So Australian coal miner South 32 wants out of SA. This is not surprising because it has unfunded mine rehabilitation liabilities of some R34 billion. So what better way than to pass this liability on to Gwede’s bestie and BEE industrialist of note, Mike Teke of Seriti Resources.
The asking price is a very modest R100 million up front and a 50% share of the free cash flow generated till 2024.
So how are Mike and South 32 going to make a profit out of this transaction? Simple really, they will make a killing out of Eskom and electricity users.
So how are Mike and South 32 going to make a profit out of this transaction? Simple really, they will make a killing out of Eskom and electricity users.
South 32’s Ifalethu colliery supplies coal to Eskom’s Duvha power station. On paper they make a loss of R65/ton supplied. So what Mike will do is ask for a R470/ton increase in the price that is worth about R68 billion over the life of the contract. See photo below. 
This is more than enough to pay the purchase price, settle the rehab liabilities and pay South 32 a healthy dividend. The cost will be borne by by electricity users who have been whacked with a 15% electricity price increase to pay for this.
But that is not the story. The real story is that South 32 is not suffering any hardship at all. Ifalethu is part of South 32’s Middelburg mine complex. The other part is Wolwekrans which is exporting its coal through Richards Bay at a healthy profit of R400/ton.
So there is no need for Eskom to pay an extra R68 billion to offset the hardship of Ifalethu, South 32 is making shitloads of money, but Mike can deliver more.
This is not the first time Mike has used his status as billionaire black industrialist to the advantage of himself and WMC. In 2006 he and seven connected comrades realised a cool R3.6 billion profit when they bought Optimum coal mine from BHP.
They paid R95.3 million and then persuaded Eskom to bump up the contract price. Mike and the Comrades, then sold to Glencore for a cool R3.6 billion. (See Barry Bateman’s article in Noseweek of March 2015.) Mike and South 32 are pulling the same trick.
It’s another rip off, financed by Eskom and us long suffering consumers.
You go Gwede. ✊🏽
You go Gwede. ✊🏽
PS. The first request for a deviation was refused, South 32 was in the driving seat. An appeal was lodged by Eskom and trust me it’s a winner.
One last point/slash question: WTF is wrong with the Competition Commission, are they deaf, stupid or blind? They approve this shit.
One last point/slash question: WTF is wrong with the Competition Commission, are they deaf, stupid or blind? They approve this shit.
Ifwelethu sells to Eskom, average cost per ton R323, average price per ton R265.
Wolwekrans exports, average cost per ton R668, average price per ton R1065.
This is one mine, yet they claim they are in distress and want another +_R460 per ton from Eskom.
Wolwekrans exports, average cost per ton R668, average price per ton R1065.
This is one mine, yet they claim they are in distress and want another +_R460 per ton from Eskom.
How does South 32 motivate this? It hires expensive consultants to bullshit, Eskom, treasury and Nersa. We pay for their gullibility. If Mike gets it right, we will pay an extra R68 billion to Eskom.
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