- Oakbay's Tegeta Resources to pay 2.15 billion rand for assets
- Transaction is expected to save 500 jobs at Optimum mine
Business rescuers for Glencore Plc’s Optimum unit in South Africa reached an agreement to sell its coal assets to a subsidiary of Oakbay Investments Group, which is controlled by the country’s Gupta family, for about 2.15 billion rand ($137 million).
The funds that Oakbay’s Tegeta Exploration & Resources will pay will settle some of Optimum’s 2.55 billion rand of bank debt, business-rescue practitioners Piers Marsden and Peter van den Steen said in an e-mailed statement Friday. Glencore will advance about 400 million rand to settle the debt balance so the transaction can go ahead, it said.
The deal includes all of Optimum Holdings’s assets, and will end business-rescue proceedings, or the local equivalent of bankruptcy protection, that started Aug. 4 due to the financial distress the Optimum mine was under, it said. The Koornfontein operation wasn’t under the same process.
“The current offer from Tegeta presents the most compelling option for all stakeholders of Optimum Holdings,” Marsden and Van den Steen said. The Optimum mine “will continue to operate in the ordinary course of business,” they said.
Eskom Holdings SOC Ltd., South Africa’s state-owned power utility, said in June it wouldn’t renegotiate a contract with Optimum to supply 5.5 million metric tons of coal annually despite Glencore saying that it was at prices that have been “significantly less than the cost of production for a number of years.” The producer had tried to renegotiate the unprofitable two-decade-old deal to supply the fuel.
“Tegeta has undertaken to honor the existing coal -supply agreement with Eskom," the practitioners said. The deal is subject to formal approval from the electricity company and the Department of Mineral Resources.
The transaction will save about 500 permanent jobs at the Optimum mine. The country faces more than 60,000 job losses this year in industries ranging from mining to aviation, the Solidarity trade union said in August as falling and rising costs have forced companies including Anglo American Plc and Lonmin Plc to consider cuts.
“I’m glad my people have got work,” Franz Stehring, head of mining for UASA union, said in a phone interview. "The minerals there are not lost."
Tegeta will assume responsibility for financing the Optimum operations from Jan. 1.