Arnot OpCo, which supplies coal to Eskom’s Arnot power station, has been placed under business rescue by the high court in Johannesburg, which also appointed Phahlani Mkhombo as the interim business rescue practitioner.
The business recue proceedings were launched by the coal mining company’s shareholder Salungano, which holds a 50% stake.
Sunday World reported in September that Salungano had approached the court in a desperate attempt to salvage Arnot Opco, telling the court that Arnot Opco’s assets exceeded its liabilities.
Robinson Ramaite, the CEO of Salungano Group, said two board meetings in February and March 2022 showed the depth of Arnot Opco’s financial problems.
It is at these meetings that Ramaite said, in the application, that the management accounts of the business were tabled. “The accounts indicated assets in the amount of R41 686 218 and current liabilities of R297 201 739,” reads the affidavit in part.
Ramaite said the situation was worsened by the trade payables, obligations to pay for goods or services in an amount of R157-million, with more than 55% of that owing for more than three months.
“Consequently, it became clear that Arnot Opco was in a state of illiquidity and would not be able to discharge its short-term obligations when they fell due,” Ramaite said, adding that attempts to solve the company’s liquidity challenges proved futile.
Salungano has agreed to make funding available to Arnot Opco in its business rescue application if successful, which funding envisages the injection of R150-million into the business.
The Arnot mine, previously owned by Exxaro, has reserves of more than 190-million tones of thermal coal. The asset, which is situated in Middleburg, Mpumalanga 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 using the proceeds of their severance packages to form a company called Innovators Resources (IR), which partnered with Salungano to form Arnot Opco.
Salungano took a 50% share in the company, while IR secured a 25% share. The 1 029 retrenched Exxaro employees all received 25%.
A report by Sizwe NtsalubaGobodo Grant Thornton shows that no sooner had Arnot Opco risen from the ashes, did the feeding frenzy take root at the company, with procurement processes flouted.
Arnot makes most of its money from supplying coal to Eskom’s Arnot power station.
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