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Surreal happenings around Lily and Barbrook sale

Efforts to sell and reopen the gold mines raise new questions.

A strange fight for ownership of Vantage Goldfields’ two gold mines, the ill-fated Lily mine and its more attractive sister Barbrook, has been developing over the last few months. And it seems to be far from over.

The Siyakhula Sonke Corporation (SSC) announced in July that its subsidiary Flaming Silver Trading had acquired the mines and would restart mining within a few months. This news was followed a few weeks later by an announcement by another grouping, Real Win Investment (RWI), that it had acquired the mines and that RWI is the new owner.

Read: Long wait to reopen Vantage Goldfields mines nearly over

Meanwhile, behind the scenes, several teams of lawyers were fighting it out in the court, each trying to secure the mines for their clients. Page after page of court documents paint a story of intrigue, including disagreements between fellow directors in what can only be described as a bitter feud.

‘All conditions met’

The latest is that SSC has filed leave to appeal the most recent court order, which ruled that the purchase agreement between SSC and Vantage should be cancelled. SSC argues that the court erred in its judgement – and the judgment – as all conditions in the purchase agreement have been met and the agreement should be enforced.

SSC seemed to be first on the scene to negotiate a deal with the business rescue practitioners to acquire the dormant mines. Both mines closed soon after the collapse of a mining shaft at Lily Gold Mine in February 2016. The relevant companies were placed in business rescue with the hope that at least parts of the businesses could be saved.

An increase in the gold price created expectations that Barbrook, at least, would be able to survive under new ownership. SSC, inter alia Flaming Silver Trading, reached an agreement with the business rescue practitioners and creditors in November 2017 to effectively acquire the mines by purchasing Vantage Goldfields and its associated company Mimco.

Straightforward deal

The terms of the agreement were not unusual. Legal documents of the myriad court cases that followed show that the agreement included three fairly basic conditions: a payment of R10 million (and R1) for the Vantage Goldfields and Mimco shares; that the new owners procure appropriate and adequate finance to run the companies; and that the minister of mineral resources and energy approve of the transaction, which will enable the transfer of the mining rights. Deadlines applied to all the conditions.

SSC CEO Fred Arendse maintains in court documents that all the conditions were met on time, except for the approval of the relevant minister, which was eventually secured after all parties mutually agreed to extend the deadline for this particular condition.

In SA, ministers cannot be rushed and ministerial approval was received a year later, in December 2018.

Gold price surge

A lot can change in a year. A big change was that the gold price increased sharply and the rand weakened significantly, leading to the highest ever gold price in rand terms. Thus, Lily and Barbrook became more attractive to potential suitors, despite the sad history and damage to the Lily mine.

Court documents indicate that the owners of Vantage Goldfields and Mimco were suddenly not too keen to sell their shares for only R10 million.

In short, they refused to hand over the shares to SSC. SSC subsequently approached the court to enforce the agreement.

Arendse told Moneyweb that the shares were duly paid for in full by way of post-commencement finance loans and cash. “We have deposited an amount of R9 million into Vantage’s lawyers’ escrow account, which is still held in escrow by the lawyers. We have paid R11.4 million in the form of post-commencement finance loans and spent another R9.5 million on other costs in preparation to take over the mines,” says Arendse.

He did not say how much of the total of R29 million spent to date went toward lawyer fees, but the ongoing court cases indicate that the figure must be substantial.

The court documents leave one with the impression that this is surely a strange case.

Director changed sides?

A former director of Flaming Star Trading, Ferdi Dippenaar, seemed to switch his allegiance to Vantage Goldfields, claiming in one of the court cases that Flaming Star never voted on a resolution that was necessary to ratify the transaction and that SCC and Flaming Star did not have the necessary finance to reopen the mines.

SCC countered this in court documents with a copy of an email in which Dippenaar cast his vote on the resolution. He voted against it, but was outvoted by the other directors of Flaming Star.

SCC also said that it secured R190 million financing from the Industrial Development Corporation and supplied proof that it partnered with the Hong Kong-listed Taung Gold, which will supply the rest of the R300 million to reopen the mines.

In contrast, Arendse questions the ability of RWI to raise the necessary funding. “RWI has to date not submitted proof that it has funding in place. Apparently, RWI approached the Public Investment Corporation for funding.”

The mysterious ‘Real Win Investment’

Quite a bit of mystery surrounds RWI. It lists its CEO as Zandile Mdanda, who seems to be the same person as Milele Group CEO Zandile Buthelezi.

Milele describes itself as an investment holding company and its website discloses its executive team as Mdanda/Buthelezi as CEO, Gloria Njiji as executive director and Nandipha Makhaba as office manager. On the mining front, Milele boasts investments in coal mines.

An internet search shows that Mdanda qualified as a geologist in 2005 and completed an MBA in 2017, both at the University of the Witwatersrand.

These qualifications seem like a good foundation to tackle the two troublesome gold mines in contention.

However, the company threw a curve ball by suggesting that Moneyweb pose its questions about Milele’s plans with the gold mines and their source of funding to Vantage Goldfields.

This raises the very important question: why would Vantage Goldfields, as a distressed seller, be involved in the funding of the transaction or be authorised to answer any questions about the future of the mines?

No end in sight

The outcome of the whole saga is still a long way off. The latest leave to appeal to the Supreme Court of Appeals in Bloemfontein has effectively halted the implementation of either of the two purchase agreements sitting on the business rescue practitioner’s desk.

Hopefully it will be resolved soon. The two gold mines, despite their modest operations, are important to the fighting investors, workers waiting to return to work, and the surrounding communities.

Presently, only the lawyers are happy.

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“Presently, only the lawyers are happy.”

Yes the last decade has been an age of golden bonanzas for the legal profession.

End of comments.

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