Koornfontein mine – Gupta – Black Royalty Minerals (BRM) – AEMFC

Reported on 8 November in news (Moneyweb) that It has been nearly two years since the Gupta-owned operation was placed in business rescue.   The sale of Koornfontein coal mine – one of the Gupta companies now in business rescue – has hit a legal obstacle: losing bidder Lurco Group is asking the High Court to interdict the business rescue practitioners from selling the mine to another bidder, Black Royalty Minerals (BRM).

The losing bidder is within its rights to bring the application, but this could delay the recommencement of operations at Koornfontein. Image: Ciaran Ryan, Moneyweb

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It was stated that Lurco submitted two bids for the mine, both for R500 million. The initial bid was backed by funding from Central Energy Fund (CEF) subsidiary African Exploration Mining and Finance Corporation (AEMFC). CEF is owned by the state. Lurco also submitted an alternative bid, independent of AEMFC, with funding from Ocean Partners Holdings.

Having missed the deadline, BRM was anointed as the preferred bidder. The BRM bid, at about R300 million, is substantially lower than Lurco’s. Lurco’s R500 million offer was far superior to other bids received – which ranged from R217 million to R300 million – according to Lurco chief operating officer Aubrey Chauke’s affidavit now in front of the court.

The fact that the BRPs were now selecting the inferior BRM bid meant creditors and employees would be deprived of 60c in the rand.

Had Lurco been made aware that the full purchase price would have to be placed in a South African bank account within five days, it would have amended its bid accordingly.

Chauke’s affidavit says Lurco submitted two bids for Koornfontein in compliance with the conditions outlined by the BRPs in July. In late September, Lurco was advised that its alternative bid had been selected as the qualifying bidder subject to the payment of an initial amount of R45 million into an escrow account.

Attorneys for the BRPs, Smit Sewgoolam, wrote to Lurco on October 26 explaining that the amended bid condition that the full purchase price be placed in a South African bank account within five days was imposed by the mine’s “affected persons” by way of a vote that was passed on October 18. The BRPs were therefore bound by the adopted rescue plan and were obliged to implement it.

Lurco counters that the BRPs are bound by the Companies Act to adopt the original business plan of October 4, and not the amended one of October 18. Chauke says there is no provision in the Companies Act for the amendment of a business rescue plan after it has been approved and adopted.

The court papers suggest Eskom is a “contingent post-commencement creditor” of Optimum Coal Mine, also under business rescue, for R1.07 billion, being penalties levied by Eskom for non-delivery of coal. Lurco claims this applies to Optimum, not to Koornfontein, which therefore reduces Eskom’s voting rights in terms of the business rescue plan.

In this case, the rescue plan could not have received more than 75% of support from creditors as required by the Companies Act.

The BRPs are therefore bound to implement the original business rescue plan which did not require the full purchase price to be placed in a South African bank account within five days.

Responding to the court application, business rescue practitioner Louis Klopper says the Lurco application will be opposed.

“As BRPs, we are compelled to follow the instructions of creditors, and these were the conditions we are mandated to execute. Lurco is within its rights to bring this application, but we are concerned that this could delay the recommencement of operations at Koornfontein.”

https://www.moneyweb.co.za/mineweb/sale-of-koornfontein-coal-mine-hits-legal-snag/

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OWNERSHIP of the Koornfontein coal mine has been awarded to Black Royalty Minerals (BRM), a division of diversified company, Makole Group.

The award to BRM comes after a second round of bidding to take Koornfontein out of business rescue where it was placed in 2017 following the ruinous management of Tegeta Exploration & Mining, a company owned by the Gupta family.

Optimum Coal Mine was also placed in business rescue and is subject to new ownership bids. No decision has yet been taken with the mine.

BRM beat rival bids from Lurco Group and Ochid Mining-Smada, according to a press statement today. In addition to winning control of Koornfontein, BRM also has control of 1.5 million tons a year coal export entitlement through Richards Bay Coal Terminal.

Lurco Group was the initial preferred bidder for Koornfontein and Optimum, but it “… failed to raise the funds necessary to conclude the acquisition,” according to the press statement. Lurco Group had been in joint venture with the Government-owned African Exploration and Mining Finance Company (AEMFC). 

“BRM’s bid included a multiple funding approach, comprising of offtake agreements, internal funding and facilities by Standard Bank,” the statement read. It was required to fulfil certain conditions by November 1.

BRM currently operates the Chilwavhusiku Colliery in Bronkhorstspruit. “The bid for Koornfontein coal mine is aligned with our existing focus and expansion strategy which combines local operations with a strong export component,” said Mareda.

Koornfontein’s mine assets include an open pit strip mine, and two underground areas (Gloria and Blinkpan), a processing plant capable of processing 3.5 million tons a year, and a railway siding with rapid loading. Operations can extend well beyond 2040, said BRM.

Makole’s Black Royalty Minerals emerges as winner of Koornfontein coal mine bidding

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Junior miner Black Royalty Minerals (BRM), a subsidiary of the Makole Group, has been selected as the preferred bidder to acquire the Koornfontein coal mine, in Mpumalanga.

The transaction includes the mine’s port allocation at the Richards Bay Coal Terminal (RBCT).

Makole group CEO Ndavhe Mareda anticipates that operations at the Koornfontein mine will restart in the first quarter of next year.

The preferred bidder selection follows a competitive bidding process and a vote by creditors where the bid by BRM was shortlisted with Lurco Group South Africa and Orchid Mining-Smada.

However, Lurco, the initial preferred bidder, failed to raise the necessary funds to conclude the acquisition.

BRM’s bid included a multiple funding approach, comprising of offtake agreements, internal funding and facilities by Standard Bank.

The Koornfontein coal mine was placed under business rescue in February last year. The mine assets include an openpit strip mine, and two underground areas (Gloria and Blinkpan), a processing plant capable of processing 3.5-million tonnes a year and a railway siding with rapid loading.

Operations could well extend beyond 2040.

Koornfontein’s RBCT allocation has export entitlement of 1.5-million tonnes a year.

Mareda believes a combination of factors resulted in BRM’s successful bid, such as its current coal mining expertise and ability to operationalise the Koornfontein coal mine, BRM’s’ ability to service the mine, its current contracts and the fact that Eskom is an existing credito

https://m.miningweekly.com/article/black-royalty-minerals-chosen-as-preferred-bidder-for-koornfontein-mine-2019-10-30

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