Mine fights for its life

ONE OF SA’S OLDEST: SURVIVED THREAT OF LIQUIDATION

Barbrook and its sister mine Lily court local and overseas investors to bring it out of business rescue.

Vantage Goldfields SA’s Barbrook and Lily mines appear to edge back from the brink of oblivion. The group survived a threat to liquidate the mines by creditors claiming a combined R212 million. Vantage was placed in business rescue in 2016 when the access entrance to the Lily mine collapsed, killing three workers. This stopped production at Lily and Barbrook, with 1 000 jobs lost.

The mines had been teetering for several years, unable to turn the assets to account due to a declining gold price environment.

They need at least R100 million to repair the collapsed portal and resink a decline shaft, and R50 million in working capital to restart operations – besides R212 million creditor repayments.

Business rescue practitioner (BRP) Rob Devereux has had to face down threats to liquidate the mines and remove him as BRP while trying to implement a rescue plan acceptable to creditors.

Vantage’s physical assets are valued at about R42 million, according to CV Asset Management’s assessment.

But this shoots to between R857 million and R1.75 billion, depending on the gold price and exchange rates, according to the competent persons’ report applying cash flows from the 4.3 million ounce resource base.

A more realistic, undiscounted valuation is R700 million to R850 million, according to one source.

Several investors appear interested in the Vantage assets. Barbrook and Lily are particularly attractive for their lower-than-average cash costs of about $805/oz and could be profitably operated in the current environment.

Flaming Silver has a binding contract to acquire 74% of shareholder capital for R10 million, subject to conditions. The IDC has offered to finance the Vantage companies in rescue with an R190 million loan package to restart its operations, subject to conditions. This is sufficient to repair structural damage, but not enough to settle creditors who’d have to be paid out of future cash flows. Devereux says there are also questions about the capacity of the shareholders behind Flaming Silver.

A London-based consortium, with cleared funds, has put in a R30 million offer to invest in the retreatment of surface material at Barbrook Tailings Storage Facility. This would meet the initial creditor payments. This is seen as the fastest way to start generating cash flows and paying down creditors.

Consortium has put in a R30 million offer