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Cape Town – The Economic Freedom Fighters (EFF) on Wednesday called on Mines Minister Ngoako Ramatlhodi to cancel all Glencore's [JSE:GLN] mining rights in South Africa.
This comes after Ramatlhodi reportedly ordered Glencore to suspend all operations at its Optimum coal mine because of the way it planned to carry out job cuts.
Reuters reported that Ramatlhodi said on Tuesday the 10 million tonne-a-year mine should be shut because Glencore did not follow legal procedure in the process of cutting jobs.
"The retrenchments ... were inhumanely conducted and disregarded all the legal prescripts which govern the process of retrenchments," he said a statement from his ministry, without being more specific.
Ramatlhodi later told Reuters the government was suspending operations at the mine until the issue was resolved.
READ: Glencore to cut 380 jobs at SA coal mine
Nationalisation
The EFF on Wednesday welcomed Ramatlhodi's stance "not to wait for the mining crisis to deepen".
EFF national spokesperson Mbuyiseni Ndlozi said the move was an unprecedented opportunity for the state to take a greater and strategic control of the mining industry through nationalisation of mines.
“If the Minister does not take his decision a step further, the likelihood of the mining industry stabilising will always remain a pipe-dream,” he said.
Glencore announced in July it would cut 380 jobs at Optimum and shut part of the mine due to lower coal prices. On Tuesday it laid the blame for Optimum's financial woes squarely at Eskom's door.
Financial strain caused by an agreement with Eskom has resulted in a Glencore coal mine entering debt rescue proceedings, the global diversified miner said in a statement in Tuesday.
Glencore said in the statement that Optimum Coal Holdings and Optimum Coal Mine (Optimum) have resolved to commence business rescue proceedings and place both Optimum Coal Holdings and Optimum Coal Mine under supervision because of "continued and unsustainable financial hardship".
Despite taking various steps over the past six months to restructure its operations and reduce costs, including downscaling operations and reducing production, Optimum has continued to experience difficulties as a result of the agreement with Eskom, said Glencore.
"Optimum is contracted to supply 5.5 million tons per annum to Eskom following an agreement signed in 1993. This agreement has resulted in Optimum supplying coal to Eskom at a cost significantly less than the cost of production for a number of years.
"Funding by shareholders - who have advanced about R900m to Optimum in addition to R2.5bn of bank funding - has enabled Optimum to sustain operations while talks with Eskom continued.
"Whilst fully aware of the unsustainable nature of the agreement and Optimum’s precarious financial situation, Eskom served a notice on Optimum in July 2015 in which it asserts its rights to claim significant historical penalties from Optimum and to impose future penalties," said Glencore.
It said the penalties Eskom seeks would result in Optimum supplying coal for an effective price of R1 per tonne.
While Optimum is disputing Eskom's claims, it cannot operate the mine and supply Eskom, Glencore said, adding that it had therefore resolved to commence business rescue proceedings.
Eskom said it has an existing coal supply and offtake agreement with Optimum and expected the terms to be honoured.
Mining crisis
The Department of Mineral Resources meanwhile met with leaders in the mining industry (organised business as well as organised labour) on Wednesday to address the issue of job losses, which could hit 10 000 as companies face higher costs and low prices for their output, Bloomberg reported on Wednesday.
READ: Ramatlhodi implores mines, unions to save jobs
At least seven mining and metal companies have announced plans to reduce their workforces in the past two months. The second-largest union in the gold industry, Amcu, has rejected an offer by operators after almost two months of talks as the metal trades close to a five-year low.
“We need an honest, frank conversation about what each one needs to do to arrest the current crisis,” Ramatlhodi told reporters in Pretoria.
“None of us should leave this meeting without committing something to the table. It is not an exercise in finger-pointing.”
Talks over wages between SA’s largest gold producers and unions need to consider the future job security of workers, Ramatlhodi said.
This follows recent announcements by several mining companies of their intention to retrench workers, said the department.
