In a first-ever for South Africa, South Africa’s largest black-empowered mining company, Exxaro, today (EDS: 1 May 2019) announces the consent granted by the Minister of Mineral Resources in terms of section 11 of the MPRDA for the cession of the mining right for its Arnot coal mine to a Consortium which will benefit its former employees who had been retrenched following the expiry of the coal supply agreement with Eskom in 2015, which ultimately lead to the closure of the mine.
The ground-breaking deal will enable the Consortium to, –upon fulfilment of the outstanding conditions precedent (including approval by the Competition Authorities), restart the mine and, upon conclusion of a new coal supply agreement with Eskom, supply coal to the national electricity provider for its Arnot power station.
The transaction entails that Exxaro will, upon fulfilment of all conditions precedent, transfer, amongst others, the Arnot mining right, and its movable and immovable assets on the mining right area to an entity called Arnot OpCo (Pty) Ltd (Arnot OpCo), at no cost. The former employees at Arnot mine will participate in the ownership structure of Arnot OpCo through a trust and Innovators Resources (Pty) Ltd (IR), which were incorporated for purposes of this transaction.
Says Mxolisi Mgojo, CEO of Exxaro: “Today is a historic day for Exxaro, and indeed South Africa, as we complete a first and important step towards this transfer which effectively will make bosses and owners of our former workers. Exxaro has always tried its very best to avoid retrenchments as retrenchment hurts our employees and their dependents the most. That is why we did not hesitate when our former employees approached us about giving them the mine so they could reopen it and mine it.”
“Exxaro is committed to powering better lives for all South Africans, including our employees, and this handover is testament to how we live our purpose. Powering better lives is not just talk for us, and we look forward to the success we know IR and Arnot Opco will make of Arnot mine.”
Mineral Resources Minister Gwede Mantashe attended the function at the mine today.
Says Mantashe: “This partnership is the first of its kind in South Africa as mineworkers will own 50% of Arnot OpCo. As it is Workers’ Day, we are here to pay solidarity to the workers at Arnot who had faith in the idea of running a successful mine. We’d also like to commend Exxaro for seeing this opportunity and making this bold decision.”
IR has partnered with Wescoal Holdings, the coal miner, trader and supplier to the domestic and export market, to restart the Arnot mine and unlock its value. IR is 100 percent owned by the former mineworkers while Wescoal has taken a 50 percent interest in Arnot HoldCo whose only asset is its 90% shareholding in Arnot OpCo, which in turn holds one asset only, namely the Arnot Mine.
“This acquisition will allow our employees deployed into Arnot OpCo to be equipped with Managerial and Business skills to successfully operate the mine in the near future and contribute to the surrounding community’s development in terms of poverty alleviation. This achievement was only made possible by the full support of Exxaro and Government together with the investment made by Wescoal to unlock this opportunity. We would also like to thank PwC, MHA and Faskens in assisting us with the structuring of this initiative as our corporate and legal transaction advisors.”
Wescoal’s CEO Dr Reginald Demana says, “This acquisition will fast track the re-start of mining at Arnot. This is a significant broad-based empowerment transaction which will secure employment and provide employees and communities around the mine with equity participation as outlined in Mining Charter III and we are excited that Wescoal Holdings is the enabling partner in the relationship with IR.”
Arnot Mine is adjacent to the Arnot Power Station and coal can be delivered to the power station through a conveyer belt, resulting in a cost competitive advantage with minimum carbon tax impact.