Johannesburg - Australia’s Vantage Goldfields plans to sue Canadian producer AfroCan Resources Gold for reneging on an $11.3 million (R164.4m) investment in Lily Gold Mine that would have seen miners being paid their salaries.
Vantage Goldfields, which owns Lily and Barbrook mines, said it would take legal action after what it described as a “setback” for the Lily mine.
“Vantage Goldfields has instructed its lawyers to claim specific performance from AfroCan, failing which AfroCan and its advisers will be held to account,” Vantage’s chief executive, Mike McChesney, said.
Vantage said AfroCan had breached the agreement to invest in the group and had failed to remedy the breach. “The breach is a setback for the Lily mine, which remains in business rescue. The AfroCan funds were urgently required to commence the business rescue plan and to pay workers’ salaries,” McChesney said.
Collapse
Lily mine was placed in business rescue after a cage collapsed in February. Three employees remain trapped in the underground container, with Vantage planning to sink a 500m decline shaft to reach them.
Business rescue practitioner Rob Devereux said he would investigate the circumstances surrounding why the deal had fallen through and report to relevant authorities, including the Financial Services Board, Sars and the Hawks.
“While Vantage Goldfields is committed to take legal action against AfroCan, the business rescue practitioner will investigate the circumstances surrounding the non-materialisation of the transaction and report any irregularity to the relevant authorities,” Devereux said.
The AfroCan transaction was effective on June 1, however, the company had not paid the $2.5m agreed upon by June 30. This was despite several meetings with the company’s chief executive, Brian Barrett, and corporate advisors, Summit Private Equity and Capital Mineral Resources Investment. It appeared that AfroCan had no intention to comply with its legal commitments.
Relationships
Two weeks ago, Barrett addressed Lily mine, the Association of Mineworkers and Construction Union and trade union Solidarity leadership at the Nelspruit head office of Vantage Gold Fields, confirming the transaction and delays in transferring the funds.
Devereux said when AfroCan did not pay, the business rescue practitioners engaged with other investors. “We will rekindle those relationships. We will continue pursuing other investors.”
Solidarity general secretary Gideon du Plessis said the main concern was the 900 workers who were in arrears after not being paid for four months and that all unions supported the legal action.
“We will jointly make sure we take action against Barrett for two reasons. The first is what he did to the 900 vulnerable mineworkers, and the second is to prevent him from similar fraudulent conduct,” Du Plessis said.
“We have come across people who do business with him. He will source money from various funders and the next moment he walks away from the deal,” Du Plessis said.
BUSINESS REPORT