Efforts to save the embattled Lily Mine near Barberton in Mpumalanga have been dealt a potentially fatal blow with the withdrawal of AfroCan Resources. The Canadian gold firm meant to invest enough money to restart operations and recover the bodies of three workers who were trapped underground nearly six months ago.
Lily Mine’s parent company, Vantage Goldfields, is planning to sue AfroCan after it failed to make a $2.5-million payment, eagerly awaited by mine bosses and employees who have not been paid since April this year, the Mail & Guardian has learned.
The $11-million total investment would have bought AfroCan 26% of Vantage Goldfields’ shares.
The Vantage Goldfields board met on Tuesday morning to consider which action to take against AfroCan and its chief executive Brian Barret, who has been accused of reneging on the placement and subscription agreement that compelled him to make a $1-million instalment payment by June 1 and another $1.5-million payment on June 30.
Yvonne Mnisi, Pretty Mabuza and Solomon Nyarenda, three surface workers, were trapped in a metal container when an underground pillar collapsed in February. Three separate rescue missions failed after subsequent collapses and the workers’ bodies have still not been recovered. Two months ago Lily Mine said it required R200-million to build a new decline shaft that would provide access to the container and announced AfroCan as the primary investor.
But relations between the two companies soured when Barret delayed the first payment, claiming Vantage Goldfields and its chief executive, Mike McChesney, had misrepresented the nature of the investment.
The Mail & Guardian is in possession of official correspondence from McChesney’s lawyers to Barret, in which the AfroCan chief executive is warned to make the payment or face legal action.
“The agreement does not give AfroCan the option as to whether it will subscribe and make the payment … Vantage intends to require AfroCan to make these payments and comply with its obligations … and is prepared to pursue other available remedies against AfroCan and you, including commencing proceedings if necessary,” the letter states.
Barret has denied that his company is in breach of the placement and subscription agreement and accuses Vantage Goldfields of lying about an “imminent” cash injection from the Industrial Development Corporation.
“The financial model provided included the IDC loan, which showed that this would be secured in June. The IDC loan was not secured, even though this assumption was continually included in the various valuation models. It is therefore clear that due to the material variances … no binding subscription agreement ever came into being,” Barret wrote.
The IDC was due to decide on Vantage Goldfields’ application for funding on June 27, but could not make any commitment without a primary investor.
Lily Mine applied for business rescue after the collapse and practitioner Rob Deveraux told the Mail & Guardian they would look for other investors following AfroCan’s withdrawal.
“We have been engaging with other investors and putting them on hold. We haven’t been sitting on our laurels,” he said.