Court approves R405m Harmony deal

Allan Seccombe | Tue, 15 Sep 2009 20:00
[miningmx.com] -- A SOUTH African court approved the R405m purchase by Harmony Gold of the Free State assets of debt-laden junior Pamodzi Gold, which faces a liquidation application in November brought by one of its largest creditors.

Pamodzi mounted a half-hearted opposition to the Harmony transaction for the Free State assets, which are in the care of provisional liquidators, during Tuesday's court hearing.

Pamodzi was unable to show proof that it could recapitalise the assets or even pay R63,000 towards the liquidators' legal costs to postpone the matter until Thursday, prompting the court to decide in Harmony's favour.

"There is now finality in the Harmony transaction. With this stamp of approval from the courts, nobody can stop those assets from going to Harmony," said one of the liquidators, Enver Motala.

The most pressing need now is to convert old-order mining rights at the Free State assets to new-order rights, something for which Harmony has set as 29 January as a target date for one of the conditions in finalising the transaction.

The court's approval clears the way for the immediate sale of rock dumps to Harmony for R20m, giving the liquidators enough cash to continue a care and maintenance programme at the shafts making up the Free State assets, keeping them dry for when Harmony takes them over.

The next phase of the transaction is the R100m purchase of the processing plant, which Harmony plans to break down to extract gold, salvageable parts and scrap.

Ex-employees of the Free State assets have told Miningmx of a desperate scramble in the days before the mine was put into provisional liquidation in March this year to seek out 'old gold' on the surface by digging up railway ballast between the shafts and plant as well as the soil around the plant and parts of the plant to put into the mills to get more gold.

The final part of the transaction is the acquistion by Harmony of the southern and northern properties making up the Free State assets. Harmony plans to first extract a pillar in the southern property and then develop the largely untapped northern parts of the mine.

A second ex-Pamodzi employee told Miningmx that it was his opinion work done in the final months of operation to "rape" high-grade parts of the pillar had severely damaged shafts, making it a very dangerous place to work. Also, the grades of the "Golden Triangle" that makes up the future of the mine in the northern properties were not quite what Pamodzi had expected.

The bulk of the almost R300m owed to the Industrial Development Corporation, which has lodged papers to liquidate and wind up the Pamodzi Gold holding company, should come from the funds realised for the Free State assets.

The workers at the Free State will be paid some R60m, which means creditors will receive approximately R0.45 in the rand.

Pamodzi's Orkney mine has also been sold. Aurora Empowerment Systems bought the mine for R215m, but the deal is yet to be sanctioned in court.

The bulk of the IDC repayment may come from the money raised in the sale of the Free State assets, which received the most from a R200m IDC loan that Pamodzi Gold has been unable to repay prompting the liquidation application by the IDC.

This means that the workers at Orkney will receive R23m and other creditors will receive between R0.43 and R0.93 in the rand, depending on how much of the Orkney money the liquidators pay to the IDC.

The final asset under control of provisional liquidators are the East Rand assets, which are still in operation. An announcement is expected soon on preferred bidders for the mines.

The purchase price may be around R300m, which means the liquidators will have raised R900m towards settling debts of R1.5m, including an onerous hedge book.