South Africa orders Glencore to suspend operations at Optimum coal mine

4 August 2015 (Last Updated August 4th, 2015 18:30)

South Africa has ordered mining firm Glencore to suspend all operations at its Optimum Colliery over job cuts.

South Africa has ordered mining firm Glencore to suspend all operations at its Optimum Colliery over job cuts.

The orders passed by the mines minister Ngoako Ramatlhodi coincided with the company's latest announcement that it was putting the mine into business rescue due to an uneconomic agreement with state power firm Eskom.

In July, Glencore announced plans to cut 380 jobs at the mine and close part of its operations over weak coal prices.

Ramatlhodi claimed that Glencore failed to follow legal procedures in the process of cutting jobs at the ten million tonne-a-year mine.

"Ramatlhodi said that operations at the mine will be suspended until a resolution is found."

Ramatlhodi said: "The retrenchments... were inhumanely conducted and disregarded all the legal prescriptsm which govern the process of retrenchments."

Ramatlhodi later told Reuters that operations at the mine will be suspended until a resolution is found.

In its latest announcement, Glencore said that an agreement was signed in 1993 for Optimum to supply 5.5 million tonnes of coal a year to Eskom.

Optimum started supplying coal at a cost that is significantly less than the expense of production for a number of years.

Based on this, Optimum carried out discussions with Eskom over the years to renegotiate the agreement to a sustainable level for both parties.

In June, Eskom said it was not willing to renegotiate the agreement and terminated the framework agreement despite. However, in early July, Optimum secured additional funding from Glencore to enable it to continue coal supply.

Glencore said that it will provide all necessary assistance to the business rescue practitioner during the process in order to develop a business rescue plan.

The new plan is expected to help Optimum to emerge as a sustainable business and a long-term supplier of coal to Eskom.