Rio Tinto subsidiary Riversdale Holdings may seek damages from Forbes & Manhattan Coal after a deal in which Forbes Coal was to buy Zululand Anthracite Colliery (ZAC) for R440 million turned sour.
Forbes Coal said on Friday that it had pulled out of the deal to buy Riversdale because the colliery’s performance had deteriorated materially. Riversdale owns 74 percent of ZAC.
Forbes Coal said subsequent to the parties entering into the deal in September last year, and pending fulfilment of the conditions precedent contained in the agreement, the performance of ZAC had deteriorated to a material extent. “This, in the opinion of Forbes Coal, constituted a material breach of certain of the provisions of the agreement by Riversdale, entitling Forbes Coal to cancel the agreement,” the Canadian company said.
Forbes Coal chief executive Stephan Theron said: “We are very disappointed that the situation has necessitated this decision, but believe that cancelling the agreement is in the best interest of all our shareholders.”
Riversdale said in a statement to its employees on Friday that it believed the claims over performance did not give rise to a breach of the sale agreement. It added that the action repudiated the sale agreement without valid reasons. Riversdale therefore reserved its right to seek damages suffered as a result.
Eric Finlayson, the chief executive of Riversdale Holdings parent Riversdale Mining, said he was “deeply disappointed” with Forbes Coal’s decision.
Forbes Coal denied that it was liable for any damages.
It was previously reported that the mine was found guilty of non-compliance with health, safety and environmental regulations, and was temporarily shut in June last year.
Black economic empowerment (BEE) partner Maweni Mining Consortium (MMC), which had previously opposed the deal, said it was glad the deal had been cancelled.
MMC chief executive Fred Arendse said at the weekend: “I do not believe that Forbes has cancelled the acquisition agreement due to ZAC’s performance, but due to the fact that the BEE structure has raised some serious concerns about the transaction and has publicly objected to any plans of Forbes Coal to leverage ZAC or related shareholding for debt to acquire Riversdale.”