/ 9 December 2016

Guptas turn R3m into R900m in mystery-shrouded mining deal

Family ties: Vega Gupta exchanges garlands with Aakash Jahajgarhia at their wedding
Family ties: Vega Gupta exchanges garlands with Aakash Jahajgarhia at their wedding

The Guptas appear to have snapped up a coal prospecting permit for just over R3-million and turned it into a staggering R900-million deal in a matter of months.

The deal, involving the rights on an Mpumalanga farm, has provided the first hint of a partnership between the controversial family and a Dubai-based conglomerate recently named in the public protector’s State of Capture report.

Centaur Mining made the second-biggest contribution – R885-million – towards the family’s bill for Optimum Coal, it was claimed in the public protector’s report.

Optimum’s previous owners, the JSE-listed Glencore, had little choice but to sell after being squeezed by Eskom, which had bent over backwards to help the Guptas in the process, according to the public protector’s report.

Optimum coal list Public protector
The public protector’s list of entities that made transfers into a Bank of Baroda account later used to pay for Optimum Coal.

The report, which is scheduled to become the basis of a judicial inquiry pending legal action by President Jacob Zuma, listed Centaur’s transfer into a Gupta business account at the Bank of Baroda as one of 32 payments made between December last year and April this year.

Centaur has ignored repeated requests to explain whether the R885-million was for a stake in Optimum or as payment for Centaur’s Mpumalanga coal deal with the Guptas.

This is a tale of how the country’s foremost junior coal miners worked their way through a deal that, evidence strongly suggests, would later help them to bag one of the crown jewels in South Africa’s coal mining industry – Optimum Coal.

Rewind to June 2014 when a little-known entity, the Wananchi Power Corporation, was prospecting on De Roodepoort, a 3 000-hectare area outside Ermelo made up of a cluster of farms.

“Out of the blue, the Guptas appeared,” said someone previously associated with the company. They were prospecting on a small patch that was smack bang in the middle of the land for which Wananchi held a permit and the only part excluded from Wananchi’s prospecting rights.

It appears that having two prospectors on one farm was not ideal and Wananchi walked away three-and-a-half years into its five-year permit, allowing the Gupta-owned Idwala Coal to buy it out.

Although Wananchi’s owners refused to speak to the Mail & Guardian, it has been established that they sold their permit, with the necessary government approval, before it was due to expire, for just over R3-million.

Wananchi’s deal was done with a company called Tokicap (Pty) Ltd. One of its directors was Aakash Jahajgarhia, the groom of Gupta Waterkloof wedding fame.

Mining rights Centaur De Roodepoort
The mining rights for the farm that were acquired through the Guptas by Centaur De Roodepoort, of which their ‘Waterkloof wedding’ relative Aakash Jahajgarhia is a director.

Company records show that Tokicap changed its name shortly afterwards to Centaur De Roodepoort, although the Dubai-based founder, Daniel McGowan, was only listed as a director on December 30 last year.

It seems the Guptas swung into action swiftly because, just six months after acquiring the permit, they were shopping for a buyer and seemingly clinched a deal with Centaur by February last year.

At the time, Centaur announced the “successful acquisition” of two sets of prospecting rights in South Africa – those previously held by the Gupta-owned Idwala Coal and those the family had bought from Wananchi.

“The recently completed acquisition of the prospecting rights are part of Centaur’s strategic plan for its mining division, with a specific focus on high-quality export thermal coal,” McGowan said in a February 2015 press release.

“The acquisition further demonstrates Centaur’s selective expansion plans in the natural resources sector in South Africa. De Roodepoort is estimated to have in situ reserves of over 54-million tonnes and a life of mine of over 25 years,” he said.

Bizarrely, this major deal with an international company warranted no announcement from the Gupta stable. Its associate company, Tegeta, only noted the following in an interview with Mining Weekly published in September this year: “Tegeta also has prospecting rights for the De Roodepoort project and prospecting is at an advanced stage. However, development of this project has been ‘temporarily halted’.”

