Optimum Coal in Arbitration with Eskom Over Coal Deliveries

Mike Teke
Black-owned JSE-listed coal-mining company Optimum Coal is to go to arbitration over the differing interpretations of a coal supply agreement that it has with Eskom. Optimum is contracted to supply 5.5-million tons of the 7.3-million tons of coal that Eskom's Hendrina power station consumes a year.
Mike Teke, left, is CEO of Optimum.

BHP Billiton Coal South Africa, with Eskom's consent, ceded the coal supply agreement to Optimum as part of a black economic-empowerment (BEE) exercise. However, the terms of the agreement were simultaneously amended.

Instead of Optimum supplying 6,5-million of coal a year to Hendrina, the contracted volume was reduced to 5,5-million tons, on the understanding that the one-million tons that would no longer be delivered were coal fines, which Eskom preferred not to receive. There has been no alteration to the price, which remained at R93/t.
Optimum is continuing to supply the coal to Hendrina pending the outcome of the arbitration.

Optimum sold R3.9-billion worth of coal in 2009. Last year's volume totalled 9.3-million tons, of which four-million tons - some 45% - were exported. Optimum is South Africa's sixth-largest thermal coal producer and its fourth-largest exporter, after Anglo Thermal Coal, Becsa and Xstrata Coal. It raised R1,5-billion when it listed on the JSE in April, which assisted the company to acquire up to 96% of Koornfontein coal mine. (Mining Weekly, 6/14/2010)