JOHANNESBURG (miningweekly.com) – Vantage Goldfields Limited (VGL) and Siyakhula Sonke Empowerment Corporation (SSC) representative Fred Arendse on June 23 proposed amended business rescue plans for the Lily gold mine, in Mpumalanga.

The Lily and Barbrook mines have been the subject of a dispute after the operations were placed under business rescue after the Lily mine collapsed in February 2016, killing three mineworkers who were trapped in a container underground.

Mining operations ceased and Mimco, a subsidiary of VGL, was unable to pay its debts in 2016. The company is a subsidiary of Vantage Goldfields South Africa (VGSA) and the major contributor to the group. Business rescue practitioners were appointed later that year in April, following which Barbrook in December 2016 filed for business rescue as it was, consequent to Mimco’s business rescue, also financially distressed.

The additional costs that Barbrook had to carry as a result of the Lily mine collapse caused significant strain on Barbrook’s cash flow. A Section 11 was granted to the mine in December 2018.

There have been several potential investors interested in taking ownership of the Lily and Barbrook mines since 2016, but VGSA in November 2017 agreed to sell the Lily and Barbrook mines to SSC subsidiary Flaming Silver on the condition that it provide R310-million to discharge business rescue plan requirements and reopen the mines.

Parties have, so far, been unable to resolve a dispute related to the business rescue.

While amended business rescue plans are yet to be published by the business rescue practitioners (BRPs), Arendse on June 23 explained during a Parliamentary portfolio committee meeting that in the proposed amended plans, VGL will sell its R194-million loan account against Barbrook to Arqomanzi in return for Arqomanzi settling VGL’s secured creditors and BRP fees.

Arqomanzi is 51% owned by Taung Gold International and 49% by the SSC group.

In addition to this, Arendse’s amended business rescue proposal will see Barbrook issue 100% of its shares to Arqomanzi for a consideration of 1c each, from where Barbrook will buy back 12-million shares held by VGL in Barbrook, also at a consideration of 1c each.

Mimco was also proposed to sell all of its tangible and intangible assets to Barbrook, in return for Barbrook settling Mimco’s creditors.

Should this proposed business rescue plan be accepted, Arendse said Arqomanzi would expedite its due diligence, regulatory approval and start preparation for operation at the first target date at the end of this year.

If the plans are published on June 22, and creditors vote in favour thereof on July 6, Arqomanzi intends to plan its first payment to employees and creditors by October, he said.

Arendse further gave insight into Arqomanzi’s development strategy from SSC, which includes the retreatment of high-grade calcine tailings, which would start in the seventh month after the completion of the settlement.

Upon approval, the company intends to immediately start with the development of a new decline at the Lily mine to access the sub-7L reserves, and proceed with a feasibility study on Barbrook, while developing the Lily mine and operating the tailings storage facility.

During the first 36 months post approval, Arqomanzi intends to determine the optimal production rate of the underground mine, re-plan its metallurgical plant to accommodate an optimal production rate and incorporate bacterial oxidation (BIOX) to increase recovery and develop the mine and expand plant capacity with BIOX to sustain higher gold production.

Arqomanzi plans to have the Lily mine achieve profitability at a steady state production of over 30 000 t a month, with tailings profitable with grade and recovery assumptions.

Barbrook, meanwhile, is intended to be profitable at 15 000 t a month at a recovery of 80%.

Prior to the amended business rescue proposal, between June 2019 and April 2020, Arqomanzi made a binding offer to VGSA with a 30% premium, which was ultimately rejected when the negotiations were terminated. The Department of Mineral Resources and Energy director-general (DG) then allegedly initiated an out of court settlement with all parties, where VGSA committed to the DG to settle the matter, according to Arendse.

Arqomanzi then initiated "huge costs" to draft a settlement agreement, negotiations for which failed despite being in the final stages owing to VGSA having allegedly demanded three to four times more money, said Arendse.

Court proceedings with VGSA are anticipated to take between 12 and 18 months to resolve, Arendse said during his presentation.

Vantage Goldfields disputes the arguments outlined above, and Mining Weekly is endeavouring to ensure that they receive right of reply.