Metallon’s Zim unit revival in limbo
A local investment firm that signed a deal to revive Metallon’s Redwing Mine in eastern Zimbabwe, has taken the corporate rescue practitioner (CRP) of one of the country’s largest gold mining asset to court for terminating the transaction.
Duatlet, comprised of Probadek Investments, Betterbrands Mining — a vehicle owned by prominent gold dealer Scott Sakupwanya and Prime Royal Africa on November 17, 2021, signed a four-year agreement with Redwing to revive the mine.
Redwing is under a corporate rescue process being led by Knowledge Hofisi of Aurifin Capital. Hofisi is alleged to have cancelled the deal after Duatlet failed to provide funding.
Duatlet is seeking a court order declaring the agreement valid and be implemented.
In terms of the agreement, the consortium was to provide initial working capital to the tune of at least US$3 million for procurement of critical spares, payment of corporate rescue costs, settlement of proven claims by creditors and payment of wages.
Redwing was to get 28 percent of net earnings while Duatlet would get the remainder at intervals directed by a steering committee using transactional platforms approved by the Fidelity Printers and Refiners. Prior to the signing of the agreement, Betterbrands, which was co-opted into Duatlet was running the mine.
After signing the deal, Betterbrands was ordered to suspend all mining activities, with immediate effect, to pave way for the operationalisation of the joint venture agreement.
According to the court papers, in which Duatlet and Propadek are the applicants while Hofisi, Redwing, Betterbrands and Master of the High Court are being cited as respondents, the CRP cancelled the deal despite having been furnished with proof of funding.
“First respondent (Hofisi) purported to cancel the joint venture mining agreement by letter dated 17th December citing that first applicant (Duatlet) had failed to furnish him with proof of funding of the project,” the court papers read.”
“This is notwithstanding that first respondent provided proof of funds through a later dated 29th November, 2021 and a bank guarantee on 15th December 2021.”
After cancelling the deal, Hofisi is alleged to have directed—without approvals from Redwing creditors — Betterbrands to resume operations on December 20, 2021.
“Application is therefore seeking the leave of the court to institute proceedings against thesecond respondent (Redwing) for an order declaring the joint venture mining agreement entered into between applicants and the second respondent (Hofisi) valid, and resultantly and order nullifying the authorisation of third mining respondent’s mining activities and the mining location and any subsequent agreements between second and third respondent,” the applicants argues.
In his rescue plan, Hofisi said Redwing will need as much as US$6 million to restart production by bringing in new investors into the business valued at about US$30 million.
Underground gold production would resume from level one using conventional handheld mining techniques before moving to level three to benefit economies of scale.
After resuming operations, Redwing would employ modern mining techniques with diesel mechanized access and mining methods, which may be attainable through the implementation of a five-year strategy as set out in the company’s restart programme.
Redwing was placed under corporate rescue in July 2020 after the Associated Mine Workers Union of Zimbabwe filed an application on the grounds that the company was financially distressed, among other reasons. Redwing was placed in corporate rescue notwithstanding opposition by Metallon Corporation, its parent company. Dr Cecil Madondo of Stone House Consultants was appointed as the corporate rescue practitioner in July 2020. However, since the commencement of corporate rescue proceedings, there has been litigation still pending. Mr Hofisi was appointed on 21 April 2021 following the suspension of Dr Madondo by the Master of the High Court.-ebusinessweekly
