- April 14, 2019
- Posted in LOCAL
Former Zimbabwe largest gold producer Metallon Corporation’s owner Mzi Khumalo, has reportedly filed for business rescue for two of its subsidiaries, Goldfields of Mazowe Limited and Goldfields of Shamva Limited, in order to protect the companies’ assets from being seized by creditors.
The Business rescue process, as established by the South African Companies Act 2008, provides a company experiencing financial distress with an opportunity to restructure its operational model and improve cash flow by offering a temporary suspension on legal actions or liquidation measures against the company, giving it an time to cut down its debt and produce the best outcomes for all the company’s stakeholders – creditors, employees and shareholders.
Both Goldfields of Mazowe Limited and Goldfields of Shamva Limited have struggled to remain afloat over the last two years in the face of a hostile Zimbabwean economy. Mining executives in Zimbabwe have recently complained about issues affecting their operations such as exchange rate disparities causing a mismatch between revenue and costs, as well as high-interest rates on the market making it challenging for mining companies to raise capital. Khumalo has struggled to raise $400 million in order to expand Metallon’s gold mines four-fold in order to scale and attain critical mass.
Metallon’s companies owe tens of millions of dollars to some of its service providers. In February, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) took Metallon Corporation to court to compel the gold miner to settle a $9.3 million bill for power supplied to three of its mines. Last September, Metallon announced it was considering paying mining-equipment suppliers in gold because a cash shortage in Zimbabwe was hindering its plan to expand output. In the same month, Goldfields of Mazowe announced a plan to retrench hundreds of employees after the company was put under care and maintenance. Production at Metallon’s mines have since been halted in order to allow creditors to attach property and mining equipment. A representative for Metallon declined to respond to a request for comment.
Metallon is Zimbabwe’s largest gold mining company, operating four gold mines throughout the country. The company, which is headquartered in London, was founded in 2002 when Mzi Khumalo acquired Lonmin’s Zimbabwean gold assets for $15.5 million. Khumalo, 63, is one of South Africa’s most recognizable businessmen and a former anti-apartheid activist. Apart from Metallon, Khumalo owns extensive business interests in the financial services and infrastructure industries.