Most of the mine's coal destined for export bypasses the terminal, the court noted. Photo: iStock
The Durban High Court this week dismissed Optimum Coal’s case to be granted access to its export entitlement through the Richards Bay Coal Terminal (RBCT).
The terminal operator suspended Optimum from exporting coal in January on the grounds that it was in default and argued that it may suffer reputational risk if it is subsequently found that lifting Optimum’s export entitlement was part of some ‘grander scheme‘ to launder money.
The judgment also referenced SA’s grey-listing by the Financial Action Task Force, which brought global attention to SA “and the steps currently being taken by the NDPP (National Directorate of Public Prosecutions) to prosecute individuals and companies they believe to be involved in money laundering criminal activities, the involvement of the Guptas and now Daniel McGowan in the use of the terminal is bringing unwanted local and global attention on the use of the terminal and RBCT.”
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The applicants in the case were Optimum Coal Mine (OCM) and Optimum Coal Terminal (OCT), both formerly Gupta-owned and both placed in business rescue in 2018. They asked the court for an interim order preventing RBCT from interfering in their right to use the terminal for the export of coal, or from transferring OCT’s shareholder interest in the terminal.
OCT’s export entitlement through the coal terminal was suspended in 2018, but lifted between January 2022 and January 2023 when outstanding dues, including wharfage fees, were paid in full.
Optimum’s court case was supported by Liberty Coal and Templar Capital, both owned by British businessman and Gupta associate Daniel McGowan, which reached agreement with the business rescue practitioners for the transfer of OCT to Liberty Coal and an entity called OCT2.
The conditions of the transfer were not met by the January 2023 due date, and the deal was halted. RBCT once again reinstated the suspension of OCT, claiming it was a permanent defaulting shareholder and that several events of default had not been remedied.
Complicating the rescue plans, in March 2022 the National Prosecuting Authority (NPA) won a preservation order against the Gupta’s Tegeta Exploration & Resources, forfeiting its roughly R3.4 billion worth of shares in OCM and OCT to the state.
The NPA argued that the preservation order was necessary to intercept the business rescue plan which would have effectively legitimised the proceeds of crime. The Guptas were able to purchase Optimum Coal using funds advanced from Eskom. The NPA also led evidence that funds provided to McGowan’s company were derived “from money stolen from the South African government.”
The Durban High court ruled that the applicants had not made out their case for relief, and that arbitration proceedings between the parties should be allowed to reach their conclusion. The ruling says RBCT’s conduct had not been prejudicial to Optimum, as shown by its willingness to lift the suspension of exports in 2022. The court also noted most Optimum coal destined for export was in any event by-passing the terminal.
The ruling gives the harrowing background to Optimum’s fall from grace.
The mine had fallen into disrepair after being asset-stripped by the Guptas, according to the business rescue practitioners. By February 2018, the mine had no banking facilities, no capital, no cash flow and equipment was in dire need of repair and maintenance.
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Underground mining contractors did not pay their personnel, and operations came to a halt. The mine also stopped paying Eskom, which switched off its power. To generate immediate cash flow, the business rescue practitioners decided to invite several contractors to mine so-called mini-pits.
In June 2022, Templar Capital took cession of the largest creditor claim against OCM, amounting to R1.3 billion. It proposed converting this debt into equity in Liberty Coal, which would assume all OCM’s creditor liabilities on a compromised basis. Liberty Coal would also acquire OCT’s assets, which consisted exclusively of its RBCT export entitlement. The National Union of Mineworkers also joined the case on the side of Optimum.
McGowan argued that RBCT’s refusal to restore Optimum’s export entitlement prejudiced his companies’ rights.
The applicants argued that they had fully settled their outstanding obligations to RBTC by July 2021, and in November of that year provided a further R10 million security for future OTC debts to the terminal operator. Liberty Coal also took cession and paid RBTC’s proven claims of R96 million.
RBTC argued, before restoring its export entitlement, the proposed rescue plan for OCT would have to resolve any historical as well as new events of default.
In April 2023, the Supreme Court of Appeal (SCA) dismissed an appeal by Tegeta, itself under business rescue, seeking the SCA’s blessing to vote on the business rescue plan for OCT.
Tegeta was a creditor in OCT and had fought a long, drawn-out battle to prevent a creditors meeting at which it could not vote. The Gauteng High Court, and then the SCA, ruled against Tegeta, saying the business rescue practitioners were now in charge and would have to vote on behalf of the company.
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.
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