Business rescue was written into the Companies Act to save firms from annihilation, but for two – Optimum Coal and Vantage Goldfields – it has become a long and litigious road.
This is probably not what the framers of the law had in mind. Business rescue practitioners for Optimum Coal, one of eight Gupta-owned companies placed in rescue in February last year, have had to face down close to 50 court cases over the course of little more than a year. Some of these were opportunistic attempts to liquidate the company and feast on the spoils, others were attempts to remove the practitioners. All of the cases went in favour of the rescue practitioners.
Something similar appears to be playing out at Vantage Goldfields, which was placed in business rescue three years ago after a support pillar collapsed at the Lily mine in Mpumalanga, resulting in the death of three workers.
Mike McChesney, long-time CEO of Vantage, says there are two bidders for its two gold mines – Barbrook and Lily – but standing in the way is Fred Arendse and the Siyakhula Sonke Corporation (SSC). They had asked the Mpumalanga High Court to force Vantage Goldfields to hand over shares, which would give SSC control of the company and its assets.
Acquisition and rehabilitation cost money
The problem, according to McChesney, is that neither SSC nor its subsidiary Flaming Silver Trading have anything like the money needed to acquire the shares and rehabilitate the mines. Meanwhile, close to 1 000 workers continue to sit on the sidelines waiting for the court to rule one way or the other, while the nearby town of Louisville dies a slow death. Vantage is the largest employer in the town.
Trade unions and community leaders are becoming increasingly frustrated at the prolonged rescue process, now bogged down in court, that has kept them out of work for more than three years.
The Industrial Development Corporation (IDC) has committed R190 million in loan funding to restart the mines, provided the eventual buyer can come up with equity funding of R50 million.
The first volley in the court battle between SSC and Vantage was fired last week. SSC, which received Section 11 support from the Department of Mineral Resources for the transfer of mining rights, now wants Vantage to hand over shares in the company. The case was complicated by an application by a former director of SSC/Flaming Silver, Ferdi Dippenaar, to be joined to the proceedings. According to a statement by SSC, Dippenaar was dismissed from the board “for serious misconduct, inter alia, leaking confidential information to the Vantage directors, whom he subsequently joined forces with to frustrate SSC/Flaming Silver’s efforts to reopen the mines.”
That’s one version of what went on.
Dippenaar supplied an affidavit to the court alleging that SSC never had the money to consummate the deal and was effectively trying to get the assets for next to nothing.
SSC put out a statement this week claiming partial victory in court last week. The court ruled that Dippenaar be joined as an intervening party in the main application (relating to the transfer of shares from Vantage to SSC), which has yet to be heard. Dippenaar lost one part of his application, where he asked the court to have the shares agreement between Flaming Silver and Vantage declared null and void on internal procedural grounds. But this does not affect the main case.
“Dippenaar’s contention that Flaming Silver did not have the funds to complete the transaction with VGSA [Vantage Goldfields SA] remains as part of the main application to be adjudicated and to which he is now a party,” says McChesney. “The judgment does not address the primary dispute between Flaming Silver and VGSA and that litigation continues pending a further hearing on a date to be determined.”
A previous agreement between Vantage and Flaming Silver for the sale of the mine assets was cancelled in March, when Flaming Silver failed to raise the funds required to reopen the mines and pay outstanding creditors, despite having had more than 16 months to do so.
The business rescue practitioners, Rob Devereux and Daniel Terblanche, have also been cited as respondents in the case, and will have to await the outcome before making a decision on the future of the mines.
“When business rescue started, it was creditors who made life difficult,” says Devereux. “The frustration now centres around shareholder issues, which is outside the ambit of business rescue.”
Meanwhile, two serious and financially qualified bidders are waiting in the wings to acquire Vantage, says McChesney, with more than 1 000 workers and their families awaiting news of their future.