Glencore vs Eskom – and some curious BEE deals
Massive spoils went to a Mauritius company with anonymous shareholders.
Mention Optimum Coal and the following words, attributed to Mark Twain, immediately come to mind: A mine is a hole in the ground with a liar standing next to it. Except in this case, there are probably several liars.
Predecessors of mining conglomerate BHP Billiton established the Optimum Coal Mine to supply Eskom’s key Hendrina Power Station by way of a conveyor belt from mine to power station. The 30-year contract they signed in 1993 determined that the price of coal supplied to Eskom was to escalate in line with the general inflation rate. Over the years, however, it became clear that mining costs were rising at a far higher rate than the general inflation rate. By 2010 BHP Billiton was happy to sell – some say give away – Optimum to a BEE consortium.
Quite apart from getting shot of an asset with poor profit prospects, what was in it for BHP Billiton?