Court Dismisses Optimum Coal's Case for Richards Bay Coal Terminal Access

The Durban High Court recently dismissed Optimum Coal’s petition for access to its export entitlement through the Richards Bay Coal Terminal (RBCT). Optimum Coal, formerly owned by the Gupta family and currently in business rescue, was barred from exporting coal by RBCT in January due to payment default. Allowing Optimum to resume exports, according to RBCT, could jeopardize the company’s reputation, especially if it was discovered that lifting the suspension was part of a larger money-laundering scheme. The court’s decision also took into account South Africa’s greylisting by the Financial Action Task Force, which drew global attention to the country’s efforts to combat money laundering and implicated the Guptas and Daniel McGowan in their use of the terminal.

Both Optimum Coal Mine (OCM) and Optimum Coal Terminal (OCT), which was previously owned by the Gupta family, sought an interim court order to prevent RBCT from interfering with their right to use the terminal for coal exports and transferring OCT’s shareholder interest. The export entitlement of the OCT was suspended in 2018, but it was reinstated between January 2022 and January 2023 after all outstanding dues were paid in full.

Liberty Coal and Templar Capital, two companies associated with British businessman Daniel McGowan, who has ties to the Guptas, backed Optimum’s case. These companies had reached an agreement with business rescue professionals to transfer OCT to Liberty Coal and another entity called OCT2. However, the transfer conditions were not met by the January 2023 deadline, resulting in the termination of the agreement. As a result, RBCT suspended OCT once more, claiming that it was a perpetual defaulting shareholder with unresolved default events.

The National Prosecuting Authority (NPA) obtained a preservation order against Tegeta Exploration & Resources, a company linked to the Guptas, in March 2022, complicating the rescue plans for Optimum Coal. Tegeta was ordered to forfeit approximately R3.4 billion in shares in OCM and OCT to the state as a result of the order. The NPA justified the preservation order by claiming that it was required to prevent the business rescue plan from legitimizing proceeds of crime, as the Guptas had acquired Optimum Coal using Eskom funds. The NPA also presented evidence that funds provided to McGowan’s company were obtained by stealing money from the South African government.

The Durban High Court ruled that the applicants (OCM and OCT) had failed to substantiate their case for relief and that the parties’ arbitration proceedings should be continued. The court determined that RBCT’s actions had not harmed Optimum, as evidenced by its willingness to lift the export ban in 2022. Furthermore, the court observed that the majority of Optimum’s coal destined for export avoided the RBCT terminal.

The court ruling shed light on Optimum Coal’s downfall. According to the business rescue practitioners, the Guptas had stripped the mine of its assets, leaving it in disrepair by February 2018. The mine lacked banking facilities, capital, and cash flow, and it required extensive equipment repairs and maintenance. Underground mining contractors failed to pay their employees, and Eskom disconnected the mine’s power supply due to unpaid bills. In order to generate immediate cash flow, the business rescue practitioners invited several contractors to mine small pits.

In June 2022, Templar Capital paid R1.3 billion for the largest creditor claim against OCM. Templar Capital proposed that this debt be converted into equity in Liberty Coal, which would assume all of OCM’s creditor liabilities. Liberty Coal would also purchase OCT’s assets, most notably its RBCT export entitlement. The case was joined by the National Union of Mineworkers in support of Optimum.

McGowan contended that RBCT’s refusal to reinstate Optimum’s export privilege was a violation of his company’s rights. The applicants claimed that they had settled their outstanding RBCT obligations by July 2021 and had provided an additional R10 million as security for future debts owed to the terminal operator. Liberty Coal also paid R96 million to settle RBCT’s proven claims.

RBCT insisted on resolving any historical and new default events before restoring Optimum’s export entitlement. The Supreme Court of Appeal (SCA) dismissed an appeal by Tegeta, which was also in business rescue, seeking permission to vote on the OCT business rescue plan in April 2023. The SCA ruled against Tegeta, stating that the business rescue practitioners had control and were responsible for voting on the company’s behalf.