23 February 2018

Zimbabwe: Mines Reel Under $31m Debt

London Stock Exchange-listed ASA Resources Plc's key Zimbabwe units - Bindura Nickel Corporation Limited and Freda Rebecca Gold Mine Limited -- have applied to the High Court to have the businesses placed under provisional judicial management, citing a serious financial crisis that has seen its debts ballooning to over US$31,3 million.

The top gold mine also attributed its current operational crisis to mismanagement by Chinese investor and shareholder in ASA Resource Group (formerly known as ASA Mwana Africa Plc), China International Mining Group Corporation, whose directors have since been issued with warrants of arrest following the alleged externalisation of funds.

"A forensic audit unearthed numerous financial irregularities which were directly linked to Chinese expatriate employees who were based at Freda Rebecca Gold Mine and Bindura Nickel Corporation. Warrants of arrests have since been issued by the Zimbabwean authorities against some Chinese employees," Freda Rebecca executive director Toindepi Retias Muganyi said in his founding affidavit.

Wintertons Legal Practitioners, Freda Rebecca Gold Mine's lawyers, filed the application alongside Freda Rebecca Holdings (Pvt) Ltd, Bindura Nickel Corporation Ltd, Hunters Road Nickel Mine (Pvt) Ltd, Trojan Nickel Mine Ltd, BSR Ltd, Greenline Enterprises (Pvt) Ltd, ASA Services (Zimbabwe) (Pvt) Ltd, Bindura Estates (Pvt) Ltd and Mwana Properties (Pvt) Ltd.

Muganyi further said the gold mines are presently unable to service their debts when they fall due, and that the liabilities of Freda Rebecca Gold Mine and Bindura Nickel Corporation are presently in excess of the respective companies' current assets, thus rendering the companies technically and practically insolvent.

"Freda Rebecca Gold Mine Ltd owes creditors in the sum of US$31 331 914. The company is also facing litigation from various parties who include former employees and creditors.

"What has led to the 10 companies being in an unsound financial position is that during the period September 2015 to September 2017, the strategic direction of the ASA group took a dramatic turn for the worse as a result of the activities of the Chinese investor in ASA, China International Group Corporation," he said.

The executive director further said ASA was founded in 2003 by a consortium of businessmen who included Kalaa Katema Mpinga, David Fish, Tim Wadeson, Oliver Mandishona Chidawu and Douglas Tawanda Munetsi.

"In 2003 ASA (then Mwana Africa) acquired the majority shareholding in Bindura Nickel Corporation Ltd from Anglo American Corporation Ltd and Freda Rebecca Gold Mine Ltd from Anglo Ashanti Gold in 2004. ASA holds about 75% and 85% of the issued shares of Bindura Nickel Corporation and Freda Rebecca Gold Mine respectively," he said.

Turning to the crisis period, Muganyi said between 2003 and 2015 ASA embarked on funding activities in order to finance its development and mining activities in the Democratic Republic of Congo (DRC), South Africa (SA) and Zimbabwe during which period Bindura Nickel Corporation's care and maintenance received a US$10 million loan.

"Most of that loan has since been paid. In October 2012, ASA also injected the sum of US$23 million into Bindura Nickel Corporation through a rights issue and private placement which enabled that company to refurbish its plant and restart operations at Trojan Mine (fifth applicant), after four years of care and maintenance," he said.

"Freda Rebecca Gold Mine benefited US$11 million of loan funding by ASA during the same period, 2003-2015. ASA was placed under administration in the United Kingdom. The problems largely arose from a Chinese investor and shareholder in ASA, China International Mining Group Corporation, causing havoc in the ASA structures.

"At Bindura Nickel Corporation an amount of US$2,7 million which was part of a US$20 million loan raised through a smelter bond in March 2015 was unlawfully externalised under the pretext of remitting a deposit for the supply of technology," Muganyi said.

"I have ascertained that Reggie Francis Saruchera, an insolvency practitioner and business turnaround expert, is willing and able to be appointed as provisional judicial manager of the applicants."

The matter is yet to be set down for hearing.


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