Eskom wants its coal mine back

how eskom’s usutu, a huge coal mine, fell into the hands of a shell company.

johannesburg – for nearly six years, eskom, south africa’s electricity giant, has been negotiating with the department of mineral resources (dmr) for the return of usutu, a world class coal mine situated literally at the “mouth” of eskom’s camden power station, near ermelo, mpumalanga.

eskom, which bought usutu’s mining rights, and most of its lands, from trans-natal in the early 1990s, after camden was mothballed in 1991, recommissioned camden in 2010. today, instead of coal moving along a conveyor belt system from usutu to camden, eskom is trucking in coal to camden, from elsewhere, in containers.

meanwhile, coal from usutu is being trucked out, mainly for export. roads are being ruined, with eskom expected to foot the bills. people in and around ermelo are screaming foul over environmental issues.

for some 18 months, usutu has been operated by vunene mining, among whose key movers and shakers is mojalefa “lefa” mbethe, who is also a founding and ongoing director of ict, which is being sued by kumba iron ore in one of the most monumental legal battles in south african history.

in that case, the litigation is focused on the award by the dmr to ict of prospecting rights over 21.4% of sishen iron ore company, where kumba has mined for more than five decades. arcelormittal south africa, the prior holder of the 21.4% stake, inexplicably allowed its rights to expire and lapse on april 30 2009.

usutu was mined from the 1980s by trans-natal (later acquired by gencor, parts of which later morphed into billiton, and which, in turn, merged in 2001 with bhp, to form bhp billiton, the world’s biggest diversified resources stock). while camden was established as a highly desirable “mouth of the mine” power station, today, vunene mining does not supply camden at all: vunene’s coal prices are above the maximum prices eskom is prepared to pay.

albertus “bertus” venter, a director of vunene mining, disputes this, saying that usutu has started supplying camden with coal. eskom’s only official statement on usutu is that it continues to negotiate with the dmr for the usutu issue to be resolved. requests by your correspondent, starting on january 28, to the dmr to explain its stance on usutu, are yet to meet with any success.

it is understood that eskom is considering legal action. if this route is followed, it would deliver the rare sight of a division of government effectively suing itself: eskom is, of course, a state-owned entity. mbethe says he hopes that the situation at usutu-camden is resolved by the end of the year.

a specialist attorney briefed on the usutu situation says that while the mining and petroleum resources development act (mprda) statutorily extinguished all common law mineral rights, unless eskom took active steps to protect its rights in 2004-2005, “the dmr could have legitimately awarded these rights to vunene”, which indeed appears to have happened in 2006.

however, it is “common cause” that in a letter dated april 28 2005, the dmr accepted eskom’s application for the conversion of usutu’s “old order” to “new order” mining rights. that story then went dead.

instead, during september 2006, the usutu prospecting rights, as a package, were awarded by the dmr, without any notice to eskom, to city square trading, a shell entity that later changed its name to vunene mining.

it is apparent that only early in 2007 did eskom discover that usutu had, under eskom’s nose, been “given away”. this had been when eskom made further enquiries at the dmr, given eskom’s decision to recommission camden, in the face of the national electricity crisis. the dmr later upgraded vunene’s prospecting rights to mining rights, per mining rights mp 30/5/1/1/2/323. mbethe suggests that it was a condition of the mining rights award that usutu supply camden.

given the known facts, peter leon, a johannesburg-based specialist mining and resources lawyer at webber wentzel, says that the dmr “clearly should have advised eskom what it was doing in view of the strategic importance of the usutu mine to eskom's operations.

“moreover, if eskom was the owner of the land at usutu, the dmr and vunene would have been under a legal duty to consult eskom as an interested and affected party. failure to consult eskom would potentially vitiate any right granted to vunene. this is in line with the recent genorah decision and follows in any event from general administrative law principles”.

while eskom has been unable to mine even a single tonne of coal, or to have contracted such mining on its behalf, at usutu, the dmr has not hesitated to burden eskom with 100% of the eventual rehabilitation costs at usutu, running into hundreds of millions of rands. this follows eskom’s ownership of the land.

usutu is not being mined near to its potential size or efficiency. venter suggests that vunene mining may be able to eventually build production up to 700 000 tonnes of coal a month, which could meet camden’s requirements. however, up to 30% of this target production would be earmarked by vunene for other customers. mbethe confirms that vunene is currently exporting the coal it mines from usutu. “imminent” is a word used by venter in response to questions over when issues in and around usutu will be resolved.


barry sergeant