Arnot Opco clinches ten-year coal supply contract with Eskom

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The reopened Arnot Colliery is expected to give jobs to the Middelburg community.
The reopened Arnot Colliery is expected to give jobs to the Middelburg community.

Arnot Opco has signed a ten-year coal-supply contract with Eskom, marking the revival of its business with the state-owned power utility.

The colliery, which is based in Mpumalanga, said the agreement marks the conclusion of months of negotiations with the power utility, which began in mid-2020.

The contract is Arnot Opco's first since its formation two years ago and comes with a clause that allows the parties to exit the the agreement after six years.

Coal will be sourced from the firm's Middelburg mine for the Arnot power station.

"As part of the agreement, Arnot Opco will deliver coal to Eskom's Arnot power station through conveyor belts. This method of delivery will minimise costs for both the power utility and the mining company," the latter said on Thursday.

The Arnot mine was closed by Exxaro in 2015 when Eskom did not renew a 40-year coal-supply agreement.

Wescoal holds a 50% stake in Arnot and the other half is controlled by Arnot Opco, after Exxaro handed over the mine to its retrenched employees in what was at the time described as a landmark deal. A total of 1 038 former Exxaro employees are shareholders in the colliery.

The company described the signing of the Eskom coal-supply agreement (CSA) as a "big boost" for the company, its former employees, and Middelburg's neighbouring community.

CEO Bontle Aphane said the mine had been the "primary source of income" for the Middelburg community before it closed down.

"With this significant CSA signing, we plan to hire more people from the community, as well as ex-employees - improving their economic prospects again and increasing our staff complement."

Eskom described the coal from the colliery as of high quality and may be used at other power stations, if needed and the utility's General Manager for Primary Energy, Sandile Siyaya, said the transaction demonstrate that "a mining asset curtailed by a major miner can be operated viably in the hands of a junior miner."

Since taking ownership of the colliery in May 2019, the new owners embarked on de-watering the flooded underground sections of the mine and prepared the surface infrastructure, while negotiations continued with Eskom.

Wescoal last month said it expects the mine to contribute 190 million tons of coal to the group.

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