Vantage Goldfields’ Lily and Barbrook mines could be sold off for much less than they are worth if the Industrial Development Corporation (IDC) does not approve a R250-million loan, because a provisional liquidation bid would be highly likely.
Lily Mine, near Barberton, has not been operational since a surface collapse two years ago, during which three workers died after they were trapped 800m underground. The company was then placed under business rescue. Three attempts to secure R300-million to pay creditors and restart the mines have failed.
If the IDC agrees to the loan, Lily and Barbrook mines can resume work and 900 jobs will be saved. But creditors applying for liquidation argue that unless investors arrive in court with “a funding agreement or a big bag of money”, provisional liquidation would almost certainly be granted.
The IDC will meet Siyakhula Sonke Empowerment Corporation (SSC), which wants to buy a 74% stake in Vantage Goldfields, about the loan on March 19.
At the end of last year Vantage Goldfields’ creditors applied for liquidation of the mines and, last month, SSC applied to have the liquidation application postponed so that funds can be secured to save the mine.
The postponement application will be heard on May 10 by the high court in Pretoria. SSC is expected to argue that it is on the verge of saving the mine and the mineworkers’ jobs.
But lawyers for the creditors, who are still owed millions of rands, are not convinced that the funds can be raised and want to sell Lily and Barbrook mines to recover their money.
“If you go strictly according to the law, [it] doesn’t matter what the business rescue practitioner says [about the possibility of securing finance], the court will have to liquidate. We will ultimately move not for a final liquidation — we hope the court can grant a provisional liquidation,” lawyer Johann Grove told the Mail & Guardian.
“In terms of section 11 [of the Mineral and Petroleum Resources Development Act], we can sell the mine, with the licence, when it is provisionally liquidated. The advantage is that the price will be reduced substantially. The ultimate selling price will be substantially less than it is currently valued,” Grove said.
SSC is a black empowerment company and launched the latest bid to take over Vantage Goldfields’ assets in Mpumalanga, by formally applying for funding from the IDC. SSC has applied for R250-million from the IDC and plans to fork out R50-million of its own capital.
“They [SSC] attach documents from the IDC but it says nothing. All it says is we will consider your application,” Grove said in response to SSC application to postpone the liquidation hearings.
But SSC’s chief executive, Fred Arendse, told the M&G that SSC was “completing our evaluation of the assets and associated infrastructure, and we expect the due diligence process to be completed by end of March 2018”.
The liquidation application is brought by the creditors, which include Rock Mining Machines and Mokonjwaan Imperial Mining Company.
Grove said: “The problem is that it has taken too long. Mr Arendse has not been able to raise the finance. He’s helped the people over Christmas with some of his own money, which is nice. But unless they come with a guarantee or a big truckload of cash on May 10, nothing is going to happen.”
Arendse brought the application to the high court through his company, Flaming Silver Trading, of which SSC is the majority shareholder. In the court papers, Arendse explains how he made a payment of R2-million to Vantage Goldfields’ workers to “ease the pressure of the holiday season” and purchased “holiday hampers worth R160 000”.
In his affidavit, Arendse said Flaming Silver secured the majority support from “all stakeholders” to take over the mine “by engaging with the surrounding communities through their chief as well as the employees through their recognised trade union, Amcu [the Associated Mineworkers and Construction Union].”
Business rescue practitioner Rob Devereux said most of the mines’ suppliers had not been paid and while the mine remained idle, under care and maintenance, Vantage Goldfields’ business rescuers had tried to keep paying for security.
“We haven’t been able to pay anything because we’ve been cleaning up gold to get cash. And I’ve used that up to pay security to keep assets intact but even that is stretching,” Devereux said.
Amcu has also strongly opposed the application, arguing in favour of postponement.
“We have been working closely with [SSC] and its directors and have requested their assistance in rescuing the business that will ensure the livelihoods of our people. We fully support and provide our unconditional support for the SSC group’s acquisition of Vantage Goldfields,” said the union’s general secretary, Jeff Mphahlele.
The bodies of the three workers trapped underground, Yvonne Mnisi, Solomon Nyarenda and Pretty Mabuza, have not been recovered because it is too dangerous to do so.
After nearly a year of broken promises the mineral resources department delivered on a compensation payout of R250 000 to their families, while the company sought to find money to pay outstanding salaries and payments to suppliers.