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, Mr 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 rescuer, Mr Knowledge Hofisi, of Aurifin Capital.
In the urgent application, in which Duatlet and Propadek are the applicants while Mr Hofisi, Redwing, Betterbrands and Master of the High Court are respondents, the CRP cancelled the deal although he had been furnished with proof of funding.
Duatlet is seeking a court order declaring the agreement valid and be implemented.
In his notice of opposition, Mr Hofisi disagree, arguing that the Duatlet failed to provide proof of funding, a substantive condition needed to operationalise the agreement.
According to Mr Hofisi, Duatlet tried to borrow money, pointing to lack of capacity to mobilise sustainable funding structures. He also argues that the matter should not be dealt with as urgent as it was filed 13 days after termination of the deal.
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.
“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, Mr 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 institute proceeding against the second respondent (Redwing) for an order declaring the joint venture mining agreement entered into between applicants and the second respondent (Hofisi) valid, and resultantly an 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 argue.
Mr Hofisi maintains the fact that Duatlet failed to provide funding 14 days after signing of the joint venture agreement, cancellation of the transactions became inevitable.
“The operationalisation of the joint venture was subject to the first applicant satisfying the condition precedent and for all intends and purposes, only proof of funding was a substantive condition,” says Mr Hofisi.
In his rescue plan, Mr 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 hand-held mining techniques before moving to level three to benefit economies of scale.