South Africa’s mines minister told Glencore on Tuesday to shut a coal mine because of the way it planned to carry out job cuts while the company said its operations were unsustainable because state power firm Eskom did not pay fair prices.
The 10 million tonne-a-year Optimum Coal Mine should be shut because Glencore did not follow legal procedure in the process of cutting jobs, Mines Minister Ngoako Ramatlhodi was quoted as saying in a statement from the ministry.
Glencore said in July it would cut 380 jobs and close some of its operations at Optimum.
“The retrenchments … were inhumanely conducted and disregarded all the legal prescripts which govern the process of retrenchments,” the statement said.
[DATA GLN:Glencore Xstrata Plc] said it had initiated a “business rescue” at Optimum because it was supplying Eskom with coal at prices lower than the cost of production.
Business rescue, similar to chapter 11 in the United States, allows a financially distressed company to temporarily delay creditors’ claims against it or its assets.
“The continued financial hardship of Optimum means that Optimum cannot continue operating the mine and supplying Eskom on this unsustainable basis,” the statement said.
South Africa’s troubled mining industry is battling with sinking commodity prices, rising costs and union disputes.
Eskom spokesman Khulu Phasiwe said on Tuesday it was in the process of renegotiating its supply contracts with coal companies because it was paying too much given softer commodity prices. It did not comment on Glencore’s operations.
Optimum is contracted to supply Eskom with 5.5 million tons of coal per year.