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Cash-strapped Lily Gold Mine in Mpumalanga has received a shot in the arm after a Canadian firm pledged an $11 million (R172 million) investment.
The mine’s business rescue practitioner, Rob Devereux, confirmed that the money from AfroCan Resources Gold would start flowing in from next week over a two-month period.
AfroCan is a private gold producer and investment firm based in Vancouver, Canada.
It has gold business interests across west, east and southern Africa, and Papua New Guinea.
Devereux said that Vantage Goldfields, which owns Lily and Barbrook mines in Mpumalanga’s Barberton area, was still hoping to secure a further R100 million from the Industrial Development Corporation (IDC), which will put the overall investment at R272 million.
Lily Mine halted operations on February 5, following a collapse at the entrance of its shaft, which left three workers buried in a container office that plunged about 60m underground.
Operations were suspended on the advice of geological experts, who warned that it was too risky to recover the trapped workers and continue mining.
AfroCan CEO Brian Barrett said his company had been interested in Vantage Goldfields’ assets long before the Lily Mine disaster, and he had been in contact with Vantage CEO Michael McChesney for some time.
“We have always considered their assets as a good investment, and the rising gold price in dollars is a contributing factor. Gold reached R20 000 an ounce last week, so it is a good investment,” Barrett said.
AfroCan will own a 26% stake after the transaction has been completed.
Meanwhile, the suspension of operations has cost Lily Mine’s 900 workers their April and May salaries, and they have had to rely on government grocery vouchers of R780 each. To resume production and return to generating income, the mine needs to open a new shaft at a cost of R200 million.
Devereux, however, said the Canadian firm’s injection would not solve the mine’s financial problems overnight.
“We will have to find a balance between paying the workers and keeping operations going to generate income,” Devereux said.
“The good thing about business rescue is that we do not have to pay creditors. We will pay the workers and give them work on the shaft, and offer packages to those who want to leave,” he said.
Devereux said the AfroCan investment would also relieve pressure on Barbrook, which shared some services with Lily Mine.
Trade union Solidarity’s general secretary, Gideon du Plessis, said: “We are grateful that all the capital projects contained in the business rescue practitioner’s approved rescue plan could now be commenced with, thanks to this funding, and that the mine could thus be in production again within a year.
“We hope that, as provided for in the business plan, the bodies of the three missing miners can be retrieved within the next six to eight months.”
He appealed to the IDC to grant further funding to enable Lily Mine to be fully operational.
IDC spokesperson Mandla Mpangase was unavailable for comment.
Association of Mineworkers and Construction Union (Amcu) president Joseph Mathunjwa said his union was happy about the investment.
He attributed the investor’s confidence to the support Amcu had given Lily Mine management.
“The investors saw that we were patient and supportive – that is why they had confidence, even though the community was up in arms,” he said.
“Solidarity wanted the workers to take voluntary severance packages, which we were totally against. We want the workers to remain in their employment because, should they leave and want to be re-employed, their conditions of employment may change.”
Devereux released an optimistic business rescue plan for Lily Mine last week.
It indicated that the mine would return to profitability within two months – because it had 4.9 million tons of ore reserves that could be mined for the next 11 years.
