Glencore share price: Company faces legal battle over SA coal unit sale

on Feb 1, 2016
Updated: Oct 21, 2019

Glencore Plc (LON:GLEN) could be facing a legal battle over the sale of its South Africa-based coal unit, Optimum Coal, which the Swiss company put under bankruptcy protection last year.

Optimum has been run by business rescue practitioners (BRPs) since August, when Glencore sounded the retreat over a dispute with SA national utility Eskom. Under long-term deals agreed about two decades ago, Optimum has been obliged to supply coal to Eskom power plants at a significant loss, and Glencore had requested the terms be renegotiated, which Eskom refused.
Optimum temporarily suspended supplies to the utility, and the company has been looking for a buyer since the BRPs took control.

In December, the administrators agreed the sale of Optimum to Tegeta, a company controlled by the Gupta family, which allegedly has close ties with SA President Jacob Zuma.
However, at least three sources cited by SA’s Business Report last week said that a group of South African businessmen, led by the chairman of the SA Mining Development Association, Peter Temane, are preparing court documents to challenge the deal after their bid was turned down.
According to the sources, Temane and his consortium offered to pay $200 million (£134 million) for Optimum, which compares with Tegeta’s $130 million winning offer.
Temane’s consortium lost “after some backroom machinations,” one of the sources said. “We should expect the high court challenge on Tegeta soon.”
An official of the National Union of Mineworkers (NUM) cited by the Business Report confirmed that the Temane consortium had approached NUM in preparation for its offer.
“There was nothing wrong with what Peter (Temane) and his group were proposing and their offer was much stronger than the Guptas,” said the official. “But they fought a losing battle because the Guptas are well-connected.”
Glencore and Optimum have not commented on the allegations.

Glencore “pleased” with Tegeta’s terms

A report in Johannesburg’s Sunday Times meanwhile alleged that Glencore’s chief executive Ivan Glasenberg had met with South Africa’s mines minister Mosebenzi Zwane in Zurich ahead of the sale agreement.
In response to questions over the report, Glencore told Bloomberg that it worked with “stakeholders”, including the government, to facilitate the sale of Optimum.
“Glencore has been working with the BRP’s of Optimum Coal and all other stakeholders including government” the company said. “Glencore is pleased with the terms of the transaction concluded by the BRPs with Tegeta.”
Glencore’s share price had edged 0.92 percent higher to 90.30p as of 09:32 GMT today, outperforming the FTSE 100 which was about 0.3 percent down. So far this year, Glencore’s stock is flat, which compares with a three-percent loss for the FTSE.
As of 09:41 GMT, Monday, 01 February, Glencore Xstrata PLC share price is 90.31p.