Bruising fight for Freda Rebecca:
Local consortium fights for stake Legal battle in the offing
ASA RESOURCE GROUP — formerly Mwana Africa — is on the brink of a potentially bruising legal battle for the control of one of its subsidiaries, Freda Rebecca, after a local consortium approached the High Court to have their claim over a 26 percent stake in the gold mine asserted.
Court papers seen by The Sunday Mail Business indicate that Zindico Consortium, a grouping of local businessmen, argues that an empowerment deal that was negotiated in 2011 with the former shareholders and directors of the Mwana Africa, entitles it to 26 percent equity in Freda Rebecca at a price consideration of US$26 million.
The National Indigenisation and Economic Board (NIEBB), a statutory body created by Government to oversee the implementation of the Indigenisation and Economic Empowerment Act passed in 2009; the Minister of Youth Development, Indigenisation and Economic Empowerment, Mr Patrick Zhuwawo; Asa Resource Group Plc; Mwana Africa (Mauritius) Limited; Freda Rebecca Holdings Limited; and Freda Rebecca Gold Mines have been cited as respondents.
Asa Resource, through its UK-based lawyers Steele & Son with Bagot Heyes Solicitors, has since indicated its interest to defend.
In his founding affidavit, Zindico chairperson Dr Ian Cletos Chikanza is imploring the court for an order of “specific performance”, which essentially compels Asa to abide by the contract signed between the two parties.
Ordinarily, specific performance is an order of a court which requires a party to perform a specific act, particularly one that is outlined in a contract.
According to Dr Chikanza, although the Freda Rebecca shareholding was negotiated in “good faith”, it is presently being frustrated by the new Chinese shareholders, especially Asa chair Mr Yat Hoi Ning, who took over the business in June 2015.
Mr Ning is currently the non-executive director of China International Mining Group Corporation (CIMGC) — Asa’s controlling shareholder with a 16,3 percent stake in the business.
He also has 6,3 percent shareholding, which makes him the most powerful individual in the resources company.
The assumption of the business by the Chinese investors was a messy affair as it resulted in the ouster of Mwana Africa founder and director Mr Kalaa Mpinga on June 10, 2015.
Earlier in October 2011, Mr Mpinga had spearheaded negotiations with Zindico Consortium in order to comply with the country’s empowerment regulations which at the time expected local shareholders to control 51 percent shareholding in foreign-owned business, especially in the extractive industry.
Ms Catharine Keene of Tabacks Law Firm in South Africa is understood to have drafted the purchase and sale of shares agreement for the parties as well as the subscription and shareholders’ agreement.
She has since submitted her affidavit confirming the development.
It is also believed that the negotiations culminated in Zindico being “formally presented” to Government as Mwana Africa’s indigenous partner in April 2012.
Mpinga fights in locals’ corner
Similarly, in an affidavit attached to Zindico’s court application, Mr Mpinga confirms the subsistence of the agreement, which, however, was not signed.
“I have read and understood the founding affidavit of the Applicant (Zindico) in this matter and I associate myself with the contents therein . . .
“On behalf of the 1st respondent and in the full knowledge and authorisation of its board of directors, Mr (Kenneth) Musanhi worked with me in the identification of an indigenous partner(s) and subsequent discussion with Dr Chikanza and his consortium (the Applicant) to purchase 26 percent equity in the 4th respondent as required by the laws of Zimbabwe.
“. . . I was also leading all the conversation with the Government of Zimbabwe and our indigenous partner (Applicant), with the support of some of my colleagues, including Mr Lorenz Werndle in London, (Ms) Caroline Mathonsi, Mr Toindepi Muganyi (now the group chief operating officer) and Mr David Murangari in Zimbabwe,” said Mr Mpinga.
He also claims that any attempt to frustrate the agreement “would not only be unlawful but also unfair and an unwarranted wanton disregard of the Zimbabwean laws”.
But the new shareholders are refusing to acknowledge the agreement.
Zindico alleges that Asa chair Mr Ning, whose reign started with the brutal purge of 12 top officials (including Mr Mpinga), has not been responding to correspondence sent to him since June 14, 2015.
However, in an update to shareholders on January 12, 2017 Asa Resource notes that the court application is based on a “two year old draft, unsigned agreement which, if signed, would have been conditional upon the approval of the directors”.
Essentially, the new shareholders claim that the draft agreement was not ratified by the firm’s board of directors.
Hurdles In a move that has widely been interpreted as a deliberate attempt to frustrate Zindico’s case, lawyers representing Asa — Steele & Son with Bagot Hayes — have since asked the local grouping’s legal representatives to serve court papers related to the case at the firm’s offices in Mauritius and London.
“We act on behalf of ASA Resource Group Plc and ASA Gold (Mauritius) formerly Mwana Africa (Mauritius) Limited). It has come to our clients’ attention that your client, Zindico Consortium, has instituted a court application in the High Court in Harare in which reference is made to both our clients.
“We understand that in the said court application, which bears the reference above, our clients are referred to as 1st
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and 2nd respondents respectively.
“As you are aware, neither of our clients have a presence in Zimbabwe and maintain registered offices in London and Mauritius respectively.
“Accordingly any service of court process on our clients has to be effected at their respective registered offices in London and Mauritius,” said the law firm.
Asa said it closed its Harare and Johannesburg offices during the third quarter of 2016 as part of the group’s rationalisation exercise.
Former Freda Rebecca managing director Mr Toindepi Muganyi has since been elevated to become Asa’s group chief operating officer, while former Bindura Nickel Corporation (BNC) managing director Mr Batirai Manhando became the group technical officer.
Asa, which is listed on the Alternative Investment Market (AIM) market of the London Stock Exchange (LSE), has two key assets in Zimbabwe – BNC and Freda Rebecca.
The gold mine, which is the country’s second-biggest producer after Metallon Gold, is however the cash cow, contributing more than 90 percent revenues generated from local operations.
In the six-month period ended September 30, Freda Rebecca reported that gold output fell to 30 367 ounces from 35 052 ounces in the same period a year earlier after the mining mill developed mechanical problems.
While revenues in the period dropped 2 percent to US$39,8 million, profit before tax climbed 61 percent to US$5,1 million.
Shades of Metallon’s empowerment wrangle
The ownership wrangle at Freda Rebecca that is pitting the new Chinese investors and the local consortium is erringly similar to the struggle between Manyame Consortium, which was fronted by local businessman Mr Lloyd Hove, and Mzi Khumalo’s Metallon Corporation for five local gold mines following the divestment of UK-based Lonmin in October 2002.
The two parties, through an agreement signed on June 24, 2002, elected to form a new company, Newco, that would negotiate for the sale of the assets with Lonmin.
Metallon was tasked with the responsibility to handle the negotiations with Lonmin.
Manyame Consortium was however envisaged to control 30 percent of the business post transaction.
However, it was later announced that a British Virgin Island registered company Pemberton Investments had bought the gold mining concern, which controls five local assets - How Mine, Shamva Mine, Arcturus Mine, Mazowe Mine and Redwing Mine.
Unbeknown to the local consortium, Pemberton was in fact owned by Mzi Khumalo.
Attempts by Manyame consortium to reclaim the business through the courts later came to nought.