The Department of Mineral Resources has granted consent in terms of section 11 of the Mineral and Petroleum Resources Development Act (MPRDA), for the cession of the mining right for Arnot coal mine to a consortium which will benefit its former employees who have been retrenched.
Employees were retrenched following the expiry of the coal supply agreement with Eskom in 2015, which ultimately lead to the closure of the mine. Upon fulfilment of the outstanding conditions precedent (including approval by the Competition Authorities), the deal will allow the consortium to 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.
Upon fulfilment of all conditions precedent, Exxaro will transfer the Arnot mining right, and its movable and immovable assets on the mining right area to an entity called Arnot OpCo, at no cost. 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.
“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,” comments Mxolisi Mgojo, Exxaro CEO.
Mineral Resources Minister Gwede Mantashe was also present at the event where the announcement was made. “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,” Mantashe said.
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% owned by the former mineworkers while Wescoal has taken a 50% 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.
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.