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Optimum's sale of coal exports rights 'makes sense' – analyst

Sep 11 2016 09:45
Liesl Peyper

Cape Town - It would make sense if Optimum Colliery sold its coal export allocation through the Richards Bay Coal Terminal (RBCT), said independent energy analyst Ted Blom, as Optimum receives “very good prices” from Eskom and therefore doesn’t have to rely on exports. 

“The company has indicated that they’re focusing on Eskom, and therefore they won’t need to access such a big export market,” Blom told Fin24 by phone. 

Miningmx reported this week that the Gupta family-controlled Oakbay Investments has allegedly sold Optimum Colliery’s coal export allocation through the Richards Bay Coal Terminal (RBCT) to the private international coal trading firm Vitol for around $250m.

A spokesperson for the Gupta family, however, said he couldn’t comment on market speculation when Fin24 approached him on the proposed deal.

According to Miningmx, a well-placed South African coal industry source told the publication that the deal had infuriated the existing members of the RBCT because they hold pre-emptive rights to use Optimum’s export allocation should Optimum not be able to supply the coal from its own operations. 

Although South Africa has high-quality coal reserves and is well positioned to export the fuel to India and China, shipments are constrained by limited port capacity.

Only shareholders have an automatic right to export through Richards Bay, which accounts for almost all of South Africa’s coal shipping capacity, Bloomberg reported

Vitol has trading and marketing operations in Cape Town. In 2012, it formed a coal trading company in neighbouring Mozambique by buying a stake in a terminal that exports coal from South African mines. Vitol traded more than 20 million tonnes of physical coal in 2015, its website shows.

Optimum on the other hand holds a 7.5% share in the coal terminal – equivalent to an annual export quota of six million tonnes of coal. 

Tegeta Exploration – a subsidiary of Oakbay – bought Optimum coal in April this year for R2.1bn from Glencore. The sale of Optimum’s export quota for $250m (about R3.6bn) would cover the purchase price and leave Tegeta with a R1.5bn profit.

READ: Glencore’s Optimum sale to Guptas likely to get bank backing

Towards the end of August the Gupta family announced that it was selling its South African business interests, claiming there was significant interest in its assets from international investors.

Oakbay Investments announced its results in Johannesburg on Thursday and reported a 7% rise in profits for the financial year ended 29 February 2016. Mining – the group’s largest operational division, contributed 44.5% to revenue at R1.17bn. 

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