Orkney gold mine tender restarted

Allan Seccombe | Tue, 30 Jun 2009 07:12
[miningmx.com] -- THE bidding process for Pamodzi Gold's Orkney mine has been re-opened after Simmer & Jack, one of the leading bidders, opted out of the process earlier in June.

Simmers CEO Gordon Miller said on 18 June the company regarded its offer for Orkney to have lapsed when it had not been told whether it was a preferred bidder by what it understood to be the deadline.

Simmers was one of the leading contenders for Orkney, which lies between its Buffelsfontein mine and the Tau Lekoa mine it is buying from AngloGold Ashanti, opening a host of synergies that would bring down costs which put Pamodzi on the back foot.

Orkney's provisional liquidators, Enver Motala, Allen Pellow and Deon Botha, met with South Africa's Industrial Development Corporation (IDC), the mine's major creditor, and they decided to restart the bidding process.

Potential bidders have three weeks in which to submit their offers and those offers will be considered during the following three weeks, with the provisional liquidators talking to the IDC and trade unions representing workers at Orkney, a former Harmony Gold mine.

The IDC and labour will give their final approval for the selection of a preferred bidder.

It's not immediately clear whether Simmers will participate again. Miller has said the cost of restarting Orkney the longer it is left idling is rising all the time as the mine deteriorates. This factor could result in Simmers make a lower offer than the first time around.

Deep-level mines need constant maintenance and deteriorate quickly without it, with stopes, or working areas, closing up, for example.

It could be argued that Simmers sees the window of opportunity for the mine as closed. Its initial offer, thought to be R110m along with a number of schemes of arrangement, was predicated on a quick restart of the mine. The mine was placed into provisional liquidation in March.

The provisional liquidators reckon the value of Orkney at around R300m.

Simmers has experience of retrieving a mine from liquidation. It acquired the earthquake-damaged Buffelsfontein that was put into liquidation by DRDGOLD.

Given the time line of at least six weeks to decide a preferred bidder for Orkney and then possibly up to six months more to effect the sale of the mine, it will be a massive task to restart Orkney. It's questionable if Simmers is prepared to undertake the task.

Skilled staff will have left, the mine's infrastructure potentially vandalised, and working areas rendered dangerous by a lack of maintenance.

Meanwhile, Harmony has been chosen as the preferred bidder for Pamodzi's Free State assets, which comprise the President Steyn gold mine.

The provisional liquidators met with the IDC, again a major creditor of the mine, to discuss Harmony's offer.

"The IDC will now consider the specific terms and conditions of the preferred bid from and revert to the joint provisional liquidators in reference to the formal approval thereof." the provisional liquidators said.

The unions will also be consulted about the offer and their approval sought. The National Union of Mineworkers and trade union Solidarity have publicly welcomed Harmony's selection as the preferred bidder on Friday.

"Once the approvals have been obtained, the joint provisional liquidators will in co-operation with the IDC, the Trade Unions concerned and Harmony Gold, urgently approach the DMR (Departments of Mineral Resources) for the formal transfer of the mining licenses to Harmony Gold, which is one of the conditions precedent to some of the sale agreements."

Harmony CEO Graham Briggs reckons the process could take about six months. He declined to say what the company offered for the mine.

Harmony will breakdown the President Steyn treatment plant, which uses older technology, to extract gold from the old workings as well as other value it can from the parts, Briggs said. Gold will be treated at Harmony's nearby plants, which have spare capacity.

The shaft pillar around Two Shaft will also be immediately exploited. In the longer term Harmony will develop the northern area of the President Steyn property, he said.

There is a tailings dump that has gold and uranium, which will form part of Harmony's strategy to extract wealth from old dumps.