[miningmx.com] — Relations between the liquidators of Pamodzi Gold and AngloGold Ashanti, which has this week suspended services to the Orkney mine because of unpaid debts, appear to be deteriorating rapidly, with a battle looming over two agreements struck between the gold producers.
The spat became public after AngloGold notified the market this week that due to unpaid debt of R22m from Aurora, the preferred bidder for Orkney which is managing the mine on behalf of the liquidators, and R16m from the liquidators, it was terminating services to the mothballed Orkney gold mine. There is a further R59m owed to AngloGold by Pamodzi Gold.
Liquidator Enver Motala said he was surprised at AngloGold’s decision, saying it had not been expected because the timeline for the payment of monies owned to AngloGold was carefully explained at a meeting a week ago.
In response, AngloGold said it had made it abundantly clear at the meeting if it was not paid what it was owed the supply of services, including water and electricity, would be terminated on 1 June.
Since then Motala has stepped up the war of words. He told Miningmx AngloGold had signed an agreement with Pamodzi Orkney, a subsidiary of Pamodzi Gold, which was mired in mounting debt, six months before it went into liquidation to toll treat ore from Orkney and retain around 50% of gold proceeds towards paying down debt to the gold major.
Motala argued this was the wrong thing to do.
The agreement could have “severe legal implications’ for AngloGold, Motala said. “The insolvency act is very clear that you cannot prefer one creditor over the other. Nobody anticipated Pamodzi Orkney would get into liquidation, which it has. We as liquidators now have to investigate that. If it is so we may well have a claim against AngloGold, a substantial claim, and they may have to repay that money.’
The sum of money is around R140m, he said. He based his comments on findings contained in an interim forensic investigation report on the financial collapse of Pamodzi Gold.
“This very serious allegation made by the management of Pamodzi against AngloGold to say it entered into an agreement with them… it’s my prima facie view, subject to us looking into it deeper, that it could constitute undue preference,’ he said.
Pamodzi Orkney and Pamodzi Gold management indicated this was one of the reasons the company failed because of the lack of cash flow from the ore they were mining at Orkney, Motala said.
Motala said he has raised the matter with AngloGold’s legal department after AngloGold terminated its services on Tuesday.
“The company did indeed have an arrangement with Pamodzi, prior to their going into provisional liquidation, to process Pamodzi’s ore at the AngloGold Ashanti plant,’ said AngloGold spokesman Alan Fine.
“We believe that was a normal commercial agreement and not a breach of any law. Naturally, Mr Motala is entitled, indeed it is his duty as a liquidator, to test any claim. We will defend any such action,’ Fine said.
Motala said he’d asked AngloGold for a copy of another agreement, one supposedly signed between Pamodzi and AngloGold for the provision of services to Orkney, but the gold company’s legal advisors recommended it should not be sent to the liquidators.
“It’s very material so we can verify the claim that AngloGold has,’ Motala said, adding AngloGold had “promised’ to hand it over but then changed its mind after seeking legal advice.
“I had to tell her [a person in AngloGold’s legal department] that under those circumstances I’ll have to subpoena you to an inquiry and subpoena the agreement,’ he said.
“Why that agreement is very important is because we are led to believe –, we haven’t seen it so I speak subject to correction – but there’s a strong indication that the agreement was never even entered into with Pamodzi. It was entered into with the previous owners of Pamodzi Orkney and I then wanted to know whether there was a cession and that Pamodzi Orkney was a party to that agreement, and that’s the reason I need that agreement,’ he said.
AngloGold’s Fine said: “We’re surprised Mr Motala hasn’t acquired the document from Pamodzi, in whose possession it is. As it is, we are obviously now taking legal advice on our rights.’
Pamodzi Gold delisted from the JSE after it was placed into provisional liquidation. It ran up debt of some R1.4bn that it was unable to repay to creditors and suppliers amongst others.
Pamodzi’s had four mines. One, President Steyn, has been successfully sold to Harmony Gold. The other two, Orkney and Grootvlei, have been earmarked for preferred bidder Aurora Empowerment Systems, which has struggled to come up with the R605m it needs to buy the mines.
It has run out of working capital and both mines are in care and maintenance subject to a refinancing package that will be triggered once Aurora successfully reverses the assets into a JSE-listed cash shell. It is expected that will happen by the end of August.