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Vantage needs R100m to keep Barbrook open

Jan 15 2017 06:01
Sizwe sama Yende

Johannesburg - Australian company Vantage Goldfields needs a further R100 million bailout after its second Mpumalanga mine was placed under business rescue last month.

Vantage Goldfields' Lily Gold Mine in Louisville near Barberton was the first operation to be placed under business rescue last year following the collapse of a shaft on February 5 that killed three workers who were in a container office that plunged 60m underground.

The company immediately mothballed Lily Mine pending a search for an investor who could inject R200 million for a new shaft to be constructed so that the container could be retrieved and operations could resume.

Workers were encouraged to take severance packages, while 100 of them were transferred to the nearby Barbrook Mine.

But now, Barbrook Mine also finds itself in distress for absorbing additional costs following the closure of Lily.

Barbrook produces about 15 000 ounces of gold a year and Vantage Goldfields' plan had been to expand production to between 50 000 and 60 000 ounces.

Business rescue practitioner Rob Devereux said Barbrook was placed under business rescue on December 13.

The last straw, said Devereux, was when Louisville community members, unions and other individuals marched and stopped workers from going to work in November.

“Barbrook is relatively small and could not absorb all those larger costs [as a result of Lily Mine’s closure]. We then had the situation where Barbrook workers were stopped from going to work,” Devereux said.

“The mine could not dig gold for the whole of November. If you consider that nothing happens in December, that is two months of lost production. Vantage Goldfields now has two distressed mines,” he said.

Devereux said that Barbrook needed a R100 million investment for expansion purposes to meet the additional costs resulting from Lily Mine’s closure.

“Nothing untoward happened at Barbrook. It’s just that it had to carry a lot of costs. If workers can get back to work, the mine can get back on its feet 100%,” he said.

Devereux said he was in talks with two local bidders about investing in Vantage Goldfields and a Swiss entity over a separate gold funding deal.

Association of Mineworkers and Construction Union (Amcu) president Joseph Mathunjwa said his union did not discourage workers from going to work and questioned the motive of those who staged the marches against the mine.

“We’re frustrated that about 1 000 of our workers are out of work because this has a ripple effect on families, the community and the government, which has a burden of more unemployed people.

"Cosatu and the National Union of Mineworkers were leading marches, yet they don’t have members there. We’re asking ourselves if this is a political issue,” Mathunjwa said.

“Amcu could not tell workers not to go to work while the company was trying to convince investors to put in their money.”

With regards to Lily Mine, Devereux said he was engaged in discussions with four potential investors who wished to acquire a stake in Vantage Goldfields Group.

He said that one funder – whose identity would be kept confidential – had agreed to fund the full amount of $15 million (R203 million) to reopen the mine by way of a streaming agreement.

“Reserve Bank approval has been acquired by the company to do the transaction. A setback has occurred that is currently being addressed. We cannot commit to the timing of the flow of funds,” Devereux said.

He said a project to try to retrieve the container would only be started once the access decline has been completed and access to that area was safe. This exercise would be conducted before the opening of the mine.

A R4.4 million compensation to the bereaved families (R200 000 each) and 75 workers who were trapped underground will be paid once funding has been secured.

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