By then Centaur had not only announced the acquisition from Dubai, it had also released details of a R500-million cash injection to get mining going by next year.

Significantly, the department of mineral resources had already granted the section 11 transfer and a new-order mining application was in the system. The department confirmed that this was lodged on May 31 this year.

The sale of mining rights requires section 11 approval from the mining minister and a key factor is black economic empowerment (BEE) shareholding. Centaur made no mention of local partners in its public statements.

They billed their new venture Centaur De Roodepoort and the Mail & Guardian has established that the Guptas held on to the legal minimum BEE shareholding of 26%. Centaur De Roodepoort has seemingly retained the all-too-familiar Gupta signature.

The family’s stake appears to be held through Aerohaven Trading, a known Gupta company. The company’s sole director is Ronica Ragavan, who replaced Nazeem Howa as chief executive of their main portfolio of companies earlier this year.

The parties subsequently installed the young Jahajgarhia as one of the directors of Centaur Mining and Centaur De Roodepoort.

Their final hurdle was getting ministerial approval to transfer the prospecting rights. Conveniently, Mosebenzi Zwane, who had been appointed mining minister just three months earlier, was in Europe last December for a meeting at Zurich’s Dolder Grand to wrap up the Guptas’ acquisition of Optimum Coal.

On the way home, it has now emerged, the minister stopped over in Dubai to meet the Guptas’ new friends, the executives of Centaur.

Barely 10 days later, on December 18, the section 11 transfer was signed off by the department.

Another noteworthy entry in the public protector’s report was that a mystery family based in the United Arab Emirates had given Centaur a R1.5-billion revolving credit facility to boost the company’s mining operations in South Africa.

In June this year, the company said the money would be used to fund mainly mining projects in South Africa and that it had secured the “green light from the Reserve Bank for R1.5-billion for the funds to be deployed in South Africa”.

Neither Centaur nor the Guptas responded to questions about the identity of this mystery benefactor, further fuelling speculation about the exact nature of their partnership.

The Gupta family, which has been accused of wielding undue influence over various politicians as well as Zuma, recently said it planned to dispose of all its South African business stakes by the end of this year.

“As a family, we now believe that the time is right for us to exit our shareholding of the South African businesses, which we believe will benefit our existing employees,” they said in a statement, adding: “We are already in discussions with several international prospective buyers.”

By Centaur’s own admission, the De Roodepoort deal is huge. The company recently estimated there was more than 100-million tonnes of coal available on the farm, a combination of high-quality export coal and Eskom product.

The mine is ideally located to truck coal to Eskom power stations and the Transnet freight rail line goes “virtually” through the property.

A dream for any coal miner – let alone a junior entrant to the market.

Mining rights Centaur De Roodepoort
Mining and dining: Minister Mosebenzi Zwane reportedly met Centaur executives in Dubai. (Delwyn Verasamy, M&G)

Questions, questions, questions, but few answers

The Guptas, who are battling money laundering and state capture allegations, all of which they have denied, declined to answer questions about this deal or their partnership with Centaur.

“The Mail & Guardian consistently printed innuendo, speculation and lies about the Gupta family, its businesses and its friends. We have replied in good faith many times, but still suffer from total rubbish being printed. We fully respect genuine media inquiries but will no longer reply to the M&G,” they said.

Centaur Mining director David Silver asked that questions be emailed to the company’s head of mining, Wesley Grogor. Repeated attempts to contact both of them since have been unsuccessful.

The questions included whether Centaur had taken up a stake in Optimum Coal through the R885-million transfer to the Bank of Baroda or whether this was payment for a different transaction such as the purchase of the majority stake in De Roodepoort.

It was also asked about claims that Mining Minister Mosebenzi Zwane met Centaur officials during his controversial festive season trip to Dubai last year and whether this had anything to do with the section 11 application to transfer the mining rights, which was signed off on December 18, just days after he returned from Dubai.

The department of mineral resources answered initial questions about the section 11 transfer involving Idwala Coal and Centaur, but not about the minister meeting Centaur executives in Dubai.