Parastatal moots plan to raise capital and reopen Lily and Barbrook mines
The Mpumalanga provincial government is ready to throw a lifeline to cash-strapped Australian company Vantage Goldfields to save jobs at its mothballed mines. During his state of the province address last Friday Mpumalanga Premier David Mabuza said that the Mpumalanga Economic Growth Agency (Mega) had been instructed to explore the viability of creating a diversified, state-owned mine to rescue jobs – particularly at Lily and Barbrook mines.
“Mega has [40%] shares in two anthracite mines – Nkomati and Kangwane – and we can utilise that arm instead of having mining assets in the province that are lying idle when unemployment is high,” Mabuza said.
“If there is no investor [for Lily and Barbrook mines], we can enter the space and mine. We can turn the situation around with the resources we have.
“What is good about us is that we will not be looking for profit and will reinvest the money into the communities,” he said.
Lily and Barbrook business rescue practitioner Rob Devereux said this week that he would begin negotiations with the Mpumalanga agency.
Devereux said he had managed to acquire more than half of the R300 million required to reopen the two mines from various investors, but nothing could happen until the full amount was procured.
“We have got various packages of funding, but not the full amount. What we have will not be enough to start working. We will hear what Mega is going to do, and the premier’s initiative was most welcome,” Devereux said.
Mega CEO Xola Sithole said the parastatal was open to acquiring a stake in the mines and raising capital to reopen them – as it had done at Nkomati Anthracite, where it partnered with the Industrial Development Corporation to inject R150 million for expansion purposes.
Mega, Sithole said, was exploring the possibility of establishing a state-owned mining company and to grow its portfolio via equity acquisition and organic growth.
“Mining contributes 25% to Mpumalanga’s gross domestic product and is critical to the economy. Lily Mine is a socioeconomic tragedy and the premier has asked us to see how we can participate [in efforts] to rescue it. We are open to any opportunity that may include equity shareholding,” Sithole said.
Vantage Goldfields ceased operations at its Lily and Barbrook gold mines, situated in Louisville near Barberton, last year.
Operations at the Lily mine were halted on February 5 last year, when its shaft collapsed and buried three workers who were in a container office that plunged 60m underground. The workers have not been recovered.
Barbrook was placed under business rescue in December after having to absorb some of Lily mine’s employees, as well as additional costs following the disaster. When Barbrook workers were prevented from digging for gold by unions and community members in November, it marked the final blow that sent Barbrook into financial distress. Both mines were placed under business rescue. The mines employed more that 1 000 workers, 900 of whom were attached to Lily mine.
The cash that Vantage Goldfields needs will be used to open a new shaft for gold extraction to resume, and also to retrieve the container office in which Pretty Nkambule, Yvonne Mnisi and Solomon Nyirenda were buried.
Part of the investment – R4.4 million – would be paid as compensation to the bereaved families (R200 000 each) and 75 mine workers (R50 000 each) who were trapped underground.
Vantage Goldfields has 4.9 million tons of gold in reserve, which can be mined for the next 11 years.
The closure of the two mines has affected the economy of Louisville to such an extent that local businesses are now collapsing.