Aurora’s Grootvlei mine in flood threat

[] — WORKERS keeping the Grootvlei mine dry for when Aurora Empowerment Systems raises the money to buy it out of liquidation are threatening to let it flood unless they receive three months worth of back pay.

In a letter sent on Thursday to two officials at UniCredit Group, a German bank heavily exposed to the Grootvlei mine, trade union Solidarity’s deputy general secretary, Gideon du Plessis, warned if some 100 workers are not paid in full for the work they’ve done over the past three months they’ll walk off the mine next week.

The letter alleges the 100 workers, who were retained to maintain and care for the mine since operations were suspended in March this year, have not been paid since then.

UniCredit owns HypoVereinsank (HvB), which is exposed to debt of up to R900m stemming from hedged gold positions at Grootvlei. UniCredit has limited the repayment to R290m of the R390m Aurora bid for the mine. Aurora has not yet paid for the mine.

“We got to a stage where the employees told us yesterday that if they don’t get a favourable response from the liquidators and Aurora directors by tomorrow [Friday], they will be forced to down tools and walk away,’ du Plessis said in the one-page letter.

Du Plessis told Miningmx the salary bill alone stood at around R30m, with payments due to power utility Eskom of around R25m, Rand Water of R4m and pension funds at R4.2m.

“We indicated if we don’t get this full salary by Monday at the latest then these workers will walk away. It’s a very serious thing for the Grootvlei mine. Management there will have to quickly learn how to work the pumps and things,’ he said.

Dawid Stander, who is heading up mining for Aurora, told Miningmx he was certain all monies owned to care-and-maintenance crews would be paid on Friday, but he couldn’t say what the figure was.

“Aurora has funds and they’ll be releasing it tomorrow to pay for care and maintenance,” Stander told Miningmx. “They [the workers] have got more than enough reason to be cross but I know this payment will happen.”

The letter to UniCredit follows more detailed letters to the joint liquidators of Grootvlei gold mine and South African president Jacob Zuma, outlining serious allegations against Aurora, which is managing the Grootvlei and Orkney mines it wants to buy from the liquidators for R605m.

Joint liquidator Enver Motala said he has spoken to Aurora management to address the workers’ concerns as a matter of urgency. “Aurora told me they will engage the workers and secure an arrangement,’ he said.


At this point Aurora is cash strapped and has suspended both mines. It has told the market it has secured a promise of $100m in funding from Swiss-based Global Emerging Markets (GEM) once it has successfully reversed the assets into a listed cash shell on the JSE.

Motala has told Miningmx the timeline for the listing is end-August, with a lot of work still to do before this happens.

The funds to pay workers on Friday were said by Stander to be coming from “people who are assisting Aurora in the interim until they do what they need to do to ensure their funding plans with GEM are in place.”

If Grootvlei is allowed to flood it could potentially mean the end of the mine and Aurora’s gold hopes. Grootvlei’s management has been fully appraised of the decision by workers to terminate their services on 7 June if their demands are not met and are working on contingency plans, said du Plessis.

Footage shown on Carte Blanche, a weekly investigative television programme, revealed the dangerously rundown state of Grootvlei, which has serious water ingress and it has a water-pumping bill of R6.5m a month to keep water below working areas.

Allegations have been levelled by water authorities that Grootvlei has pumped untreated water into nearby water ways and there have been threats of prosecution.

In the 31 March 2010 letter to President Zuma, who is the uncle of Khulubuse Zuma, one of Aurora’s directors, Solidarity said Aurora had not only failed to pay salaries at both mines, it had failed to transfer statutory unemployment insurance fund contributions to the Department of Labour since October 2009.

Solidarity said pension fund deductions had not been paid to Sentinel Pension Fund and Mining Employees Pension Fund since October last year and that it had not made statutory worker’s compensation payments to Rand Mutual Assurers.

Finally, Solidarity said there were allegations that tax deductions from workers’ salaries had not been paid to the South African Revenue Service.

Given the nature of these allegations, the question must surely be raised whether Aurora will win the approval of the JSE to reverse list into Labat.

Motala told Miningmx on Thursday he has confronted Aurora about the Solidarity accusations and instructed the directors to compile a full report in response to the allegations. “If these allegations are true I’ve demanded that Aurora take immediate remedial action,’ he said.

AngloGold has withdrawn services to the Orkney mine for outstanding debt of nearly R100m, adding another wrinkle to Aurora’s gold ambitions.