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

CityPress - - Busi­ness - SIZWE SAMA YENDE sizwe.yende@city­

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

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