Lily Mine’s revival may be derailed if claims of negligence are proven

Miners protest outside the mineral resources department’s offices in Pretoria in 2016. (Gallo Images/Thapelo Maphakela)

Miners protest outside the mineral resources department’s offices in Pretoria in 2016. (Gallo Images/Thapelo Maphakela)

Just months after clinching a deal to revive the Lily Mine in Mpumalanga, Vantage Goldfields now faces claims that it was acting negligently while the mine was under care and maintenance, as there was illegal mining going on there and at the neighbouring Barbrook Mine.

The allegations have been made in a liquidation application by Dwaine Koch, a representative of the creditors of Barbrook. The creditors are seeking to liquidate Vantage, which owns both mines.

Their application includes claims that the illegal mining of underground pillars has been taking place at the shuttered Lily mine. Such activity could risk a pillar collapse similar to the February 2016 tragedy in which three workers died after being trapped in a metal container used as an office. This led to the mine being closed and Vantage Goldfields was placed in business rescue.

The creditors also say that gold-bearing material is being sold from Barbrook without the knowledge of the department of mineral resources.

The situation at Lily Mine is “out of control”, Koch said in a lawyer’s letter to Vantage Goldfields’s business rescue practitioner, Rob Devereux.

“Illegal miners tend to typically mine the underground pillars, which could cause further underground collapse, resulting in certain fatalities and the sterilisation of the whole ore body. The occurrence of the latter would cause the whole ore body to be worthless,” Koch wrote.

Devereux hit back in a lawyer’s letter to Koch, pointing out that section 149 of the Companies Act states that he has no right to ask about the Lily Mine operations on behalf of Barbrook’s creditors, and the business rescue practitioner is not obliged to share any information about the state of the operations.

Devereux’s lawyers said he was “fully aware of all activities taking place at the Lily Mine, all of which are being dealt with”.

In April, Devereux secured a breakthrough — a R190-million loan from the Industrial Development Corporation and an agreement with the Siyakhula Sonke Corporation to buy out all Vantage Goldfields’s shares for R10-million.

Siyakhula’s chief executive, Fred Arendse, has accused Koch of trying to undermine the deal so that liquidation can go ahead and the company shares can be sold off cheaply.

In a letter to Koch, Arendse charged that Koch’s appointment as a consultant to Galane Gold, which failed to take over the Lily Mine last year, has rendered him conflicted: “It is very difficult to believe that his actions are anything less than malicious and of ill intent. He cannot possibly claim to have the best interests of any of these parties at heart when he is so clearly conflicted.”

The breakthrough happened with the help of new Mineral Resources Minister Gwede Mantashe and Deputy President David Mabuza, who “played an instrumental role in closing the deal”, Devereux said.

But the deal could still be derailed if Koch’s claims are proven valid at the liquidation hearing. Without the legal standing to probe employees’ claims of illegal mining at Lily Mine, Koch’s application would be based on the operations at Barbrook.

Koch claims in his letter that Barbook has been mining gold-bearing ore since January 2018 and this material is being sold to pay creditors and cover security costs, all without the department’s knowledge.

Devereux said that Vantage Goldfields entered into a joint venture with Selamanda Mining to clean and process the gold ore.

“The [department] is aware of the joint venture and visited the mine on three occasions in the last three months. All activities at the mine are regulated, safe and legal,” he said.

The mine has also been left to decay over the past two years, Koch claimed. “No underground pumping is currently maintained, causing the mine to flood and [the] overwhelming of equipment, resulting in damage to electrical substations, electric fans, gully boxes [and so on].”

Devereux disputed that equipment was damaged: “There is no damage to underground workings and, save for cable theft of electrical cable and a few motors, the equipment is intact. Apart from a few scrap items being sold as such (the proceeds of which have been accounted for), no assets have been alienated.”

Koch said that cash-strapped Vantage Goldfields has entered into a four-year agreement with employees to pay off their outstanding salaries, as it cannot raise the funds while searching for new investors.

This week, Devereux described the attempt by Koch to liquidate Vantage Goldfields as “malicious”.

Koch said he would press ahead with the application and intends to prove his claims during the hearing, which has been set down for July 27.

If he is successful, he could undermine a significant political investment made by Mantashe and the president of the National Union of Mineworkers Joseph Montisetsi, who reached out to Devereux to ensure that the company survives.

“There’s been a big push from the politicians because of the impact the closure of the mine has on the community, and the potential to score a big political victory before the elections,” Devereux said.

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