Deal to resume operations
The rescue plan would allow the mine to resume operations after its closure three months ago and would save 900 jobs
Mpumalanga’s Lily Gold Mine is close to clinching a R200 million deal with one of three possible investors that would allow the mine to resume operations after its closure three months ago following a rockfall that resulted in a massive sinkhole. Lily Mine’s business rescue practitioner, Rob Devereux, said he had approached five investors, and three were looking promising and could inject capital into the financially stressed business. However, he declined to name them.
“We’re very close to securing an investor and will hopefully make an announcement soon,” Devereux said.
The imminent investment, Devereux said, was a combination of a loan and equity shareholding “so that we do not burden the company with a lot of repayments of interest”.
Devereux released an optimistic business rescue plan for the mine this week, which indicated that should it secure funding to open a new shaft, it would return to profitability – once a new access decline was drilled, which could take six to eight months – since it had 4.9 million tons of ore reserves that could be mined for the next 11 years.
The funding is expected to be in place by the end of next month and it would take eight months to develop the new access decline and then, by the end of May 2017, the mine could be profitable again.
“There is a reasonable prospect of the company being rescued, given that the conditions of the business rescue plan are met and there is a market for the company to continue,” said Devereux.
“The mine is a good investment for any person,” he added.
The rescue of the mine was vital because the communities in the Lilydale valley and surrounding areas were dependent on the mine and a failure to rescue the mine, which would lead to liquidation, would have a devastating effect on these people, Devereux said.
“It is estimated that the closure of the mine would affect 9 000 people. This is based on employees having to support at least 10 dependants in the community,” he said.
It is known that one of the investors approached is the government-owned Industrial Development Corporation (IDC), but Devereux said the IDC was still considering the mine’s funding application.
IDC spokesperson Mandla Mpangase was not available for comment.
Lily Mine is based in Louisville outside Barberton and was owned by Australian Vantage Goldfields. It was shut down on February 5 after a sinkhole opened up at the entrance of its shaft.
A container lamp office plunged about 60m underground and the bodies of three workers inside it – Pretty Nkambule, Yvonne Mnisi and Solomon Nyerende – have still not been retrieved.
The mine’s 900 workers were not paid in April and face the same fate this month should the investment deal be delayed.
The closure of the Lily Mine has also placed the nearby Barbrook Gold Mine under “tremendous pressure” as the two mines used to share common shares, but now the Barbrook mine is required to fund them on its own.
Devereux’s business rescue plan, which City Press has seen, indicates that the mine could extract 30 000 ounces of gold a year in the next decade and therefore it has a reasonable prospect of being rescued. Lily Mine last recorded a R14.4 million net loss in 2010. It has since been consistently making a profit after production was increased from 6 000 ounces a year to 25 000 ounces in 2014.
Lily Mine had suffered a R39.3 million loss by March. However, before the disaster, it had made a R2.5 million profit by January. It recorded a total profit of R35 million at the end of the 2015 financial year.
Despite the promising news, Association of Mineworkers and Construction Union (Amcu) president Joseph Mathunjwa condemned the IDC for delaying funds to save jobs at the mine.
“It’s surprising that the IDC has been taking a risk and putting money in other mining ventures that have not produced a single ounce of gold, but not here,” said Mathunjwa.
“One is tempted to say it is because Amcu is the majority union at Lily Mine and is not part of the tripartite alliance.
“Lily Mine is the future of the community and we don’t understand why the IDC is not using the opportunity to save jobs and show that our government is concerned. All we hear is that the NUM [the National Union of Mineworkers] has been recruiting our members and telling them that the IDC will not give funding to the mine if they continue supporting Amcu.”
NUM deputy president Joseph Montisetsi confirmed that the union had been recruiting members, but denied Mathunjwa’s allegation.
“Our recruitment slogan is that we want the mine to find the three workers first before any business rescue plan goes ahead. We’re against a business rescue plan if the workers are not found. This multinational company is undermining local people and we don’t believe they’re honest when they say they don’t have money,” Montisetsi said.
RECOVERY MODE A member of a search-and-rescue team at Lily Gold Mine