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Barbrook rescue plagued by fraud concerns

Dec 10 2017 06:01
Sizwe sama Yende

Johannesburg - Creditors of Mpumalanga’s Barbrook Mine have reported business rescue practitioner Rob Devereux to the Companies and Intellectual Property Commission (CIPC), citing concerns over fraud and reckless trading.

Barbrook’s creditors’ committee reported the case on November 28.

Tshiamo Zebediela, the spokesperson for the CIPC, said she could not comment on how far the investigation was.

Barbrook creditors are owed more than R30 million, while Lily Mine creditors are owed R88 million.

Barbrook is a sister operation of Lily Mine in Louisville, outside Barberton. The latter mine collapsed in February 2016.

Barbrook, the smaller operation, depended on Lily Mine to share costs.

The two mines were shut down as they required a R300 million bailout. Both are owned by Australian company Vantage Goldfields.

Creditors for Barbrook and Lily mines have, meanwhile, also applied for provisional liquidation of the mines following Devereux’s failure to get new investors involved.

This after two potential Canadian investors, AfroCan Resources Gold and Galane Gold, pulled out last year following disagreements.

The liquidation application is scheduled to take place on January 29.

Dwaine Koch, chairperson of the Barbrook creditors’ committee, said the creditors also rejected Devereux’s optimistic business rescue plan, which he released early last year, as they found that it contained “flaws and uncertainties”.

One critical issue was that the social and labour plans were not captured in the rescue scheme.

“We have reported Devereux to the CIPC for his conduct – and also the directors for fraud,” Koch said.

The reasons are outlined in correspondence which the creditors’ committee submitted to Devereux on May 25.

The correspondence, which City Press has seen, indicates that Devereux said in his business rescue plan that, following investigations into the affairs of the company, no fraud or reckless trading was found.

“Contradicting your declaration is the financial statement [enclosed in the business rescue plan] factually demonstrating that Barbrook Mine never made profit since 2011.

"More specifically, Barbrook Mine incurred losses from the said year, which increased at an alarming rate.

"Hence, Barbrook Mine has been entirely insolvent and dependent on Lily Mine,” the letter reads.

“We therefore cannot understand why Barbrook Mine was not concurrently placed under business rescue with Lily Mine by its directors [since], evidently, it was not able to operate separately from Lily Mine in a solvent manner.

“For the sake of clarity, why did the directors of Barbrook Mine opt to continue with the business, despite the fact that it will not be able to honour its payment obligations during the normal course of business?”

Barbrook was placed under business rescue in December 2016, nine months after Lily Mine.

The creditors say the directors had a duty to put the mine under business rescue or liquidate it when it was clear that it was financially distressed or insolvent – or, alternatively, issue a notice to affected people, giving reasons for not placing the company under business rescue.

The creditors want Devereux to explain why he said that no fraud or reckless trading was undertaken by Barbrook’s directors.

If Devereux has changed his mind, the creditors want to know what action he has taken against the directors – for example, imposed criminal and civil charges against them and reported them to the CIPC.

Koch said: “The business rescue practitioner is trying to raise money on a document [the business rescue plan] that is not approved.”

Devereux did not take calls or respond to text messages this week.

Koch said Devereux did not respond to correspondence from the creditors, indicating how “chaotic” the situation was.

In earlier correspondence, dated February 14, the creditors also warned that the mine’s licence might be revoked because a report by Minxcon Consulting found that R23 million was required for rehabilitation – in contrast to the amount of R744 000 reflected in an analysis report by Devereux.

“We are concerned at the possibility that Barbrook Mine’s environmental affairs, and the noncompliance of the same, could result in penalties and/or criminal charges and/or revoking of the mine’s licence,” say the creditors.

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business rescue  |  debt  |  mining  |  lily mine
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