Tendele Coal Mining – and its holding company Petmin (Pty) Ltd – is heavily indebted to local banks and shareholders and stands to be liquidated by year end unless it can open new coal pits in KwaZulu-Natal immediately.

These are some of the claims made in court papers by Tendele business development director Nathi Kunene after local community members applied for a high court interdict to stop Tendele from digging three new pits in the Mtubatuba area, north of Richards Bay.

Nearly 200 families stand to be evicted from their homesteads and rural farms if the pits are opened – though Tendele argues that the overwhelming majority have consented to move or have signed written relocation agreements.

Kunene has further denied that local traditional leaders were intimidating community members in order to bulldoze an easy mining path for Tendele, or that the company treated local residents as mere “dots on a map” standing in the way of company profits.

In a responding affidavit stretching to nearly 200 pages, Kunene said: “If Tendele is unable to commence mining in this area very soon, it will default on its debt obligations. This will induce Tendele’s funders to realise their security and strip the assets of the mine, which will lead to the liquidation of Tendele.”

The result would be the permanent closure of the company’s Somkhele mine and the permanent loss of employment and other benefits to the Mpukunyoni community and the broader economy, Kunenesaid – adding that banking debts exceeded R367-million and preference share debts topped R1-billion.

In response to a founding affidavit by the Mfolozi Community Environmental Justice Organisation (Mcejo), he denied that members of the Mpukonyoni Traditional Council (MTC) issued a warning to some community members last year that their “eyes will turn to blood” if they stood in Tendele’s path.

Kunene stated that the new open-cast anthracite coal pits were essential if Tendele were to have any chance of surviving. Unless the new mines went ahead, Tendele would in all likelihood “cease to exist” by the end of the year.

“As a result of its inability to access the new mining areas, Tendele is in a precarious financial position. If it does not commence mining, it will be unable to generate sufficient cash flow to satisfy its debt repayment obligations.”

Read more in Daily Maverick: Judge blocks expansion of Tendele Coal’s Somkhele mine in KZN

He said Petmin owned 80% of Tendele and was also linked by the debt funding that they had incurred in order to keep Tendele’s Somkhele mine going.

“Petmin and Tendele have continued to survive by incurring debt from Standard Bank, Nedbank and the Industrial Development Corporation [IDC]. The total amount of this debt facility is R367.75-million.

“Nedbank holds R183.75-million of the debt in term loans and short-term banking facilities of R50-million and R53-million in rehabilitation guarantees. The Industrial Development Corporation holds R31-million of Tendele and Petmin’s debt. The first payment on the main debt is due in January 2024.

“Standard Bank holds R50-million of Petmin and Tendele’s debt. These are on-demand, short-term banking facilities and can be called at any time if Standard Bank is concerned that there is insufficient progress being made in accessing new mining areas.”

All of Tendele and Petmin’s assets had been put up as collateral to secure the debt, he said. This included all of the mining equipment and Tendele’s mining rights.

Finance was first provided in 2015 through a transaction between Petmin and Nedbank. The debt was due to be repaid over a number of years. However, after the Covid-19 pandemic, it became necessary to renegotiate the terms of finance with Nedbank.

Nedbank was also concerned about “the uncertainty created by the litigation preventing Tendele from gaining access to the new mining areas”.

The unnecessary claim that Tendele acts if it can do anything it wants in the community is improper and reveals that this application is motivated by an animus against Tendele

Petmin and Tendele had recently negotiated a significant re-financing deal with Nedbank. Standard Bank also agreed to continue to provide its short-term banking facilities in order to comply with the IDC’s requirements for its R31-million loan drawn by Tendele in December 2022.

All of the funders were prepared to continue to finance Tendele’s operations on condition that Tendele was able to gain access to the new mining areas. The extensive delay in accessing these areas caused by the litigation had resulted in the funders becoming concerned and considering whether, rather than continuing to finance Petmin and Tendele, to call on their security.

Over and above the banking debts, Tendele’s shareholders had also invested about R403-million to keep the mine operating and to secure the revised banking facilities.

“Due to the underperformance of Tendele mainly as a result of the continued litigation, the group has been unable to service the preference share debt and together with the accrued preference share dividends, this preference share debt has grown to R1.147-billion as at 28 February 2023. The last dividend paid to shareholders was in May 2018.”

As a result of the initial funding and subsequent funding, total shareholder funding, including unpaid interest/dividends, since 2015 now amounted to R1.550-billion.

Read more in Daily Maverick: KZN rural residents beg high court to save their homes and livelihoods and rein in rampant Tendele coal mining

However, Tendele was currently only generating between R15-million to R20-million of revenue per month from low-quality anthracite products and was only able to service part of the operating costs and the interest on its debt.

“As I have explained above, in July 2022, it ceased to be financially viable for Tendele to continue mining in the existing areas and Somkhele mine was put on care and maintenance.”

From its previous position of employing up to 1,600 workers at Somkhele, it now had only 22 permanent mine workers and some part-time employees.

Now that coal deposits have been all but exhausted from this mining pit, Tendele hopes to open new pits near Mtubatuba. (Photo: Rob Symons)

“If this court grants the interdict, it is virtually certain that Nedbank and the other funders will choose to call on their security, rather than continuing to fund an entity beset by uncertainty and litigation risk.”

Kunene mostly laid the blame on Mcejo, which had launched a series of court cases since 2018, contesting the legality of the company’s mine expansion plans.

Last year, the Gauteng High Court ruled that Tendele’s mining rights were invalid and likened the company to “an unbridled horse that showed little or no regard for the law”. However, the court did not set aside the mining rights, ordering instead that a final appeal decision should be made by the minister of mineral resources and energy.

Now Tendele insists the company would be able to secure funding and start to service its main debt if it was not barred from opening new mines.

‘Merely dots on a map’

Last month, in an affidavit filed in the Pietermaritzburg High Court, local Mcejo member Israel Nkosi alleged that Tendele “acts as if it can do anything it wants in our community … It is as if our lives do not matter – we are merely dots on a map to be told and not asked.”

Nkosi further claimed that at a meeting in Ophondweni in October, “it was reported that the traditional leadership opened the meeting with a threatening remark that translates as: ‘if anyone speaks against the mine, his eyes will turn to blood’.”

Kunene, however, said that “the unnecessary claim that Tendele acts if it can do anything it wants in the community is improper and reveals that this application is motivated by an animus against Tendele”.

Regarding the claims about intimidation and eyes turning to blood, Kunene said: “I am advised and submit that the alleged remarks made at the meeting constitute inadmissible hearsay and fall to be disregarded by the Court. In any event, no such remarks were made at the meeting at Ophondweni … It is highly irresponsible, and improper, for the applicants to attempt to adduce such extreme and false claims before the Court.”

It was also inappropriate for Mcejo to “impute malfeasance or moral turpitude by innuendo and suggestion” to the MTC.

“I am advised and submit that to the extent that the applicants wished to allege such conduct, they were obliged to do so openly and forthrightly so as to allow the MTC a fair opportunity to respond.”

Tendele has also argued that Mcejo’s legal representatives have misconstrued the legal effect of the Gauteng High Court’s May 2022 ruling.

“The effect of Bam J’s decision is that the Mining Right and Environmental Management Programme (EMPR) continue to exist in fact and in law. Rather than setting the Mining Right and EMPR aside, Bam J preserved them.” DM/OBP

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