The ‘velvet gloves are off’ in the battle for Barbrook and Lily mines

Arqomanzi must be recognised as a creditor, and business rescue practitioners cannot amend rescue plans unilaterally, says high court.
Workers who have been waiting six years to get their jobs back will have to wait a few more months at least. Image: Shutterstock

The “velvet gloves are off between the fighting parties” in the battle for control of the Barbrook and Lily mines, according to Judge President Francis Legodi of the Mpumalanga High Court.

It’s now six years that the mines have been under business rescue. Earlier this year, it seemed that the rescue of Vantage Goldfields by Australia’s Macquarie Metals was a done deal, and all that remained was to dispense with a few legalities.

Now it doesn’t seem so cut and dried. Arqomanzi, which acquired from Standard Bank loan claims of R391 million and R189 million in two of the companies that control Barbrook and Lily, was this week declared to be a valid creditor.

Read: 6 years in business rescue, Barbrook and Lily gold mines cannot escape the court system

This makes it the largest creditor – something the business rescue practitioners (BRPs) refuted – and means it must be given a chance to vote on the proposed business rescue plan.

Battle for control

The mines went into business rescue after a support pillar at Lily Mine in Mpumalanga collapsed and claimed the lives of three workers.

The fate of the mines has been the subject of a hostile battle for control, pitting Macquarie Metals against Arqomanzi, whose financial backer is Hong Kong-registered Alpha Capital Group.

Legodi this week ruled that any transfer of the mining rights owned by Barbrook Mines and Makonjwaan Imperial Mining (which owns Lily) require ministerial approval in terms of Section 11 of the Mineral and Petroleum Resources Development Act (MPRDA).

The business rescue practitioners were further interdicted and restrained from misrepresenting the need to seek ministerial approval for any transfer of the mining rights.

The ruling also states that Arqomanzi lawfully acquired R189.7 million in Barbrook loans claims from Standard Bank, and the BRPs were ordered to recognise it as a creditor in the rescue proceedings.

Read:

The court ruled that Arqomanzi could now, in effect, vote R377 million in Vantage Goldfields, and R172 million in Barbrook Mines, which is sufficient to swing the vote for or against the business rescue plan in these companies.

This latest judgment throws open the battle for control of the Barbrook and Lily mines.

Mike McChesney, CEO of Vantage Goldfields, says Vantage had been granted leave to appeal an earlier judgment by Legodi in which the BRPs were instructed not to unilaterally amend the business rescue plans.

This latest judgment may also be appealed “should it be necessary,” says McChesney.

Macquarie ‘sidestepped ministerial scrutiny’

Arqomanzi argued in court that Macquarie Metals had managed to sidestep ministerial scrutiny as required under Section 11 of the MPRDA when it acquired a controlling interest in Vantage, which in turn owns the mining rights in Barbrook and Lily.

The latest court ruling supports that view, and obligates the BRPs to secure ministerial approval.

Arqomanzi CEO Neil Herrick says the Hong Kong investors have paid out R15 000 to each of 550 workers as a measure of goodwill and says these workers will be paid the entirety of their claims against the company once operations recommence.

Arqomanzi proposes injecting R390 million into mine infrastructure, such as the sinking of a decline shaft at Lily to recover the bodies of the deceased workers and to reopen the mine, refurbishing the metallurgy plant, and processing of tailings on the site.

The relaunch and optimisation of Barbrook – which has a more complex metallurgy than Lily – will be delayed until Lily is up and running.

Herrick says Arqomanzi has R550 million committed from Alpha Capital and the Industrial Development Corporation, but the Hong Kong investors are willing to stump up more cash, if needed.

Meanwhile, the fate of Barbrook and Lily mines and the workers, who have been waiting six years to get their jobs back, will likely have to wait a few months more for the courts to light the way forward.

Herrick says Arqomanzi is still awaiting a response from the BRPs over his claims that a fraudulent a letter of funding was used by Macquarie Metals shareholder Africa Pacific Capital.

The BRPs have denied these claims, and Vantage Goldfields put out a statement saying no bank would provide details about its customers in the way suggested by Arqomanzi.

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When one does a Corporate Finance Transaction, one should always confirm proof of funds, did the BRP check the proof of funds in this transaction? if so what was his findings? has this being communicated to all affected parties?

The BRP is an officer of the court and should look after the Creditors.

In this matter the BRP should also make a better effort to recover those that passed away in this tragedy!

Where is the accountability?

End of comments.

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