Junior gold miner takes on the IDC
Joel Mafenya says he made his money long before black economic empowerment (BEE) was in fashion, so he can afford to be more patient than the average entrepreneur.
He owns a gold mine that can give him a reasonably quick R70-million, provided he can sell his stockpile of gold-bearing ore. Instead, the Soweto-born businessman is taking on the mighty Industrial Development Corporation (IDC) in his quest to get the mine operational.
Despite many obstacles, Mafenya is set on getting the mine he bought out of liquidation five years ago back into operation — a move that now proves tricky because the IDC has taken him to court to attach the mine as security for the loan he received for the purchase.
Mafenya’s company, Floxifor Gold, bought Blue Dot Mine for just under R10-million in 2011.
Blue Dot is a 3 000 hectare operation in Schweizer-Reneke in the North West. The R10‑million was part of a R23-million deal with the IDC, which covered the purchase price and a pre-feasibility study.
He is baffled by why the IDC backed him during the difficult phase and seemingly lost its appetite for his project just as he nears the final stage — marked by the production of a technical report, called a Competent Person’s Report (CPR) — that will serve as proof of the economic viability of the mine.
The IDC has claimed that Mafenya’s company was broke and was not good for the loan. But Mafenya is claiming it was the government lender that breached the terms of the original loan, not him.
The IDC’s payment system, which required him to spend first and then to submit claims, had affected his cash flow at times. There would sometimes be significant delays in paying him because the IDC required “five signatures” before approving his claims, Mafenya says.
He also believes it wants to sell the mine to a preferred investor.
The state lender, Mafenya claims, had withheld permission, without providing reasons, for him to sign up an international partner that was ready to invest in the project. He claims the IDC was not interested in his potential partner, a listed foreign company, and instead called him to meet executives from an Indian company in May. Court papers state that nothing came of those talks.
His company is not in a “financially precarious position”, nor is its demise “inevitable”, he says, and he challenges the IDC to provide the court with proof of this claim.
The mine has a healthy gold ore stockpile, confirmed by two separate geological reports. This could be sold to generate cash if needed, he says.
Even though he is not in the market for a buyer, he regularly received unsolicited bids for the stockpile, including one in November from Oakbay, the Gupta-owned company, which made him a nonbinding offer to haul it for processing at one of its mines. Mafenya says he didn’t take them up on the offer.
Oakbay owns a uranium mine in the vicinity — ironically, a purchase funded by the IDC several years ago.
In a detailed affidavit, Mafenya said, despite officials allegedly agreeing to consider extra funding in September, the state lender instead rushed to court — ex parte (one party only) — to obtain a certificate of indebtedness.
The IDC claimed it was concerned that Mafenya had asked for additional funding to the tune of R4.3-million a month to cover running expenses for a year and had failed to produce the crucial CPR.
As a result, the IDC rejected his bid for extra funding and determined that this mining project lacked economic merit.
But Mafenya, who spent R10-million of his own money, is fighting back. He wants reasons and proof, in terms of the Promotion of Administrative Justice Act, that officials had discussed his application for further funding and considered the merits thereof.
No one can dispute Mafenya’s passion for the project, but mining is not for the faint-hearted. This was always going to be an ambitious one for a lone new entrant to the industry. But, he says, it was never a get-quick-rich scheme for him. “I didn’t take a government loan to buy a Ferrari. I sold my Porsche to pay Eskom and I sold my house to boost my cash flow,” he told the Mail & Guardian.
Mafenya claims that IDC officials provided little support while he slogged away for five years to undo damage caused by the mine’s closure under the previous owners.
Upon taking transfer of the mine, it soon became apparent that the work envisaged to ready the mine was more intricate than Mafenya had anticipated, and that the cost would influence the initial budget, he said in his affidavit. This included honouring legal compliance notices, building a dam to drain the mine, which had flooded in the run-up to the purchase, and repairing underground and electrical infrastructure.
He says it was resolved last year that extra funds would be needed so drilling could be done to conclude the CPR.
Mafenya claims that, although he had positive feedback from IDC officials after a meeting in September over this application, he later discovered that this had merely camouflaged their secret plan to go to court to attach the mine.
The IDC says it was not able to make a determination on the viability of the mine in the absence of the CPR. It “hopes” that Floxifor would be able to secure this report to enable it to consider another application for funding, and says it was well within its rights to go to court.
The case is due to be heard in May.