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Mineral Resources Minister Mosebenzi Zwane’s statement on June 6 that mining operations at Lily Gold Mine in Mpumalanga could not continue until the bodies of three workers had been recovered may have scuppered a R171 million investment.
However, Lily’s business rescue practitioner and government have rubbished claims by Canadian company AfroCan Resources Gold that Zwane’s statement was one of the reasons the company pulled the plug.
AfroCan CEO Brian Barrett said: “The minister was quoted in the South African media saying that Lily ... would remain closed until the container [with the workers] was recovered ... Without the certainty of Lily ... recommencing commercial operations, just who will provide the R160 million required to attempt the recovery of the container is unclear.”
Lily’s business rescue practitioner, Rob Devereux, said that AfroCan’s reasons for withdrawing were unfounded.
“All approvals for payment in the business rescue plan happened before AfroCan signed to invest. We’re engaging with new investors after this fiasco,” Devereux said.
However, Barrett said Vantage Goldfields’ “subsequent malicious media attacks” may have scuppered any chance of getting AfroCan back to the table.
Vantage CEO Michael McChesney said a legal process against AfroCan had started, but he would not comment because the matter was sub judice.
AfroCan’s injection would have enabled the company to resume operations – it stopped on February 5 after a collapse at the entrance of one of its shafts. A container with three workers inside sank underground and has not been recovered.
According to the rescue business plan, Lily could be profitable again because it has 4.9 million tons of ore in its reserve, enough to be mined for 11 years.
Barrett said that he was supposed to meet McChesney and Devereux and the department’s representatives, but he could not attend.
“[After the meeting] McChesney said that the [department] would of course allow mining operations to recommence, but would not put anything in writing to this effect, nor would [the department] make any public announcements in contradiction of the minister’s statement,” said Barrett.
Zwane’s spokesperson, Martin Madlala, said neither the department nor the minister were involved in the negotiations between AfroCan and Vantage.
“I think that it is important to note that the department does not engage in intercompany negotiations,” Madlala said.
Barrett gave more reasons for his company’s withdrawal in the transaction.
According to him, it was unclear who would fund the compensation of the workers. Zwane and McChesney announced in February that families of the three dead workers would receive R200 000 each, while the surviving 76 mine workers would receive R50 000 each. This ex gratia payment amounts to R4.3 million.
Barrett said the business rescue plan had a disclaimer about the payment.
“[While] the business rescue plan was published on May 16 and voted on by affected parties on May 25 – before AfroCan signed the subscription agreement on May 26 – it is still unclear just who will fund this [compensation amount] of R4.3 million, particularly in light of Vantage’s admission that there is no funding available from the Industrial Development Corporation,” said Barrett.
Madlala said Zwane did not make any commitment for the compensation.
“The commitments referred to were made by the mine in the presence of both the minister and the union,” Madlala said.
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