Creditors of Lily and Barbrook gold mines have threatened to apply for the removal of the mines’ joint business rescue practitioners.
This is partly due to the practitioners issuing contradicting reports about the financial capability of recent investor, Siyakhula Sonke Corporation’s (SSC’s) subsidiary Flaming Silver Trading 373.
The creditors have also taken issue with business rescue practitioners Rob Devereux’s and Daniel Terblanche’s lack of support for SSC Flaming Silver in their court application to force the mines’ owner, Vantage Goldfields SA (VGSA), to hand over share certificates to the company after reaching a sale agreement to acquire a 74% stake.
Vantage Goldfields unilaterally cancelled the sale agreement on March 26, claiming that SSC Flaming Silver did not have the funds to re-open the mines.
The mines need a R310 million injection to start operating again, after they were shut down in 2016 and put under business rescue.
SSC has been insisting that they have the funds – a fact substantiated by the latest business rescue practitioners’ report dated May 21, in which it said: “Further to this transaction we confirm that the Section 11 application has been granted by DMR (the department of mineral resources) dated December 21 2018.
“This is consent by the DMR that Flaming Silver may acquire the shares. Furthermore, we can confirm that proof of funds for the SSC Flaming Silver/Vantage Goldfields transaction has been received by the BRPs [business rescue practitioners].”
VGSA CEO, Michael McChesney, has described the business rescue practitioners’ statement that they have seen SSC’s proof of funding as “unfounded” and “misguided”.
McChesney said VGSA challenged this assertion prior to the release of the report.
SSC Flaming Silver received a R190 million loan from the Industrial Development Corporation (IDC), sourced more funds on its own and also paid R10 million to VGSA for the shares.
City Press has seen a letter dated June 7 2019 that the creditors’ lawyers from DR Lourens Attorneys wrote to Devereux and Terblanche, detailing their concerns.
The lawyers slam the business rescue practitioners for refusing to offer outright support to SSC Flaming Silver in its legal battle with VGSA.
“SSC has taken a firm stand against Vantage and is currently embroiled in a vigorous legal encounter for the relief of creditors and employees; yet it seems the business rescue practitioners, despite acknowledgment of proof of funds from SSC and their capability to perform, have elected to act as witnesses only and refuse to outright support SSC by such means necessary,” reads the DR Lourens Attorneys letter.
“Your aforesaid behaviour doesn’t make sense at all given the fact that you must act in the best interest of the creditors and employees,” it added.
Neither Devereux nor Terblanche responded to questions emailed to them this week.
The creditors’ lawyers were also scathing of the business rescue practitioners’ work, saying it was “undoubtedly the most absurd business rescue exercise”.
“This business rescue exercise has gained major adverse popularity as a consequence of poor management, poor performance, shortage of skills, poor reporting and contradicting reports.”
DR Lourens said VGSA had regrettably developed a track record of being the cause of constant investment failures – referring to two failed deals with Canadian companies AfroCan Resources Gold and Galane Gold in 2016 and 2017.
AfroCan Resources raised a question about who would be responsible for paying the ex-gratia payment of R4.35 million that was awarded to the families of the three dead workers, who were killed when the mine shaft sank, and 75 workers were trapped but were later rescued.
The lawyers said they had proof that Galane Gold had money to re-open the mines but VGSA said they were unable to raise the requisite funds.
“Since the inception of SSC,” said DR Lourens, “neither Vantage nor yourselves once raised or indicated any concerns into the funding and/or funding capability of SSC.”
Both mines were put under business rescue and 1 000 workers were laid off.