VMR scales back in R150m Cons Murch deal

[miningmx.com] – VILLAGE Main Reef (VMR) said it had agreed to sell its 76.6% stake in its gold and antimony mine, Consolidated Murchison, for R150m ($15m) in a further effort to transform itself into a mining investment company.

Once the transaction is concluded, the company will have Tau Lekoa, a gold mine on the West Rand, as its only operating asset. It also owns the Lesogo Platinum prospect, and a 19% stake in Continential Coal, an Australian-listed coal producer.

In its March quarter operating and financial results, the company said that Cons Murch struggled owing to ageing infrastructure and underground equipment which would need R100m in capital investment to restore.

The buyer of the asset is private company, Stibium Mining, which will pay an initial R84m following shareholder approvals, a process that would take about three months to complete, the company said.

The balance of the fee would be paid over once transfer of control had been approved by the South African government. VMR was uncertain when this would take place. The funds would help shore up VMR’s balance sheet.

VMR posted a disappointing March quarter posting a R32.7m loss owing to lower gold production from Tau Lekoa, a function of the slow start-up to the year following year-end holidays, the company said. This compares to a R449m profit in the previous quarter which reflects the de-recognition of Blyvoor for an amount of R 449m which was recognised as a profit in VMR’s books.

VMR has about R130m in cash on its balance sheet as of March 31 of which R81m is restricted to cover rehabilitation guarantees related to Buffelsfontein, a gold mine.

Blyvoor realised a loss of R14m in the March quarter as the R21m carrying cost exceeded the proceeds earned from assets sold and revenue from treating surface material.

Buffels now has a monthly carrying cost of R5m whilst it goes through the process of rehabilitation. VMR said it had adequate funds to cover this cost.