Nelspruit - Rural communities in Mpumalanga have been granted a 16.1% stake in a coal mine following a ground-breaking agreement reached after Sentula Mining secured a R151 million loan from the Industrial Development Corporation (IDC).
The agreement will put an end to tensions between the owners of the Nkomati anthracite mine and the surrounding tribal communities of KwaLugedlane, Matsamo and Mawewe near Komatipoort, who have over the years accused the mine’s management of overlooking locals when employing staff, of degrading their farming land and of blasting too close to their houses, causing the walls to crack.
Sentula Mining owns 60% of the mine through its subsidiary Benicon Coal, and the rest is owned by the Mpumalanga Growth Development Agency (Mega), a state-owned enterprise.
Nkomati Anthracite has been operating in the area since 2009, and the local communities have been disrupting its operations on and off over the years while trying to force management to accede to their demands.
Mega played a major role in securing a stake in the mine for the residents following engagements with them over the past two years.
Mega chief executive officer Xola Sithole said: “Following the mandate given by the Mega board, numerous engagements were held between Mega, Sentula and the IDC, the result of which was Nkomati successfully securing a recapitulation loan in the amount of R151.6 million from the IDC. The IDC loan agreement contains certain covenants and security provisions that are standard for an agreement of this nature.”
Sithole said the advancement of the loan would be undertaken once various conditions we met. These conditions include Nkomati’s submission of all relevant environmental management approvals to the IDC and the warehousing of the 16.1% of the issued share capital of Nkomati on behalf of the local communities.
Once the warehousing arrangement is implemented, Sentula’s shareholding in Nkomati will be diluted by 9.66% to 50.34%, while Mega will retain its 33.56%.
“Mega is elated that the communities will acquire their shares in Nkomati at a nominal value, which is in line with Mega’s transformational agenda,” Sithole said.
The Nkomati anthracite mine presently has a labour force of 151. The mine has 7.2 million tons of proven reserves and 4.4 million tons of indicated resources. Anthracite is produced as a coke blend for domestic consumption from opencast and underground operations. This blend is used in the manufacturing of steel and ferrochrome.
Sentula chief executive officer Jacques Badenhorst said the mine’s local buyers were Samancor and Glencore.
Badenhorst said that 350 more people would be employed when the plans to expand the mine were realised.
“We are operating in a poor area and are positive about the economic input. Our target will be the local community, although that is not always possible,” he said.
“There were many disruptions because the community was not involved in the process and we went through a detailed and intensive process in the past two years – we evaluated assets and determined the required capital. We then made a decision to go full steam ahead to develop the mine, and it makes sense that we involve the community,” said Badenhorst.
The mine had previously been under care and maintenance, he said, and only employed four security guards before Sentula and Mega charted a way forward.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER