Johannesburg - Evraz Highveld Steel and Vanadium’s bankruptcy protection practitioners have named International Resources Limited (IRL) as the successful bidder for South Africa’s second-largest steel producer.
IRL was offering R350 million to settle creditors’ claims against Evraz Highveld Steel and R20m as a payment to shareholders, bankruptcy protection officials said in a presentation on the company’s website yesterday.
IRL, based in Hong Kong and with interests in mining, forestry and real estate, would invest a further R4.1 billion in the business over the next three to four years to refurbish equipment and build a 200-megawatt cogeneration plant, the practitioners said.
It said this capital spend would see the company ramp up steel production to pre-2008 levels (910 000 tons of steel production per year) within 18 months, following the completion of the capital upgrade and to 1.5 million tons of steel production per year over the next three to four years.
IRL also intends to establish an ultra-high grade vanadium pentoxide production line with annual capacity of 23 000 tons of steel production per year.
Highveld’s production suite would be further enhanced by the commissioning of a 200 000 tons per annum titanium slag production line, producing 75 percent titanium.
Business rescue
This would see the utilisation of by-products, which previously have added no benefit.
Highveld was placed under business rescue proceedings in April after a slump in demand for the metal and a surge in cheaper imports left it with insufficient funds.
Evraz paid more than a combined $678m (R9bn) to buy Highveld in two transactions from Anglo American in 2006 and 2007.
IRL “requires all suspensive conditions to be fulfilled by March 31, 2016, and the implementation date to be no later than June 30, 2016,” the practitioners said. The offer also included R150m to help Highveld repay financing made available by the Industrial Development Corporation (IDC), it said.
Should IRL’s proposal be accepted, the company would start production as soon as possible, raising this to 1.5 million tons annually in three to four years. As an alternative, IRL proposed to buy Highveld as a going concern for R350m.
If neither of the two proposals were accepted, the company would be wound down, and creditors might receive between 10 and 14 percent of their claims, the practitioners said.
Secretary general of the National Union of Metalworkers of SA (Numsa), Irvin Jim, said the union would continue with the parallel process it was engaged in to save jobs at Highveld, after the company last month issued a section 189 restructuring notice, effectively starting the process of terminating jobs.
Advanced talks
Jim would not be drawn on what specifically the process was, but he ruled out court action at this stage, saying advanced talks were continuing with the government and the IDC.
“We have reached the stage of making framework agreements with these parties until matters are resolved.”
Jim said Numsa was, at this stage, not aware of the possible takeover of Highveld by IRL and would welcome it if the company was being sold as a going concern, which meant that benefits due to workers would be intact.
Evraz Highveld Steel chief executive Johan Burger last month confirmed that up to 1 100 employees, or 50 percent of staff, faced retrenchment.
In a statement yesterday, Evraz said employees were not affected by the IRL proposed transaction and that unions and the company were finalising the section 189 process, which was under way and fell outside of the proposed transaction.
* Additional reporting by Bloomberg
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