Defunct diamond mine, Gye Nyame Resources is set to get a fresh capital injection of $20 million from a potential investor while creditors are expected to vote to defer their payment pending recapitalisation of the mine.
Gye Nyame Resources, a joint venture between the state-owned Zimbabwe Mining Development Corporation (ZMDC) and Bill Minerals, represented by Ghanaian businessman William Ato Essien, had its licence revoked earlier this year due to insolvency and failure to adhere to environmental requirements.
The company, which was granted mining concessions in Marange in 2011, was subsequently placed under provisional liquidation on March 26 at the behest of some creditors.
It was then placed under final judicial management on June 25.
According to court documents seen today, the High Court ordered a scheme of arrangement between the company and its creditors to be held at the end of this month under the chairmanship of retired Justice Moses Chinhengo.
During the meeting, creditors are expected to agree to a moratorium to defer payment of liabilities owed pending completion of the recapitalisation of the company.
According to the documents, the company is proposing that its creditors also agree to a conversion of liabilities owed to preference shares where a special purpose vehicle would be established.
The ordinary shareholding in the SPV would be 50 percent to Marange Resources and the balance to the investor entity.
“The investor entity has been identified as Damo Resources (Private) Limited which has committed to investing between $15 million to $20 million in rejuvenating mining operations,” read one of the documents, while no further details of the investor were availed.
The SPV would issue cumulative redeemable preference shares to the creditors with interest payments at a coupon rate of 10 percent per annum while payment would be made every quarter after an initial grace period of 12 months from date of implementation of scheme.
The preference shares, according to the document would be redeemed in full during a period of not exceeding 36 moths.
“The SPV, apart from resuming mining operations, will carry out additional geological exploratory works and related mine development,” read the document.
As at September 31, 2013, the company’s assets were estimated to be worth $6.6 million while its liabilities totalled $4.4 million.
Creditors presented fresh claims worth over $5 million, at the last creditors meeting in June among them Metbank, which is owed $1.9 million; the Zimbabwe Republic Police $755 000 and workers $500 000.
Gye Nyame came under the spotlight last year when President Robert Mugabe accused former ZMDC chairman, Godwills Masimirembwa, of soliciting a bribe worth $6 million from the company’s Ghanaian investors. Mugabe eventually recanted, saying it was the Ghanaian investors who had misled Zimbabwean authorities.
It is alleged that the Ghanaian investor injected only $8 million out of an agreed $110 million into the business, with further claims that no due diligence was carried out to ascertain his company’s financial capabilities.
The major shareholders in Gye Nyame are ZMDC, which owns 50 percent, the Zimbabwe Republic Police Trust (20 percent), Bill Minerals represented by Ghanaian William Ato Essien (24 percent), and Dantor, a company representing the interests of local shareholders, Itai Munyeza and Blessmore Chanakira, with a six percent shareholding.
The company lost most of its assets to some creditors who attached them before the mine was placed under judicial management.-The Source