It’s been three years of agony for the 1 000 staff who were sidelined when Vantage Goldfields SA (VGSA) was placed in business rescue after a key support pillar at Lily mine collapsed and claimed the lives of three workers.
The two mines owned by Vantage – Lily and Barbrook – were placed in business rescue in 2016. These are some of the oldest gold mines in the country, and a vital artery of support for the nearby town of Louisville, now in an advanced state of atrophy. The mines were the biggest employers for the town’s inhabitants, who have waited anxiously for news of a potential rescuer.
Last week, miners got the news they had been waiting for: a group called Real Win Investments was ready to fund the refurbishment of the two mines and recommence production. It’s a deal that had been simmering for several months pending the unwinding of a failed agreement between VGSA and a group called Flaming Silver, owned by Siyakhula Sonke Corporation (SSC).
Business rescue practitioners repeatedly asked SSC for proof that it had the funds to repay creditors and reopen the mines, but each time drew a blank. SSC managed to secure Section 11 approval from the Department of Mineral Resources and Energy for the transfer of mining rights, but was never able to show the business rescue practitioners, nor the Australian owners of VGSA, that it had the money needed to do the deal.
Cloud over previous contender’s motives
VGSA cancelled the agreement with SSC and started entertaining offers from other bidders. SSC then asked the Mpumalanga High Court to compel VGSA to honour the original agreement and hand over shares in the company. A former director of SSC, Ferdi Dippenaar, furnished an affidavit to the court claiming that SSC never had the money to do the deal and was trying to get the assets for next to nothing.
Last week the same court dismissed SSC’s application for leave to appeal an earlier judgment against it. There is a possibility that SSC, which has a cost order against it, may take its case to the Supreme Court of Appeal in Bloemfontein, but that will not hold up the rescue of the mines, says VGSA’s CEO Mike McChesney.
The latest court victory clears the path for Real Win Investments to acquire the mines, which need an initial investment of R350 million to settle outstanding creditors, re-establish operations at Barbrook mine and install an environmentally friendly bio-oxidation processing plant for the recovery of gold.
Barbrook could be up and running within six months, while Lily could take up to a year before it is back in operation. Plans are in place to sink a new decline shaft – accessible by low-profile trucks – to a depth of about 150 metres at Lily. It is unlikely that the collapsed shaft at Lily will ever be rehabilitated.
Real Win says one of the main attractions of the two mines is the extensive ore reserves. Both are shallow underground mines currently operating at about 300 metres and accessible by vehicles. Lily grades average about 2.5 grams a ton (g/t) and Barbrook 4.5g/t. The Barbrook ore is more complex and therefore expensive to mine.
“We can now put the Flaming Silver/SSC chapter behind us and concentrate on completing the transactional requirements for the sale of VGSA to Real Win,” says McChesney. “Real Win is a new special purpose vehicle formed by founding shareholders Pius Mokgokong, Zandile Mdanda (CEO) and Lindani Dhlamini. As the outgoing shareholder we are satisfied that they have the necessary qualifications, experience and financial capability to make a success of the VGSA and the South African assets including Lily and Barbrook in the future.”
He adds: “Since the announcement last week by Real Win that they will become the new owners of VGSA and the South Africa assets we have received overwhelming support. Creditors, ex-employees and community members are pleased that, finally, we have presented them with a credible option for the re-opening of the mines.”
Mokgokong has extensive mining and boardroom experience and is a qualified mining engineer with degrees from Cardiff and the USA. Mdanda is a qualified geologist with an MBA, and a director of the Milele Group. Real Win has completed its preliminary due diligence and is now following up with an independent due diligence that will be completed in the coming weeks.
McChesney says he has been asked to remain on as CEO of the mining group.
Real Win has provided proof of funding to the business rescue practitioners to enable the business rescue process to be concluded, says Mdanda. “Real Win has been engaging with the business rescue practitioners over recent months regarding progress on the acquisition of VGSA. Because of circumstances outside of our control we were severely constrained in taking the transaction forward.”
Those obstacles now appear to be out of the way and displaced workers are eagerly awaiting news of their call back to work.