Redwing Mining Company employees have applied to have the gold mining company replaced, for the second time, under the corporate rescue, two weeks after the Supreme Court nullified an earlier High Court order that put the firm under statutory administration, citing legal technicalities.
The Supreme Court dismissed the locus standi of the Associated Mine Workers Union of Zimbabwe (AMWUZ), which initially applied at the High Court for corporate rescue while the notice of intention, also known as the standard notice to place the company under the reconstruction process was not properly issued
The workers, who claim to be owed several millions of dollars, made the application on the basis that the Supreme Court ruling was on legal technicalities and not on merit.
“Applicants ultimately seek the appointment of Mr Knowledge Hofisi of Aurifin Capital as the corporate rescue practitioner,” said the workers.
Mr Hofisi was the corporate rescue practitioner before the Supreme Court nullified the firm’s reconstruction.
“Mr Hofisi is a seasoned corporate rescue practitioner who managed to revive David Whitehead, a company that had been under supervision for over 10 years and which at times…was said to be beyond redemption,” the workers said in the application.
Redwing, estimated to have a gold reserve worth US$30 million, is one of the gold mines owned by Mzi Khumalo’s Metallon in Zimbabwe, alongside How Mine near Bulawayo and Mazowe Gold mine. It used to produce about 60 kg of gold per month.
According to the court application, the company is facing financial distress and failing to pay its debts.
As such, returning it to its shareholders would lead to its collapse with workers standing to be the most affected, the workers argue. In the audited financial statements for the year ended December 31, 2020, the company’s current liabilities exceeded current assets by US$3,2 million and “these conditions indicated the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue operating as a going concern,” the workers said.
While the company appears to be technically insolvent, the position does not take into account the value of the resource, “but if something is not done urgently, the company is slowly moving towards insolvency,” the employees added.
According to the competent person’s report prepared by Australian firm Golder Associates, the mine has an estimated lifespan of 70 years at its peak extraction level while the quantified mineral resource is about 2,63 million ounces of gold.
“Corporate rescue comes in as a suitable remedy to the problem as it ensures employment contracts remain intact, the shareholders do not lose their contributions to the company and the company itself continues operating,” said the workers.
Redwing Mining Company corporate rescue manager Mr Knowledge Hofisi had already come up with a rescue plan, which entailed the settlement of proven liabilities, reconstructing the balance sheet, resumption of underground mining, security of employment, and overall contribution to the economy.
He said the company needed 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.
Much of the funding would be raised from new institutional investors who buy shares from existing shareholders and also inject funds into the business. Part of the funds to be injected will be used to settle creditors or the potential investors would buy shares from the existing shareholder and also have new shares issued to them.