coal smokestack
Optimum Coal Mine resumes it’s supply  to Eskom’s Hendrina power station.

In South Africa, Optimum Coal Mine resumed its supply of coal to state-owned power utility Eskom’s Hendrina power station on Friday.

This follows negotiations between the business rescue practitioners for Optimum Coal Mine and Eskom. It was agreed that this decision is best until an optimal solution for both parties is met.

Business Rescue Practitioner, Piers Marsden said: “The recommencement of supply is intended to allow for meaningful negotiations to find a sustainable solution for all parties”.

The agreement was placed on hold last month while the coal company embarked on a business rescue mission to resolve its financial situation.

Coal mine resumes supply

According to a press statement, the business rescue practitioners have agreed that Optimum Coal Mine will resume the supply of coal to Eskom for the duration of the negotiations at the base price of around ZAR150 per tonne.

The mine has secured financial support from Glencore for this purpose.

Supply agreement

The coal mine, which is owned by Anglo–Swiss multinational commodity trading and mining company, Glencore, said that its Optimum Coal Mine was under financial strain because it was selling coal to Eskom for less than the cost of production.

Last month, the business rescue practitioners originally said that as an interim measure, Optimum propose to supply Hendrina at the mine’s cash cost of production between ZAR400-ZAR450 per tonne of coal, Mining weekly reported.

The mine, which supplies Eskom with 5.5 million tonnes of coal per annum, contributing 2,000MW to the national electricity grid, is still bound to a 25-year power purchase agreement for another three years.

Unsustainable operations

In August, Mining Review Africa reportated that while fully aware of the unsustainable nature of the agreement and Optimum’s precarious financial situation, Glencore said in a statement that Eskom served a notice on Optimum in July 2015.

The notice is enforcing specifications in the supply agreement which Optimum is unable to meet on a sustainable basis and which were the subject of the recent renegotiation discussions.

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