The Supreme Court of Appeal will be the battle ground for control of the embattled Arnot coal mine, which has a lucrative long-term contract to supply Eskom with coal.
Judge Stuart Wilson this week granted leave to appeal his earlier decision that junior miner Ndalamo Resources is the preferred bidder for Arnot OpCo coal mine, which is under business rescue.
Wilson had concluded that post-commencement financier creditors cannot vote on business rescue plans, a judgement that drew scathing criticism from business rescue practitioners.
At the heart of the dispute is the conduct of Arnot’s business rescue practitioner Lincoln Mkhombo, who reopened the bidding process, as he believed the tally of votes had not been properly calculated, resulting in the proposal failing to muster the 75% support threshold.
The dispute is also centred on whether Arnot’s creditor Mashwayi had voting rights. Mashwayi became a creditor of Arnot OpCo after the business rescue process commenced, making it a post-commencement financier.
Wilson said there is a reasonable chance the SCA might rule differently.
“It is not strictly necessary for me to consider the strength of Mr Mkhombo’s, Arnot’s and Mashwayi’s prospects of success in deciding the interim execution application, because I have already found that Ndalamo has not demonstrated it would suffer irreparable harm without interim execution.
“In a context as complex as this, I cannot accept that submission. The consequences of pushing the sale through, only for it to be undone a few months later, are unknowable. It seems ill advised to assume that they will all be reversible.”
In a creditors meeting held recently, 88% of Arnot OpCo creditors, who are collectively owed R339.5-million by the company, voted in favour of Ndalamo’s R435-million bid. The mine is said to have reserves of more than 190-million tonnes of thermal coal, making it one of the largest coal reserves in Africa.
Arnot’s 50% shareholder Wescoal Mining is in support of the deal going through. The deal will not be finalised until the court processes are concluded.
Ndalamo already boasts an impressive portfolio. The company, run by Shammy Luvhengo, was established in 2013. The 100% black-owned mid-tier coal producer has controlling stakes in the North Block Complex near the Arnot power station and New Clydesdale Colliery close to Eskom’s Kriel power station.
The mining house also has a controlling interest in Ubuntu Colliery, an opencast operation near the Kusile power station, as well as a 50% stake in Arnot South Colliery, which is close to Eskom’s Hendrina and Arnot plants.
The Arnot mine, previously owned by Exxaro, was the surrounding community’s main source of income for four decades and its closure in 2015 dealt a big blow to the community.
However, eight former Exxaro employees decided to revive the mine. They formed Innovators Resources (IR), using their retrenchment packages and pension payouts as seed capital. The employees then partnered with Salungano, which owns Wescoal Mining.
Sunday World reported last year how the ownership structure imploded as the workers and Wescoal could not see eye to eye. A report by Sizwe Ntsaluba Gobodo Grant Thornton shows that no sooner had Arnot Opco risen from the ashes did the feeding frenzy take root, with procurement processes flouted.
The probe found several companies were paid amounts that exceeded those on their invoices. One supplier was paid R2.4-million more than what was agreed. The investigation also found that Arnot gave work to seven companies it did not have contracts with.
The audit firm could also not find evidence that invoices to the tune of R3.8-million were for services provided. The company was found to owe service providers more than R130-million.
Investigators found that more than R40-million was spent on consultants and Covid-19 with little or no financial controls in place.
