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Chinese group bid for Aurora mines "imminent"

Allan Seccombe | Mon, 07 Jun 2010 17:35

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[miningmx.com] -- A Chinese consortium, said to be headed by Hong Kong-based Grand TG, is preparing a $50m bid for the two liquidated gold mines managed by Aurora Empowerment Systems, which plans to list the operations.

A source in the mining sector told Miningmx the consortium, which will back a South African entity, is preparing the bid and that it is concerned about the way Aurora has operated the Grootvlei and Orkney mines, which have both been put into care and maintenance after Aurora ran out of money.

A second source confirmed that the offer is imminent.

South African media have identified one of the Chinese parties as Hong Kong-listed Grand TG Gold Holdings, a Western company which focuses predominantly on gold exploration, mining and processing in China. Both sources confirmed the identity of the company as part of the consortium.

The offer, said to be around a total of $50m or nearly R390m, will be made for both mines, which is well short of the R605m Aurora has offered for the operations.

The consortium is reported to be concerned about the way Aurora has managed the mines and the effect this will have on the life of the operations. Underground mines in South Africa deteriorate quickly if they are not carefully maintained, making it a very expensive exercise to restart them.

Simmer & Jack, the most obvious choice to operate the Orkney mine, walked away from their bid labelled by liquidators as too low, but which Simmer's management argued was right, considering the amount of time the mine had been standing idle.

Aurora is now mired in a stand off with 100 workers who were caring for and maintaining the Grootvlei mine over the non-payment of wages.

Trade union Solidarity has fired off letters to South African president Jacob Zuma, the liquidators of the mine once owned by Pamodzi Gold and officials at Germany's UniCredit bank, the main creditor to the mine, complaining about the non-payment of wages and other alleged financial irregularities, all of which have cast doubt over Aurora's plans to list the mines.

Matters came to a head on Monday when the 100 employees stopped work at the Grootvlei mine, which needs constant pumping and maintenance of aged infrastructure.

Aurora has paid part of the February wages due to the 100-strong care-and-maintenance crew, but there are still payments for the remainder of February, March, April and May outstanding.

The workers will not return until these monies are paid, along with insurance contributions covering any injuries or fatalities sustained at the mine and the release of funds towards upgrading the pumping systems, which some have argued are on the point of collapsing.

Solidarity has received a number of calls from Aurora asking for the workers to reconsider their decision and return to work, but until the workers' demands are met they will not accede to the request, said Gideon du Plessis, deputy general secretary of Solidarity.

"We are standing firm on our demands and people will not go back until those demands are met," he told Miningmx.

Liquidator Enver Motala said Aurora had come up with a plan to ensure the mine stays dry. "Aurora is busy sorting it out and they've got other people to do the pumping. They can't allow anything to happen to the mine," he said.

Motala said no offer had yet been received from the Chinese consortium, which has conducted a due diligence study of Grootvlei and Orkney, from which AngloGold Ashanti has withdrawn services for non-payment of debts totalling nearly R100m.

"They [the Chinese consortium] were supposed to make an offer two weeks ago. So far we've not received anything," he said.

Aurora, a black-empowerment company, is headed by Nelson Mandela's grandson Zondwa and Jacob Zuma's nephew Khulubuse. It also counts as its director Michael Hulley, Jacob Zuma's lawyer.

Aurora has put in a bid of R605m for both mines, but has yet to pay for them. It has an agreement with the liquidators to manage the mines.

A Malaysian backer, AM Equity, has pulled out of the deal and Aurora has secured a funding agreement with Swiss-based Global Emerging Markets (GEM) to pump in $100m on the successful listing of the two mines on the JSE.

Aurora plans to reverse the mines into Labat, a cash shell on the JSE. The listing is expected around August, Motala has said.

GEM has agreed to a further funding package of $100m that Aurora can draw down on to recapitalise the two mines.



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