Pamodzi Gold rings in the changes

Allan Seccombe | Wed, 06 May 2009 21:39

[miningmx.com] -- IN the least surprising development in the South African gold mining sector Peter Steenkamp resigned with immediate effect as CEO of debt-ridden Pamodzi Gold, which is in provisional liquidation.

The former CEO Ken Steenkamp, who stepped down to be a non-executive director when Peter was appointed from Harmony in June 2007, and chairman Ndaba Ntsele will assume executive responsibility for Pamodzi until 26 May this year.

Peter Steenkamp was appointed to drive what turned out to be a dangerously ambitious strategy of growing annual production to a million ounces within just a couple of years. Pamodzi never came close to that target.

It inherited an onerous hedge book when it acquired the East Rand operations from Canada’s Bema in 2006 ahead of listing on the JSE, tying one hand firmly behind its back.

Pamodzi has also attracted criticism for its lofty growth target, which entailed it acquiring the Orkney mines from Harmony Gold and the President Steyn mines from Thistle in February 2008. Its second hand was tied behind its back.

Steenkamp has been speaking since early 2008 of raising R400m to recapitalise the mines that hadn’t received all the finances they needed under previous owners.

While R200m was raised from South Africa’s Industrial Development Corporation, the second tranche has never materialised for reasons that have never been made entirely clear to investors.

Pamodzi has time and time again assured investors the arrival of the remaining capital was imminent. Those assertions wore thin and patience thinner when the money failed to arrive as all the while there was a rising clamour from suppliers for payments. Some of these suppliers have lost their businesses.

The company racked up debt of more than R1bn. Creditors approached the courts to liquidate assets. The assets have subsequently been placed into provisional liquidation, which opens the way for them to be sold.

And buyers are circling.

The first to publicly put up its hand was Simmer & Jack, which has conducted a due diligence on the Orkney mine which lies between its Buffelsfontein and Tau Lekoa mine. An offer from Simmers is due soon.

A second offer might come from Sekunjalo Investments, which has put together a consortium of wealthy Middle East investors who have put $500m towards a mining investment fund.

The problem is that the consortium wants exclusivity, something the liquidators are not prepared to consider.

Pamodzi told the market on Wednesday its directors were still trying to recapitalise the company, which was set up to take advantage of a legislated drive to boost black ownership of South African mining assets.

A hunt is on for a new CEO, but given the high level of uncertainty within Pamodzi and its future this is likely to be a big ask.