New twist in Pamodzi saga

Allan Seccombe | Fri, 19 Jun 2009 15:07
[miningmx.com] -- THE decision on a preferred bidder for Pamodzi Gold’s President Steyn mine has been pushed back for at least another week. The provisional liquidators are assessing Harmony Gold’s offer and investigating another bid.

Pamodzi’s assets were put into the care of provisional liquidators after the company ran up debts of more than R1bn. The assets are: the President Steyn mine, the Orkney mine and the East Rand mines.

The President Steyn mine, currently on care and maintenance, is in the Free State and is near Harmony’s operating mine, which opens synergies that few others can hope to replicate. These synergies could allow it to break down the President Steyn processing plant and extract gold from the parts, run the mine more cost-effectively as well as access gold- and uranium-bearing tailings dumps.

The provisional liquidators have to take Harmony’s offer to creditors of the mine, the Industrial Development Corporation (IDC) and organised labour. This process should be completed by June 26.

However, there is a fresh twist. A group that had suggested a couple of weeks ago it would make a bid for all three of Pamodzi’s assets has come up with a funding letter. The liquidators have to verify this and then run it through an assessment process, consulting creditors and labour.

The unspecified offer, thought to be close to $100m, could be for all three assets.

The group is not thought to be the Sekunjalo Middle East Mining Consortium, which had initially suggested a bid for the holding company, Pamodzi Gold, but later diluted this to an offer just for President Steyn.

The consortium’s bid of $105m included a $75m portion towards working capital, meaning the creditors of the mine would have to share $30m or R240m, something the liquidators were deeply unhappy about.

The liquidators have given themselves as much lattitude as possible in the tender process, allowing fresh bidders to come in late or giving bidders extra time in securing financing documents after the deadline. They argue this gives them the flexibility to secure the best price -- or deal -- for the assets to the benefit of creditors and labour.

The process of disposing of the assets is proving to be fraught, with Simmer & Jack's bid lapsing on 15 June for the Orkney mine, which would have made a great fit in the hands of the JSE-listed junior. Simmers said the liquidators were expected to make a decision on the preferred bidder by 12 June.

It might be a question of who blinks first when it comes to securing the future of Orkney.

Simmers CEO Gordon Miller told investors on Thursday the group had not by 18 June been notified whether it was a preferred bidder and therefore assumed it was not.

Simmers argues that every day the mine is not properly maintained the greater the cost will be to restore it to safe operation, meaning the price it might offer in the future will have to be proportionally lower to account for this. One of the chief provisional liquidators, Enver Motala, is said to be highly vexed by Simmers’ approach, which he sees as trying to force the liquidators to accept a lower price for the mine.

Harmony has adopted a more patient approach at President Steyn and has told the liquidators it is prepared to wait another week to find out if it is a preferred bidder.

The offer from Simmers is understood to have been a bit lower than would have been acceptable to Orkney’s creditors and the conditions of its offer weren’t likely to be accepted by labour.

Pamodzi is led by Ndaba Ntsele, the former non-executive chairman and founder, who has assumed executive responsibilities after the resignation of Peter Steenkamp as chief executive. Ntsele and the board are still trying to recapitalise the company, the suspended group said in a release to the JSE.

Efforts to recapitalise the company have failed, with directors repeatedly assuring investors the arrival of money was imminent. Despite one tranche of R200m coming from the IDC, a matching amount never materialised, sounding the death knell for the company.

Pamodzi’s shares are suspended.

Independent non-executive director Mzila Mthenjane has resigned from the board with effect from June 12.