AfroCan
Canadian gold mining company, AfroCan Resources Gold has responded to recent media reports regarding its involvement in the Vantage Goldfields Lily Mine transaction.

AfroCan Resources Gold on Monday denied allegations that it had deceived Vantage Goldfields over Lily Mine’s business rescue and the promise to invest in reopening the collapsed Lily mine in Barberton.

The gold mining firms’ response follows accusations made by Solidarity earlier this month that AfroCan had defrauded Lily Mine and not paid the agreed upon $2.5 million as part of the $11 million investment to the mine by the June 30 deadline.

In a statement AfroCan said that it denies much of the positioning and notes that certain statements are mere spurious allegations.

“AfroCan has issued a formal communication to Vantage Goldfields the Australian holding company of Lily Mine setting out its position,” said the gold mining firm.

AfroCan, through its attorneys in Sydney-Australia, says Vantage has no grounds on which to bring action or any claim whatsoever against it and that the company would vigorously resist any such claim if it were brought.

AfroCan says that the intention of the media onslaught was to intimidate and leverage the risk of loss of reputation to coerce one party to perform to the will of the other.

Reasons for the withdrawal of AfroCan

The South African Minister of Minerals and Energy, Mosebenzi Zwane announced the award of ex gratia payments of R200 000 per family of each deceased worker and R50 000 per worker who was underground at the time of the crown pillar collapse on 5 February.

Vantage CEO McChesney admitted that it was at the Minister’s behest not to retrench the Lily Mine workers, which has now caused the significant problems with arrear salaries.

On 6 June the Minister was quoted in the South African media ruling that Lily Mine would remain closed until the container was recovered.

The gold mining firm notes that on 17 June, McChesney and the Lily mine business rescue practitioner Rob Devereaux met with the Department of Mineral Resources (DMR). AfroCan CEO Brian Barrett was invited to this meeting, but the time of the meeting was changed at the last minute and he was unable to attend.

McChesney reported to Barrett after the meeting that the DMR would of course allow mining operations to recommence but would not confirm this in writing nor would the DMR make any public announcements in contradiction of the Minister’s statement.

Furthermore, the gold mining firm says that Solidarity and NUM have enjoyed much press coverage recently and this is wholly opportunistic as the actual percentage representation of Solidarity and NUM combined at the time of the crown pillar collapse on 5 February was very close to zero percent.

AMCU is by vast majority the representative union at Vantage. According to AfroCan, turing the first week of June 2016 AMCU leadership offered to facilitate the funding of the April salaries with a post commencement loan of R10 million from respected businessmen in their local community.

This offer was rejected out-of-hand by Devereaux and Vantage.

Also, a meeting was held at the offices of Vantage in Nelspruit at which Barrett and McChesney shook hands in front of a witness (Charles Mostert, Chairman of Capital, the financial intermediary in the transaction) on a deal whereby AfroCan would provide funding to Vantage on the basis of a convertible note.

Four days later, McChesney phoned Barrett to say that he is reneging on this deal, Vantage was not going ahead with the transaction. Mostert called Barrett furious at this development accusing McChesney of negotiating in bad faith.

“Had that deal been struck Vantage would have received funding from AfroCan before the end of April 2016.”

The way forward

On 23 June 2016 at the invitation of AfroCan, McChesney and Devereaux attended a meeting aimed at resolving the challenges facing the parties in concluding the transaction.

McChesney agrees that the foundation principal upon which the meeting is conducted is that, given the current circumstances AfroCan cannot perform in terms of the signed subscription agreement and any talk of breach by AfroCan is “off the table”.

However, at the meeting AfroCan declared its belief that it may take a month to get the desired comfort AfroCan’s investors would require to move forwards with the transaction.

It was suggested that the current Vantage shareholders invest the $700 (R10 million) required to pay the April salaries.

McChesney declared that his shareholders are “jaundiced by the South African situation, the sovereign risk, the political and BEE issues. Existing shareholders would not be investing any further funds into Vantage”.

On 25 June Vantage sent the gold mining firm a letter formally acknowledging the difficulties facing AfroCan’s investor-base. The letter proposed alternative investment strategies for AfroCan’s investment in Vantage including reverting to the convertible note option that Vantage walked away from in April.

Vantage placed the gold mining firm in breach under the terms of the 26 May 2016 signed Subscription Agreement and threatens legal action on 27 June.

Faced with yet another about-turn in negotiations and with insufficient time to review Vantage’s proposals or properly address the challenges acknowledged by McChesney in his letter of 25 June 2017 AfroCan had no option but to withdraw from the transaction.

Brian Barrett AfroCan’s CEO said that the about-turn by Vantage just two days after McChesney confirmed in a letter that the parties had commenced a joint process aimed at removing the obstacles to concluding the transaction, combined with the aftermath of Vantages’ subsequent malicious media attack on AfroCan, may have scuppered any chance of AfroCan getting its stakeholders and investors back to the table.