How bigwig officials bullied Glencore to sell Optimum mine

A mineral resources minister, Eskom executives and a senior government official were among several powerful individuals who exerted undue pressure on Glencore to sell its Optimum Coal Holdings (OPH) local assets to Tegeta Exploration and Resources in 2015, the Commission of Inquiry into State Capture heard yesterday.

In his testimony before the commission, former Glencore SA CEO Clinton Ephron told of how former minerals minister Mosebenzi Zwane – accompanied by Gupta business associate Salim Essa – travelled to Switzerland to meet Glencore group CEO Ivan Glasenberg in a Zurich hotel to persuade him to sell all the company’s SA assets to the family-linked company.

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Seen as a last-ditch effort, the Zwane two-day meeting with Glasenberg followed a bid by former Eskom executive Matshela Koko and department of minerals deputy director-general Joel Raphela, who had been piling pressure on Ephron to sell OPH assets to Tegeta at a time the company experienced a loss-making phase.

Ephron said the meeting between Zwane, Glasenberg and Essa was followed by one with Tony Gupta.

While Glencore was negotiating new terms with Eskom, Ephron said Optimum was suddenly hit by a series of section 54 work stoppages in 2015 by the department of mineral resources (DMR), based on “frivolous reasons”.

Ephron said the notices were “unduly harsh and disproportionate” as one was issued to halt the entire underground operations of the mine due to an oil leak in one of the trucks, while other notices were issued on weekends when the department’s inspectors were not on duty.

The section 54 work stoppage notices perform an important function to maintain health and safety at workplace in mines, but they further crippled Optimum’s viability, which was already under severe strain from Eskom’s refusal to renegotiate.

“At the time we thought it was a clear warning shot from the DMR. To our mind it implied we needed to support the Optimum sale,” Ephron said.

Glencore had no choice but to put Optimum under business rescue even though shareholders were willing to refinance the mine.

But then Glencore was approached by audit firm KPMG on behalf of Gupta-owned firm, Oakbay Investments, with an offer to purchase Optimum Holdings, which included Richards Bay Coal Terminal, Koornfontein and Optimum mines, for R1 billion.

Glencore rejected this offer, saying that it was willing to sell Optimum assets “at a reasonable price”.

Ephron said Oakbay then set in motion the wheels to buy the mine from Glencore, setting up a series of meetings with Glencore’s group CEO Ivan Glasenberg in Zurich in December 2015.

This meeting was attended by Rajesh “Tony” Gupta, former mineral resources minister Mosebenzi Zwane, Gupta associate Salim Essa, Glasenberg and Ephron himself.

Zwane has long maintained, even in Parliament, that he never attended the meeting.

At the meeting, a price of R2.15 billion, which was more than double the initial offer, was agreed for Optimum.

Ephron said that Tony Gupta spoke about the rehabilitation trust funds which were invested in long-term equity instruments to avoid price votality, and requested that Optimum convert the rehabilitation funds into cash equivalents.

“We were suspicious of them at the time. The only reason we decided to sell was a number of reasons, including substantial risks associated with it. It was a painful decision,” Ephron said.

“With benefit of hindsight, it was quite easy to join the dots. We were shocked by what came out of the Public Protector’s State of Capture report.”

When it transpired the Guptas had a R600 million shortfall, efforts to raise the funds through South African banks were turned down, forcing the former Eskom CEO to authorise a pre-payment in millions to save the transaction.

– Additional reporting by ANA

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