SSC aiming to remove BRP from Barbrook mines rescue after years of alleged inactivity

Lily Mine disaster

THE company aiming to takeover the Lily mine where a tragic accident claimed the lives of three miners after a pillar collapse in 2016 has started legal proceedings to have the mine’s business rescue practitioner (BRP) removed.

Siyakhula Sonke Empowerment Corporation (SSC) said in a statement today that a memorandum of understanding (MoU) signed with Rob Devereux to stand down had not been acted upon. Devereux was appointed BRP of Vantage Goldfields which owns the Barbrook mines, including Lily, in Mpumalanga province, almost three years ago.

“This should have happened last week,” said Fred Arendse, who co-founded SSC, of the BRP’s resignation. “We have tried our triple best to be reasonable, but we have had no communication from the BRP. It’s not personal, but we have important things to do in order to resume mining at Barbrook; we’re getting nowhere”.

SSC said it had instructed its attorney it had “sufficient grounds” to bring an application to request the court to remove the BRP.

“If the BRP played a constructive role with us, assisted us, provided proper leadership and instead of being inaccessible and uncommitted, we could have made much more progress to date,” said Arendse. “Since our involvement and my recent appointment as a Vantage director, we have uncovered many issues,” he said.

“The BRP’s secret dealings were not done in the best interest of the company and has had a detrimental effect on all of us, especially the ex-employees and communities.”

SSC had invested R23m in Vantage Goldfields to date which included fees collected by the BRP. Devereux argued that his fees were prescribed by the Companies Act and had been approved by the board and creditors. He added he had incurred costs of a “… professional nature”, including legal costs. Arendse said SSC planned to have these costs recovered.

SSC said in September that it planned to spend up to R250m resuscitating gold mining in the region, as well as expand production. A R190m loan has been raised with the Industrial Development Corporation.

If all goes well, however, the two mines will be producing 50,000 ounces of gold a year whereas Vantage was producing 37,000 to 40,000 oz annually. The operations, long mined by the majors in the past, also have potential to extend their lives 10 to 15 years.

5 COMMENTS

  1. David, this is advertorial in a naked form.
    Their press release said they had ‘invested R23m’ in the transaction? You changed it to R21m????. If you take the trouble to read the Barbrook creditor list on sturns.co.za, you will note that SSC has already shoved in two claims (450k and 1,45k) …alongside long suffering workers for looking at this transaction. And, the BRP has agreed to this claim, plus SSC’s R15m a year management contract.
    A UK group apparently offered to fund a sub project for $2m which would have generated cash flows as per July 2028 rescue plan. This did not suit the background players as the investors insisted on operational control over their cash injection.
    Have you seen a single document that shows SSC has raised, secured, got commitments for 1c of equity? I doubt it.
    The BRP has probably not responded to SSC because it has no locus standi in the process as well as in the SA courts to change, amend, remove a BRP over assets which it does not own. The right to acquire assets in the future does not count.
    I am surprised at an experienced journalist like yourself swallowing this and abusing your readers with this drivel.

    • Hi Observe – The R21m vs R23m is a mistake which I have now corrected. Thanks for pointing this out.
      I will also take this argument to SSC for a response. (There was an IDC loan of R190m which was widely reported elsewhere so I assume from this SSC has the firepower.)

      David

  2. The IDC is not a bank. Its mandate is to lend to SA industry in the interests of creating jobs to meet national targets. The terms of this alleged ‘loan’ state that:
    (1) it shall be granted to the companies in rescue, namely Barbrook mining, Mimco and Vantage goldfields SA….. NOT SSC as you incorrectly state.
    (2) shareholders of the beneficiary companies shall be liable to the IDC in their personal capacity (a dealbreaker if ever I saw one)
    (3) SSC does not meet the criteria of financial and technical competence as stated in the MPRDA in that it has not acquired, developed and brought into production a single mining asset. (having a few people with paper qualifications who are moonlighting, does not count.) If anything Galane Gold is better placed for this deal.
    (4) there is already an indigenous party in the mix called Lomshiyo investments (made up of the community in whose valley Lily and Barbrook are located, and local women -other members)
    In theory, they could also apply to the IDC and bring in a contract miner in the same way thst SSC is planning to do…..plus, we know with certainty that they actually own 26% of the holdco equity but have been removed from any decision making by the garrulous, much promising, SSC group whose balance sheet would likely show little substance.

    It’s of academic interest if the IDC loan has been signed or not as the main contention is that it has to matched by equity.

    To replace the BRP would require lengthy and time consuming and costly litigation. He won’t voluntarily resign until he is paid for two years of work. Therefore, this will amount to a stand off. SSC is already capitalising his future costs – hence the reluctance to move out.

    It is not the BRP’s inactivity per se which has fouled up the works, rather the inability of SSC after one year of time wasting to produce a single equity investor to go into Flaming Silver ? or alongside it in the resue companies – the big gaping chasm between a deal and a delusion of grandeur.

    Finally, how would an equity investor exit from a PE stake such as this? , They risk massive dilution when the true costs of the restart become evident.

    The BRP is being held to ransom by vested interests scavenging around this deal and he does not have the experience or expertise to fight them off. Unless, he changes tack, this blight on the international community’s radar will further taint investment into domestic assets.

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