Burgh deal, the plan states: “The payment terms are favourable in that funds will be paid weekly as soon as the coal is tipped. This will have a positive effect on cash flow and assist in introducing immediate liquidity into the system.”
Van der Burgh won the contract to rescue the Gupta mines because he came “without conditions”, Times Select quoted Klopper as saying earlier this month.
His company will earn a 10% commission on each ton of coal sold, he previously told Times Select.
“We’ve come in at a critical point. It was a risk for us to get involved but these mines are still two of the greatest and best coal assets in South Africa,” Van der Burgh said.
“Salvaging it comes down to management and that’s what we specialise in.”