Southgold business rescue completed
THE COMPLETION of business rescue of Southgold Exploration meant the Burnstone gold mine in Balfour, Mpumalanga, was likely to resuscitate the economy of the area, Peter van den Steen, the mine’s business rescue practitioner, said yesterday.
Burnstone is 100 percent owned by Southgold, which was previously held by JSE- and Toronto-listed Great Basin Gold.
Great Basin Gold filed for business rescue at Southgold in September 2012. The company invested $500 million (R5.4 billion) to develop the mechanised mine, but went into liquidation after running into financial difficulties.
Wits Gold became the winning bidder for Southgold Exploration from the business rescue practitioner.
Sibanye Gold, South Africa’s second-largest gold producer, exercised its option to acquire Southgold and Burnstone last year after buying Wits Gold for $7.4m and taking on $177.3m in bank debt owed. Sibanye has plans to spend R1 billion to develop the ore body.
The business rescue process started 22 months ago and was completed on Monday.
“The completion of the business rescue is huge. The mine was facing liquidation, which could have resulted in a hole in the ground and some scrap metal around it, as all licences and rights lapse when a mine is liquidated. This would have been another Aurora empowerment controversy,” Van den Steen said.
Aurora was named the preferred bidder for Pamodzi’s liquidated Orkney and Grootvlei mines and was blamed for stripping the assets and selling them for scrap metal.
Van den Steen was roped in by Southgold to initiate the business rescue and proposed restructuring of the company’s debt and the sale of Burnstone.
The completion of the business rescue would allow Sibanye to develop Burnstone, James Wellsted, a Sibanye Gold spokesman, said yesterday.
Sibanye had completed a due diligence on the mine and needed to work on understanding the ore body before projections for production were made public. Approval for the plans from the executive committee were also outstanding, he said.
The company planned to use conventional mining methods and would mine only higher grade ore, unlike Great Basin, which planned to mechanise. “We are still developing our production plans and strategy, so any forecasts on issues like jobs and life of mine are pure speculation at this stage.”
Lara Kahn, a partner at Webber Wentzel, which represented Van den Steen, said this was the first and largest business rescue success in South Africa. The transaction was a real “shot in the arm” for business rescue.
She believed that South Africa could see a continued rise in business rescue transactions. “This is a real good news story for South African enterprises as the Southgold business rescue impacts both the mining industry and the financial sector.”
Great Basin Gold shares are currently suspended.