The Inquirer (Monrovia)
4 September 2008
The much awaited due diligence report on the Western Cluster Iron Ore Deposit confirms what most analysts had already stated.
Delta Mining Consolidated is a bankrupt company with no free cash flows since it began operations in 2006! According to the Deloitte and Touche due diligence report, Delta is technically insolvent and had never made any investment above seven hundred thousand United States Dollars.
Despite Delta's negative cash flow and technical insolvency, the Inter Ministerial Mineral Technical Committee (IMMTC) chose the company to make a 1.5 billion dollar investment in the project over well known and respected international giants such as Sinosteel Corporation, Tata, Arcelor Mittal and Rio Doce!
According to investigation, key findings and implications from the due diligence report indicate: "Delta hasn't generated revenue since it commenced operating 1 March 2006. Delta had negative FCF for FY07 and FY08. Delta was neither solvent nor liquid in FY07 and FY08. Delta does not have previous investments that exceed R6m."
According to the probe, "Delta's ability to generate revenue cannot be determined and it is currently incurring losses. Delta's ability to conduct its current operations and any future expansion or investment is dependent on external funding."
It was also discovered that Delta appears under-capitalized and may not be able to continue operations in the short to medium-term. Delta will rely heavily on its strategic alliance partners for financial support and that Delta and its current associates have limited exposure with multinational cross border infrastructure development.".
Our investigation found out that what is even more surprising is that despite the information in the due diligence report, the Inter Ministerial Mineral Technical Committee (IMMTC) is still recommending Delta for the Western Cluster.
Sources said a report prepared last week for the President by the IMMTC concludes that the Government of Liberia should invite the bankrupt company to begin negotiations on implementation of the Western Cluster Iron Ore.
The IMMTC report to the President provides additional information not corroborated by the due diligence indicating that Delta has recapitalized a subsidiary, DMC Coal in July of this year, providing "substantial" capitalization.
The amount of the capitalization was not indicated. The report to the President also says Delta now has strategic partners, such as AMB, IDC of South Africa, but no firm commitments by these partners to the project were indicated by the Deloitte and Touche due diligence. Experts in international tender say any improved circumstance of a bidder after the bids were received should not be factored into the selection process.
Experts say whatever little improvement to the ability of Delta was caused by the announcement by the President of Liberia that they had won the Western Cluster Deposits.
An international mineral expert who chooses to remain anonymous said "what were members of the IMMTC thinking to still recommend Delta to the President?" Some other international partners have privately intimated that the selection of a bankrupt company seriously impinges the credibility of the government as regards its efforts at transparency.
According to the Deloitte and Touche due diligence report, Delta did not present financial statements during the bidding process and only prepared them for the purpose of the due diligence report, and they were unaudited.
According to Deloitte and Touche, the accuracy of the financial statements could not be determined since they were unaudited and unverified by any independent source.
Meanwhile, mineral experts are scratching their heads over how a company that did not present financial statements could have been short listed beyond the Expression of Interest (EOI) stage and eventually win a 1.6 billion dollar project.
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