Glencore was under pressure to sell to Guptas, #StateCaptureInquiry hears

Johannesburg – The Zondo commission has heard how mining giant Glencore was pressured into selling not just its Optimum coal mine but all the assets held in its Optimum Holdings to the Gupta’s Oakbay Resources. 

Former Glencore CEO Clinton Ephron outlined in detail how the Department of Mineral Resources and Eskom did the Guptas bidding in an effort to benefit the controversial family’s mining interest. 

Glencore owned Optimum Holdings which included assets such as Optimum coal mine which supplied coal to Eskom’s Hendrina power station. At the time, in 2015, Optimum had a coal supply agreement contract of 25 years. The contract was to expire in December 2018. 

In 2015,  Ephron told the commission that Glencore was approached by auditing company KPMG which said a client was interested in buying Optimum coal mine. Ephron said the company asked who was the client and the auditing firm confirmed that it was Oakbay Resources. 

Ephron said the group offered to purchase the mine for R2 billion but Glencore declined to sell. 

In the same year, Oakbay Resources returned with another offer for Optimum and it offered R1 per share. The sale looked promising at the time and only a few issues needed to be sorted. 

Ephron said during this time he got a call from Joel Raphela,  the deputy director general for the department of mineral resources, who told him that he was aware of the deal. Ephron said the Raphela said the sale of Optimum coal mine only would not be enough and that the entire assets of Optimum Holdings would also have to be sold. The assets included Optimum coal mine, the Richards Bay coal terminal and the Koornfontein coal mine.

Ephron said he taken aback by the offer. In an Eskom meeting with executives including Matshela Koko, Koko raised a similar issue which Raphela had raised that Eskom would only support the sale if it included the entire assets of Optimum Holdings. 

Oakbay made a third offer after this and were prepared to pay Glencore R1 billion for the entire assets of Optimum Holdings. Glencore yet again rejected the offer as it was below the price the company valued its assets. 

Section 54 notices

Ephron said after the rejection, Optimum coal mine was issued with various sections 54 notices. These notices are issued by the department of mineral resources (DMR) when it has concerns about the safety of a mine and the notice immediately shuts down a mine’s operations. 

"It is very uncommon that inspectors worked over the weekend to issue those notices. We would have spoken to the DMR about the notices. 

"At the time we thought it was a clear warning shot to Glencore from the DMR regarding potential litigation of the mine. That implied in our minds that we need to support an offer for the sale of the Optimum Holdings in order to ensure its survival," said Ephron.

Ephron said in a Glencore conference call in November 2015, It was decided that since Optimum coal mine was under voluntary business rescue Glencore would take the company out of that situation and would financially support it. He said it was decided that Oakbay’s offer of R1 billion could not be accepted. 

Zwane bats for the Guptas in Switzerland 

Ephron also told the inquiry about former mineral resources minister Mosebenzi Zwane’s efforts to help the Guptas purchase Optimum Holdings. He confirmed that Zwane had travelled to Switzerland to meet with Glencore CEO Ivan Glasenberg in December 2015. The meeting was arranged by Zwane. 

“Zwane and Glasengberg met at hotel Zurich and I understand the meeting was also attended by Salim Essa. When Glasenberg asked who Mr Essa was he was told that he was an advisor to the minister. Glasenberg asked Zwane about section 54 notices, but Zwane did not engage him on this issue and instead noted that he wished to discuss Optimum. Glasenberg told Zwane that Glencore would be open to a sale at an appropriate price. Zwane responded by saying that he was sure that Glencore could reach a deal with the Gupta family,” Ephron recalled. 

In another meeting on December  2 2015, Ephron said those present were Zwane, Essa, Tony Gupta and Glasenburg. Zwane opened the meeting and said the best option was for an agreement to be met. 

Zwane has denied that he ever travelled to Switzerland to meet with Glasenberg.

A purchase price of R2.51 billion was agreed for the purchase of all Optimum Holding’s assets. 

Ephron agreed that pressure was placed on Glencore to sell the mine. 

“While is it clear that pressure was bought to bear of Glencore to sell the mine, Glencore ultimately entered into a transaction that made commercial sense. Obviously had Eskom agreed to engage with Glencore in 2015 the situation could have been avoided,” said Ephron. 

A couple of years after the Guptas took over Optimum Holdings mines failed to deliver on coal supply to Eskom.

The mines were placed under voluntary liquidation. The Brakfontein coal mine, also owned by the Guptas, which was meant to supply Eskom with coal had stopped in March 2018, six years before the end of the agreement. 

Ephron has concluded his testimony. 

IOL

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