Consortium bids for Pamodzi mine

Ines Schumacher | Wed, 10 Jun 2009 17:59
[miningmx.com] -- THE SEKUNJALO Middle East Mining Consortium says it placed a $105m bid for debt-laden Pamodzi Gold’s President Steyn mine on Wednesday.

The consortium placed the bid with the advisors to the provisional liquidators of Pamodzi's assets, which are three mining complexes in South Africa, Sekunjalo said in a statement.

This offer comes a week after the bidding deadline for the asset. However, provisional liquidator Enver Motala said that by Wednesday afternoon he had not been notified of the bid.

“I don’t know anything about the bid, but maybe Standard Bank received it on our behalf,” Motala told Miningmx. The liquidators are meeting on Thursday to discuss all bids received for the assets up for sale.

Pamodzi Gold's three mining assets -- President Steyn, Orkney and the East Rand mines -- are under provisional liquidation and up for sale after the company ran up debts of more than R1bn with creditors. Its shares are suspended from trade on the JSE.

Wealthy Middle East families and other investors own 70% of the consortium in which JSE-listed and black-controlled Sekunjalo Investments is a junior partner. The consortium had made a Section 311 offer to Pamodzi's directors who turned it down a few weeks ago.

The consortium has now approached the liquidators for just the one asset, the under-capitalised President Steyn mine in the Free State province for which Harmony Gold and two other companies have placed bids.

“The bid is focused on committing up to $75m for working capital, thus ensuring the long-term sustainable operation of the mining assets as well as the protection of as many jobs as possible,” the consortium said.

If successful, this will be the consortium's first direct investment into the South African mining sector. The consortium has $500m to invest, it has been reported in various South African media.

Pamodzi acquired President Steyn from international mining group Thistle Mining in September 2007 for R300m. This compares to the nearly R900m the consortium is prepared to pay.

Harmony CEO Graham Briggs has told Miningmx his company had made the bid because the mine is surrounded by Harmony's operations, which unlocks synergies with President Steyn, something that has to make it a very strong contender for the mine.

“R900m is damn high. I’d be surprised if Harmony bid more than R500m for President Steyn,” Peter Major from Cadiz Corporate Solutions told Miningmx.

Harmony has the mine wrapped up with the synergies it could offer, he said. “If anyone can make President Steyn work, it’s Harmony.” Major said.

Major said an international company with no mining experience was not in a position to run the mine effectively. “What game are they playing? The provisional liquidators haven’t seen anything on paper and the consortium has no mining experience. They’re starting to look more and more foolish,” he said.

The consortium is reliably understood to have spent more than $3m on due diligence studies of the Pamodzi assets. One of the groups within the consortium is said to be a Canadian group with mining experience.

The consortium is also in talks with some leading mining executives within South Africa that it wants to head up a mining group if it acquires assets.

"The consortium partners have to date been involved in mining transactions upward of $27bn globally," the consortium said in a statement.

Thistle was an example of how an international mining group with no local knowledge messed up the asset, Major said. “Thistle ran the asset into the ground and Pamodzi couldn’t get it to run properly either. The place is a death trap,” Major said.