The R1 deal that could make or break South Africa
In this latest edition of Podcasts from the Edge Peter Bruce talks to Seriti Resources CEO Mike Teke about the choppy waters suddenly surrounding the agreement to take over the vast coal-mining resources of South32. Combined with the Anglo American coal business Seriti has already acquired, the South32 mines would make Mike Teke the biggest single coal-supplier to Eskom, SA’s debt-drunk power utility. But there’s a problem — one of the South 32 mines supplies directly to Eskom’s critical Duvha power station and it loses money with every delivery. Teke says he won’t do the deal until Eskom agrees a better coal price for the supplying mine. The National Treasury won’t give it permission to pay. But without the mine Duvha would close and that would bring even more chaos to the power grid. What is to be done? South 32, desperate to get rid of the assets, has since offered Seriti $250m over the next decade. That’ll help, says Teke but he still wants to hear what the Treasury does with a second approach from Eskom. He wants the current price of R280/t of coal increased to R550 a tonne. That may sound a lot but Teke reminds Bruce that coal export prices are now well above R1000/t. A deal will be done, says Teke, and he’d even be prepared to share ownership of the Duvha mine if one of the many losing bidders for the South 32 assets would like to try their luck.