Extract from Exxaro Resources Limited’s Reviewed condensed group financial statements, unreviewed production & sales volumes YE 31 December 2015, 3 March 2016
Arnot
Eskom issued Exxaro with a notice that the offtake of coal from Arnot mine would discontinue after 31 December 2015. All production has ceased, a section 189 process was declared and discussions continue with Eskom on the closure and rehabilitation of this mine Exxaro owns the mining right for this resource while Eskom owns the assets and is responsible for the ultimate mine rehabilitation and post closure obligations.
From FY13, both parties agreed on the need for a memorandum of understanding to develop win-win scenarios on the R/tonne cost. Since then, Exxaro and Eskom agreed to investigate plans to optimise the mine as the cost was becoming excessive given Eskom’s delay in procuring surface rights for the opencast reserves, Mooifontein.
As part of this review:
– An optimised scenario was discussed and agreed in principle by Eskom, after which an independent study was to be launched to test assumptions. Eskom never initiated this independent study despite repeated requests by Exxaro
– The chosen scenario would form the basis of a new coal-supply agreement post FY15
– On 8 September 2015, Eskom notified Exxaro in writing that the coal-supply agreements would expire at the end of 2015, and advised Exxaro to initiate closure activities. In terms of the agreements, either party has to give two years’ notice of its intent to terminate the coal-supply agreement
– Numerous engagements have taken place with Eskom and there is an impasse between the companies on the interpretation of the obligations for closure in the agreement, notably relating to funding the rehabilitation trust fund shortfall, future liabilities, operational and all closure-related costs
– The parties are proceeding with arbitration in terms of the coal-supply agreement resolution mechanisms.
Impact on employees
– Employees were briefed by mine management on the contents of the Eskom letter on 21 September 2015
– 1 853 people are directly affected by the closure
– A section 189 notice was issued to organised labour and employees on 2 December 2015
– A commissioner from the Commission for Conciliation, Mediation and Arbitration (CCMA) was appointed, with the first meeting on 14 January 2016
– Organised labour requested additional information which was supplied on 15 January and 4 February 2016
– To date, all required information has been submitted to organised labour and further sessions have been scheduled.
Exxaro, Department of Mineral Resources (DMR), Eskom and organised labour discussions
– Meetings between Exxaro, Eskom, DMR and organised labour took place on 22 December 2015 and 4 February 2016 to identify ways to prevent job losses and the sterilisation of coal reserves
– A revised coal-supply agreement proposal was sent to Eskom in February 2016, based on an optimised mine plan, including the Mooifontein opencast reserves which would effectively halve the unit cost per tonne to Eskom.
Going forward
All equipment and infrastructure is being reclaimed for a disposal strategy that will be implemented by Eskom.
In the meantime, the section 189 process is continuing.
Statement issued by Exxaro through the JSE SENS service, 3 March 2016
