WESCOAL’S parent company, Salungano, could be trading under insolvent circumstances, NG Global Energy Solutions – which has given the coal mining company up to 10 days to pay back R11.2 million for failure to honoUr a coal supply contract – claims in a court application.
The application is seeking the liquidation of Salungano which, according to court papers, was supposed to deliver coal to NG Global Energy Solutions, a South African commodity trading company.
Financial woes have been swirling around Salungano and its subsidiary, Wescoal, over the past few months. Rocked by the resignations of three members of its audit and risk committee, Salungano also has liabilities surpassing R1 billion, most of which should be settled within the next six months.
Now, the company, which recently won a court application for the operationalisation of the liquidation of ArnotOpCo, has been given 10 days to indicate whether it intends to oppose the application for its liquidation brought by NG Global Energy Solutions..
NG Global Energy Solutions argues in its court application that Salungano failed “to deliver the coal” and that its representatives have been “verbally” demanding “delivery of the coal on numerous occasions” without success.
“The refusal by the respondent to deliver coal to the applicant despite the due and proper performance by the applicant of its obligations in terms of the agreement constitutes a clear intention not to be bound by the written, alternatively verbal, sale agreement,” the commodity trader notes in its application.
Payments made to Salungano by the company in the period July to December 2022 amount to R1.2m, in addition to other payments amounting to R10m. This prompted NG Global Energy Solutions to cancel the agreement on September 5, 2023.
The company subsequently wrote to Salungano through legal representatives “notifying” Salungano of the cancellation of the contract and claiming restitution.
Furthermore, and because Salungano has not disputed its indebtedness – notes NG Global Energy in its application for the liquidation of Salungano – this constitutes “proof of the respondent’s inability” to pay off its debts.
“If the respondent is not experiencing financial difficulties, it ought to be able to pay its way from current revenue or readily available resources,” wrote NG Global Energy in its arguments.
Salungano would have to oppose the application for liquidation lodged against it by NG Global Energy Solutions earlier this month within 10 days.
Salungano’s major subsidiary, Wescoal, operates two collieries, Khanyisa and Elandspruit, and is a 45% shareholder in Arnot, currently under business rescue, which operates the Arnot mine.
NG Energy Solutions has cited Salungano’s R16.2m loss in 2022 and its delayed financials for the period to end March 2023 as evidence that the company is “trading under insolvent” circumstances.
“There is a real risk that the respondent’s creditors will remain unpaid; the respondent has no cash to pay creditors. The applicant requests that the respondent be wound up in terms of S344(f) of the Companies Act.”
Salungano’s woes appear to extend beyond the financial and legal hiccups it is facing. The company is also running out of coal supplies, with Wescoal grounded.
In August, the JSE suspended trade in Salungano’s shares after the coal miner failed to publish its financials.
In July this year, Salungano advised shareholders that "due to an unforeseen delay in the finalisation of the audit process" the release of its financials had been delayed.
The delay related to “the finalisation of its funding refinancing agreements”, a development the company had referred to in its interim results for the six months ended September 30, 2022, and released in December last year.
“Salungano unfortunately has to delay the publication of the company’s financial results for the year ended March 31, 2023,” the company said then.
BUSINESS REPORT