Johannesburg - Junior miner Pamodzi Gold has until Wednesday to raise funds, otherwise its judicial managers will approach the court to put all its operations into provisional liquidation, clearing the way for their sale.
Best Rock, the mystery group thought to be a commodity broker, was expected to have paid R200m into Pamodzi's account on Monday, but Enver Motala from SBT Trust, a court-appointed joint provisional liquidator for the Orkney mines and joint provisional judicial manager of the other two operations, said this had not happened.
Motala has requested a meeting with Best Rock's Pretoria-based attorneys on Tuesday to wring a firm commitment from them that funding, thought to be coming from an unidentified European bank, will be paid into Pamodzi's account by Wednesday at the latest.
"If the money is not here by Wednesday, we have a fiduciary duty to report to the court that there is no money available and recommend that the other two companies (the East Rand operations and the Free State operations) be placed into provisional liquidation like Orkney," Motala told Miningmx.
The soonest the urgent approach to the courts could happen is Tuesday or Wednesday next week, taking in consideration the four-day long weekend from Friday this week.
Motala held a late meeting with Pamodzi directors on Monday to ascertain exactly where the money was that various media reported as having been secured.
A letter from legal firm Alberts, Bekker, Vorster, Pillay & Partners was attached to Pamodzi's judicial management application documents. This indicated that a R200m Venezuelan government bond on Best Rock's behalf had been received and that Standard Bank had verified the bond's authenticity, daily newspaper Sake Beeld reported on Monday.
Motala was clear, however, that the money was not available and that Wednesday was the deadline for incontrovertible proof the funds were available.
If Best Rock did make the investment, acting Pamodzi financial director Kobus du Plooy told Motala there were a number of smaller investors prepared to put money into the company, giving the company a better chance of turning around.
Motala was critical of Pamodzi's decision to place the East Rand and Free State mines into judicial management to stop the ongoing spate of liquidation proceedings by creditors who are owed hundreds of millions of rands. He put the levels of debt within each of the mining groups at between R1.1bn and R1.3bn.
Call for compromise
Judicial management was the best option if funding was guaranteed, which in Pamodzi's case has been less than certain.
He argued that putting the firm into provisional liquidation would offer a solution to its woes by allowing an investor or group of investors to come in, reach a compromise agreement with creditors and restart the mines without the debt currently encumbering them. In the meantime, those mines would be put into care and maintenance to preserve the assets.
The compromise agreement is carried in Section 311 of the Companies Act.
Motala argued this would suit creditors who would get virtually nothing in final liquidation proceedings. By compromising on Pamodzi's debts, they would receive something rather than nothing and could potentially still have dealings with the new owners.
"This is my advice. I think it's the best way forward and resolve this," he said.
Interestingly, according to a document seen by Motala, Best Rock has a clause in a document that allows it to withdraw its funding if Pamodzi goes into provisional liquidation or judicial management.
The worry about the mines going into final liquidation is that they would automatically lose their mining licences, something that doesn't happen in provisional liquidation.
The return date for the provisional liquidation of Orkney is April 14. The judicial management return date is in May.
One of the big concerns for the provisional liquidators and judicial managers is the decision to house Pamodzi's assets in a special purpose vehicle, which has been offered as security for loans incurred.
This, so far, comprises the R200m already raised from the Industrial Development Corporation and possibly Best Rock, if it invests funds in Pamodzi.
The question Motala raises is whether this gives those big lenders preferential treatment at the expense of other creditors if insolvency proceedings go ahead.
- Miningmx.com
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