Siyakhula Sonke Empowerment Corporation (SSC) has entered into a binding agreement to acquire 74% of Vantage Goldfields SA – which owns the mines near Louieville outside Barberton, in Mpumalanga.
It is, however, still trying to raise the funds needed to take the mines out of business rescue. Vantage sold the shares to SSC for a nominal fee of R1.
To complicate matters, on 29 January, a court will hear the creditors’ application to have the mines liquidated. The creditors are adamant they will only withdraw their application if the mines are reopened before the court date.
Lily Mine was placed under business rescue in March 2016. Barbrook followed suit in December that year.
Since then, business rescue practitioner Rob Devereux has struggled to get investors to reopen the mines. Two potential Canadian investors – AfroCan Resources Gold Limited and Galane Gold – pulled out last year following disagreements with Vantage Goldfields.
Lily Mine was shut down when part of it collapsed on February 5 2016. Three workers and the container they were in on the surface fell into a huge sinkhole and were buried under tons of rock and sand.
Their bodies have still not been recovered. About 1 000 workers were laid off.
Barbrook, a sister company that depended on Lily’s operations, went into financial distress and was shut down as well.
SSC Group CEO Fred Arendse said they signed the deal with Vantage Goldfields in November last year.
He said they were in advanced negotiations with a number of parties, including the Industrial Development Corporation, to secure funding and conclude the transaction.
“Current indications are that up to R310m could be required to take the mines out of business rescue,” he said.
This figure is made up of R139m due to creditors and approximately R171m to put the mines back into production. This would include working capital, developing a new decline to access the remaining ore reserves at Lily Mine and the costs associated with reopening Barbrook.
Arendse said SSC believed the two mines could successfully be taken out of business rescue and that it could take up to 12 months to get them back into operation – at production levels before the accident.
Barbrook creditors’ committee chairperson, Dwaine Koch, said he did not have trust in the deal because nothing concrete had been forthcoming.
“This is a delaying tactic. We want the mines to be opened prior January 29 to justify why our liquidation application should be withdrawn.”
He was concerned that Vantage Goldfields CEO Mike McChesney had written to creditors indicating that the agreement required SSC to reopen the mines by January 31, despite the liquidation hearing scheduled two days before that.
Creditors rejected Devereux’s optimistic business rescue plan, which he released last year. They said it contained “flaws and uncertainties”. They reported Devereux to the Companies and Intellectual Property Commission for alleged fraud and reckless trading.
Commission spokesperson Tshiamo Zebediela confirmed this week that the complaint was being investigated. Devereux said he was unaware of it.
Questions over deal
Koch said he received a notice about the SSC deal from Devereux on November 3. There was, however, no explanation about how the deal was constructed and what it entailed.
Devereux said the IDC’s credit committee would decide on the SSC’s application on January 23.
Arendse said Koch’s liquidation application was negatively affecting the SSC’s endeavours to acquire funding.
“We have received a formal letter from the national office of the Association of Mineworkers and Construction Union (Amcu), and Vantage Goldfields’ management, and correspondence from the community’s traditional leadership indicating that they do not support any liquidation application and wish to work constructively with all of us to reopen the mines.
“As experience has taught many of us, nobody benefits from liquidation applications,” Arendse said.
To show its seriousness about the deal, Arendse said that SSC donated food parcels worth R160 000 to former workers and paid R2m towards their salaries in December.