Glencore could sell troubled South Africa’s Optimum Coal unit

1 December 2015 (Last Updated December 1st, 2015 18:30)

Glencore is reportedly planning to sell its troubled Optimum Coal unit in South Africa.

Coal

Glencore is reportedly planning to sell its troubled Optimum Coal unit in South Africa.

At present, the unit is entangled in a dispute over the coal price with South African power utility Eskom.

In August, Optimum Coal went into business rescue, citing an unprofitable agreement to supply Eskom with the fuel, according to those with knowledge of the matter.

At that time, Eskom demanded $156m penalty payment from Optimum Coal for supplying poor quality coal claiming it resulted in weak performance and caused damage to its equipment and affected the power plants' overall performance.

"Since the beginning of 2014, coal prices in South Africa have dropped 43% to $47.05 a tonne."

Disputing Eskom's claim Glencore said that the mine commenced business rescue procedures as a result of its contract to supply coal to Eskom at a lower cost.

Eskom said it will exit the three decade contract. Eskom spokesman Khulu Phasiwe told Bloomberg that the company purchasing the assets will have to continue supplying Eskom.

Since the beginning of 2014, coal prices in South Africa have dropped 43% to $47.05 a tonne.

The business rescuers of Optimum had suspended the supply deal and then reinstated it until the end of November.

In July 2015, Glencore had announced plans to cut around 380 jobs at its Optimum Coal mine after ending some operations there.


Image: Optimum commenced business rescue procedures as a result of its contract to supply coal to Eskom at a lower cost. Photo: courtesy of SOMMAI / FreeDigitalPhotos.net.